REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ITHACA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 2322, 2341 & 2351 56-1385842
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code No.) Identification No.)
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HIGHWAY 268 WEST
P.O. BOX 620
WILKESBORO, NORTH CAROLINA 28697
(910) 667-5231
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ERIC N. HOYLE
Senior Vice President-Finance and Administration
Highway 268 West
P.O. Box 620
Wilkesboro, North Carolina 28697
(910) 667-5231
(Name, address, including zip code, and telephone number,
including area code, of registrant's agent for service of process)
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COPIES TO:
CARL L. REISNER, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of the Registration Statement.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: [X]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF Amount of
SECURITIES TO Amount to be Maximum Offering Maximum Aggregate Registration
BE REGISTERED Registered Price Per Share/1/ Offering Price/1/ Fee
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(1) Common Stock, par value $.01 per share.......... 10,109,290 $0.01 $101,092.90 $100.00
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/1/ Calculated in accordance with Rule 457(f)(2).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
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ITHACA INDUSTRIES, INC.
CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B)
OF REGULATION S-K, SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-1
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FORM S-1 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
-------------------------------- ---------------------------------
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1. Forepart of Registration Statement and Outside Front Cover Page of
Prospectus................................................................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus......................
Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of Earnings to Fixed
Charges...................................................................... Prospectus Summary; Risk Factors; Selected
Financial Data;
4. Use of Proceeds.............................................................. Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.............................................. Plan of Distribution
6. Dilution..................................................................... *
7. Selling Security Holders..................................................... Selling Stockholders
8. Plan of Distribution......................................................... Outside Front and Inside Front Cover Pages of
Prospectus; Plan of Distribution
9. Description of Securities to be Registered................................... Outside Front Cover Page of Prospectus;
Description of Capital
Stock
10. Interests of Named Experts and Counsel....................................... Legal Matters; Experts
11. Information with Respect to the Registrant................................... Outside Front and Inside Front Cover Pages of
Prospectus;
Prospectus Summary; Risk Factors; the Company;
Selected Financial Data; Management's Discussion
and Analysis of Financial Condition and Results
of Operations; Business; Directors and Management;
Compensation and Stock Option Committee Interlocks
and Insider Participation; Financial Statements
12. Disclosure of Commission Position on Indemnification for Securities Indemnification of Directors and Officers
Act Liabilities..............................................................
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* Item inapplicable
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 17, 1997
PROSPECTUS
10,109,290 Shares
Ithaca Industries, Inc.
Common Stock
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This Prospectus relates to the offering from time to time of up to
10,109,290 shares ("Shares") of Common Stock, par value $.01 per share (the
"Common Stock"), issued by Ithaca Industries, Inc. (the "Company" or "Ithaca
Industries" or "Ithaca"), a Delaware corporation, to certain creditors of the
Company pursuant to the Company's Plan of Reorganization dated as of August 29,
1996, ("Plan of Reorganization") under Section 1121(a) of the United States
Bankruptcy Code (the "Bankruptcy Code") and pursuant to a certain Management
Agreement entered into with Alvarez & Marsal, Inc. dated December 17, 1996 (the
"Management Agreement"). The Plan of Reorganization became effective on December
16, 1996 (the "Effective Date of the Plan of Reorganization"). Pursuant to the
Plan of Reorganization, 10,000,000 shares of Common Stock were issued following
the Effective Date of the Plan of Reorganization and, as of March 17, 1997,
constituted all of the shares of Common Stock outstanding. Pursuant to the
Management Agreement, an Option to purchase 109,290 shares was granted to
Alvarez & Marsal, Inc., the Company's financial and business advisor, as of
January 31, 1997. As of the date of this Prospectus, Alvarez & Marsal, Inc. has
not exercised its option.
The Shares may be sold to the public from time to time by certain
holders thereof (the "Selling Stockholders") in the amount and the manner
described herein or as may be set forth in a Prospectus Supplement accompanying
this Prospectus. The Company will receive no proceeds from the sale of any of
the Shares by any of the Selling Stockholders. See "Plan of Distribution."
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SEE "RISK FACTORS" ON PAGE 7 FOR INFORMATION CONCERNING CERTAIN RISKS
ASSOCIATED WITH AN INVESTMENT IN ANY OF THE SHARES.
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Through the date hereof, there has been no established public trading
market for the Securities. Application will be made to list the Common Stock on
the NASDAQ National Market. There can be no assurance that any active trading
market will develop or will be sustained for the Common Stock or as to the price
at which the Common Stock may trade or that the market for the Common Stock will
not be subject to disruptions that will make it difficult or impossible for the
holders of the Common Stock to sell shares in a timely manner, if at all, or to
recoup their investment in the Common Stock. See "Risk Factors--Liquidity;
Absence of Market for Common Stock."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is o
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The Selling Stockholders directly, through agents designated from
time to time, or through dealers or underwriters also to be designated, may sell
the Common Stock from time to time on terms to be determined at the time of
sale. To the extent required, the Common Stock to be sold, the names of the
Selling Stockholders, the respective purchase prices of public offering prices,
historical trading information for the Common Stock, the names of any such
agent, dealer or underwriter, and any applicable commissions or discounts with
respect to a particular offer will be set forth in an accompanying Prospectus
Supplement. See "Plan of Distribution." If the Company is advised that an
underwriter has been engaged with respect to the sale of any Shares offered
hereby, or in the event of any other material change in the plan of
distribution, the Company will cause an appropriate amendment to the
Registration Statement of which this Prospectus forms a part to be filed with
the Securities and Exchange Commission (the "Commission") reflecting such
engagement or other change. See "Additional Information."
The Company will not receive any proceeds from this offering, but
agreed to pay substantially all of the expenses of this offering other than
applicable transfer taxes, seller's counsel fees, commissions, fees and
discounts payable to dealers, agents or underwriters. The Selling Stockholders
and any broker dealers, agents or underwriters that participate with the Selling
Stockholders in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Description of Capital
Stock--Registration Rights Agreement" and "Plan of Distribution" for a
description of certain indemnification arrangements.
Until 90 days subsequent to the effective date of this filing, all
dealers effecting transactions in the registered securities whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
2
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ADDITIONAL INFORMATION
When the Registration Statement of which this Prospectus forms a part
was declared effective by the Commission, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith became obligated to file
reports and other information with the Commission. Reports and other information
concerning the Company may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and at Suite 1300,
7 World Trade Center, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 upon payment of the fees prescribed by the
Commission. Reports, proxy, information statements and other information
regarding the Company filed electronically with the Commission are available on
the Commission's web site (http://www.sec.gov).
The Company has filed with the Commission a Registration Statement
(which term shall encompass any amendments and exhibits thereto) under the
Securities Act with respect of the Shares offered hereby. This Prospectus, which
forms a part of such Registration Statement, does not contain all the
information set forth in such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete; with respect to each
such contract, agreement or other document filed as an exhibit to such
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Any interested parties may inspect
such Registration Statement, without charge, at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and may obtain copies of all or any part of it from the Commission upon payment
of the fees prescribed by the Commission. Neither the delivery of this
Prospectus or any Prospectus Supplement nor any sales made hereunder or
thereunder shall under any circumstances create any implication that the
information contained herein or therein is correct as of any time subsequent to
the date hereof or thereof or that there has been no change in the affairs of
the Company since the date hereof or thereof.
3
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. FOR PURPOSES OF PRESENTING FINANCIAL
INFORMATION IN THIS PROSPECTUS (OTHER THAN THE FINANCIAL STATEMENTS), THE
COMPANY'S FISCAL YEARS ARE INDICATED AS ENDING ON JANUARY 31, ALTHOUGH BEFORE
DECEMBER OF 1996 SUCH PERIODS ACTUALLY ENDED ON THE FRIDAY NEAREST SUCH DATE AND
AFTER NOVEMBER OF 1996 SUCH PERIODS ACTUALLY END ON THE SATURDAY NEAREST SUCH
DATE.
THE COMPANY
The Company believes it is the largest manufacturer of private label
underwear and women's hosiery products in the United States, operating
distribution and manufacturing facilities in the Southeastern United States and
off-shore manufacturing facilities in Central America. The Company has three
principal product lines: (i) men's and boys' underwear and outerwear T-shirts
(ii) women's and girls' underwear and (iii) women's hosiery. In marketing its
products, the Company utilizes the private label names or trade names of its
customers as well as licensed brand names. The Company's products are sold
through a wide range of retail distribution channels and are offered to the
public through more than 10,000 customer outlets, including discount stores,
department stores, specialty stores, drug stores and supermarkets. The key
elements of the Company's strategy are supplying a wide variety of product
offerings at a number of price points, maintaining a strong presence in multiple
channels of distribution, maintaining close customer relationships by developing
products and programs that suit individual customer needs, and maintaining a low
cost and flexible manufacturing capability.
The Company was founded in 1948 in Ithaca, New York as a manufacturer
of women's underwear. Since that time, Ithaca has evolved from a specialized
producer of women's underwear for J.C. Penney to become a leading diversified
producer and marketer of undergarments to major retailers throughout the United
States. Over the years, Ithaca expanded its product lines and manufacturing
capacity, adding women's hosiery in 1968, men's and boys' underwear in 1972, and
T-shirts in 1983. In 1983, Ithaca's founder sold the business to an investor
group led by Merrill Lynch Capital Partners Inc. ("MLCP"), a private investment
firm affiliated with Merrill Lynch & Co., Butler Capital Corporation ("Butler")
and senior management. The Company was recapitalized in 1988. In December 1992,
the Company completed a public offering of $125,000,000 of 11.125% Senior
Subordinated Notes due 2002 ("Notes"). In connection with the completion of the
offering, the Company and its stockholders completed a reorganization whereby
the Company became a wholly-owned subsidiary of Ithaca Holdings, Inc., a
Delaware corporation ("Holdings").
During fiscal 1996, the Company incurred covenant defaults under its
bank credit agreement, originally dated as of December 10, 1992 and amended and
restated as of December 16, 1996 (the "Credit Agreement"). Under the terms of a
series of waivers between the Company and the parties to the Credit Agreement,
the Company was unable to pay the interest due on the Notes. In the third and
fourth quarters of fiscal 1996 the Company undertook an extensive review of its
manufacturing capacity, overhead structure, product lines and customer base.
These efforts resulted in the promulgation of a three-year business plan, which
was revised in May, 1996 (as revised, the "Business Plan"), to enhance
performance and reduce overhead expenses. The Company consolidated its
distribution centers and production capacity to increase efficiencies,
consolidated the operations of certain plants to off-shore facilities and
accelerated the process of moving sewing operations off-shore. See "Management
Discussion and Analysis of Financial Condition and Results of Operations."
In furtherance of its restructuring efforts, on October 8, 1996 the
Company filed a voluntary petition for reorganization under Chapter 11 ("Chapter
11") of the Bankruptcy Code with the Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On the Effective Date of the Plan of
Reorganization, the Company emerged from bankruptcy pursuant to the Plan of
Reorganization. Pursuant to the Plan of Reorganization, among other things,
10,000,000 shares of Common Stock were distributed to the holders of the Notes,
the Notes were retired, the Company ceased to be a subsidiary of Holdings, and
the Credit Agreement was amended and restated.
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The Company is organized under the laws of the State of Delaware and
its principal executive offices are located at Highway 268 West, P.O. Box 620,
Wilkesboro, North Carolina 28697, telephone number (910) 667- 5231.
RISK FACTORS
See "Risk Factors" for information concerning certain risks
associated with an investment in the Shares.
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is qualified by and
should be read in conjunction with the Financial Statements and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The Company's
Results of Operations for the 42-week period ended November 22, 1996 reflect the
consummation of the Plan of Reorganization and the transactions contemplated
thereby and the application of Fresh Start Reporting rules and procedures.
Accordingly, the future Results of Operations of the Company will generally not
be comparable to the periods discussed below due to the effects of the Plan of
Reorganization, the transactions completed thereby and related financing. See
"Consolidated Financial Data." Income per share for periods prior to the
Effective Date of the Plan of Reorganization is not meaningful because during
such periods the Company was a wholly owned subsidiary of a holding company.
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Preconfirmation
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42-Week Fiscal Year Ended
Period Ended January 31,
November 22,
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1996 1996 1995 1994 1993 1992
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(Dollars in thousands)
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STATEMENT OF INCOME DATA:
Net sales $297,604 $398,819 $414,800 $414,671 $440,357 $402,670
Gross profit 42,061 44,882 72,859 68,072 79,137 79,703
Selling, general and
administrative expenses 27,670 43,486 37,075 39,711(1) 33,996 30,122
(Recovery of) provision for
asset write-downs and
restructuring (2,964) 51,591(2)
Operating income (loss) 17,355 (50,195) 35,784 28,361 45,141 50,664
Interest expense - net(3) 17,489 26,905 23,147 23,455 24,027 29,938
Reorganization items (1,176)(4)
Income (loss) before income
taxes
and extraordinary items 1,666 (76,802) 13,166 4,968 21,647 20,971
Income tax expense (benefit) 4,218 (27,157) 5,653 2,086 8,415 11,190
(Loss) income before
extraordinary items (2,552) (49,644) 7,513 2,882 13,232 9,781
Extraordinary items(5) 67,924 -- -- -- (5,939) --
Net income (loss) $ 65,372 $(49,644) $ 7,513 $ 2,882 $ 7,293 $ 9,781
======== ========= ======== ======== ======= ========
BALANCE SHEET DATA (AT END
OF PERIOD): Post-Confirmation
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Working capital (deficit) $ 75,591 ($145,909) $113,028 $123,222 $122,230 $ 79,334
Total assets 155,993 208,642 224,471 235,997 236,588 186,351
Long-term debt exclusive of
current maturities 77,255 n/a(6) 221,819 242,785 250,720 216,519
Total stockholders' equity
(deficit) 22,116 (93,558) (43,914) (51,427) (54,309) (69,254)
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(1) Includes a bad debt provision of $4 million to cover the bankruptcy of a
major T-shirt customer during the second quarter of fiscal 1994.
(2) In fiscal 1996 the Company initiated a restructuring plan to improve
operating performance and reduce costs. In connection with this plan, the
Company recorded charges totaling $51,591,000 ($33,379,000 after related
income tax benefits). Such charges related to (i) the closing and
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consolidation of certain manufacturing and distribution facilities, (ii)
the write-down of certain equipment associated with closed facilities,
(iii) the write-off and establishment of reserves for inventory and
accounts receivable associated with customers, product lines, and specific
products that the Company elected to discontinue manufacturing and
distributing, (iv) severance and other costs associated with plant closures
and overhead reductions, and (v) the write-off of certain impaired
intangible assets.
(3) Principally includes interest expense on long-term debt and amortization of
deferred debt expense, offset by interest income from the short-term
investment of excess cash. During the period from August 29, 1996 through
November 22, 1996, the Company did not accrue interest on the Senior
Subordinated Notes due 2002 which were cancelled in connection with the
Plan of Reorganization.
(4) Reorganization items for the 42-week period ended November 22, 1996 include
$3,765,000 million of adjustments to record assets and liabilities at fair
value in connection with the application of Fresh Start Reporting.
(5) Loss on early extinguishment of debt (net of income tax benefit of
$3,763,000) on December 10, 1992 and gain on debt discharge (net of income
tax expense of $23,056,000) pursuant to confirmation of Plan of
Reorganization at November 22, 1996.
(6) Due to continuing covenant violations, temporary waivers granted and events
of default, as further discussed in "Management's Discussion and Analysis,"
all of the Company's outstanding debt was classified as current at February
2, 1996.
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RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS IN THE
COMMON STOCK SHOULD CONSIDER THE SPECIFIC FACTORS SET FORTH BELOW AS WELL AS THE
OTHER INFORMATION SET FORTH IN THIS PROSPECTUS.
RECENT EMERGENCE FROM REORGANIZATION PROCEEDING
On December 16, 1996, the Company emerged from bankruptcy pursuant to
the Plan of Reorganization. The Plan of Reorganization left all the Company's
creditor's claims unimpaired except for parties to the Credit Agreement, which
was restructured, and the holders of the Notes (the "Noteholders"), who received
10,000,000 shares of Common Stock in exchange for all of their Notes, which were
then retired. While trade creditors were paid in full, it is possible that the
fact of the bankruptcy will adversely impact the Company's future relationship
with customers and suppliers and its future access to capital. The Company can
not predict what, if any, impact this will have.
SUBSTANTIAL LEVERAGE
Although, in connection with the Plan of Reorganization, $125 million
of indebtedness was converted to equity, the Company remains significantly
leveraged. As of November 22, 1996, the Company had borrowings of $77,185,000.
As of March 14, 1997, there was $61,500,000 of borrowings outstanding under the
Credit Agreement (exclusive of $7,556,000 of outstanding letters of credit) and
the Company had additional borrowing capacity under the Credit Agreement of up
to $58,627,000.
The degree to which the Company is leveraged could have important
consequences for holders of the Common Stock, including: (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, product development, acquisitions, general corporate
purposes or other purposes may be impaired; (ii) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of the
principal and interest on its indebtedness; (iii) terms of the Company's debt
instruments restrict the Company's ability to pay dividends and impose other
operating and financial restrictions; and (iv) the Company's degree of leverage
may make it vulnerable to economic downturns and may limit its ability to
withstand competitive pressures. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Company believes that, based on current levels of operations and
expected efficiency gains, its cash flow from operations will be adequate to
make scheduled payments of principal and interest on its indebtedness prior to
final maturity, to permit anticipated capital expenditures and to fund working
capital requirements. However, the Company's ability to make required payments
of principal at maturity will be dependent on its ability to refinance its
indebtedness at maturity, and the ability of the Company to meet its debt
service obligations generally will be dependent upon the future performance of
the Company, which, in turn, will be subject to general economic conditions,
financial, competitive, business factors and other factors, including factors
beyond the Company's control. The Company's obligations under the Credit
Agreement mature on August 31, 1999 (the "Maturity Date"). The Company
contemplates that its outstanding obligations under the Credit Agreement will be
satisfied on or before the Maturity Date, in whole or in part, through a
refinancing. The form of refinancing will be based upon economic conditions at
the time of refinancing. However, in the event the Company cannot effectuate
such a refinancing prior to the Maturity Date, there is a risk that the Company
may not be able to satisfy its obligations under the Credit Agreement.
The Credit Agreement contains a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, make capital expenditures, pay dividends, create
liens on assets, enter into leases, investments or acquisitions, engage in
mergers or consolidations, or engage in certain transactions with affiliates and
otherwise restrict corporate activities (including change of control and asset
sale transactions). In addition, under the Credit Agreement, the Company is
required to maintain specified financial ratios, and comply with tests,
including minimum EBITDA levels, minimum interest coverage ratios, and minimum
fixed charge coverage ratios, some of which become more restrictive over
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time. The Company's obligations under the Credit Agreement are secured by
substantially all the assets of the Company. The breach of any of these
covenants or restrictions could result in a default under the Credit Agreement,
which could permit the lenders party to the Credit Agreement to declare all
amounts borrowed thereunder to be due and payable together with accrued and
unpaid interest, to terminate their commitments to make further loans and issue
letters of credit and to proceed against the collateral securing the obligations
owing to them. Any such default could have a significant adverse effect on the
market value and the marketability of the Common Stock.
RISKS INHERENT IN BUSINESS PLAN
In the third and fourth quarters of fiscal 1996 the Company undertook
an extensive review of its manufacturing capacity, overhead structure, product
lines and customer base. These efforts resulted in the promulgation of the
Business Plan to enhance performance and reduce overhead expenses. The Company
consolidated its distribution centers and production capacity to increase
efficiencies, consolidated the operations of certain plants to off-shore
facilities and accelerated the process of moving sewing operations off-shore.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Business Plan."
The Business Plan is dependent upon, among other things, the
Company's ability to increase its foreign sourcing capabilities and to otherwise
manufacture its products at a competitive cost. A key element of the Business
Plan is to develop foreign contracting sources, particularly for women's and
girls' underwear. The Company is also engaged in ongoing efforts to consolidate
its women's hosiery operations and to consolidate other operations in offshore
facilities. The success of the Company's foreign sourcing efforts is dependent,
among other things, upon the absence of political or economic disruptions,
quotas, labor disruptions, embargoes or currency fluctuations that might
adversely affect the Company, particularly in Honduras and other foreign nations
where the Company currently or in the future sources its products.
The Business Plan is also dependent upon the efficient operation of
new centralized distribution centers, the success of the Company's efforts to
streamline its stock keeping units ("SKU's"), to eliminate unprofitable and
low-profit lines and products, to reduce its selling, general and administrative
expenses and to efficiently manage its inventory levels.
FRESH START REPORTING
The Plan of Reorganization was confirmed on November 22, 1996. The
Company emerged from bankruptcy on December 16, 1996, the Effective Date of the
Plan of Reorganization. Accordingly, the Company's Consolidated Balance Sheets
as of November 22, 1996, the date on which Fresh Start Reporting was adopted,
and its Consolidated Statements of Operations and Consolidated Statement of
Stockholders' Equity (Deficit) for the periods thereafter will not be comparable
to the Consolidated Financial Statements for prior periods included elsewhere
herein.
IMPORTANCE OF MAJOR CUSTOMERS
For the 42-week period ended November 22, 1996, J.C. Penney accounted
for approximately 47% of the total net sales of the Company. No other customers
accounted for 10% or more of total net sales for the 42-week period ended
November 22, 1996. The loss of a material amount of sales to J.C. Penney, or a
decline in J.C. Penney's business, or the loss of one of the Company's other
major customers would have a material adverse effect on Ithaca's Results of
Operations. See "Business--Importance of Major Customers."
COMPETITION
The underwear and women's hosiery businesses are highly competitive.
A substantial portion of the Company's operations remain located in the United
States while a number of the Company's competitors have moved to foreign
sourcing to a significantly greater degree. A key element of the Business Plan
is to develop
8
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foreign sourcing, particularly for women's and girls' underwear. The Company's
failure to develop such sourcing capabilities could materially adversely affect
the Company.
The Company believes that suppliers in the underwear and women's
hosiery businesses compete primarily on the basis of price, quality and customer
service. The Company competes with other private label manufacturers as well as
manufacturers of branded products. Several of the Company's competitors have
significantly greater financial resources and market recognition than the
Company. Many of the Company's customers purchase a portion of their private
label program's requirements from competitors as well as from Ithaca. See
"Business--Competition."
FOREIGN SOURCING
The Company currently relies and anticipates increasing reliance on
foreign sourcing of its products. The Company's ability to utilize foreign
sourcing is dependent on the absence of political or economic disruptions,
quotas, labor disruptions, embargoes or currency fluctuations in the countries
in which the Company sources its products.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of certain senior
executives, including: Jim D. Waller, Chief Executive Officer, President and
Chairman of the Board, Eric N. Hoyle, Chief Financial Officer, Senior Vice
President-Finance and Administration and Secretary, R. Dean Riggs, Executive
Vice President-Operations and David H. Jones, Executive Vice President-Sales.
The Company believes the loss of the services of one or more of these senior
executives could have a material adverse effect on the Company.
LIQUIDITY; ABSENCE OF MARKET FOR COMMON STOCK
There is no currently existing formal trading market for the Common
Stock. Pursuant to the Plan of Reorganization and the Management Agreement, the
Shares were issued to a limited number of holders. Application will be made to
list the Common Stock on NASDAQ National Market. There can be no assurance that
any active trading market will develop or will be sustained for the Common Stock
or as to the price at which the Common Stock may trade or that the market for
the Common Stock will not be subject to disruptions that will make it difficult
or impossible for the holders of the Common Stock to sell shares in a timely
manner, if at all. In addition, if such markets develop, the trading markets for
the Ithaca Common Stock may be unstable and illiquid for an indeterminate period
of time. In addition, holders of the Common Stock who are deemed to be
"underwriters" as defined in subsection 1145(b) of the Bankruptcy Code, or who
are otherwise deemed to be "affiliates" or "control persons" of the Company
within the meaning of the Securities Act, will be unable to freely transfer or
sell their respective securities (which securities will be "restricted
securities" within the meaning of the Securities Act), except pursuant to an
available exemption from registration under the Securities Act and under
equivalent state securities or "blue sky" laws. However, as described below,
certain holders of Common Stock have certain registration rights.
EFFECT OF FUTURE SALES OF COMMON STOCK; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales
of Common Stock or the availability of Common Stock for future sale will have on
the market price of the Common Stock, prevailing from time to time. Sales of
substantial amounts of Common Stock or the perception that such sales may occur,
could adversely affect prevailing market prices for the Common Stock.
An aggregate of 10,000,000 shares of Common Stock were issued
pursuant to the Plan of Reorganization. Pursuant to Section 1145 of the
Bankruptcy Code, all of such shares of Common Stock are freely tradeable without
registration under the Securities Act, except for shares that were issued to an
"underwriter" (as defined in Section 1145(b) of the Bankruptcy Code) or that are
acquired by an "affiliate" of the Company. With respect to all of the shares of
Common Stock issued to the Noteholders pursuant to the Plan of Reorganization
(together
9
<PAGE>
with any securities issued or issuable in respect thereof by way of a dividend,
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise, the "Registrable
Securities") the Company has entered into a registration rights agreement with
certain stockholders (the "Registration Rights Agreement") which requires Ithaca
to use its reasonable best efforts to file, cause to be declared effective and
keep effective for three years or until all registerable securities are sold, a
"shelf" registration statement (the "Shelf Registration"). The Registration
Statement of which this Prospectus is a part is the Shelf Registration referred
to in the Registration Rights Agreement. See "Description of Capital
Stock-Registration Rights Agreement."
DIVIDENDS
The Company presently intends to retain earnings for working capital
and to fund capital expenditures. Accordingly, there is no present intention to
pay cash dividends on any shares of the Common Stock. In addition, the Credit
Agreement prohibits the payment of cash dividends on the Company's equity
securities.
CERTAIN CORPORATE GOVERNANCE MATTERS
The Company's Amended and Restated Certificate of Incorporation filed
with the Secretary of State of Delaware on December 16, 1996 (the "Certificate")
provides that the terms of the seven members of the Board of Directors of the
Company, one of whom is Jim D. Waller, Chief Executive Officer of the Company,
will expire at the annual meeting of the stockholders of the Company next
following the Company's fiscal year ending January 31, 1998. It is possible that
such provisions, as well as certain other provisions of the Company's
Certificate and certain provisions of the General Corporation Law of Delaware,
may make it more difficult to accomplish transactions which stockholders may
otherwise deem to be in their best interests. Such provisions may be deemed to
have an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that might result in the receipt of a premium over the market
price for the securities held by stockholders. See "Description of Capital
Stock."
FORWARD LOOKING STATEMENTS
Certain statements in the Registration Statement of which this
Prospectus forms a part including information set forth under "Risk
Factors--Risks Inherent in Business Plan" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," constitute
"Forward-Looking Statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Ithaca desires to take
advantage of certain "safe harbor" provisions of the Reform Act and is including
this special note to enable the Company to do so. Forward-looking statements
including the Registration Statement of which this Prospectus forms a part,
involve known and unknown risks, uncertainties, and other factors which could
cause the Company's actual results, performance (financial or operating) or
achievements to differ materially from the future results, performance
(financial or operating) or achievements expressed or implied by such
forward-looking statements. The Company believes a change in the following
important factors could cause such a material difference to occur: (1) the level
of sales to the Company's major customers, in particular J.C. Penney which
accounted for approximately 47% of the Company's total net sales for the 42-week
period ended November 22, 1996; (2) 's ability to source or manufacture its
products at a competitively favorable cost; (3) the general strength of
retailing, in particular in the apparel categories in which the Company operates
and at the retail outlets which are major customers of the Company; (4) the
continued services of certain of the Company's senior executives; (5) the
comparative strength of the Company's principal competitors, particularly, the
impact of foreign sourcing in certain of the Company's product categories; (6)
the absence of political or economic disruptions, quotas, labor disruptions,
embargoes or currency fluctuations that might adversely affect the Company,
particularly in Honduras and other foreign nations where the Company currently
or in the future sources its products; (7) the success of the Company's recent
Business Plan and reorganization, particularly the success of the Company's
ongoing efforts to consolidate its women's hosiery operations and to consolidate
certain other operations in offshore facilities and to increase its foreign
sourcing capabilities (especially in women's and girls' underwear categories),
the level of efficiency of operation of the Company's new centralized
distribution centers, the success of the Company's
10
<PAGE>
efforts to streamline its SKU's and eliminate unprofitable and low-profit lines
and products, the success of the Company's efforts to reduce its selling,
general and administrative expenses, and the success of the Company's efforts to
efficiently manage its inventory levels; (8) the impact of price fluctuations of
the Company's raw materials, particularly cotton and spandex, and the Company's
ability to pass on to retailers and consumers any possible price increases; (9)
the continued improvement of the Company's information systems; (10) the ability
of the Company to have access to adequate capital to meet its working capital
needs and to fund necessary capital expenditures.
Many of the foregoing factors have been discussed in the Company's
prior Commission filings and other publicly available documents. Had the Reform
Act been effective at an earlier time, this special note would have been
included in earlier Commission filings. The foregoing review of significant
factors should not be construed as exhaustive or as an admission regarding the
adequacy of disclosures previously made by the Company prior to the effective
date of the Reform Act.
USE OF PROCEEDS
The Company will receive none of the proceeds from the sale of the
Common Stock by the Selling Stockholders. A total of 10,000,000 shares of Common
Stock were initially issued to Noteholders of the Company in accordance with the
Plan of Reorganization under which the Company emerged from a Chapter 11
bankruptcy proceeding. An option to purchase 109,290 shares of the Company's
Common Stock was issued to Alvarez & Marsal, Inc. pursuant to the Management
Agreement as a portion of compensation for the turnaround-management and
financial restructuring advisory services rendered the Company.
DIVIDEND POLICY
The Company has no present intention of paying any dividends on the
Common Stock. The declaration and payment of future dividends to holders of
Common Stock will be at the discretion of the Company's Board of Directors and
will depend upon many factors, including the Company's financial condition,
earnings, the capital requirements of its operating subsidiaries, legal
requirements and such other factors as the Board of Directors deems relevant. In
addition, the Credit Agreement prohibits the payment of cash dividends on the
capital stock of the Company.
Under the Delaware General Corporations Law ("DGCL"), the Company may
only declare and pay dividends out of surplus (as defined in the DGCL), or, if
there is no surplus and subject to certain conditions, out of net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year.
MARKET FOR THE COMMON STOCK
Through the date hereof there has been no established public trading
market for the Common Stock. See "Risk Factors--Liquidity; Absence of Market for
Common Stock." Pursuant to the Plan of Reorganization, 10,000,000 shares of
Common Stock were issued following the Effective Date of the Plan of
Reorganization and, as of March 17, 1997, constituted all of the outstanding
shares of Common Stock. In reliance on the exemption provided by Section 1145 of
the Bankruptcy Code, none of the shares of Common Stock issued pursuant to the
Plan of Reorganization was registered under the Securities Act in connection
with its issuance pursuant to the Plan of Reorganization; however, those shares
are being registered hereby for resale by the Selling Stockholders pursuant to
certain registration rights. Shares issued pursuant to the Plan of
Reorganization are freely tradeable without registration under the Securities
Act, except for any shares that were issued to an "underwriter" (as defined in
Section 1145(b) of the Bankruptcy Code) or that are subsequently acquired by an
"affiliate" of the Company, all of which shares will be "restricted securities"
within the meaning of Rule 144 under the Securities Act ("Rule 144"). Shares of
Common Stock which are "restricted securities" within the meaning of Rule 144
may not be resold in the absence of registration under the Securities Act other
than in accordance with Rule 144
11
<PAGE>
or another exemption from registration. See "Description of Capital
Stock--Registration Rights Agreement" for a discussion of the rights of certain
stockholders of the Company to request registration of sales of their shares of
Common Stock. A total of 109,290 shares of Common Stock are being registered
hereby in connection with the Company's grant to Alvarez & Marsal, Inc. of an
option to purchase such shares. As of March 3, 1997, there were approximately 10
holders of record of Common Stock and there were no outstanding options or
warrants to purchase, or securities convertible into, Common Stock or Preferred
Stock other than options to purchase 899,514 shares of Common Stock, including
the options granted to Alvarez & Marsal, Inc., issuable under the Company's 1996
Long Term Stock Incentive Plan ("LTIP"), of which options to purchase 240,994
shares are currently exercisable.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company at
November 22, 1996 and as adjusted to give effect to the revised capital
structure of the Company as a result of the Plan of Reorganization. This table
should be read in conjunction with the Company's Consolidated Financial
Statements, including the notes thereto, found elsewhere in this Prospectus.
<TABLE>
<CAPTION>
November 22, 1996
------------------------------------
(in thousands)
POST
HISTORICAL CONFIRMATION(2)
---------- ---------------
<S> <C> <C>
Current Installments of Long Term Debt $202,016(1) $ -
Long Term Debt
Credit Facility: - 77,185
Other - 70
Total 202,016 77,255
------- -------
Stockholders' (deficit) equity:
Preferred Stock, par value $.01 per share; 2,500,000 - -
Shares authorized; none issued
Preconfirmation Common Stock (par value $.01, 1,000 - -
authorized, issued and outstanding)
Common Stock (par value $.01 per share, 27,500,000 - 100
authorized, 10,000,000 issued and outstanding)
Additional Paid-In Capital 9,000 22,016
Retained Earnings (Deficit) (101,156) -
Total Stockholders' (Deficit) Equity (92,156) 22,116
-------- -------
Total Capitalization $109,860 $99,371
======== =======
</TABLE>
- ----------
(1) Reflects classification of all outstanding debt as current due to Company's
defaults under the Credit Agreement and the Notes.
12
<PAGE>
(2) Reflects application of Fresh Start Reporting provisions and the effects of
the Plan of Reorganization, including: (i) forgiveness of the Notes and
accrued interest and (ii) other fair value adjustments.
13
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Statement of
Operations for the 42-week period ended November 22, 1996, has been prepared to
reflect the consummation of the Company's Plan of Reorganization and certain
Fresh Start Reporting Adjustments. The Unaudited Pro Forma Consolidated
Statement of Operations has been prepared as if such consummation occurred on
February 1, 1996. The Unaudited Pro Forma Consolidated Statement of Operations
is not necessarily indicative of the results that would have actually occurred
if the Plan of Reorganization had actually been consummated on such date and
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Company's Audited
Consolidated Financial Statements and the notes thereto included elsewhere in
this Prospectus.
Unaudited Pro Forma Consolidated Statement of Operations
42-Week Period ended November 22, 1996
(Dollars in thousands, except per share information)
<TABLE>
<CAPTION>
Fresh Start
Reporting and
Reorganization
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $ 297,604 $297,604
Cost of sales 255,543 $ (1,934)/a/ 253,609
---------- ----------- ---------
Gross profit 42,061 1,934 43,995
Selling general and administrative 27,670 (385)/a/ 27,285
expenses
(Recovery of) asset write-downs (2,964) (2,964)
and restructuring
---------- ----------- ---------
Operating income 17,355 2,319 19,674
Other income (deductions):
Interest and amortization of (2,597) 1,377/b/ (1,220)
deferred debt expense-related
parties
Interest and amortization of (14,892) 7,871/b/ (7,021)
deferred debt expense-
other
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C>
Reorganization Items:
Adjustments to fair value
Professional fees and (2,589) 2,589/c/ --
other 3,765 (3,765)/d/ --
Other, net 625 625
---------- ----------- ---------
Income before taxes 1,666 10,391 12,058
Income tax expense 4,218 605/e/ 4,823
---------- ----------- ---------
Net (loss) income before extraordinary $ (2,552) $ 9,786 $ 7,235
item
========== =========== =========
Extraordinary gain on 67,924 (67,924)/f/ --
debt forgiveness, net of tax
Net income $ 65,372 $(58,138) 7 ,235
========== =========== =========
(Loss) income per share(g)
(Loss) income before extraordinary
item (0.25) 0.72
Extraordinary item 6.79 --
---------- ---------
Net income $ 6.54 $ 0.72
========== =========
</TABLE>
- ------------------------------
a To adjust depreciation expense for fixed asset writedowns of $13,500
recorded in conjunction with Fresh Start Reporting adjustments as follows:
Cost of Sales $ 1,934
Selling, general & administrative 385
---------
Total $ 2,319
=========
b To reflect interest expense of the debt structure of the Company after
confirmation of the Plan of Reorganization. The interest rate under the
Credit Agreement was assumed to be 9.75%. The adjustment to interest
expense is summarized as follows:
Related party:
Note interest $ 1,604
Other interest (227)
---------
Net $ 1,377
=========
Non-Related party:
Note interest 6,414
Other interest 1,457
---------
Net $ 7,871
=========
c To eliminate reorganization items.
d To eliminate net fair value adjustments recorded in conjunction with fresh
start reporting.
e Income tax expense is assumed at an effective rate of 40%.
f To reverse extraordinary gain on debt discharge and related income tax
expense.
g Pro forma earnings per share are based upon 10 million Shares outstanding.
15
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial information with respect
to the Company for the 42-week period ended November 22, 1996 and the five
fiscal years ended January 31, 1996 and is derived from and should be read in
conjunction with the Company's audited Consolidated Financial Statements and
related notes included elsewhere in this Prospectus. Income per share for
periods prior to the Effective Date of the Plan of Reorganization is not
meaningful because during such periods the Company was a wholly owned subsidiary
of Holdings.
The selected financial information set forth below is qualified by and
should be read in conjunction with the Financial Statements and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The Company's
Results of Operations for the 42-week period ended November 22, 1996 reflect the
consummation of the Plan of Reorganization and the transactions contemplated
thereby and the application of Fresh Start Reporting rules and procedures. The
future Results of Operations of the Company will generally not be comparable to
the periods discussed below due to the effects of the Plan of Reorganization.
See "Consolidated Financial Data."
The fiscal period beginning February 2, 1996 and ended November 22, 1996
reflects the effects of the Plan of Reorganization.
<TABLE>
<CAPTION>
Preconfirmation
-------------------------------------------------------------------------------------------------
42-Week
Period Ended Fiscal Year Ended
November 22, January 31,
------------------ ----------------------------------------------------------------------------
1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales $297,604 $398,819 $414,800 $414,671 $440,357 $402,670
Gross profit 42,061 44,882 72,859 68,072 79,137 79,703
Selling, general and
administrative expenses 27,670 43,486 37,075 39,711(1) 33,996 30,122
(Recovery of) provision for
asset write-downs and
restructuring (2,964) 51,591(2)
Operating income (loss) 17,355 (50,195) 35,784 28,361 45,141 50,664
Interest expense - net(3) 17,489 26,905 23,147 23,455 24,027 29,938
Reorganization items (1,176)(4) -- -- -- -- --
Income before income taxes
and extraordinary items 1,666 (76,802) 13,166 4,968 21,647 20,971
Income tax expense (benefit) 4,218 (27,157) 5,653 2,086 8,415 11,190
(Loss) income before
extraordinary items (2,552) (49,644) 7,513 2,882 13,232 9,781
Extraordinary items(5) 67,924 -- -- -- (5,939) --
Net income (loss) $ 65,372 $(49,644) $ 7,513 $ 2,882 $ 7,293 $ 9,781
======== ========= ======== ======== ======== ========
BALANCE SHEET DATA (AT END
OF PERIOD): Post-Confirmation
-----------------
Working capital (deficit) $ 75,591 ($145,909) $113,028 $123,222 $122,230 $ 79,334
Total assets 155,993 208,642 224,471 235,997 236,588 186,351
Long-term debt exclusive of
current maturities 77,255 n/a(6) 221,819 242,785 250,720 216,519
Total stockholders' equity 22,116 (93,558) (43,914) (51,427) (54,309) (69,254)
(deficit)
</TABLE>
- ----------------------------------------
(1) Includes a bad debt provision of $4 million to cover the bankruptcy of a
major T-shirt customer during the second quarter of fiscal 1994.
(2) In fiscal 1996 the Company initiated a restructuring plan to improve
operating performance and reduce costs. In connection with this plan, the
Company recorded charges totaling $51,591,000 ($33,379,000 after related
income tax benefits). Such charges related to (i) the closing and
consolidation of certain manufacturing and distribution facilities, (ii) the
write-down of certain equipment associated with closed
16
<PAGE>
facilities, (iii) the write-off and establishment of reserves for inventory
and accounts receivable associated with customers, product lines, and
specific products that the Company elected to discontinue manufacturing and
distributing, (iv) severance and other costs associated with plant closures
and overhead reductions, and (v) the write-off of certain impaired
intangible assets.
(3) Principally includes interest expense on long-term debt and amortization of
deferred debt expense, offset by interest income from the short- term
investment of excess cash. During the period from August 29, 1996 through
November 22, 1996, the Company did not accrue interest on the Senior
Subordinated Notes due 2002 which were cancelled in connection with the Plan
of Reorganization.
(4) Reorganization items for the 42-week period ended November 22, 1996 include
$3,765,000 of adjustments to record assets and liabilities at fair value in
connection with the application of Fresh Start Reporting.
(5) Loss on early extinguishment of debt (net of income tax benefit of
$3,763,000) on December 10, 1992 and gain on debt discharge (net of income
tax expense of $23,056,000) pursuant to confirmation of Plan of
Reorganization at November 22, 1996.
(6) Due to continuing covenant violations, temporary waivers granted and events
of default, as further discussed in "Management's Discussion and Analysis,"
all of the Company's outstanding debt was classified as current at February
2, 1996.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the related notes included elsewhere in
this Prospectus.
The following table sets forth the percentage relationship to total
net sales of certain items included in the Company's Statements of Operations:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
-----------------------------
42-WEEK PERIOD
ENDED NOVEMBER 22, 1996 1996 1995 1994
----------------------- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales:
Men's & boys'
underwear 40.9% 35.7% 34.8% 28.0%
Women's and girls'
underwear 17.2 18.7 20.6 18.9
T-shirts 15.5 16.3 14.8 19.4
Women's hosiery 24.5 27.3 27.8 31.6
Other 1.9 2.0 2.0 2.1
----------- ----------- ----------- -----------
Total 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- -----------
Cost of sales 85.9% 88.7% 82.4% 83.6%
----------- ----------- ----------- -----------
Gross profit 14.1 11.3 17.6 16.4
Selling, general and
administrative expenses 9.3 10.9 8.9 9.6
(Recovery of) provisions for
asset write-downs and
restructuring (1.0)% 12.9%
----------- ----------- ----------- -----------
Operating income (loss) 5.8 (12.6) 8.7 6.8
Interest expense-net 5.9 6.7 5.6 5.6
Other (net) (0.2) -- (0.1) --
Reorganization items (0.4)%
----------- ----------- ----------- -----------
Income (loss) before
income taxes and
extraordinary items 0.5 (19.2) 3.2 1.2
Income tax expense
(benefit) 9.2 (6.8) 1.4 0.5
Extraordinary item-gain
on debt discharge 30.6
Net income (loss) 21.9% (12.4)% 1.8% .7%
=========== =========== =========== ===========
</TABLE>
18
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF 42-WEEK PERIOD ENDED NOVEMBER 22, 1996 ("YTD FISCAL 1997") TO
43-WEEK PERIOD ENDED NOVEMBER 24, 1995 ("YTD FISCAL 1996").
Net sales declined 11.2% to $297.6 million in YTD fiscal 1997 from
$335.1 million in YTD fiscal 1996. Men's and boys' underwear sales were up 1.2%;
women's and girls' underwear sales were down 19.5% and women's hosiery sales
were down 18.8%. Outerwear T-shirts sales decreased 16.6%. Unit volume was down
12.9% with men's and boys' underwear down 3.3%, women's and girls' underwear
down 18.6% and women's hosiery down 17.3%, and outerwear T-shirt volume down
18.7%. The average selling price per dozen in YTD fiscal 1997 increased to
$20.57 from $20.18, primarily reflecting a mix change among product lines. There
were no significant pricing changes to the Company's customers during YTD fiscal
1997.
The sales declines reflected the implementation of the Company's
Business Plan which was designed, among other objectives, to eliminate
unprofitable products. Sales in YTD fiscal 1997 included $39.9 million of sales
resulting from the wind-down of discontinued products, which will not recur in
future periods. These sales of discontinued products were not included in the
Business Plan which reflected only sales of products that the Company intends to
continue selling.
Gross profit declined $3.0 million or 6.6% during YTD fiscal 1997
compared to YTD fiscal 1996; however, gross margin improved to 14.1% of sales
from 13.4% in the prior period, as product costs fell proportionately faster
than the sales decline. The improved gross margin was attributable to lower
costs from offshore sourcing of men's and boys' underwear and women's and girls'
underwear. In YTD fiscal 1997, the Company reduced its excess domestic
manufacturing capacity in the men's and boys' underwear, women's and girls'
underwear and outerwear T-Shirt divisions by closing plants. Approximately 1,500
manufacturing and overhead jobs were eliminated by these closings in YTD fiscal
1997. Women's hosiery was favorably impacted by improved production efficiency
and progress in eliminating unprofitable products.
The Company recorded a reversal in YTD fiscal 1997 of $3.0 million of
asset writedowns taken during Fiscal 1996 (related to recovery of receivables
previously identified as impaired assets) compared to provisions for workforce
reductions and assets writedown of $14.2 million in the YTD fiscal 1996 period.
Selling, general and administrative expenses decreased by $6.3
million (18.5%) in YTD fiscal 1997 to $27.7 million from $34.0 million in YTD
fiscal 1996, which represented a decrease from 10.9% as a percentage of sales in
YTD fiscal 1996 to 9.3% as a percentage of sales in YTD fiscal 1997. The primary
component of this decrease was lower employee related costs, resulting from
headcount reductions early in the fiscal 1997 period. Shipping expense was $2.0
million lower in the current period reflecting operation of the consolidated
distribution centers in the current period compared with the transition to these
distribution centers in the prior period and lower sales levels in YTD fiscal
1997 as compared to YTD fiscal 1996.
Interest expense, net of interest income, decreased to $17.5 million
for YTD fiscal 1997 compared to $22.0 million in fiscal 1996. The decrease in
YTD fiscal 1997 was due to nonaccrual of bondholder interest after August 29,
1996 ($3.2 million lower than YTD fiscal 1996) and lower average borrowings in
1997, partially offset by higher interest rates during the period.
Income tax expense in YTD fiscal year 1997 was 253.3% of income
before income taxes, compared to 35.3% in full year fiscal 1996. The increase is
due primarily to the provision for deferred tax liabilities resulting from tax
bases reductions in connection with the gain from the debt discharge associated
with the confirmation of the Plan of Reorganization and to the non-deductibility
of certain restructuring charges.
19
<PAGE>
COMPARISON OF FISCAL 1996 TO FISCAL 1995
Net sales declined 3.9% ($398.9 million) in fiscal 1996 from fiscal
1995 ($414.8 million). Men's and boys' underwear sales were down 1.7%, women's
and girls' underwear sales were down 12.6%, and women's hosiery sales were down
5.4% reflecting in part the increase in casual workplace attire and longer
lasting products. Outerwear T-shirt sales increased 6.2%. Unit volume was down
7.0%, with men's and boys' underwear down 4.3%, women's and girls' underwear
down 8.8%, and women's hosiery down 11.3%, partially offset by a 9.1% increase
in outerwear T-shirt volume. The average selling price per dozen in fiscal 1996
increased to $20.09 from $19.04, reflecting a mix change among product lines.
There were no significant pricing changes to the Company's customers during
fiscal 1996.
Gross profit decreased significantly ($28.0 million or 38%) during
fiscal 1996 compared to fiscal 1995. All product categories had decreased gross
profit during fiscal 1996, due to erratic demand, lower production volume and
manufacturing cost increases which were not offset by price increases. In
particular, lower sales, increased SKU's, and higher overhead costs resulted in
an operating loss in the branded women's hosiery line. Anticipating that the
weakness in the U.S. retail environment would persist, with severe pricing
pressures likely to continue or escalate with resulting adverse effect on the
Company's profitability, the Company undertook an extensive review of its
manufacturing capacities, overhead structure, product lines and customer base in
the third and fourth quarters of fiscal 1996 and the first and second quarters
of fiscal 1997.
As a result of the implementation of objectives formulated during
this review, the Company recorded provisions for workforce reduction and asset
write-downs of $51.6 million in fiscal 1996. Approximately $24.2 million of this
provision was related to cost of goods, including costs associated with a major
program sourced in the Far East. In fiscal 1996 the Company reduced its excess
domestic manufacturing capacity in the men's and boys' underwear, women's and
girls' underwear and outerwear T-shirt divisions by closing plants.
Approximately 1,100 manufacturing and overhead jobs were eliminated by these
closings in the 1996 fiscal year.
Selling, general and administrative expenses, excluding provisions
for workforce reductions and asset write-downs, increased by $6.4 million
(17.3%) in fiscal 1996 to $43.5 million from fiscal 1995. The primary component
of this increase was shipping expense, which increased by $2.5 million (27.1%),
due to non-recurring costs incurred in the relocation of both the men's and
boys' underwear and women's and girls' underwear distribution activities to new
facilities in fiscal 1996, while operating from inefficient temporary facilities
during much of the year. Professional and legal fees were approximately $3.1
million higher in fiscal 1996 compared to the prior year, related primarily to
costs associated with a proposed bank debt refinancing in the second and third
fiscal quarters of 1996 and the subsequent financial restructuring activities.
Interest expense, net of interest income, increased to $26.9 million
for fiscal 1996 compared to $23.1 million in fiscal 1995. The increase in fiscal
1996 was due to higher average borrowings in 1996 and higher interest rates
during the period.
The loss before income taxes generated an income tax benefit of $27.2
million in fiscal 1996, an effective rate of 35.3% compared to an effective rate
of 43% in fiscal 1995. The change in effective tax rate was primarily due to the
write-off in fiscal 1996 of certain intangibles which did not create any tax
benefit.
COMPARISON OF FISCAL 1995 TO FISCAL 1994
Net sales were essentially unchanged ($414.8 million) in fiscal 1995
from the previous fiscal year ($414.7 million). Men's and boys' underwear sales
increased (24.6%) and women's and girls' underwear (10.1%) sales increased in
fiscal 1995. However, these increases were offset by decreases in sales of
women's hosiery (12.2%) and outerwear T-shirts (23.7%). Overall dozens increased
by (1.8%) with increases in men's and women's underwear being largely offset by
decreases in women's hosiery and outerwear T-shirts. The largest decrease in
unit volume occurred in the outerwear T-shirt division (29%) and
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<PAGE>
was caused primarily by a decrease in unit sales to two major customers. The
average selling price per dozen decreased in fiscal 1995 to $19.04 from $19.33,
due to mix change among product lines.
Gross profit increased from $68.1 million in fiscal 1994 to $72.9
million in fiscal 1995 (7.0%). The increase was attributable to increases in
men's and boys' underwear and women's and girls' underwear and was a result of
higher dozens shipped in the current fiscal year as well as the reduction of
excess capacity. The reduction in capacity was accomplished during fiscal 1995
when the men's and boys' underwear product group began consolidating its
domestic cutting and distribution into a single facility and when management
reduced women's hosiery capacity by closing one of the Company's plants. No
material exit or post employment benefit costs were incurred as a result of
those plant closings. The Company also continued to expand its offshore
production and sourcing capabilities in fiscal 1995.
Selling, general and administrative expenses decreased to $37.1
million in fiscal 1995 from $39.7 million in the prior fiscal year (6.6%). This
decrease was a result of a $4.0 million bad debt write-off in fiscal 1994 which
was partially offset by higher marketing expenses in the 1995 fiscal year. There
were no significant bad debt write-offs in fiscal 1995.
Interest expense, net of interest income, was $23.1 million for
fiscal 1995 compared to $23.5 million in fiscal 1994. The decrease in fiscal
1995 was due to lower average debt levels, net of the effect of increased
interest rates during the period.
Income tax expense was 42.9% of income before income taxes in fiscal
1995 compared with 42% in fiscal 1994. In fiscal 1995 the Company settled its
outstanding disputes with the Internal Revenue Service with a tax payment of
$1.6 million, all of which was accrued in prior years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's existing Credit Agreement was amended and restated on
December 16, 1996. As of that date, the Credit Agreement provides for a term
loan facility ("Term Loan") of $55.0 million and a revolving loan facility of
$77.2 million. The revolving loan facility includes a sub-limit of $25.0 million
for the issuance of letters of credit. For thirty-day periods beginning in
December and May of each year, commitments under the revolving loan facility are
reduced to $63.0 million and $68.0 million, respectively, (the "Clean-Down
Periods"). As of March 14, 1997, the Company had $53.0 million of Term Loans
outstanding, $8.5 million of borrowings under its revolving loan facility, and
$7.6 million of outstanding letters of credit. The Company at March 14, 1997 had
$58.6 million available for borrowings under its revolving loan facility.
At November 22, 1996 the Company's working capital was $75.6 million
and the current ratio was 2.7:1. The Company reported a working capital deficit
at the end of fiscal 1996 because of the presentation of substantially all
outstanding debt as currently payable. The calculation of a current ratio under
such circumstance would not be meaningful. Working capital of $113.0 million as
of January 31, 1995 decreased by $10.2 million (8.3%) from $123.2 million as of
January 31, 1994. The current ratio was 3.9:1 as of January 31, 1995, compared
to 4.2:1 as of January 31, 1994.
Capital additions of $3.2 million during YTD fiscal 1997 were
primarily related to purchases of machinery and equipment and were substantially
below capital additions of $13.9 million during the full fiscal year 1996.
Capital additions of $13.9 million in fiscal year 1996 related principally to
the Company's new centralized distribution facilities and were significantly
above the additions of $8.5 million in fiscal 1995 and $8.9 million in fiscal
1994.
The Company's cash on hand as of November 22, 1996 was $1.3 million
compared with $10.4 million at January 31, 1996. This decrease in cash was used
to reduce outstanding bank borrowings during YTD fiscal 1997.
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Inflation has had only a minimal impact on the Company in the past.
The Company has minimized the impact of inflation on costs and expenses through
cost controls and increased manufacturing efficiency. The Company has at times
experienced some increase in the cost of labor, supplies, raw materials and
administrative expenses. The Company is not always able to promptly pass on cost
increases to its customers, principally due to timing of raw materials purchases
and customer orders as well as competitive pressures.
FINANCIAL CONDITION
On October 8, 1996 the company filed a voluntary petition for
reorganization under Chapter 11 with the Bankruptcy Court. The filing of the
voluntary petition resulted from a sequence of events stemming from the
Company's default under the Credit Agreement.
On December 16, 1996, the Company emerged from bankruptcy. Pursuant
to the Plan of Reorganization, the Company has repaid or will repay
substantially all of its secured and unsecured claims and indebtedness as
follows: General unsecured claims were or will be satisfied in the ordinary
course of business. Noteholder Claimants received the right to a pro rata share
of 10,000,000 shares of Ithaca Common Stock (representing, in the aggregate, all
of the outstanding shares of Ithaca Common Stock except for Common Stock issued
pursuant to the LTIP). Prior equity interests in the Company were cancelled,
annulled and extinguished. Administrative claims were or will be paid in full,
in cash, in the ordinary course of business. Tax claims were or will be paid in
full. Priority claims were or will be paid in full. The Credit Agreement was
amended and restated. General secured claims were or will be paid in full. Each
holder of an allowed general secured claim was either paid in full on the
Effective Date of the Plan of Reorganization (or the date upon which there is a
final order allowing such claim as an allowed secured claim), or was otherwise
to be rendered unimpaired.
BUSINESS PLAN
In the third and fourth quarters of fiscal 1996 the Company undertook
an extensive review of its manufacturing capacity, overhead structure, product
lines and customer base. The Company analyzed its strategic plans in connection
with the utilization of its plants located in Honduras, as well as obtaining
products from other foreign sources. These efforts resulted in the promulgation
of the Business Plan which the Company is in the process of implementing. In
general, to enhance its performance and reduce overhead expenses, the Company
consolidated its distribution centers and production capacity to increase
efficiencies, consolidated certain plants to off-shore facilities and
accelerated the process of moving more sewing operations off-shore. As part of
the implementation of the Business Plan, the Company has terminated certain real
property leases and unprofitable license agreements, and made certain payments
in connection therewith. In addition, the Company reduced the number of styles
and products it had been producing, eliminated certain unprofitable customers
and product lines, began the process of establishing Far East outsourcing
capability, and closed selected plants. Beginning in fiscal 1998, the Company
has been unable to obtain the level of sales revenue from new programs
anticipated by the Business Plan and therefore may not be able to achieve the
Operating Results set forth in the Business Plan. The Company believes this
resulted from customers' reluctance to place new or additional programs with the
Company while it was implementing its financial restructuring as well as
increased pressure from the Company's competitors to place programs with both
existing and potential new customers.
The Company has previously made its Business Plan, which contained
projections regarding the Company's future net sales and operating income,
publicly available. Projections contained in the Business Plan were not prepared
with a view to complying with published guidelines of the Commission nor with
the accounting profession's principles regarding projections. In addition, such
information was based on a number of assumptions and was subject to significant
uncertainties and contingencies, many of which are beyond the Company's control.
Further, the Business Plan did not reflect any tax expense or credits during the
projection period, and utilized asset and liability valuations from the
Company's Historical Financial Statements, modified for the impact of the
exchange of the Notes for equity and the resultant elimination of
bondholder interest during the projection period. Such information does not
reflect the impact of "Fresh Start" accounting rules, does not conform to
generally accepted accounting principles, and constitutes Forward Looking
Statements under the Reform Act as discussed in "Risk Factors--Forward Looking
Statements" and in the "Special Note Regarding Forward-Looking Statements"
included prior to Part I of the Company's 1996 10-K.
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BUSINESS
GENERAL
Ithaca is a leading designer, marketer and manufacturer of private
label men's and boys' underwear and outerwear T-shirt products, women's and
girls' underwear and women's hosiery. The Company believes it is the largest
manufacturer of private label underwear and women's hosiery products in the
United States, operating distribution and manufacturing facilities in the
Southeastern United States and off-shore manufacturing facilities in Central
America. The key elements of the Company's strategy are suppling a wide variety
of product offerings at a number of price points, maintaining a strong presence
in multiple channels of distribution, maintaining close customer relationships
by developing products and programs that suit individual customer needs, and
maintaining a low cost and flexible manufacturing capability.
PRODUCTS AND SALES
The Company's three principal product lines are (1) men's and boys'
underwear and outerwear T-shirts, (2) women's and girls' underwear and (3)
women's hosiery. The Company offers a large selection of products in a wide
range of styles, sizes and colors. Ithaca has worked closely with its customers
over the years to develop a wide variety of products in each of its product
lines to meet the needs of retailers in varied distribution channels. The
Company's offerings within each product line range from lower priced goods sold
by supermarkets and discount stores to higher quality, higher priced styles sold
by department stores. Management believes that this product breadth gives it a
competitive advantage over other U.S. private label manufacturers who do not
offer such a wide selection, and over foreign manufacturers who generally are
not as capable of providing prompt delivery on a broad range of products.
Ithaca's products are sold through a wide range of retail distribution channels
and are offered to the public through more than 10,000 customer outlets,
including discount stores, department stores, specialty stores, drug stores and
supermarkets
MEN'S AND BOYS' UNDERWEAR AND OUTERWEAR T-SHIRTS
Ithaca designs and manufactures over 160 styles of crew-neck
T-shirts, V-neck T-shirts, briefs, athletic shirts and fashion underwear for its
line of men's and boys' underwear. Ithaca also designs and manufactures over 30
styles of tank top shirts, mock turtleneck shirts, white and colored pocket
T-shirts and white and colored T-shirt blanks for screen printing for its
T-shirt product line. Products are made of 100% cotton, cotton and polyester
blends and, for fashion underwear, nylon.
Men's and boys' underwear accounted for approximately 41% of the
Company's net sales in the 42- week period ended November 22, 1996, 36% in
fiscal 1996, 35% in fiscal 1995 and 28% in fiscal 1994.
Outerwear T-shirt sales accounted for approximately 16% of the Company's net
sales in the 42-week period ended November 22, 1996, 16% in fiscal 1996, 15% in
fiscal 1995 and 19% in fiscal 1994.
WOMEN'S AND GIRLS' UNDERWEAR
Ithaca designs and manufactures over 100 styles of briefs, hip
huggers and bikini panties for its line of women's and girls' underwear.
Women's and girls' underwear sales accounted for approximately 17% of
the Company's net sales in the 42-week period ended November 22, 1996, 19% in
fiscal 1996, 21% in fiscal 1995 and 19% in fiscal 1994.
WOMEN'S HOSIERY
Ithaca designs and manufactures over 130 styles of regular sheer
pantyhose, control top and support pantyhose, knee-highs and stockings for its
line of women's hosiery for women. Women's hosiery sales
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accounted for approximately 24.5% of the Company's net sales in the 42-week
period ended November 22, 1996, 27% in fiscal 1996, 28% in fiscal 1995 and 32%
in fiscal 1994.
RAW MATERIALS
The principal materials used in the Company's production of goods are
cotton, polyester, nylon and spandex yarns as well as tricot and powernet
fabrics. The Company does not produce its own yarns and believes that purchasing
yarns from the wide range of available sources in the United States is
cost-effective. Ithaca also purchases dyestuffs and packaging materials. The
Company is not always able to promptly pass on to its customers price increases
in raw materials principally due to the timing of raw material purchases and
customer orders as well as competitive conditions.
Management believes its sources of raw materials are adequate and
does not currently anticipate difficulty in obtaining raw materials to meet
needs. The Company has not experienced any significant shortages of raw
materials during the past 30 years.
MANUFACTURING AND SOURCING
Ithaca manufactures its products at 16 plants in the southeastern
United States and Central America, and sources a portion of its products from
contractors located in other countries throughout the world. Goods typically are
produced in anticipation of customer demand and the Company maintains a general
inventory which turned over 3.6 times in the 42-week period ending November 22,
1996. In both its women's hosiery and fabric production facilities, Ithaca has
the flexibility to shift its manufacturing processes easily among many styles,
colors and sizes in response to changes in demand. Approximately half of the
Company's men's and boys' products are assembled off-shore from components that
are cut in the United States. Less than one-fifth of women's and girls'
underwear are produced off-shore and the Company is vigorously exploring
opportunities to increase its off-shore sourcing for these products. Essentially
all of the Company's women's hosiery products are produced domestically.
Management is continually evaluating opportunities to reduce costs by performing
more of its production processes offshore and the Company may increase the
amount of foreign production in the future, if advantageous.
TRADEMARKS, LICENSES AND PATENTS
Ithaca's products are predominantly sold under the private label
names or trade names of its customers. The Company usually seeks to obtain
trademark registration protection for those private label names developed by the
Company, although such protection generally is not as critical as with branded
products. The Company has registered over 46 trademarks in the United States,
and has 3 trademark applications pending as of December 3, 1996.
Ithaca has license agreements permitting it to manufacture and sell
specific underwear products using the trademarks of others. The Company has the
exclusive U.S. license from Hang Ten International to use the Hang Ten trademark
on men's and boys' underwear through January 31, 1999. The Company has the
exclusive U.S. license from John Weitz Inc. to use the John Weitz trademark on
specified underwear products for men and boys through September 30, 1997. Ithaca
has a license agreement with International Licensing Corporation to use the
Lightning Bolt trademark on specified underwear products for men through January
31, 1999. The Company has exclusive U.S. licenses from Salant Corporation to use
the Lady Manhattan trademark on specified women's underwear products through
December 31, 1999. Ithaca holds a patent for an Automatic Labelling Machine &
Method which expires on February 3, 2001.
The Company does not believe that the loss of any trademark or
license with respect to any product or products or the expiration or
invalidation of any patent would have a material adverse effect on the overall
business of the Company.
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DELIVERY REQUIREMENTS
All purchase orders are taken for current delivery and the Company
has no long-term sales contracts with any customer, or any contract entitling
Ithaca to be the exclusive supplier of merchandise to any retailer. The
Company's standard payment terms are net 30 days and are shipped
F.O.B.--distribution center.
SEASONALITY
The Company does not regard its overall business as highly seasonal.
IMPORTANCE OF MAJOR CUSTOMERS
For the 42-week period ended November 22, 1996, J.C. Penney accounted
for approximately 47% of the total net sales of the Company, compared to nearly
42% in fiscal 1996, 44% in fiscal 1995 and 41% in fiscal 1994. Wal-Mart
accounted for approximately 9% of total net sales for the 42-week period ended
November 22, 1996, compared to approximately 11% in fiscal 1996, 13% in fiscal
1995, and 12% in fiscal 1994. No other customers accounted for 10% or more of
net sales in the 42-weeks ending November 22, 1996 or in fiscal 1996, 1995 or
1994. Although the Company's reliance on its major customers has generally
decreased over the last ten years, the loss of a material amount of sales to
J.C. Penney, or a decline in J.C. Penney's business, or the loss of one of the
Company's other major customers would have a material adverse effect on Ithaca's
Results of Operations.
BACKLOG
The dollar amount of backlog of orders believed to be firm as of
November 22, 1996 and as of the end of fiscal 1996 is not material for an
understanding of the business of the Company.
COMPETITION
The women's hosiery and underwear markets in the United States are
highly competitive. The Company's products compete with products manufactured by
other private label suppliers as well as with products manufactured under
recognized name brands.
Ithaca believes it is the largest manufacturer of private label
merchandise in each of its three principal product lines, offering a broad
selection of styles, sizes and colors. The private label underwear and women's
hosiery products business is generally comprised of small scale, privately owned
companies with limited product lines. However, management is aware of several
large private label manufacturers with substantial resources. Ithaca's principal
private label competitors include: Beltex, Springford, Nantucket, Oneita, Tultex
and Delta Woodside in men's and boys' underwear or outerwear T-shirts;
Fitzgerald and Wundies Industries Inc. in women's and girls' underwear; and
Americal Corp., Glendale Hosiery Company, Inc. and Acme-McCrary Corp. in women's
hosiery.
The supply of branded underwear and women's hosiery products is
dominated by a few large manufacturers, some of which have substantially greater
financial resources and market recognition than Ithaca. Many of these
manufacturers also produce some private label underwear and women's hosiery
products. The Company's largest competitors among branded product manufacturers
are: Jockey International Inc. ("Jockey" and "Jockey for Her" brands), Sara Lee
Corp. ("Hanes" and "Hanes Her Way" brands) and Fruit of the Loom, Inc. ("Fruit
of the Loom" and "BVD" brands) in underwear; and Sara Lee Corp. ("Hanes" and
"L'eggs" brands), Kayser-Roth Corp. ("No Nonsense" brand) and Pennaco Hosiery
Inc. ("Round the Clock" brand) in women's hosiery.
Competition in the underwear and women's hosiery products market is
generally based on price, quality and service. The Company believes that it has
an advantage over other private label suppliers because it offers marketing
services to retailers implementing private label programs.
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IMPORTS
Ithaca's products compete with goods produced worldwide. Trade
association data available to the Company suggests that imported goods,
including offshore assembly of domestically cut garments, represented
approximately 36.5% of the total retail sales of men's and boys' underwear in
calendar 1996, up from 26.4% in calendar 1995, represented 51.7% of women's and
girls' panties compared with 45.4% in the prior year, and represented 13.1% of
sheer hosiery and tights versus 8.4% in calendar 1995. Reliable data on sales of
imported T-shirts is not believed to be available; however, retail sales of
men's and boys' knit sport shirts was reported to be 52.8% imports in calendar
1996 versus 49.3% in the prior year. The Company believes that it is important
to have the capability of sourcing a portion of its products from outside the
United States. The Company has consolidated certain plants to off-shore
facilities and has accelerated the process of moving more sewing operations
off-shore. The Company has established four Honduran subsidiaries which operate
three sewing plants in that country, primarily for men's and boys' underwear and
outerwear T-shirts. With respect to women's and girls' underwear, Ithaca has
begun the process of establishing Far East sourcing capability. The Company's
ability to utilize foreign sourcing is dependent on the absence of political or
economic disruptions, quotas, labor disruptions, embargoes or currency
fluctuations in the countries in which the Company sources its products.
ENVIRONMENTAL MATTERS
The Company believes that its facilities and operations are
substantially in compliance with current federal, state and local regulations
regarding safety, health and environmental pollution. Ithaca generally has
experienced no difficulty in complying with these regulations and such
compliance has not had a material adverse effect on the Company's capital
expenditures, earnings or competitive position.
EMPLOYEES
The Company employed approximately 7,900 people as of February 1,
1997, of which approximately 7,400 were engaged in manufacturing and
approximately 500 were engaged in managerial, administrative or sales and
marketing functions. None of the Company's employees are covered by a collective
bargaining agreement. The Company considers its relations with employees to be
satisfactory and has never experienced any interruption of operations due to
labor disputes.
PROPERTIES
The Company owns its corporate headquarters in Wilkesboro, North
Carolina. The Company leases sales offices in New York City and Dallas, Texas.
The Company manufactures and distributes much of its women's and girls'
underwear at its owned Cairo, Georgia facility, and maintains three additional
owned sewing facilities in the Southeastern United States. Cutting and
distribution for men's and boys' underwear and T-shirt products takes place at
an owned centralized distribution and cutting facility in Vidalia, Georgia.
Men's and boys' underwear and outerwear T-shirts are sewn in four owned plants
in the Southeastern United States and at 3 facilities leased by the Company in
Honduras. The Company manufactures and distributes its women's hosiery products
at two owned facilities in North Carolina. Fabric for use in the Company's
underwear and T-shirt products is knit and finished at the Company's owned
facility in Gastonia, North Carolina and narrow fabrics, such as waistbands, are
manufactured at an owned facility in Graham, North Carolina. The Company also
utilizes leased storage facilities at several plant locations. All of the
Company's facilities are kept in good repair and have well-maintained equipment.
LEGAL PROCEEDINGS
From time to time the Company is involved in legal proceedings
relating to claims arising out of its operations in the normal course of
business. The Company believes that there are no material legal proceedings
pending or threatened against the Company or any of its properties.
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DIRECTORS AND MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Walter J. Branson 35 Director
Peter C. Cheston 38 Acting Chief Operating Officer
Marvin B. Crow 65 Director
Francis Goldwyn 43 Director
Morton Handel 62 Director
Eric N. Hoyle 49 Senior Vice President-Finance and Administration,
Secretary, Chief Financial Officer
David H. Jones 54 Executive Vice President-Sales
R. Dean Riggs 45 Executive Vice President-Operations
Jim D. Waller 56 Chairman of the Board, Chief Executive Officer,
President, Director
David N. Weinstein 38 Director
James A. Williams 54 Director
</TABLE>
Walter J. Branson was elected as a member of the post-reorganization
Board of Directors. Mr. Branson is currently Senior Vice President of
Development of the Big Party Corp. He joined the retailing firm as Vice
President of Development in 1996. From 1993 to 1996, Mr. Branson was the Chief
Financial Officer for CWT Specialty Stores. From 1989 to 1992, Mr. Branson was
employed by Executive Life Insurance as an Investment Manager.
Peter C. Cheston joined the Company in November 1995, temporarily, as
Acting Chief Operating Officer. Mr. Cheston is a Managing Director at Alvarez &
Marsal, Inc. a turnaround management firm, with whom he has been employed since
1985. It is anticipated that he will resign from this position at such time as
determined by the Board of Directors.
Marvin Crow was elected as a member of the post-reorganization Board
of Directors. At present, Mr. Crow serves on the Board of Directors of Dyersberg
Corporation, National Spinning Company, The Bibb Company and Ameritex Yarn
Corporation and works as a consultant for National Spinning Company, Texfi
Industries, Inc., Fortsmann & Company, Inc. and Charles Craft. Mr. Crow is also
actively involved with KBO Enterprises, Inc. Established by his family in 1989,
KBO Enterprises is involved in video rental, fitness, and TCBY Yogurt stores in
the Carolinas.
Francis Goldwyn was elected as a member of the post-reorganization
Board of Directors. Since 1993 Mr. Goldwyn has been a principal of Chapman
Management Inc., a provider of strategic operating and financial consulting
services. From 1991 to 1992, Mr. Goldwyn served as an Executive Vice President
with the Gitano Group, Inc.
Morton Handel was elected as a member of the post-reorganization
Board of Directors. Presently, Mr. Handel is a director of CompUSA and
Concurrent Computer Corporation and President of S&H Consulting Ltd. Mr. Handel
has served as a director of Concurrent Computer Corporation since 1991. S&H
Consulting Ltd. provides strategic operating and financial consulting services.
Mr. Handel served as a member of the Management Committee of Remington Products
Company, a consumer products manufacturer, from 1992 to 1996.
Eric N. Hoyle joined the Company in January 1994 as Senior Vice
President--Finance and Administration and Chief Financial Officer. Mr. Hoyle was
previously employed by Bali Company, a
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manufacturer and marketer of Intimate Apparel from 1980 to 1994, most recently
as Chief Financial Officer and Vice President Finance and Administration. Mr.
Hoyle is a Certified Public Accountant.
David H. Jones joined the Company in January 1997 as Executive Vice
President-Sales. Prior to joining Ithaca, Mr. Jones was with Gerber
Childrenswear, Inc. where he served as President and CEO from 1994 to 1996 and
as Vice President-Sales from 1991 to 1994. Mr. Jones has over 25 years
experience in the apparel business.
R. Dean Riggs joined the Company in August, 1996 as Executive Vice
President-Manufacturing. Mr. Riggs was previously employed by Sara Lee Knit
Products from 1974 to 1996. His most recent assignments included Vice
President-Operations Planning and Vice President-Manufacturing & Operations in
the Casual Wear Division.
Jim D. Waller has served as Chief Executive Officer since April 1991.
Mr. Waller joined Anderson Hosiery as Vice President--Marketing in 1968 and
became Vice President--Marketing of Ithaca upon its acquisition of Anderson
Hosiery from Collins and Aikman in 1982. Mr. Waller was elected a director in
January 1985, President in June 1987 and Chairman of the Board in March 1995.
Mr. Waller has served as President and a director of Holdings between January
1992 and the Effective Date of the Plan of Reorganization and as Chairman
between March 1995 and the Effective Day of the Plan of Reorganization.
David N. Weinstein was elected as a member of the post-reorganization
Board of Directors. Mr. Weinstein is a Managing Director in the High Yield
Department at BancBoston Securities, Inc. Mr. Weinstein was Head of the High
Yield Capital Market Group at Chase Securities, Inc. and a Managing Director of
the firm from 1993 to 1996. From 1990 through 1993, Mr. Weinstein served in
various roles at Lehman Brothers/Smith Barney Shearson including as Head of the
Capital Markets Group in the High Yield Department at Lehman Brothers and as
Director of the High Yield/Private Finance Group at Smith Barney Shearson.
James A. Williams was elected as a member of the post-reorganization
Board of Directors. Mr. Williams is the President and Chief Executive Officer of
Great American Knitting Mills and has served in that capacity since 1991. Mr.
Williams joined Great American Mills as Senior Vice President of Sales and
Marketing in 1985. From 1970 through 1985, Mr. Williams was employed by
Adams-Mill Hosiery Company, first as a Sales Manager and later as Senior Vice
President-Sales & Marketing.
Pursuant to the Plan of Reorganization, the Board of Directors of the
Company consists of seven (7) directors, one of whom is Jim D. Waller. The term
of office of each director will expire at the first annual meeting of
stockholders of the Company next following the Company's fiscal year ending
January 31, 1998. Directors of the Company hold office until their successors
are elected and qualified, or until their earlier resignation or removal. Each
executive officer is appointed by the Board of Directors for a term specified by
the Board, or until his or her earlier resignation or removal.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has established an Audit
Committee and a Compensation and Stock Option Committee.
The Audit Committee is responsible for meeting with representatives
of the Company's independent certified public accountants and financial
management to review accounting, internal control, auditing and financial
reporting matters, and is also responsible, among other things, for maintaining
liaison with and exercising such supervision of the actions of said accountants
in whatever manner and to whatever extent shall be deemed, at its discretion,
necessary, proper and in the best interest of the Company and its stockholders.
The Audit Committee consists of Messrs. Crow, Goldwyn and Handel, three
Directors who are not and never have been employees of the Company.
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The Compensation and Stock Option Committee is responsible for
reviewing and approving officer and executive salaries and for reviewing and
recommending for approval by the Board of Directors executive and key employee
compensation plans, including incentive compensation and other benefits, and
consists of Messrs. Branson, Weinstein and Williams, all of whom are not and
never have been employees of the Company.
DIRECTOR COMPENSATION
Other than $21,909 paid to F. Richard Redden, a director of the
Company until the Effective Date of the Plan of Reorganization, non-employee
Directors received no remuneration for serving on the Board of Directors during
fiscal 1997. Currently, non-employee Directors of the Company (Messrs. Branson,
Crow, Goldwyn, Handel, Weinstein and Williams) are paid retainer fees of $20,000
per year. Each non-employee Director also receives a fee of $1,500 for each day
of board or committee meetings attended. The Company and its subsidiaries do not
pay fees to Directors who are employees of any of the Company and its
subsidiaries.
EXECUTIVE COMPENSATION
The following table sets forth a summary of compensation for services
rendered in all capacities for the three fiscal years ended January 31, 1997 for
the Chief Executive Officer, the three other most highly compensated executive
officers of the Company and two executives for whom disclosure would be required
but for the fact that they were not employed by the Company at the end of the
last completed fiscal year.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
Number of
Securities
Underlying All Other
Options Compensation
NAME AND POSITION YEAR SALARY BONUS (2) (3) (4)
----------------- ---- ------ --------- ----- ---------
<S> <C> <C> <C> <C> <C>
J.D. Waller 1997 $490,988 $ -0- 273,224 $1,219
Chairman, President and 1996 $490,984 -0- -0- 1,219
Chief Executive Officer 1995 480,413 316,130 -0- 1,079
N.J. Wehrmann(5) 1997 206,583 -0- -0- 1,219
Executive Vice President - 1996 206,583 -0- -0- 1,219
Manufacturing 1995 202,194 88,060 -0- 1,092
G.P. Felten(6) 1997 123,384 -0- -0- 660
Senior Vice President - 1996 217,000 -0- -0- 1,219
Sales & Marketing 1995 214,000 88,514 -0- 1,651
E.N. Hoyle 1997 190,500 -0- 65,000 1,219
Senior Vice President - 1996 190,000 -0- -0- 1,544
Finance and Administration, 1995 180,847 82,032 -0- 64
Chief Financial Officer
</TABLE>
30
<PAGE>
- --------------------
(1) As the Company had only three executive officers (other than the Chief
Executive Officer), only such three executive officers are included in this
table and the other tables in "Executive Compensation." Mr. Peter C.
Cheston, Acting Chief Operating Office of the Company, receives no salary
directly from the Company. Mr. Cheston receives remuneration from Alvarez &
Marsal, Inc., with whom he is employed. See "Consulting Arrangements."
(2) The Company anticipates awarding bonuses for fiscal 1997 on or before April
15, 1997.
(3) Represents options to purchase shares of common stock of the Company
pursuant to the Company's LTIP.
(4) The amounts reported in this column represent the Company's matching
contributions for the account of the named executive officers pursuant to
the Company's Employee Retirement Savings Plan (the "401(k) Plan").
(5) Mr. Wehrmann's employment with the Company terminated in August, 1996. He
has since been replaced by R. Dean Riggs.
(6) Mr. Felten's employment with the Company terminated in August, 1996. He has
since been replaced by David H. Jones.
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<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR/1/
<TABLE>
<CAPTION>
% of Total
Number of Options/SARs Potential Realizable Value at Assumed
Securities Granted to Exercise or Annual Rates of Stock Price Appreciation
Underlying Employees in Base Price Expiration for Option Term
Name Options Granted Fiscal Year ($/Sh) Date (5%) ($) (10%) ($)
- ---------------- ---------------- ------------------ --------------- ------------ -------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
J.D. Waller 273,224 34.58% $6.00 1/23/07 $1,030,874 $2,612,692
E.N. Hoyle 65,000 8.23% $6.00 1/23/07 $245,245 $621,560
All Employees 790,224 100.00% $6.00 1/23/07 $2,981,515 $7,556,481
as a group
</TABLE>
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company entered into an employment agreement with Jim D. Waller
in February, 1997 (the "Employment Agreement"). The Employment Agreement, which
expires on December 31, 1999, calls for Mr. Waller to serve as the Company's
Chief Executive Officer, at an annual base salary of $490,000. Mr. Waller is
eligible to participate in the Company's Cash Bonus Plan and the Company's LTIP.
If Mr. Waller's employment is terminated during the term of the
Employment Agreement, he will be entitled to receive his base salary until
termination. If such termination is without cause (defined as gross negligence
that is materially detrimental to the Company; wilful, material, continued and
bad faith failure to perform and discharge his duties and responsibilities or
conviction of a felony involving personal dishonesty) or if Mr. Waller resigns
for good reason (defined as either a failure to re-elect him as Chief Executive
Officer, an assignment of duties significantly different from Chief Executive
Officer, a material limitation of the powers of Chief Executive Officer, a
reduction in base salary, relocation from Wilkesboro, North Carolina or a
failure to obtain the assumption of the Employment Agreement by a successor),
until the expiration of the Employment Agreement, Mr. Waller will be entitled to
receive 65% of his base salary if his employment terminates during the fiscal
year ending in the third year prior to the expiration date, 80% of his base
salary if his employment terminates during the fiscal year ending in the second
year prior to the expiration date and 100% of his base salary if his employment
is terminated thereafter. In the case of Mr. Waller's death during the term of
the Employment Agreement, his designee, estate, personal or legal
representative, as the case may be, shall be entitled to receive his then
current base salary until the earlier of one year or the date of expiration of
the Employment Agreement. If Mr. Waller is mentally or physically incapacitated
during the term of the
- -----------
/1/ All options granted in fiscal 1997 are exercisable at a strike price of
$6.00 which the Company's Board of Directors determined to be approximately
equal to the fair market value of the Common Stock at the time of grant.
Approximately 16.67% of the options awarded will vest at the end of each of
fiscal 1997, fiscal 1998 and fiscal 1999. Up to an additional 16.67% of the
options will vest approximately 45 days after the end of each of fiscal
1997, fiscal 1998 and fiscal 1999, with the number of options vesting linked
to the achievement of certain performance goals related to EBITDA, subject
to the discretion of the Compensation and Stock Option Committee in
accordance to the terms of the LTIP. See "Employment and Consulting
Agreements." Assuming the officers' continued employment with the Company,
the options will expire on the tenth anniversary of the date of grant.
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<PAGE>
Employment Agreement and is unable to perform his duties, he will be entitled to
receive 50% of his base salary until the earlier of one year after his
replacement or the expiration of the agreement.
The Employment Agreement contains restrictions on disclosure by Mr.
Waller of confidential information and restricts Mr. Waller's right to compete
with the Company anywhere the Company does business during the term of his
employment and for 24 months thereafter. As described above, the Employment
Agreement is terminable upon the death of Mr. Waller, by the Company for cause,
upon disability or by Mr. Waller under certain circumstances. In addition,
unless Mr. Waller's employment is terminated for cause by the Company, or Mr.
Waller terminates his employment other than for good reason, (as previously
defined) Mr. Waller is entitled to continue to participate in all group health,
medical and employee benefits plans and programs to which he was previously
entitled for the remaining term of the Employment Agreement.
The Company has also entered into a one-year Management Agreement
with Alvarez & Marsal, Inc. pursuant to which Mr. Peter Cheston will serve as
the Company's Acting Chief Operating Officer at a monthly fee of $35,000
(subject to downward adjustment upon the mutual agreement of Mr. Cheston and
Ithaca if Mr. Cheston devotes less than ninety percent of his time to the
management of Ithaca). In addition, pursuant to the Management Agreement,
Alvarez & Marsal, Inc. received an option to purchase 109,290 shares of the
Company's capital stock as of January 24, 1997 and is eligible to participate in
the Cash Bonus Plan (as defined below). The Management Agreement is terminable
by Ithaca upon 30 days notice. The Management Agreement also provides for
certain customary indemnifications by the Company of Alvarez and Marsal, Inc.
and its directors, officers, agents and affiliates for actions arising out of
Alvarez and Marsal, Inc.'s performance under the Management Agreement. Alvarez
and Marsal, Inc. will not be entitled to indemnification if the action results
from willful misconduct or gross negligence on the part of Alvarez and Marsal,
Inc.
Approximately 150 employees, as recommended by management, are
eligible to participate in the Cash Bonus Plan. In fiscal 1997, up to $1.5
million, may be distributed under the Cash Bonus Plan if certain Business Plan
targets are achieved. The Board of Directors has the discretion to increase the
amount available under the Cash Bonus Plan. Under the provisions of the Cash
Bonus Plan, 85% of the amount available for cash bonuses will be paid out if 85%
of the target performance level is achieved and will be increased pro rata as
actual performance meets or equals up to 115% of the Business Plan targets.
Ithaca has implemented the Ithaca Industries, Inc. 1996 Long-Term
Stock Incentive Plan (previously defined as the "LTIP"), to be administered by
the Compensation and Stock Option Committee comprised of two or more members of
the Board each of whom is intended to be a "Director" (within the meaning of
Rule 16b-3 promulgated under the Securities and Exchange Act of 1934) and an
"outside director" (within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code") Section 162 (m)) although, the mere fact that the
Compensation and Stock Option Committee does not consist of non-employee
Directors and outside directors will not invalidate any awards made by it. Any
officer, other key employee or consultant to the Company or any of its
subsidiaries who is not a member of the Compensation and Stock Option Committee
is eligible to participate in the LTIP. The Compensation and Stock Option
Committee has the sole and complete authority to determine the participants to
whom awards shall be granted ("Participant" or "Participants").
The LTIP authorizes the grant of awards to participants with respect
to a maximum of 928,962 shares of the Company's Common Stock, which awards may
be made in the form of (a) nonqualified stock options, (b) stock options
intended to qualify as incentive stock options under Section 422 of the Code,
(c) stock appreciation rights, (d) restricted stock and/or restricted stock
units, (e) performance awards, and (f) other stock based awards. In any calendar
year, a Participant may not receive stock options or stock appreciation rights
for more than 273,224 of the Company's shares. No more than 109,290 shares of
Common Stock or the equivalent cash value thereof, may be paid to a Participant
in connection with the settlement of any award(s) designated as a Performance
Compensation Award (as defined below) in respect of a single performance period.
Any Performance Compensation Award that is deferred shall not (between the date
that the award is deferred and the payment date), increase (i) with respect to
an award payable in cash, by a measuring factor for each fiscal year greater
than a reasonable rate of interest set by the Compensation and Stock Option
Committee or (ii) with respect to an award payable in shares of the Company, by
an amount greater than the appreciation of a share of the
33
<PAGE>
Common Stock from the date such award is deferred to the payment date. If any
award granted under the LTIP is forfeited, or if an award has expired,
terminated or been cancelled for any reason whatsoever (other than by reason of
exercise or vesting), then the shares of Common Stock covered by such award may
be granted to another Participant pursuant to the terms of the LTIP, to the
maximum extent permitted under Section 162(m) of the Code.
Stock options intended to qualify as incentive stock options will be
subject to terms, conditions and such rules as may be prescribed by Section 422
of the Code. Additionally, non-qualified and incentive stock options granted
under the LTIP shall be subject to such terms, including exercise price and
conditions and timing of exercise, as may be determined by the Compensation and
Stock Option Committee and specified in the applicable award agreement. Payment
in respect of the exercise of an option granted under the LTIP may be made (a)
in cash, (b) its equivalent, or if and to the extent permitted by the
Compensation and Stock Option Committee and subject to such rules as may be
established by the Compensation and Stock Option Committee, (c) by exchanging
Common Stock owned by the optionee (which are not the subject of any pledge or
other security interest and which have been owned by such optionee for at least
6 months), (d) through the delivery of irrevocable instructions to a broker to
sell the Common Stock being acquired upon exercise of the option and to deliver
promptly to the Company an amount equal to the aggregate exercise price or (e)
by a combination of the foregoing, provided that the combined value of all cash,
cash equivalents and the fair market value of shares of Common Stock so tendered
to the Company (as of the date of such tender) is at least equal to the
aggregate exercise price of the option.
Stock appreciation rights granted under the LTIP may not be
exercisable earlier than six months after the date of grant but shall otherwise
be subject to such terms, including grant price and conditions and limitations
applicable to exercise as may be determined by the Compensation and Stock Option
Committee and specified in the applicable award agreement. Stock appreciation
rights may be granted in tandem with another award, in addition to another
award, or freestanding and unrelated to another award. A stock appreciation
right shall entitle the Participant to receive an amount equal to the excess of
the fair market value of a share of Common Stock over the grant price on the
date of exercise thereof. The Compensation and Stock Option Committee shall
determine whether a stock appreciation right shall be settled in cash, Common
Stock or a combination of cash and Common Stock.
Restricted stock and restricted stock units granted under the LTIP
shall be subject to such terms and conditions as may be determined by the
Compensation and Stock Option Committee in its sole discretion, including,
without limitation, the duration of the period during which, and the conditions,
if any, under which, the restricted stock and restricted stock units may be
forfeited to the Company. Each restricted stock unit shall have a value equal to
the fair market value of a share of Common Stock. Upon the lapse of the
restrictions applicable thereto, or otherwise in accordance with the applicable
award agreement, restricted stock units shall be paid in cash, shares of Common
Stock, other securities or other property, as determined in the sole discretion
of the Compensation and Stock Option Committee. Dividends paid on any shares of
restricted stock may be paid directly to the participant, withheld by the
Company subject to vesting of the restricted shares, or may be reinvested in
additional shares of restricted stock or in additional restricted stock units,
as determined by the Compensation and Stock Option Committee in its sole
discretion.
Performance awards granted under the LTIP shall consist of a right
denominated in cash or shares of Common Stock, payable at such time and in such
form as the Compensation and Stock Option Committee shall determine, payable in
amounts determined by the Compensation and Stock Option Committee, based upon
the achievement of such performance goals during such performance periods as the
Compensation and Stock Option Committee shall establish. Subject to the terms of
the LTIP and any applicable award agreement, the Compensation and Stock Option
Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
performance award and the amount and kind of any payment or transfer to be made
pursuant to any performance award. Performance awards may be paid in a lump sum
or in installments following the close of the performance period or, in
accordance with procedures established by the Compensation and Stock Option
Committee, on a deferred basis.
34
<PAGE>
In addition to the foregoing types of awards, the Compensation and
Stock Option Committee shall have the authority to grant to Participants an
"Other Stock-Based Award", which shall consist of any right which is (a) not a
stock option, stock appreciation right, restricted stock or restricted unit
award or performance award, and (b) an award of shares of Common Stock or an
award denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of Common Stock (including, without
limitation, securities convertible into shares of Common Stock), as deemed by
the Compensation and Stock Option Committee to be consistent with the purposes
of the LTIP; provided that any such rights must comply, to the extent deemed
desirable by the Compensation and Stock Option Committee, with Rule 16b-3 and
applicable law. Subject to the terms of the LTIP and any applicable award
agreement, the Incentive Plan Committee shall determine the terms and conditions
of any such other stock-based award, including the price, if any, at which
securities may be purchased pursuant to any other stock-based award granted
under the LTIP. In the sole and complete discretion of the Compensation and
Stock Option Committee, an award, whether made as any other stock-based award or
as any other type of award issuable under the LTIP, may provide the participant
with dividends or dividend equivalents, payable in cash, shares of Common Stock,
other securities or other property on a current or deferred basis.
The Compensation and Stock Option Committee shall also have the
discretion to designate any award as a "Performance Compensation Award." While
awards in the form of stock options and stock appreciation rights are intended
to qualify as "Performance-Based Compensation" under Section 162(m) of the Code,
provided that the exercise price or the grant price, as the case may be, is
established by the Compensation and Stock Option Committee to be equal to the
fair market value per share of Common Stock as of the date of grant, this form
of award enables the Compensation and Stock Option Committee to treat certain
other awards under the LTIP as Performance Based Compensation and thus preserve
deductibility by the Company for federal income tax purposes of such awards
which are made to participants in the LTIP.
Each Performance Compensation Award shall be payable only upon
achievement over a specified performance period of a duration of at least one
year of a pre-established objective performance goal established by the
Compensation and Stock Option Committee for such period. The Compensation and
Stock Option Committee may designate one or more performance criteria for
purposes of establishing a performance goal with respect to Performance
Compensation Awards made pursuant to the LTIP. The performance criteria that
will be used to establish such performance goals shall be based on the
attainment of specific levels of performance of the Company (or subsidiary,
affiliate, division or operational unit of the Company) and shall be limited to
the following: return on net assets, return on shareholders' equity, return on
assets, return on capital, shareholder returns, profit margin, EBITDA, earnings
per share, net earnings, operating earnings, price per share and sales or market
share.
With regard to a particular performance period, the Compensation and
Stock Option Committee shall have the discretion, subject to the terms of the
LTIP, to select the length of the performance period, the type(s) of Performance
Compensation Award(s) to be issued, the performance goals that will be used to
measure performance for the period and the performance formula that will be used
to determine what portion, if any, of the Performance Compensation Award has
been earned for the period. Such discretion shall be exercised by the
Compensation and Stock Option Committee in writing no later than 90 days after
the commencement of the period. Performance for the period shall be measured and
certified by the Compensation and Stock Option Committee upon the period's
close. In determining entitlement to payment in respect of a Performance
Compensation Award, the Compensation and Stock Option Committee may through use
of negative discretion reduce or eliminate such award, provided such discretion
is permitted under Section 162(m) of the Code. The Compensation and Stock Option
Committee may not use negative discretion with respect to any option or stock
appreciation right other than an option or stock appreciation right that is
intended to be a Performance Compensation Award.
In the event that the Compensation and Stock Option Committee
determines that any corporate transaction or event affects the shares of Common
Stock awarded pursuant to the LTIP, such that an adjustment is appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the LTIP, then the Compensation and Stock
Option Committee shall, in such manner as it may
35
<PAGE>
deem equitable, adjust any or all of (a) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
with respect to which awards may be granted, (b) the number of shares of Common
Stock or other securities of the Company (or number and kind of other securities
or property) subject to outstanding awards, and (c) the grant or exercise price
with respect to any award or (d) if deemed appropriate, make provision for a
cash payment to the holder of an outstanding award in consideration for the
cancellation of such award; provided, in each case that no such adjustment shall
be authorized to the extent such authority would cause an award designated by
the Compensation and Stock Option Committee as a Performance Compensation Award
or an option or stock appreciation right with an exercise price or grant price
(as applicable) equal to the fair market value of a share of Common Stock to
fail to qualify as Performance Based Compensation.
In the event of a Change of Control of the Company (as defined in the
LTIP), any outstanding awards which are unexerciseable or otherwise unvested
shall automatically be deemed exercisable or otherwise vested as of immediately
prior to the Change of Control.
Each award, and each right under any award, shall be exercisable only
by the Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's guardian or legal representative. No award
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant other than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any affiliate; provided that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
The Board of Directors may amend, alter, suspend, discontinue, or
terminate the LTIP or any portion thereof at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without shareholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act or Code Section 162(m) (provided that the Company is subject to
the requirements of Section 16 of the Exchange Act or Code Section 162(m), as
the case may be, as of the date of such action).
As of January 31, 1997, options representing 899,514 shares were
awarded to 40 individuals and Alvarez & Marsal, Inc. Options representing
504,402 shares were awarded as nonqualified stock options, of which 240,994
vested as of January 31, 1997. Options representing 395,112 shares were awarded
as Performance Compensation Awards as of January 31, 1997, of which, up to
131,704 are expected to vest on April 15, 1997.
In addition, the Company presently (i) maintains a medical and dental
benefits plan (the "Medical Plan") which covers substantially all employees and
(ii) sponsors a qualified defined contribution retirement plan for its employees
under section 401(k) of the Internal Revenue Code of 1986 (the "Retirement
Plan"). The Medical Plan is funded currently by contributions from the Company
and employees based on anticipated claim costs. Company contributions to the
Retirement Plan are based upon a percentage of the employees' contributions.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
During the Company's last fiscal year there were no Compensation and
Stock Option Committee Interlocks.
CONSULTING ARRANGEMENTS
In connection with consulting services provided by Mr. Redden, a
former Director of the Company who resigned on the Effective Date of the Plan of
Reorganization, Osnos and Company, of which Mr. Redden was President, billed the
Company $8,313 for services rendered in fiscal year 1996 and $21,258 for
services rendered
36
<PAGE>
subsequently through November 22, 1996. The Company does not anticipate working
with Osnos and Company in the future.
Alvarez and Marsal, Inc., of which Mr. Cheston is a managing
director, is providing turnaround management and financial restructuring
advisory services to the Company. The Company was billed $337,847 in fiscal 1996
and $1,179,752 for the 42-week period ended November 22, 1996. In addition, an
Option to purchase 109,290 shares at $6.00 per share was granted to Alvarez &
Marsal, Inc., the Company's financial and business advisor, as of January 31,
1997. As of the date of this Prospectus, Alvarez & Marsal, Inc. has not
exercised any portion of its option.
37
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company's authorized capital stock consists of 30,000,000 shares
including 2,500,000 shares of Preferred Stock, par value $.01 per share and
27,500,000 shares of Common Stock, par value of $.01 per share. American Stock
Transfer & Trust Company is the transfer agent and registrar for the Common
Stock. As of March 3, 1997, 10,000,000 shares of Common Stock were issued and
outstanding. Pursuant to the LTIP, options representing a maximum of 928,962
shares of Common Stock may be awarded. As of January 31,1997, Alvarez & Marsal,
Inc. were granted an option to purchase 109,290 shares of Common Stock. See
"Employment and Consulting Agreements" for a description of the terms and
conditions of Common Stock distributed pursuant to the LTIP. Alvarez & Marsal
may exercise its option until January 31, 2007. As of March 17, 1997, Alvarez &
Marsal, Inc. has not exercised any portion of its option.
PREFERRED STOCK
The Board of Directors has the authority, without further action by
the stockholders, to issue up to 2,500,000 shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company has no present plan to issue any shares of preferred stock.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each
share held of record and shall vote as a single class on all matters as to which
stockholders are entitled to vote. There are no cumulative voting rights in the
election of directors. The quorum required at any stockholders' meeting for
consideration of any matter is a majority of all outstanding shares entitled to
vote, represented in person or by proxy. All matters will be decided by a
majority of the votes cast at stockholder meetings by holders of shares present
in person or by proxy who are entitled to vote.
Holders of the Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of funds legally available for
dividends. See "Risk Factors- Dividends" and "Dividend Policy." In the event of
any liquidation, dissolution or winding up of the Company, the holders of the
Common Stock are entitled to receive pro rata any assets distributable to
stockholders in respect of shares held by them, after payment of all obligations
of the Company. The holders of Common Stock are not entitled to pre-emptive
rights to any securities issued by the Company.
The Shares of the Common Stock, offered hereby, are duly authorized,
validly issued, fully paid and nonassessable.
The Company is authorized to issue additional shares of capital stock
from time to time There are no specific restrictions upon such issuances, except
that the Company's Certificate prohibits the issuance of non-voting equity
securities if, and only to the extent that and so long as, Section 1123 of the
Bankruptcy Code is applicable and would prohibit such issuance.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND AMENDED AND RESTATED BY-LAWS
Certain provisions of the Certificate and the Amended and Restated
By-laws ("By-laws") of the Company summarized below may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in its best interest, including an
attempt that might result in a premium over the market price for shares held by
stockholders.
38
<PAGE>
The Certificate or By-laws provide (i) that no director may be
removed from office during his term except for cause, (ii) that vacancies on the
Board of Directors may be filled only by the remaining directors and not by the
stockholders, (iii) that any action required or permitted to be taken by the
stockholders may only be taken at an annual or special meeting of the
stockholders and stockholder action by written consent in lieu of a meeting is
prohibited, (iv) that special meetings of stockholders may be called only by a
majority of the Board of Directors, by the Chairman of the Board of Directors or
the President of the Company, (v) that stockholders are not permitted to call a
special meeting or require that the Board of Directors call a special meeting of
stockholders, (vi) that the nomination of candidates for election as directors,
other than by or at the direction of the Board of Directors, requires advance
notice and (vii) that the consideration of stockholder proposals at annual
meetings of stockholders requires advance notice. In general, notice of intent
to nominate a director or raise business at such meetings must be received by
the Company not less than 60 or more than 90 days prior to the anniversary of
the previous year's annual meeting and must contain certain information
concerning the person to be nominated or the matters to be brought before the
meeting and concerning the stockholder submitting the proposal.
The foregoing summary is qualified in its entirely by the provisions
of the Company's Certificate and Bylaws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
The By-laws provide that the Board of Directors will consist of seven
(7) members. The terms of the directors, one of whom pursuant to the Plan of
Reorganization is Jim D. Waller, Chief Executive Officer of the Company, will
expire at the annual meeting of the stockholders of the Company next following
the Company's fiscal year ending January 31, 1998. For the relevant period, it
is possible that such provisions may make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best interest.
Such provisions may be deemed to have a taker-over effect and may delay, defer
or prevent a tender-offer or takeover attempt that might result in the receipt
of a premium over the market price for the securities held by stockholders.
CERTAIN PROVISIONS OF DELAWARE LAW
Section 203 of the DGCL ("Section 203") prohibits, subject to certain
exceptions specified therein, certain transactions between a Delaware
corporation and an Interested Stockholder (as defined below) of a Delaware
corporation. An Interested Stockholder may not engage in any business
combination, including mergers, consolidations or acquisitions of additional
shares of the corporation having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain transactions that would
increase the Interested Stockholder's proportionate share ownership in the
corporation, for a three-year period following the date on which such
stockholder becomes an Interested Stockholder unless (i) prior to such date, the
Board of Directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an Interested
Stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an Interested Stockholder, the Interested Stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding certain shares), or (iii) on or subsequent to
such date, the business combination is approved by the Board of Directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66-2/3% of the outstanding voting stock which
is not owned by the Interested Stockholder. Except as otherwise specified in
Section 203, an "Interested Stockholder" is defined to include (x) any person
that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within three years immediately prior to the relevant date and (y) the
affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for
a person who would be an Interested Stockholder to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Certificate does not exclude the Company from the restrictions
imposed under Section 203. The provisions of Section 203 may encourage companies
interested in acquiring the Company to negotiate in advance with the Board of
Directors because the stockholder approval requirement would be avoided if a
majority of the directors then in office
39
<PAGE>
approve the business combination of the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the management of the Company. It is
possible that such provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.
REGISTRATION RIGHTS AGREEMENT
The Company has entered into a Registration Rights Agreement, dated
as of the Effective Date of the Plan of Reorganization, with certain holders of
Common Stock pursuant to which the Company agreed to use its reasonable best
efforts to file within 90 days after the consummation of the Plan of
Reorganization a Registration Statement, use its reasonable best efforts to
cause the Shelf Registration to be declared effective and to keep such Shelf
Registration continuously effective until the earlier of the disposition of all
Registrable Securities and three (3) years after the initial date of the Shelf
Registration; provided, however, that Ithaca will be permitted to suspend the
availability of the Self Registration for up to ninety (90) days during any
twelve-month period and, for any period during which Ithaca is not eligible to
use Form S-3 for the Shelf Registration, and for such additional reasonable
periods as are necessary to cause any post-effective amendments to the Shelf
Registration to become effective. The Shelf Registration may not be used to
effect any underwritten offering unless such an offering relates to a Demand
Registration (as defined below). Ithaca will pay certain expenses in connection
with registrations made under the Shelf Registration (which expenses will not
include, unless such registration is a Demand Registration, any fees or expenses
of counsel for any holder of Registerable Securities ("Holder" or "Holders").
Ithaca will also effect up to three (3) registrations (the "Demand
Registrations") at the request of the Designated Holders (as defined in the
Registration Rights Agreement) in the event the Shelf Registration is
unavailable or, in the case of an underwritten offering, at the request of the
Approved Underwriter (as defined below); provided, however, that no such Demand
Registration is required to be effected earlier than one-hundred eighty (180)
days after the effective date of any Registration Statement (other than the
Shelf Registration or a Registration Statement on Form S-4 or From S-8 (or any
successor form thereto)) of Ithaca, under the Securities Act, covering
securities of the same class as any Registrable Securities. The Registration
Rights Agreement provides that, subject to certain conditions, Butler and The
Northwestern Mutual Life Insurance Company ("Northwestern") will each have the
right to request one (1) Demand Registration. Designated Holders owning at least
20% of the Registrable Securities held by all of the Designated Holders will
have the right to request the remaining one (1) Demand Registration; provided,
however, that Northwestern and the Butler Noteholders shall not be included as a
requesting Holder in determining whether Holders holding at least 20% of the
Registrable Securities have requested such Demand Registration unless such
Holder shall have previously exercised or forfeited prior to exercise its right
to request its Demand Registration described in the preceding sentence; and,
provided, further, however, that for each Demand Registration described in the
preceding sentence that shall have been forfeited prior to exercise, the number
of Demand Registrations permitted to be made as described in this sentence shall
be increased by one. The Butler Noteholders sold their Notes prior to the
execution of the Registration Rights Agreement and, accordingly, the Company
believes that they are deemed to have forfeited their right to request a Demand
Registration.
Pursuant to the Registration Rights Agreement, Ithaca is required to
use its best efforts to file a Demand Registration within sixty (60) days after
the period within which requests for registration may be given to Ithaca. Ithaca
has the right, in the case of a Demand Registration, to postpone the filing or
effectiveness of, or to withdraw, any Registration Statement if in the good
faith judgment of its Board of Directors, such registration would materially
interfere with any material financing, acquisition, corporate reorganization or
merger or other transaction involving Ithaca or any subsidiary thereof;
provided, however, that such postponement or withdrawal will last only for so
long as such material interference would exist, but in no event for more than
one-hundred eighty (180) days.
The Holders initiating a Demand Registration (the "Initiating
Holders") owning a majority of the Registrable Securities owned by the
Initiating Holders to be included in the registration may elect to cause a
Demand Registration to be underwritten, in which case, the lead or managing
underwriter (the "Approved
40
<PAGE>
Underwriter") made pursuant to a Demand Registration will be selected by Ithaca
and must be reasonably acceptable to the Initiating Holders owning a majority of
the Registrable Securities owned by the Initiating Holders to be included in the
registration. Other Holders will, and Ithaca and other persons holding
registration rights in certain circumstances may, be permitted to participate in
a Demand Registration. Notwithstanding the foregoing sentence, if the Approved
Underwriter determines that the aggregate amount of securities requested to be
included in such offering is sufficiently large to have an adverse effect on the
success of such offering, then Ithaca will include in such registration only the
aggregate amount of Registrable Securities that in the opinion of the Approved
Underwriter may be sold without any such effect on the success of such offering
(the "Approved Underwriter Amount"), and (i) if the number of Registrable
Securities to be included in such registration is greater than the Approved
Underwriting Amount, then each Holder will be entitled to have included in such
registration Registrable Securities equal to its pro rata portion of the
Approved Underwriter Amount, as based on the amounts of Registrable Securities
and Ithaca and any Person who is not a Holder will not be permitted to include
any securities therein, and (ii) to the extent that the number of Registrable
Securities to be included by the Holders is less than the Approved Underwriter
Amount, securities that Ithaca and any Person who is not a Holder proposes to
register may also be included. Ithaca will pay substantially all expenses in
connection with the Demand Registration (including certain fees and expenses of
a single counsel for all Holders participating in such registration).
If Ithaca proposes to file or files a Registration Statement under
the Securities Act with respect to an offering by Ithaca for its own account of
any class of security (other than a Registration Statement on Form S-4 or S-8
(or any successor form thereto)) under the Securities Act, then Ithaca will
offer the Holders the opportunity to register the number of Registrable
Securities as each such Holder may request. Subject to certain conditions,
Ithaca will use its best efforts to permit the Holders to include such
Registrable Securities in such offering on the same terms and conditions as the
securities of Ithaca included therein. Notwithstanding the foregoing, if such
registration involves an underwritten offering and the managing underwriter or
underwriters (the "Company Underwriter") determines that the total amount of
securities requested to be included in such offering (the "Total Securities") is
sufficiently large so as to have an adverse effect on the success of the
distribution of the Total Securities, then, Ithaca will include in such
registration, to the extent of the number of Registrable Securities which Ithaca
is so advised can be sold in (or during the time of) such offering without
having such adverse effect, first, all Ithaca Common Stock or securities
convertible into, or exchangeable or exercisable for Ithaca Common Stock that
Ithaca proposed to register for its own account, second, all securities proposed
to be registered by the Holders, pro rata among such Holders, and third, all
other securities proposed to be registered. Ithaca will pay certain expenses
attributable to the Holders in connection with such registrations (which
expenses will not include any fees or expenses of counsel for any Holder).
Ithaca will indemnify and hold harmless each Holder, its directors,
officers, partners, employees, advisors and agents, and each Person who controls
(within the meaning of the Securities Act or the Exchange Act) such Holder, to
the extent permitted by law, from and against any and all losses, claims,
damages, expenses (including, without limitation, reasonable costs of
investigation and fees, disbursements and other charges of counsel) or other
liabilities resulting from or arising out of or based upon any untrue, or
alleged untrue, statement of a material fact contained in any Registration
Statement, Prospectus, preliminary Prospectus, notification or offering circular
(as amended or supplemented if Ithaca has furnished any amendments or
supplements thereto) or other disclosure document, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except insofar
as the same are caused by or contained in any information furnished in writing
to Ithaca by or on behalf of such Holder expressly for use therein. Ithaca will
also indemnify any underwriters of the Registrable Securities, their officers,
directors and employees, and each Person who controls any such underwriter
(within the meaning of the Securities Act and the Exchange Act) to the same
extent as provided above with respect to the indemnification of the Holders of
Registrable Securities.
Each Holder agrees to indemnify and hold harmless Ithaca, any
underwriter retained by Ithaca and their respective directors, officers,
employees, advisors, agents and each Person who controls (within the meaning of
the Securities Act and the Exchange Act) Ithaca or such underwriter to the same
extent as the foregoing indemnity from Ithaca to the Holders (subject to the
proviso to this sentence and applicable law), but only with respect to
41
<PAGE>
any information furnished in writing by or on behalf of such Holder expressly
for use therein; provided, however, that the liability of any Holder will be
limited to the amount of the net proceeds received by such Holder in the
offering giving rise to such liability.
42
<PAGE>
SELLING STOCKHOLDERS
The following tables provide certain information with respect to the
Common Stock held by each Selling Stockholder, which information has been
furnished to the Company by the Selling Stockholders and other sources and which
the Company has not verified. Because the Selling Stockholders may sell all or
some part of the Common Stock which they hold pursuant to this Prospectus and
the fact that this offering is not being underwritten on a firm commitment
basis, no estimate can be given as to the amount of Common Stock that will be
held by the Selling Stockholders upon termination of this Offering. See "Plan of
Distribution." The Common Stock offered by this Prospectus may be offered from
time to time in whole or in part by the persons named below or by their
transferees, as to whom applicable information will, to the extent required, be
set forth in a Prospectus Supplement.
Amount to be
Amount of Stock offered for
owned prior to Stockholder's
NAME OFFERING ACCOUNT
- ---- -------- -------
[To be provided by amendment.]
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of common stock
of the Company beneficially owned, as of March 17, 1997, by certain executive
officers and by each person known by the Company to beneficially own more than
5% of any class of the Company's voting securities.
<TABLE>
<CAPTION>
Name and Amount and Nature
Title of Class Address of Beneficiaries of Beneficial Ownership Percentage of Class
- -------------- ------------------------ ----------------------- -------------------
<S> <C> <C> <C>
Common Stock Jim D. Waller/1/ 91,075 *
Eric N. Hoyle/1/ 21,667 *
All Executive Officers 283,408 2.6%
as a group/1/
</TABLE>
- ----------
* Less than 1%.
1 The named executive officers have been awarded options to purchase the
shares indicated as of January 31, 1997, pursuant to the LTIP. Options
awarded under the LTIP that are not vested or that do not vest within 60
days from the date of this Prospectus are not included. In each case, the
options to purchase half of the number of the shares indicated vested as of
January 31, 1997. The Company anticipates that the option to purchase the
remaining half of the number of shares indicated will vest as of April 15,
1997 subject to Performance Goals. See "Directors and Management-Executive
Compensation" for a description of the LTIP.
43
<PAGE>
PLAN OF DISTRIBUTION
Of the Shares included in this Prospectus, 10,000,000 were
distributed on a pro rata basis to holders of the Notes, which were retired
pursuant to the Plan of Reorganization, under which the Company emerged from
bankruptcy on December 16, 1996. An option to purchase 109,290 of the Shares was
issued to Alvarez & Marsal, Inc. pursuant to the Management Agreement as a
portion of the compensation for the turnaround-management and financial
restructuring advisory services rendered the Company.
The Company will receive no proceeds from this offering. The Common
Stock may be sold from time to time to purchasers directly by any of the Selling
Stockholders. Alternatively, any of the Selling Stockholders may from time to
time, offer the Common Stock through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of Common Stock
for whom they may act as agent. The Selling Stockholders and any underwriters,
dealers or agents that participate in the distribution of Common Stock may be
deemed to be underwriters, and any profit on the sale of Common Stock by them
and any discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. If the Company is advised that an underwriter has been
engaged with respect to the sale of any Common Stock offered hereby, or in the
event of any other material change in the plan of distribution, the Company will
cause appropriate amendments to the Registration Statement of which this
Prospectus forms a part to be filed with the Commission reflecting such
engagement or other change. See "Additional Information."
At the time a particular offer of Common Stock is made, to the extent
required, a Prospectus Supplement will be provided by the Company and
distributed by the relevant Selling Stockholder which will set forth the
aggregate amount of Common Stock being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, any
discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discount, commissions or concessions allowed or
reallowed or paid to dealers.
The Common Stock may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the Selling Stockholders or by agreement between the Selling
Stockholders and underwriters or dealers.
Through the date hereof, there has been no established public trading
market for the Common Stock. The Shares were issued to the holders of the Notes
pursuant to the Plan of Reorganization and the Management Agreement. Application
will be made to list the Common Stock on NASDAQ National Market. There can be no
assurance that any active trading market will develop or will be sustained for
the Common Stock or as to the price at which the Common Stock may trade or that
the market for the Common Stock will not be subject to disruptions that will
make it difficult or impossible for the holders of Common Stock to sell Common
Stock in a timely manner, if at all, or to recoup their investment in the Common
Stock. See "Risk Factors--Liquidity; Absence of Market for Common Stock" and
"Risk Factors--Effect of Future Sales of Common Stock; Registration Rights."
Under applicable rules and regulations under the Exchange Act any
person engaged in a distribution of Common Stock may not simultaneously engage
in market-making activities with respect to such Common Stock for a period of
nine business days prior to the commencement of such distribution and ending
upon the completion of such distribution. In addition to and without limiting
the foregoing, each Selling Stockholder will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales of any of the Common Stock by the Selling Stockholders. All of the
foregoing may affect the marketability of the Common Stock and the ability of
any person or entity to engage in market-making activities with respect to the
Common Stock.
44
<PAGE>
Pursuant to the Registration Rights Agreement, the Company is
obligated to pay substantially all of the expenses incident to the registration,
offering and sale of the Common Stock of the Selling Stockholders to the public
other than commissions and discounts of underwriters, dealers or agents. The
Selling Stockholders, and any underwriter they may utilize, and their respective
controlling persons are entitled to be indemnified by the Company against
certain liabilities, including liabilities under the Securities Act. See
"Description of Capital Stock--Registration Rights Agreement."
LEGAL MATTERS
Certain legal matters regarding the Shares were passed upon for the
Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company as
of November 22, 1996, February 2, 1996 and January 27, 1995 and for the 42-week
period ended November 22, 1996 and for each of the years in the two-year period
ended February 2, 1996, have been included herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and in the
Registration Statement upon the authority of said firm as experts in accounting
and auditing.
The reports of KPMG Peat Marwick LLP covering the November 22, 1996
consolidated financial statements contains an explanatory paragraph that states
the Company emerged from bankruptcy and as of November 22, 1996 adopted
fresh-start reporting in accordance with American Institute of Certified Public
Accountants Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code."
45
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Index to Financial Statements
Page
----
Independent Auditors' Report .............................................. F-2
Consolidated Balance Sheets as of November 22, 1996, February 2,
1996, and January 27, 1995............................................. F-3
Consolidated Statements of Operations for the 42-Week Period ended
November 22, 1996 and for the Years ended February 2, 1996
and January 27, 1995................................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the
42-Week Period ended November 22, 1996 and for the Years
ended February 2, 1996 and January 27, 1995............................ F-6
Consolidated Statements of Cash Flows for the 42-Week Period ended
November 22, 1996 and for the Years ended February 2, 1996
and January 27, 1995................................................... F-7
Notes to Consolidated Financial Statements ................................ F-9
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ithaca Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Ithaca
Industries, Inc. and subsidiaries as of November 22, 1996, February 2, 1996, and
January 27, 1995, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the 42-week period ended
November 22, 1996 and each of the years in the two-year period ended February 2,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ithaca Industries,
Inc. and subsidiaries as of November 22, 1996, February 2, 1996, and January 27,
1995, and the results of their operations and their cash flows for the 42-week
period ended November 22, 1996 and each of the years in the two-year period
ended February 2, 1996, in conformity with generally accepted accounting
principles.
On December 16, 1996, the Company emerged from bankruptcy. As described in note
1 to the consolidated financial statements, the Company accounted for the
reorganization as of November 22, 1996 and adopted fresh-start reporting in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7, FINANCIAL REPORTING BY ENTITIES IN REORGANIZATION UNDER THE
BANKRUPTCY CODE. As a result, the consolidated balance sheet as of November 22,
1996 presents the financial position of the reorganized entity and is,
therefore, not comparable to the consolidated balance sheets for periods prior
to the Company's emergence from bankruptcy.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
January 31, 1997
F-2
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
November 22, 1996, February 2, 1996, and January 27, 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Post-Confirmation Preconfirmation
November 22, February 2, January 27,
Assets (Note 6) 1996 1996 1995
--------------- ---- ---- ----
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,329 10,369 7,531
Trade accounts receivable, net of allowance for
doubtful accounts of $1,508 at November 22, 1996,
and $1,215 at February 2, 1996 and
January 27, 1995, respectively (note 9) 45,342 29,958 40,304
Due from Parent (note 8) -- 604 926
Inventories (note 3) 68,706 56,079 97,117
Deferred taxes (note 7) -- 20,212 4,936
Prepaid expenses and other current assets 508 1,567 1,366
Refundable income taxes (note 7) -- 13,159 --
Assets held for disposition, net of estimated
reserves (notes 3, 4, and 13) 2,973 17,139 --
-------- -------- --------
Total current assets 118,858 149,087 152,180
-------- -------- --------
Net property, plant, and equipment (note 4) 35,647 54,295 55,389
Other assets:
Intangible assets, net of accumulated amortization
of $-0-, $22,570, and $19,016 at November 22,
1996, February 2, 1996, and January 27, 1995,
respectively (note 5) 453 905 4,459
Deferred debt expense, net of accumulated amortization
of $-0-, $7,868, and $3,799 at November 22, 1996,
February 2, 1996, and January 27, 1995, respec-
tively (note 13) -- 3,651 7,720
Cost in excess of fair value of net assets acquired,
net of accumulated amortization of $1,097 at
January 27, 1995 (note 13) -- -- 2,768
Other, including cash surrender value of officers' life
insurance 1,035 704 1,955
-------- -------- --------
Total other assets 1,488 5,260 16,902
-------- -------- --------
$155,993 208,642 224,471
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Post-Confirmation Preconfirmation
November 22, February 2, January 27,
Liabilities and Stockholders' Equity (Deficit) 1996 1996 1995
---------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Current liabilities:
Current installments of long-term debt, due to related
parties (notes 6 and 10) $ -- 33,757 --
Current installments of long-term debt (notes 6
and 10) 135 206,301 639
Accounts payable 12,486 16,414 17,139
Accrued payroll and related expenses 14,743 10,335 11,276
Accrued restructuring costs (note 13) 2,468 12,204 --
Income taxes payable (note 7) 2,718 -- 3,154
Deferred income taxes (note 7) 5,215 -- --
Other accrued expenses 5,502 15,985 6,944
-------- ------- -------
Total current liabilities 43,267 294,996 39,152
-------- ------- -------
Long-term debt, excluding current installments, due to
related parties (notes 6 and 10) 11,344 -- 35,223
Long-term debt, excluding current installments (notes 6 and 10) 65,911 -- 186,596
Deferred income taxes (note 7) 13,355 7,204 7,414
Preconfirmation redeemable cumulative preferred stock of $.01
par value. Authorized but unissued 500,000 shares at
February 2, 1996 and January 27, 1995 -- -- --
Stockholders' equity (deficit):
Preferred stock, $.01 par value; authorized 2,500,000 shares;
none outstanding -- -- --
Common stock of $.01 par value; authorized 27,500,000
shares; issued and outstanding 10,000,000 shares at
November 22, 1996 100 -- --
Preconfirmation common stock, par value $.01; authorized and
issued 1,000 shares at February 2, 1996 and January 27, 1995 -- -- --
Additional paid-in capital 22,016 9,000 9,000
Accumulated deficit -- (102,558) (52,914)
-------- ------- -------
Total stockholders' equity (deficit) 22,116 (93,558) (43,914)
Commitments and contingencies (notes 6, 9, 11, 12, and 13)
-------- ------- -------
$155,993 208,642 224,471
======== ======= =======
</TABLE>
F-4
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
42-Week Period ended November 22, 1996 and Years ended
February 2, 1996 and January 27, 1995
(In thousands)
<TABLE>
<CAPTION>
42-Week
Period ended Years ended
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales (note 9) $ 297,603 398,819 414,800
Cost of sales (note 3) 255,543 353,937 341,941
--------- --------- ---------
Gross profit 42,060 44,882 72,859
Selling, general, and administrative expenses
(notes 8, 11, and 12) 27,670 43,486 37,075
(Recovery of) provision for asset write-downs and
restructuring (note 13) (2,964) 51,591 --
--------- --------- ---------
Operating income (loss) 17,354 (50,195) 35,784
--------- --------- ---------
Other income (deductions):
Interest and amortization of deferred debt
expense - related parties (contractual interest
of $3,252 at November 22, 1996) (2,597) (3,918) (3,566)
Interest and amortization of deferred debt
expense - other, net of interest income of
$164, $237, and $895 at November 22,
1996, February 2, 1996, and January 27,
1995, respectively (contractual interest of
$17,512 at November 22, 1996) (14,892) (22,987) (19,581)
Other, net 625 299 529
(16,864) (26,606) (22,618)
Income (loss) before reorganization items,
income taxes, and extraordinary item 490 (76,801) 13,166
Reorganization items:
Adjustments to fair value 3,765 -- --
Professional fees and other (2,589) -- --
--------- --------- ---------
Income (loss) before income taxes
and extraordinary item 1,666 (76,801) 13,166
Income tax (expense) benefit (note 7) (4,218) 27,157 (5,653)
--------- --------- ---------
(Loss) income before extraordinary item (2,552) (49,644) 7,513
Extraordinary item - gain on debt discharge of $90,980
before income taxes of $23,056 (notes 1 and 7) 67,924 -- --
--------- --------- ---------
Net income (loss) $ 65,372 (49,644) 7,513
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity (Deficit)
42-Week Period ended November 22, 1996 and Years ended
February 2, 1996 and January 27, 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Total
Shares Additional Retained stockholders'
------------------------ Common paid-in earnings equity
Preconfirmation New stock capital (deficit) (deficit)
--------------- --- ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 28, 1994 1,000 -- $ -- 9,000 (60,427) (51,427)
Net income -- -- -- -- 7,513 7,513
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 27, 1995 1,000 -- -- 9,000 (52,914) (43,914)
Net loss -- -- -- -- (49,644) (49,644)
---------- ---------- ---------- ---------- ---------- ----------
Balance at February 2, 1996 1,000 -- -- 9,000 (102,558) (93,558)
Net income for 42-week period ended November 22,
1996 (Preconfirmation) -- -- -- 65,372 65,372
Effect of reorganization:
Elimination of accumulated deficit -- -- -- 37,186 37,186
Cancellation of predecessor shares (1,000) -- -- (9,000) -- (9,000)
Issuance of new shares -- 10,000,000 100 22,016 -- 22,116
---------- ---------- ---------- ---------- ---------- ----------
Balance at November 22, 1996 (Post-Confirmation) -- 10,000,000 $ 100 22,016 -- 22,116
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
42-Week Period ended November 22, 1996 and Years ended
February 2, 1996 and January 27, 1995
(In thousands)
<TABLE>
<CAPTION>
42-Week
Period ended Years ended
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash provided by operating activities:
Net income (loss) $ 65,372 (49,644) 7,513
Adjustments to reconcile net income (loss) to net
cash provided by operations:
(Recovery of) provision for asset write-downs
and restructuring (2,964) 40,623 --
Gain on debt discharge (90,980) -- --
Depreciation and amortization of property,
plant, and equipment 6,936 8,713 8,652
Provision for (recovery of) doubtful accounts 293 -- (582)
Amortization of intangible assets, goodwill,
and deferred debt expense 1,516 5,459 2,635
Amortization of discount on subordinated notes 52 62 62
Write-off of deferred debt expense 2,589 - --
Provision for deferred taxes 31,578 (15,486) (765)
(Gain) loss on sale of property, plant, and
equipment (292) 22 (238)
Net adjustments in accounts for fair value (3,765) -- --
Changes in operating assets and liabilities before
the effects of restructuring reclassifications:
Trade accounts receivable and due from Parent (13,011) 4,668 (841)
Inventories (646) 12,071 (22,455)
Prepaid expenses and other assets 14,204 (13,495) 1,514
Assets held for disposition 18,523 -- --
Accounts payable (3,928) (725) 78
Accrued payroll and related expenses 4,408 (941) 2,695
Other accrued expenses 1,469 6,390 4,645
Due to Parent -- -- (2,030)
Accruals relating to IRS examination -- -- (4,354)
-------- -------- --------
Net cash provided by (used in)
operating activities 31,354 (2,283) (3,471)
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment 949 219 563
Additions to property, plant, and equipment (3,248) (13,887) (8,478)
Decrease (increase) in other assets -- 1,251 (711)
-------- -------- --------
Net cash used in investing activities (2,299) (12,417) (8,626)
-------- -------- --------
</TABLE>
(Continued)
F-7
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
42-Week
Period ended Years ended
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Repayment of long-term debt $(38,095) (19,462) (20,971)
Proceeds from long-term debt -- 37,000 --
-------- -------- --------
Net cash (used in) provided by
financing activities (38,095) 17,538 (20,971)
-------- -------- --------
Net (decrease) increase in cash and
cash equivalents (9,040) 2,838 (33,068)
Cash and cash equivalents at beginning of year 10,369 7,531 40,599
-------- -------- --------
Cash and cash equivalents at end of year $ 1,329 10,369 7,531
======== ======== ========
Supplemental disclosures - cash paid (received)
during the year for:
Income taxes $(16,835) 1,224 7,149
======== ======== ========
Interest paid to related parties $ 379 2,654 3,314
======== ======== ========
Interest paid to others $ 7,632 16,309 17,046
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
F-8
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 22, 1996, February 2, 1996, and January 27, 1995
(In thousands, except share data)
(1) Reorganization and Emergence from Chapter 11
--------------------------------------------
On December 16, 1996 (the "Effective Date"), Ithaca Industries, Inc. (the
"Company") emerged from Chapter 11 of the United States Bankruptcy Code
("Chapter 11") pursuant to the Prepackaged Chapter 11 Plan of
Reorganization (the "Plan"), which was confirmed by The Bankruptcy Court
on November 22, 1996 (the "Confirmation Date"). The Plan implemented a
financial restructuring whereby approximately $125,000 ($124,625, net of
original issue discount) of previously outstanding Senior Subordinated
Notes (the "Notes") and related accrued interest, which were subject to
settlement under the Plan were exchanged for approximately 10,000,000
shares of new common stock (the "Common Stock") issued by the Company in
connection with the reorganization. Additionally, the Company's Credit
Agreement was amended and restructured. The restructured long-term debt
outstanding after consummation of the Plan is secured by substantially
all of the assets of the Company. All previously outstanding common stock
was canceled, annulled, and extinguished.
Pursuant to the Plan, the Company's certificate of incorporation and
bylaws were amended and restated in their entirety by the Amended and
Restated Certificate of Incorporation (the "Certificate") and the Amended
and Restated Bylaws (the "Bylaws") to provide, among other things, for
the restructuring of the Company's equity capitalization under the Plan.
As of the Effective Date of the Plan, the Company was authorized to issue
27,500,000 of the Company's $.01 par value, common stock of which an
aggregate of 10,000,000 shares was issued and distributed pursuant to the
Plan. An aggregate of 928,962 shares of common stock was reserved for
issuance pursuant to the 1996 Long-Term Stock Incentive Plan (the "Stock
Plan").
The Company's Certificate authorized 2,500,000 shares of preferred stock
with $.01 par value. The Board of Directors is authorized, upon
two-thirds affirmative vote, to issue preferred stock subject to
restrictions contained in the Amended and Restated Credit Agreement
("Amended Agreement" ), in one or more series, for any purpose permitted
by law, and is authorized to fix the designations, power, rights, and
preferences of the preferred stock. The Certificate provides that the
Company will not issue any nonvoting equity securities to the extent
prohibited by The Bankruptcy Code. The Certificate may be amended in
accordance with applicable law to remove the prohibition.
During fiscal 1996, the Company incurred covenant defaults under the
Credit Agreement. In addition, the Company did not make the December 15,
1995 and June 15, 1996 scheduled interest payments due on the Notes or
scheduled quarterly principal payments due under the Credit Agreement on
January 31, April 30, and July 31, 1996. Gross profits decreased
significantly during fiscal 1996 compared to fiscal 1995 due to lower
sales volume and manufacturing cost increases which were not offset by
price increases. As a result of these factors, on October 8, 1996 (the
"Petition Date"), the Company filed a voluntary petition for relief under
Chapter 11 in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). The Company filed the Plan to
consummate a financial restructuring that had been negotiated by the
Company, its Noteholders and parties to the Credit Agreement, and the
sole shareholder of the Company's outstanding stock. The Company was
operated as a debtor-in-possession subject to the supervision of the
Bankruptcy Court until December 16, 1996.
(Continued)
F-9
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
The Company continued to pay its trade creditors and other debt
obligations in the ordinary course of business.
Fresh-Start Reporting
---------------------
For financial reporting purposes, the effective date of the Company's
emergence from Chapter 11 was assumed to be November 22, 1996. In
accordance with AICPA Statement of Position 90-7, FINANCIAL REPORTING BY
ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE ("SOP 90-7"), the
Company adopted "fresh-start reporting," including the terms of the
Amended Agreement and reflected the effects of such adoption in the
financial statements as of November 22, 1996. The Post-Confirmation
balance sheet has been separated from the Preconfirmation balance sheet
and prior period amounts by a bold line to signify that the balance sheet
is that of a new reporting entry and has been prepared on a basis not
comparable to prior periods.
The reorganization value of the Company was determined by management
utilizing several factors and various valuation methods, including
discounted cash flows, cash flow multiple ratios, and other applicable
ratios. Reorganization value generally approximates fair value of the
entity before considering liabilities and approximates the amount a
willing buyer would pay for the assets of the entity after the
restructuring. Based on information from parties-in-interest and from the
Company's financial advisors, the total reorganization value of the
Company was estimated to be $155,993.
The estimated reorganization value of the Company was allocated to
specific asset categories as follows:
Current assets $ 118,858
Property and equipment 35,647
Other noncurrent assets 1,488
-------------
$ 155,993
=============
The primary valuation methodology employed to determine the
reorganization value of the Company was a net present value approach. The
estimated unleveraged reorganization value of the Company was computed
using a discounted cash flow analysis. This analysis included the present
values of (i) the discounted projected free cash flows of the Company
through fiscal year 1999, (ii) the discounted terminal value of the
Company at the end of that 1999 fiscal year, and (iii) projected excess
cash on hand at the Confirmation Date. For purposes of discounting
values, a discount rate of 9.5% was utilized throughout the analysis. The
terminal value was based upon a 3.5% growth factor in perpetuity with a
6% terminal discount rate.
All payments and distributions required by the Plan to be made by the
Company with respect to prepetition claims against the Company have been
made or provided for in the accompanying consolidated balance sheet at
November 22, 1996, and no further material recourse to the Company is
available to any person with respect to any prepetition claims.
(Continued)
F-10
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
The effect of the Plan and the implementation of Fresh-Start Reporting
for the Company's consolidated balance sheet as of November 22, 1996 was
as follows:
<TABLE>
<CAPTION>
Pre-Fresh Start Adjustments Fresh Start
balance sheet to record the balance sheet
November 22, Plan at Fair value November 22,
1996 confirmation(a) adjustments(b) 1996
---- --------------- -------------- ----
<S> <C> <C> <C> <C>
Cash $ 1,329 -- -- 1,329
Other current assets 117,802 (13,549) 13,276 117,529
Property, plant, and equipment 139,026 -- (103,379) 35,647
Accumulated depreciation (89,876) -- 89,876 --
--------- --------- --------- ---------
Net property, plant, and equipment 49,150 -- (13,503) 35,647
--------- --------- --------- ---------
Other long-term assets 1,035 -- -- 1,035
Other intangible assets 3,042 (2,589) -- 453
--------- --------- --------- ---------
$ 172,358 (16,138) (227) 155,993
========= ========= ========= =========
Bank Credit Agreements $ 202,016 (201,881) -- 135
Other current liabilities 55,847 (8,723) (3,992) 43,132
Long-term debt -- 77,255 -- 77,255
Noncurrent deferred income taxes 6,651 5,198 1,506 13,355
Stockholders' equity (deficit) (92,156) 112,013 2,259 (c) 22,116
--------- --------- --------- ---------
$ 172,358 (16,138) (227) 155,993
========= ========= ========= =========
</TABLE>
(a) To record the forgiveness of the notes, the issuance of common stock, and
the related income tax effects pursuant to the Plan.
(b) To record the adjustments to assets and liabilities to their estimated
fair value.
(c) Net adjustment to equity consists of net fair value adjustments of $3,765
less related income tax effects of $1,506.
The Company adopted Fresh-Start Reporting because holders of existing
voting shares before filing and confirmation of the Plan received less
than 50% of the voting shares of the emerging entity and its
reorganization value was less than its post-petition liabilities and
allowed claims. The adjustments to reflect the consummation of the Plan,
include the pretax gain on debt discharge of $90,980 (principally accrued
interest and principal of the notes) and the adjustment of $3,765 to
record assets and liabilities at their estimated fair values, have been
reflected in the accompanying consolidated statements of operations for
the 42-week period ended November 22, 1996. Deferred taxes of
approximately $23,056 were provided as a result of the debt discharge and
the resulting reductions to the tax bases of assets in accordance with
Section 108 of the Internal Revenue Code.
(2) Summary of Significant Accounting Policies and Practices
--------------------------------------------------------
(a) Description of Business and Basis of Presentation
-------------------------------------------------
The Company is a designer, marketer, and manufacturer of
private-label women's and girls' underwear, men's and boys'
underwear, hosiery, and T-shirt products, operating distribution
and manufacturing facilities in the Southeastern United States and
off-shore manufacturing facilities in Central America.
Additionally, the Company sources some of its production from
various contractors worldwide. The Company markets its products
through a wide range of national and regional retail distribution
channels, including discount stores, department stores, specialty
stores, drug stores, and supermarkets. The majority of the
Company's raw materials are readily available and are not dependent
upon a single supplier.
(Continued)
F-11
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(b) Principles of Consolidation
---------------------------
These consolidated financial statements include the financial
statements of Ithaca Industries, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
(c) Cash and Cash Equivalents
-------------------------
Cash balances at year-end reflect short-term interest-bearing
deposits, net of outstanding checks. Cash balances also include
overdraft amounts for which the right of offset with other accounts
exists. For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an
initial maturity of three months or less to be cash equivalents.
Cash and cash equivalents include interest-earning deposits of
$1,329, $10,369, and $7,531 at November 22, 1996, February 2, 1996,
and January 27, 1995, respectively.
(d) Inventories
-----------
Inventories consist of raw materials, work in process, and finished
goods relating to manufacturing operations and are valued at the
lower of cost or market with cost determined using the last-in,
first-out (LIFO) basis.
(e) Property, Plant, and Equipment
------------------------------
Property, plant, and equipment are stated at cost. Upon emergence
from Chapter 11, the Company adopted Fresh-Start Reporting
effective November 22, 1996 and, accordingly, all property, plant,
and equipment was restated to its estimated fair value and
historical accumulated depreciation was eliminated. Depreciation
and amortization expense of plant and equipment is calculated using
the straight-line method over the estimated remaining useful lives
of the assets as follows:
Buildings 25 - 30 years
Property improvements 5 - 10 years
Machinery and equipment 3 - 8 years
Vehicles 3 years
(f) Intangibles
-----------
Patents, license agreements, and leasehold intangible assets are
amortized over their respective remaining terms. On an ongoing
basis, management reviews the valuation and amortization of
intangible assets. As part of the review, management estimates fair
values based upon recent historical results and expected future
results, taking into consideration events or circumstances which
might affect their fair values. As of November 22, 1996, management
does not consider the unamortized balances of the intangible assets
as being impaired.
(Continued)
F-12
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
Deferred debt expenses are amortized over the lives of the loans to
which the expenses relate. As a result of the adoption of
Fresh-Start Reporting and the related restructuring of the Credit
Agreement, the unamortized balance of deferred debt expense was
included in reorganization expense for the 42-week period ended
November 22, 1996.
(g) Revenue Recognition
-------------------
Sales are recognized at the time the related goods are shipped.
(h) Income Taxes
------------
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Prior to its emergence from Chapter 11, the Company was included in
an affiliated group and the Company's Federal taxable income was
included in such group's consolidated tax return. Pursuant to a tax
sharing agreement with the Parent, the Company recognized income
tax expense or benefit as if it were to file separate Federal,
state, or local income tax returns. The Company entered into the
Intercompany Compromise and Settlement Agreement which included a
provision that terminated the tax sharing agreement effective
November 22, 1996.
(i) Stock Option Plan
-----------------
Effective November 22, 1996 with the adoption of its stock option
plan, the Company elected to account for its stock option plan in
accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of
the underlying stock exceeded the exercise price. On November 22,
1996, the Company adopted Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), ACCOUNTING FOR STOCK-BASED
COMPENSATION, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures
for employee stock option grants made in future years as if the
fair-value based method defined in SFAS No. 123 had been applied.
The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS No. 123.
(Continued)
F-13
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(j) Fiscal Year
-----------
The Company's fiscal year ends on the last Saturday closest to the
end of January. The results of operations for November 22, 1996
reflect a 42-week period. The results of operations for 1996
reflect a 53-week period (fiscal 1996), and the results for 1995
reflect a 52-week period (fiscal 1995).
(k) Reclassifications
-----------------
Certain reclassifications were made to February 2, 1996 and January
27, 1995 amounts to conform to November 22, 1996 classifications.
(l) Use of Estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(3) Inventories
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Raw materials and supplies $ 16,375 24,676 34,622
Work-in-process 15,937 16,882 17,606
Finished goods 42,030 53,962 52,997
------ ------ ------
74,342 95,520 105,225
Less excess of FIFO over LIFO cost - 10,474 8,108
Less inventory included in assets held for
disposition, net (note 13) 5,636 28,967 -
----- ------ -
$ 68,706 56,079 97,117
====== ====== ======
</TABLE>
Upon adoption of Fresh-Start Reporting at November 22, 1996, the excess
of first-in, first-out (FIFO) over LIFO cost is equal to zero as
inventories were restated to their fair value. The adjustment has been
included in fair value adjustments in note 1.
During the period ended November 22, 1996 and the year ended February 2,
1996, LIFO inventory layers were liquidated. This reduction resulted in
charging lower inventory costs prevailing in previous years to cost of
goods sold, thus reducing cost of sales by $1,367 and $271, respectively,
which is lower than the amount that would have resulted from replacing
the liquidated inventory at end of year prices.
(Continued)
F-14
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(4) Property, Plant, and Equipment
------------------------------
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Land $ 1,306 2,936 2,410
Buildings and improvements 18,295 55,838 45,976
Machinery and equipment 15,580 85,821 81,993
Vehicles 104 428 460
Construction in progress 566 241 2,588
-------- -------- --------
35,851 145,264 133,427
Less accumulated depreciation and amortization -- 84,941 78,038
Less property, plant, and equipment included in
assets held for disposition (note 12) 204 6,028 --
-------- -------- --------
$ 35,647 54,295 55,389
======== ======== ========
</TABLE>
(5) Intangible Assets
-----------------
Intangible assets consist of the following (note 13):
<TABLE>
<CAPTION>
Gross Net
amount Amortization amount
------ ------------ ------
<S> <C> <C> <C>
November 22, 1996 - Post-Confirmation $ 453 -- 453
======= ======= =======
February 2, 1996:
Patents $11,860 10,955 905
Value of work force in place 7,946 7,946 --
Licensing agreement 3,669 3,669 --
------- ------- -------
$23,475 22,570 905
======= ======= =======
January 27, 1995:
Patents $11,860 10,412 1,448
Value of work force in place 7,946 6,096 1,850
Licensing agreement 3,669 2,508 1,161
------- ------- -------
$23,475 19,016 4,459
======= ======= =======
</TABLE>
(Continued)
F-15
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(6) Long-Term Debt
--------------
A summary of long-term debt follows:
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Borrowings under credit agreements:
Revolving credit facility:
Base rate loans $ 22,185 -- --
LIBOR-based loans -- 37,000 --
Term loans:
Base rate loans 55,000 -- --
LIBOR-based loans -- 77,771 96,072
Senior Subordinated Notes, due 2002 with interest
payable quarterly at 11.125%, net of unamortized
original issue discount of $375, $427, and $489 -- 124,573 124,511
9.0% to 10.5% notes, maturing through 1998 205 714 1,875
-------- -------- --------
77,390 240,058 222,458
Less current installments of long-term debt 135 240,058 639
-------- -------- --------
$ 77,255 -- 221,819
======== ======== ========
</TABLE>
Pursuant to the Plan, the Credit Agreement was amended and restated and
the Notes were canceled and exchanged for all of the Company's
outstanding capital stock on the Effective Date. The following is a
summary description of the Amended and Restated Credit Agreement
("Amended Agreement") issued on the Effective Date.
REVOLVING CREDIT COMMITMENT
The total Revolving Credit Commitment ("Revolving Loan") under the
Amended Agreement is $77,200 which is inclusive of (i) any outstanding
unpaid balance of prepetition revolving credit loans and post-petition
debtor-in-possession financing, (ii) $22,185 transferred from the
Preconfirmation term loan balance, and (iii) a $25,000 letter of credit
subfacility. For a 30-day period beginning in May and December of each
year, commitments under the revolving loan are reduced to $63 million and
$68 million, respectively.
The total outstanding Revolving Loan including letters of credit may not
exceed a borrowing base determined by specified percentages of eligible
accounts receivable and inventory as defined by the Amended Agreement. A
commitment fee of 0.5% of the unused Revolving Loan is due each year. A
letter of credit fee of 2.5% per annum of the daily stated amount of all
letters of credit and facing fees of 1/4 of 1% per annum of the daily
stated amount of all standby and trade letters of credit is payable
quarterly in arrears. The Revolving Credit Commitment expires August 31,
1999.
At November 22, 1996, there was $22,185 outstanding under the Revolving
Loan provisions and $8,997 issued under the trade and standby letters of
credit provision of the Amended Agreement. The total availability as
calculated under the provisions of the Amended Agreement at November 22,
1996 was $41,347.
(Continued)
F-16
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
TERM LOAN COMMITMENT
The total Term Loan Commitment ("Term Loan") under the Amended Agreement
is $55,000 which is payable in yearly installments of $2,000 on January
31, 1997; $5,000 on January 31, 1998; $4,000 on January 31, 1999; and
$44,000 on August 31, 1999. At November 22, 1996, $2,000 of the
outstanding term loan balance has been excluded from current installments
of long-term debt as this amount could be repaid using the Revolving
Loan.
The Term Loan contains mandatory prepayment provisions which require that
certain excess cash flows, proceeds from the sale of discontinued
operations, other proceeds outside the ordinary course of business, and
tax refunds as defined must be used to pay down the outstanding term loan
balance in reverse order of maturity. Once repaid, Term Loans may not be
reborrowed. The Term Loan Commitment expires August 31, 1999.
At November 22, 1996, there was $55,000 outstanding under the Term Loan
provisions of the Amended Agreement.
Except in certain limited circumstances, the Revolving Loan and the Term
Loan will bear interest at 150 basis points above the base rate which is
defined as the higher of (i) 1/2 of 1% in excess of the adjusted
certificate of deposit rate, (ii) the prime lending rate, and (iii) 1/2
of 1% in excess of the overnight federal funds rate. Interest is due in
arrears on the last day of each month. The interest rate is subject to
cumulative increases in the event the Company (i) does not achieve
certain earnings before interest taxes and depreciation (EBITDA) targets
or (ii) fails to make annual principal payments, other than regularly
scheduled term loan amortization payments, of at least $5,000. In
addition, default interest is payable at the base rate plus 2%.
Borrowings under the Amended Agreement are secured by a lien against all
assets of the Company and subsidiaries. The Amended Agreement contains
certain financial and nonfinancial covenants. As of November 22, 1996,
the Company was in compliance with all such covenants.
Prior to its amendment and restatement, the Credit Agreement had a
revolving credit facility (the "Facility") which provided for
availability of $65 million until October 31, 1998. The entire amount
outstanding under the Credit Agreement was to mature on October 31, 1998.
Advances under the Facility were not to exceed a borrowing base
determined by specific percentages of eligible accounts receivable and
inventories (each as defined in the Credit Agreement). A commitment fee
of 0.5% per annum was required on all unused amounts under the Facility.
The Company had a rate protection agreement which limited the base
interest rate payable on the first $25 million outstanding term loan
principal to 7.5% through December 21, 1995. At February 2, 1996,
installments totaling approximately $240,058 were classified as current
as these amounts were in default under the Credit Agreement.
(Continued)
F-17
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
Borrowings under the Credit Agreement, at the Company's option, were
either base rate loans or LIBOR (London Interbank Offered Rate) based
loans. Base rate loans bear interest at the lenders' prime rate (8.25% at
February 2, 1996 and November 22, 1996) of interest plus 1.5%.
LIBOR-based loans bear interest at the LIBOR rate of 5.375% at February
2, 1996 plus 2.75%.
Borrowings under the Credit Agreement were secured by a pledge of all
securities owned by the Company and a security interest in all the
Company's tangible and intangible assets.
Interest on the Notes was payable semiannually on each June 15 and
December 15, commencing December 15, 1992. Prior to the conversion of the
Notes to equity interests pursuant to the Plan, approximately $24,625 and
$24,573 of the Notes were held by related parties at November 22, 1996
and February 2, 1996, respectively, and are included in related party
liabilities on the accompanying consolidated balance sheets.
(7) Income Taxes
------------
Components of income tax (expense) benefit consist of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
42-week period ended November 22, 1996:
Federal $ 3,113 (7,042) (3,929)
State 1,191 (1,480) (289)
----- ------ ----
$ 4,304 (8,522) (4,218)
===== ====== ======
Year ended February 2, 1996:
Federal $ 10,302 13,639 23,941
State 1,369 1,847 3,216
----- ----- -----
$ 11,671 15,486 27,157
====== ====== ======
Year ended January 27, 1995:
Federal $ (4,751) 167 (4,584)
State (1,106) 37 (1,069)
----- ----- -----
$ (5,857) 204 (5,653)
====== ====== ======
</TABLE>
(Continued)
F-18
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
Income tax benefit (expense) for the 42-week period ended November 22, 1996 and
the years ended February 2, 1996 and January 27, 1995 amounted to $4,218,
$(27,157), and $5,653, an effective rate of 253.0%, 35.3%, and 42.9%,
respectively, which differs from the "expected" income tax expense (computed by
applying the U.S. Federal corporate income tax rate of 35% for the 42-week
period ended November 22, 1996, fiscal 1996, and fiscal 1995 to income (loss)
before income taxes and extraordinary item) as follows:
<TABLE>
<CAPTION>
42-week
period ended Years ended
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Computed "expected" income tax benefit (expense) $ (583) 26,881 (4,610)
State and local taxes, net of Federal
income tax benefit (45) 2,090 (695)
Amortization of intangible assets - (1,632) (64)
Nondeductible expenses relating to bankruptcy (744) -- --
Provision for resolution of tax audits and adjustments
to refund receivable (2,727) -- --
Other, net (119) (182) (284)
-------- -------- --------
$ (4,218) 27,157 (5,653)
======== ======== ========
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
November 22, 1996, February 2, 1996, and January 27, 1995 are presented
below:
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
November 22, February 2, January 27,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Nondeductible accruals $ 3,927 9,036 3,050
Restructuring related reserves and write-downs
of inventory, receivables, and property, plant,
and equipment 2,199 9,049 --
Inventory write-downs 1,387 718 393
Interest on IRS settlement -- -- 173
Accounts receivable reserves and allowances -- 291 353
State taxes -- 749 613
Other -- 369 354
-------- -------- --------
Deferred tax assets 7,513 20,212 4,936
-------- -------- --------
Deferred tax liabilities:
Plant and equipment (14,258) (7,204) (7,414)
Accounts receivable (2,914) -- --
Inventory (7,989) -- --
Other (922) -- --
-------- -------- --------
Deferred tax liabilities (26,083) (7,204) (7,414)
-------- -------- --------
Net deferred tax asset (liability) $(18,570) 13,008 (2,478)
======== ======== ========
</TABLE>
In fiscal 1993, the Company paid approximately $1,600 in partial
settlement of an Internal Revenue Service audit which proposed the
disallowance of amortization of certain intangible assets. In fiscal
1995, the audit was settled with a final payment of approximately $1,600.
(Continued)
F-19
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(8) Related Party Transactions
--------------------------
During the period ended November 22, 1996 and the years ended February 2,
1996 and January 27, 1995, the Company engaged in transactions with
related parties, including reimbursement for (income) expenses incurred
on behalf of the former Parent company of approximately $(299), $325, and
$2,390, respectively, with a balance receivable of $305, $604, and $926
at November 22, 1996; February 2, 1996; and January 27, 1995,
respectively.
The Company also licensed certain trademarks from an affiliate under
terms and conditions consistent within the industry. Royalties paid to
the affiliate totaled $175 in fiscal 1995. No royalty payments were made
to the affiliate in fiscal 1996 or the 42-week period ended November 22,
1996.
In connection with the Chapter 11 filing, the equity interests of the
former Parent were canceled, extinguished, and annulled. Additionally,
the Company entered into the Intercompany Compromise and Settlement
Agreement as of the Effective Date which included a provision to
terminate the license agreement.
(9) Credit Concentrations
---------------------
Most of the Company's sales are concentrated with national retailers. For
the 42-week period ended November 22, 1996, one customer individually
accounted for 47% of net sales. For the years ended February 2, 1996 and
January 27, 1995, two customers accounted for 42% and 11% and 44% and 13%
of net sales, respectively.
At November 22, 1996, February 2, 1996, and January 27, 1995, the Company
had $1,938, $2,935, and $4,634, respectively, of trade accounts
receivable due from customers that are believed to be moderate to high
credit risks. These accounts have been factored under a nonrecourse
non-notification factoring arrangement which reduces the credit risk to
the Company subject to performance by the factor. Management anticipates
the factor will be able to fulfill its obligations if required.
(10) Fair Value of Financial Instruments
-----------------------------------
At November 22, 1996, the fair value of the Company's debt is equal to
the carrying amount as it was subject to restructuring. At February 2,
1996 and January 27, 1995, the fair value of the Company's long-term debt
is estimated based on the most recent trading prices offered for the
Company's debt. The carrying amounts and estimated fair values of the
Company's long-term debt are as follows:
<TABLE>
<CAPTION>
Preconfirmation
--------------------------------------------
February 2, 1996 January 27, 1995
---------------------- -------------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Long-term debt:
Revolving credit facility $ (37,000) (37,000) - -
Term loans (77,771) (72,716) (96,072) (96,072)
Senior subordinated notes (124,573) (56,250) (124,511) (117,500)
Other long-term borrowings (714) (714) (1,875) (1,875)
</TABLE>
(Continued)
F-20
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
The carrying value of all other financial instruments in the consolidated
balance sheets equals or approximates their fair value.
(11) Commitments and Other Matters
-----------------------------
The Company leases certain equipment and warehousing facilities under
operating leases expiring at various dates through 2010. Total rent
expense under these leases amounted to approximately $3,881, $3,414, and
$3,798 for the period ended November 22, 1996 and the years ended
February 2, 1996 and January 27, 1995, respectively. In addition, the
Company is responsible for payment of applicable real estate taxes,
insurance, and maintenance expenses.
At November 22, 1996, future minimum annual rentals under these leases
are as follows:
Fiscal years ending in:
- -----------------------
1997 $ 4,594
1998 2,769
1999 2,220
2000 1,479
2001 1,008
Thereafter 1,014
-----------
$ 13,084
===========
The Company has royalty agreements for certain licensed products. The
total royalty expense under these agreements amounted to approximately
$479, $2,541, and $2,644 for the 42-week period ended November 22, 1996
and the years ended February 2, 1996 and January 27, 1995, respectively.
At November 22, 1996, the future minimum royalty expense for the fiscal
year ending in 1997 will be approximately $642.
(12) Employee Benefit Plans
----------------------
The Company has an incentive compensation plan under which certain
employees may receive discretionary bonus awards from a bonus pool
calculated based on a specified percentage of operating income, as
defined. The Board of Directors may override the calculations with
additional bonus amounts at its discretion. Bonus amounts expensed under
these arrangements for the year ended January 27, 1995 was approximately
$1,310. No bonuses were accrued for the year ended February 2, 1996.
Bonus amounts expensed for the 42-week period ended November 22, 1996
were $1,740.
On the Effective Date, the Company adopted a stock option plan pursuant
to which the Company's Board of Directors may grant stock options to
officers and key employees. The Stock Plan authorizes grants of options
of up to 928,962 shares of authorized but unissued common stock. Stock
options may be granted at an exercise price equal to or less than fair
market value as stipulated in the applicable award agreement. Excluding a
grant of 109,290 options to certain outside consultants, 50% of the total
options available have three-year terms and one-third of these options
vest and become fully exercisable annually.
(Continued)
F-21
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
The remaining 50% of the options available are performance based and are
awarded based upon the achievement of certain performance targets for
each of the next three years. Up to one-third of the total performance
options granted are eligible for vesting annually. At November 22, 1996,
no stock options had been granted.
The Company maintains a medical benefits plan and trust which covers
substantially all employees of the Company. The plan is funded currently
by contributions from the Company and employees based on anticipated
claim costs. Company contributions to the plan were $5,604, $8,585, and
$9,544 for the 42-week period ended November 22, 1996 and the years ended
February 2, 1996 and January 27, 1995, respectively. Net assets available
for plan benefits held in trust were $735 at November 22, 1996; $605 at
February 2, 1996; and $78 at January 27, 1995.
The Company sponsors a defined contribution retirement plan for its
employees. Company contributions are based upon a percentage of the
employees' contributions. Contributions and administrative expenses
incurred by the Company on behalf of the plan totaled approximately $319,
$456, and $473 for the 42-week period ended November 22, 1996 and the
years ended February 2, 1996 and January 27, 1995, respectively.
(13) Restructuring
-------------
In the third quarter of fiscal 1996, in response to operating losses
resulting from decreasing sales as well as high manufacturing and
distribution costs, the Company initiated a restructuring plan to improve
operating performance and reduce costs. In connection with this plan, the
Company recorded charges totaling $51,591 ($33,379 after related income
tax benefits), of which $14,153 ($9,157 net of income tax benefits), and
$37,438 ($24,222 net of income tax benefits) were charged to operating
expenses in the third and fourth quarters of fiscal 1996, respectively.
Such charges related to (i) the closing and consolidation of certain
manufacturing and distribution facilities; (ii) the write-down of certain
equipment associated with closed facilities to net realizable value;
(iii) the write-off and establishment of reserves to reduce inventory and
accounts receivable to estimated net realizable value for amounts
associated with customers, product lines, and specific products that the
Company elected to discontinue manufacturing and distributing; (iv)
severance and other costs associated with plant closures and overhead
reductions resulting from a total domestic work force reduction in fiscal
1996 and the 42-week period ended November 22, 1996 of approximately two
thousand six hundred employees, of which approximately one thousand one
hundred and one thousand five hundred had occurred during fiscal 1996 and
the 42-week period ended November 22, 1996, respectively; and (v) the
write-off of certain impaired intangible assets, principally deferred
debt expense of $2,672 and goodwill of $2,395. As of November 22, 1996
and February 2, 1996, assets held for disposition consist of the
following:
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
November 22, February 2,
1997 1996
---- ----
<S> <C> <C>
Trade accounts receivable, net of estimated reserve of $2,176
at February 2, 1996 $ - 3,824
Property, plant, and equipment, net of estimated reserve of $4,228
at February 2, 1996 204 1,800
Inventory, net of obsolescence reserve of $17,452 and allocated
LIFO reserve of $1,033 at February 2, 1996 2,541 11,515
----- ------
$ 2,745 17,139
===== ======
</TABLE>
(Continued)
F-22
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
The reserves reflect management estimates of the recoverability of the
related assets.
(14) Quarterly Financial Data (Unaudited)
------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter/a/
------- ------- ------- ----------
<S> <C> <C> <C> <C>
42-week period ended November 22, 1996:
Net sales $ 97,619 78,883 98,624 22,477
Gross profit 12,691 11,707 13,367 4,295
Provision for asset write-
downs and restructuring -- (2,964) -- --
Net income (loss) (1,302) 641 (1,303) 67,336
Year ended 1996:
Net sales $ 93,661 101,688 111,521 91,949
Gross profit 16,856 13,664 12,227 2,135
Provision for asset write-
downs and restructuring -- -- (14,153) (37,438)
Net income (loss) 110 (1,907) (11,840) (36,007)
Year ended 1995:
Net sales $ 104,632 101,523 115,192 93,453
Gross profit 18,580 18,188 20,837 15,254
Net income 2,000 1,977 3,206 330
</TABLE>
/a/Results reflect three-week period ended November 22, 1996.
F-23
<PAGE>
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------------
TABLE OF CONTENTS
PAGE
Additional Information..................................... 3
Prospectus Summary......................................... 4
The Company............................................... 4
Risk Factors............................................... 7
Use of Proceeds........................................... 11
Dividend Policy........................................... 11
Market for the Common Stock ............................... 11
Capitalization............................................ 12
Unaudited Pro Forma Financial
Information .......................................... 14
Selected Financial Data................................... 16
Management's Discussion
Analysis of Financial Condition
and Results of Operations............................ 18
Business.................................................. 24
Directors and Management.................................. 28
Description of Capital Stock.............................. 38
Selling Stockholders...................................... 43
Plan of Distribution...................................... 44
Legal Matters............................................. 45
Experts................................................... 45
Index to Financial Statements................................ F-1
---------------------------
UNTIL _____________ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS.
================================================================================
10,109,290 SHARES
ITHACA INDUSTRIES, INC.
COMMON STOCK
------------
PROSPECTUS
------------
, 1997
----------- ---
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with
the sale and distribution of the Shares being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Commission registration fee and NASD filing fee.
Commission registration fee.......................................... 100
Legal fees and expenses.............................................. 50,000
Accounting fees and expenses......................................... 30,000
Miscellaneous........................................................ 10,000
--------
Total............................................................ $ 90,100
========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation (a "Derivative Action")), if the relevant party
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of Derivative
Actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
actions, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification had been found liable
to the corporation. The Statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise.
Section 8.1 of the Certificate and Article 8.1 of the By-Laws of the
registrant calls for indemnification to the full extent permitted under Delaware
law as from time to time in effect. Subject to any restrictions imposed by
Delaware law, the By-Laws provide a right to indemnification for expenses
(including attorneys' fees and disbursements, judgments, fines, excise taxes,
penalties, amounts paid in settlement, charges and costs) actually and
reasonably incurred or suffered by any person in connection with any actual or
threatened action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, to the extent permitted by law, any Derivative
Action) by reason of the fact that such person is or was serving as a director
or officer of the registrant or that, being or having been a director or officer
or an employee of the registrant, such person is or was serving at the request
of the registrant as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including an
employee benefit plan. The By-Laws also provide that the registrant may, by
action of its Board of Directors, provide indemnification to its employees and
agents with the same scope and effect as the foregoing indemnification of
directors and officers.
II-1
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the laws of Delaware, the Certificate and Bylaws,
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person of the
Registrant in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SELLING STOCKHOLDERS.
10,000,000 Shares of Common Stock were issued in reliance upon the
exemption provided by Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(Defined terms are used herein as defined in the Prospectus.)
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
2.1 Plan of Reorganization (incorporated by reference to Exhibit
A of Exhibit 2.1 to the Company's Form 8-K, dated September
3, 1996.)
2.2 Modification of the Plan of Reorganization
2.3 Second Modification of the Plan of Reorganization
3.1 Amended and Restated Certificate of Incorporation
3.2 By-Laws (incorporated by reference to Exhibit F of Exhibit
2.1 to the Company's Form 8-K, dated September 3, 1996.)
4 Registration Rights Agreement (incorporated by reference to
Exhibit H of Exhibit 2.1 to the Company's Form 8-K, dated
September 3, 1996.)
5 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison re:
legality
10.1 Credit Agreement (Exhibit P of which is incorporated by
reference to Exhibit 99.1 to the Company's Form 10-K, dated
May 17, 1996, and Exhibit Q is included in Item 2.1
10.2 LTIP (incorporated by reference to Exhibit I of Exhibit 2.1
to the Company's Form 8-K, dated September 3, 1996.)
10.3 Management Agreement
II-2
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
10.4 Employment Agreement of Jim D. Waller
21 List of Subsidiaries of the Company
23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included
in item 5)
23.2 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule for the 42-week period ended November
22, 1996 and the fiscal year ended February 2, 1996
- -----------
FINANCIAL STATEMENT SCHEDULE:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Schedule II Valuation and Qualifying Accounts--42-week period ended S-1
November 22, 1996 - Preconfirmation and years ended February 2,
1996 and January 27, 1995.
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement.
II-3
<PAGE>
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Wilkesboro, North
Carolina, on this 17th day of March, 1997.
ITHACA INDUSTRIES, INC.
By: /s/ Eric N. Hoyle
----------------------------
Eric N. Hoyle
(Secretary, Chief Financial and
Accounting Officer)
We, the undersigned officers and directors of Ithaca Industries, Inc.,
hereby severally constitute Jim D. Waller, and Eric N. Hoyle, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, any
and all amendments, including post-effective amendments, to this Registration
Statement, and generally do all such things in our name and on our behalf in
such capacities to enable Ithaca Industries, Inc. to comply with the applicable
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities Exchange Commission, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys, or either of them, to
any and all such amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman, Chief March 17, 1997
/s/Jim D. Waller Executive Officer,
- ----------------------
Jim D. Waller President and Director
/s/Walter J. Branson Director March 12, 1997
- ----------------------
Walter J. Branson
/s/Marvin B. Crow Director March 17, 1997
- ----------------------
Marvin B. Crow
/s/Francis Goldwyn Director March 14, 1997
- ----------------------
Francis Goldwyn
/s/Morton E. Handel Director March 11, 1997
- ----------------------
Morton E. Handel
/s/David N. Weinstein Director March 17 , 1997
- -----------------------
David N. Weinstein
/s/James A. Williams Director March 17, 1997
- ----------------------
James A. Williams
II-5
<PAGE>
Schedule II
-----------
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
42-Week Period ended November 22, 1996, Preconfirmation,
and Years ended February 2, 1996 and January 27, 1995
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning cost and end of
Description of year expenses Deductions year/period
----------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C>
42-week period ended November 22, 1996,
Preconfirmation :
Allowance for doubtful accounts $1,215,000 333,724 40,428 1,508,296
Provision for discounts 99,178 1,925,578 2,019,996 4,760
Provision for claims and allowances 1,255,602 4,579,938 4,590,803 1,244,737
---------- ---------- ---------- ----------
Total $2,569,780 6,839,240 6,651,227 2,757,793
========== ========== ========== ==========
Year ended February 2, 1996:
Allowance for doubtful accounts $1,215,000 54,965 54,965 1,215,000
Provision for discounts 146,974 2,776,842 2,824,638 99,178
Provision for claims and allowances 1,373,208 6,530,524 6,648,130 1,255,602
---------- ---------- ---------- ----------
Total $2,735,182 9,362,331 9,527,733 2,569,780
========== ========== ========== ==========
Year ended January 27, 1995:
Allowance for doubtful accounts $1,797,344 (528,547) 53,797 1,215,000
Provision for discounts 269,658 2,937,297 3,059,981 146,974
Provision for claims and allowances 1,061,451 5,575,020 5,263,263 1,373,208
---------- ---------- ---------- ----------
Total $3,128,453 7,983,770 8,377,041 2,735,182
========== ========== ========== ==========
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
2.1 Plan of Reorganization (incorporated by reference to Exhibit
A of Exhibit 2.1 to the Company's Form 8-K, dated September
3, 1996.)
2.2 Modification of the Plan of Reorganization
2.3 Second Modification of the Plan of Reorganization
3.1 Amended and Restated Certificate of Incorporation
3.2 By-Laws (incorporated by reference to Exhibit F of Exhibit
2.1 to the Company's Form 8-K, dated September 3, 1996.)
4 Registration Rights Agreement (incorporated by reference to
Exhibit H of Exhibit 2.1 to the Company's Form 8-K, dated
September 3, 1996.)
5 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison re:
legality
10.1 Credit Agreement (Exhibit P of which is incorporated by
reference to Exhibit 99.1 to the Company's Form 10-K, dated
May 17, 1996, and Exhibit Q is included in Item 2.1
10.2 LTIP (incorporated by reference to Exhibit I of Exhibit 2.1
to the Company's Form 8-K, dated September 3, 1996.)
10.3 Management Agreement
10.4 Employment Agreement of Jim D. Waller
21 List of Subsidiaries of the Company
23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included
in item 5)
23.2 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule for the 42-week period ended November
22, 1996 and the fiscal year ended February 2, 1996
Exhibit 2.2
-----------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: ) CASE NO.
)
ITHACA INDUSTRIES, INC., ) CHAPTER 11
)
DEBTOR. )
)
MODIFICATION OF DEBTOR'S
PREPACKAGED PLAN OR REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Pursuant to Section 1127 of Title 11 of the United States Code, 11
U.S.C. ss.ss. 101 et seq., and Rule 3019 of the Federal Rules of Bankruptcy
Procedure, Ithaca Industries, Inc. (the "Debtor"), debtor and
debtor-in-possession, submits the following modification to the Debtor's
Prepackaged Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated
August 29, 1996 (the "Plan"):
1. Section 8.1(c) of the Plan is deleted in its entirety and
replaced with the following:
"(c) The aggregate amount of (i) scheduled (where no superseding
proof of Claim is timely filed) and filed General Unsecured Claims, and (ii) the
Debtor's accounts payable as of the Petition Date in respect of trade and
payroll obligations as contained in the Debtor's books and records and set forth
in an officer's
<PAGE>
2
certificate to be filed with the Bankruptcy Court on or prior to the date of the
Confirmation Hearing, shall not exceed $20,000,000."
Dated: Wilmington, Delaware
October 8, 1996
ITHACA INDUSTRIES, INC.
Debtor and Debtor-in-Possession
By: /s/ Jim Waller
------------------------------------
Jim Waller,
Chairman, President and Chief
Executive Officer
YOUNG, CONAWAY, STARGATT & TAYLOR
Co-Counsel to the Debtor and
Debtor-in-Possession
By: /s/ Laura Davis Jones
---------------------------------
Laura Davis Jones (LDJ-2436)
11th Floor, Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6642
-and-
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
Counsel to the Debtor and
Debtor-in-Possession
By: Jeffrey W. Levitan (JL-6155)
A Member of the Firm
1585 Broadway
New York, New York 10036
(212) 969-3000
Exhibit 2.3
-----------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: ) CASE NO. 96-1583 (HSB)
)
ITHACA INDUSTRIES, INC., ) CHAPTER 11
)
DEBTOR. )
)
SECOND MODIFICATION OF DEBTOR'S
PREPACKAGED PLAN OR REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------
Pursuant to Section 1127 of Title 11 of the United States Code, 11
U.S.C. ss.ss. 101 et seq., and Rule 3019 of the Federal Rules of Bankruptcy
Procedure, Ithaca Industries, Inc. (the "Debtor"), debtor and
debtor-in-possession, by and through its attorneys, submits the following second
modification to the Debtor's Prepackaged Plan of Reorganization Under Chapter 11
of the Bankruptcy Code dated August 29, 1996 (as amended by the Debtor's first
modification dated October 8, 1996, the "Plan"):
1. The following new Sections 1.3.1, 1.3.2 and 1.3.3 are added
immediately after Section 1.3 of the Plan:
1.3.1 "Amended and Restated Bank Group Documents" shall mean the Amended
and Restated Credit Agreement, and all agreements, instruments and
documents executed in connection therewith, which set forth the terms and
conditions governing the Amended and Restated Ithaca Secured Notes and
which shall be filed with the Bankruptcy Court no later than ten (10) days
following the Effective Date.
1.3.2 "Amended and Restated Credit Agreement" shall mean the Credit
Agreement as amended and restated on and as of the Effective Date.
<PAGE>
2
1.3.3 "Amended and Restated Ithaca Secured Notes" shall mean the secured
notes to be issued by Reorganized Ithaca for distribution to the Bank
Group pursuant to Section 4.2.1(a) of the Plan in accordance with the
Amended and Restated Bank Group Documents.
2. Sections 1.55 and 1.58 of the Plan are deleted in their
entirety.
3. Section 4.2.1 of the Plan is modified by (i) renumbering that
section as Section 4.2.1(a), and (ii) deleting the preamble to the term sheet
contained in such section and replacing it with the following:
4.2.1(a) Class 2A (Allowed Bank Group Secured Claims). On the Effective
Date, the Credit Agreement shall be amended and restated, to reflect the
principal terms set forth herein, and such other terms as to which the
Debtor, the Reorganized Debtor, the Informal Committee and the Lenders may
agree, and each holder of an Allowed Bank Group Secured Claim shall
receive (subject to Section 6.11 hereof) its Pro Rata share of the Amended
and Restated Ithaca Secured Notes issued pursuant to the Amended and
Restated Bank Group Documents which shall contain the following principal
terms:
4. The following new Section 4.2.1(b) shall be added immediately
after the term sheet in new Section 4.2.1(a) of the Plan:
4.2.1(b) The liens, pledges, mortgages and security interests securing the
Obligations (as such term is defined in the Amended and Restated Credit
Agreement) shall remain in full force and effect through and after the
Effective Date and shall continue to constitute valid, enforceable,
perfected, first priority liens, pledges, mortgages or security interests
securing the Obligations (subject to any permitted liens as set forth in
the Amended and Restated Credit Agreement) after the amendment and
restatement of the Credit Agreement contemplated herein.
5. The following new Section 6.31 shall be added immediately
after Section 6.30 of the Plan:
6.31 Execution of Amended Bank Group Documents. On the Effective Date, the
Debtor and the other parties thereto shall execute and deliver the Amended
and Restated Bank Group Documents, but only so long as the same shall be
in form and substance reasonably satisfactory to the Debtor, the Informal
Committee and each Lender.
<PAGE>
3
6. Section 8.1(f) of the Plan is deleted and replaced with the
following:
(f) The Amended and Restated Bank Group Documents shall be in form and
substance reasonably satisfactory to each Lender, the Official Committee
and the Informal Committee.
Dated: Wilmington, Delaware
November 20, 1996
YOUNG, CONAWAY, STARGATT & TAYLOR
Co-Counsel to the Debtor and Debtor-in-Possession
By: /s/ Joel Waite
-----------------------------------------
Laura Davis Jones (LDJ-2436)
11th Floor, Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6642
-and-
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
Co-Counsel to the Debtor and Debtor-in-Possession
By: Jeffrey W. Levitan (JL-6155)
A Member of the Firm
1585 Broadway
New York, New York 10036
(212) 969-3000
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
of
ITHACA INDUSTRIES, INC.
Ithaca Industries, Inc., originally incorporated under Delaware
General Corporation Law on September 22, 1983 under the name of New Ithaca
Corporation, hereby amends and restates its certificate of incorporation as
follows:
1. NAME. The name of the corporation is Ithaca Industries, Inc.
(the "Corporation").
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office is 1209 Orange Street, City of Wilmington,
County of New Castle, State of Delaware 19801; and its registered agent at such
address is The Corporation Trust Company.
3. PURPOSE. The purpose of the Corporation is to engage in, carry
on and conduct any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law (as amended from time to
time, the "DGCL").
4. NUMBER OF SHARES. The total number of shares of stock that the
Corporation shall have authority to issue is 30,000,000, divided as follows:
2,500,000 shares of Preferred Stock, of the par value of $.01 per share (the
"Preferred Stock"), and 27,500,000 shares of Common Stock, of the par value of
$.01 per share (the "Common Stock").
5. DESIGNATION OF CLASSES; RELATIVE RIGHTS, ETC. The designation,
relative rights, preferences and limitations of the shares of each class are as
follows:
5.1 PREFERRED STOCK. The shares of Preferred Stock may be
issued from time to time in one or more series of any number of shares, provided
that the aggregate number of shares issued and not canceled of any and all such
series shall not exceed the total number of shares of Preferred Stock
hereinabove authorized, and with such powers, preferences, rights and
qualifications, limitations or restrictions thereof, and such distinctive serial
designations, all as shall hereafter be stated and expressed in the resolution
or resolutions adopted by the Board of Directors of the Corporation (the "Board
of Directors") providing for the issue of such shares of Preferred Stock from
time to time pursuant to authority to do so which is hereby vested in the Board
of Directors. Each series of shares of Preferred Stock (a) may have such voting
rights or powers, full or limited, or, subject to Section 5.3, may be
<PAGE>
2
without voting rights or powers; (b) may be subject to redemption at such time
or times and at such prices; (c) may be entitled to receive dividends (which may
be cumulative or non-cumulative) at such rate or rates, on such conditions and
at such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock; (d) may have
such rights upon the voluntary or involuntary liquidation, winding up or
dissolution of, or upon any distribution of the assets of, the Corporation; (e)
may be made convertible into or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the Corporation at such price or prices or at such rates of exchange
and with such adjustments; (f) may be entitled to the benefit of a sinking fund
to be applied to the purchase or redemption of shares of such series in such
amount or amounts; (g) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the Corporation or any
subsidiary, upon the issue of any additional shares (including additional shares
of such series or of any other series) and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of, any outstanding shares of
the Corporation and (h) may have such other relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof; all
as shall be stated in said resolution or resolutions providing for the issue of
such shares of Preferred Stock. Any of the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of any such
series of Preferred Stock may be made dependent upon facts ascertainable outside
of the resolution or resolutions adopted by the Board of Directors providing for
the issue of such Preferred Stock pursuant to the authority vested in the Board
by this Section 5.1, provided that the manner in which such facts shall operate
upon the voting powers, designations, preferences, rights and qualifica tions,
limitations or restrictions of such series of Preferred Stock is clearly and
expressly set forth in the resolution or resolutions providing for the issue of
such Preferred Stock. The term "facts" as used in the preceding sentence shall
have the meaning given to it in section 151(a) of the DGCL. Shares of Preferred
Stock of any series that have been redeemed (whether through the operation of a
sinking fund or otherwise) or that if convertible or exchangeable have been
converted into or exchanged for shares of any other class or classes, shall have
the status of authorized and unissued shares of Preferred Stock undesignated as
to series and may be reissued as a part of the series of which they were
originally a part or as part of a new series of shares of Preferred Stock to be
created by resolution or resolutions of the Board of Directors or as part of any
other series of shares of Preferred Stock, all subject to any conditions or
restrictions on issuance set forth in the resolution or resolutions adopted by
the Board of Directors providing for the issue of any series of shares of
Preferred Stock.
5.2 COMMON STOCK. All shares of Common Stock shall be
identical and shall entitle the holders thereof to the following rights and
privileges:
5.2.1 VOTING RIGHTS. Subject to the provisions of any
applicable law or of the By-laws of the Corporation (the "By-laws"), as from
time to
<PAGE>
3
time amended, with respect to the closing of the transfer books or the fixing of
a record date for the determination of stockholders entitled to vote and except
for voting rights granted to holders of Preferred Stock as otherwise provided by
law or by the resolution or resolutions providing for the issue of any series of
shares of Preferred Stock, the holders of outstanding shares of Common Stock
shall exclusively possess voting power for the election of directors and for all
other purposes. Each holder of record of shares of Common Stock shall be
entitled to one vote for each share of Common Stock standing in such holder's
name on the books of the Corporation and the Common Stock shall vote as a single
class on all matters on which the Common Stock is entitled to vote.
5.2.2 DIVIDENDS. When and as dividends are declared
thereon, whether payable in cash, property or securities of the Corporation,
subject to the prior rights of the holders of Preferred Stock, if any, the
holders of Common Stock shall be entitled to share in such dividend ratably
according to the number of shares of Common Stock so held.
5.2.3 LIQUIDATION RIGHTS. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, subject to the prior rights of creditors and of the holders of
Preferred Stock, if any, the holders of Common Stock shall be entitled to share,
ratably according to the number of shares of Common Stock held by them, as a
single class, in the remaining assets of the Corporation available for
distribution to its stockholders.
5.3 RESTRICTION ON ISSUANCES OF NON-VOTING EQUITY SECURITIES.
The Corporation shall not issue any nonvoting equity securities; PROVIDED, that
this provision, which is included in this Certificate of Incorporation in
compliance with section 1123(a)(6) of the United States Bankruptcy Code of 1978,
as amended, shall have no force or effect beyond that required by such section
1123(a)(6) and shall be effective only for so long as such section 1123(a)(6) is
in effect and applicable to the Corporation.
5.4 CONSIDERATION. Subject to the provisions of this
Certificate of Incorporation and except as otherwise provided by law, the stock
of the Corporation, regardless of class, may be issued for such consideration
and for such corporate purposes as the Board of Directors may from time to time
determine.
5.5 NO PRE-EMPTIVE RIGHTS. The holders of shares of Common
Stock are not entitled to any preemptive right to subscribe for, purchase or
receive any part of any new or additional issue of stock of any class, whether
now or hereafter authorized or of bonds, debentures or other securities
convertible into or exchangeable for stock.
6. COMPROMISE, ARRANGEMENT OR REORGANIZATION. Whenever a
compromise or arrangement is proposed between this Corporation and its creditors
or
<PAGE>
4
any class of them and/or between this Corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State of Delaware
may, on the application in a summary way of this Corporation or of any creditor
or stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under the provisions of section 291 of the DGCL
or on the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of section 279 of the DGCL,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corpora tion, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agrees to any compromise or arrangement and to any reorganization
of this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
7. LIMITATION OF LIABILITY. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, including breaches resulting from
such director's grossly negligent behavior, except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under section 174 of the DGCL or
(d) for any transaction from which the director derived any improper personal
benefits. If the DGCL is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
8. INDEMNIFICATION.
8.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Corporation, or is or was serving as a director, officer,
manager, member, employee or agent or in any other capacity at the request of
the Corporation, for any other corporation, company, partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity") while
serving as a
<PAGE>
5
director or officer of the Corporation, against judgments, fines, penalties,
excise taxes, amounts paid in settlement and costs, charges and expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
by such person in connection with such Proceeding, if such person acted in good
faith and in a manner such person believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
To the extent specified by the Board of Directors of the Corporation at any time
and to the extent not prohibited by law, the Corporation may indemnify any
person who is or was made, or threatened to be made, a party to any threatened,
pending or completed Proceeding, whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of
the Corporation to procure a judgment in its favor, by reason of the fact that
such person is or was an employee or agent of the Corporation, or is or was
serving as a director, officer, manager, member, employee or agent or in any
other capacity at the request of the Corporation, for any Other Entity, against
judgment, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements) actually and
reasonably incurred by such person in connection with such Proceeding, if such
person acted in good faith and in a manner such person believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
8.2 The Corporation shall, from time to time, reimburse or
advance to any director or officer or other person entitled to indemnification
hereunder the funds necessary for payment of expenses, including attorneys' fees
and disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; PROVIDED, HOWEVER, that, if required by
the DGCL, such expenses incurred by or on behalf of any director or officer or
other person may be paid in advance of the final disposition of a Proceeding
only upon receipt by the Corporation of an undertaking, by or on behalf of such
director or officer (or other person indemnified hereunder), to repay any such
amount so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right of appeal that such director,
officer or other person is not entitled to be indemnified for such expenses.
8.3 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Amended and Restated Certificate
of Incorporation, the By-laws, any agreement (including any policy of insurance
purchased or provided by the Corporation under which directors, officers,
employees and other agents of the Corporation are covered), any vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
<PAGE>
6
8.4 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall continue as to a person who has ceased to be a director or officer (or
other person indemnified hereunder) and shall inure to the benefit of the
executors, administrators, legatees and distributees of such person.
8.5 The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, member, manager, employee or agent of an
Other Entity, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Section 8, the
By-laws or under section 145 of the DGCL or any other provision of law.
8.6 The provisions of this Section 8 shall be a contract
between the Corporation, on the one hand, and each director and officer who
serves in such capacity at any time while this Section 8 is in effect and any
other person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such director, officer, or other person intend to be
legally bound. No repeal or modification of this Section 8 shall affect any
rights or obligations with respect to any state of facts then or theretofore
existing or thereafter arising or any proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
8.7 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
Neither the failure of the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) to have made a determination
prior to the commencement of such action that such indemnification or
reimbursement or advancement of expenses is proper in the circumstances nor an
actual determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that such per son is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
8.8 Any director or officer of the Corporation serving in any
capacity in (i) another corporation of which a majority of the shares entitled
to vote in the election of its directors is held, directly or indirectly, by the
Corporation or
<PAGE>
7
(ii) any employee benefit plan of the Corporation or any corporation referred to
in clause (i) shall be deemed to be doing so at the request of the Corporation.
8.9 Any person entitled to be indemnified or to reimbursement
or advancement of expenses as a matter of right pursuant to this Section 8 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; PROVIDED, HOWEVER, that if no such notice is given, the right to
indemnification or reimbursement or advancement of expenses shall be determined
by the law in effect at the time indemnification or reimbursement or advancement
of expenses is sought.
9. DIRECTORS. This Section is inserted for the management of the
business and for the conduct of the affairs of the Corporation and it is
expressly provided that it is intended to be in furtherance of and not in
limitation or exclusion of the powers conferred by applicable law.
9.1 NUMBER, ELECTION, AND TERMS OF OFFICE OF BOARD OF
DIRECTORS. The business of the Corporation shall be managed by a Board of
Directors consisting of not less than 3 or more than 10 members. The exact
number of directors within the minimum and maximum limitations specified in the
preceding sentence shall be fixed from time to time by resolution adopted by a
majority of the entire Board of Directors then in office, whether or not present
at a meeting. Directors may be elected by written ballot or by voice vote.
9.2 TENURE. Except as set forth in the immediately succeeding
sentence, the term of office of each director shall expire at the first annual
meeting of stockholders of the Corporation next following the Corporation's
fiscal year ending January 31, 1998. The director designated by the Butler
Noteholders (as defined in the Corporation's plan of reorganization dated August
29, 1996, as the same may be amended (the "Plan"), under Chapter 11 of Title 11
of the United States Code) pursuant to the Plan shall have an initial term of
office expiring at the annual meeting of stockholders of the Corporation next
following the Corporation's fiscal year ending January 30, 1999. Notwithstanding
any provisions to the contrary contained herein, each director shall hold office
until his successor is elected and qualified, or until his earlier death,
resignation or removal.
9.3 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a
<PAGE>
8
majority vote of the remaining directors then in office although less than a
quorum, or by a sole remaining director, and directors so chosen shall hold
office until their respective successors are duly elected and qualified. When
any director shall give notice of resignation effective at a future date, the
Board of Directors may fill such vacancy to take effect when such resignation
shall become effective.
10. ACTION BY STOCKHOLDERS. Notwithstanding the provisions of
section 228 of the DGCL (or any successor statute), any action required or
permitted by the DGCL to be taken at any annual or special meeting of
stockholders of the Corporation may be taken only at such an annual or special
meeting of stockholders and cannot be taken by written consent without a
meeting. At any annual meeting or special meeting of stockholders of the
Corporation, only such business shall be conducted as shall have been brought
before such meeting in the manner provided by the By-laws.
11. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of
stockholders for any purpose may be called at any time by the Board of
Directors, the Chairman of the Board of Directors or by the President of the
Corporation. Special meetings shall be held at such place or places within or
without the State of Delaware as shall from time to time be designated by the
Board of Directors and stated in the notice of such meeting or in the waiver of
notice thereof.
12. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board of
Directors may from time to time adopt, amend or repeal the By-laws; PROVIDED,
HOWEVER, that any By-laws adopted or amended by the Board of Directors may be
amended or repealed, and any By-laws may be adopted, by a vote of the
stockholders having at least a majority in voting power of the then issued and
outstanding shares of capital stock of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation, which restates and amends the
Corporation's Certificate of Incorporation, to be made, executed and
acknowledged by its duly authorized officer this 16th day of December, 1996, as
directed by and provided for in the Order of the United States Bankruptcy Court
for the District of Delaware, dated November 22, 1996, Confirming Debtor's
Prepackaged Plan of Reorganization under Chapter 11 of the Bankruptcy Code,
which court has jurisdiction of a proceeding under Chapter 11 of the United
States Bankruptcy Code for the reorganization of the Company pursuant to Section
303 of the Delaware General Corporation Law.
/s/ Eric N. Hoyle
--------------------------------------
Name: Eric N. Hoyle
Title: Senior Vice President,
Finance and Administration
Exhibit 5
---------
PAUL, WEISS, RIFKIND WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
March 17, 1997
Ithaca Industries, Inc.
Highway 268 West
P.O. Box 620
Wilkesboro, North Carolina 28697
Ithaca Industries, Inc.
Registration Statement on Form S-1
REGISTRATION NO.
----------------
Ladies and Gentlemen:
In connection with the above-captioned Registration Statement, dated
March 17, 1997, as amended (the "Registration Statement"), filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations promulgated thereunder (the
"Rules"), we have been requested by Ithaca Industries, Inc. (the "Company"), to
furnish our opinion as to the legality of 10,109,290 shares (the "Shares") of
the Company's Common Stock, par value $.01 per share ("Common Stock"),
registered for sale thereunder. The 10,000,000 Shares issued in connection with
the consummation of the Company's Plan of Reorganization are referred to herein
as the "Reorganization Shares" and the
<PAGE>
Ithaca Industries, Inc. 2
109,290 Shares issuable upon exercise of an option (the "A&M Option") granted to
Alvarez & Marsal, Inc. are referred to herein as the "Option Shares."
In connection with the furnishing of this opinion, we have reviewed
the Registration Statement (including all amendments thereto), originals, or
copies certified or otherwise identified to our satisfaction, of the Company's
Amended and Restated Certificate of Incorporation and By-laws, each as in effect
on the date hereof, and records of certain of the Company's corporate
proceedings. We have made such other investigations of fact and law and have
examined and relied upon the originals, or copies certified or otherwise
identified to our satisfaction, of such documents, records, certificates or
other instruments, and upon such factual information otherwise supplied to us,
as in our judgment are necessary or appropriate to render the opinion expressed
below. In addition, we have assumed, without independent investigation, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity of original documents to all documents submitted
to us as certified, photostatic, reproduced or conformed copies, the
authenticity of all such latter documents and the legal capacity of all
individuals who have executed any of the documents.
Based upon the foregoing, we are of the opinion that the
Reorganization Shares are, and the Option Shares when issued and paid for upon
<PAGE>
Ithaca Industries, Inc. 3
exercise of the A&M Option will be, duly authorized, validly issued, fully paid
and nonassessable.
Our opinion expressed above is limited to the General Corporation
Law of the State of Delaware. Please be advised that no member of this firm is
admitted to practice in the State of Delaware. Our opinion is rendered only with
respect to the laws, and the rules, regulations and orders thereunder, which are
currently in effect.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" contained in the Prospectus included in the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required by the Act or the Rules.
Very truly yours,
/s/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Exhibit 10.1
------------
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
ITHACA INDUSTRIES, INC.,
VARIOUS BANKS,
CANADIAN IMPERIAL BANK OF COMMERCE
AS CO-AGENT
AND
BANKERS TRUST COMPANY,
AS AGENT
------------------------------
DATED AS OF DECEMBER 16, 1996
-------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. Amount and Terms of Credit........................ 1
1.1 The Commitments....................................... 1
1.2 Minimum Amount of Each Revolving
Loan Borrowing...................................... 4
1.3 Notice of Borrowing................................... 4
1.4 Disbursement of Funds................................. 5
1.5 Notes................................................. 6
1.6 Pro Rata Borrowings................................... 7
1.7 Interest.............................................. 7
1.8 Increased Costs, etc.................................. 8
1.9 Compensation.......................................... 9
1.10 Change of Lending Office.............................. 9
1.11 Replacement of Banks.................................. 9
SECTION 2. Letters of Credit................................. 10
2.1 Letters of Credit..................................... 10
2.2 Minimum Stated Amount................................. 12
2.3 Letter of Credit Requests............................. 12
2.4 Letter of Credit Participations....................... 13
2.5 Agreement to Repay Letter of Credit Drawings.......... 15
2.6 Increased Costs....................................... 16
SECTION 3. Commitment Commission; Fees; Reductions
of Commitment....................................... 17
3.1 Fees.................................................. 17
3.2 Voluntary Termination of Unutilized
Commitments......................................... 18
3.3 Mandatory Reduction of Commitments.................... 19
SECTION 4. Prepayments; Payments; Taxes...................... 19
4.1 Voluntary Prepayments................................. 19
4.2 Mandatory Repayments and Commitment
Reductions.......................................... 20
4.3 Method and Place of Payment........................... 24
4.4 Net Payments.......................................... 24
SECTION 5. Conditions Precedent to Loans on
the Initial Borrowing Date.......................... 27
5.1 Execution of Agreement; Notes......................... 27
5.2 Officer's Certificate................................. 27
5.3 Opinions of Counsel................................... 27
5.4 Corporate Documents; Proceedings;
Management.......................................... 28
5.5 Employee Benefit Plans; Shareholders'
Agreements; Management Agreements;
Employment Agreements; Collective
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<PAGE>
Bargaining Agreements; Debt Agreements.............. 28
5.6 Effective Date of Reorganization Plan................. 29
5.7 Pledge Agreement...................................... 29
5.8 Security Agreement.................................... 30
5.9 Cash Collateral Agreement............................. 31
5.10 Intentionally Omitted................................. 31
5.11 Mortgages; Title Insurance; Surveys; etc.............. 31
5.12 Adverse Change, etc................................... 32
5.13 Litigation............................................ 32
5.14 Fees, etc............................................. 33
5.15 Solvency Certificate; Environmental
Analyses; Insurance Analyses; Accounts
Receivable Audit; Real Estate Appraisals............ 33
5.16 Consent Letter........................................ 34
5.17 Pro Forma Balance Sheet............................... 34
5.18 Initial Borrowing Base Certificate.................... 34
SECTION 6. Conditions Precedent to All
Credit Events....................................... 34
6.1 No Default; Representations and
Warranties.......................................... 34
6.2 Notice of Borrowing; Letter of Credit
Request............................................. 35
SECTION 7. Representations, Warranties and
Agreements.......................................... 35
7.1 Corporate Status...................................... 35
7.2 Corporate Power and Authority......................... 36
7.3 No Violation.......................................... 36
7.4 Governmental Approvals................................ 37
7.5 Financial Statements; Financial Condition;
Undisclosed Liabilities; Projections; etc........... 37
7.6 Litigation............................................ 38
7.7 True and Complete Disclosure.......................... 38
7.8 Use of Proceeds; Margin Regulations................... 39
7.9 Tax Returns and Payments.............................. 39
7.10 Compliance with ERISA................................. 40
7.11 The Security Documents................................ 40
7.12 Properties............................................ 42
7.13 Capitalization........................................ 42
7.14 Subsidiaries.......................................... 43
7.15 Compliance with Statutes, etc......................... 43
7.16 Investment Company Act................................ 43
7.17 Public Utility Holding Company Act.................... 43
7.18 Environmental Matters................................. 44
7.19 Labor Relations....................................... 45
7.20 Patents, Licenses, Franchises and
Formulas............................................ 45
7.21 Indebtedness.......................................... 45
7.22 Reorganization Plan................................... 46
7.23 Indebtedness of Holdings and Its
Non-Ithaca Subsidiaries............................. 46
7.24 Acknowledgment of Obligations; No Claims.............. 46
7.25 Term Loans............................................ 46
SECTION 8. Affirmative Covenants............................. 47
8.1 Information Covenants................................. 47
8.2 Books, Records and Inspections........................ 52
<PAGE>
8.3 Maintenance of Property; Insurance.................... 52
8.4 Corporate Franchises.................................. 53
8.5 Compliance with Statutes, etc......................... 54
8.6 Compliance with Environmental Laws.................... 54
8.7 ERISA................................................. 55
8.8 End of Fiscal Years; Fiscal Quarters.................. 56
8.9 Performance of Obligations............................ 56
8.10 Payment of Taxes...................................... 56
8.11 Interest Rate Protection.............................. 56
8.12 Registry.............................................. 56
8.13 Accounts.............................................. 57
8.14 Successor Cash Collateral Agreement................... 59
SECTION 9. Negative Covenants................................ 59
9.1 Liens................................................. 59
9.2 Consolidation, Merger, Purchase or Sale
of Assets, etc...................................... 62
9.3 Dividends............................................. 64
9.4 Leases................................................ 64
9.5 Indebtedness.......................................... 64
9.6 Advances, Investments and Loans....................... 65
9.7 Transactions with Affiliates.......................... 66
9.8 Capital Expenditures.................................. 67
9.9 Consolidated Fixed Charge Coverage Ratio.............. 67
9.10 Minimum EBITDA........................................ 67
9.11 Consolidated Interest Coverage Ratio.................. 68
9.12 Limitation on Voluntary Payments and
Modifications of Indebtedness;
Modifications of Certificate of
Incorporation, By-Laws and Certain
Other Agreements; etc............................... 68
9.13 Limitation on Certain Restrictions on
Subsidiaries........................................ 69
9.14 Limitation on Issuance of Capital Stock............... 69
9.15 Business.............................................. 70
9.16 Limitation on Creation of Subsidiaries
and Entering into Partnerships and
Joint Ventures...................................... 70
SECTION 10.....................................Events of Default
70
10.1 Payments.............................................. 70
10.2 Representations, etc.................................. 71
10.3 Covenants............................................. 71
10.4 Default Under Other Agreements........................ 71
10.5 Bankruptcy, etc....................................... 71
10.6 ERISA................................................. 72
10.7 Security Documents.................................... 73
10.8 Judgments............................................. 73
10.9 Change of Control..................................... 73
SECTION 11. Definitions and Accounting Terms.................. 74
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<PAGE>
11.1 Defined Terms......................................... 74
SECTION 12. The Agent and Co-Agent............................ 102
12.1 Appointment........................................... 102
12.2 Nature of Duties...................................... 103
12.3 Lack of Reliance on the Agent and
Co-Agent............................................ 103
12.4 Certain Rights of the Agent
and Co-Agent........................................ 103
12.5 Reliance.............................................. 104
12.6 Indemnification....................................... 104
12.7 The Agent and Co-Agent in Their
Individual Capacities............................... 104
12.8 Holders............................................... 105
12.9 Resignation by the Agent and the Co-Agent............. 105
SECTION 13. Miscellaneous..................................... 106
13.1 Payment of Expenses, etc.............................. 106
13.2 Right of Setoff....................................... 107
13.3 Notices............................................... 108
13.4 Benefit of Agreement.................................. 108
13.5 No Waiver; Remedies Cumulative........................ 110
13.6 Payments Pro Rata..................................... 110
13.7 Calculations; Computations............................ 111
13.8 GOVERNING LAW; SUBMISSION TO
JURISDICTION; VENUE; WAIVER
OF JURY TRIAL....................................... 111
13.9 Counterparts.......................................... 113
13.10 Effectiveness......................................... 113
13.11 Headings Descriptive.................................. 113
13.12 Amendment or Waiver................................... 113
13.13 Survival.............................................. 114
13.14 Domicile of Loans..................................... 114
SCHEDULE I Commitments
SCHEDULE II Real Property
SCHEDULE III Environmental Matters
SCHEDULE IV Existing Indebtedness
SCHEDULE V Insurance
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<PAGE>
SCHEDULE VI ERISA Matters
SCHEDULE VII Excepted Accounts
SCHEDULE VIII Existing Liens
SCHEDULE IX Existing Bankers Trust Letters of Credit
EXHIBIT A Notice of Borrowing
EXHIBIT B-1 Term Note
EXHIBIT B-2 Revolving Note
EXHIBIT B-3 Swingline Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Opinion of Paul, Weiss, Rifkind, Wharton & Gar
rison
EXHIBIT E Officers' Certificate
EXHIBIT F Pledge Agreement
EXHIBIT G Security Agreement
EXHIBIT H Cash Collateral Agreement
EXHIBIT I Intentionally Omitted
EXHIBIT J Intentionally Omitted
EXHIBIT K Solvency Certificate
EXHIBIT L Consent Letter
EXHIBIT M Borrowing Base Certificate
EXHIBIT N Letter Agreement
EXHIBIT O Assignment and Assumption Agreement
EXHIBIT P Business Plan
EXHIBIT Q Reorganization Plan
EXHIBIT R Section 4.04(b)(iii) Certificate
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<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, originally dated as of December
1, 1992, among ITHACA INDUSTRIES, INC., a Delaware corporation (the "Borrower"),
the Banks party hereto from time to time, CANADIAN IMPERIAL BANK OF COMMERCE,
acting through one or more agencies, branches or affiliates, as Co-Agent (in
such capacity, the "Co-Agent") and BANKERS TRUST COMPANY, as Agent, or any of
their respective predecessors in interest, and amended and restated by the
parties hereto as of December __, 1996 (all capitalized terms used herein and
defined in Section 11 are used herein as therein defined).
W I T N E S S E T H:
WHEREAS, subject to and upon the terms and conditions herein set forth,
the Banks are willing to amend and restate the Original Credit Agreement and to
make available to the Borrower the respective credit facilities provided for
herein;
NOW, THEREFORE, IT IS AGREED:
AMENDMENT AND RESTATEMENT
The Borrower, the Banks, the Agent and the Co-Agent hereby agree to the
amendment and restatement in its entirety of the Original Credit Agreement by
this Agreement, and upon the Effective Date, the original Credit Agreement shall
be deemed so amended and restated. On and after the Effective Date, all
references herein shall be deemed to constitute references to this Amended and
Restated Credit Agreement.
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.1 THE COMMITMENTS. (a) Pursuant to the Original Credit Agreement, and
subject to and upon the terms and conditions set forth therein, each Bank with a
Term Loan Commitment severally agreed to make, and did make, an original term
loan (each as amended and restated hereunder, a "Term Loan" and, collectively,
the "Term Loans") to the Borrower, which Term Loans do not exceed for any Bank,
in initial aggregate principal amount, that amount which equals the Term Loan
Commitment of such Bank on the Initial Borrowing Date (after giving effect to
the repayment and reduction of Term Loans pursuant to Section 1.02). Once
repaid, Term Loans may not be reborrowed.
(b) Subject to and upon the terms and conditions set forth herein, each
Bank with a Revolving Loan Commitment severally agrees, at any time and from
time to time on and after the Initial Borrowing Date and prior to the Final
Maturity Date, to make a loan or loans (each, a "Revolving
<PAGE>
Loan" and, collectively, the "Revolving Loans") to the Borrower, which Revolving
Loans (i) may be repaid and reborrowed in accordance with the provisions hereof,
(ii) shall not exceed for any Bank at any time outstanding that aggregate
principal amount which, when added to the product of (x) such Bank's Adjusted
Percentage and (y) the sum of (I) the aggregate amount of all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, and (II) the aggregate principal amount of all
Swingline Loans (exclusive of Swingline Loans which are repaid with the pro
ceeds of, and simultaneously with the incurrence of, the respective incurrence
of Revolving Loans) then outstanding, equals (1) if such Bank is a
Non-Defaulting Bank, the Adjusted Revolving Loan Sub-Commitment of such Bank at
such time and (2) if such Bank is a Defaulting Bank, the Revolving Loan
Commitment of such Bank at such time, and (iii) shall not exceed for all Banks
at any time outstanding that aggregate principal amount which, when added to (x)
the amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) at such time, and (y) the
aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) then outstanding, exceeds an
amount equal to the lesser of (A) the Borrowing Base at such time or (B) the
Total Revolving Loan Sub-Commitment at such time.
(c) Subject to and upon the terms and conditions herein set forth, BTCo
in its individual capacity agrees to make at any time and from time to time
after the Initial Bor rowing Date and prior to the Swingline Expiry Date, a loan
or loans to the Borrower (each, a "Swingline Loan" and, collec tively, the
"Swingline Loans"), which Swingline Loans (i) may be repaid and reborrowed in
accordance with the provisions hereof, (ii) shall not exceed in aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Revolving Loans made by Non-Defaulting Banks then
outstanding and Letter of Credit Outstandings at such time, an amount equal to
the lesser of (A) the Borrowing Base at such time less the aggregate principal
amount of all outstanding Revolving Loans made by Defaulting Banks and (B) the
Adjusted Total Revolving Loan Sub-Commitment at such time (after giving effect
to any reductions to the Adjusted Total Revolving Loan Sub-Commitment on such
date), and (iii) shall not exceed at any time outstanding the Maximum Swingline
Amount.
(d) On any Business Day, BTCo may, in its sole dis cretion, give notice
to the Banks that its outstanding Swing line Loans shall be funded with a
Borrowing of Revolving Loans (provided that such notice shall be deemed to have
been automatically given upon the occurrence of an Event of Default under
Section 10.05 or upon the exercise of any of
<PAGE>
the remedies provided in the last paragraph of Section 10), in which case a
Borrowing of Revolving Loans (each such Borrowing, a "Mandatory Borrowing")
shall be made on the immediately succeeding Business Day by all Banks with a
Revolving Loan Commitment (without giving effect to any reductions thereto
pursuant to the last paragraph of Section 10) PRO RATA based on each Bank's
Adjusted Percentage (determined before giving effect to any termination of the
Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the
proceeds thereof shall be applied directly to BTCo to repay BTCo for such
outstanding Swingline Loans. Each such Bank hereby irrevocably agrees to make Re
volving Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding sentence
and on the date specified in writing by BTCo notwithstanding (i) the amount of
the Mandatory Borrowing may not comply with the minimum amount for Borrowings
otherwise required hereunder, (ii) whether any conditions specified in Section 5
are then satisfied, (iii) whether a Default or an Event of Default then exists,
(iv) the date of such Mandatory Borrowing, and (v) the amount of the Borrowing
Base, the Total Revolving Loan Sub-Commitment or the Adjusted Total Revolving
Loan Sub-Commitment at such time. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower), then each such Bank hereby agrees
that it shall forthwith purchase (as of the date the Mandatory Borrowing would
otherwise have occurred, but ad justed for any payments received from the
Borrower on or after such date and prior to such purchase) from BTCo such
participations in the outstanding Swingline Loans as shall be necessary to cause
such Banks to share in such Swingline Loans ratably based upon their respective
Adjusted Percentages (determined before giving effect to any termination of the
Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the
Revolving Loan Commitments of such Bank, if not terminated pursuant to the terms
hereof, shall be reduced on a dollar for dollar basis, PROVIDED that (x) all
interest payable on the Swingline Loans shall be for the account of BTCo until
the date as of which the respective participation is required to be purchased
and, to the extent attributable to the purchased participation, shall be payable
to the participant from and after such date and (y) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing Bank
shall be required to pay BTCo interest on the principal amount of participation
purchased for each day from and including the day upon which the Mandatory
Borrowing would otherwise have occurred to but excluding the date of payment for
such participation, at the overnight Federal Funds rate for the first three days
and at the rate otherwise applicable to Revolving Loans for each day thereafter.
<PAGE>
1.2 MINIMUM AMOUNT OF EACH REVOLVING LOAN BORROWING. Borrowings of
Revolving Loans shall be made in aggregate principal amounts of not less than
(a) on the Initial Borrowing Date, the sum of (i) $22,185,598.61 (which amount
shall be used to reduce repay in part the outstanding principal amount of the
Term Loans and thereby reduce such outstanding principal amount from
$77,185,598.61 to $55,000,000) PLUS (ii) the aggregate other amounts, if any,
necessary to consummate the terms of the Reorganization Plan, PROVIDED that the
aggregate of the amounts set forth in (i) and (ii) shall not exceed the Total
Revolving Loan Sub-Commitment and (b) thereafter, $1,000,000 and, if greater in
either case, in integral multiples of $500,000; PROVIDED FURTHER, that Mandatory
Borrowings shall be made in the amounts required by Section 1.01(d). The
aggregate principal amount of each Borrowing of Swingline Loans shall not be
less than $500,000 and, if greater, in integral multiples of $250,000. More than
one Borrowing may occur on the same date. All Borrowings made on the Initial
Borrowing Date pursuant to clause (a)(i) of the immediately preceding sentence,
shall be deemed to have been made in connection with the amendment and
restatement of the Original Credit Agreement without necessity of the actual
delivery of a Notice of Borrowing by the Borrower or the transfer of money among
the parties hereto.
1.3 NOTICE OF BORROWING. (a) Except as set forth in Section 1.02,
whenever the Borrower desires to make a Bor rowing hereunder (excluding
Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Agent
at its Notice Office at least one Business Day's prior notice of each Loan to be
made hereunder, PROVIDED that any such notice shall be deemed to have been given
on a certain day only if given before 12:00 noon (New York time) on such day.
Each such notice (each a "Notice of Borrowing") shall be irrevocable and shall
be given by the Borrower in the form of Exhibit A, appropriately completed to
(i) specify the aggregate principal amount of the Loans to be made pursuant to
such Borrowing, the date of such Borrowing (which shall be a Business Day) and
the dates of the most recent December Clean-Down Period and May Clean-Down
Period and (ii) certify that there are no Defaults or Events of Default
hereunder. The Agent shall promptly give each Bank which is required to make
Loans of the Tranche specified in the respective Notice of Borrowing, notice of
such proposed Borrowing, of such Bank's proportionate share thereof and of the
other matters required by the immediately preceding sentence to be specified in
the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of Swingline
Loans hereunder, it shall give BTCo not later than 12:00 noon (New York time) on
the date that a Swingline Loan is to be made, written notice or telephonic
notice confirmed in writing of each Swingline Loan to be made hereunder. Each
such notice shall be irrevocable and specify in each case (A) the date of
Borrowing (which shall be a Business Day) and (B) the aggregate principal amount
of the Swingline Loans to be made pursuant to such Borrowing.
<PAGE>
(ii) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of such Borrowing of Swingline Loans,
BTCo may act without liability upon the basis of telephonic notice of such
Borrowing, believed by BTCo in good faith to be from a President, a Chief
Operating Officer, an Executive Vice President, a Vice President, a Treasurer or
an Assistant Treasurer of the Borrower prior to receipt of written confirmation.
In each such case, the Borrower hereby waives the right to dispute BTCo's record
of the terms of such telephonic notice of such Borrowing of Swingline Loans.
(iii) Mandatory Borrowings shall be made upon the no tice specified in
Section 1.01(d), with the Borrower irrevo cably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(d).
1.4 DISBURSEMENT OF FUNDS. Except as otherwise specifically provided in
the immediately succeeding sentence, no later than 12:00 noon (New York time) on
the date specified in each Notice of Borrowing (or (x) in the case of Swingline
Loans, not later than 2:00 p.m. (New York time) on the date specified pursuant
to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(d)), each Bank
with a Commitment of the respective Tranche will make available its PRO RATA
portion of each such Borrowing requested to be made on such date (or in the case
of Swingline Loans, BTCo shall make available the full amount thereof). All such
amounts shall be made available in Dollars and in immediately available funds at
the Payment Office of the Agent, and the Agent will make available to the
Borrower at the Payment Office the aggregate of the amounts so made available by
the Banks. Unless the Agent shall have been notified by any Bank prior to the
date of Borrowing that such Bank does not intend to make available to the Agent
such Bank's portion of any Borrowing to be made on such date, the Agent may
assume that such Bank has made such amount available to the Agent on such date
of Borrowing and the Agent may, in reliance upon such assumption, make available
to the Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Agent by such Bank, the Agent shall be entitled to
recover such corresponding amount on demand from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the Agent's demand therefor,
the Agent shall promptly notify the Borrower and the Borrower shall immediately
pay such corresponding amount to the Agent. The Agent shall also be entitled to
recover on demand from such Bank or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower until the
date such corresponding amount is recovered by the Agent, at
<PAGE>
a rate per annum equal to (i) if recovered from such Bank, at the overnight
Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest
applicable to the respective Borrowing, as determined pursuant to Section 1.07.
Nothing in this Section 1.04 shall be deemed to relieve any Bank from its
obligation to make Loans hereunder or to prejudice any rights which the Borrower
may have against any Bank as a result of any failure by such Bank to make Loans
hereunder.
1.5 NOTES. (a) The Borrower's obligation to pay the principal of, and
interest on, the Loans of each Bank shall be evidenced (i) if Term Loans, by a
promissory note duly ex ecuted and delivered by the Borrower substantially in
the form of Exhibit B-1 with blanks appropriately completed in conformity
herewith (each, a "Term Note" and, collectively, the "Term Notes"), (ii) if
Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-2, with blanks appropriately
completed in conformity herewith (each, a "Revolving Note" and, collectively,
the "Revolving Notes"), and (iii) if Swingline Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-3,
with blanks appropriately completed in conformity herewith (the "Swingline
Note").
(b) The Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Term Loan of
such Bank as of the Initial Borrowing Date (after giving effect to the reduction
described in Section 1.02) and be payable in the principal amount of the Term
Loan evidenced thereby, (iv) mature on the Final Maturity Date, (v) bear
interest as provided in Section 1.07, (vi) be subject to mandatory repayment as
provided in Section 4.02, and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(c) The Revolving Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Revolving
Loan Commitment of such Bank and be payable in the aggregate principal amount of
the Revolving Loans evidenced thereby, (iv) mature on the Final Maturity Date,
(v) bear interest as provided in Section 1.07, (vi) be subject to mandatory
repayment as provided in Section 4.02, and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(d) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo and be dated the Initial
Borrowing Date, (iii) be in a stated aggregate principal amount equal to the
Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby from time to time, (iv) mature on
the Swingline Expiry Date, (v) bear
<PAGE>
interest as provided in Section 1.07, and (vi) be entitled to the benefits of
this Agreement and the other Credit Documents.
(e) Each Bank will note on its internal records the amount of each of
its Loans and each payment in respect thereof and will prior to any transfer of
any of its Notes endorse on the reverse side thereof the outstanding principal
amount of Loans evidenced thereby. Failure to make any such notation shall not
affect the Borrower's obligations in respect of such Loans.
1.6 PRO RATA BORROWINGS. All Borrowings of Revolving Loans under this
Agreement shall be made by the Banks PRO RATA on the basis of their Revolving
Loan Commitments; PROVIDED that all Borrowings of Revolving Loans made pursuant
to a Mandatory Borrowing shall be incurred from the Banks PRO RATA on the basis
of their Adjusted Percentages. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans provided to be
made by it hereunder, regardless of the failure of any other Bank to make its
Loans hereunder.
1.7 INTEREST. (a) The Borrower agrees to pay in terest in respect of
the unpaid principal amount of each Loan from the date the proceeds thereof are
made available to the Borrower until the maturity thereof (whether by
acceleration or otherwise) at a rate per annum which shall be equal to the sum
of the Applicable Margin plus the Base Rate as each shall be in effect from time
to time.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to 2% per annum in
excess of the rate otherwise applicable to Loans from time to time, such
interest to be payable on demand.
(c) Accrued (and theretofore unpaid) interest in respect of each Loan
shall be payable (i) monthly in arrears on the last Business Day of each month,
and (ii) on any repayment (on the amount repaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(d) For each fiscal year (commencing with the fiscal year commencing
closest to February 1, 1997), the Borrower shall, on or prior to the Quarterly
Payment Date occurring in April of such fiscal year, deliver to the Agent and
the Banks an officer's certificate setting forth the Applicable Margin
determined in accordance with the definition thereof set forth herein (together
with the calculations supporting such determination). The Applicable Margin as
so determined shall
<PAGE>
be the Applicable Margin for such fiscal year. If the amounts of interest
payments made by the Borrower during the portion of such fiscal year prior to
the delivery of such officers' certificate are less than the amounts applicable
to such fiscal year by reason of the determination of Applicable Margin as set
forth in such officers' certificate, then such deficiency shall be payable on
the date of the delivery of such officers' certificate.
1.8 INCREASED COSTS, ETC. If at any time after the date of this
Agreement any Bank determines that the introduc tion of or any change in any
applicable law or governmental rule, regulation, order, guideline, directive or
request (whether or not having the force of law) concerning capital adequacy, or
any change in interpretation or administration thereof by any governmental
authority, central bank or compa rable agency, will have the effect of
increasing the amount of capital required or expected to be maintained by such
Bank or any corporation controlling such Bank based on the existence of such
Bank's Commitments hereunder or its obligations hereunder, then the Borrower
shall pay to such Bank, upon its written demand therefor, such additional
amounts as shall be required to compensate such Bank or such other corporation
on an after-tax basis for the increased cost to such Bank or such other
corporation or the reduction in the rate of return to such Bank or such other
corporation as a result of such increase of capital. In determining such
additional amounts, each Bank will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable, PROVIDED that such
Bank's determination of compensation owing under this Section 1.08 shall, absent
manifest error, be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this Section 1.08, will give prompt written notice thereof to the Borrower,
which notice shall show the basis for calculation of such additional amounts.
1.9 COMPENSATION. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all rea sonable losses, expenses and liabilities which such
Bank may sustain as a consequence of any default by the Borrower to repay its
Loans when required by the terms of this Agreement or any Note held by such
Bank.
1.10 CHANGE OF LENDING OFFICE. Each Bank agrees that on the occurrence
of any event giving rise to the operation of Section 1.08, Section 2.06 or
Section 4.04 with respect to such Bank, it will, if requested by the Borrower,
use rea sonable efforts (subject to overall policy considerations of such Bank)
to designate another lending office for any Loans or Letters of Credit affected
by such event, PROVIDED that such designation can be made on such terms that
such Bank and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of such Section. Nothing in this Section 1.10 shall affect
or postpone any of
<PAGE>
the obligations of the Borrower or the right of any Bank provided in Sections
1.08, 2.06 and 4.04.
1.11 REPLACEMENT OF BANKS. If any Bank becomes a Defaulting Bank or
otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, the
Borrower shall have the right, if no Default or Event of Default then exists, to
either replace such Bank (the "Replaced Bank") with one or more other Eligible
Transferee or Transferees, none of whom shall constitute a Defaulting Bank at
the time of such replacement (collectively, the "Replacement Bank") acceptable
to the Agent or, at the option of the Borrower, to replace only the Revolving
Loan Commitment (and outstandings pursuant thereto) of the Replaced Bank with an
identical Revolving Loan Commitment provided by the Replacement Bank, PROVIDED
that (i) at the time of any replacement pursuant to this Section 1.11, the
Replacement Bank shall enter into one or more Assignment and Assumption
Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to
said Section 13.04(b) to be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire all of the Commitments and outstanding Loans (or,
in the case of the replacement of only the Revolving Loan Commitment, the
Revolving Loan Commitment and outstanding Revolving Loans) of, and in each case
participations in Letters of Credit by, the Replaced Bank and, in connection
therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal
to the sum of (A) an amount equal to the principal of, and all accrued interest
on, all outstanding Loans (or, in the case of the replacement of only the
Revolving Loan Commitment, the outstanding Revolving Loans) of the Replaced
Bank, (B) an amount equal to all Unpaid Drawings that have been funded by (and
not reimbursed to) such Replaced Bank, together with all then unpaid interest
with respect thereto at such time, and (C) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01 and
(y) BTCo an amount equal to such Replaced Bank's Adjusted Percentage (for this
purpose, determined as if the adjustment described in clause (y) of the
immediately succeeding sentence had been made with respect to such Replaced
Bank) of any Unpaid Drawing (which at such time remains an Unpaid Drawing) to
the extent such amount was not theretofore funded by such Replaced Bank, and
(ii) all obligations of the Borrower owing to the Replaced Bank (other than
those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Bank concurrently with such replacement. Upon the
execution of the respective Assignment and Assumption Agreements, the payment of
amounts referred to in clauses (i) and (ii) above and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of the appropriate Note or
Notes executed by the Borrower, (x) the Replacement Bank shall become a Bank
hereunder and, unless the respective
<PAGE>
Replaced Bank continues to have outstanding Term Loans hereunder, the Replaced
Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement, which shall survive as to such
Replaced Bank and (y) the Adjusted Percentages of the Banks shall be
automatically adjusted at such time to give effect to such replacement (and to
give effect to the replacement of a Defaulting Bank with one or more
Non-Defaulting Banks).
SECTION 2. LETTERS OF CREDIT.
2.1 LETTERS OF CREDIT. (a) Subject to and upon the terms and conditions
herein set forth, the Borrower may request that BTCo issue, at any time and from
time to time on and after the Initial Borrowing Date and prior to the Final
Maturity Date, (x) for the account of the Borrower and for the benefit of any
holder (or any trustee, agent or other similar representative for any such
holders) of L/C Supportable Indebtedness of the Borrower or any of its
Subsidiaries, an irrevocable standby letter of credit, in a form customarily
used by BTCo or in such other form as has been approved by BTCo (each such
standby letter of credit, a "Standby Letter of Credit") in support of such L/C
Supportable Indebtedness and (y) for the account of the Borrower and for the
benefit of sellers of goods to the Borrower or any of its Subsidiaries, an
irrevocable sight documentary letter of credit in a form customarily used by
BTCo or in such other form as has been approved by BTCo (each such documentary
letter of credit, a "Trade Letter of Credit" and each such Trade Letter of
Credit and each Standby Letter of Credit, a "Letter of Credit") in support of
commercial transactions of the Borrower and its Subsidiaries as set forth in
Section 2.01(b). Notwithstanding anything herein to the contrary, each Existing
Bankers Trust Letter of Credit shall, without necessity of action by or on
behalf of the Borrower, BTCo or any other Person, be (i) deemed a Letter of
Credit hereunder for all purposes hereof and of the other Credit Documents and
(ii) entitled to all benefits of this Agreement and the other Credit Documents.
(b) BTCo hereby agrees that it will, at any time and from time to time
on or after the Initial Borrowing Date and prior to the Final Maturity Date,
following its receipt of the respective Letter of Credit Request, issue for the
account of the Borrower one or more Letters of Credit (x) in the case of Standby
Letters of Credit, in support of such L/C Supportable Indebtedness of the
Borrower or any of its Subsidiaries as is permitted to remain outstanding
without giving rise to a Default or Event of Default hereunder and (y) in the
case of Trade Letters of Credit, in support of sellers of goods as referenced in
Section 2.01(a), PROVIDED that BTCo shall be under no obligation to issue any
Letter of Credit of the types described above if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain BTCo from issuing
such Letter of Credit
<PAGE>
or any requirement of law applicable to BTCo or any request or directive
(whether or not having the force of law) from any governmental authority with
jurisdiction over BTCo shall prohibit, or request that BTCo refrain from, the
issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon BTCo with respect to such Letter of Credit
any restriction or reserve or capital requirement (for which BTCo is not
otherwise compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not ap plicable, in effect or known to BTCo
as of the date hereof and which BTCo in good faith deems material to it; or
(ii) BTCo shall have received notice from any Bank of the type described
in the penultimate sentence of Section 2.03(b) prior to the issuance of such
Letter of Credit.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such time
would either (x) exceed $25,000,000 or (y) exceed, when added to the
aggregate principal amount of all Revolving Loans made by Non-Defaulting
Banks and Swingline Loans then outstanding, an amount equal to the lesser of
(A) the Borrowing Base at such time less the aggregate principal amount of
all outstanding Revolving Loans made by Defaulting Banks and (B) the Adjusted
Total Revolving Loan Sub-Commitment at such time and (ii) each Letter of
Credit shall by its terms terminate on or before the earlier of (x) (A) in
the case of Standby Letters of Credit, the date which occurs 12 months after
the date of the issuance thereof (although any such Standby Letter of Credit
may be extendable for successive periods of up to 12 months, but not beyond
the Final Maturity Date, on terms acceptable to BTCo) and (B) in the case of
Trade Letters of Credit, the date which occurs 180 days after the date of
issuance thereof or (y) the Final Maturity Date.
2.2 MINIMUM STATED AMOUNT. The Stated Amount of each Letter of Credit
shall be not less than $250,000 or such lesser amount as is acceptable to BTCo.
2.3 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower desires that a
Letter of Credit be issued for its account, the Borrower shall give the Agent
and BTCo at least ten Business Days' (or two Business Days in the case of Trade
Letters of Credit, or, in each case such shorter period as is acceptable to BTCo
in any given case) written notice thereof. Each notice shall be in the form of
Exhibit C (each a "Letter of Credit Request"). The Agent shall promptly transmit
copies of each Letter of Credit Request to each Bank.
<PAGE>
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
2.01(c). Unless BTCo has received notice from any Bank before it issues a Letter
of Credit that one or more of the conditions specified in Section 5 or Section 6
are not then satisfied (and in the case of Section 6, such condition(s) shall
not have been waived in accordance with the terms hereof), or that the issuance
of such Letter of Credit would violate Section 2.01(c), then BTCo may issue the
requested Letter of Credit for the account of the Borrower in accordance with
BTCo's usual and customary practices. Upon its issuance of any Letter of Credit,
BTCo shall promptly notify each Bank of such issuance, which notice shall be
accompanied by a copy of the Letter of Credit actually issued.
2.4 LETTER OF CREDIT PARTICIPATIONS. (a) Immedi ately upon the issuance
by BTCo of any Letter of Credit, BTCo shall be deemed to have sold and
transferred to each Bank with a Revolving Loan Commitment, other than BTCo (each
such Bank, in its capacity under this Section 2.04, a "Partici pant"), and each
such Participant shall be deemed irrevocably and unconditionally to have
purchased and received from BTCo, without recourse or warranty (except as
provided in Section 2.04(b)), an undivided interest and participation, to the ex
tent of such Participant's Adjusted Percentage in such Letter of Credit, each
drawing made thereunder and the obligations of the Borrower under this Agreement
with respect thereto, and any security therefor or guaranty pertaining thereto.
Upon any change in the Revolving Loan Commitments or Adjusted Percentages of the
Banks pursuant to Section 1.11 or 13.04 or as a result of a Bank Default, it is
hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid
Drawings, there shall be an automatic adjustment to the participations pursuant
to this Section 2.04 to reflect the new Adjusted Percentages of the assignor and
assignee Bank or of all Banks with Revolving Loan Commitments, as the case may
be.
(b) In determining whether to pay under any Letter of Credit, BTCo
shall have no obligation relative to the other Banks other than to confirm that
any documents required to be delivered under such Letter of Credit appear to
have been de livered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by BTCo under or in connection with any Letter of Credit if taken or omitted in
the absence of gross negligence or willful misconduct and in accordance with the
requirement of the preceding sentence (to the extent appli cable), shall not
create for BTCo any resulting liability to the Borrower or any Bank.
(c) In the event that BTCo makes any payment under any Letter of Credit
and the Borrower shall not have reimbursed such amount in full to BTCo pursuant
to Section 2.05(a), BTCo shall promptly notify the Agent, which shall promptly
notify each Participant of such failure, and,
<PAGE>
subject to Section 2.04(b), each Participant shall promptly and unconditionally
pay to BTCo the amount of such Participant's Adjusted Percentage of such
unreimbursed payment in Dollars and in same day funds. If BTCo so notifies,
prior to 11:00 a.m. (New York time) on any Business Day, any Participant
required to fund a payment under a Letter of Credit, such Participant shall make
available to BTCo in Dollars such Participant's Adjusted Percentage of the
amount of such payment on such Business Day in same day funds. If and to the
extent such Participant shall not have so made its Adjusted Percentage of the
amount of such payment available to BTCo, such Participant agrees to pay to
BTCo, forthwith on demand such amount, together with interest thereon, for each
day from such date until the date such amount is paid to BTCo at the overnight
Federal Funds Rate. The failure of any Participant to make available to BTCo its
Adjusted Percentage of any payment under any Letter of Credit shall not relieve
any other Participant of its obligation hereunder to make available to BTCo its
Adjusted Percentage of any Letter of Credit on the date required, as specified
above, but no Participant shall be responsible for the failure of any other
Participant to make available to BTCo such other Participant's Adjusted
Percentage of any such payment.
(d) Whenever BTCo receives a payment of a reimburse ment obligation as
to which it has received any payments from the Participants pursuant to clause
(c) above, BTCo shall pay to each Participant which has paid its Adjusted
Percentage thereof, in Dollars and in same day funds, an amount equal to such
Participant's share (based upon the proportionate ag gregate amount originally
funded by such Participant to the aggregate amount funded by all Participants)
of the principal amount of such reimbursement obligation and interest thereon
accruing after the purchase of the respective participations.
(e) In addition to its obligations under 2.04(b), upon the request of
any Participant, BTCo shall furnish to such Participant copies of any Letter of
Credit issued by it and such other documentation as may reasonably be requested
by such Participant.
(f) Subject to Section 2.04(b), the obligations of the Participants to
make payments to BTCo with respect to Letters of Credit issued by it shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Credit Documents;
<PAGE>
(ii) the existence of any claim, setoff, defense or other right which the
Borrower may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), the Agent, any Participant, or any other
Person, whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (includ ing
any underlying transaction between the Borrower and the beneficiary named in
any such Letter of Credit);
(iii) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any re
spect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any of
the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.5 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse BTCo, by making payment to BTCo in immediately
available funds at the Payment office, for any payment or disbursement made by
BTCo under or in respect of any Letter of Credit (each such amount, so paid
until reimbursed, an "Unpaid Drawing"), immediately after, and in any event on
the date of, such payment or disbursement by BTCo, with interest on the amount
so paid or disbursed by BTCo, to the extent not reimbursed prior to 12:00 noon
(New York time) on the date of such payment or disbursement by BTCo, from and
including the date paid or disbursed to but excluding the date BTCo was
reimbursed by the Borrower therefor at a rate per annum which shall be the Base
Rate in effect from time to time plus the Applicable Margin, PROVIDED, HOWEVER,
to the extent such amounts are not reimbursed prior to 12:00 noon (New York
time) on the third Business Day following such payment or disbursement, interest
shall thereafter accrue on the amounts so paid or disbursed by BTCo (and until
reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in
effect from time to time plus the Applicable Margin plus 2%, in each such case,
with interest to be payable on demand. BTCo shall give the Borrower prompt
notice of each Drawing under any Letter of Credit, provided that the failure to
give any such notice shall in no way affect, impair or diminish the Borrower's
obligations hereunder.
(b) The obligations of the Borrower under this Sec tion 2.05 to
reimburse BTCo with respect to Unpaid Drawings (including, in each case,
interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against any Bank (including in its
capacity as issuer of the Letter of
<PAGE>
Credit or as Participant), including, without limitation, any defense based upon
the failure of any drawing under a Letter of Credit (each a "Drawing") to
conform to the terms of the Letter of Credit or any nonapplication or
misapplication by the beneficiary of the proceeds of such Drawing or any of the
items enumerated in Section 2.04(f), clauses (i) to (v), inclusive; PROVIDED,
HOWEVER, that the Borrower shall not be obligated to reimburse BTCo for any
wrongful payment made by BTCo under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of
BTCo.
2.6 INCREASED COSTS. If, after the Effective Date, the introduction of
or any change in any applicable law, rule, regulation, order, guideline or
request or in the interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by BTCo or any Participant with any request or directive by any such
authority (whether or not having the force of law), or any change in generally
acceptable accounting principles, shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement against
letters of credit issued by BTCo or participated in by any Participant, or (ii)
impose on BTCo or any Participant any other conditions relating, directly or
indirectly, to this Agreement or any Letter of Credit; and the result of any of
the foregoing is to increase the cost to BTCo or any Participant of issuing,
maintaining or participating in any Letter of Credit, or reduce the amount of
any sum received or receivable by BTCo or any Participant hereunder or reduce
the rate of return on its capital with respect to Letters of Credit (except for
changes in the rate of tax on, or determined by reference to, the net income or
profits of BTCo or such Participant pursuant to the laws of the jurisdiction in
which it is organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein), then, upon demand to
the Borrower by BTCo or any Participant (a copy of which demand shall be sent by
BTCo or such Participant to the Agent), the Borrower shall pay to BTCo or such
Participant such additional amount or amounts as will compensate such Bank on an
after-tax basis for such increased cost or reduction in the amount receivable or
reduction on the rate of return on its capital. BTCo or any Participant, upon
determining that any additional amounts will be payable pursuant to this Section
2.06, will give prompt written notice thereof to the Borrower, which notice
shall include a certificate submitted to the Borrower by BTCo or such
Participant (a copy of which certificate shall be sent by BTCo or such
Participant to the Agent), setting forth in reasonable detail the basis for the
calculation of such additional amount or amounts necessary to compensate BTCo or
such Participant. The certificate required to be delivered
<PAGE>
pursuant to this Section 2.06 shall, absent manifest error, be final and
conclusive and binding on the Borrower.
SECTION 3. COMMITMENT COMMISSION; FEES; REDUCTIONS OF
COMMITMENT.
3.1 FEES. (a) The Borrower agrees to pay the Agent for distribution to
each Non-Defaulting Bank with a Revolving Loan Commitment a commitment
commission (the "Commitment Commission") for the period from the Initial
Borrowing Date to and including the Final Maturity Date (or such earlier date as
the Total Revolving Loan Commitment shall have been terminated), computed at a
rate for each day equal to 1/2 of 1% per annum on the daily average Unutilized
Revolving Loan Commitment of such Non-Defaulting Bank. Accrued Commitment
Commission shall be due and payable quarterly in immediately available funds in
arrears on each Quarterly Payment Date and on the Final Maturity Date or such
earlier date upon which the Total Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Agent for dis tribution to each
Non-Defaulting Bank with a Revolving Loan Commitment (based on their respective
Adjusted Percentages) a fee in respect of each Letter of Credit issued hereunder
(the "Letter of Credit Fee"), for the period from and including the date of
issuance of such Letter of Credit to and including the termination of such
Letter of Credit, computed at a rate per annum equal to 2.5% of the daily Stated
Amount of such Letters of Credit. Accrued Letter of Credit Fees payable in
immediately available funds with respect to Letters of Credit shall be due and
payable quarterly in arrears on each Quarterly Payment Date, and all accrued
Letter of Credit Fees with respect to Letters of Credit shall be due and payable
in immediately available funds upon the first day after the termination of the
Total Revolving Loan Commitment upon which no Letters of Credit remain
outstanding.
(c) The Borrower agrees to pay to BTCo, for its own account, a facing
fee in respect of each Letter of Credit is sued for its account hereunder (the
"Facing Fee") (x) in the case of each Standby Letter of Credit, for the period
from and including the date of issuance of such Standby Letter of Credit to and
including the termination of such Standby Letter of Credit, computed at a rate
equal to 1/4 of 1% per annum of the daily Stated Amount of such Standby Letter
of Credit, PROVIDED that in any event the minimum amount of the Facing Fee for
each Standby Letter of Credit shall be $500 (it being agreed that, at the time
of any termination or expiration of a Standby Letter of Credit, if $500 exceeds
the amount of Facing Fees theretofore paid or then accrued with respect to such
Standby Letter of Credit, the amount of such excess shall be payable on the next
date upon which accrued Facing Fees are otherwise payable with respect to
Standby Letters of Credit as provided in the following sentence), and (y) in the
case of each Trade Letter of Credit, in an amount equal to 1/4 of 1% of the
Stated Amount of such Trade Letter of Credit as of the date of issuance thereof,
PROVIDED that
<PAGE>
in any event the minimum amount of the Facing Fee for each Trade Letter of
Credit shall be $500. Accrued Facing Fees payable with respect to Letters of
Credit shall be due and payable quarterly in arrears on each Quarterly Payment
Date, and all accrued Facing Fees with respect to Letters of Credit shall be due
and payable in immediately available funds upon the first day after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(d) The Borrower shall pay to BTCo, for its own ac count, upon each
drawing under, issuance of, or amendment to, any Letter of Credit, such amount
as shall at the time of such event be the administrative charge which BTCo is
generally imposing in connection with such occurrence with respect to letters of
credit.
(e) The Borrower shall pay to the Agent, for its own account, such
other fees as have been agreed to in writing by the Borrower and the Agent.
3.2 VOLUNTARY TERMINATION OF UNUTILIZED COMMITMENTS. Upon at least two
Business Days' prior notice to the Agent at its Notice Office (which notice the
Agent shall promptly transmit to each of the Banks), the Borrower shall have the
right, at any time or from time to time, without premium or penalty, to
terminate the Total Unutilized Revolving Loan Commitment, in whole or in part,
in integral multiples of $1,000,000 in the case of partial reductions to the
Total Un utilized Revolving Loan Commitment, PROVIDED that (i) each such
reduction shall apply proportionately to permanently reduce the Revolving Loan
Commitment of each Bank with such a Commitment and (ii) the reduction to the
Total Unutilized Revolving Loan Commitment shall in no case be in an amount
which would cause the Revolving Loan Commitment of any Bank to be reduced (as
required by preceding clause (i)) by an amount which exceeds the remainder of
(x) the Unutilized Revolving Loan Commitment of such Bank as in effect
immediately before giving effect to such reduction minus (y) such Bank's
Adjusted Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
3.3 MANDATORY REDUCTION OF COMMITMENTS. (a) The Total Commitment (and
the Term Loan Commitment and the Revolving Loan Commitment of each Bank) shall
terminate in its entirety on December 31, 1996, unless the Initial Borrowing
Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank) shall terminate in its entirety on the Initial
Borrowing Date.
<PAGE>
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each Bank) shall terminate in its entirety on the Final
Maturity Date.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date after the Initial Borrowing Date upon which a
mandatory prepayment of Term Loans pursuant to any of Sections 4.02(d) through
(i), inclusive, is required (and exceeds in amount the aggregate principal
amount of Term Loans then outstanding) or would be required if Term Loans were
then outstanding, the Total Revolving Loan Commitment shall be permanently
reduced by the amount, if any, by which the amount of such required prepayment
(determined as if an unlimited amount of Term Loans were actually outstanding)
exceeds the aggregate principal amount of Term Loans then outstanding.
(e) Each reduction to the Total Revolving Loan Com mitment pursuant to
this Section 3.03 shall be applied proportionately to reduce the Revolving Loan
Commitment of each Bank with such a Commitment.
SECTION 4. PREPAYMENTS; PAYMENTS; TAXES.
4.1 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay
the Loans, without premium or penalty, in whole or in part at any time and from
time to time on the following terms and conditions: (i) the Borrower shall give
the Agent prior to 12:00 noon (New York time) at its Notice Office at least one
Business Day's prior written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay Loans (or same day notice in the case of
Swingline Loans provided such notice is given prior to 12:00 noon (New York
time) on such Business Day), whether Term Loans, Revolving Loans or Swingline
Loans shall be prepaid and the amount of such prepayment, which notice the Agent
shall promptly transmit to each of the Banks; (ii) each prepayment shall be in
an aggregate principal amount of at least $1,000,000 (or $250,000 in the case of
Swingline Loans); and (iii) each prepayment in respect of any Loans made
pursuant to a Borrowing shall be applied PRO RATA among such Loans; PROVIDED
that at the Borrower's election in connection with any prepayment of Revolving
Loans pursuant to this Section 4.01, such prepayment shall not be applied to any
Revolving Loan of a Defaulting Bank. Each prepayment of principal of Term Loans
pursuant to this Section 4.01 shall be applied to reduce the then remaining
Scheduled Repayments in inverse order of maturity after giving effect to all
prior reductions thereto.
4.2 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS. (a) (i) On any day
on which the sum of the aggregate out standing principal amount of the Revolving
Loans made by Non-Defaulting Banks, Swingline Loans and the Letter of Credit
Outstandings exceeds the Adjusted Total Revolving Loan Sub-Commitment as then in
effect, the Borrower shall prepay
<PAGE>
principal of Swingline Loans and, after the Swingline Loans have been repaid in
full, Revolving Loans of Non-Defaulting Banks in an amount equal to such excess.
If, after giving effect to the prepayment of all outstanding Swingline Loans and
Revolving Loans of Non-Defaulting Banks, the aggregate amount of the Letter of
Credit Outstandings exceeds the Adjusted Total Revolving Loan Sub-Commitment as
then in effect, the Borrower shall pay to the Agent at the Payment Office, on
such date an amount of cash or Cash Equivalents equal to the amount of such
excess (up to a maximum amount equal to the Letter of Credit Outstandings at
such time), such cash or Cash Equivalents to be held as security for all
obligations of the Borrower to Non-Defaulting Banks hereunder in a cash
collateral account to be established by the Agent.
(ii) On any day on which the aggregate outstanding principal amount of
the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan
Commitment of such Defaulting Bank, the Borrower shall prepay principal of
Revolving Loans of such Defaulting Bank in an amount equal to such excess.
(b) If any Borrowing Base Certificate shall disclose the existence of a
Borrowing Base Deficiency, the Borrower shall, within one Business Day after the
delivery thereof in accordance with Section 8.01(k), prepay principal of
Swingline Loans in such amounts as are needed to eliminate the Borrowing Base
Deficiency. To the extent that a Borrowing Base Deficiency continues to exist
after repayment in full of all Swingline Loans, the Borrower shall prepay the
principal of Revolving Loans made by Non-Defaulting Banks in an amount equal to
such remaining Borrowing Base Deficiency and, to the extent such Borrowing Base
Deficiency exceeds the principal amount of then outstanding Revolving Loans made
by Non-Defaulting Banks, pay an amount of cash or Cash Equivalents equal to such
excess (up to a maximum amount equal to the Letter of Credit Outstanding at such
time) to the Agent at the Payment Office, such cash or Cash Equivalents to be
held as security for all obligations of the Borrower hereunder in a cash
collateral account established by the Agent; PROVIDED that such amounts shall,
so long as no Default or Event of Default then exists, be released from time to
time to the extent in excess of the Borrowing Base Deficiency.
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Term Loans, to the
extent then out standing, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(d)
through (i), inclusive, a "Scheduled Repayment," and each such date, a
"Scheduled Repayment Date"):
<PAGE>
SCHEDULED REPAYMENT DATE AMOUNT
January 31, 1997 $2,000,000
January 31, 1998 $5,000,000
January 31, 1999 $4,000,000
Final Maturity Date $44,000,000
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which the Borrower or any of its Subsidiaries receives any proceeds from
any sale or issuance of its equity (other than to any Subsidiary of the Borrower
made by the Borrower or any other Subsidiary of the Borrower), an amount equal
to 100% of the cash proceeds of the respective equity issuance (net of customary
underwriting discounts and commissions and other reasonable costs associated
therewith) shall be applied as a mandatory repayment of principal of outstanding
Term Loans; PROVIDED, HOWEVER, that in the case of cash proceeds received by the
Borrower or any of its Subsidiaries from the exercise of warrants, options or
similar securities by or on behalf of an employee of the Borrower or such
Subsidiary, the Borrower may defer such application until the Borrower shall
have received (and not so applied), in the aggregate, $50,000 of such proceeds.
The amount of each prin cipal repayment of Term Loans made as required by this
Section 4.02(d) shall be applied to reduce the then remaining Scheduled
Repayments in inverse order of maturity after giving effect to all prior
reductions thereto.
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which the Borrower or any of its Subsidiaries receives any proceeds from
any incurrence by the Borrower or any of its Subsidiaries of Indebtedness for
borrowed money (other than (i) Indebtedness for borrowed money permitted to be
incurred pursuant to Section 9.05 as such Sec tion is in effect on the Effective
Date, and (ii) additional Indebtedness permitted to be incurred by the Borrower
pursuant to Section 9.05 as such Section may be modified by the Superma jority
Banks from time to time but only to the extent that the Supermajority Banks
expressly waive the applicability of this Section 4.02(e) with respect to the
incurrence of such addi tional Indebtedness or expressly permit the proceeds
thereof to be used for purposes other than for repayments pursuant to this
Section 4.02(e)), an amount equal to the cash proceeds of the respective
incurrence of Indebtedness (net of customary under writing or placement
discounts and commissions and other rea sonable costs associated therewith)
shall be applied as a mandatory repayment of principal of outstanding Term
Loans. The amount of each principal repayment of Term Loans made as required by
this Section 4.02(e) shall be applied to reduce the then remaining Scheduled
Repayments in inverse order of maturity after giving effect to all prior
reductions thereto.
(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, no later than five Business Days
following each date after the Effective Date upon which the Borrower or any of
its Subsidiaries receives
<PAGE>
proceeds from any sale of assets (including capital stock and securities held
thereby, but excluding (aa) sales of inventory in the ordinary course of
business and (bb) sales of other assets to the extent permitted by Sections
9.02(ii), 9.02(vi) and 9.02(vii) and (cc) sales of "Assets Held for Disposition"
in an aggregate amount equal to the amount set forth therefor in the Business
Plan), an amount equal to 100% of the Net Sale Proceeds thereof shall be applied
as a mandatory repayment of principal of outstanding Term Loans; PROVIDED,
HOWEVER, that if the Borrower or any of its subsidiaries receives during any
fiscal month proceeds of sales of such "Assets Held for Disposition" which,
together with proceeds of such sales previously received by the Borrower or its
Subsidiaries, are in excess of the aggregate amount set forth therefor in the
Busi ness Plan ("Excess Proceeds"), the Borrower may defer such ap plication and
repayment until the 45th day immediately following the end of such fiscal month
of the immediately succeeding month. The amount of each repayment of Term Loans
made as re quired by this Section 4.02(f) shall be applied to reduce the then
remaining Scheduled Repayments in inverse order of maturity after giving effect
to all prior reductions thereto.
(g) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each Excess Cash Payment Date, an amount equal to 100% of the
Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as
a mandatory repayment of principal of outstanding Term Loans. The amount of each
repayment of Term Loans made as required by this Section 4.02(g) shall be
applied to reduce the then remaining Scheduled Repayments in inverse order of
maturity after giving effect to all prior reductions thereto.
(h) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within five Business Days following
each date after the Effective Date on which the Borrower or any of its
Subsidiaries receives any proceeds from any Recovery Event, an amount equal to
100% of the proceeds of such Recovery Event (net of reasonable costs and taxes
incurred in connection with such Recovery Event and any amounts required to be
applied (which are in fact applied) to the repayment of any other Indebtedness
secured (to the extent permitted by this Agreement) by the property subject to
such Recovery Event) shall be applied as a mandatory repayment of principal of
outstanding Term Loans, PROVIDED that so long as no Default or Event of Default
then exists, such proceeds (other than (i) proceeds received in respect of any
key-man life insurance required to be maintained pursuant to Section 8.03 and
(ii) proceeds received in excess of $5,000,000 in respect of any single Recovery
Event, it being understood that if such amount exceeds $5,000,000, then the
entire amount and not just the portion in excess of $5,000,000 shall be subject
to mandatory prepayment as provided in this Section 4.02(h)) shall not be
required to be so applied on such date to the extent that the Borrower delivers
a certificate to the Agent on or prior to such
<PAGE>
date stating that such proceeds shall be used to replace or restore any
properties or assets in respect of which such proceeds were paid within one year
following the date of such Recovery Event (which certificate shall set forth the
estimates of the proceeds to be so expended), and PROVIDED, FURTHER, that if all
or any portion of such proceeds not so applied to the repayments of the Term
Loans are not so used within such one year period, such remaining portion shall
be applied on the last day of such period as a mandatory repayment of principal
of outstanding Term Loans. The amount of each repayment of Term Loans made as
required by this Section 4.02(h) shall be applied to reduce the then remaining
Scheduled Repayments in inverse order of maturity after giving effect to all
prior reductions thereto.
(i) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, no later than five Business Days
following each date after the Effective Date on which the Borrower or any of its
Subsidiaries receives an Excess Tax Refund, an amount equal to 100% of the
amount of such refund that constitutes an Excess Tax Refund shall be ap plied as
a mandatory repayment of principal of outstanding Term Loans. The amount of each
repayment of Term Loans made as re quired by this Section 4.02(i) shall be
applied to reduce the then Scheduled Repayments in inverse order of maturity
after giving effect to all prior reductions thereto.
(j) Notwithstanding anything to the contrary con tained elsewhere in
this Agreement, (i) all then-outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the Final Maturity Date.
4.3 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Agent for the account of the Bank or Banks entitled thereto not later than
12:00 noon (New York time) on the date when due and shall be made in Dollars in
immediately available funds at the Payment Office of the Agent. Whenever any
payment to be made hereunder or under any Note shall be stated to be due on a
day which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest shall be payable at the applicable rate during such extension.
4.4 NET PAYMENTS. (a) All payments made by the Borrower hereunder,
or by the Borrower under any Note, will be made without setoff, counterclaim or
other defense. Except as provided in Section 4.04(b), all such payments will be
made free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the immediately succeeding sentence, any
tax imposed on or measured by the net income or profits of a Bank pursuant to
the laws of the juris diction in which it is organized or in which the principal
of fice or applicable lending office of such Bank is located or any subdivision
thereof or therein) and all interest, penalties or similar liabilities with
respect thereto (collectively, "Taxes"). If any amounts are payable in respect
of Taxes pur suant to the preceding sentence, then the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income of such Bank pursuant to the laws of the
jurisdiction in which the principal office or applicable lending office of such
Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or ap plicable
lending office of such Bank is located and for any withholding of income or
similar taxes imposed by the United States of America as such Bank shall
determine are payable by, or withheld from, such Bank in respect of such amounts
so paid to or on behalf of such Bank pursuant to the preceding sentence and in
respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. If any Taxes are so levied or im posed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. The Borrower will furnish
to the Agent within 45 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 agrees to indemnify and hold harmless each
Bank, and reimburse such Bank upon its written request, for the amount of any
Taxes so levied or im posed and paid by such Bank.
(b) Each Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees, (i) in the case of any such Bank that is a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and which constitutes a Bank hereunder on the
Initial Borrowing Date, to provide to the Borrower and the Agent on or prior to
the Initial Borrowing Date two original signed copies of Internal Revenue
Service Form 4224 or Form 1001 certifying to such Bank's entitlement to an
exemption from United States withholding tax with respect to payments to be made
under this Agreement and under any Note, (ii) in the case of any such Bank that
is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, that, to the
extent legally entitled to do so, (x) with respect to a Bank that is an assignee
or transferee of an interest under this Agreement pursuant to Sec tion 1.11 or
13.04 (unless the respective Bank was already a Bank hereunder immediately prior
to such assignment or trans fer), upon the date of such assignment or transfer
to such Bank, and (y) with respect to any such Bank, from time to time upon the
reasonable written request of the Borrower or the Agent after the Initial
Borrowing Date, such Bank will provide to the Borrower and the Agent two
original signed copies of Internal
<PAGE>
Revenue Service Form 4224 or Form 1001 (or any successor forms) certifying to
such Bank's entitlement to an exemption from, or reduction in, United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, (iii) in the case of any such Bank (other than a Bank described
in clause (i) or (ii) above) which constitutes a Bank hereunder on the Initial
Borrowing Date, to provide to the Borrower and the Agent, on or prior to the
Initial Borrowing Date (x) a certificate substantially in the form of Exhibit R
(any such certificate, a "Section 4.04(b)(iii) Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8, certifying to such Bank's entitlement at the date of such certificate
(assuming compliance by the Borrower with Section 8.12) to an exemption from
U.S. withholding tax under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Agreement and under any Note, and (iv)
in the case of any such Bank (other than a Bank described in clause (i) or (ii)
above), to the extent legally entitled to do so, (x) with respect to a Bank that
is an assignee or transferee of an interest under this Agreement pur suant to
Section 1.11 or 13.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), upon the date of such
assignment or transfer to such Bank, and (y) with respect to any such Bank, from
time to time upon the reasonable written request of the Borrower or the Agent
after the Initial Borrowing Date, to provide to the Borrower and the Agent such
other forms as may be required in order to establish the entitlement of such
Bank to an exemption from withholding with respect to payments under this
Agreement and under any Note. Notwithstanding anything to the contrary contained
in Section 4.04(a), but subject to the immediately succeeding sentence, the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
fees or other amounts payable hereunder (without any obligation to pay the
respective Bank additional amounts with respect thereto) for the account of any
Bank which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes and which has not
provided to the Borrower such forms required to be provided to the Borrower
pursuant to the first sentence of this Section 4.04(b) (or to the extent such
forms do not establish a complete exemption from such withholding). Not
withstanding anything to the contrary contained in the preceding sentence and
except as set forth in Section 13.04(b), the Borrower agrees to indemnify each
Bank in the manner set forth in Section 4.04(a) in respect of any amounts
deducted or with held by it as described in the immediately preceding sentence
as a result of any changes after the Effective Date in any ap plicable law,
treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of income or
similar Taxes.
SECTION 5. CONDITIONS PRECEDENT TO LOANS ON THE INI TIAL BORROWING
DATE. The obligation of each Bank to amend and restate the Term Loans and to
make the Revolving Loans, and the obligation of BTCo to issue Letters of Credit,
on the Initial
<PAGE>
Borrowing Date is subject at the time of the making of such Loans or the
issuance of such Letters of Credit to the satis faction of the following
conditions:
5.1 EXECUTION OF AGREEMENT; NOTES. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each of the Banks the
appropriate Term Note and/or Revolving Note executed by the Borrower, and to
BTCo the Swingline Note executed by the Borrower, in each case in the amount,
maturity and as otherwise provided herein.
5.2 OFFICER'S CERTIFICATE. On the Initial Borrowing Date, the Agent
shall have received a certificate dated the Initial Borrowing Date signed on
behalf of the Borrower by the President, any Executive Vice President or any
Vice President of the Borrower stating that all of the conditions in Section 5
have been satisfied on such date.
5.3 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the Agent
shall have received (i) from Paul, Weiss, Rif kind, Wharton & Garrison, counsel
to the Borrower, an opinion addressed to the Agent, the Co-Agent and each of the
Banks and dated the Initial Borrowing Date covering the matters set forth in
Exhibit D and such other matters incident to the transaction contemplated herein
as the Agent or the Co-Agent may reasonably request, (ii) from Olive & Olive,
special intellectual property counsel to the Borrower, an opinion covering the
perfection of the security interests granted or continued pursuant to the
Security Agreement in the intellectual property covered thereby, which opinion
shall be in form and substance satisfactory to the Agent, the Co-Agent and each
of the Banks and (iii) from local counsel reasonably satisfactory to the Agent,
opinions each of which shall be in form and substance satisfactory to the Agent,
the Co-Agent and each of the Banks and shall cover the perfection and priority
of the security interests granted or continued pursuant to the Security
Agreement, the Cash Collateral Agreement and the Mortgages (except that no
opinion need be given with respect to the priority of the lien of any Mortgage)
and such other matters incident to the transactions contemplated herein as the
Agent or the Co-Agent may reasonably request.
5.4 CORPORATE DOCUMENTS; PROCEEDINGS; MANAGEMENT. (a) On the Initial
Borrowing Date, the Agent shall have re ceived a certificate, dated the Initial
Borrowing Date, signed by the President, the Chief Operating Officer, any
Executive Vice President or any Vice President of the Borrower, and at tested to
by the Secretary or any Assistant Secretary of the Borrower, in the form of
Exhibit E with appropriate insertions, together with copies of the Certificate
of Incorporation and ByLaws of the Borrower and the resolutions of any Credit
Party referred to in such certificate, and the foregoing shall be
<PAGE>
acceptable to the Agent and the Co-Agent in their reasonable
discretion.
(b) All corporate and legal proceedings and all in struments and
agreements in connection with the transactions contemplated by this Agreement
and the other Documents shall be satisfactory in form and substance to the
Agent, the Co-Agent and each of the Banks, and the Agent shall have received all
information and copies of all documents and papers, including records of
corporate proceedings, governmental approvals, good standing certificates and
bring-down telegrams, if any, which the Agent or the Co-Agent reasonably may
have requested in con nection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.
(c) The Borrower shall have identified its senior management and
board of directors to the Agent, the Co-Agent and the Banks, and the Agent, the
Co-Agent and each of the Banks shall be reasonably satisfied with all
arrangements (including compensation arrangements) pertaining thereto.
5.5 EMPLOYEE BENEFIT PLANS; SHAREHOLDERS' AGREEMENTS; MANAGEMENT
AGREEMENTS; EMPLOYMENT AGREEMENTS; COLLECTIVE BARGAINING AGREEMENTS; DEBT
AGREEMENTS. On the Initial Borrow ing Date, there shall have been delivered to
the Agent true and correct copies, certified as true and complete by an
appropriate officer of the Borrower of all of the following (except to the
extent that the same have been previously delivered to the Banks): (i) all
employee benefit plans (other than multiem ployer plans as defined in Section
4001(a)(3) of ERISA), or any other similar plans or arrangements for the benefit
of employees of the Borrower and any profit sharing plans and deferred
compensation plans of the Borrower (collectively, the "Employee Benefit Plans"),
(ii) all agreements entered into by the Bor rower governing the terms and
relative rights of its capital stock and any agreements entered into by
shareholders relating to any such entity with respect to their capital stock
(col lectively, the "Shareholders' Agreements"), (iii) all agreements with
members of, or with respect to, the management of the Borrower (collectively,
the "Management Agreements"), (iv) any employment agreements entered into by the
Borrower (col lectively, the "Employment Agreements"), (v) all collective
bargaining agreements applying or relating to any employee of the Borrower
(collectively, the "Collective Bargaining Agree ments"), and (vi) all agreements
evidencing or relating to In debtedness of the Borrower which is to remain
outstanding after giving effect to the incurrence of Loans on the Initial Borrow
ing Date if the aggregate principal amount of the respective Indebtedness
exceeds (or upon utilization of any unused commit ments may exceed) $50,000
(collectively, the "Debt Agreements"); all of which Employee Benefit Plans,
Shareholders' Agreements, Management Agreements, Employment Agreements,
Collective Bargaining Agreements and Debt Agreements shall be in form and
substance satisfactory to the Agent, the Co-Agent and each of the Banks and
shall be in full force and effect on the Initial Borrowing Date.
<PAGE>
5.6 EFFECTIVE DATE OF REORGANIZATION PLAN. On or prior to the
Initial Borrowing Date, (i) the Reorganization Plan shall have been confirmed by
a Final Order (the "Confirmation Order") and (ii) all conditions to the
occurrence of the Reorganization Plan Effective Date shall have been satisfied
or waived in accordance with the terms of the Reorganization Plan. Without
limiting the generality of the foregoing, all Existing Credit Agreement
Obligations required pursuant to the Reorgani zation Plan to be paid on and as
of the Effective Date (includ ing, without limitation, accrued and unpaid
non-default interest to the Effective Date and accrued and unpaid default
interest to October 31, 1996) shall be so paid with the proceeds of Loans in
accordance with the terms of the Reorganization Plan, and the Borrower shall
remain liable for all other Existing Credit Agreement Obligations (including
without limitation Bank Indemnification claims) in accordance with the terms of
the Reorganization Plan and this Agreement.
5.7 PLEDGE AGREEMENT. On or before the Initial Borrowing Date, the
Borrower shall have duly authorized, ex ecuted and delivered an Amended and
Restated Pledge Agreement in the form of Exhibit F (as modified, supplemented or
amended from time to time, the "Pledge Agreement") and shall have de livered to
the Collateral Agent, as Pledgee, all the Pledged Securities, if any, referred
to therein then owned by the Bor rower, (x) endorsed in blank in the case of
promissory notes constituting Pledged Securities and (y) together with executed
and undated stock powers, in the case of capital stock consti tuting Pledged
Securities and (z) an officer's certificate to the effect that the pledges under
the Original Pledge Agreement shall continue to constitute legal, valid,
effective and con tinuing first priority pledges (except for Permitted Liens)
securing all Obligations.
5.8 SECURITY AGREEMENT. On or before the Initial Borrowing Date, the
Borrower shall have duly authorized, ex ecuted and delivered an Amended and
Restated Security Agreement in the form of Exhibit G (as modified, supplemented
or amended from time to time, the "Security Agreement") covering all of the
Borrower's present and future Security Agreement Collateral, together with:
(a) proper Financing Statements (Form UCC-1) fully executed for
filing under the UCC or other appropriate filing offices of each
jurisdiction as may be necessary or, in the opinion of the Collateral
Agent, desirable to perfect the security interests purported to be created
by the Security Agreement;
(b) copies of Requests for Information or Copies (Form UCC-11), or
equivalent reports, listing all effective financing statements that name
the Borrower as debtor and that are filed in the jurisdictions referred to
in clause (a) above, together with copies of such other financing
<PAGE>
statements (none of which shall cover the Collateral except to the extent
evidencing Permitted Liens or as to which the Collateral Agent shall have
received termination statements (Form UCC-3) or such other termination
statements as shall be required by local law) fully executed for filing;
(c) evidence of the completion of all other record ings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect or continue the
perfection of the security interests granted by the Secu rity Agreement;
(d) evidence that all other actions necessary or, in the opinion of
the Collateral Agent, desirable to perfect and protect the security
interests granted by the Security Agreement have been taken; and
(e) an officer's certificate to the effect that the liens on,
pledges of and security interests in the assets and property of the
Borrower and its affiliates under the Original Security Agreement shall
continue to constitute legal, valid, effective and continuing first
priority (ex cept for Permitted Liens) liens, pledges and security in
terests securing all Obligations.
5.9 CASH COLLATERAL AGREEMENT. On the Initial Bor rowing Date, the
Borrower shall have delivered to the Agent written confirmation from First Union
National Bank of North Carolina ("First Union") that First Union will continue
to act as Original Cash Collateral Agent pursuant to the Original Cash
Collateral Agreement until at least 60 days after the Initial Borrowing Date.
5.10 INTENTIONALLY OMITTED.
5.11 MORTGAGES; TITLE INSURANCE; SURVEYS; ETC. On
the Initial Borrowing Date, the Collateral Agent shall have
received:
(i) fully executed counterparts of amended and re stated mortgages
or deeds to secure debt in each case in form and substance satisfactory to
the Agent and the Co-Agent (each, a "Mortgage" and, collectively, the
"Mort gages"), which Mortgages shall cover all of the Real Prop erty owned
by the Borrower and its Subsidiaries and which shall be designated as such
on Schedule II (each, a "Mort gaged Property" and collectively, the
"Mortgaged Proper ties"), together with evidence that counterparts of the
Mortgages have been delivered to the title insurance com pany insuring the
Lien of the Mortgages for recording in all places to the extent necessary
or desirable, in the judgment of the Collateral Agent, effectively to
create a valid and enforceable first priority mortgage lien on each
Mortgaged Property in favor of the Collateral Agent (or such other trustee
as may be required or desired under local law) for the benefit of the
Secured Creditors;
<PAGE>
(ii) mortgagee title insurance policies or date/down modification
endorsements to existing policies, as ap plicable, on each Insured
Property issued by First American Title Insurance Company or such other
title insurers reasonably satisfactory to the Collateral Agent (the
"Mortgage Policies") in amounts satisfactory to the Col lateral Agent, the
Co-Agent and each of the Banks assuring the Collateral Agent that the
Mortgages on such Insured Properties are valid and enforceable first
priority mort gage liens on the respective Insured Properties, free and
clear of all defects and encumbrances except Permitted Encumbrances and
such Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to the Col lateral Agent, the Co-Agent and each of the Banks
and shall include, as appropriate, an endorsement for future advances
under this Agreement and the Notes and for any other matter that the
Collateral Agent, the Co-Agent or any Bank in its or their discretion may
reasonably request, shall not include an exception for mechanics' liens,
and shall provide for affirmative insurance and such reinsurance as the
Collateral Agent, the Co-Agent or any Bank in its or their discretion may
reasonably request; and
(iii) a survey, in form and substance reasonably sat isfactory to the
Collateral Agent, of each Insured Prop erty, certified by a licensed
professional surveyor rea sonably satisfactory to the Collateral Agent.
5.12 ADVERSE CHANGE, ETC. (a) On the Initial Bor rowing Date,
nothing shall have occurred (and the Banks shall have become aware of no facts
or conditions not previously known) which the Agent, the Co-Agent or any Bank
shall determine has, or could reasonably be expected to have, a material adverse
effect on the rights or remedies of the Agent, the Co-Agent or the Banks, or on
the ability of the Borrower to perform its obligations to the Agent, the
Co-Agent and the Banks or which has, or could reasonably be expected to have, a
materially adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower.
(b) On or prior to the Initial Borrowing Date, all necessary
governmental (domestic and foreign) and third party approvals in connection with
the transactions contemplated by the Credit Documents and otherwise referred to
herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken by
any competent authority which restrains, prevents or imposes materially adverse
conditions upon the consummation of the transactions contemplated by the Credit
Documents and otherwise referred to herein or therein. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief
<PAGE>
or other restraint pending or notified prohibiting or imposing materially
adverse conditions upon the making of the Loans.
5.13 LITIGATION. On the Initial Borrowing Date, no litigation by any
entity (private or governmental) shall be pending or threatened with respect to
this Agreement or any documentation executed in connection herewith or the
transac tions contemplated hereby, or with respect to any material In debtedness
of the Borrower which is to remain outstanding after the consummation of the
transactions contemplated by the Credit Documents or which the Agent, the
Co-Agent or any Bank shall determine could reasonably be expected to have a
materially adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower.
5.14 FEES, ETC. On the Initial Borrowing Date, the Borrower shall
have paid to the Agent, the Co-Agent and the Banks all reasonable costs, fees
and expenses (including, with out limitation, legal fees and expenses, and the
expense of the accounts receivable and inventory audit referred to in Section
5.15) incurred by the Agent, the Co-Agent and the Banks with respect to the
transactions contemplated herein and in connec tion with the restructuring and
reorganization of the Borrower prior the Effective Date as contemplated in the
Reorganization Plan and the Confirmation Order, to the extent then due.
5.15 SOLVENCY CERTIFICATE; ENVIRONMENTAL ANALYSES; INSURANCE
ANALYSES; ACCOUNTS RECEIVABLE AUDIT; REAL ESTATE AP PRAISALS. On the Initial
Borrowing Date, the Borrower shall cause to be delivered to the Agent (i) a
certificate in the form of Exhibit K, addressed to the Agent, the Co-Agent and
each of the Banks and dated the Initial Borrowing Date, from the Chief Financial
Officer of the Borrower, providing the opinion of the Chief Financial Officer of
the Borrower that, after giving effect to the transactions contemplated by the
Credit Documents, the Borrower is not insolvent and will not be rendered
insolvent by the indebtedness incurred in connection herewith, will not be left
with unreasonably small capital with which to engage in its business and will
not have incurred debts beyond its ability to pay such debts as they mature and
become due, (ii) updated environmental assessments from the Borrower's internal
environmental personnel, the results of which shall be in scope, form and
substance acceptable to the Agent, the Co-Agent and each of the Banks, (iii)
analyses and evidence of insurance (including key-man life insurance) complying
with the requirements of Section 8.03 for the business and properties of the
Borrower, in scope, form and substance satisfactory to the Agent, the Co-Agent
and each of the Banks and naming the Collateral Agent as an additional insured
and/or loss payee (or assignee in the case of the key-man life insurance), and
stating that such insurance shall not be cancelled or revised without 30 days
prior written notice by the insurer to the Agent, (iv) an accounts receivable
and inventory audit of the Borrower performed by Price Waterhouse LLP, the
results of which shall be satisfactory to the Agent, the Co-Agent and each of
the Banks, and (v) real estate appraisals with respect to each Mortgaged
Property owned by the Borrower, which real estate
<PAGE>
appraisals shall satisfy the requirements set forth in 12 CFR, Part 34-Subpart
C, shall be accompanied by a certification of the appraisal firm providing such
appraisals that they comply with such requirements and shall in all other
respects be satisfactory to the Agent, the Co-Agent and each of the Banks.
5.16 CONSENT LETTER. On the Initial Borrowing Date, the Agent shall
have received a letter from CT Corporation Sys tem, presently located at 1633
Broadway, New York, New York 10019, substantially in the form of Exhibit K,
indicating its consent to its appointment by the Borrower as its agent to re
ceive service of process as specified in Section 13.08.
5.17 PRO FORMA BALANCE SHEET. On or prior to the Initial Borrowing
Date, the Banks shall have received an unau dited PRO FORMA consolidated balance
sheet of the Borrower at November 1, 1996 prepared in accordance with generally
accepted accounting principles except as specifically set forth in the notes to
such balance sheet (after giving effect to the trans actions contemplated by the
Credit Documents), which PRO FORMA consolidated balance sheet shall be in form
and substance sat isfactory to the Agent, the Co-Agent and each of the Banks.
5.18 INITIAL BORROWING BASE CERTIFICATE. On the Initial Borrowing
Date, the Borrower shall have delivered to the Agent the initial Borrowing Base
Certificate meeting the requirements of Section 8.01(k).
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation
of each Bank to amend and restate the Term Loans and to make Revolving Loans
(including Revolving Loans made on the Initial Borrowing Date, but excluding
Mandatory Borrowings made thereafter, which shall be made as provided in Section
1.01(d)), and the obligation of BTCo to issue any Letter of Credit, is subject,
at the time of each such Credit Event (ex cept as hereinafter indicated), to the
satisfaction of the fol lowing conditions:
6.1 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on the
date of the making of such Credit Event (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
6.2 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior to the
making of each Loan (excluding Swingline Loans), the Agent shall have received a
Notice of Borrowing meeting the requirements of Section 1.03(a). Prior to the
mak ing of any Swingline Loan, BTCo shall have received the notice required by
Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and
BTCo shall have received a Letter of Credit Re quest meeting the requirements of
Section 2.03.
The acceptance of the proceeds of each Credit Event shall constitute
a representation and warranty by the Borrower to the Agent and each of the Banks
that all the conditions specified in Section 5 and in this Section 6 and
applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Agent at the Notice Office for the account of each of the Banks and,
except for the Notes, in sufficient counterparts for each of the Banks and shall
be in form and substance satisfactory to the Banks.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREE MENTS. In order to
induce the Banks to enter into this Agree ment and to amend and restate the Term
Loans and to make the Revolving Loans, and issue (or participate in) the Letters
of Credit as provided herein, the Borrower and each other Credit Party makes the
following representations, warranties and agreements, in each case after giving
effect to the transactions contemplated by the Credit Documents, all of which
shall survive the execution and delivery of this Agreement and the Notes and the
amending and restating of the Term Loans and the making of the Revolving Loans
and the issuance of the Letters of Credit, with the occurrence of each Credit
Event on or after the Initial Borrowing Date being deemed to constitute a
representation and warranty that the matters specified in this Section 7 are
true and correct on and as of the Initial Borrowing Date and on the date of each
such Credit Event (it being understood and agreed that any representation or
warranty which by its terms is made as of a specified date shall be required to
be true and correct in all material respects only as of such specified date).
7.1 CORPORATE STATUS. The Borrower and each Sub sidiary of the
Borrower (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage, and (iii) is
duly qualified and is authorized to do business and is in good standing in each
jurisdiction where the ownership, leasing or operation of its property or the
conduct of its business requires such qualifications except for failures to be
so qualified which, in the aggregate, could not reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsidiaries taken as a whole.
7.2 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Credit Documents
<PAGE>
to which it is party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of each of such Credit Documents.
Each Credit Party has duly executed and delivered each of the Credit Documents
to which it is party, and each of such Credit Documents constitutes its legal,
valid and binding obligation enforceable in accordance with its terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
7.3 NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by it
with the terms and provisions thereof, (i) will contravene any provision of any
law, statute, rule or regulation or any order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the Security
Documents) upon any of the property or assets of the Borrower or any Subsidiary
of the Borrower pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement or loan agreement, or any other material agreement, contract or
instru ment, to which the Borrower or any Subsidiary of the Borrower is a party
or by which it or any of its property or assets is bound or to which it may be
subject, or (iii) will violate any provision of the Certificate of Incorporation
or By-Laws of the Borrower or any Subsidiary of the Borrower.
7.4 GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made prior to the Initial Borrowing Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Credit Document or (ii) the legality,
validity, binding effect or en forceability of any such Credit Document.
7.5 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UN DISCLOSED
LIABILITIES; PROJECTIONS; ETC. (a) The statement of financial condition of the
Borrower at February 2, 1996 and the related statement of income and cash flow
and changes in share holders' equity of the Borrower for the fiscal year ended
on such date, and furnished to the Banks prior to the Effective Date present
fairly the financial condition of the Borrower at the date of such statements of
financial condition and the re sults of the operations of the Borrower for such
fiscal year. All such financial statements have been prepared in accordance with
generally accepted accounting principles and practices
<PAGE>
consistently applied. Since February 2, 1996, there has been no material adverse
change in the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower or of the Borrower and its
Subsid iaries taken as a whole.
(b) On and as of the Initial Borrowing Date, after giving effect to
the transactions contemplated by the Credit Documents and to all Indebtedness
(including the Loans) being incurred or assumed and Liens created by the
Borrower in con nection therewith, (a) the sum of the assets, at a fair valua
tion, of the Borrower will exceed its debts; (b) the Borrower has not incurred
and does not intend to incur, and does not believe that it will incur, debts
beyond its ability to pay such debts as such debts mature; and (c) the Borrower
will have sufficient capital with which to conduct its business. For purposes of
this Section 7.05(b), "debt" means any liability on a claim, and "claim" means
(i) any right to payment, whether or not such a right is reduced to judgment,
liquidated, unliqui dated, fixed, contingent, matured, unmatured, disputed,
undis puted, legal, equitable, secured, or unsecured, or (ii) any right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully disclosed in the financial statements delivered
pursuant to Section 7.05(a), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to the Borrower of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in aggregate, would be mate rial to the Borrower.
As of the Initial Borrowing Date, the Borrower does not know of any basis for
the assertion against the Borrower of any liability or obligation of any nature
what soever that is not fully disclosed in the financial statements delivered
pursuant to Section 7.05(a) which, either individually or in the aggregate,
could be material to the Borrower.
(d) On and as of the Initial Borrowing Date, the financial
projections (the "Projections") previously delivered to the Agent, the Co-Agent
and the Banks have been prepared on a basis consistent with the financial
statements referred to in Section 7.05(a) (other than as set forth in such
Projections), and there are no statements or conclusions in any of the Pro
jections which are based upon or include information known to the Borrower to be
misleading in any material respect or which fail to take into account material
information regarding the matters reported therein. On the Initial Borrowing
Date, the Borrower believed that the Projections were reasonable and at
tainable.
7.6 LITIGATION. There are no actions, suits or proceedings pending
or, to the best knowledge of the Borrower, threatened (i) with respect to any
Credit Document, (ii) with respect to any material Indebtedness of the Borrower
or any of its Subsidiaries, or (iii) that could reasonably be expected to
materially and adversely affect the business, operations, prop erty, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsid iaries taken as a whole.
7.7 TRUE AND COMPLETE DISCLOSURE. All factual in formation (taken as
a whole) furnished by or on behalf of the Borrower or its Subsidiaries in
writing to the Agent, the Co-Agent or any Bank (including, without limitation,
all informa tion contained in the Disclosure Statement, the Business Plan and
the Credit Documents) for purposes of or in connection with this Agreement, the
other Credit Documents or any transaction contemplated herein or therein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of the Borrower or its Subsidiaries in writing to the Agent, the
Co-Agent or any Bank will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading in any material respect at such time in light of the
circumstances under which such information was provided.
7.8 USE OF PROCEEDS; MARGIN REGULATIONS. (i) Pro ceeds of Revolving
Loans incurred on the Initial Borrowing Date shall be used for the purposes
described in Section 7.08(a) and may be used for the purpose described in clause
(ii) hereof, and (ii) proceeds of Revolving Loans and Swingline Loans incurred
after the Initial Borrowing Date shall be used for the Borrower's general
corporate purposes, including to finance the working capital needs of the
Borrower.
(a) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof nor the occurrence of any other Credit Event will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
7.9 TAX RETURNS AND PAYMENTS. The Borrower and the Subsidiaries have
timely filed or caused to be timely filed with the appropriate taxing authority,
all returns, statements, forms and reports for taxes (the "Returns") required to
be filed by or with respect to the income, properties or operations of the
Borrower and/or any of its Subsidiaries. The returns accurately reflect all
liability for taxes of the Borrower and its Subsidiaries for the periods covered
thereby. Each of the Borrower and its Subsidiaries has paid all taxes payable by
it other than taxes the amounts of which have not been established, and other
than those contested in good faith and for which adequate reserves have been
established in accordance with generally accepted accounting principles. Except
as disclosed in the financial statements referred to in Section 7.05(a), there
is no material action, suit, proceeding, investigation, audit, or claim now
pending or, to the knowledge of the
<PAGE>
Borrower, threatened by any authority regarding any taxes relating to the
Borrower or any of its Subsidiaries. As of the Initial Borrowing Date, and
except for state tax audit exten sions entered into in the ordinary course of
the Borrower's and its Subsidiaries' respective businesses, neither the Borrower
nor any of its Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower or
any of its Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of the Borrower or any of its
Subsidiaries not to be subject to the normally applicable stat ute of
limitations. None of the Borrower or any of its Subsid iaries have provided,
with respect to themselves or property held by them, any consent under Section
341 of the Code.
7.10 COMPLIANCE WITH ERISA. Each Plan is in sub stantial compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability; no Plan has an accumulated or waived funding deficiency, has
permitted decreases in its funding standard account or has applied for an
extension of any amortization period within the meaning of Section 412 of the
Code; neither the Borrower, any Subsidiary of the Borrower nor any ERISA
Affiliate has incurred any material liability to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code or expects to incur any
liability under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate any Plan; no condition exists
which presents a mate rial risk to the Borrower or any Subsidiary of the
Borrower or any ERISA Affiliate of incurring a liability to or on account of a
Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial
assumptions and computation methods con sistent with subpart 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of the Borrower, all Subsidiaries
of the Borrower and all ERISA Affiliates to all Plans which are multi employer
plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date of any Credit Event, would not exceed
$1,000,000; no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and none of the Borrower or any
Subsidiary of the Borrower maintains or contributes to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to
retired employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA) the
obligations with respect to which could have a material adverse effect on the
ability of the Borrower to per form its obligations under this Agreement. Except
with respect to representations made regarding withdrawal liability, all of the
representations contained in this Section 7.10 which are made with respect to
any Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of
ERISA) shall be to the best knowledge of each of the Borrower.
<PAGE>
7.11 THE SECURITY DOCUMENTS. (a) The provisions of the Original
Security Agreement were, and the provisions of the Security Agreement are,
effective to create and continue in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the Borrower in the Security
Agreement Collateral described therein, and the Original Secu rity Agreement
created, and the Security Agreement creates, a fully perfected first lien on,
and security interest in, all right, title and interest of the Borrower, in all
of the Secu rity Agreement Collateral described therein, subject to no other
Liens other than Permitted Liens, and which Lien continues uninterrupted and
unaffected by the filing by the Borrower of a petition for relief under the
Bankruptcy Code and the con summation of the Reorganization Plan. The
recordation of the Original Security Agreement in the United States Patent and
Trademark office together with filings on Form UCC-1 made pur suant to the
Original Security Agreement was effective, under federal law, to perfect, and
the recordation of the Security Agreement in such office together with filings
on Form UCC-1 made pursuant to the Security Agreement will be effective to
continue the perfection of, the security interest granted to the Collateral
Agent in the trademarks and patents covered by the Original Security Agreement,
and the filing of the Original Security Agreement with the United States
Copyright office to gether with filings on Form UCC-1 made pursuant to the
Original Security Agreement was effective under federal law to perfect, and the
recordation of the Security Agreement in such office together with filings on
Form UCC-1 made pursuant to the Secu rity Agreement will be effective to
continue the perfection of, the security interest granted to the Collateral
Agent in the copyrights covered by the Security Agreement. The Borrower has good
and marketable title to all Security Agreement Collateral described therein,
free and clear of all Liens except those described above in this clause (a).
(b) The security interests created in favor of the Collateral Agent,
as Pledgee for the benefit of the Secured Creditors, under the Original Pledge
Agreement did, and the provisions of Pledge Agreement do, constitute first
perfected security interests in the Pledged Securities described in the Pledge
Agreement (subject to no security interests of any other Person), and which
security interests continue uninterrupted and unaffected by the filing by the
Borrower of a petition for relief under the Bankruptcy Code and the consummation
of the Reorganization. No filings or recordings are required in order to perfect
(or maintain the perfection or priority of) the se curity interests created in
the Pledged Securities under the Pledge Agreement.
(c) The security interests created in favor of the Cash Collateral
Agent for the benefit of the Secured Creditors under the Original Cash
Collateral Agreement did, and the pro visions of the Cash Collateral Agreement
do, constitute first
<PAGE>
perfected security interests in the Cash Collateral (subject to no security
interests of any other Person), and which security interests continue
uninterrupted and unaffected by the filing by the Borrower of a petition for
relief under the Bankruptcy Code and the consummation of the Reorganization
Plan. No filings or recordings are required in order to perfect (or maintain the
perfection or priority of) the security interests created in the Cash Collateral
under the Cash Collateral Agreement.
(d) The Original Mortgages when filed did create, and the Mortgages
do continue, as security for the obligations purported to be secured thereby, a
valid and enforceable per fected security interest in and mortgage lien on all
of the Mortgaged Properties in favor of the Collateral Agent (or such other
trustee as may be required or desired under local law) for the benefit of the
Secured Creditors, superior to and prior to the rights of all third persons
(except that the security interest and mortgage lien created in the Mortgaged
Properties may be subject to the Permitted Encumbrances related thereto) and
subject to no other Liens (other than Permitted Liens), and which mortgage liens
continue uninterrupted and unaffected by the filing by the Borrower of a
petition for relief under the Bankruptcy Code and the consummation of the
Reorganization Plan. Schedule II contains a true and complete list of each
parcel of Real Property owned or leased by the Borrower on the Effective Date,
and the type of interest therein held by the Borrower. The Borrower has good
title to all Mortgaged Properties free and clear of all Liens except those
described in the first sentence of this subsection (d).
7.12 PROPERTIES. The Borrower and each of its Sub sidiaries have
good title to all properties owned by them, in cluding all property reflected in
the balance sheet of the Bor rower as referred to in Section 7.05(a) and in the
pro forma balance sheet referred to in Section 5.17 (except as sold or otherwise
disposed of since the date of such balance sheet in the ordinary course of
business), free and clear of all Liens, other than (i) as referred to in the
balance sheet or in the notes thereto or in the pro forma balance sheet or (ii)
Permit ted Liens. Schedule II sets forth all the real property owned by the
Borrower. No Subsidiary of the Borrower owns real prop erty.
7.13 CAPITALIZATION. On the Initial Borrowing Date and after giving
effect to the transactions contemplated by the Reorganization Plan, the
authorized capital stock of the Bor rower shall consist of 27,500,000 shares of
common stock, $.01 par value per share, and 2,500,000 shares of preferred stock,
$0.01 par value per share, of which 10,000,000 shares of common stock shall be
issued and outstanding. All such outstanding shares have been duly and validly
issued, are fully paid and nonassessable and are free of preemptive rights.
Other than Indebtedness of the Borrower being converted to capital stock of the
Borrower on the Initial Borrowing Date in accordance with the terms of the
Reorganization Plan, the Borrower does not, as of the Initial Borrowing Date,
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any
<PAGE>
options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock, except for employee stock options to
be granted to certain employees of the Borrower as set forth in the Ithaca
Industries, Inc. 1996 Long-Term Stock Incentive Plan (a copy of which has
heretofore been delivered to the Banks).
7.14 SUBSIDIARIES. (a) Other than Ithaca, S.A. and Robson Square
1800 Services, Ltd. (both of which are organized in jurisdictions other than the
United States of America) and Subsidiaries created pursuant to Section 9.16
after the Initial Borrowing Date, the Borrower has no Subsidiaries.
(b) At least 65% of the equity of each Subsidiary of the Borrower
organized in jurisdictions other than the United States of America has been
pledged in favor of the Agent for the benefit of the Agent, Co-Agent and Banks
pursuant to the Pledge Agreement.
7.15 COMPLIANCE WITH STATUTES, ETC. Each of the Borrower and its
Subsidiaries is in compliance with all ap plicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies
or authorities, domestic or foreign, in respect of the conduct of its business
and the ownership of its property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards and controls),
except such non compliances as could not, in the aggregate, reasonably be ex
pected to have a material adverse effect on the business, op erations, property,
assets, liabilities, condition (financial or otherwise) or prospects of the
Borrower or of the Borrower and its Subsidiaries taken as a whole.
7.16 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company controlled by an
"investment company," within the mean ing of the Investment Company Act of 1940,
as amended.
7.17 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
7.18 ENVIRONMENTAL MATTERS. (a) The Borrower and each of its
Subsidiaries have complied with, and on the date of such Credit Event are in
compliance with, all applicable Envi ronmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of the Borrower or any of its Subsidiaries after due inquiry,
past or threatened Environmental Claims against the Borrower or any of its
Subsidiaries or any Real Property owned
<PAGE>
or operated by the Borrower or any of its Subsidiaries that individually or in
the aggregate could reasonably be expected to materially and adversely affect
the business, operations, property, assets, liabilities, condition (financial or
other wise) or prospects of the Borrower or of the Borrower and its Subsidiaries
taken as a whole. There are no facts, circum stances, conditions or occurrences
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower after due inquiry, on any
property adjoining or in the vicinity of any such Real Property that, to the
best knowledge of the Borrower after due inquiry, could reasonably be expected
(i) to form the basis of an Envi ronmental Claim against the Borrower or any of
its Subsidiaries or any such Real Property that individually or in the aggregate
could reasonably be expected to materially and adversely affect the business,
operations, property, assets, liabilities, condi tion (financial or otherwise)
or prospects of the Borrower or of the Borrower and its subsidiaries taken as a
whole, or (ii) to cause any such Real Property to be subject to any restrictions
on the ownership, occupancy, use or transferability of such Real Property by the
Borrower or any of its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by the Borrower or any of its Subsidiaries where such generation, use,
treatment or storage has violated or could reasonably be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any Real Property owned or operated by the Borrower or any of its
Subsidiaries where such Release has violated or could reasonably be expected to
violate any applicable Environmental Law. Except as set forth on Schedule III,
there are not now any underground storage tanks located on any Real Property
owned or operated by the Borrower or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 7.18,
the representations made in this Section 7.18 shall only be untrue if the
aggregate effect of all failures and noncompliances of the types described above
could reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower or of the Borrower and its Subsidiaries taken as a
whole.
7.19 LABOR RELATIONS. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a material adverse effect on the Borrower or on the Borrower
and its Subsidiaries taken at whole. There is (i) no significant unfair labor
practice complaint pending against the Borrower or any of its Sub sidiaries or,
to the best knowledge of the Borrower, threatened against any of them, before
the National Labor Relations Board, and no significant grievance or significant
arbitration pro ceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Sub sidiaries or, to
the best knowledge of the Borrower, threatened
<PAGE>
against any of them, (ii) no significant strike, labor dispute, slowdown or
stoppage pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threat ened against the Borrower or any of its
Subsidiaries, and (iii) to the best knowledge of the Borrower, no union
representation question existing with respect to the employees of the Borrower
or any of its Subsidiaries, except (with respect to any matter specified in
clause (i), (ii) or (iii) above, either individu ally or in the aggregate) such
as could not reasonably be ex pected to have a material adverse effect on the
business, op erations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
7.20 PATENTS, LICENSES, FRANCHISES AND FORMULAS. Each of the
Borrower and its Subsidiaries owns all the patents, trademarks, permits, service
marks, trade names, copyrights, licenses, franchises and formulas, or rights
with respect to the foregoing, and has obtained assignments of all leases and
other rights of whatever nature, necessary for the present conduct of its
business, without any known conflict with the rights of others which, or the
failure to obtain which, as the case may be, would result in a material adverse
effect on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower or of the Borrower and its
Subsidiaries taken as a whole.
7.21 INDEBTEDNESS. Schedule IV sets forth a true and complete list
of all Indebtedness of the Borrower and its Subsidiaries as of the Initial
Borrowing Date and which is to remain outstanding after giving effect thereto
(excluding the Loans, the "Existing Indebtedness"), in each case showing the
aggregate principal amount thereof and the name of the respec tive borrower and
any other entity which directly or indirectly guaranteed such debt.
7.22 REORGANIZATION PLAN. At the time of consumma tion of the
transactions contemplated in the Credit Documents, the Reorganization Plan
Effective Date shall have occurred. At the time of consummation thereof, all
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all courts, governmental agencies, authorities or
instrumentalities required in order to make or consummate the transactions
contemplated in the Reorganization Plan have been obtained, given, filed or
taken and are or will be in full force and effect (or effective judicial relief
with respect thereto has been obtained). All applicable waiting periods with
respect thereto have or, prior to the time when required, will have, expired
without, in all such cases, any action being taken by any competent authority
which restrains, prevents, or imposes material adverse conditions upon the
transactions contemplated in the Reorganization Plan. Additionally, there does
not exist any judgment, order or injunction prohibiting or imposing material
adverse conditions upon the transactions contemplated
<PAGE>
in the Reorganization Plan, or the occurrence of any Credit Event or the
performance by the Borrower of its obligations under the Credit Documents. All
actions taken by the Borrower pursuant to or in furtherance of the consummation
of the transactions contemplated in the Reorganization Plan have been taken in
compliance with the Credit Documents, the Reorga nization Plan and all
applicable laws.
7.23 INDEBTEDNESS OF HOLDINGS AND ITS NON-ITHACA SUBSIDIARIES.
Except as set forth in the Intercompany Compro mise and Settlement Agreement,
neither the Borrower nor any Subsidiary of the Borrower is liable for any
Indebtedness or other obligations of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due) of Holdings or any of
its Non-Ithaca Subsidiaries.
7.24 ACKNOWLEDGMENT OF OBLIGATIONS; NO CLAIMS. As of the Initial
Borrowing Date, the Borrower is truly and justly indebted to the other parties
to this Agreement for the payment of the Obligations owing to each such party,
without defense, reduction, offset, counterclaim or cause of action of any kind
whatsoever.
7.25 TERM LOANS. Immediately after giving effect to the repayment
and reduction of Term Loans pursuant to Section 1.02, the outstanding principal
amount of Term Loans is $55,000,000.
SECTION 8. AFFIRMATIVE COVENANTS. The Borrower cov enants and agrees
that on and after the Effective Date and until the Total Commitments and all
Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings,
together with interest, Fees and all other obligations incurred hereunder,
thereunder and under the other Credit Documents, are paid in full:
8.1 INFORMATION COVENANTS. The Borrower will furnish to each Bank:
(a) MONTHLY REPORTS. Within 45 days after the end of each fiscal
month of the Borrower, the consolidated balance sheets of the Borrower and
its Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of income and retained earnings and statement of
cash flows for such month and for the elapsed portion of the fiscal year
ended with the last day of such month, in each case setting forth
comparative figures for the corresponding month in the prior fiscal year
and the budgeted figures for such month as set forth in the re spective
budget delivered pursuant to Section 8.01(e).
(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close
of the first three quarterly accounting periods in each fiscal year of the
Borrower, the consoli dated balance sheets of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly period and the
related (x) consolidated statements of income (categorized by business
segment) and retained earnings and (y)
<PAGE>
consolidated statement of cash flows, in each case for such quarterly
period and for the elapsed portion of the fiscal year ended with the last
day of such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year, all of which
shall be certified by the chief financial officer of the Borrower, subject
to normal year-end audit adjustments.
(c) ANNUAL FINANCIAL STATEMENTS. Within 100 days after the close of
each fiscal year of the Borrower, the consolidated balance sheets of the
Borrower and its Con solidated Subsidiaries as at the end of such fiscal
year and the related consolidated statements of income (catego rized by
business segment) and retained earnings and statement of cash flows for
such fiscal year setting forth comparative figures for the preceding
fiscal year and (other than as to such categorization by business segment)
certified by independent certified public accountants of recognized
national standing reasonably acceptable to the Required Banks, together
with a report of such accounting firm stating that in the course of its
regular audit of the financial statements of the Borrower, which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm obtained no knowledge of any Default or Event of Default
which has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(d) MANAGEMENT LETTERS. Promptly after the Borrower's receipt
thereof, a copy of any "management letter" received by the Borrower from
its certified public accountants and the management's responses thereto.
(e) BUDGETS. No later than 30 days prior to the commencement of the
first day of each fiscal year of the Borrower, a budget in form
satisfactory to the Required Banks (including budgeted statements of
income and sources and uses of cash and balance sheets and a projection of
the peak inventory amount for the first fiscal year covered by each such
budget) prepared by the Borrower for (x) each of the twelve months of such
fiscal year prepared in detail and (y) each of the two years immediately
following such fiscal year prepared in summary form, in each case, of the
Borrower and its Subsidiaries, accompanied by the statement of the chief
financial officer of the Borrower to the effect that, to the best of his
knowledge, the budget is a reasonable estimate for the period covered
thereby; PROVIDED, HOWEVER, that for the fiscal year ended closest to
January 31, 1998, the Borrower shall furnish such budget no later than
February 1, 1997.
(f) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section
<PAGE>
8.01(b) and (c), a certificate of the chief financial of ficer of the
Borrower to the effect that, to the best of his knowledge, no Default or
Event of Default has occurred and is continuing or, if any Default or
Event of Default has occurred and is continuing, specifying the nature and
extent thereof, which certificate shall (x) set forth the calculations
required to establish whether the Borrower was in compliance with the
provisions of Sections 4.02(f) and (g) (but with respect to Section
4.02(g) only to the extent delivered with the financial statements
required by Section 8.01(c)), 9.04, 9.05, 9.06 and 9.08 through 9.11,
inclusive, at the end of such fiscal quarter or year, as the case may be
and (y) if delivered with the financial statements required by Section
8.01(c), set forth the amount of Excess Cash Flow for the respective
Excess Cash Payment Period.
(g) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within ten Business Days (or three Business Days in the case of clause (i)
below) after an officer of the Borrower obtains knowledge thereof, notice
of (i) the occurrence of any event which constitutes a Default or Event of
Default and (ii) any litigation or governmental investigation or
proceeding pending (x) against the Bor rower or any of its Subsidiaries
which could reasonably be expected to materially and adversely affect the
business, operations, property, assets, liabilities, condition (fi nancial
or otherwise) or prospects of the Borrower or any of its Subsidiaries, (y)
with respect to any material In debtedness of the Borrower or any of its
Subsidiaries, or (z) with respect to any Credit Document.
(h) OTHER REPORTS AND FILING. Promptly, copies of all financial
information, proxy materials and other in formation and reports, if any,
which the Borrower or any of its Subsidiaries shall file with the
Securities and Exchange Commission or any successor thereto (the "SEC") or
deliver to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other
representative therefor).
(i) ENVIRONMENTAL MATTERS. Promptly upon, and in any event within
ten Business Days after, an officer of the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of one or more of the
following environ mental matters, unless such environmental matters could
not, individually or when aggregated with all other such environmental
matters, be reasonably expected to materially and adversely affect the
business, operations, property, assets, liabilities, condition (financial
or otherwise) or prospects of the Borrower or of the Borrower and its
Subsidiaries taken as a whole: (i) any pending or threatened Environmental
Claim against the Borrower or any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries; (ii) any con
dition or occurrence on or arising from any Real Property owned or
operated by the Borrower or any of its Subsidiar ies that (a) results in
noncompliance by the Borrower or
<PAGE>
any of its Subsidiaries with any applicable Environmental Law or (b) could
reasonably be expected to form the basis of an Environmental Claim against
the Borrower or any of its Subsidiaries or any such Real Property; (iii)
any con dition or occurrence on any Real Property owned or operated by the
Borrower or any of its Subsidiaries that could reasonably be expected to
cause such Real Property to be subject to any restrictions on the
ownership, occupancy, use or transferability by the Borrower or any of its
Sub sidiaries of such Real Property under any Environmental Law; and (iv)
the taking of any removal or remedial action in response to the actual or
alleged presence of any Haz ardous Material on any Real Property owned or
operated by the Borrower or any of its Subsidiaries as required by any
Environmental Law or any governmental or other administra tive agency,
PROVIDED that in any event the Borrower shall deliver to each Bank all
notices received by the Borrower or any of its Subsidiaries from any
government or govern mental agency under, or pursuant to, CERCLA. All such
notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and the
Borrower's or such Subsidiary's response thereto. In addition, the
Borrower will provide the Banks with copies of all communications with any
gov ernment or governmental agency relating to Environmental Laws, all
communications with any person relating to Envi ronmental Claims, and such
detailed reports of any Envi ronmental Claim as may reasonably be
requested by the Banks.
(j) ANNUAL MEETINGS WITH BANKS. Within 150 days after the close of
each fiscal year of the Borrower, the Borrower shall hold a meeting with
all of the Banks at which meeting shall be reviewed the financial results
of the previous fiscal year and the financial condition of the Borrower
and the budgets presented for the current fiscal year of the Borrower.
(k) BORROWING BASE CERTIFICATES, ETC. On the Initial Borrowing Date
and, to the best extent practicable, not later than 10:00 a.m. (New York
time) on the twentieth Business Day of each month from and after the
Initial Borrowing Date, but in no event later than the date of delivery of
the monthly reports required by Section 8.01(a), a borrowing base
certificate in the form of Exhi bit M (each a "Borrowing Base
Certificate") which shall be prepared as of November 1, 1996 (in the case
of the first such certificate) or as of the last Business Day of the
preceding fiscal month (in the case of subsequent certifi cates) and
certified by the chief financial officer of the Borrower. Such Borrowing
Base Certificate shall include (i) a breakdown of inventory showing the
amounts thereof comprising work in process, raw material and finished
goods
<PAGE>
and (ii) such other information pertaining thereto as any
Bank may reasonably request.
(l) On the second Business Day of each week from and after the
Initial Borrowing Date through and including the week ended January 31,
1997 (the "Delivery Day"), (w) pro jections showing (on a daily basis for
such week and the immediately succeeding week, and on a weekly basis there
after) anticipated cash receipts and disbursements, Re volving Loans,
Swingline Loans and Letter of Credit Out standings for the four-week
period commencing on the Busi ness Day immediately preceding the Delivery
Day, (x) a statement of such information on a historical basis for the
immediately preceding week, (y) a statement of the Borrower's and its
Subsidiaries' outstanding accounts re ceivable and, to the best extent
practicable, accounts payable, in each case as of the end of the
immediately preceding week, and all reserves applicable to such ac counts
receivable, together with an aging report on such accounts receivable and,
to the best extent practicable, accounts payable and (z) such other
information pertaining to any of the foregoing as any Bank may reasonably
request.
(m) On the second Business Day of each month from and after February
1997, (w) projections showing (on a weekly basis) anticipated cash
receipts and disbursements, Revolving Loans, Swingline Loans and Letter of
Credit Out standings for such month, (x) a statement of such informa tion
on a historical basis for the immediately preceding month, (y) a statement
of the Borrower's and its Subsid iaries' outstanding accounts receivable
and, to the best extent practicable, accounts payable, in each case as of
the end of the immediately preceding month, and all re serves applicable
to such accounts receivable, together with an aging report on such
accounts receivable and, to the best extent practicable, accounts payable
and (z) such other information pertaining to any of the foregoing as any
Bank may reasonably request.
(n) To the best extent practicable, on the twentieth Business Day of
each month from and after the Initial Bor rowing Date, but in no event
later than the date of deliv ery of the monthly reports required by
Section 8.01(a), (x) a breakdown reflecting (aa) the Borrower's and its
Subsidiaries' inventory by location as of the end of such month, (bb) the
Borrower's and its Subsidiaries' ten larg est accounts payable by payee,
(cc) the Borrower's and its Subsidiaries' overhead expenditures by
category and (dd) a preliminary estimate of Consolidated EBITDA and (y) a
cer tificate of the Chief Financial Officer of the Borrower describing in
reasonable detail the Borrower's progress in selling the "assets held for
disposition" as described in the Business Plan and the net book value and
sales prices of the assets sold.
(o) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) with
<PAGE>
respect to the Borrower or its Subsidiaries as any Bank may
reasonably request.
8.2 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries in conformity with generally accepted
accounting prin ciples and all requirements of law shall be made of all dealings
and transactions in relation to its business and activities. The Borrower will,
and will cause each of its Subsidiaries to, permit officers and designated
representatives of the Agent or any Bank to visit and inspect, under guidance of
officers of the Borrower or such Subsidiary, any of the properties of the
Borrower or such Subsidiary, and to examine the books of account of the Borrower
or such Subsidiary and discuss the affairs, finances and accounts of the
Borrower or such Subsidiary with, and be advised as to the same by, its and
their officers, all at such reasonable times and intervals and to such
reasonable extent as the Agent or such Bank may request.
8.3 MAINTENANCE OF PROPERTY; INSURANCE. (a) Schedule V sets forth a
true and complete listing of all insur ance maintained by the Borrower and its
Subsidiaries as of the Effective Date. The Borrower will, and will cause each of
its Subsidiaries to, (i) keep all property necessary in its business in good
working order and condition, (ii) maintain insurance on all its property in at
least such amounts and against at least such risks as is consistent and in
accordance with industry practice, provided that with respect to each Mortgaged
Property, such insurance shall be maintained in such amounts as are set forth
opposite each such Mortgaged Property on Schedule II, (iii) maintain, to the
extent available, on a nonrated basis by reputable insurers, policies of key-man
life insurance of $10,000,000 on Mr. Jim D. Waller (and $5,000,000 on each chief
executive officer of the Borrower subsequent to Mr. Waller) which policies shall
be assigned to the Collateral Agent as collateral security for the obligations
of the Borrower hereunder, and (iv) furnish to each Bank, upon written request,
full information as to the insurance carried. At any time that insurance at
levels described on Schedule V is not being maintained by the Borrower or any
Subsidiary of the Borrower, the Borrower will notify the Banks in writing within
three Business Days thereof and, if thereafter notified by the Required Banks to
do so, the Borrower or any such Subsidiary, as the case may be, shall obtain
insurance at such levels at least equal to those set forth on Schedule V to the
extent then generally available.
(b) The Borrower will at all times keep its property insured in
favor of the Collateral Agent, and all policies (in cluding Mortgage Policies)
or certificates (or certified copies thereof) with respect to such insurance
(and any other insurance maintained by the Borrower) (i) shall be endorsed to
the Collateral Agent's satisfaction for the benefit of the Col lateral Agent
(including, without limitation, by naming the Collateral Agent as loss payee or
as an additional insured), (ii) shall state that such insurance policies shall
not be can celled or revised without 30 days' prior written notice thereof by
the respective insurer to the Collateral Agent, (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Secured Creditors, (iv) shall contain
the standard non contributory mortgagee clause endorsement in favor of the Col
lateral Agent with respect to hazard insurance coverage, (v) shall, except in
the case of public liability insurance and workers' compensation insurance,
provide that any losses shall be payable notwithstanding (A) any act or neglect
of the Bor rower or any of its Subsidiaries, (B) the occupation or use of the
properties for purposes more hazardous than those permitted by the terms of the
respective policy if such coverage is ob tainable at commercially reasonable
rates and is of the kind from time to time customarily insured against by
Persons owning or using similar property and in such amounts as are customary,
(C) any foreclosure or other proceeding relating to the insured properties, or
(D) any change in the title to or ownership or possession of the insured
properties, and (vi) shall be depos ited with the Collateral Agent. If the
Borrower shall fail to insure its property in accordance with this Section 8.03,
or if the Borrower shall fail so to endorse and deposit all policies or
certificates with respect thereto, the Collateral Agent shall have the right
(but shall be under no obligation) to procure such insurance and the Borrower
agrees to reimburse the Collateral Agent for all costs and expenses of procuring
such insurance.
8.4 CORPORATE FRANCHISES. The Borrower will, and will cause each of
its Subsidiaries to, do or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises, li censes and patents; PROVIDED, HOWEVER, that nothing in this
Section 8.04 shall prevent (i) sales of assets by the Borrower or any of its
Subsidiaries in accordance with Section 9.02, (ii) the withdrawal by the
Borrower or any of its Subsidiaries of its qualification as a foreign
corporation in any jurisdiction where such withdrawal could not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower or of the Borrower and its Subsidiaries taken as a whole, or
(iii) the taking of any action respecting any right, franchise, license or
patent determined by the board of directors of the Borrower to be in the best
interest of the Borrower or any of its Subsidiaries.
8.5 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
authorities or bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such noncompliances as could
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, liabilities,
condition
<PAGE>
(financial or otherwise) or prospects of the Borrower or of the
Borrower and its Subsidiaries taken as a whole.
8.6 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) The Borrower will
comply, and will cause each of its Subsidiaries to comply, in all material
respects with all Environmental Laws applicable to ownership or use of its Real
Property now or hereafter owned or operated by the Borrower or any of its Sub
sidiaries, will promptly pay or cause to be paid all costs and expenses incurred
in such compliance, and will keep or cause to be kept all such Real Property
free and clear of any Liens im posed pursuant to such Environmental Laws.
Neither the Borrower nor any of its Subsidiaries will generate, use, treat,
store, release or dispose of, or permit the generation, use, treatment, storage,
release or disposal of Hazardous Materials on any Real Property now or hereafter
owned or operated by the Borrower or any of its Subsidiaries, or transport or
permit the transportation of Hazardous Materials to or from any such Real
Property except for Hazardous Materials used or stored at any such Real
Properties in material compliance with all applicable Environmental Laws and
reasonably required in connection with the operation, use and maintenance of any
such Real Property.
(b) At the written request of the Agent or the Re quired Banks,
which request shall specify in reasonable detail the basis therefor, at any time
and from time to time, the Bor rower will provide, at the Borrower's sole cost
and expense, an environmental site assessment report concerning any Real Prop
erty, prepared by an environmental consulting firm approved by the Required
Banks, indicating the presence or absence of Haz ardous Materials and the
potential cost of any removal or reme dial action in connection with any
Hazardous Materials on such Real Property, PROVIDED that in no event shall such
request be made more often than once every two years for any particular Real
Property unless either (i) the Obligations have been de clared due and payable
pursuant to Section 10 or (ii) the Banks receive notice under Section 8.01(i) of
any event for which notice is required to be delivered for any such Real
Property. If the Borrower fails to provide the same ninety (90) days after such
request was made, the Agent may order the same, and the Borrower shall grant and
hereby grants to the Agent and the Banks and their agents access to such Real
Property and spe cifically grants the Agent and the Banks an irrevocable nonex
clusive license, subject to the rights of tenants, to undertake such an
assessment, all at the Borrower's expense.
8.7 ERISA. As soon as possible and, in any event, within 10 days
after the Borrower or any Subsidiary of the Bor rower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following, the
Borrower will deliver to each of the Banks a certificate of the chief financial
officer of the Borrower setting forth details as to such occurrence and the
action, if any, which the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with
<PAGE>
any notices required or proposed to be given to or filed with or by the
Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or
the Plan administrator with respect thereto: that a Reportable Event has
occurred, that an accumulated funding deficiency has been incurred or an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan, that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA, that a Plan has an Unfunded Current Liability giving rise to a lien under
ERISA or the Code (other than pursuant to Section 4204 of ERISA), that
proceedings may be or have been instituted to terminate a Plan, that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan, or that the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate will or may incur any liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069 or 4201 of ERISA or,
except as disclosed on Schedule VI, under Section 4204 of ERISA, or with respect
to a Plan under Section 4971 or 4975 of the Code or Section 409 or 502(i) or
502(l) of ERISA. The Borrower will deliver to each of the Banks a complete copy
of the annual report (Form 5500) of each Plan required to be filed with the
Internal Revenue Service (other than any Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA). In addition to any certificates or
notices delivered to the Banks pursuant to the first sentence hereof, copies of
annual reports and any notices received by the Borrower or any Subsidiary of the
Borrower or any ERISA Affiliate with respect to any Plan shall be delivered to
the Banks no later than 10 days after the later of the date such report or
notice has been filed with the Internal Revenue Service or received by the
Borrower or the Subsidiary or the ERISA Affiliate.
8.8 END OF FISCAL YEARS; FISCAL QUARTERS. The Bor rower shall cause
(i) each of its, and each of its Subsidiar ies', fiscal years to end on the
Saturday closest to January 31, and (ii) each of its, and each of its
Subsidiaries', fiscal quarters to end on the Saturday closest to April 30, July
31, October 31 and January 31.
8.9 PERFORMANCE OF OBLIGATIONS. The Borrower will, and will cause
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, indenture, secu rity agreement and other debt instrument by which
it is bound, except such nonperformances as could not in the aggregate have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsid iaries taken as a whole.
8.10 PAYMENT OF TAXES. The Borrower will pay and discharge or cause
to be paid and discharged, and will cause each of its Subsidiaries to pay and
discharge, all taxes, as sessments and governmental charges or levies imposed
upon it or
<PAGE>
upon its income or profits, or upon any properties belonging to it, in each case
on a timely basis, and all lawful claims which, if unpaid, might become a lien
or charge upon any properties of the Borrower or any of its Subsidiaries;
PROVIDED that neither the Borrower nor any of its Subsidiaries shall be required
to pay any such tax, assessment, charge, levy or claim which is being contested
in good faith and by proper proceedings if it has maintained adequate reserves
with respect thereto in accordance with generally accepted accounting
principles.
8.11 INTEREST RATE PROTECTION. The Borrower shall no later than 45
days following the Initial Borrowing Date enter into Interest Rate Protection
Agreements acceptable to the Agent establishing a fixed or maximum interest rate
acceptable to the Agent for an aggregate amount equal to at least $45,000,000
notional principal amount for (i) an initial period of at least eighteen months
and (ii) thereafter for a period expiring on or after the Final Maturity Date.
8.12 REGISTRY. The Borrower hereby covenants that it shall maintain
a register on which it will record the Com mitments from time to time of each of
the Banks, the Loans made by each of the Banks and each repayment in respect of
the prin cipal amount of the Loans of each Bank. Failure to make any such
recordation, or any error in such recordation shall not affect the Borrower's
obligations in respect of such Loans. Upon the written request of the Borrower,
the Agent hereby agrees to use its reasonable efforts to provide to the Borrower
such information, not otherwise available to the Borrower, as the Borrower shall
reasonably request from time to time in order to enable it to fulfill its
obligations pursuant to this Section 8.12 and the Borrower shall have no
obligation to make any such recordation until it receives such requested
information from the Agent. Without limiting the Borrower's obligations
hereunder, the Borrower shall indemnify any Bank described in Section
4.04(b)(iii) or (iv) for any losses (including withholding of Taxes required)
arising as a result of the Borrower's failure to comply with this Section 8.12.
With re spect to any Bank described in Section 4.04(b)(iii) or (iv), (a) the
transfer of the Commitments of such Bank and the rights to the principal of, and
interest on, any Loan made pursuant to such Commitments shall not be effective
until such transfer is recorded on the register maintained by the Borrower with
respect to ownership of such Commitments and Loans and prior to such recordation
all amounts owing to the transferor with respect to such Commitments and Loans
shall remain owing to the transferor and (b) the Borrower shall immediately
record all such transfers when notified thereof by the transferor Bank and such
transfer shall be made only through (x) the surrender of a Note and the
reissuance of such Note by the Borrower to the new holder of the old Note or the
issuance by the Borrower of a new Note to the new holder (the "Issuance System")
or (y) a register maintained by the Borrower and referred to in the first
sentence of this Section (the "Book Entry System"). The Borrower agrees to
<PAGE>
indemnify any transferee Bank from and against any and all losses, claims,
damages and liabilities (including, without limitation, any amounts paid by the
transferee to the transferor in connection with the transfer and all amounts
which would otherwise be owing to the transferee if the transfer had been
properly recorded) resulting from the Borrower's failure to record any such
transfer through either the Issuance System or the Book Entry System.
8.13 ACCOUNTS. The Borrower will, and will cause its
Subsidiaries to:
(a) Except for deposit and other bank accounts at the institutions set
forth on Schedule VII ("Excepted Ac counts"), maintain all of their respective
active deposit and other bank accounts ("Accounts") (x) as collateral accounts
(collectively, the "Collateral Account") at (aa) the offices of the Original
Cash Collateral Agent pursuant to the Original Cash Collateral Agreement until
the Origi nal Cash Collateral Agreement is terminated pursuant to Section 8.14
and (bb) thereafter at the offices of the Successor Cash Collateral Agent
pursuant to the Successor Cash Collateral Agreement and/or (y) as collateral
accounts at one or more other commercial banks reasonably acceptable to the
Required Banks (such other commercial banks, collectively, an "Alternative
Bank"), and in the event that such deposits shall be maintained at any such
other Alternative Bank, the Borrower shall have conveyed to such Alternative
Bank for the ratable benefit of the Secured Creditors, a lien on and security
interest in such Accounts and the funds and other property therein, pursuant to
agreements in form and substance reasonably satisfactory to the Required Banks;
PROVIDED, HOWEVER, that the Borrower shall (x) not maintain balances in (aa) the
Excepted Accounts and Transferred Accounts in excess of $600,000 in the
aggregate at any one time and (bb) an Excepted Account or Transferred Account in
any amount unless the Local Bank or the bank holding the Transferred Account, as
applicable, shall have executed and delivered, with respect thereto, a letter
agreement (executed by the Borrower and the Original Cash Collateral Agent or
Successor Cash Collateral Agent) in the form of Exhibit N hereto (a "Letter
Agreement"), PROVIDED that (xx) with respect to Excepted Accounts other than the
two Accounts identified on Schedule VII as being located in Honduras (the
"Honduras Accounts"), this clause (x)(bb) shall apply only to Excepted Accounts
having $25,000 or more on deposit at any time from and after the Initial
Borrowing Date, (yy) with respect to the Honduras Accounts, the Borrower and its
Subsidiaries shall not maintain balances in such Accounts in excess of $200,000
in the aggregate for more than two consecutive Business Days and (zz)
notwithstanding the foregoing, the Borrower may (xxx) maintain balances in its
Local Payroll Account not to exceed $2,500,000 at any one time, so long as the
Borrower, the Local Payroll Bank and the Original Cash Collateral Agent or
Successor Cash Collateral Agent shall have executed and delivered a Letter
Agreement with respect thereto and (yyy) exceed the limit established in clause
<PAGE>
(yy) above for its Honduras Accounts by $1,500,000 for up to five consecutive
days during June and December of each year in order to make extra payroll and
other benefits payments in accordance with the customs and practice for the
Borrower's Honduran operations, and (y) take any other action with respect
thereto reasonably requested by the Agent, the Co-Agent or the Cash Collateral
Agent; PROVIDED, FURTHER, that (xxx) so long as an Event of Default has occurred
and is continuing, the Cash Collateral Agent may deliver the written
instructions referred to in the Letter Agreement directing that the funds and
other property in the Excepted Accounts or Transferred Accounts be paid to the
Cash Collateral Agent, which funds shall then be distributed or otherwise dealt
with in accordance with the terms of the Cash Collateral Agreement and the
Security Agreement and (yyy) nothing herein shall be deemed to prohibit the
Borrower from, at its option at any time, terminating an Excepted Account or
Transferred Account and transferring the funds therein to the Collateral Account
or another account held or maintained by a commercial bank (a "Transferred
Account") with respect to which a Letter Agreement has been executed and
delivered; and
(b) Deposit cash receipts into, and make cash dis bursements out of, the
Accounts and (subject to the limi tation on balances set forth in clause (x) to
the first proviso in subparagraph (a) above) the Excepted Accounts and
Transferred Accounts, in each case in the ordinary course of business.
8.14 SUCCESSOR CASH COLLATERAL AGREEMENT. No later than 60 days
following the Initial Borrowing Date, the Borrower shall (a) terminate the
Original Cash Collateral Agreement, (b) duly authorize, execute and deliver the
Successor Cash Col lateral Agreement, (c) transfer all Collateral Accounts to
the Successor Cash Collateral Agent and (d) to the extent necessary or
appropriate in the reasonable judgment of the Agent and the Co-Agent, procure a
written modification (in form and substance reasonably satisfactory to the Agent
and the Co-Agent) to each Letter Agreement reflecting the foregoing.
SECTION 9. NEGATIVE COVENANTS. The Borrower cov enants and agrees
that on and after the Effective Date and until the Total Commitments and all
Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings,
together with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full:
9.1 LIENS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
the Borrower or any of its Subsidiaries, whether now owned or here after
acquired, or sell any such property or assets subject to
<PAGE>
an understanding or agreement, contingent or otherwise, to re purchase such
property or assets (including sales of accounts receivable with recourse to the
Borrower or any of its Subsid iaries), or assign any right to receive income or
permit the filing of any financing statement under the UCC or any other similar
notice of Lien under any similar recording or notice statute; PROVIDED that the
provisions of this Section 9.01 shall not prevent the creation, incurrence,
assumption or existence of the following (liens described below are herein
referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or govern mental charges or
levies not yet due or Liens for taxes, assessments or governmental charges or
levies being con tested in good faith and by appropriate proceedings for which
adequate reserves have been established in accordance with generally accepted
accounting principles;
(ii) Liens in respect of property or assets of the Borrower or any of its
Subsidiaries imposed by law, which were incurred in the ordinary course of
business and do not secure Indebtedness for borrowed money, such as carriers',
warehousemen's, materialmen's and mechanics' liens and other similar Liens
arising in the ordinary course of business, and (x) which do not in the
aggregate materially detract from the value of the Borrower's or such Subsid
iary's property or assets or materially impair the use thereof in the operation
of the business of the Borrower or such Subsidiary or (y) which are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves have been established, which proceed ings have the effect of preventing
the forfeiture or sale of the property or assets subject to any such Lien;
(iii) Liens in existence on the Effective Date which are listed, and the
property subject thereto described, in Schedule VIII, but only to the respective
date, if any, set forth in such Schedule VIII for the removal and termination of
any such Liens, plus renewals and extensions of such Liens to the extent set
forth on Schedule VIII, PROVIDED that (x) the aggregate principal amount of the
In debtedness, if any, secured by such Liens is not in excess of $150,000 and
(y) any such renewals or extensions do not encumber any additional assets or
properties of the Bor rower or any of its Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to the Security Documents;
(vi) leases or subleases granted to other Persons not materially
interfering with the conduct of the business of the Borrower and its
Subsidiaries taken as a whole, so long as such leases or subleases are otherwise
permitted by Section 9.02;
(vii) Liens upon assets subject to Capitalized Lease Obligations to the
extent permitted by Section 9.08, pro vided that (x) the amount of such
Capitalized Lease Obli gations incurred in any one fiscal year, together with
the aggregate principal amount of all Indebtedness incurred in such fiscal year
and secured by Liens permitted by clause (viii) of this Section 9.01, shall not
exceed that ag gregate amount permitted by Section 9.05(v), (y) such Liens only
serve to secure the payment of Indebtedness arising under such Capitalized Lease
Obligation and (z) the Lien encumbering the asset giving rise to the Capitalized
Lease Obligation does not encumber any other asset of the Borrower or any
Subsidiary of the Borrower;
(viii) Liens placed upon (i) equipment or machinery used in the ordinary
course of business of the Borrower or any of its Subsidiaries or (ii) Real
Property of the Borrower or any of its Subsidiaries, in each case at the time of
acquisition thereof by the Borrower or any such Subsidiary or within 60 days
thereafter to secure Indebtedness incurred to pay all or a portion of the
purchase price thereof, PROVIDED that (x) the aggregate principal amount of all
Indebtedness secured by Liens permitted by this clause (viii) incurred in any
fiscal year, together with the amount of all Capitalized Lease Obligations
incurred in such year, does not exceed that aggregate amount permitted by
Section 9.05(v) and (y) in all events, the Lien encumbering the equipment,
machinery or Real Property so acquired does not encumber any other asset of the
Borrower or such Subsidiary;
(ix) easements, rights-of-way, restrictions, en croachments and other
similar charges or encumbrances, and minor title deficiencies, in each case not
securing In debtedness and not materially interfering with the conduct of the
business of the Borrower or any of its Subsidiaries;
(x) Liens arising from precautionary UCC financing statement filings
regarding operating leases, equipment under construction for the Borrower or any
of its Subsid iaries or equipment being used by the Borrower or any of its
Subsidiaries on a trial basis (and anticipated to be leased pursuant to an
operating lease, or purchased, by the Borrower or such Subsidiary);
(xi) Liens arising out of judgments or awards in re spect of which the
Borrower or any of its Subsidiaries shall in good faith be prosecuting an appeal
or proceedings for review in respect of which there shall have been secured a
subsisting stay of execution pending such appeal or proceedings, PROVIDED that
the aggregate amount of all such judgments or awards (and any cash and the fair
market value of any property subject to such Liens) does not ex ceed $1,000,000
at any time outstanding;
<PAGE>
(xii) statutory and common-law landlords' liens under leases to which the
Borrower or any of its Subsidiaries is a party;
(xiii) customary restrictions imposed by licensors of software or
trademarks on users thereof;
(xiv) interests of licensees and sublicensees in any trademarks or other
intellectual property license or sublicense by the Borrower or any of its
Subsidiaries; and
(xv) Liens arising from precautionary UCC financing statement filings
regarding sales of accounts receivable permitted under Section 9.02(x).
9.2 CONSOLIDATION, MERGER, PURCHASE OR SALE OF AS SETS, ETC. Except
as otherwise permitted in writing by the Supermajority Banks, the Borrower will
not, and will not permit any of its Subsidiaries to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolida tion,
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time unless such agreement is expressly conditioned upon
either (x) obtaining the written approval of the Banks in accordance with the re
quirements of Section 13.12 or (y) the repayment in full of all Obligations and
the termination of all Commitments) all or any part of its property or assets,
or enter into any sale-leaseback transactions, or purchase or otherwise acquire
(in one or a series of related transactions) any part of the property or assets
(other than purchases or other acquisitions of inventory, materials and
equipment in the ordinary course of business) of any Person, except that:
(i) Capital Expenditures by the Borrower and its
Subsidiaries shall be permitted to the extent not in vio
lation of Section 9.08;
(ii) each of the Borrower and its Subsidiaries may, in the ordinary
course of business, sell, lease or otherwise dispose of any assets which,
in the reasonable judgment of such Person, are no longer useful in the
conduct of such Person's business, PROVIDED that the aggregate Net Sale
Proceeds of all assets subject to sales or other dis positions shall not
exceed $500,000 in any fiscal year of the Borrower;
(iii) investments may be made to the extent permitted
by Section 9.06;
(iv) each of the Borrower and its Subsidiaries may lease (as lessee)
real or personal property to the extent permitted by Section 9.04 (so long
as any such lease does not create a Capitalized Lease Obligation);
(v) each of the Borrower and its Subsidiaries may
make sales of inventory in the ordinary course of business;
<PAGE>
(vi) each of the Borrower and its Subsidiaries may sell or otherwise
dispose of equipment and other assets (other than Real Property) at the
fair market value there of, PROVIDED that the proceeds thereof (x) shall
consist of at least 75% in cash and no more than 25% in promissory notes
and (y) do not exceed $50,000 in the aggregate for any single sale or
other disposition or series of related sales or other dispositions;
(vii) each of the Borrower and its Subsidiaries may sell or otherwise
dispose of equipment and other assets (other than Real Property) at the
fair market value thereof and in amounts in excess of those amounts
permitted pursuant to Section 9.02(vi), PROVIDED that the proceeds thereof
(x) shall consist of at least 75% in cash and no more than 25% in
promissory notes and (y) do not exceed $1,000,000 in the aggregate in any
fiscal year of the Bor rower;
(viii) the Borrower may enter into licensing agreements and make
related purchases of inventory in the ordinary course of business provided
that the aggregate amount of inventory so purchased in any fiscal year of
the Borrower does not exceed $1,000,000;
(ix) Dividends may be paid to the extent permitted by
Section 9.03; and
(x) the Borrower and its Subsidiaries may sell ac counts receivable
for cash pursuant to customary factoring arrangements in form and
substance reasonably satisfactory to the Agent; PROVIDED, HOWEVER, that
(i) the Borrower or such Subsidiary shall have determined in its
reasonable judgment that such sale is prudent in light of the finan cial
condition of the account debtor, (ii) the proceeds of each such sale shall
equal or exceed 98% of the face amount of the account receivable sold,
(iii) all such sales are on a non-recourse basis to the Borrower and its
Subsidiaries and (iv) the aggregate amount of all such sales does not
exceed $15,000,000 in any fiscal year of the Borrower.
To the extent the Supermajority Banks waive the provisions of this Section 9.02
with respect to the sale of any Collateral, or any Collateral is sold as
permitted by this Section 9.02, such Collateral shall be sold free and clear of
the Liens created by the Security Documents, and the Agent and Collateral Agent
shall be authorized to take any actions deemed appropriate in order to effect
the foregoing.
9.3 DIVIDENDS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, authorize, declare or pay any
Dividends with respect to the Borrower or any of its
Subsidiaries, except that any Subsidiary of the Borrower may pay
<PAGE>
Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower.
9.4 LEASES. The Borrower will not permit the ag gregate payments
(including, without limitation, any property taxes paid as additional rent or
lease payments) made by the Borrower and its Subsidiaries on a consolidated
basis under any agreement to rent or lease any real or personal property (or any
extension or renewal thereof) (excluding Capitalized Lease Obligations) to
exceed (x) for each of the fiscal years ending closest to January 31, 1997 and
January 31, 1998, $9,000,000 and (y) for each fiscal year thereafter, 110% of
the amount permitted for the immediately preceding fiscal year.
9.5 INDEBTEDNESS. Except as otherwise permitted in writing by the
Supermajority Banks, the Borrower will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement
and the other Credit Documents;
(ii) Existing Indebtedness shall be permitted to the extent the same
is listed on Schedule IV in an aggregate principal amount not in excess of
$150,000, PROVIDED that no refinancings or renewals thereof shall be
permitted;
(iii) accrued expenses and current trade accounts pay
able incurred in the ordinary course;
(iv) Indebtedness under Interest Rate Protection
Agreements entered into in compliance with Section 8.11;
and
(v) Indebtedness subject to Liens permitted under Section 9.01(viii)
or evidenced by Capitalized Lease Obli gations to the extent permitted
pursuant to Section 9.08, PROVIDED that in no event shall the aggregate
principal amount of such Indebtedness and Capitalized Lease Obliga tions
incurred in any fiscal year set forth below (PROVIDED that the first
period set forth below shall begin on the Effective Date and shall end on
the last day of the fiscal year ended closest to January 31, 1997) exceed
the amount set forth opposite such fiscal year below:
FISCAL YEAR ENDING CLOSEST TO AMOUNT
January 31, 1997 $500,000
January 31, 1998 $1,000,000
January 31, 1999 $1,500,000
January 31, 2000 $2,000,000
9.6 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not, and will
not permit any of its Subsidiaries to, di rectly or indirectly, lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures
<PAGE>
contract or otherwise become liable for the purchase or sale of currency or
other commodities at a future date in the nature of a futures contract, or enter
into swaps, options, repurchase agreements, caps, collars, floors or other
derivative transac tions with respect to interest rates (except as required by
Section 8.11), commodities, securities or other financial in struments, or hold
any cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold accounts
receivables owing to any of them, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary terms;
(ii) the Borrower and its Subsidiaries may acquire and hold cash and
Cash Equivalents, provided that during any time that Revolving Loans of
Non-Defaulting Banks or Swingline Loans are outstanding the aggregate
amount of cash and Cash Equivalents permitted to be held by the Bor rower
and its Subsidiaries shall not exceed $5,000,000 for any period of two
consecutive Business Days;
(iii) investments in capital stock or promissory notes resulting from
the conversion of uncollectible accounts receivable of the Borrower or any
of its Subsidiaries;
(iv) noncash consideration received by the Borrower or any of its
Subsidiaries in connection with any asset sale to the extent permitted by
Sections 9.02(vi) and (vii);
(v) the Borrower and its Subsidiaries may make ad ditional loans,
advances and other investments in partner ships, joint ventures and
similar investments with Persons that are not Affiliates of the Borrower
so long as the aggregate principal amount thereof at any time outstanding
(determined without regard to any write-downs or write-offs thereof) shall
not exceed $1,000,000; and
(vi) advances to or for the benefit of employees of the Borrower or
its Subsidiaries in an aggregate unpaid amount of $250,000 or less at any
time.
9.7 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower or any of its Subsidiaries, other than in the
ordinary course of business and on terms and conditions sub stantially as
favorable to the Borrower or such Subsidiary as would reasonably be obtained by
the Borrower or such Subsidiary at that time in a comparable arm's-length
transaction with a Person other than an Affiliate, except that (i) Dividends may
be paid to the extent provided in Section 9.03, (ii) loans may be made and other
transactions may be entered into by the Borrower
<PAGE>
to the extent permitted by Section 9.06 and (iii) the Borrower may consummate
the transactions contemplated by the Intercompany Compromise and Settlement
Agreement. Without limiting the foregoing, in no event shall any management or
similar fees be paid by the Borrower or any of its Subsidiaries to any Person,
except to Alvarez & Marsal, Inc. as the same has been disclosed to the Banks in
the Reorganization Plan (or as modified with the written agreement of the
Required Banks).
9.8 CAPITAL EXPENDITURES. The Borrower will not, and will not permit
any of its Subsidiaries to, make any Capital Expenditures, except that during
any fiscal year (taken as one accounting period) the Borrower and its
Subsidiaries may make Capital Expenditures so long as the aggregate amount of
such Capital Expenditures does not exceed $6,000,000 in such fiscal year.
Notwithstanding anything to the contrary contained in this Section 9.08, (A) the
Borrower and its Subsidiaries may make additional Capital Expenditures in any
fiscal year in an amount equal to the amount of insurance proceeds received by
the Borrower or any of its Subsidiaries from any Recovery Event occurring within
one year prior to the start of such fiscal year to the extent such proceeds are
not required to be applied by the Borrower as a mandatory repayment pursuant to
Section 4.02(h) and have not yet been applied to replace or restore properties
or assets as permitted by Section 4.02(h) and (B) to the extent that the amount
of Capital Expenditures permitted in a fiscal year as set forth in this Section
9.08 (and without increasing any such amount by the amount of any additional
amounts permitted to be spent in such fiscal year pursuant to this sentence)
exceeds the amount of Capital Expenditures actually made by the Borrower and its
Subsidiaries during such fiscal year, an amount (the "Rollover Amount") equal to
90% of such excess may be carried forward and utilized to make Capital
Expenditures in addition to the amount permitted above in the immediately
succeeding fiscal year; PROVIDED that no amount once carried forward to the next
fiscal year may be carried forward to a fiscal year thereafter.
9.9 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower will not
permit the Consolidated Fixed Charge Coverage Ratio for (a) the period
commencing February 3, 1996 and ending October 31, 1996, taken as one accounting
period, to be less that 0.8:1 and (b) each period of four consecutive fiscal
quar ters ending with the quarter set forth in column A below, taken as one
accounting period, to be less than the corresponding ratio set forth in column B
below:
A B
Fourth quarter 1997 0.8:1
First quarter 1998 0.85:1
Second quarter 1998 0.95:1
Third quarter 1998 0.95:1
Fourth quarter 1998
and each quarter thereafter
until August 31, 1999 1.0:1
<PAGE>
9.10 MINIMUM EBITDA. The Borrower will not permit Consolidated
EBITDA for (a) the period commencing February 3, 1996 and ending October 31,
1996, taken as one accounting pe riod, to be less than $14,700,000 and (b) each
period of four consecutive fiscal quarters ending with the quarter set forth in
column A below, taken as one accounting period, to be less than the
corresponding amount set forth in column B below:
A B
Fourth quarter 1997 $16,000,000
First quarter 1998 $16,500,000
Second quarter 1998 $19,100,000
Third quarter 1998 $21,300,000
Fourth quarter 1998 $24,000,000
First quarter 1999 $26,300,000
Second quarter 1999 $28,000,000
Third quarter 1999 $30,200,000
Fourth quarter 1999
and each quarter thereafter
until August 31, 1999 $31,500,000
9.11 CONSOLIDATED INTEREST COVERAGE RATIO. The Bor rower will not
permit the Consolidated Interest Coverage Ratio for (a) the period commencing
February 3, 1996 and ending Octo ber 31, 1996, taken as one accounting period,
to be less than 1.3:1 and (b) each period of four consecutive fiscal quarters
ending with the quarter set forth in column A below, taken as one accounting
period, to be less than the corresponding amount set forth in column B below:
A B
Fourth quarter 1997 1.3:1
First quarter 1998 1.4:1
Second quarter 1998 1.6:1
Third quarter 1998 1.8:1
Fourth quarter 1998 2.0:1
First quarter 1999 2.2:1
Second quarter 1999 2.4:1
Third quarter 1999 2.7:1
Fourth quarter 1999
and each quarter thereafter
until August 31, 1999 2.9:1
9.12 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICA TIONS OF
INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPO RATION, BY-LAWS AND
CERTAIN OTHER AGREEMENTS; ETC. The Borrower will not, and will not permit any of
its Subsidiaries to, (i) make (or give any notice in respect of) any voluntary
or optional payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of deposit ing with the trustee with
respect thereto money or securities before due for the purpose of paying when
due) any Existing
<PAGE>
Indebtedness, (ii) amend or modify, or permit the amendment or modification of,
any provision of the Existing Indebtedness or of any agreement (including,
without limitation, any purchase agreement, indenture, loan agreement or
security agreement) relating thereto, (iii) amend, modify or change its
Certificate of Incorporation (including, without limitation, by the filing or
modification of any certificate of designation) or By-Laws, or any agreement
entered into by it, with respect to its capital stock, or enter into any new
agreement with respect to its capital stock, (iv) amend, modify or change the
Intercompany Compromise and Settlement Agreement or any Employee Benefit Plan
(except, in the case of an Employee Benefit Plan, to the extent that such
amendment, modification or change does not impose liabilities, obligations or
costs on Borrower or any Subsidiary that could reasonably be expected to have a
material adverse effect on the business, operations, property, assets, condition
(financial or otherwise) of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
9.13 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSID IARIES. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any In debtedness owed to the Borrower or a Subsidiary
of the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries, or (c) transfer any of its properties or assets to the
Borrower, except for such encumbrances or re strictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) cus tomary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or a Sub sidiary of the
Borrower, and (iv) customary provisions re stricting assignment of any licensing
agreement entered into by the Borrower or a Subsidiary of the Borrower in the
ordinary course of business.
9.14 LIMITATION ON ISSUANCE OF CAPITAL STOCK. The Borrower shall not
permit any of its Subsidiaries to issue any capital stock (including by way of
sales of treasury stock) or any options or warrants to purchase, or securities
convertible into, capital stock, except (i) for transfers and replacements of
then outstanding shares of capital stock, (ii) for stock splits, stock dividends
and similar issuances which do not de crease the percentage ownership of the
Borrower or any of its Subsidiaries in any class of the capital stock of such
Subsid iary, and (iii) to qualify directors to the extent required by applicable
law.
9.15 BUSINESS. The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indi rectly) in any business other than the
business in which the Borrower is engaged on the Effective Date and any other
reason ably related businesses.
<PAGE>
9.16 LIMITATION ON CREATION OF SUBSIDIARIES AND EN TERING INTO
PARTNERSHIPS AND JOINT VENTURES. (a) The Borrower shall not, and shall not
permit any of its Subsidiaries to, establish, create or acquire any Subsidiary
without the prior written consent of the Required Banks. In connection with any
such consent, it is understood that the Required Banks may re quire that any
newly formed Subsidiary enter into a guaranty (a "Subsidiary Guaranty") and a
security agreement (a "Subsidiary Security Agreement") in each case, in form and
substance rea sonably satisfactory to the Agent, the Co-Agent and the Required
Banks. Notwithstanding the foregoing, the Borrower may create up to four Wholly
Owned Subsidiaries under the laws of Honduras so long as (i) the capital stock
thereof is at all times owned directly by the Borrower and (ii) no less than 65%
of the outstanding shares of such capital stock are pledged to the Collateral
Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement;
PROVIDED, HOWEVER, that if there is a change in any statute, law, rule or
regulation to the effect that the Borrower is able to pledge 66-2/3% or more of
the stock of such Subsidiaries to the Collateral Agent for the benefit of the
Secured Parties pursuant to the Pledge Agreement, and such Subsidiaries are able
to execute a Subsidiary Guaranty and Subsidiary Security Agreement, all without
the imposition of material adverse tax consequences on the Borrower or its
Subsidiaries taken as a whole, then the Borrower shall promptly effectuate such
pledge and such Subsidiaries shall promptly execute and deliver such Subsidiary
Guaranty and Subsidiary Security Agreement.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any partnerships or joint ventures except to the
extent permitted by Section 9.06(v).
SECTION 10. EVENTS OF DEFAULT. Upon the occurrence
of any of the following specified events (each an "Event of
Default"):
10.1 PAYMENTS. The Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for two or more Business Days, in the payment when due
of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any other
amounts owing hereunder or thereunder; or
10.2 REPRESENTATIONS, ETC. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in any
material re spect on the date as of which made or deemed made as provided in
Section 6; or
10.3 COVENANTS. The Borrower shall (i) default in
the due performance or observance by it of any term, covenant or
agreement contained in Section 8.01(g)(i), 8.08 or 9 or (ii)
<PAGE>
default in the due performance or observance by it of any other term, covenant
or agreement contained in this Agreement and, in the case of this clause (ii),
such default shall continue un remedied for a period of 30 days after written
notice to the Borrower by the Agent or any Bank; or
10.4 DEFAULT UNDER OTHER AGREEMENTS. The Borrower or any Subsidiary
of the Borrower shall (i) default in any payment of any Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity, or (iii) any
Indebtedness of the Borrower or any Subsidiary of the Borrower shall be declared
to be due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof, provided
that it shall not be a Default or Event of Default under this Section 10.04
unless the aggregate principal amount of all Indebtedness as described in
preceding clauses (i) through (iii), inclusive, is at least $500,000; or
10.5 BANKRUPTCY, ETC. The Borrower or any Subsidiary of the Borrower
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bank ruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Borrower or any Subsidiary of the Borrower, and the petition is not
controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or any Subsidiary of the Borrower, or the Borrower or, any
Subsidiary of the Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower or any Subsidiary of the Bor rower,
or there is commenced against the Borrower or any Sub sidiary of the Borrower
any such proceeding which remains un dismissed for a period of 60 days, or the
Borrower or any Sub sidiary of the Borrower is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any Subsidiary of the Borrower suffers
any appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
the Bor rower or any Subsidiary of the Borrower makes a general assign ment for
the benefit of creditors; or any corporate action is taken by the Borrower or
any Subsidiary of the Borrower for the purpose of effecting any of the
foregoing; or
<PAGE>
10.6 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amor tization period is sought or granted under Section 412
of the Code, any Plan is, shall have been or is likely to be terminated or the
subject of termination proceedings under ERISA, any Plan shall have an Unfunded
Current Liability, the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate has incurred or is likely to incur a liability to or on account of a
Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code, or the Borrower or any
Subsidiary of the Borrower has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(l) of ERISA) which provide benefits to retired employees (other than as
required by Section 601 of ERISA) or employee pension benefit plans (as defined
in Section 3(2) of ERISA); (b) there shall result from any such event or events
the imposition of a lien, the granting of a security interest, or a liability or
a material risk of incurring a liability; (c) which lien, security interest or
liability, in the opinion of the Required Banks, could reasonably be expected to
have a material adverse effect upon the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsidiaries taken as a whole; or
10.7 SECURITY DOCUMENTS. At any time after the execution and
delivery thereof, any of the Security Documents shall cease to be in full force
and effect, or shall cease to give the Collateral Agent for the benefit of the
Secured Credi tors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral), in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except as permitted by
Section 9.01), and subject to no other Liens (except as permitted by Section
9.01), or the Borrower or any Subsidiary shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any of the Security Documents and such default shall
continue beyond any grace period specifically applicable thereto pursuant to the
terms of such Security Document; or
10.8 JUDGMENTS. One or more judgments or decrees shall be entered
against the Borrower or any Subsidiary of the Borrower involving in the
aggregate for the Borrower and its Subsidiaries a liability (not paid or fully
covered by a repu table insurance company) and such judgments and decrees either
shall be final and nonappealable or shall not be vacated, dis charged or stayed
or bonded pending appeal for any period of 30 consecutive days, and the
aggregate amount of all such judgments exceeds $500,000; or
<PAGE>
10.9 CHANGE OF CONTROL. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent, the Col lateral Agent, the Original Cash
Collateral Agent (prior to the termination of the Original Cash Collateral
Agreement as set forth in Section 8.14) and the Successor Cash Collateral Agent,
as applicable, upon the written request of the Required Banks, shall by written
notice to the Borrower, take any or all of the following actions, without
prejudice to the rights of the Agent, any Bank or the holder of any Note to
enforce its claims against any Credit Party (provided, that, if an Event of
Default specified in Section 10.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the Agent to the
Borrower as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commit ments
terminated, whereupon all Commitments of each Bank shall forthwith terminate
immediately and any Commitment Commission shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and the Notes and all Obliga tions
owing hereunder and thereunder to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Credit Party; (iii) terminate any
Letter of Credit, which may be terminated, in accordance with its terms; (iv)
direct the Borrower to pay (and the Borrower agrees that upon receipt of such
notice, or upon the occurrence of an Event of Default specified in Section 10.05
with respect to the Borrower, it will pay) to the Collateral Agent at the
Payment Office such additional amount of cash, to be held as security by the
Collateral Agent, as is equal to the aggregate Stated Amount of all Letters of
Credit issued for the account of the Borrower and then outstanding; and (v)
enforce, as Collateral Agent, Original Cash Collateral Agent (prior to the
termination of the Original Cash Collateral Agreement as set forth in Section
8.14) or Successor Cash Collateral Agent, as applicable, all of the Liens and
security interests created pursuant to the Security Documents.
SECTION 11. DEFINITIONS AND ACCOUNTING TERMS.
11.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts" shall have the meaning provided in Section 8.13.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the
sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing
(x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled
<PAGE>
"Select Interest Rates," published weekly on Form H.15, as of the date hereof,
or if such publication or a substitute containing the foregoing rate information
shall not be published by the Federal Reserve System for any week, the weekly
average offering rate determined by the Agent on the basis of quotations for
such certificates received by it from three certificate of deposit dealers in
New York of recognized standing or, if such quotations are unavailable, then on
the basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Agent for determining the current annual assessment payable by
the Agent to the Federal Deposit Insurance Corporation for insuring three-month
certificates of deposit.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus the sum of the amount of all net
non-cash charges (including, without limitation, depreciation, amortization,
deferred tax expense and noncash interest expense) which were included in
arriving at Consolidated Net Income for such period less the sum of the amount
of all net noncash gains (exclusive of items reflected in Adjusted Consolidated
Working Capital) included in arriving at Consolidated Net Income for such
period, plus the sum of all gains arising from the reversal during such period
of restruc turing and other charges in respect of lines of business con
stituting discontinued businesses as of the Effective Date.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Li abilities.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Loan Commitment at such time by the Adjusted Total
Revolving Loan Commitment at such time, it being understood that all references
herein to Revolving Loan Commit ments and the Adjusted Total Revolving Loan
Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total
Revolving Loan Commitment, as the case may be, has been termi nated shall be
references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect immediately prior to such termination,
PROVIDED that (A) no Bank's Adjusted Percentage shall change upon the occurrence
of a Bank Default from that in effect immediately prior to such
<PAGE>
Bank Default if after giving effect to such Bank Default, and any repayment of
Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(a) or
otherwise, the sum of (i) the aggregate outstanding principal amount of
Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate outstanding
principal amount of Swingline Loans plus (iii) the Letter of Credit
Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted Percentage that would have become effective upon the
occurrence of a Bank Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks
plus (ii) the aggregate outstanding principal amount of the Swingline Loans plus
(iii) the Letter of Credit Outstandings is equal to or less than the Adjusted
Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted
Percentage is changed pursuant to the preceding clause (B) and (ii) any
repayment of such Bank's Revolving Loans, or of Unpaid Drawings with respect to
Letters of Credit or of Swingline Loans, that were made dur ing the period
commencing after the date of the relevant Bank Default and ending on the date of
such change to its Adjusted Percentage must be returned to the Borrower as a
preferential or similar payment in any bankruptcy or similar proceeding of the
Borrower, then the change to such Non-Defaulting Bank's Adjusted Percentage
effected pursuant to said clause (B) shall be reduced to that positive change,
if any, as would have been made to its Adjusted Percentage if (x) such
repayments had not been made and (y) the maximum change to its Adjusted
Percentage would have resulted in the sum of the outstanding principal of
Revolving Loans made by such Bank plus such Bank's new Adjusted Percentage of
the outstanding principal amount of Swingline Loans and of Letter of Credit
Outstandings equalling such Bank's Revolving Loan Commitment at such time.
"Adjusted Revolving Loan Sub-Commitment" for each Non-
Defaulting Bank shall mean at any time the product of such
Bank's Adjusted Percentage and the Adjusted Total Revolving Loan
Sub-Commitment.
"Adjusted Total Revolving Loan Commitment" shall mean at any time
the Total Revolving Loan Commitment less the ag gregate Revolving Loan
Commitments of all Defaulting Banks.
"Adjusted Total Revolving Loan Sub-Commitment" shall mean, at any
time, an amount equal to the Adjusted Total Re volving Loan Commitment, PROVIDED
that during each (a) December Clean-Down Period, the Adjusted Total Revolving
Loan Sub-Commitment shall not exceed $63,000,000 MINUS the aggregate Revolving
Loan Commitments of all Defaulting Banks and (b) May Clean-Down Period, the
Adjusted Total Revolving Loan Sub-Commitment shall not exceed $68,000,000 MINUS
the aggregate Revolving Loan Commitments of all Defaulting Banks.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person),
<PAGE>
controlled by, or under direct or indirect common control with, such Person;
PROVIDED, HOWEVER, that for purposes of Section 9.07, an Affiliate of the
Borrower shall include Holdings, each Non-Ithaca Subsidiary and any Person that
directly or indirectly owns more than 5% of any class of the capital stock of
Holdings and any officer or director of Holdings or any such Person. A Person
shall be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall mean Bankers Trust Company, in its ca pacity as Agent
for the Banks hereunder, and shall include any successor to the Agent appointed
pursuant to Section 12.09.
"Agreement" shall mean this Credit Agreement, as mod ified,
supplemented or amended from time to time.
"Alternative Bank" shall have the meaning provided in Section 8.13.
"Applicable Margin" shall mean:
(w) from and after the Initial Borrowing Date through and
including the last day of the fiscal year ended closest to
January 31, 1997 (the "1997 Fiscal Year"), 1.5%;
(x) from and after the first day of the fiscal year
commencing closest to February 1, 1997 through
and including the last day of such fiscal year
(the "1998 Fiscal Year"), the sum (the "1998
Fiscal Year Rate") of (i) 1.5% PLUS (ii) if Con
----
solidated EBITDA for the 1997 Fiscal Year shall
have been less than $17,500,000, or the Borrower
shall not have prepaid the Term Loans in an ag
gregate principal amount of at least $5,000,000
(other than pursuant to Section 4.02(c)) during,
or in respect of, the 1997 Fiscal Year, 0.25%;
(y) from and after the first day of the fiscal year
commencing closest to February 1, 1998 through
and including the last day of such fiscal year
(the "1999 Fiscal Year"), the sum (the "1999
Fiscal Year Rate") of (i) the 1998 Fiscal Year
Rate PLUS (ii) if Consolidated EBITDA for the
----
1998 Fiscal Year shall have been less than
28,300,000, or the Borrower shall not have pre
paid the Term Loans in an aggregate principal
amount of at least $5,000,000 (other than pursu
ant to Section 4.02(c)) during, or in respect
of, such fiscal year, 0.5%; and
<PAGE>
(z) from and after the first day of the fiscal year
commencing closest to February 1, 1999 through
and including the Final Maturity Date, the sum
of (i) the 1999 Fiscal Year Rate PLUS (ii) if
----
Consolidated EBITDA for the 1999 Fiscal Year
shall have been less than 37,000,000, or the
Borrower shall not have prepaid the Term Loans
in an aggregate principal amount of at least
$5,000,000 (other than pursuant to Section
4.02(c)) during, or in respect of, such fiscal
year, 0.5%.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit O (appropriately
completed).
"Bank" shall mean each financial institution listed on Schedule I,
as well as any institution which becomes a "Bank" hereunder pursuant to Section
1.11 or 13.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.04(c) or (ii) a Bank having notified in writing the Borrower
and/or the Agent that it does not intend to comply with its obligations under
Section 1.01(a), 1.01(b) or 1.01(d) or Section 2, in either case as a result of
any takeover of such Bank by any regulatory authority or agency.
"Bank Indemnification Claims" shall have the meaning
provided in the Reorganization Plan.
"Bankruptcy Code" shall have the meaning provided in
Section 10.05.
"Bankruptcy Court" shall have the meaning provided in
the Reorganization Plan.
"Base Rate" at any time shall mean the highest of (i) 1/2 of 1% in
excess of the Adjusted Certificate of Deposit Rate, (ii) the Prime Lending Rate
and (iii) 1/2 of 1% in excess of the overnight Federal Funds Rate.
"Book Entry System" shall have the meaning provided in
Section 8.12.
"Borrower" shall have the meaning provided in the
first paragraph of this Agreement.
"Borrowing" shall mean the borrowing of a Loan of a single Tranche
from all the Banks having Commitments with re spect to the respective Tranche
(or from BTCo in the case of Swingline Loans) on a given date. Any and all
Borrowings per mitted hereunder shall be limited to Borrowings of Revolving
Loans and/or Swingline Loans.
<PAGE>
"Borrowing Base" shall mean, as at any date on which the amount
thereof is being determined, an amount equal to the sum of (i) 85% of Eligible
Receivables, (ii) 50% of Eligible Inventory, (iii) 50% of the Foreign Letter of
Credit Stated Amount and (iv) the Maximum Overadvance Amount, each as deter
mined from the Borrowing Base Certificate most recently deliv ered pursuant to
Section 8.01(k).
"Borrowing Base Certificate" shall have the meaning
provided in Section 8.01(k).
"Borrowing Base Deficiency" shall mean, at any time, the amount, if
any, by which the sum of the aggregate principal amount of Revolving Loans and
Swingline Loans then outstanding plus the Letter of Credit Outstandings at such
time exceeds the Borrowing Base then in effect.
"BTCo" shall mean Bankers Trust Company in its indi
vidual capacity.
"Business Day" shall mean any day except Saturday, Sunday and any
day which shall be in New York City a legal hol iday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Business Plan" shall mean the Borrower's business plan dated May 7,
1996, attached as Exhibit P hereto.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expen ditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and the amount of Capitalized Lease
Obligations incurred by such Person.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under generally accepted accounting principles, are or will
be required to be capitalized on the books of such Person, in each case taken at
the amount thereof accounted for as indebtedness in accordance with such
principles.
"Cash Collateral" shall mean all "Collateral" as de
fined in the Cash Collateral Agreement.
"Cash Collateral Order" shall mean that certain "Emergency Order
Authorizing Debtor in Possession to Use Cash Collateral Pursuant to Section 363
of the Bankruptcy Code and Providing Adequate Protection and Granting
Superpriority Claims and Replacement Liens and Security Interests" entered on or
<PAGE>
about October 8, 1996 by the Bankruptcy Court and any Final Order entered with
respect thereto.
"Cash Equivalents" shall mean, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) time deposits and
certificates of deposit of any commercial bank having, or which is the principal
banking subsidiary of a bank holding company having, a long-term unsecured debt
rating of at least "A" or the equivalent thereof from Standard & Poor's
Corporation or "A2" or the equivalent thereof from Moody's Investors Service,
Inc. with maturities of not more than six months from the date of acquisition by
such Person, (iii) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (ii)
above, (iv) commercial paper issued by any Person incorporated in the United
States rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than six months after the date
of acquisition by such Person, and (v) investments in money market funds
substantially all of whose assets are comprised of securities of the types
described in clauses (i) through (iv) above.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as the same
may be amended from time to time, 42 U.S.C. ss. 9601 ET SEQ.
"Change of Control" shall mean such time, after the Reorganization
Plan Effective Date as (i) any Schedule 13D under the Securities Exchange Act,
or any amendment to any such Schedule, or any successor form is received by the
Borrower which indicates that, or the Borrower otherwise becomes aware that, a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act) has become the "beneficial owner" (within the meaning
of Rule 13d-3 under the Securities Exchange Act), by way of merger,
consolidation or otherwise, of 51% or more of the voting power of the voting
capital stock of the Borrower, or (ii) during any period of two consecutive
calendar years, individuals who at the beginning of such period constituted the
Board of Directors of the Borrower (together with any new directors whose
election by the Board of Directors of the Borrower or whose nomination for
election by the shareholders of the Borrower, as the case may be, was ap proved
by a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors of the Borrower, as the case may be, then in office.
"Co-Agent" shall have the meaning provided in the
first paragraph of this Agreement.
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement, and to any subsequent provision of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purport to be
granted) pursuant to any Original Security Document or Security Document,
including, without limitation, all Cash Collateral, all Pledge Agreement Collat
eral, all Security Agreement Collateral, all Mortgaged Prop erties and all cash
and Cash Equivalents delivered as collateral pursuant to Section 4.02 or 11
hereof.
"Collateral Account" shall have the meaning provided
in Section 8.13.
"Collateral Agent" shall mean the Agent acting as collateral agent
for the Secured Creditors pursuant to the Se curity Documents.
"Collective Bargaining Agreements" shall have the
meaning provided in Section 5.05.
"Commitment" shall mean any of the commitments of any Bank, I.E.,
whether the Term Loan Commitment or Revolving Loan Commitment.
"Commitment Commission" shall have the meaning pro
vided in Section 3.01(a).
"Confirmation Order" shall have the meaning provided
in the Reorganization Plan.
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of the Borrower and its Consolidated Subsidiaries.
"Consolidated Current Liabilities" shall mean, at any time, the
consolidated current liabilities of the Borrower and its Subsidiaries at such
time, but excluding the current portion of and accrued but unpaid interest on
any Indebtedness under this Agreement and any other long-term Indebtedness which
would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, the sum of the
aggregate outstanding principal amount of all Indebted ness (including, without
limitation, the principal component of Capitalized Lease Obligations, but
excluding Interest Rate Pro tection Agreements) of the Borrower and its
Consolidated Sub
sidiaries.
<PAGE>
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income of the Borrower and its Consolidated Subsidiaries, before Consolidated
Net Interest Expense and pro vision for taxes and without giving effect to any
extraordinary gains or losses or gains or losses from sales of assets other than
inventory sold in the ordinary course of business.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all amortization of intangibles and
depreciation that were deducted in arriving at Consolidated EBIT for such
period.
"Consolidated Fixed Charge Coverage Ratio" for any period shall mean
the ratio of Consolidated EBITDA to Consoli dated Fixed Charges for such period.
"Consolidated Fixed Charges" for any period shall mean the sum of
(i) Consolidated Net Interest Expense for such period, (ii) the amount of all
cash Dividends which were paid on any capital stock of the Borrower and its
Subsidiaries during such period (other than Dividends paid by a Subsidiary of
the Borrower to the Borrower or another Subsidiary of the Borrower), (iii) the
amount of all Capital Expenditures for such period (other than (1) Capital
Expenditures made with the proceeds from sales of assets or insurance proceeds
from any Recovery Event, in each case to the extent such proceeds are not
required to be applied by the Borrower as a mandatory repayment pursuant to
Section 4.02 and (2) additional Capital Expenditures made during such period
utilizing the Rollover Amount but only to the extent that the Borrower would
have been in compliance with the Consolidated Fixed Charge Coverage Ratio for
all periods which include one or more fiscal quarters from the fiscal year
preceding the fiscal year in which the Rollover Amount is so utilized,
recalculated on the assumption that the amount of all additional Capital
Expenditures so utilizing the Rollover Amount were instead made on a ratable
basis over the four fiscal quarters comprising the immediately preceding fiscal
year), (iv) the excess, if any, of all taxes paid for such period over all tax
refunds received for such period, and (v) the scheduled principal amount of all
amortization payments on all Indebtedness of the Borrower and its Subsidiaries
for such pe riod.
"Consolidated Interest Coverage Ratio" for any period shall mean the
ratio of Consolidated EBITDA to Consolidated Net Interest Expense.
"Consolidated Net Income" shall mean, for any period, net income of
the Borrower and its Consolidated Subsidiaries for such period determined on a
consolidated basis plus the amount of all noncash compensation expenses arising
in connection with management stock option plans less the sum of all gains
arising from the reversal of restructuring and other charges in respect of lines
of business constituting discontinued businesses as of the Effective Date.
"Consolidated Net Interest Expense" shall mean, for any period, the
total consolidated interest expense of the Bor rower and its Consolidated
Subsidiaries for such period (calcu lated without regard to any limitations on
the payment thereof) plus, without duplication, that portion of Capitalized
Lease Obligations of the Borrower and its Consolidated Subsidiaries representing
the interest factor for such period, in each case net of the total consolidated
cash interest income of the Bor rower and its Consolidated Subsidiaries for such
period.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with generally accepted accounting
principles in the United States.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guar antee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obli gor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capi tal or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note and each Security Document and, after the execution and delivery thereof,
each Subsidiary Guar anty.
"Credit Event" shall mean the making of any Loan or
the issuance of any Letter of Credit.
"Credit Party" shall mean the Borrower and, following
the execution and delivery of one or more Subsidiary Guaranties,
<PAGE>
each Subsidiary of the Borrower which is a party to a Subsidiary
Guaranty.
"Debt Agreements" shall have the meaning provided in
Section 5.05.
"December Clean-Down Period" shall mean any period of thirty
consecutive days commencing on any date on or after each December 1, commencing
with December 1, 1996 (or, if such date is not a Business Day, on the first
Business Day immediately thereafter), and ending on or before the immediately
succeeding January 31 (or, if such date is not a Business Day, on the first
Business Day immediately thereafter).
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Disclosure Statement" shall have the meaning provided
in the Reorganization Plan.
"Dividend" with respect to any Person shall mean that such Person
has declared or paid a dividend or returned any equity capital to its
stockholders or authorized or made any other distribution, payment or delivery
of property (other than common stock of such Person) or cash to its stockholders
as such, or redeemed, retired, purchased or otherwise acquired (other than by
way of issuance of shares of capital stock), directly or indirectly, for a
consideration any shares of any class of its capital stock outstanding on or
after the Effective Date (or any options or warrants issued by such Person with
respect to its capital stock), or set aside any funds for any of the foregoing
purposes, or shall have permitted any of its Subsidiaries to purchase or
otherwise acquire for a consid eration any shares of any class of the capital
stock of such Person outstanding on or after the Effective Date (or any op tions
or warrants issued by such Person with respect to its capital stock). Without
limiting the foregoing, "Dividends" with respect to any Person shall also
include all payments made or required to be made by such Person with respect to
any stock appreciation rights, plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing purposes.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Drawing" shall have the meaning provided in Section
2.05(b).
"Effective Date" shall have the meaning provided in
Section 13.10.
"Eligible Inventory" shall mean the gross dollar value (valued at
the lower of cost (determined on a first-in, first-out basis) or market value)
of the inventory of the Borrower which conforms to the representations and
warranties contained in the Security Agreement and which at all times continues
to be acceptable to the Collateral Agent in its reasonable judgment, less (i)
any supplies (other than raw materials), spare parts, goods returned or rejected
(except to the extent that such returned or rejected goods continue to conform
to the representations and warranties contained in the Security Agree ment and
continue to be acceptable to the Collateral Agent in its reasonable judgment) by
customers and goods to be returned to suppliers, (ii) any advance payments made
by customers with respect to inventory of the Borrower, (iii) any inventory held
at locations outside of the United States of America (other than In-Transit
Inventory), (iv) any inventory held at locations not owned or leased by the
Borrower or any of its Subsidiaries and (v) reserves required by the Collateral
Agent in its reasonable judgment.
"Eligible Receivables" shall mean the total face amount of the
receivables of the Borrower which conform to the representations and warranties
contained in the Security Agree ment and at all times continue to be acceptable
to the Col lateral Agent in its reasonable judgment less any returns, dis
counts, claims, credit and allowances of any nature (whether issued, owing,
granted or outstanding) and less reserves for any other matter affecting the
creditworthiness of account debtors owing the receivables and excluding (i) bill
and hold (deferred shipment) transactions, (ii) contracts or sales to any
Affiliate of the Borrower, (iii) all receivables which have not been paid in
full within 30 days of the due date thereof or which have been disputed by the
account debtor, (iv) governmental sales, (v) receivables with respect to which
the Borrower has recorded, on its books and records, a partially or wholly
offsetting payable (but only to the extent of the amount so offset), (vi) sales
to account debtors outside the United States and (vii) accounts receivable sold
as permitted by Section 9.02(x).
"Eligible Transferee" shall mean and include a com mercial bank,
financial institution or other "accredited inves tor" (as defined in Regulation
D of the Securities Act).
"Employee Benefit Plans" shall have the meaning pro
vided in Section 5.05.
"Employment Agreements" shall have the meaning pro
vided in Section 5.05.
"Environmental Claims" means any and all administra tive, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (a) any and all Claims by gov ernmental or regulatory authorities
for enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law, and (b) any and all Claims
by any third party seeking damages, contribution, indem nification, cost
recovery, compensation or injunctive relief in connection with alleged injury or
threat of injury to health, safety or the environment due to the presence of
Hazardous Ma terials.
<PAGE>
"Environmental Law" means any Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, guideline, written policy and
rule of common law now or hereaf ter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C, ss.
1251 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ.; the
Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ.; the Safe Drinking Water Act, 42
U.S.C. ss. 3803 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 ET
SEQ.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
U.S.C. ss. 11001 ET SEQ.; the Hazardous Material Transportation Act, 49 U.S.C.
ss. 1801 ET SEQ. and the Occupational Safety and Health Act, 29 U.S.C. ss. 651
ET SEQ.; and any state and local or foreign counterparts or equivalents, in each
case as amended from time to time.
"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. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement, and to any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted there for.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or any Subsidiary of the Borrower
would be deemed to be a "single employer" within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
"Event of Default" shall have the meaning provided in
Section 10.
"Excepted Accounts" shall have the meaning provided in
Section 8.13.
"Excess Cash Flow" shall mean, for any Excess Cash Payment Period,
the remainder of (i) the sum of (a) Adjusted Consolidated Net Income for such
period, (b) the provision for taxes for such period to the extent such provision
reduces Ad justed Consolidated Net Income for such period, and (c) the decrease,
if any, in Adjusted Consolidated Working Capital from the first day to the last
day of such period, minus (ii) the sum of (a) the amount of Capital Expenditures
(to the extent not financed with Indebtedness or made with insurance proceeds
and otherwise as permitted pursuant to Section 9.08) made by the
<PAGE>
Borrower and its Subsidiaries on a consolidated basis during such period, (b)
the aggregate principal amount of permanent principal payments of Indebtedness
for borrowed money of the Borrower (other than repayments of Loans, PROVIDED
that repayments of Loans shall be deducted in determining Excess Cash Flow if
such repayments were (x) required as a result of a Scheduled Repayment under
Section 4.02(c) or (y) made as a vol untary prepayment with internally generated
funds (but in the case of a voluntary prepayment of Revolving Loans, only to the
extent accompanied by a voluntary reduction to the Total Re volving Loan
Commitment)) during such period, (c) the amount of taxes paid in cash with
respect to such period, and (d) the increase, if any, in Adjusted Consolidated
Working Capital from the first day to the last day of such period.
Notwithstanding the foregoing, for purposes of calculating "Excess Cash Flow,"
federal, state or local income tax refunds or the proceeds of sales of "Assets
Held for Disposition" (as described in the Business Plan), to the extent that
the Borrower's actual or anticipated receipt of the same increases or decreases
Adjusted Consolidated Working Capital, shall not be included in such
calculation; PROVIDED, HOWEVER, that the Borrowers' obligations to make payments
pursuant to Section 4.02(f) and (i) shall not in any way be affected by such
calculation.
"Excess Cash Payment Date" shall mean the date occur ring 90 days
after the last day of each fiscal year of the Bor rower (beginning with its
fiscal year ended closest to January 31, 1997).
"Excess Cash Payment Period" shall mean with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
"Excess Tax Refund" shall mean any federal, state and local income
tax refund the amount of which, together with all such refunds received by the
Borrower and its Subsidiaries from and after February 1, 1996, exceeds
$25,300,000.
"Existing Bankers Trust Letter of Credit" shall mean the Letters of
Credit, if any, issued by BTCo pursuant to the Original Credit Agreement which
are outstanding and undrawn as of the Effective Date and are identified on
Schedule IX.
"Existing Credit Agreement Obligations" shall mean
"Obligations" as defined in the Original Credit Agreement.
"Existing Indebtedness" shall have the meaning pro
vided in Section 7.21.
"Facing Fee" shall have the meaning provided in Sec
tion 3.01(c).
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period
<PAGE>
to the weighted average of the rates on overnight Federal Funds transactions
with members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of 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 the Agent.
"Fees" shall mean all amounts payable pursuant to or
referred to in Section 3.01.
"Final Maturity Date" shall mean August 31, 1999, or such earlier
date on which the Commitments terminate and the Notes become due and payable
pursuant to Section 10 hereof.
"Final Order" shall have the meaning provided in the
Reorganization Plan.
"Foreign Letter of Credit Stated Amount" means the Stated Amount of
Letters of Credit issued in favor of third-party contractors (or their
designees) to support the production of goods for the Borrower or any of its
Subsidiaries outside of the United States of America, which goods (i) are not
owned by the Borrower at the time of issuance of any such Letters of Credit, and
(ii) will become In-Transit Inventory substantially simultaneously with the
first payment or disbursement by BTCo under such Letters of Credit.
"Hazardous Materials" means (a) any petroleum or pe troleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insula tion, transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls,
and radon gas; (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous substances," "restricted hazardous waste,"
"toxic substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority.
"Holdings" means Ithaca Holdings, Inc.
"Honduras Accounts" shall have the meaning provided in
Section 8.13.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, inter est, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Indebtedness of the types described in
clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any
Lien on any property owned by
<PAGE>
such Person, whether or not such Indebtedness has been assumed by such Person,
(iv) the aggregate amount required to be capitalized under leases under which
such Person is the lessee, (v) all obligations of such person to pay a specified
purchase price for goods or services, whether or not delivered or accepted,
I.E., take-or-pay and similar obligations, (vi) all Contingent Obligations of
such Person and (vii) all obligations under any Interest Rate Protection
Agreement or under any similar type of agreement entered into with a Person not
a Bank.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the first Borrowing hereunder occurs.
"Insured Property" shall mean each Mortgaged Property designated as
such on Schedule II.
"Intercompany Compromise and Settlement Agreement" shall have the
meaning provided in the Reorganization Plan.
"Interest Rate Protection Agreements" shall have the meaning
provided in the Security Documents.
"In-Transit Inventory" shall mean inventory (i) owned by the
Borrower, (ii) in the possession, custody or control of the Borrower or its
agents, (iii) located outside of, but in transit to, the United States of
America and (iv) in which the Borrower has granted to the Collateral Agent for
the benefit of the Secured Creditors a legal, valid, enforceable, fully per
fected, first priority security interest, subject to no Liens other than
Permitted Liens and to which effect, an opinion of counsel to the Borrower has
been given in form and substance reasonably satisfactory to the Collateral
Agent, the Agent, the Co-Agent and the Banks (it being understood that such
opinion may contain customary exceptions or limitations as to the pri ority of
such security interest).
"Issuance System" shall have the meaning provided in
Section 8.12.
"L/C Supportable Indebtedness" shall mean (i) obliga tions of the
Borrower or its Subsidiaries incurred in the ordi nary course of business with
respect to workers compensation, surety bonds and other similar statutory
obligations and (ii) such other obligations of the Borrower or any of its
Subsidiar ies as are reasonably acceptable to BTCo and otherwise permitted to
exist pursuant to the terms of this Agreement.
"Leaseholds" of any Person means all the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Letter Agreement" has the meaning provided in Section
8.13.
<PAGE>
"Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided
in Section 3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all out standing Letters of Credit and (ii)
the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning
provided in Section 2.03(a).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan
and each Swingline Loan.
"Local Bank" shall mean a commercial bank holding or maintaining an
Excepted Account.
"Local Payroll Account" shall mean the payroll account maintained by
the Local Payroll Bank for the Borrower.
"Local Payroll Bank" shall mean First Union National
Bank of North Carolina.
"Management Agreements" shall have the meaning pro
vided in Section 5.05.
"Mandatory Borrowing" shall have the meaning provided
in Section 1.01(d).
"Margin Stock" shall have the meaning provided in
Regulation U.
"Maximum Overadvance Amount" shall mean the lesser of (i) 50% of the
excess of (x) the gross dollar value (valued at the lower of cost (determined on
a first-in, first-out basis) or market value) of inventory which (aa) conforms
to the repre sentations and warranties contained in the Security Agreement, (bb)
at all times continues to be acceptable to the Collateral Agent in its
reasonable judgment, (cc) is owned by the Borrower and (dd) is held at locations
that are (xx) not owned or leased by the Borrower or any of its Subsidiaries or
(yy) outside of the United States of America (other than In-Transit Inventory)
over (y) $8,200,000 and (ii) for the fiscal year ended closest to the date set
forth in column 1 below, the corresponding amount set forth in column 2 below:
<PAGE>
1 2
- -
January 31, 1997 $3,500,000
January 31, 1998 4,500,000
January 31, 1999
and thereafter until
August 31, 1999 6,500,000
"Maximum Swingline Amount" shall mean $5,000,000.
"May Clean-Down Period" shall mean any period of thirty consecutive
days commencing on any date on or after each May 1 (or, if such date is not a
Business Day, on the first Business Day immediately thereafter), from and after
the Effec tive Date and ending on or before the immediately succeeding June 30
(or, if such date is not a Business Day, on the first Business Day immediately
thereafter).
"Mortgage" shall have the meaning provided in Section
5.11.
"Mortgage Policies" shall have the meaning provided in
Section 5.11.
"Mortgaged Property" shall have the meaning provided
in Section 5.11.
"Net Sale Proceeds" shall mean for any sale of assets, the gross
cash proceeds (including any cash received by way of deferred payment pursuant
to a promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of cash taxes payable by reason of such
sale, reasonable transaction costs and payments of unassumed liabilities
relating to the assets sold at the time of, or within 60 days after, the date of
such sale and the amount of such gross cash proceeds required to be used to
repay any In debtedness (other than Indebtedness of the Banks pursuant to the
Credit Documents) which is secured by the respective assets which were sold.
"Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.
"Non-Ithaca Subsidiaries" shall mean any Subsidiary of Holdings
other than the Borrower or any Subsidiary of the Borrower.
"Note" shall mean each Term Note, the Swingline Note
and each Revolving Note.
"Notice of Borrowing" shall have the meaning provided
in Section 1.03.
<PAGE>
"Notice Office" shall mean the office of the Agent located at 130
Liberty Street, New York, New York 10006, Atten tion: Dana Klein, or such other
office as the Agent may here after designate in writing as such to the other
parties hereto.
"Obligations" shall mean all amounts owing to the Agent, the
Co-Agent, the Collateral Agent or any Bank pursuant to the terms of this
Agreement, the Reorganization Plan or any other Credit Document.
"Original Cash Collateral Agent" shall mean First Union National
Bank of North Carolina, as Cash Collateral Agent pursuant to the Original Cash
Collateral Agreement.
"Original Cash Collateral Agreement" shall mean the Cash Collateral
Agreement dated as of December 4, 1995 between the Borrower and First Union
National Bank of North Carolina, as in effect immediately prior to the Effective
Date.
"Original Credit Agreement" shall mean the Credit Agreement, dated
as of December 1, 1992, among Holdings, the Borrower, various lenders, Canadian
Imperial Bank of Commerce and Kleinwort Benson Limited, as Co-Agents and Bankers
Trust Company, as Agent, as the same has been amended, modified or
supplemented through the Effective Date.
"Original Mortgage" shall mean a Mortgage (as defined
in the Original Credit Agreement).
"Original Pledge Agreement" means the Pledge Agree ment, dated as of
December 10, 1992, made by the Borrower, and the Agent, as Collateral Agent for
the benefit of the Banks, the Agent and the Co-Agent, as in effect immediately
prior to the Effective Date.
"Original Security Agreement" means the Security Agreement, dated as
of December 10, 1992, between the Borrower and the Agent for the benefit of the
Agent, the Co-Agent and the Banks, as in effect immediately prior to the
Effective Date.
"Original Security Document" means a Security Document
(as defined in the Original Credit Agreement).
"Participant" shall have the meaning provided in Sec
tion 2.04(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006, or such other office as the Agent
may hereafter designate in writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corpo ration
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the
<PAGE>
denominator of which is the Total Revolving Loan Commitment at such time,
provided that if the Percentage of any Bank is to be determined after the Total
Revolving Loan Commitment has been terminated, then the Percentages of the Banks
shall be deter mined immediately prior (and without giving effect) to such
termination.
"Permitted Encumbrance" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the title insurance
policy or title commitment deliv ered with respect thereto, all of which
exceptions must be ac ceptable to the Required Banks in their reasonable
discretion.
"Permitted Liens" shall have the meaning provided in
Section 9.01.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan, as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), or at any time during the
five calendar years preceding the date of any Credit Event was maintained or
contributed to by (or to which there was an obligation to contribute of) the
Borrower or a Subsidiary of the Borrower or an ERISA Affiliate.
"Pledge Agreement" shall have the meaning provided in
Section 5.07.
"Pledge Agreement Collateral" shall mean all "Col lateral" as
defined in the Pledge Agreement.
"Pledged Securities" shall have the meaning assigned that term in
the Pledge Agreement.
"Pledged Stock" shall have the meaning assigned that term in the
Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Projections" shall have the meaning provided in Sec
tion 7.05(d).
<PAGE>
"Quarterly Payment Date" shall mean the last Business Day of each
January, April, July and October occurring after the Effective Date.
"RCRA" shall mean the Resource Conservation and Re
covery Act, as the same may be amended from time to time, 42
U.S.C. ss. 6901 ET SEQ.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, im provements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the Bor rower or any of
its Subsidiaries of any cash insurance proceeds or condemnation award payable
(i) by reason of theft, loss, physical destruction or damage or any other
similar event with respect to any property or assets of the Borrower or any of
its Subsidiaries and (ii) under any policy of insurance required to be
maintained by the Borrower under Section 8.03.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof estab lishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escap ing, emptying, seeping,
placing, pouring and the like, into or upon any land or water or air, or
otherwise entering into the environment.
"Reorganization Plan" shall mean the Debtor's Pre packaged Plan of
Reorganization Under Chapter 11 of the Bank ruptcy Code, in the form of Exhibit
Q, confirmed by the Bank ruptcy Court on November 22, 1996.
"Reorganization Plan Effective Date" shall mean the
"Effective Date" as defined in the Reorganization Plan.
"Replaced Bank" shall have the meaning provided in
Section 1.11.
<PAGE>
"Replacement Bank" shall have the meaning provided in
Section 1.11.
"Reportable Event" shall mean an event described in Section 4043(b)
of ERISA with respect to a Plan as to which the 30-day notice requirement has
not been waived by the PBGC.
"Required Banks" shall mean, at any time, Non-Defaulting Banks, the
sum of whose outstanding Term Loans (or, if prior to the Initial Borrowing Date,
Term Loan Commitments) and Revolving Loan Commitments (or after the termination
thereof, outstanding Revolving Loans and Adjusted Percentage of outstanding
Swingline Loans and Letter of Credit Outstandings) at such time represent an
amount greater than fifty percent of the sum of all outstanding Term Loans of
Non-Defaulting Banks (or, if prior to the Initial Borrowing Date, the Total Term
Loan Commitment) and the Adjusted Total Revolving Loan Commitment (or after the
termination thereof, the sum of the then total outstanding Revolving Loans of
Non-Defaulting Banks, and the aggregate Adjusted Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
"Required Term Loan Banks" shall mean, at any time, Non-Defaulting
Banks, the sum of whose outstanding Term Loans (or, if prior to the Initial
Borrowing Date, Term Loan Commit ments) at such time represent an amount greater
than fifty per cent of the sum of all outstanding Term Loans (or, if prior to
the Initial Borrowing Date, the Total Term Loan Commitment).
"Returns" shall have the meaning provided in Section
7.09.
"Revolving Loan" shall have the meaning provided in
Section 1.01(b).
"Revolving Loan Commitment" shall mean, for each Bank, the amount
set forth opposite such Bank's name in Schedule I hereto directly below the
column entitled "Revolving Loan Commitment," as same may be (x) reduced from
time to time pur suant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted
from time to time as a result of assignments to or from such Bank pursuant to
Section 1.11 or 13.04(b).
"Revolving Note" shall have the meaning provided in
Section 1.05(a).
"Rollover Amount" shall have the meaning provided in
Section 9.08.
"Scheduled Repayment" shall have the meaning provided
in Section 4.02(c).
<PAGE>
"Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(c).
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(iii) Certificate" shall have the
meaning provided in Section 4.04(b).
"Secured Creditors" shall have the meaning assigned that term in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regula tions promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and the rules and regulations promulgated
thereunder.
"Security Agreement" shall have the meaning provided
in Section 5.08.
"Security Agreement Collateral" shall mean all "Col lateral" as
defined in the Security Agreement.
"Security Document" shall mean the Pledge Agreement, the Security
Agreement, the Original Cash Collateral Agreement, the Successor Cash Collateral
Agreement, each Mortgage and, after the execution and delivery thereof, each
Subsidiary Secu rity Agreement.
"Shareholders' Agreements" shall have the meaning
provided in Section 5.05.
"Standby Letter of Credit" shall have the meaning
provided in Section 2.01(a).
"Stated Amount" of each Letter of Credit shall, at any time, mean
the maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Subsidiary Guaranty" shall have the meaning provided
in Section 9.16.
<PAGE>
"Subsidiary Security Agreement" shall have the meaning
provided in Section 9.16.
"Successor Cash Collateral Agent" shall mean Bankers Trust Company,
and its successors and assigns as Cash Collateral Agent pursuant to the
Successor Cash Collateral Agreement.
"Successor Cash Collateral Agreement" shall mean an Amended and
Restated Cash Collateral Agreement substantially in the form of Exhibit H (as
modified, supplemented or amended from time to time), covering all present and
future Cash Collateral.
"Supermajority Banks" shall mean, at any time, Non-Defaulting Banks,
the sum of whose outstanding Term Loans (or, if prior to the Initial Borrowing
Date, Term Loan Commitments) and Revolving Loan Commitments (or after the
termination thereof, outstanding Revolving Loans and Adjusted Percentage of
outstanding Swingline Loans and Letter of Credit Outstandings) at such time
represent an amount greater than two thirds of the sum of all outstanding Term
Loans of Non-Defaulting Banks (or, if prior to the Initial Borrowing Date, the
Total Term Loan Commitment) and the Adjusted Total Revolving Loan Commitment (or
after the termination thereof, the sum of the then total outstanding Revolving
Loans of Non-Defaulting Banks, and the aggregate Adjusted Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Out standings at such time).
"Supermajority Revolving Loan Banks" shall mean, at any time,
Non-Defaulting Banks, the sum of whose outstanding Revolving Loan Commitments
(or after the termination thereof, outstanding Revolving Loans and Adjusted
Percentage of at such time represent an amount greater than two thirds of the
sum of the Adjusted Total Revolving Loan Commitment (or after the ter mination
thereof, the sum of the then total outstanding Revolv ing Loans of
Non-Defaulting Banks, and the aggregate Adjusted Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
"Swingline Expiry Date" shall mean, at any time, the earlier of (i)
the date which is two Business Days prior to August 31, 1999 or (ii) the Final
Maturity Date.
"Swingline Loan" shall have the meaning provided in
Section 1.01(c).
"Swingline Note" shall have the meaning provided in
Section 1.05(a).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(a).
<PAGE>
"Term Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I hereto directly below the column
entitled "Term Loan Commitment", as same may be adjusted from time to time as a
result of assign ments to or from such Bank pursuant to Section 1.11 or
13.04(b).
"Term Note" shall have the meaning provided in Section 1.05 (a).
"Total Commitments" shall mean, at any time, the sum
of the Commitments of each of the Banks.
"Total Revolving Loan Commitment" shall mean, at any time, the sum
of the Revolving Loan Commitments of each of the Banks.
"Total Revolving Loan Sub-Commitment" shall mean, at any time, an
amount equal to the Total Revolving Loan Commitment at such time, PROVIDED that
during each (a) December Clean-Down Period, the Total Revolving Loan
Sub-Commitment shall not exceed $63,000,000 and (b) May Clean-Down Period, the
Total Revolving Loan Sub-Commitment shall not exceed $68,000,000.
"Total Term Loan Commitment" shall mean, at any time, the sum of the
Term Loan Commitments of each of the Banks.
"Total Unutilized Adjusted Revolving Loan Commitment" shall mean, at
any time, an amount equal to the remainder of (x) the then Adjusted Total
Revolving Loan Commitment, less (y) the sum of the aggregate principal amount of
outstanding Revolving Loans made by Non-Defaulting Banks and the principal
amount of all Swingline Loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, 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 and Swingline loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Trade Letter of Credit" shall have the meaning pro
vided in Section 2.01(a).
"Tranche" shall mean the respective facility and com mitments
utilized in amending and restating and making the Loans hereunder, with there
being three separate Tranches, I.E., Term Loans, Revolving Loans and Swingline
Loans.
"Transferred Accounts" has the meaning provided in Section 8.13.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any,
by which the actuarial present value of the accumulated benefits under the Plan
as of the close of its most
<PAGE>
recent plan year, determined in accordance with Statement of Financial
Accounting Standards No. 35, based upon the actuarial assumptions used by the
Plan's actuary in the most recent annual valuation of the Plan, exceeds the fair
market value of the assets allocable thereto, determined in accordance with
Section 412 of the Code.
"United States" and "U.S." shall each mean the United
States of America.
"Unpaid Drawing" shall have the meaning provided for
in Section 2.05(a).
"Unutilized Revolving Loan Commitment" with respect to any Bank, at
any time, shall mean such Bank's Revolving Loan Commitment at such time, less
the sum of (i) the aggregate out standing principal amount of Revolving Loans
made by such Bank and (ii) such Bank's Adjusted Percentage of the Letter of
Credit Outstandings in respect of Letters of Credit issued under this Agreement.
"Wholly-Owned Subsidiary" shall mean, as to any Per son, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-owned
Subsidiaries of such Person has a 100% equity interest at such time.
SECTION 12. THE AGENT AND CO-AGENT.
12.1 APPOINTMENT. The Banks hereby designate Bankers Trust Company
as Agent (for purposes of this Section 12, the term "Agent" shall include
Bankers Trust Company in its capacity as Collateral Agent pursuant to the
Security Documents) and Canadian Imperial Bank of Commerce, acting through one
or more agencies, branches or affiliates, as Co-Agent, to act as specified
herein and in the other Credit Documents. Each Bank hereby irrevocably
authorizes, and each holder of any Note by the acceptance of such Note shall be
deemed irrevocably to authorize, the Agent and the Co-Agent to take such action
on its behalf under the provisions of this Agreement, the other Credit Documents
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent or the Co-Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
The Agent and the Co-Agent may perform any of their duties hereunder by or
through their respective officers, directors, agents or employees.
12.2 NATURE OF DUTIES. Neither the Agent nor the Co-
Agent shall have any duties or responsibilities except those
<PAGE>
expressly set forth in this Agreement and the Security Docu ments. Neither the
Agent, the Co-Agent nor any of their re spective officers, directors, agents or
employees shall be li able for any action taken or omitted by it or them
hereunder or under any other Credit Document or in connection herewith or
therewith, unless caused by its or their gross negligence or willful misconduct.
The duties of the Agent and the Co-Agent shall be mechanical and administrative
in nature; neither the Agent nor the Co-Agent shall have by reason of this
Agreement or any other Credit Document a fiduciary relationship in respect of
any Bank or the holder of any Note; and nothing in this Agreement or any other
Credit Document, expressed or implied, is intended to or shall be so construed
as to impose upon the Agent or any Co-Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein.
12.3 LACK OF RELIANCE ON THE AGENT AND CO-AGENT. Independently and
without reliance upon the Agent or the Co-Agent, each Bank and the holder of
each Note confirm that, to the extent it deems appropriate, such Bank or holder,
as ap plicable, has made and shall continue to make (i) its own inde pendent
investigation of the financial condition and affairs of the Borrower in
connection with the making and the continuance of the Loans and the taking or
not taking of any action in con nection herewith and (ii) its own appraisal of
the creditwor thiness of the Borrower and, except as expressly provided in this
Agreement, neither the Agent nor the Co-Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Bank
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. Neither the Agent nor the Co-Agent shall be
responsible to any Bank or the holder of any Note 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, perfec tion,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of the Borrower or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of the Borrower or the existence or possible existence of
any Default or Event of Default.
12.4 CERTAIN RIGHTS OF THE AGENT AND CO-AGENT. If either the Agent
or the Co-Agent shall request instructions from the (i) Banks, (ii) Required
Banks, (iii) Supermajority Banks or (iv) Supermajority Revolving Loan Banks and
the Required Term Loan Banks with respect to any act or action (including
failure to act) in connection with this Agreement or any other Credit Document,
the Agent or the Co-Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent or the Co-Agent shall have received
instructions from the applicable Banks; and neither the Agent nor the Co-Agent
shall incur liability to any Person by reason of so refraining. Without limiting
the foregoing, no Bank or
<PAGE>
the holder of any Note shall have any right of action whatsoever against the
Agent or the Co-Agent as a result of the Agent or the Co-Agent acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the applicable Banks.
12.5 RELIANCE. The Agent and the Co-Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by any Person that the Agent or the Co-Agent believed to be the proper
Person, and, with respect to all legal matters pertaining to this Agreement and
any other Credit Document and its duties hereunder and thereunder, upon advice
of counsel selected by the Agent or the Co-Agent.
12.6 INDEMNIFICATION. To the extent the Agent and/or the Co-Agent is
not reimbursed and indemnified by the Borrower, the Banks will reimburse and
indemnify the Agent and/or the Co-Agent, in proportion to their respective
"percentages" as used in determining the Required Banks, for and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by the Agent and/or the Co-Agent
in performing their respective duties hereunder or under any other Credit
Document, or in any way relating to or arising out of this Agreement or any
other Credit Document; PROVIDED that no Bank shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's or the
Co-Agent's gross negligence or willful mis conduct.
12.7 THE AGENT AND CO-AGENT IN THEIR INDIVIDUAL CAPACITIES. With
respect to their respective obligations to make Loans under this Agreement, the
Agent and the Co-Agent shall have the rights and powers specified herein for a
"Bank" and may exercise the same rights and powers as though they were not
performing the duties specified herein; and the term "Banks," "Required Banks,"
"holders of Notes" or any similar terms shall, unless the context clearly
otherwise indicates, include the Agent and the Co-Agent in their individual
capaci ties. The Agent and the Co-Agent may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with any
Credit Party or any Affiliate of any Credit Party as if they were not performing
the duties specified herein, and may accept fees and other consideration from
the Borrower or any other Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
<PAGE>
12.8 HOLDERS. The Agent and the Co-Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the as signment, transfer or endorsement thereof, as the
case may be, shall have been filed with the Agent. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee or indorsee, as the case may be,
of such Note or of any Note or Notes issued in exchange therefor.
12.9 RESIGNATION BY THE AGENT AND THE CO-AGENT. (a) The Agent or the
Co-Agent may resign from the performance of all their respective functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Borrower and the Banks. In the
case of the resignation by the Agent, such resignation shall take effect upon
the appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below. In the case of a resignation by the Co-Agent, such
resignation shall become effective immediately.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial bank
or trust company reasonably acceptable to the Borrower, which acceptance shall
not be unreasonably withheld (it being understood and agreed that any Bank is
deemed to be acceptable to the Borrower).
(c) If a successor Agent shall not have been so ap pointed within
such 15 Business Day period, the Agent, with the consent of the Borrower, which
shall not be unreasonably with held, shall then appoint a successor Agent who
shall serve as Agent hereunder or thereunder until such time, if any, as the
Banks appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause (b)
or (c) above by the 20th Business Day after the date such notice of resignation
was given by the Agent, the Agent's resignation shall become effective and the
Banks shall thereafter perform all the duties of the Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Banks
appoint a successor Agent as provided above.
<PAGE>
SECTION 13. MISCELLANEOUS.
13.1 PAYMENT OF EXPENSES, ETC. The Borrower shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent, the Co-Agent, and the Banks
(including, without limitation, the reasonable fees and expenses of the
appraiser delivering the real estate appraisals pursuant to Section 5.14 and the
reasonable fees and disbursements of Wachtell, Lipton, Rosen & Katz, and local
counsel) in connection with the preparation, execution and delivery of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto, and of the Agent, the Co-Agent and each of the Banks in
connection with the enforcement of this Agreement and the other Credit Documents
and the documents and instruments referred to herein and therein (in cluding,
without limitation, the reasonable fees and disburse ments of counsel for the
Agent, for the Co-Agent and for each of the Banks); (ii) pay and hold each of
the Banks harmless from and against any and all present and future stamp, excise
and other similar taxes with respect to the foregoing matters and save each of
the Banks harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Bank) to pay such taxes; and (iii) indemnify the Agent, the Co-Agent and
each Bank, and each of their respective Affiliates, share holders, officers,
directors, employees, representatives, at torneys and agents from and hold each
of them harmless against any and all liabilities, obligations (including removal
or re medial actions), losses, damages, penalties, claims, actions, judgments,
suits, costs, expenses and disbursements (including reasonable attorneys' and
consultants' fees and disbursements) incurred by, imposed on or assessed against
any of them as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or not
the Agent, the Co-Agent or any Bank is a party thereto) related to the entering
into and/or performance of this Agreement or any other Credit Document or the
use of any Letter of Credit or the proceeds of any Loans hereunder or the
consummation of any transactions contemplated herein or in any other Credit
Document or the exercise of any of their rights or remedies provided herein or
in the other Credit Documents, or (b) the actual or alleged presence of
Hazardous Materials in the air, surface water or groundwater or on the surface
or subsurface of any Real Property owned or at any time operated by the Borrower
or any of its Subsidiaries, the generation, storage, transportation, handling or
disposal of Hazardous Materials at any location, whether or not owned or
operated by the Borrower or any of its Subsidiaries, the non-compliance of any
Real Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any Real
Property, or any Environmental Claim asserted against Holdings, any of its
Subsidiaries or any Real Property owned or at any time operated by the Borrower
or any of its Subsidiaries, including, in each case, without limitation, the
reasonable fees and disbursements of counsel and other consultants incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any losses, liabilities, claims, damages or expenses to the extent
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless the Agent, the Co-Agent or any Bank set forth in the preceding sentence
may be unenforceable because it is violative of any law or public policy, the
Borrower shall make the maximum con tribution to the payment and satisfaction of
each of the indem nified liabilities which is permissible under applicable law.
<PAGE>
13.2 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Bank is hereby
granted a security interest in and is hereby authorized at any time or from time
to time, without presentment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby expressly waived,
to set off against or sell and to appropriate and apply any and all deposits
(general or special) and any other Indebtedness at any time held or owing by
such Bank (including, without limitation, by branches and agencies of such Bank
wherever located) to or for the credit or the account of the Borrower against
and on account of the Bank Indemnification Claims or the Obligations and
liabilities of the Borrower to such Bank under this Agreement or under any of
the other Credit Documents, including, without limitation, all interests in
Obligations purchased by such Bank pursuant to Section 14.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
13.3 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to any Credit Party,
at such Credit Party's address specified opposite its signature below; if to any
Bank, at its address specified op posite its name below; and if to the Agent, at
its Notice Of fice; or, as to any Credit Party, the Agent or the Co-Agent, at
such other address as shall be designated by such party in a written notice to
the other parties hereto and, as to each Bank, at such other address as shall be
designated by such Bank in a written notice to the Borrower and the Agent. All
such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective when deposited
in the mails, delivered to the telegraph company, cable company or overnight
courier, as the case may be, or sent by telex or telecopier, except that notices
and communications to the Agent or Co-Agent shall not be effective until
received by the Agent or Co-Agent.
13.4 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, HOWEVER, no Credit Party may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of all the Banks and, PROVIDED
FURTHER, that, although any Bank may transfer, assign or grant participations in
its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder
(and may not transfer or assign all or any portion of its Commitments hereunder
except as provided in Section 13.04(b)) and the transferee, assignee or
participant, as the case may be, shall not constitute a "Bank" hereunder and,
PRO VIDED FURTHER, that no Bank shall transfer or grant any par ticipation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would (i) extend the final scheduled maturity of any Loan, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the Final
Maturity Date) in which such par ticipant is participating, or reduce the rate
or extend the time of payment of interest or Fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest rates)
or reduce the principal amount thereof, or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment shall not constitute a change in the terms of
such participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the Collateral
under all of the Security Documents (except as expressly provided in the Credit
Documents) supporting the Loans hereunder in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the other Credit Documents (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of thy
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Commitments
and related outstanding Obliga tions hereunder to its parent company and/or any
Affiliate of such Bank which is at least 50% owned by such Bank or its parent
company or to one or more Banks or (y) assign all, or if less than all, a
portion equal to at least $5,000,000 in the aggregate for the assigning Bank or
assigning Banks, of such Commitments and related outstanding Obligations
hereunder to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Bank by execution of an Assignment and
Assumption Agreement, PROVIDED that, (i) at such time Schedule I shall be deemed
modified to reflect the Commit ments of such new Bank and of the existing Banks,
(ii) new Notes will be issued to such new Bank and to the assigning Bank upon
the request of such new Bank or assigning Bank, such new Notes to be in
conformity with the requirements of Section 1.05 to the extent needed to reflect
the revised Commitments, (iii) the consent of BTCo shall be required in
connection with any assignment of Revolving Loan Commitments (which consent
shall not be unreasonably withheld) and (iv) the Agent shall receive at the time
of each such assignment, from the assigning Bank,
<PAGE>
the payment of a non-refundable assignment fee of $3,000. To the extent of any
assignment pursuant to this Section 13.04(b), from and after the effective date
of such assignment the as signing Bank shall be relieved of its obligations
hereunder with respect to its assigned Commitments. At the time of each
assignment pursuant to this Section 13.04(b) to a Person which is not already a
Bank hereunder and which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Bank shall, to the extent legally entitled to do so, provide
to the Borrower in the case of a Bank described in clause (ii) or (iv) of
Section 4.04(b), the forms described in such clause (ii) or (iv), as the case
may be. To the extent that an assignment of all or any portion of a Bank's
Commitments and related outstanding Obligations pursuant to Section 1.11 or this
Section 13.04(b) would, at the time of such assignment, result in increased
costs under Section 1.08, 1.09, 2.06 or 4.04 from those being charged by the
respective assigning Bank prior to such assignment, then the Borrower shall not
be obligated to pay such increased costs (although the Borrower shall be
obligated to pay any other increased costs of the type described above resulting
from changes after the date of the respective assignment).
(c) Nothing in this Agreement shall prevent or pro hibit any Bank
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by such Bank from such Federal Reserve Bank.
13.5 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part
of the Agent, the Co-Agent or any Bank or any holder of any Note in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Borrower or any other Credit Party and the
Agent, the Co-Agent or any Bank or the holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Agent, the Co-Agent or any Bank or the
holder of any Note would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Agent, any Co-Agent or any Bank or the holder of any Note to any other or
further action in any circumstances without notice or demand.
13.6 PAYMENTS PRO RATA. (a) Except as otherwise provided in this
Agreement, the Agent agrees that promptly after its receipt of each payment from
or on behalf of the Borrower in respect of any Obligations hereunder, it shall
distribute such payment to the Banks (other than any Bank that has consented in
writing to waive its PRO RATA share of any such payment) PRO RATA based upon
their respective shares, if any, of the Obligations with respect to which such
payment was received.
<PAGE>
(b) Each of the Banks agrees that, if it should re ceive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of set off or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or other
wise), which is applicable to the payment of the principal of, or interest on,
the Loans, Unpaid Drawings, Commitment Commis sion or Letter of Credit Fees, of
a sum which with respect to the related sum or sums received by other Banks is
in a greater proportion than the total of such Obligation then owed and due to
such Bank bears to the total of such Obligation then owed and due to all of the
Banks immediately prior to such receipt, then such Bank receiving such excess
payment shall purchase for cash without recourse or warranty from the other
Banks an interest in the Obligations of the respective Party to such Banks in
such amount as shall result in a proportional participation by all the Banks in
such excess amount; PROVIDED that if all or any portion of such excess amount is
thereafter recovered from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
(c) Notwithstanding anything to the contrary con tained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
13.7 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with generally accepted accounting principles in the United States consistently
applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Borrower to the Banks);
PROVIDED that, except as otherwise spe cifically provided herein, all
computations of Excess Cash Flow and all computations determining compliance
with Sections 9.08 through 9.11, inclusive, shall utilize accounting principles
and policies in conformity with those used to prepare the historical financial
statements delivered to the Banks pursuant to Section 7.05(a).
(b) All computations of interest, Commitment Commis sion and Fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest, Commitment Commission or Fees are payable.
13.8 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER
CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN
CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CHOICE OF LAW PRINCIPLES THEREOF. ANY LEGAL ACTION OR
<PAGE>
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK IN NEW YORK COUNTY, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND
EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633
BROADWAY, NEW YORK, NEW YORK 10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, AP POINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE
BORROWER AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK
CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE
AGENT UNDER THIS AGREEMENT. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE
BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE CO-AGENT UNDER THIS AGREEMENT,
ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OB JECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CON TEMPLATED HEREBY OR THEREBY.
13.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
13.10 EFFECTIVENESS. This Agreement shall become effective on the
date (the "Effective Date") on which the Bor rower, the Agent, the Co-Agent and
each of the Banks shall have signed a copy hereof (whether the same or different
copies) and
<PAGE>
shall have delivered the same to the Agent at its Notice Office or, in the case
of the Banks, shall have given to the Agent telephonic (confirmed in writing),
written or telex notice (ac tually received) at such office that the same has
been signed and mailed to it. The Agent will give the Borrower, the Co-Agents
and each Bank prompt written notice of the occurrence of the Effective Date.
13.11 HEADINGS DESCRIPTIVE. The headings of the
several sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the meaning
or construction of any provision of this Agreement.
13.12 AMENDMENT OR WAIVER. (a) Neither this Agree ment nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks or, as set forth in Section 13.12(b) hereof, the Supermajority
Banks, the Supermajority Revolving Loan Banks or the Required Term Loan Banks,
PROVIDED that no such change, waiver, discharge or termination shall, without
the prior writ ten consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Final Maturity Date, or reduce the
rate or extend the time of payment of interest or Fees thereon, or reduce the
principal amount thereof, (ii) release all or substantially all of the
Collateral (except as expressly provided in the Security Documents) under all
the Security Documents, (iii) amend, modify or waive any provision of Section 5
or this Section 13.12, (iv) reduce the percentage specified in the definition of
Required Banks, or (v) consent to the assignment or transfer by any Credit Party
of any of its rights and obligations under any Credit Document; PROVIDED
FURTHER, that no such change, waiver, discharge or termination shall (w)
increase the Commitments of any Bank over the amount thereof then in effect
without the prior written consent of such Bank (it being understood that waivers
or modifications of conditions precedent, covenants, Defaults or Events of
Default or of a mandatory reduction in the Total Commitment shall not constitute
an increase of the Commitment of any Bank, and that an increase in the available
portion of any Commitment of any Bank shall not constitute an increase in the
Commitment of such Bank), (x) without the prior written consent of BTCo, amend,
modify or waive any provision of Section 2 or alter its rights or obligations
with respect to Letters of Credit or Swingline Loans, (y) without the prior
written consent of the Agent or the Co-Agent, amend, modify or waive any
provision of Section 12 as same applies to the Agent or the Co-Agent or any
other provision as same relates to the rights or obligations of the Agent or the
Co-Agent or (z) without the prior written consent of the Collateral Agent,
<PAGE>
amend, modify or waive any provision relating to the rights or
obligations of the Collateral Agent.
(b) Notwithstanding any of the foregoing, the prior written consent
of the (x) Supermajority Banks shall be required to (i) amend, modify or waive
any of the provisions or requirements of Sections 9.02 and 9.05 hereof or (ii)
reduce the percentage specified in the definition of Supermajority Banks and (y)
Supermajority Revolving Loan Banks and the Required Term Loan Banks shall be
required to (i) amend, modify or waive any of the definitions of Borrowing Base,
Eligible Receivables, Eligible Inventory, Foreign Letter of Credit Stated Amount
or Maximum Overadvance Amount and (ii) reduce the percentage specified in the
definition of Supermajority Revolving Loan Banks or Required Term Loan Banks, as
applicable.
13.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Sections 1.08, 1.09, 2.06, 4.04, 12.06 and 13.01 shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
13.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans
at, to or for the account of any office, Sub sidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.08, 1.09 or 4.04 from those
being charged by the respective Bank prior to such transfer, then the Borrower
shall not be obligated to pay such increased costs (although the Borrower shall
be obligated to pay any other increased costs of the type described above
resulting from changes after the date of the respective trans fer).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
ADDRESS:
Highway 268 West ITHACA INDUSTRIES, INC.
Wilkesboro, North Carolina
28697
Tel: (919) 667-5231
Fax: (919) 667-2979 By /s/ Eric Hoyle
--------------------------------
Title: Chief Financial Officer
Attention: Eric Hoyle
130 Liberty Street BANKERS TRUST COMPANY,
30th Floor individually and as Agent
New York, New York 10006
Tel: (212) 250-1724
Fax: (212) 250-7218
By /s/ Dana Klein
--------------------------------
Title: Vice President
Attention: Dana Klein
Two Paces West CANADIAN IMPERIAL BANK OF
2727 Paces Ferry Road COMMERCE, acting through one
Suite 1200 or more agencies, branches
Atlanta, GA 30339 or affiliates, as Co-Agent
Tel: (770) 319-4902
Fax: (770) 319-4954
By /s/ Douglas J. Smith
--------------------------------
Attention: Roger Colden Title: Senior Manager
277 Park Avenue - 9th Floor DLJ CAPITAL FUNDING
New York, NY 10017
Tel: (212) 892-2407
Fax: (212) 892-5286
By /s/ Stephen P. Hickey
--------------------------------
Title:
Attention: Wendy LaMantia
Two Paces West CIBC, INC.
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Tel: (770) 319-4902
Fax: (770) 319-4954
By /s/ Douglas J. Smith
--------------------------------
Title: Vice President
Attention: Roger Colden
<PAGE>
787 Seventh Avenue BANQUE PARIBAS
New York, NY 10019
Tel: (212) 841-2551
Fax: (212) 841-2333
By /s/ J. McCarthy
-----------------------------------
Title:
Attention: Mary Finnegan
11111 Santa Monica Boulevard FOOTHILL CAPITAL CORPORATION
Suite 1500
Los Angeles, CA 90025
Tel: (310) 996-7159
Fax: (310) 478-8785
By /s/ Karen S. Sandler
-----------------------------------
Title: Vice President
Attention: Karen Sandler
Two World Trade Center THE FUJI BANK, LIMITED
79-81st Floors
New York, NY 10048
Tel: (212) 898-2073
Fax: (212) 912-0516
By /s/ Masanobu Kobayashi
-----------------------------------
Title: Vice President and Manager
Attention: Mark Hanslin
One Parkview Plaza VAN KAMPEN AMERICAN CAPITAL
Oakbrook Terrace, IL 60181 PRIME RATE INCOME TRUST
Tel: (708) 684-6425
Fax: (708) 684-6740
By /s/ Brian Good
-----------------------------------
Title: Vice President
Attention: Jeffrey W. Maillet
85 Broad Street-26th Floor PEARL STREET/GOLDMAN SACHS
New York, NY 10004
Tel: (212) 902-2512
Fax: (212) 902-3757
By /s/ John E. Urbar
-----------------------------------
Title: Authorized Signer
Attention: Marnie Gordon
<PAGE>
1 South Wacker Drive- Suite 2800 SANWA BUSINESS CREDIT CORPORATION
Chicago, Il 60606
Tel: (312) 853-1326
Fax: (312) 853-8753
By /s/ Les Meier
-----------------------------------
Title: First Vice President
Attention: Les Meier
1900 East Ninth Street NATIONAL CITY BANK
Cleveland, OH 44114
Tel: (216) 575-3130
Fax: (216) 575-3053
By /s/ Jeffrey C. Geeding
-----------------------------------
Title: Vice President
Attention: Jeffrey C. Geeding
231 South LaSalle Street BANK OF AMERICA ILLINOIS
17th Floor
Chicago, Il 60697
Tel: (312) 828-6521
Fax: (312) 828-5423
By /s/ Christopher S. Field
-----------------------------------
Title:
Attention: Christopher Field
<PAGE>
Exhibit A
---------
Notice of Borrowing
Bankers Trust Co., as Agent for the Banks party to the
Credit Agreement referred to below
One Bankers Trust Plaza
New York, NY 10006
Attention: Mr. M. Egleston
Gentlemen:
The undersigned, Ithaca Industries , Inc. (the "Borrower"), refers to the
Amended and Restated Credit Agreement dated as of December 16, 1996 (as amended
from time to time, the "Credit Agreement", the terms defined therein being used
herein as defined), among the Borrower, various Banks from time to time party
thereto, Canadian Imperial Bank of Commerce, as Co-Agent and you as Agent for
such Banks and hereby gives you notice, irrevocably, pursuant to Section 1.03 of
the Credit Agreement, that the undersigned hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by Section
1.03 of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Borrowing is $
22,185,598.61.
(ii) The Business Day of the Proposed Borrowing is December 16, 1996.
(iii) The December Clean-Down Period shall begin on December 16, 1996.
(iv) The Proposed Borrowing is to consist of Revolving Loans.
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:
(a) the representations and warranties contained in the Credit Agreement
are and will be true and correct in all material respects, both before and after
giving effect to the Proposed Borrowing and to the application of the proceeds
thereof, as though made on such date ( it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date); and
<PAGE>
Notice of Borrowing
Page 2
(b) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
ITHACA INDUSTRIES, INC.
ERIC N. HOYLE
Senior Vice President Finance and Administration
Chief Financial Officer
ENH:btf/lem
<PAGE>
Exhibit B-1
-----------
AMENDED AND RESTATED TERM NOTE
$
------------ New York, New
York
December , 1996
FOR VALUE RECEIVED, ITHACA INDUSTRIES, INC., a Dela ware corporation
(the "Borrower"), hereby promises to pay to the order of (the "Bank"), in lawful
money of the United States of America in immediately available funds, at the
office of Bankers Trust Company (the "Agent") located at One Bankers Trust
Plaza, New York, New York 10006 on the Final Maturity Date (as defined in the
Agreement referred to below) the principal sum of DOLLARS ($ ) or, if less, the
then unpaid principal amount of all Term Loans (as defined in the Agreement)
made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Term Notes referred to in the Credit
Agreement, dated as of December 1, 1992 and amended and restated as of December
, 1996, among the Borrower, the lenders from time to time party thereto
(including the Bank), Canadian Imperial Bank of Commerce, acting through one or
more of its agencies, branches or affiliates, as Co-Agent and Bankers Trust
Company, as Agent (as from time to time in effect, the "Agreement"), and is
entitled to the benefits thereof. This Note is secured by the Security Documents
(as defined in the Agreement). As provided in the Agreement, this Note is
subject to voluntary prepayment and mandatory repayment prior to the Final
Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, pro test or notice
of any kind in connection with this Note.
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
ITHACA INDUSTRIES, INC.
By
---------------------------------
Title:
-2-
<PAGE>
Exhibit B-2
-----------
AMENDED AND RESTATED REVOLVING NOTE
$ New York, New
----------- York
December 16, 1996
FOR VALUE RECEIVED, ITHACA INDUSTRIES, INC., a Dela ware corporation
(the "Borrower"), hereby promises to pay to the order of (the "Bank"), in lawful
money of the United States of America in immediately available funds, at the
office of Bankers Trust Company (the "Agent") located at One Bankers Trust
Plaza, New York, New York 10006 on the Final Maturity Date (as defined in the
Agreement referred to below) the principal sum of DOLLARS ($ ) or, if less, the
then unpaid principal amount of all Revolving Loans (as defined in the
Agreement) made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.07 of the Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement, originally dated as of December 1, 1992 among the Borrower, the
lenders from time to time party thereto (including the Bank), Canadian Imperial
Bank of Commerce, acting through one or more of its agencies, branches or
affiliates, as Co-Agent and Bankers Trust Company, as Agent, as amended and
restated as of December 16, 1996 (as from time to time in effect, the
"Agreement"), and is entitled to the benefits thereof. This Note is secured by
the Security Documents (as defined in the Agreement). As provided in the
Agreement, this Note is subject to voluntary prepayment and mandatory repayment
prior to the Final Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, pro test or notice
of any kind in connection with this Note.
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
ITHACA INDUSTRIES, INC.
By
-------------------------
Title:
-2-
<PAGE>
Exhibit B-3
-----------
AMENDED AND RESTATED SWINGLINE NOTE
$5,000,000 New York, New York
December 16, 1996
FOR VALUE RECEIVED, ITHACA INDUSTRIES, INC., a Dela ware corporation
(the "Borrower"), hereby promises to pay to the order of BANKERS TRUST COMPANY
(the "Bank"), in lawful money of the United States of America in immediately
available funds, at the office of Bankers Trust Company (the "Agent") located at
One Bankers Trust Plaza, New York, New York 10006 on the Swingline Expiry Date
(as defined in the Agreement referred to below) the principal sum of FIVE
MILLION DOLLARS ($5,000,000) or, if less, the then unpaid principal amount of
all Swingline Loans (as defined in the Agreement) made by the Bank pursuant to
the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.07 of the Agreement.
This Note is the Swingline Note referred to in the Credit Agreement,
originally dated as of December 1, 1992, among the Borrower, the lenders from
time to time party thereto (including the Bank), Canadian Imperial Bank of
Commerce, acting through one or more of its agencies, branches or affiliates, as
Co-Agent and Bankers Trust Company, as Agent and amended and restated as of
December 16, 1996 (as from time to time in effect, the "Agreement"), and is
entitled to the benefits thereof. This Note is secured by the Security Documents
(as defined in the Agreement). As provided in the Agreement, this Note is
subject to voluntary prepayment and mandatory repayment prior to the Swingline
Expiry Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, pro test or notice
of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
<PAGE>
ITHACA INDUSTRIES, INC.
By
---------------------------------
Title:
-2-
<PAGE>
EXHIBIT C
---------
LETTER OF CREDIT REQUEST
No. (1) Dated (2)
--------- ----------------------
Bankers Trust Company, as Agent under the Amended and Restated Credit
Agreement (as amended, modified or supplemented from time to time, the "Credit
Agreement"), originally dated as of December 1, 1992 and amended and restated as
of December 16, 1996, among Ithaca Industries, Inc., the lenders from time to
time party thereto, Canadian Imperial Bank of Commerce, acting through one or
more of its agencies, branches or affiliates, as Co-Agent and Bankers Trust
Company, as Agent One Bankers Trust Plaza New York, New York 10006
Dear Sirs:
We hereby request that Bankers Trust Company, in its individual
capacity, issue a [Standby] [Trade] Letter of Credit for the account of the
undersigned on (3) (the "Date of Issuance") in the aggregate stated
-------------
amount of (4) .
------------
(1) Insert Letter of Credit Request Number.
(2) Insert date of Letter of Credit Request.
(3) Insert date of Issuance which shall be at least 10 Business Days
(or 2 Business Days in the case of Trade Letters of Credit) from the date hereof
(or, in each case, such shorter period as is acceptable to Bankers Trust
Company).
(4) Aggregate initial stated amount of Letter of Credit.
For purposes of this Letter of Credit Request, unless otherwise defined
herein, all capitalized terms used herein which are defined in the Credit
Agreement shall have the re spective meaning provided therein.
<PAGE>
The beneficiary of the requested Letter of Credit will be
(5) , and such Letter of Credit will be in support of (6) and
- ---------- --------------
will have a stated expiration date of (7) .
----------------
We hereby certify that:
(1) The representations and warranties contained in the Credit
Agreement will be true and correct in all material respects, before and after
giving effect to the issuance of the Letter of Credit requested hereby, on
the Date of Issuance (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be
required to be true and correct in all material respects only as of such
date).
(2) No Default or Event of Default has occurred and is continuing nor,
after giving effect to the issuance of the Letter of Credit requested hereby,
would such a Default or Event of Default occur.
(5) Insert name and address of beneficiary.
(6) Insert description of L/C Supportable Indebtedness and describe
obligation to which it relates in the case of Standby Letters of Credit and a
description of the commercial transaction which is being supported in the case
of Trade Letters of Credit.
(7) Insert last date upon which drafts may be presented which may not
be later than (i) 12 months after the Date of Issuance or, if earlier, the Final
Maturity Date for Standby Letters of Credit or (ii) 180 days after the Date of
Issuance or, if earlier, the Final Maturity Date in the case of Trade Letters of
Credit.
<PAGE>
EXHIBIT C
Copies of all documentation with respect to the supported transaction
are attached hereto.
ITHACA INDUSTRIES, INC.
By
--------------------------
Title:
<PAGE>
Exhibit D
---------
December 16, 1996
To the Agent, Co-Agent and each of the Banks
party to the Credit Agreement referred to below
Ladies and Gentlemen:
We have acted as counsel to Ithaca Industries, Inc., a
Delaware corporation (the "Borrower") in connection with the Amended and
Restated Credit Agreement, originally dated as of December 1, 1992 and amended
and restated as of December 16, 1996 ( the "Credit Agreement"), among the
Borrower, the lenders party thereto (the "Banks"), Bankers Trust Company, as
Agent (the "Agent") and Canadian Imperial Bank of Commerce, acting through one
or more agencies, branches or affiliates, as co-agent (the "Co-Agent"). Unless
otherwise indicated, capitalized terms used herein but not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
This opinion is being furnished to you at the request of the Borrower pursuant
to Section 5.03 of the Agreement.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such documents
as we have deemed necessary or appropriate as a basis for the opinions set forth
herein, including, the Credit Documents executed on or before the date hereof,
and such other public and corporate certificates, agreements, documents and
records as we deemed relevant and necessary as a basis for the opinions
hereinafter expressed.
<PAGE>
To the Agent, Co-Agent and each of the Banks 2
party to the Credit Agreement referred to below
In our examination of the Credit Documents, we have assumed, without
independent investigation, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the enforceability of the Credit
Documents against each party thereto other than the Borrower, the legal capacity
of all individuals who have executed any of the Credit Documents, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies of valid existing agreements or other documents and the
authenticity of the originals of all such copies. As to questions of fact, we
have relied upon the factual matters contained in the representations and
warranties of the Borrower made in the Credit Documents and upon certificates of
officers of the Borrower, public officials and other appropriate persons.
Based upon the foregoing, and subject to the assumptions, exceptions
and qualifications set forth herein, we are of the opinion that:
1. The Borrower (i) is a duly incorporated and validly existing
corporation in good standing under the laws of the State of Delaware, (ii) has
the corporate power and authority to own its property and assets and to transact
the business in which it is engaged and presently proposes to engage in, and
(iii) is duly qualified and is authorized to do business and is in good standing
in each jurisdiction listed on Schedule 1.
2. The Borrower has the corporate power and authority to execute,
deliver and perform the terms and provisions of each of the Credit Documents to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of each of such Credit Documents.
Assuming compliance with the laws of the jurisdictions in which the real
property subject to the Mortgages are located, the Borrower has duly executed
and delivered each of the Credit Documents to which it is a party and each of
such Credit Documents (other than the Mortgages as to which we express no
opinion) constitutes its legal, valid and binding obligation enforceable against
the Borrower, in accordance with its terms.
3. Neither the execution, delivery or performance by the Borrower of
the Credit Documents to which it is a party (including, without limitation, the
granting of Liens pursuant to the Security Documents), nor compliance by it with
the terms and provisions thereof, (i) will contravene or violate (x) any
provision of any law, statute, rule or regulation of the United States
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve
<PAGE>
To the Agent, Co-Agent and each of the Banks 3
party to the Credit Agreement referred to below
System) or the State of New York or the General Corporation Law of the State of
Delaware ("GCL"), or (y) any order, writ, injunction or decree of any court or
governmental instrumentality applicable to the Borrower of which we have
knowledge, (ii) will conflict with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
Lien (except for Liens in favor of the Collateral Agent or Original Cash
Collateral Agent for the benefit of the Secured Creditors pursuant to the
Security Documents) upon any of the property or assets of the Borrower pursuant
to the terms of the agreements set forth on Schedule 2, to which the Borrower is
a party or (iii) will violate any provision of the Certificate of Incorporation
or By-Laws of the Borrower.
4. To our knowledge, there are no actions, suits or proceedings
pending, or threatened with respect to any Credit Document.
5. Except for the filings which are necessary to perfect the
security interests granted under the Security Documents, no order, consent,
approval, license or authorization of, or filing, recording or registration with
(except as have been obtained or made prior to the Initial Borrowing Date), or
exemption by, any governmental or public body or authority of the United States
or the State of New York, or any subdivision thereof, or under the GCL is
required to authorize, or is required in connection with, (i) the execution,
delivery or performance of any Credit Document or (ii) the legality, validity,
binding effect or enforceability of any such Credit Document.
6. Neither the Borrower nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
7. Neither the Borrower nor any of its Subsidiaries is a "holding
company," or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
8. The Borrower is the record owner of all of the Pledged Stock (as
such term is defined in the Pledge Agreement) listed on Part I of Annex A to the
Pledge Agreement. After giving effect to the delivery to the Collateral Agent of
such Pledged Stock in the State of New York and assuming the continued
possession by the Collateral Agent of such Pledged Stock, and after giving
effect to the making of, or
<PAGE>
To the Agent, Co-Agent and each of the Banks 4
party to the Credit Agreement referred to below
amendment and restatement of, the Loans on the date hereof, the security
interest created in favor of the Collateral Agent under the Pledge Agreement
constitutes a valid and perfected security interest for the benefit of the
Secured Creditors and the Collateral Agent to secure the Obligations in all
right, title and interest of the Borrower in and to such Pledged Stock, which
security interest, assuming the Banks and the Collateral Agent are entering into
the Credit Agreement in good faith without notice of any adverse claim to the
Pledged Stock, has priority over any other security interest which can be
perfected under the Uniform Commercial Code of the State of New York (the
"NY-UCC"). No filings, registrations or recordings are required in order to
perfect (or maintain the perfection or priority of) the security interest
created under the Pledge Agreement.
9. After giving effect to the making of, or the amendment and
restatement of, the Loans on the date hereof, the security interest created in
favor of the Collateral Agent under the Security Agreement constitutes a valid
security interest in favor of the Collateral Agent, for the benefit of the
Secured Creditors and the Collateral Agent to secure the Obligations, in all
right, title and interest of the Borrower in and to the Collateral, to the
extent that Article 9 of the NY-UCC is applicable thereto. The UCC-1 financing
statements listed on Schedule 3 hereto (the "New York Financing Statements") are
in appropriate form for filing, and the filing offices listed on said Schedule 3
(the "New York Filing Offices") are all of the offices in New York in which
filings are required to perfect the security interest of the Collateral Agent
for the benefit of the Secured Creditors in the Collateral to the extent that
such perfection can be accomplished by filing under the NY-UCC. Assuming such
New York Financing Statements have been duly presented for filing to the New
York Filing Offices with the appropriate filing fees tendered, or duly accepted
for filing by the appropriate filing officers in each New York Filing Office,
and after giving effect to the making, or the amendment and restatement of, of
the Loans on the date hereof, then to the extent that security interests in the
Collateral may be perfected by filing under the NY-UCC, such filings have
resulted in the perfection of such security interests.
10. Assuming that the representation made by the Borrower in Section
2.4 of the Security Agreement with respect to the location of its chief
executive office is and remains true and correct, under the NY-UCC, the
perfection and the effect of perfection or non-perfection of the security
interests granted by the Borrower in its Receivables, Contracts, Contract Rights
and General Intangibles (as each such term is defined in the Security Agreement)
are governed by the laws (including the conflict of laws rules) of the State of
North Carolina to the extent that
<PAGE>
To the Agent, Co-Agent and each of the Banks 5
party to the Credit Agreement referred to below
said Receivables, Contracts, Contract Rights and General Intangibles consist of
"accounts" and "general intangibles" as described in the NY-UCC.
The foregoing opinion is subject to the following assumptions,
exceptions and qualifications:
(a) The enforceability of the Credit Documents may be: (i)
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting creditors' rights generally; (ii)
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity); and (iii)
subject to the qualification that certain remedial provisions of the Security
Agreement and the Pledge Agreement are or may be unenforceable in whole or in
part under the laws of the State of New York, but the inclusion of such
provisions does not make the remedies afforded by the Security Agreement and the
Pledge Agreement inadequate for the practical realization of the rights and
benefits purported to be provided thereby except for the economic consequences
resulting from any delay imposed by, or any procedure required by, applicable
New York laws, rules, regulations and court decisions and by constitutional
requirements in and of the State of New York.
(b) We express no opinion as to: (i) the enforceability of any
provisions contained in the Security Agreement and the Pledge Agreement that
purport to establish (or may be construed to establish) evidentiary standards;
(ii) the enforceability of any provisions contained in the Security Agreement
and the Pledge Agreement that constitute waivers which are prohibited under the
NY-UCC prior to default; (iii) the enforceability of forum selection clauses in
the federal courts; (iv) the enforceability of waiver of jury trial clauses; or
(v) the enforceability of any clause relating to indemnification or contribution
under federal or state securities laws.
(c) In giving the opinions set forth in paragraphs 8, 9 and 10
above, we express no opinion as to: (i) the Borrower's right, title or interest
in or to any Collateral or the description of such Collateral in the Security
Agreement or the Pledge Agreement; (ii) the laws of any other state or the
perfection and effect of perfection or non-perfection of a security interest in
the Collateral subject to the laws of any state other than New York; (iii) the
perfection of security interests in fixtures, equipment used in farming
operations, farm products, consumer goods, timber or minerals or the like, or
accounts resulting from the sale thereof; or (iv) the creation, validity,
perfection, priority or enforceability of any security interest sought to be
created in any patents, trademarks, trade names, service marks, copyrights,
deposit
<PAGE>
To the Agent, Co-Agent and each of the Banks 6
party to the Credit Agreement referred to below
accounts, insurance policies, real property or any other items of property to
the extent that a security interest therein is excluded from the coverage of
Article 9 of the NY-UCC. In addition, except as specifically set forth in
paragraphs 8 and 9 above, we express no opinion as to the perfection of any
security interest and, except as specifically set forth in paragraph 9 above, we
express no opinion as to the priority of any security interest.
(d) We wish to point out that in the case of proceeds (as
defined in Article 9 of the NY-UCC), the continuation of perfection of any
security interest therein (i) is limited to the extent set forth in Section
9-306 of the NY-UCC, and (ii) if such proceeds consist of property in which a
perfected security interest cannot be obtained or maintained by the filing of
the New York Financing Statements in the New York Filing Offices, will require
additional compliance with applicable provisions of the NY-UCC.
(e) We call to your attention the fact that (i) Article 9 of
the NY-UCC requires the filing of continuation statements within the period of
six months prior to the expiration of five years from the date of the original
filing of financing statements or the date of filing of any continuation
statement, as applicable, in order to maintain the effectiveness of the filings
referred to in this opinion, and (ii) additional filings may be necessary if any
debtor changes its name, identity or corporate structure or the jurisdictions in
which its places of business, its chief executive office or the Collateral are
located.
Our opinions expressed above are limited to the laws of the United
States of America and the State of New York and the GCL. Please be advised that
no member of this firm is admitted to practice in the State of Delaware. Our
opinions are rendered only with respect to the laws, and the rules, regulations
and orders thereunder, which are currently in effect.
This letter is furnished by us solely for your benefit in connection
with the transactions referred to in the Credit Agreement and may not be relied
upon by any other Person, except that the letter may be relied upon by any
Person who is a participant of a Bank or your or their respective counsel, or
who in the future, becomes a Bank or a participant of a Bank or their respective
counsel. We hereby authorize the Borrower's local counsel and intellectual
property counsel to rely upon
<PAGE>
To the Agent, Co-Agent and each of the Banks 7
party to the Credit Agreement referred to below
the matters set forth in this letter for purposes of, and as a basis for, the
delivery by such law firms of their opinions under Section 5.03 of the Credit
Agreement.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE>
SCHEDULE 1
Jurisdictions of Good Standing
BORROWER:
Alabama
California
Delaware
Florida
Georgia
Kentucky
Louisiana
New York
South Carolina
Texas
<PAGE>
9
SCHEDULE 2
List of Material Agreements
Intercompany Compromise and Settlement Agreement among the
Borrower, Bestform Foundations, Inc. and Ithaca Holdings, Inc., dated September
30, 1996.
<PAGE>
10
SCHEDULE 3
List of Financing Statements
In all cases the secured party is Bankers Trust Company, as
Collateral Agent.
DEBTOR FILING OFFICE
Ithaca Industries, Inc. Secretary of State, New York
Ithaca Industries, Inc. City Register of New York
County, State of New York
<PAGE>
Exhibit E
---------
ITHACA INDUSTRIES, INC.
OFFICER'S CERTIFICATE
I, the undersigned, Senior Vice President of Ithaca Industries,
Inc., a corporation organized and existing under the laws of the State of
Delaware (the "Company"), do hereby certify that:
1. This Certificate is furnished pursuant to the Amended and
Restated Credit Agreement, originally dated as of December 1, 1992 and amended
and restated as of December 16, 1996 (the "Credit Agreement"), among the
Company, the lenders from time to time party thereto, Canadian Imperial Bank of
Commerce, acting through one of more of its agencies, branches or affiliates, as
Co-Agent and Bankers Trust Company, as Agent. Unless otherwise defined herein,
capitalized terms used in this Certificate shall have the meanings set forth in
the Credit Agreement.
2. The following named individuals are elected officers of the
Company, each holds the office of the Company set forth opposite his name as of
December 16, 1996. The signature written opposite the name and title of each
such officer is his correct signature.
NAME OFFICE SIGNATURE
Jim D. Waller Chief Executive Officer,
President
----------------
R. Dean Riggs Executive Vice President
----------------
- ---------------------------- ------------------------ -----------------------
Eric N. Hoyle Senior Vice President
----------------
- ---------------------------- ------------------------ -----------------------
3. Attached hereto as Exhibit A is a copy of the Amended and
Restated Certificate of Incorporation of the Company as filed in the Office of
the Secretary of State of the State of Delaware on December 16, 1996, as in
effect the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy of the
Amended and Restated By-Laws of the Company which were duly adopted, are in full
force and effect on the date hereof.
5. Attached hereto as Exhibit C.1 is a true and correct copy of
resolutions which were duly adopted on October 4, 1996 by written consent of the
Board of Directors of the Company authorizing the filing of a petition for
relief under
<PAGE>
Page 2
the provisions of Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code"). Attached hereto as Exhibit C.2 is a true and correct copy of
the order of the Bankruptcy Court of the District of Delaware ("Bankruptcy
Court") dated November 22, 1996.
6. Attached hereto as Exhibit D are true and correct copies of all
Employee Benefit Plans of the Company.
7. As indicated in Exhibit E, there are no Shareholders'
Agreements with respect to the capital stock of the Company.
8. Attached hereto as Exhibit F is a true and correct copy of the
Management Agreement of the Company.
9. As indicated in Exhibit G, there are no Employment Agreements
of the Company.
10. As indicated in Exhibit H, there are no Collective Bargaining
Agreements of the Company.
11. Attached hereto as Exhibit I are true and correct copies of the
Debt Agreements of the Company.
12. Attached hereto as Exhibit J is a true and correct copy of the
Factoring Agreement of the Company.
13. On the date hereof, all of the conditions in Section 5 of the
Credit Agreement have been satisfied.
14. On the date hereof, the representations and warranties contained
in the Credit Agreement and in the other Credit Documents are true and correct
in all material respects, both before and after giving effect to each Credit
Event to occur on the date hereof and the application of the proceeds thereof
(it being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).
15. On the date hereof, no Default or Event of Default has occurred
and is continuing or would result from the Credit Events to occur on the date
hereof or from the application of the proceeds thereof.
16. There is no proceeding for the dissolution or liquidation of the
Company or threatening its existence.
17. On the date hereof, the liens on, pledges of and security
interests in the assets and property of the Borrower and its affiliates under
the
<PAGE>
Page 3
Original Security Agreement continue to constitute legal, valid, effective and
continuing first priority (except for Permitted Liens) liens, pledges and
security interests securing all Obligations.
18. On the date hereof, the pledges under the Original Pledge
Agreement continue to constitute legal, valid, effective and continuing first
priority pledges (except for Permitted Liens) securing all Obligations.
19. As of the date hereof, the following conditions precedent to the
effectiveness of the Reorganization Plan have been satisfied: (Capitalized terms
used in this paragraph 19 shall have the meaning set forth in the Reorganization
Plan):
(a) The aggregate amount of scheduled (where no superseding proof of
Claim is timely filed) and filed General Secured Claims did not exceed $150,000.
(b) The aggregate amount of scheduled (where no superseding proof of
Claim is timely filed) and filed General Unsecured Claims did not exceed
$20,000,000.
(c) The Clerk of the Bankruptcy Court has entered the Confirmation
Order and the Confirmation Order has become a Final Order. A draft Confirmation
Order was delivered to the Informal Committee, the Official Committee and the
Bank Group Steering Committee prior to the date of the Confirmation Hearing.
(d) All actions and documents necessary to implement the provisions
of the Plan on the Effective Date have been, respectively, effected or executed
and delivered.
(e) The New Ithaca Bank Group Documents are in form and substance
reasonably satisfactory to each Lender and the Informal Committee.
(f) A cash collateral (and, if applicable, a debtor-in-possession
financing) order has been entered in the Reorganization Case in form and
substance reasonably satisfactory to each Lender and the Informal Committee.
(g) All outstanding obligations of the Debtor under any
debtor-in-possession financing arrangements have been paid in full or otherwise
satisfied, and such arrangements have been terminated.
(h) The Termination Date has not passed.
The Debtor, with the consent of the Informal Committee and the Bank
Group Steering Committee has waived the condition precedent to the effectiveness
of the Plan which would have required the aggregate amount of scheduled (where
no superseding proof of Claim was timely filed) and filed Tax Claims and
Priority
<PAGE>
Page 4
Claims not to exceed $150,000 (exclusive of amounts required to cure defaults in
executory contracts or unexpired leases to be assumed pursuant to the Plan).
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of
December, 1996.
-----------------------------
Name: Eric N. Hoyle
Title: Senior Vice President
<PAGE>
Page 5
ITHACA INDUSTRIES, INC.
I, the undersigned, Chief Executive Officer and President, do hereby
certify that:
1. Eric N. Hoyle is a duly elected and qualified Senior Vice
President of the Company and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand this day of
-------
December, 1996.
-------------------------
Name: Jim D. Waller
Title: Chief Executive Officer
and President
<PAGE>
Exhibit F
---------
AMENDED AND RESTATED PLEDGE AGREEMENT
AMENDED AND RESTATED PLEDGE AGREEMENT (as amended, modified or
supplemented from time to time, this "Agreement"), originally dated as of
December 10, 1992 and amended and restated as of December 16, 1996, made by
ITHACA INDUSTRIES, INC., a Delaware corporation (the "Pledgor"), to BANKERS
TRUST COMPANY, as Collateral Agent (the "Pledgee") for the benefit of (x) the
Banks, the Co-Agent and the Agent (each as hereinafter defined) under, and any
other lenders from time to time party to, the Credit Agreement hereinafter
referred to (such Banks, the Co-Agent, the Agent and other lenders, if any, are
hereinafter called the "Bank Creditors") and (y) if one or more Banks enter into
one or more (i) interest rate protection agreements (including, without
limitation, in terest rate swaps, caps, floors, collars and similar agree
ments), (ii) foreign exchange contracts, currency swap agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency values and/or (iii) other types of hedging agreements from time to
time (collectively, the "Interest Rate Protection Agreements"), with, or
guaranteed by, the Pledgor, any such Bank or Banks (even if any such Bank
subsequently ceases to be a Bank under the Credit Agreement for any reason) so
long as any such Bank participates in the extension of such Interest Rate
Protection Agreements and their subsequent assigns, if any (collectively, the
"Other Creditors" and, together with the Bank Creditors, are hereinafter called
the "Secured Creditors"). Except as otherwise defined herein, terms used herein
and defined in the Credit Agreement shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, the Pledgor, the lenders (the "Banks") from time to time party
thereto, Canadian Imperial Bank of Commerce, acting through one or more of its
agencies, branches or affiliates, as Co-Agent (together with any successor
Co-Agent, the "Co-Agent") and Bankers Trust Company, as Agent (together with any
successor agent, the "Agent"), have entered into an Amended and Restated Credit
Agreement, originally dated as of December 1, 1992 and amended and restated as
of December , 1996, providing for the making of Loans and the issuance of, and
participation in, Letters of Credit as contemplated therein (as used herein, the
term "Credit Agreement" means the Amended and Restated Credit Agreement
described above in this paragraph, as the same may be amended, modified,
extended,
-1-
<PAGE>
renewed, replaced, restated or supplemented from time to time, and including any
agreement extending the maturity of, or restructuring (including, but not
limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Pledgor and whose obligations are guaranteed by the Pledgor
thereunder or any increase in the amount borrowed) all or any portion of the
Indebtedness under such agreement or any successor agreements;
WHEREAS, the Pledgor may at any time and from time to time enter into,
or guarantee obligations of its Subsidiaries under, one or more Interest Rate
Protection Agreements with one or more Other Creditors;
WHEREAS, it is a condition to each of the above described extensions of
credit to the Pledgor that the Pledgor shall have executed and delivered this
Agreement;
WHEREAS, the Pledgor desires to enter into this Agreement in order to
satisfy the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the above described extensions of
credit to be made to the Pledgor and other benefits accruing to the Pledgor, the
receipt and suf ficiency of which are hereby acknowledged, the Pledgor hereby
makes the following representations and warranties to the Pledgee for the
benefit of the Secured Creditors and hereby covenants and agrees with the
Pledgee for the benefit of the Secured Creditors as follows:
1. SECURITY FOR OBLIGATIONS. (a) This Agreement is made by the
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of and interest
on the Notes issued, and Loans made, under the Credit Agreement, and all
reimbursement obligations and Unpaid Drawings with respect to the Letters of
Credit under the Credit Agreement and (y) all other obligations and
indebtedness (including, without limitation, indemnities, Fees and interest
-2-
<PAGE>
thereon) of the Pledgor to the Bank Creditors now existing or hereafter
incurred under, arising out of, or in connection with the Credit Agreement
and the other Credit Documents and the due performance and compliance by the
Pledgor with all of the terms, conditions and agreements contained in the
Credit Agreement and the other Credit Documents (all such principal,
interest, obligations and liabilities described in this clause (i) being
herein collectively called the "Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
owing by the Pledgor to the Other Creditors under, or with respect to, any
Interest Rate Protection Agreement, whether such Interest Rate Protection
Agreement is now in existence or hereafter arising, and the due performance
and compliance by the Pledgor with all of the terms, conditions and
agreements contained therein (all such obligations and liabilities described
in this clause (ii) being herein collectively called the "Other
Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest in the
Collateral; and
(iv) in the event of any proceeding for the collec tion or enforcement of
any indebtedness, obligations, or liabilities of the Pledgor referred to in
clauses (i) and (ii), after an Event of Default (as such term is defined in
the Security Agreement) shall have occurred and be continuing, the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or
otherwise dispos ing of or realizing on the Collateral, or of any exercise by
the Pledgee of its rights hereunder, together with reasonable attorneys' fees
and court costs;
-3-
<PAGE>
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (iv) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
(b) Subject to the terms and conditions and relying on the
representations, warranties and covenants set forth herein and in the other
Credit Documents, the Original Pledge Agreement is hereby amended and restated
in its entirety and each reference to this Agreement shall be deemed to include
a reference to the Original Pledge Agreement as amended and restated hereby. The
Borrower agrees that the Liens and security interests granted under the Original
Pledge Agreement, and the Borrower's obligations thereunder and in respect
thereof, are continuing, valid and enforceable and are not subject to any
offset, reduction, defense, counterclaim or cause of action of any kind
whatsoever.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the
term "Stock" shall mean (x) with respect to corporations incorporated under the
laws of the United States or any State or territory thereof (each a "Domestic
Corporation"), all of the issued and outstanding shares of capital stock at any
time owned by the Pledgor of any Domestic Corporation and (y) with respect to
corporations not Domestic Corporations (each a "Foreign Corporation"), all of
the issued and outstanding shares of capital stock at any time owned by the
Pledgor of any Foreign Corporation; PROVIDED, that, except as provided in the
last sentence of this Section 2, the Pledgor shall not be required to pledge
hereunder more than 65% of the total combined voting power of all classes of
capital stock of any Foreign Corporation entitled to vote and (ii) the term
"Notes" shall mean (x) all promissory notes at any time issued to the Pledgor by
any of its Subsidiaries or Affiliates and (y) except as otherwise provided in
clause (A) of the immediately following proviso, all other promissory notes from
time to time issued to, or held by, the Pledgor if the aggregate principal
amount of each such promissory note is in excess of $10,000, provided that (A)
in the case of the immediately preceding clause (y), the aggregate principal
amount of all such promissory notes not required to be pledged hereunder shall
at no time exceed $100,000 and (B) except as provided in the last sentence of
this Section 2, the Pledgor shall not be required to pledge hereunder any
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promissory notes issued to the Pledgor by any Subsidiary of the Pledgor which is
a Foreign Corporation. As used herein, the term "Securities" shall mean all of
the Stock and Notes. The Pledgor represents and warrants, as to the Stock and
Notes owned by the Pledgor, that on the date hereof (a) the Stock consists of
the number and type of shares of the stock of the corporations as described in
Part I of Annex A hereto; (b) such Stock constitutes that percentage of the
issued and outstanding capital stock of the issuing corporation as is set forth
in Part I of Annex A hereto; (c) the Notes consist of the promissory notes
described in Part II of Annex A hereto; and (d) the Pledgor is the holder of
record and sole beneficial owner of the Stock and the Notes and there exist no
options or preemption rights in respect of any of the Stock. If following a
change in the relevant sections of the Code or the regulations, rules, rulings,
notices or other official pronouncements issued or promulgated thereunder which
would permit a pledge (x) of 66 2/3% or more of the total
combined voting power of all classes of capital stock of any Foreign Corporation
entitled to vote and (y) of any promissory note issued by any Subsidiary of the
Pledgor which is a Foreign Corporation without causing the undistributed
earnings of such Foreign Corporation as determined for Federal income taxes to
be treated as a deemed dividend to the Pledgor for Federal income tax purposes,
then the 65% limitation set forth in clause (i)(y) and the limitation in the
proviso of clause (ii) in each case of this Section 2 shall no longer be
applicable and the Pledgor shall duly pledge and deliver to the Pledgee such of
the Securities not theretofore required to be pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. PLEDGE. To secure the Obligations and for the purposes set forth
in Section 1, the Pledgor (i) hereby grants to the Pledgee a security interest
in all of the Collateral, (ii) hereby pledges and deposits with the Pledgee the
Securi ties owned by the Pledgor on the date hereof, and delivers to the Pledgee
certificates therefor, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank by the Pledgor (and
accompanied by any transfer tax stamps required in connection with the pledge of
such Securities, with signatures appropriately guaranteed to the extent
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required) in the case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee and (iii) hereby assigns, transfers, hypothecates and
sets over to the Pledgee all of the Pledgor's right, title and interest in and
to such Securities (and in and to the certificates or instruments evidencing
such Securities), to be held by the Pledgee, upon the terms and conditions set
forth in this Agreement.
3.2. SUBSEQUENTLY ACQUIRED SECURITIES. If the Pledgor shall acquire (by
purchase, stock dividend or other wise) any additional Securities at any time or
from time to time after the date hereof, the Pledgor will promptly thereaf ter
pledge and deposit such Securities (or certificates or in struments representing
Securities) as security with the Pledgee and deliver to the Pledgee certificates
or instruments therefor, duly endorsed in blank in the case of Notes, and
accompanied by undated stock powers duly executed in blank by the Pledgor (and
accompanied by any transfer tax stamps re quired in connection with the pledge
of such Securities, with signatures appropriately guaranteed to the extent
required) in the case of Stock, or such other instruments of transfer as
are acceptable to the Pledgee, and will promptly thereafter deliver to the
Pledgee a certificate executed by a principal executive officer of the Pledgor
describing such Securities and certifying that the same has been duly pledged
with the Pledgee hereunder. Subject to the last sentence of Section 2, the
Pledgor shall not be required at any time to pledge hereunder any Notes issued
to the Pledgor by a Subsidiary which is a Foreign Corporation or more than 65%
of the total combined voting power of all classes of capital stock of any
Foreign Corporation entitled to vote.
3.3. UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2, if any Securities (whether now owned
or hereafter acquired) are uncertificated securities, the Pledgor shall promptly
notify the Pledgee thereof, and shall promptly take all actions re quired to
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perfect the security interest of the Pledgee under applicable law (including, in
any event, under Sections 8-313 and 8-321 of the New York Uniform Commercial
Code if appli cable). The Pledgor further agrees to take such actions as the
Pledgee deems necessary or desirable to effect the foregoing and to permit the
Pledgee to exercise any of its rights and remedies hereunder, and agrees to
provide an opinion of counsel reasonably satisfactory to the Pledgee with
respect to any such pledge of uncertificated Securities promptly upon request of
the Pledgee.
3.4. DEFINITIONS OF PLEDGED STOCK; PLEDGED NOTES; PLEDGED SECURITIES
AND COLLATERAL. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock;" all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes;" all Pledged Stock and Pledged Notes together are called the "Pledged
Securities;" and the Pledged Securi ties, together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, are hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have
the right to appoint one or more sub agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee. The Pledgee shall promptly notify the
Pledgor of any such subagent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless
and until there shall have occurred and be continuing an Event of Default, the
Pledgor shall be entitled to vote any and all Pledged Securities owned by it,
and to give consents, waivers or ratifications in respect thereof, PROVIDED that
no vote shall be cast or any consent, waiver or ratification given or any action
taken which would violate, result in breach of any covenant contained in, or be
inconsistent with, any of the terms of this Agreement, the Credit Agreement, any
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other Credit Document or any Interest Rate Protection Agreement, or which would
have the effect of impairing the value of the Collateral or any part thereof or
the position or interests of the Pledgee or any Secured Creditor. All such
rights of the Pledgor to vote and to give consents, waivers and ratifications
shall cease in case an Event of Default has oc curred and is continuing, and
Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have
occurred and be continuing an Event of Default, all cash dividends and
distributions payable in re spect of the Pledged Stock and all payments in
respect of the Pledged Notes shall be paid to the Pledgor. The Pledgee shall be
entitled to receive directly, and to retain as part of the Collateral:
(a) all other or additional Stock or other securities (other than cash)
paid or distributed by way of dividend or otherwise, as the case may be, in
respect of the Pledged Stock;
(b) all other or additional Stock or other securi ties paid or
distributed in respect of the Pledged Stock by way of stock-split, spin-off,
split-up, reclassifica tion, combination of shares or similar rearrangement;
and
(c) all other or additional Stock or other securi ties or property
(excluding cash) which may be paid in respect of the Collateral by reason of
any consolidation, merger, exchange of stock, conveyance of assets, liquida
tion or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Col lateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by the Pledgor contrary to the provisions of this Section 6
and Section 7 shall be received in trust for
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the benefit of the Pledgee, shall be segregated from other property or funds of
the Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the
same form as so received (with any necessary endorsement).
7. REMEDIES IN CASE OF EVENTS OF DEFAULT. If there shall have occurred
and be continuing an Event of Default, then and in every such case, the Pledgee
shall be entitled to exercise all of the rights, powers and remedies (whether
vested in it by this Agreement, any other Credit Document, any Interest Rate
Protection Agreement or by law) for the protection and enforcement of its rights
in respect of the Collateral, and the Pledgee shall be entitled to exercise all
the rights and remedies of a secured party under the Uniform Commercial Code as
then in effect in the relevant jurisdiction and also shall be entitled, without
limitation, to exercise the following rights, which the Pledgor hereby agrees to
be commercially reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 to the Pledgor;
(b) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
(c) to accelerate any Pledged Note which may be ac celerated in
accordance with its terms, and take any other lawful action to collect upon
any Pledged Note;
(d) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers and
ratifications in re spect of the Collateral and otherwise act with respect
thereto as though it were the outright owner thereof (the Pledgor hereby
irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to do so);
and
(e) to sell, assign and deliver, or grant options to purchase, all or
any part of the Collateral, or any interest therein, at any public or private
sale, without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to redeem or
otherwise (all of which are hereby waived by the Pledgor), for cash, on
credit or for other property, for immediate or future delivery without any
assumption of credit risk, and for
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such price or prices and on such terms as the Pledgee in its absolute
discretion may determine, PROVIDED that at least 10 days' written notice of
the time and place of any such sale shall be given to the Pledgor. The
Pledgee shall not be obligated to make any such sale of Collateral regardless
of whether any such notice of sale has theretofore been given. The Pledgor
hereby waives and releases to the fullest extent permitted by law any right
or equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the Collateral
and any other security for the Obligations or otherwise. At any such sale,
unless prohibited by applicable law, (i) the Pledgee, on behalf of the
Secured Creditors, and any Secured Creditor may bid for and purchase all or
any part of the Collateral so sold free from any such right or equity of
redemption and (ii) may use and apply any of the Obligations owed to it (or,
in the case of Pledgor, any or all of the Obligations owed to the Secured
Creditors) as a credit on account of the purchase price payable at such sale.
Neither the Pledgee nor any Secured Creditor shall be liable for failure to
collect or realize upon any or all of the Collateral or for any delay in so
doing nor shall any of them be under any obligation to take any action
whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy
of the Pledgee provided for in this Agreement, the other Credit Documents, or
the Interest Rate Protection Agreements, or now or hereafter existing at law or
in equity or by statute shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise or beginning
of the exercise by the Pledgee or any Secured Creditor of any one or more of the
rights, powers or remedies provided for in this Agreement, the other Credit
Documents or the Interest Rate Protection Agreements or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
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simultaneous or later exercise by the Pledgee or any Secured Creditor of all
such other rights, powers or remedies, and no failure or delay on the part of
the Pledgee or any Secured Creditor to exercise any such right, power or remedy
shall operate as a waiver thereof. No notice to or demand on the Pledgor in any
case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any
of the rights of the Pledgee or any Secured Creditor to any other or further
action in any circumstances without notice or demand.
9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee upon
any sale or other disposition of the Col lateral, together with all other moneys
received by the Pledgee hereunder, shall be applied to the payment of the
Obligations in the manner provided by Section 7.4 of the Security Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees to indemnify and hold harmless the
Pledgee and each Secured Creditor and their respective successors, assigns,
employees, agents, attorneys and servants (individually an "Indemnitee," and
collectively the "Indemnitees") from and against any and all claims, demands,
losses, judgments and liabilities (including liabilities for penalties) of
whatsoever kind or nature, and to reimburse each Indemnitee for all costs and
expenses, including reasonable attorneys' fees and expenses, growing out of or
resulting from this Agreement or the exercise by any Indemnitee of any right or
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remedy granted to it hereunder or under the other Credit Documents or the
Interest Rate Protection Agreements. In no event shall any Indemnitee be liable
for any matter or thing in connection with this Agreement other than to account
for moneys actually received by it in accordance with the terms hereof. If and
to the extent that the obligations of the Pledgor under this Section 11 are
unenforceable for any reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a)
The Pledgor agrees that it will join with the Pledgee in ex
ecuting and, at its own expense, file and refile under the
Uniform Commercial Code or other applicable law such financing
statements, continuation statements and other documents in
such offices as the Pledgee may deem necessary or appropriate and wherever
required by law in order to perfect, continue and preserve the Pledgee's
security interest in the Collateral and hereby authorizes the Pledgee to file
financing statements and amendments thereto relative to all or any part of the
Collateral without the signature of the Pledgor where permitted by law, and
agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instru ments as
the Pledgee may reasonably require or deem advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder.
(b) The Pledgor hereby appoints the Pledgee the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's dis cretion
to take any action and to execute any instrument which the Pledgee may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement.
It is expressly understood and agreed that the obligations of the Pledgee as
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holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agree ment. By accepting the benefits hereof, each
Secured Creditor shall be deemed to have agreed to the terms and conditions set
forth in Article X of the Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time, which is incorporated
herein by reference in its entirety; PROVIDED that all references therein to
"this Agreement" shall be a reference to this Agreement, PROVIDED FURTHER that
all references therein to the "Assignor" shall be a reference to the "Pledgor,"
and PROVIDED FURTHER that all references therein to the "Collateral Agent" shall
be a reference to the "Pledgee." The Pledgee shall act hereunder on the terms
and conditions set forth in said Article X.
14. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except as may be
permitted in accordance with the terms of the Credit Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The
Pledgor represents and warrants that (a) it is, or at the time when pledged
hereunder will be, the legal, record and beneficial owner of, and has (or will
have) good title to, all Securities pledged hereunder, subject to no Lien
(except the Lien created by this Agreement); (b) it has full corporate power,
authority and legal right to pledge all the Securities pursuant to this
Agreement; (c) this Agreement has been duly authorized, executed and delivered
by the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms; (d) except to the extent
already obtained or made, no consent of any other party (including, without
limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required to be obtained by the Pledgor in
connection with (i) the execution, delivery or performance of this Agreement,
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(ii) the validity or enforceability of this Agreement, (iii) the perfection or
enforceability of the Pledgee's security interest in the Collateral or (iv) the
exercise by the Pledgee of any of its rights or remedies provided herein; (e)
the execution, delivery and performance of this Agreement will not violate any
provision of any applicable law or regulation or of any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign, applicable to the Pledgor, or of the Certificate of Incorporation or
By-Laws of the Pledgor or of any securities issued by the Pledgor or any of its
Subsidiaries, or of any mortgage, indenture, lease, loan agreement, credit
agreement or other contract, agreement or instrument or undertaking to which the
Pledgor or any of its Subsidiaries is a party or which purports to be binding
upon the Pledgor or any of its Subsidiaries or upon any of their respective
assets and will not result in the creation or imposition of (or the obligation
to create or impose) any lien or encumbrance on any of the assets of the Pledgor
or any of its Subsidiaries except as contemplated by this Agreement; (f) all the
shares of the Stock have been duly and validly issued, are fully paid and
non-assessable and are subject to no options to purchase or similar rights; (g)
each of the Pledged Notes constitutes, or when executed by the obligor thereof
will constitute, the legal, valid and binding obligation of such obligor,
enforceable in accordance with its terms; and (h) the pledge, assignment and
delivery to the Pledgee of the Securities pur suant to this Agreement creates a
valid and perfected first priority Lien in the Securities, and the proceeds
thereof, subject to no Lien or to any agreement purporting to grant to any third
party a Lien on the property or assets of the Pledgor which would include the
Securities. The Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Securities and the proceeds
thereof against the claims and demands of all persons whomsoever; and the
Pledgor covenants and agrees that it will have like title to and right to pledge
any other property at any time hereafter pledged to the Pledgee as Collateral
hereunder and will likewise defend the right thereto and security interest
therein of the Pledgee and the Secured Creditors.
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16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obli gations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, dis charged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addi tion or supplement to or
deletion from the Credit Documents, the Interest Rate Protection Agreements or
any other instrument or agreement referred to therein, or any assignment or
transfer of any thereof; (b) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or instrument
including, without limitation, this Agreement; (c) any furnishing of any addi
tional security to the Pledgee or its assignee or any accep tance thereof or any
release of any security by the Pledgee or its assignee; (d) any limitation on
any party's liability or obligations under any such instrument or agreement or
any in validity or unenforceability, in whole or in part, of any such instrument
or agreement or any term thereof; or (e) any bank ruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any
action taken with respect to this Agreement by any trustee or re ceiver, or by
any court, in any such proceeding, whether or not the Pledgor shall have notice
or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If there shall have occurred and be
continuing an Event of Default then, and in every such case, upon receipt by the
Pledgor from the Pledgee of a written request or requests that the Pledgor cause
any registration, qualification or compliance under any Federal or state
securities law or laws to be effected with respect to all or any part of the
Pledged Stock, the Pledgor as soon as practicable and at its expense will use
its best efforts to cause such registration to be effected (and be kept
effective) and will use its best efforts to cause such qualification and
compliance to be effected (and be kept effective) as may be so requested and as
would permit or facilitate the sale and dis tribution of such Pledged Stock,
including, without limitation, registration under the Securities Act of 1933, as
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then in effect (or any similar statute then in effect), appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with any other government requirements, PROVIDED that the
Pledgee shall furnish to the Pledgor such information regarding the Pledgee as
the Pledgor may request in writing and as shall be required in connection with
any such registration, qualification or compliance. The Pledgor will cause the
Pledgee to be kept advised in writing as to the progress of each such
registration, qualification or compliance and as to the completion thereof, will
furnish to the Pledgee such number of prospectuses, offering circulars or other
documents incident thereto as the Pledgee from time to time may reasonably
request, and will indemnify the Pledgee and all others participating in the
distribution of such Pledged Stock against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged untrue statement) of a
material fact contained therein (or in any related registra tion statement,
notification or the like) or by any omission (or alleged omission) to state
therein (or in any related reg istration statement, notification or the like) a
material fact required to be stated therein or necessary to make the state ments
therein not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing to the
Pledgor by the Pledgee expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7,
and such Pledged Securities or the part thereof to be sold shall not, for any
reason what soever, be effectively registered under the Securities Act of 1933,
as then in effect, the Pledgee may, in its sole and absolute discretion, sell
such Pledged Securities or part thereof by private sale in such manner and under
such circumstances as the Pledgee may deem necessary or advisable in order that
such sale may legally be effected without such registration. Without limiting
the generality of the foregoing, in any such event the Pledgee, in its sole and
absolute discretion (i) may proceed to make such private sale notwithstanding
that a registration statement for the purpose
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of registering such Pledged Securities or part thereof shall have been filed
under such Securities Act, (ii) may approach and negotiate with a single
possible purchaser to effect such sale, and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof. In the event of any such sale, the
Pledgee shall incur no responsibility or liability for selling all or any part
of the Pledged Securities at a price which the Pledgee, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration as aforesaid.
18. TERMINATION; RELEASE. (a) After the Termi nation Date (as defined
below), this Agreement shall terminate, and the Pledgee, at the request and
expense of the Pledgor, will execute and deliver to the Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
moneys at the time held by the Pledgee hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Commitments and all
Interest Rate Protection Agreements have been terminated, no Note under the
Credit Agreement is outstanding (and all Loans have been repaid in full), all
Letters of Credit have been terminated and all Obligations then owing have been
paid in full.
(b) Notwithstanding anything to the contrary con tained above, upon the
presentment of satisfactory evidence to the Pledgee in its sole and absolute
discretion that all obligations evidenced by any Pledged Note have been repaid
in full, and that any payments received by the Pledgor were permitted to be
received by the Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon
the request and at the expense of the Pledgor, duly assign, transfer and deliver
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to the Pledgor (without recourse and without any representation or warranty)
such Pledged Note if same is then in the possession of the Pledgee and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement.
(c) In the event that any part of the Collateral is sold in connection
with a sale permitted by Section 9.02 of the Credit Agreement or otherwise
released at the direction of the Supermajority Banks as set forth in Section
13.12 of the Credit Agreement (or all Banks if required by Section 13.12 of the
Credit Agreement) and the proceeds of such sale or sales or from such release
are applied in accordance with the provisions of Section 4.02 of the Credit
Agreement, to the extent required to be so applied, the Pledgee, at the request
and expense of the Pledgor, will duly assign, transfer and deliver to the
Pledgor (without recourse and without any representation or warranty) such of
the Collateral as is then being (or has been) so sold or released and as may be
in the possession of the Pledgee and has not theretofore been released pursuant
to this Agreement.
(d) At any time that the Pledgor desires that Col lateral be released
as provided in the foregoing subsection (a), (b) or (c), it shall deliver to the
Pledgee a certificate signed by its chief financial officer stating that the
release of the respective Collateral is permitted pursuant to such subsection
(a), (b) or (c). If requested by the Pledgee (although the Pledgee shall have no
obligation to make any such request), the Pledgor shall furnish appropriate
legal opinions (from counsel acceptable to the Pledgee), addressed to the
Pledgee, the Agent and the Co-Agent, to the effect set forth in the immediately
preceding sentence.
(e) The Pledgee shall have no liability whatsoever to any Secured
Creditor as the result of any release of Col lateral by it in accordance with
this Section 18 except for liability resulting from the Pledgee's gross
negligence or willful misconduct.
19. NOTICES, ETC. All notices and other communications hereunder
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shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed as fol lows:
(a) if to the Pledgor, at:
Ithaca Industries, Inc.
Highway 268 West
Wilkesboro, North Carolina 28697
Attention: Eric N. Hoyle
(b) if to the Pledgee, at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Dana Klein
(c) if to any Bank Creditor, at such address as
such Bank Creditor shall have specified in the Credit
Agreement;
(d) if to any Other Creditor at such address as
such Other Creditor shall have specified in writing to
the Pledgor and the Pledgee;
or at such other address as shall have been furnished in writ ing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and con ditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Pledgor and the Pledgee (with the written
consent of the Required Banks or, to the extent required by Section 13.12 of the
Credit Agreement with the consent of the Supermajority Banks or each of the
Banks); PROVIDED, HOWEVER, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class (as defined below) of
Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors (as defined below)
of such affected Class. For the purpose of this Agreement, the term "Class"
-19-
<PAGE>
shall mean each class of Secured Creditors, I.E., whether (y) the Bank Creditors
as holders of the Credit Agreement Obligations or (z) the Other Creditors as the
holders of the Other Obligations. For the purpose of this Agreement, the term
"Requisite Creditors" of any Class shall mean each of (x) with respect to the
Credit Agreement Obligations, the Required Banks and (y) with respect to the
Other Obligations, the hold ers of 51% of all obligations outstanding from time
to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
21. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF. The
headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
constitute one instrument. In the event that any provision of this Agreement
shall prove to be invalid or unenforceable, such provision shall be deemed to be
severable from the other provisions of this Agreement which shall remain binding
on all parties hereto.
22. RECOURSE. This Agreement is made with full re course to the
Pledgor and pursuant to and upon all the repre sentations, warranties, covenants
and agreements on the part of the Pledgor contained herein, in the other Credit
Documents, in the Interest Rate Protection Agreements and otherwise in writing
in connection herewith or therewith.
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected of ficers duly authorized as of
the date first above written.
ITHACA INDUSTRIES, INC.,
as Pledgor
By
----------------------------------
-20-
<PAGE>
Name:
Title:
BANKERS TRUST COMPANY, as
Collateral
Agent, as Pledgee
By
-----------------------------------
Name:
Title:
-21-
<PAGE>
Exhibit G
---------
AMENDED AND RESTATED SECURITY AGREEMENT
between
ITHACA INDUSTRIES, INC.
and
BANKERS TRUST COMPANY,
as Collateral Agent
Originally dated as of December 10, 1992
and Amended and Restated as of December __, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I SECURITY INTERESTS
2
0.1. Grant of Security Interests.......................... 2
0.2. Power of Attorney.................................... 3
1.
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND
COVENANTS 3
1.1. Necessary Filings 3
1.2. No Liens 4
1.3. Other Financing Statements 4
1.4. Chief Executive Office; Records 4
1.5. Location of Inventory and Equipment 5
1.6. Recourse 6
1.7. Trade Names; Change of Name 6
2.
ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES;
CONTRACT RIGHTS; INSTRUMENTS 7
2.1. Additional Representations and Warranties 7
2.2. Maintenance of Records 7
2.3. Direction to Account Debtors; Contracting
Parties; etc. 8
2.4. Modification of Terms; etc. 8
2.5. Collection 8
2.6. Instruments 9
2.7. Further Action 9
3.
ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS 9
3.1. Additional Representations and Warranties 9
3.2. Licenses and Assignments 10
3.3. Infringements 10
3.4. Preservation of Marks 10
3.5. Maintenance of Registration 11
3.6. Future Registered Marks 11
3.7. Remedies 11
4.
ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS
AND COPYRIGHTS 12
4.1. Additional Representations and Warranties 12
4.2. Licenses and Assignments 12
4.3. Infringements 12
-i-
<PAGE>
4.4. Maintenance of Patents 13
4.5. Prosecution of Patent Application 13
4.6. Other Patents and Copyrights 13
4.7. Remedies 13
5.
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL
13
5.1. Protection of Collateral Agent's Security............ 13
5.2 Warehouse Receipts Non-negotiable 14
5.3. Further Actions...................................... 14
5.4 Financing Statements 14
6.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 15
6.1. Remedies; Obtaining the Collateral Upon
Default 15
6.2. Remedies; Disposition of the Collateral 16
6.3. Waiver of Claims 17
6.4. Application of Proceeds 18
6.5. Remedies Cumulative 21
6.6. Discontinuance of Proceedings 21
7.
ARTICLE VIII INDEMNITY......................................... 22
7.1. Indemnity............................................ 22
7.2. Indemnity Obligations Secured by
Collateral; Survival.............................. 23
8.
ARTICLE IX .......................................DEFINITIONS
24
9.
ARTICLE X ..............................THE COLLATERAL AGENT
30
9.1. Appointment.......................................... 30
9.2. Nature of Duties..................................... 30
9.3. Lack of Reliance on the Collateral Agent............. 31
9.4........... Certain Rights of the Collateral Agent
32
9.5. Reliance............................................. 32
9.6. Indemnification...................................... 32
9.7. The Collateral Agent in its Individual
Capacity.......................................... 33
9.8. Holders.............................................. 34
9.9. Resignation by the Collateral Agent.................. 34
9.10. Fees and Expenses of Collateral Agent................ 34
10.
ARTICLE XI .....................................MISCELLANEOUS
35
10.1. Notices.............................................. 35
10.2. Waiver; Amendment.................................... 36
10.3. Obligations Absolute................................. 36
<PAGE>
10.4...........................Successors and Assigns
37
10.5. Headings Descriptive................................. 37
10.6. Severability......................................... 37
10.7. GOVERNING LAW........................................ 37
10.8. Assignor's Duties.................................... 37
10.9. Termination; Release................................. 38
10.10. Counterparts......................................... 39
ANNEX A Schedule of Permitted Filings
ANNEX B Schedule of Record Locations
ANNEX C Schedule of Inventory and Equipment Locations
ANNEX D Schedule of Trade, Fictitious and Other Names
ANNEX E Schedule of Marks
ANNEX F Schedule of License Agreements and Assignments
ANNEX G Schedule of Patents and Applications
ANNEX H Schedule of Copyrights and Applications
-iii-
<PAGE>
AMENDED AND RESTATED SECURITY AGREEMENT
---------------------------------------
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of December __, 1996
amending and restating the Security Agreement dated as of December 2, 1992 (the
"Original Security Agreement"), between ITHACA INDUSTRIES, INC., a Delaware
corporation (the "Assignor"), and BANKERS TRUST COMPANY, as Collateral Agent
(the "Collateral Agent") for the benefit of (x) the Banks, the Co-Agent and the
Agent (each as hereinafter defined) under, and any other lenders from time to
time party to, the Credit Agreement hereinafter referred to (such Banks, the
Co-Agent, the Agent and other lenders, if any, are hereinafter called the "Bank
Creditors") and (y) if one or more Banks enter into one or more (i) interest
rate protection agreements (including, without limitation, interest rate swaps,
caps, floors, collars and similar agreements), (ii) foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against the fluctuations in currency values and/or (iii) other types of
hedging agreements from time to time (collectively, the "Interest Rate
Protection Agreements") with, or guaranteed by, the Assignor, any such Bank or
Banks (even if any such Bank subsequently ceases to be a Bank under the Credit
Agreement for any reason) so long as any such Bank participates in the extension
of such Interest Rate Protection Agreements and their subsequent assigns, if any
(collectively, the "Other Creditors" and, together with the Bank Creditors, are
hereinafter called the "Secured Creditors"). Except as otherwise defined herein,
terms used herein and defined in the Credit Agreement shall be used herein as so
defined.
W I T N E S S E T H :
WHEREAS, the Assignor, the lenders (the "Banks") from time to time
party thereto, Canadian Imperial Bank of Commerce, acting through one or more of
its agencies, affiliates or branches, as Co-Agent (together with any successor
Co-Agent, the "Co-Agent") and Bankers Trust Company, as Agent (together with any
successor agent, the "Agent"), have entered into an Amended and Restated Credit
Agreement, originally dated as of December 1, 1992 and amended and restated as
of December , 1996, providing for the amending and restating of Term Loans and
the making of Revolving Loans and the issuance of, and participation in, Letters
of Credit as contemplated therein (as used herein, the term "Credit Agreement"
means the Amended and Restated Credit Agreement described above in this
paragraph, as the same may be amended, modified, extended, renewed, replaced,
restated or supplemented from time to time, and including any agreement
extending the maturity of, restructuring (including, but not limited to, the
inclusion of additional
<PAGE>
borrowers thereunder that are Subsidiaries of the Assignor and whose obligations
are guaranteed by the Assignor thereunder or any increase in the amount
borrowed) all or any portion of the Indebtedness under such agreement or any
successor agreements;
WHEREAS, the Assignor may at any time and from time to time enter into,
or guarantee obligations of its Subsidiaries under, one or more Interest Rate
Protection Agreements with one or more Other Creditors;
WHEREAS, it is a condition to each of the above-described extensions of
credit to the Assignor that the As signor shall have executed and delivered this
Agreement;
WHEREAS, the Assignor desires to enter into this Agreement in order the
satisfy the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the extensions of credit to be made
to the Assignor and other benefits accruing to the Assignor, the receipt and
sufficiency of which are hereby acknowledged, the Assignor hereby makes the
following representations and warranties to the Collateral Agent for the benefit
of the Secured Creditors and hereby covenants and agrees with the Collateral
Agent for the benefit of the Secured Creditors as follows:
1.
ARTICLE I
SECURITY INTERESTS
1.1. GRANT OF SECURITY INTERESTS. (a) As security for the prompt and
complete payment and performance when due of all of the Obligations, the
Assignor does hereby sell, assign and transfer unto the Collateral Agent, and
does here by grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority (subject to Liens
evidenced by Permitted Filings and other Liens permitted under Section 9.01 of
the Credit Agreement) in, all of the right, title and interest of the Assignor
in, to and under all of the following, whether now existing or hereafter from
time to time acquired: (i) each and every Receivable, (ii) all Contracts,
together with all Contract Rights arising thereunder, (iii) all Inventory, (iv)
the Cash Collateral Account (B) established for the Assignor and all monies,
securities and instruments deposited or required to be deposited in such Cash
Collateral Account (B), (v) all Equipment, (vi) all Marks, together with the
registrations and right to all renewals thereof, and the goodwill of the
business of the Assignor symbolized by the Marks, (vii) all Patents and
Copyrights, and all reissues, renewals or extensions thereof, (viii) all
computer programs of the Assignor and all intellectual property rights therein
and all other proprietary information of the Assignor, including, but not
limited to, Trade Secrets, (ix) all other Goods, General Intangibles, Chattel
Paper, Documents and
<PAGE>
Instruments (other than the Pledged Securities), and (x) all Proceeds and
products of any and all of the foregoing (all of the above, collectively, the
"Collateral").
(b) The security interests of the Collateral Agent under this Agreement
extend to all Collateral of the kind which is the subject of this Agreement
which the Assignor may acquire at any time during the continuation of this Agree
ment.
(c) Subject to the terms and conditions and relying on the
representations, warranties and covenants set forth herein and in the other
Credit Documents, the Original Security Agreement is hereby amended and restated
in its entirety and each reference to this Agreement shall be deemed to include
a reference to the Original Security Agreement as amended and restated hereby.
The Borrower agrees that the Liens and security interests granted under the
Original Security Agreement, and the Borrower's obligations thereunder and in
respect thereof, are continuing, valid and enforceable and are not subject to
any offset, reduction, defense, counterclaim or cause of action of any kind
whatsoever.
1.2. POWER OF ATTORNEY. The Assignor hereby consti tutes and appoints
the Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of the Assignor or otherwise), in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement, which appointment as attorney is coupled with an interest.
2.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Assignor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
2.1. NECESSARY FILINGS. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted by the As signor to the Collateral Agent hereby in respect of
the Col lateral have been or shall have been accomplished and the security
interest granted to the Collateral Agent pursuant to the Original Security
Agreement and continued pursuant to this Agreement in and to the Collateral
constitutes or shall constitute a perfected security interest therein prior to
the rights of all other Persons therein and subject to no other Liens (except
that the Collateral may be subject to the security interests evidenced by the
financing statements dis closed on Annex A hereto, but only to the respective
date, if any, set forth on Annex A (the "Permitted Filings") and to any other
Liens permitted under Section 9.01 of the Credit Agreement) and is or shall be
entitled to all the rights, priorities and benefits afforded by the Uniform
Commercial Code or other relevant law as enacted in any relevant juris diction
to perfected security interests.
2.2. NO LIENS. The Assignor is, and as to Collateral acquired by it
from time to time after the date hereof the Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby, Liens
permitted under Section 9.01 of the Credit Agreement or evidenced by the
Permitted Filings), and the Assignor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
2.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdic tion) on file or of record in any relevant jurisdiction
covering or purporting to cover any interest of any kind in the Collateral
except as disclosed in Annex A hereto and so long as the Total Commitments have
not been terminated or any Letter of Credit or Note remains outstanding or any
of the obligations remain unpaid or any Interest Rate Protection or Other
Hedging Agreement remains in effect or any Obligations are owed with respect
thereto, the Assignor will not execute or authorize to be filed in any public
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by the Assignor.
2.4. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of the
Assignor is located at Highway 268 West, Wilkesboro, North Carolina 28697. The
Assignor will not move its chief executive office except to such new location as
the Assignor may establish in accordance with the last sentence of this Section
2.4. The originals of all documents evidencing all Receivables and Contract
Rights and Trade Secrets of the Assignor and the only original books of account
and records of the Assignor relating thereto are, and will continue to be, kept
at such chief executive office, at such other locations shown on Annex B hereto
or at such new locations as the Assignor may establish in accordance with the
last sentence of this Section 2.4. All Receivables and Contract Rights of the
Assignor are, and will continue to be, maintained at, and controlled and
directed (including, with out limitation, for general accounting purposes) from,
the office locations described above. The Assignor shall not es tablish new
locations for such offices until (i) it shall have given to the Collateral Agent
not less than 30 days' prior written notice of its intention so to do, clearly
describing such new location and providing such other
<PAGE>
information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new location, it shall have taken all action
to maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect and (iii) at the request of the Collateral Agent, it shall have furnished
an opinion of counsel acceptable to the Collateral Agent to the effect that all
financing or continuation statements and amendments or supplements thereto have
been filed in the appropriate filing office or offices, and all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and Equipment
held on the date hereof by the As signor is located at one of the locations
shown on Annex C hereto or is In-Transit Inventory (as defined in the Credit
Agreement). The Assignor agrees that all Inventory and all Equipment now held or
subsequently acquired by it shall be kept at (or shall be in transport to) any
one of the loca tions shown on Annex C hereto, or such new location as the
Assignor may establish in accordance with the last sentence of this Section 2.5.
The Assignor may establish a new loca tion for Inventory and Equipment only if
(i) it shall have given to the Collateral Agent not less than 30 days' prior
written notice of its intention so to do, clearly describing such new location
and providing such other information in connection therewith as the Collateral
Agent may reasonably request, (ii) with respect to such new location, as
promptly as practicable and in no event later than 30 days after the
establishment thereof, it shall have taken all action to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect and (iii) at the
request of the Collateral Agent, it shall have furnished an opinion of counsel
acceptable to the Collateral Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the appropriate filing office or offices, and all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such fil ings) have been taken, in order to perfect (and
maintain the perfection and priority of) the security interest granted hereby.
2.6. RECOURSE. This Agreement is made with full recourse to the
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of the Assignor contained herein, in the other Credit
Documents, in the Interest Rate Protection Agreements and otherwise in writing
in connection herewith or therewith.
<PAGE>
2.7. TRADE NAMES; CHANGE OF NAME. The Assignor does not have or operate
in any jurisdiction under, or in the pre ceding 12 months has not had or has not
operated in any jurisdiction under, any trade names, fictitious names or other
names (including, without limitation, any names of divisions or operations)
except its legal name and such other trade, fictitious or other names as are
listed on Annex D hereto. The Assignor shall not change its legal name or assume
or operate in any jurisdiction under any trade, ficti tious or other name except
those names listed on Annex D hereto and new names (including, without
limitation, any names of divisions or operations) established in accordance with
the last sentence of this Section 2.7. The Assignor shall not assume or operate
in any jurisdiction under any new trade, fictitious or other name until (i) it
shall have given to the Collateral Agent not less than 30 days' prior written
notice of its intention so to do, clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new name, it shall have taken all action to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect and (iii) at the request of the Collateral Agent, it shall have fur
nished an opinion of counsel acceptable to the Collateral Agent to the effect
that all financing or continuation state ments and amendments or supplements
thereto have been filed in the appropriate filing office or offices, and all
other actions (including, without limitation, the payment of all filing fees and
taxes, if any, payable in connection with such filings) have been taken, in
order to perfect (and main tain the perfection and priority of) the security
interest granted hereby.
3.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time when
each of its Receivables arises, the Assignor shall be deemed to have represented
and warranted that such Receivable, and all records, papers and documents
relating thereto (if any) are genuine and in all respects what they purport to
be, and that all papers and documents (if any) relating thereto (i) will
represent the genuine, legal, valid and binding obligation of the account debtor
evidencing indebtedness unpaid and owed by the respective account debtor arising
out of the performance of labor or services or the sale or lease and delivery of
the merchandise listed therein, or both, (ii) will be the only original writings
evidencing and embodying such obligation of the account debtor named therein
(other than copies created for general accounting purposes), (iii) will evidence
true and valid obligations, enforceable in accordance with their respective
terms and (iv) will be in compliance and will conform in all material
<PAGE>
respects with all applicable federal, state and local laws and applicable laws
of any relevant foreign jurisdiction.
3.2. MAINTENANCE OF RECORDS. The Assignor will keep and maintain at its
own cost and expense satisfactory and complete records of its Receivables and
Contracts, including, but not limited to, the originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and the Assignor will make the same available on the
Assignor's premises to the Collateral Agent for inspection, at the Assignor's
own cost and expense, at any and all reasonable times upon demand. Upon the
occurrence and during the continuance of an Event of Default and upon the
request of the Collateral Agent, the Assignor shall, at its own cost and
expense, deliver all tangible evidence of its Receivables and Contract Rights
(including, without limitation, all documents evidencing the Receivables and all
Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by the Assignor). Upon the occurrence and during the continuance of an Event of
Default, if the Collateral Agent so directs, the Assignor shall legend, in form
and manner reasonably satisfactory to the Collateral Agent, the Receivables and
the Contracts, as well as books, records and documents of the Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Collateral Agent and that the Collateral Agent has a security interest
therein.
3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PAR TIES; ETC. Upon the
occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs the Assignor, the Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account (B) established for the Assignor, (y) that the
Collateral Agent may, at its op tion, directly notify the obligors with respect
to any Receivables and/or under any Contracts to make payments with respect
thereto as provided in the preceding clause (x) and (z) that the Collateral
Agent may enforce collection of any such Receivables and Contracts and may
adjust, settle or com promise the amount of payment thereof, in the same manner
and to the same extent that the Assignor might have done. With out notice to or
assent by the Assignor, the Collateral Agent may apply any or all amounts then
in, or thereafter deposited in, the Cash Collateral Account (B) in the manner
provided in Section 7.4 of this Agreement. The costs and expenses (in cluding
reasonable attorneys' fees and expenses) of collec tion, whether incurred by the
Assignor or the Collateral Agent, shall be borne by the Assignor.
<PAGE>
3.4. MODIFICATION OF TERMS; ETC. The Assignor shall not rescind or
cancel any indebtedness evidenced by any Receivable or under any Contract, or
modify any term relating to such indebtedness or make any adjustment with
respect thereto, or extend or renew the same, or compromise or settle any
material dispute, claim, suit or legal proceeding relating thereto, (or, except
as provided in the Credit Agreement, sell any Receivable or Contract, or
interest therein, without the prior written consent of the Collateral Agent,
except as permitted by Section 3.5. The Assignor will duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts and will do nothing to impair the rights of the
Collateral Agent in the Receivables or Contracts.
3.5. COLLECTION. The Assignor shall endeavor to cause to be collected
from the account debtor named in each of its Receivables or obligor under any
Contract, as and when due (including, without limitation, amounts which are
delin quent, such amounts to he collected in accordance with gener ally accepted
lawful collection procedures) any and all amounts owing under or on account of
such Receivable or Con tract, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Receivable or
under such Contract, except that, prior to the occurrence of an Event of
Default, the Assignor may allow in the ordinary course of business as
adjustments to amounts owing under its Receivables and Contracts (i) an
extension or renewal of the time or times of payment, or settlement for less
than the total unpaid balance, which the Assignor finds appropriate in
accordance with sound business judgment and (ii) a refund or credit due as a
result of returned or dam aged merchandise or improperly performed services. The
costs and expenses (including, without limitation, attorneys' fees and expenses)
of collection, whether incurred by the Assignor or the Collateral Agent, shall
be borne by the Assignor.
3.6. INSTRUMENTS. If the Assignor owns or acquires any Instrument
constituting Collateral (and not otherwise re quired to be pledged pursuant to
the Pledge Agreement), the Assignor will within ten days notify the Collateral
Agent thereof, and upon request by the Collateral Agent will promptly deliver
such Instrument to the Collateral Agent appropriately endorsed to the order of
the Collateral Agent as further security hereunder.
3.7. FURTHER ACTION. The Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or de liver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
4.
<PAGE>
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS
4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Assignor represents
and warrants that it is the true and lawful exclusive owner of the Marks listed
in Annex E hereto and that said listed Marks include all the United States
federal registrations or applications registered in the United States Patent and
Trademark Office. The Assignor represents and warrants that it owns or is
licensed to use or is not prohibited from using all Marks that it uses. The
Assignor further warrants that it is aware of no third party claim that any
aspect of the Assignor's present or contemplated business operations infringes
or will infringe any Mark. The Assignor represents and warrants that it is the
owner of record of all United States registrations and applications listed in
Annex E hereto and that said registrations are valid, subsisting, have not been
cancelled and that the Assignor is not aware of any third-party claim that any
of said registrations is invalid or unenforceable. The Assignor hereby grants to
the Collateral Agent an absolute power of attorney to sign, upon the occurrence
and during the continuance of an Event of Default, any document which may be
required by the United States Patent and Trademark Office in order to effect an
absolute assignment of all right, title and interest in each Mark and associated
goodwill, and record the same. The Assignor represents and warrants that it has
executed an Assignment of Security Interest in U.S. Trademarks, dated as of the
date hereof, in favor of the Collateral Agent and in form and substance
acceptable to the Collateral Agent.
4.2. LICENSES AND ASSIGNMENTS. Other than the license agreements listed
on Annex F hereto and any extensions or renewals thereof, the Assignor hereby
agrees not to divest itself of any right under any Significant Mark absent prior
written approval of the Collateral Agent.
4.3. INFRINGEMENTS. The Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who may be infringing or otherwise violating any of the Assignor's
rights in and to any Significant Mark, or with respect to any party claiming
that the Assignor's use of any Sig nificant Mark violates any property right of
that party, in each case to the extent that the Assignor reasonably believes
that such infringement or violation is material to its business. The Assignor
further agrees, unless otherwise agreed by the Collateral Agent, diligently to
prosecute any Person infringing any Significant Mark to the extent that the
Assignor reasonably believes that such infringement is material to its business.
4.4. PRESERVATION OF MARKS. The Assignor agrees to use its Significant
Marks in interstate commerce during the time in which this Agreement is in
effect, sufficiently to preserve such Significant Marks as trademarks or service
marks registered under the laws of the United States.
4.5. MAINTENANCE OF REGISTRATION. The Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
1.5 U.S.C. ss.ss. 1051 ET SEQ. to maintain trademark registration, including but
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its Significant
Marks pursuant to 15 U.S.C. ss.ss. 1058(a), 1059 and 1065, and shall pay all
fees and disbursements in connection therewith and shall not abandon any such
filing of affidavit of use or any such application of renewal prior to the
exhaustion of all administrative and judicial remedies without prior written
consent of the Collateral Agent.
<PAGE>
4.6. FUTURE REGISTERED MARKS. If any Mark registration issues hereafter
to the Assignor as a result of any application now or hereafter pending before
the United States Patent and Trademark Office, within thirty (30) days of
receipt of such certificate the Assignor shall deliver a copy of such
certificate, and a grant of security in such mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be satisfactory to the Collateral Agent.
4.7. REMEDIES. If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the Assignor, take any or all of
the following actions: (i) declare the entire right, title and interest of the
Assignor in and to each of the Marks and the goodwill of the business associated
therewith, together with all trademark rights and rights of protection to the
same, vested, in which event such rights, title and interest shall immediately
vest, in the Col lateral Agent for the benefit of the Secured Creditors, in
which case the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 to execute, cause to be acknowledged and
notarized and record said absolute assignment with the applicable agency; (ii)
take and use or sell the Marks and the goodwill of the Assignor's business
symbolized by the Marks and the right to carry on the business and use the
assets of the Assignor in connection with which the Marks have been used; and
(iii) direct the Assignor to refrain, in which event the Assignor shall refrain,
from using the Marks in any manner whatsoever, directly or indirectly, and, if
requested by the Collateral Agent, change the Assignor's corporate name to
eliminate therefrom any use of any Mark and execute such other and further
documents that the Collateral Agent may request to further confirm this and to
transfer ownership of the Marks and registrations and any pending trademark
application in the United States Patent and Trademark office or any equivalent
government agency or office in any foreign jurisdiction to the Collateral Agent.
5.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS
5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Assignor represents
and warrants that it is the true and lawful exclusive owner of all rights in the
Patents listed in Annex G hereto and in the Copyrights listed in Annex H hereto,
that said Patents include all the United States patents and applications for
United States patents that such Assignor now owns and that said Copyrights
constitute all the United States copyrights registered with the United States
Copyright Office and applications for United States copyrights that the Assignor
now owns. The Assignor represents and warrants that it owns or is licensed to
practice under all Patents and Copyrights that it now uses or practices under.
The Assignor further warrants that it is aware of no third party claim that any
aspect of the Assignor's present or contemplated business operations in fringes
or will infringe any patent or any copyright. The Assignor hereby grants to the
Collateral Agent an absolute power of attorney to sign, upon the occurrence and
during the continuance of any Event of Default, any document which may be
required by the United States Patent and Trademark Office or the United States
Copyright Office in order to effect an absolute assignment of all right, title
and interest in each Patent and Copyright, and record the same. The Assignor
represents and warrants that it has executed an Assignment of Security Interest
in U.S. Patents, dated as of the date hereof, in favor of the Collateral Agent
and in form and substance satisfactory to the Collateral Agent.
<PAGE>
5.2. LICENSES AND ASSIGNMENTS. Other than the license agreements listed
on Annex F hereto and any extensions or renewals thereof, the Assignor hereby
agrees not to divest itself of any right under any Significant Patent or
Significant Copyright absent prior written approval of the Collateral Agent.
5.3. INFRINGEMENTS. The Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to the Assignor with respect to any infringement or other
violation of the Assignor's rights in any Significant Patent or Significant
Copyright, or with respect to any claim that practice of any Significant Patent
or Significant Copyright violates any property right of that party, in each case
to the extent that the Assignor reasonably believes that such infringement or
violation is material to its business. The Assignor further agrees, absent
direction of the Collateral Agent to the contrary, diligently to prosecute any
Person infringing any Significant Patent or Significant Copyright to the extent
that the Assignor reasonably believes that such infringement is material to its
business.
5.4. MAINTENANCE OF PATENTS. At its own expense, the Assignor
shall make timely payment of all post-issuance fees required pursuant to
35 U.S.C. ss. 41 to maintain in force its present rights under each
Significant Patent.
5.5. PROSECUTION OF PATENT APPLICATION. At its own expense, this
Assignor shall diligently prosecute all applications for Significant Patents
listed in Annex G hereto and shall not abandon any such application prior to
exhaustion of all- administrative and judicial remedies, absent written consent
of the Collateral Agent.
5.6. OTHER PATENTS AND COPYRIGHTS. Within 30 days of acquisition of a
Patent or Copyright, or of filing of an application for a Patent or Copyright,
the Assignor shall deliver to the Collateral Agent a copy of said Patent or
Copyright or such application, as the case may be, with a grant of security as
to such Patent or Copyright, as the case may be, confirming the grant thereof
hereunder, the form of such confirmatory grant to be satisfactory to the
Collateral Agent.
5.7. REMEDIES. If an Event of Default shall occur and be continuing,
the Collateral Agent may by written notice to the Assignor, take any or all of
the following actions: (i) declare the entire right, title, and interest of the
Assignor in each of the Patents and Copyrights vested, in which event such
right, title, and interest shall immediately vest in the Collateral Agent for
the benefit of the Secured Creditors, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 5.1 to
execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents and Copyrights; and (iii) direct the Assignor to refrain, in which event
the Assignor shall refrain, from practicing the Patents and Copyrights directly
or indi rectly, and the Assignor shall execute such other and further documents
as the Collateral Agent may request further to confirm this and to transfer
ownership of the Patents and Copyrights to the Collateral Agent for the benefit
of the Secured Creditors.
<PAGE>
6.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. The Assignor will do
nothing to impair the rights of the Collateral Agent in the Collateral. The
Assignor will at all times keep its Inventory and Equipment insured in favor of
the Collateral Agent, at the Assignor's own expense to the extent and in the
manner provided in Section 8.03 of the Credit Agreement. Subject to Section
4.02(h) of the Credit Agreement, the Collateral Agent may apply any proceeds of
such insurance in accordance with Section 7.4 hereof. The Assignor assumes all
liability and responsibility in connection with the Collateral acquired by it
and the liability of the Assignor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Assignor.
6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. The Assignor agrees that if any
warehouse receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be "negotiable" (as such term is used in Section 7-104 of the
Uniform Commercial Code as in effect in any relevant jurisdiction or under other
relevant law).
6.3. FURTHER ACTIONS. The Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. FINANCING STATEMENTS. The Assignor agrees to execute and deliver
to the Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may from time to time request or as
are necessary or desirable in the opinion of the Collateral Agent to establish
and maintain a valid, enforceable, first priority perfected security interest in
the Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the Uniform Commercial Code as enacted in any and
all relevant jurisdictions or any other relevant law. The Assignor will pay any
applicable filing fees, recordation taxes and related expenses. The Assignor
authorizes the Collateral Agent to file any such financing statements without
the signature of the Assignor where permitted by law.
7.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. The Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, subject to any mandatory requirements; of applicable law
then in effect, the Collateral Agent, in addition to any rights now or hereafter
existing under applicable law, shall have all rights as a secured creditor under
the Uniform Commercial Code in all relevant jurisdictions and may also:
<PAGE>
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from the Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon the Assignor's
premises where any of the Collateral is located and remove the same and use
in connection with such removal any and all services, supplies, aids and
other fa cilities of the Assignor; and
(b) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent and may exercise any and all remedies of the Assignor in
respect of such Col lateral; and
(c) withdraw all monies, securities and instruments in the Cash
Collateral Account (B) for application to the Obligations in accordance with
Section 7.4; and
(d) sell, assign or otherwise liquidate, or direct the Assignor to
sell, assign or otherwise liquidate, any or all of the Collateral or any part
thereof, and take possession of the proceeds of any such sale or liquidation;
and
(e) take possession of the Collateral or any part thereof, by directing
the Assignor in writing to deliver the same to the Collateral Agent at any
place or places designated by the Collateral Agent, in which event the
Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the place
or places so designated by the Collateral Agent and there
delivered to the Collateral Agent, and
(ii) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by the
Collateral Agent as provided in Section 7.2, and
(iii) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition; and
(f) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for such
term and on such conditions and in such manner as the Collateral Agent shall
in its sole judgment determine;
it being understood that the Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by the Assignor of said obligation.
7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 and any
other Collateral whether or not so repossessed by the Collateral Agent, may be
sold, assigned, leased or otherwise disposed of under one or more contracts or
as an entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at
<PAGE>
such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair which the Collateral Agent
shall determine to be commercially reasonable. Any such disposition which shall
be a private sale or other private proceedings permitted by such requirements
shall be made upon not less than 10 days' written notice to the Assignor
specifying the time at which such disposition is to be made and the intended
sale price or other consideration therefor, and shall be subject, for the 10
days after the giving of such notice, to the right of the As signor or any
nominee of the Assignor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days' written
notice to the Assignor specifying the time and place of such sale and, in the
absence of applicable require ments of law, shall be by public auction (which
may, at the Collateral Agent's option, be subject to reserve), after publication
of notice of such auction not less than 10 days prior thereto in two newspapers
in general circulation in the City of New York. To the extent permitted by any
such requirement of law, each of the Collateral Agent and each of the Secured
Creditors (i) may bid for and become the purchaser of the Collateral or any item
thereof, offered for sale in accordance with this Section without accountability
to the Assignor and (ii) may use and apply any of the Obligations owed to it
(or, in the case of Collateral Agent, any or all of the Obligations owed to the
Secured Creditors) as a credit on account of the purchase price payable at such
sale. If, under mandatory requirements of applicable law, the Collateral Agent
shall be required to make disposition of the Collateral within a period of time
which does not permit the giving of notice to the Assignor as hereinabove
specified, the Collateral Agent need give the Assignor only such notice of
disposition as shall be reasonably practicable in view of such man datory
requirements of applicable law. The Assignor agrees to do or cause to be done
all such other acts and things as may be reasonably necessary to make such sale
or sales of all or any portion of the Col lateral valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at the Assignor's expense.
7.3. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement,
THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION
OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD OTHERWISE HAVE UNDER
THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the
Assignor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Collateral Agent's
rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay, extension
or moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of
the Collateral or any portion thereof, and the Assignor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
<PAGE>
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Assignor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Assignor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Assignor.
7.4. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement or the Mortgage to
which the Assignor is a party requires proceeds of Collateral under such
agreement to be applied in accordance with the provisions of this Agreement, the
Pledgee or Mortgagee under such other agreement) upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all amounts owing the
Collateral Agent of the type described in clauses (iii) and (iv) of
the definition of "Obligations";
(ii) second, to the extent proceeds remain after the application pursuant
to the preceding clause (i), an amount equal to the outstanding Primary
Obligations shall be paid to the Secured Creditors as provided in Section
7.4(f), with each Secured Creditor receiving an amount equal to such
outstanding Primary Obligations or, if the proceeds are insufficient to pay
in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be
distributed;
(iii) third, to the extent proceeds remain after the application pursuant
to the preceding clauses (i) and (ii), an amount equal to the outstanding
Secondary Obligations shall be paid to the Secured Creditors as provided in
Section 7.4(f), with each Secured Creditor receiving an amount equal to its
outstanding Secondary Obligations or, if the proceeds are insufficient to pay
in full all such Secondary Obligations, its Pro Rata Share of the amount
remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the application pursuant
to the preceding clauses (i) through (iii), inclusive, and following the
termination of this Agreement pursuant to Section 11.9(a) hereof, to the
Assignor or to whomever may be lawfully entitled to receive such surplus.
(b) Intentionally Omitted.
(c) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Pri mary Obligations or Secondary
Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the
case of the Credit Agreement Obligations, all principal of, and interest on, all
Loans, all Unpaid Drawings theretofore made (together with all interest accrued
thereon), and the aggregate Stated Amounts of all Letters of Credit issued (or
deemed issued) under the Credit Agreement, and all Fees and (ii) in the case of
the Other Obligations, all amounts due under the Interest Rate Protection
<PAGE>
Agreements (other than indemnities, fees (including, without limitation,
attorneys' fees and expenses) and similar obligations and liabilities) and (z)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(d) When payments to Secured Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall
be applied (for purposes of making determinations under this Section 7.4 only)
(i) first, to their Primary obligations and (ii) second, to their Secondary
Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any
distribution would result in over payment to such Secured Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of the other Secured Creditors,
with each Secured Creditor whose Primary Obligations or Secondary Obligations,
as the case may be, have not been paid in full to receive an amount equal to
such excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such
Secured Creditor and the denominator of which is the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of all Secured Creditors entitled
to such distribution.
(e) Each of the Secured Creditors agrees and acknowledges that if the
Bank Creditors are to receive a distribution on account of undrawn amounts with
respect to Letters of Credit issued (or deemed issued) under the Credit
Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Agent under the Credit Agreement and held by it,
for the equal and ratable ben efit of the Bank Creditors, as cash security for
the repayment of Obligations owing to the Bank Creditors as such. If any amounts
are held as cash security pursuant to the immediately preceding sentence, then
upon the termination of all outstanding Letters of Credit, and after the
application of all such cash security to the repayment of all Obligations owing
to the Bank Creditors after giving effect to the termination of all such Letters
of Credit, if there remains any excess cash, such excess cash shall be returned
by the Agent to the Collateral Agent for distribution in accordance with Section
7.4(a) hereof.
(f) Except as set forth in Section 7.4(e), all payments required to be
made hereunder shall be made (x) if to the Bank Creditors, to the Agent under
the Credit Agreement for the account of, and distribution to, the Bank
Creditors, and (y) if to the Other Creditors, to the trustee, paying agent or
other similar representative (each a "Representative") for the Other Creditors
or, in the absence of such a Representative, directly to the Other Creditors.
(g) For purposes of applying payments received in accordance with this
Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Agent
under the Credit Agreement and (ii) the Representative for the Other Creditors
or, in the absence of such a Representative, upon the Other Creditors for a
determination (which the Agent, each Representative for any Secured Creditors
and the Secured Creditors agree (or shall agree) to provide upon request of the
Collateral Agent) of the outstanding Primary Obligations and Secondary
Obligations owed to the Bank Creditors or the Other Creditors, as the case may
be. Unless it has actual knowl edge (including by way of written notice from a
Bank Creditor or an Other Creditor) to the contrary, the Agent and each
Representative, in furnishing information pursuant to the preceding sentence,
and the Col lateral Agent, in acting hereunder, shall be entitled to assume that
no Secondary Obligations are outstanding. Unless it has actual knowledge
(including by way of written notice from an Other Creditor) to the contrary, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements are in existence.
<PAGE>
(h) It is understood and agreed that the Assignor shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the aggregate amount of the sums referred to in clauses
(i) through (iii), inclusive, of Section 7.4(a).
7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy hereby
specifically given to the Collateral Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the Interest
Rate Protection Agreements, the other Credit Docu ments or now or hereafter
existing at law or in equity, or by statute and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time or simultaneously and as often and in such order as may be
deemed expedient by the Collat eral Agent. All such rights, powers and remedies
shall be cumulative and the exercise or the beginning of exercise of one shall
not be deemed a waiver of the right to exercise of any other or others. No delay
or omission of the Collateral Agent in the exercise of any such right, power or
remedy, renewal or extension of any of the Obligations and no course of dealing
between the Assignor and the Collateral Agent or any holder of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on the Assignor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Collateral Agent to any other or further
action in any circumstances without notice or demand. In the event that the
Collateral Agent shall bring any suit to enforce any of its rights hereunder and
shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees and expenses, and the
amounts thereof shall be included in such judgment.
7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the Assignor, the
Collateral Agent and each holder of any of the Obligations shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest created under this Agreement, and all rights,
remedies and powers of the Collateral Agent shall continue as if no such
proceeding had been instituted.
8.
ARTICLE VIII
INDEMNITY
8.1. INDEMNITY. (a) The Assignor agrees to indemnify, reimburse and
hold the Collateral Agent, each Secured Creditor and their respective
successors, assigns, employees, agents, attorneys and servants (hereinafter in
this Section 8.1 referred to individually as "Indemnitee," and collectively as
"Indemnities") harmless from any and all liabili ties, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and all
costs, expenses or disbursements (including reasonable attorneys' fees and
expenses) (for the purposes of this Section 8.1 the foregoing are collectively
called "expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnities in any way relating to or arising out of this
Agreement, any Interest Rate Protection or Other Hedging Agreement, any other
Credit Document or any other document executed in connection herewith and
<PAGE>
therewith or in any other way connected with the administration of the
transactions contemplated hereby and thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), any contract claim or, to the maximum extent permitted under
applicable law, the violation of the laws of any country, state or other
governmental body or unit, or any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage); provided that no Indemnitee shall be indemnified pursuant to this
Section 8.1(a) for expenses to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. The Assignor agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation,
damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor
shall assume full responsibility for the defense thereof. Each Indemnitee agrees
to use its best efforts to notify promptly the Assignor of any such assertion of
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a), the Assignor
agrees to pay, or reimburse the Collateral Agent and the Secured Creditors for
any and all fees, costs and expenses of whatever kind or nature incurred in
connection with the creation, preservation or protection of the Collateral
Agent's Liens on, and security interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge of any taxes
or Liens upon or in respect of the Collateral, premiums for insurance with
respect to the Col lateral and all other fees, costs and expenses in connection
with protecting, maintaining or reserving the Collateral and the Collateral
Agent's interest therein, whether through judicial proceedings or otherwise, or
in defending or prosecuting any actions, suits or pro ceedings arising out of or
relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b), the
Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Assignor in this Agreement, any Interest Rate Protection Agreement, any other
Credit Document or in any writing contemplated by or made or delivered pursuant
to or in connection with this Agreement, any Interest Rate Protection Agreement
or any other Credit Document.
(d) If and to the extent that the obligations of the Assignor under
this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements and the payment of all other Obligations and
notwithstanding the discharge thereof.
<PAGE>
9.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Agent" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Creditor" shall have the meaning provided in the first paragraph
of this Agreement.
"Banks" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
"Cash Collateral Account (B)" shall mean a non-interest bearing cash
collateral account established pursuant to this agreement and maintained with
the Collateral Agent for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 11.2.
"Co-Agent" shall have the meaning provided in the first Whereas clause
of this Agreement.
"Collateral" shall have the meaning provided in Section
1.1(a) of this Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of the Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between the Assignor and one or
more additional parties (including, without limitation, (i) each partnership
agreement to which the Assignor is a party and (ii) any Interest Rate Protection
Agreements), but excluding licenses to the extent that the terms thereof
prohibit the assignment of, or granting of a security interest in, such
licenses.
"Copyrights" shall mean any United States copyright which the Assignor
now or hereafter has registered with the United States Copyright Office, as well
as any application for a United States copyright registration now or hereafter
made with the United States Copyright Office by the Assignor.
<PAGE>
"Credit Agreement" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Credit Agreement Revolving Obligations" shall mean all Credit
Agreement Obligations which do not constitute Georgia Mortgage Secured
Credit Agreement Obligations.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by the Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by the Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York and
shall in any event include all of the Assignor's claims, rights, powers,
privileges, authority, options, security interests, liens and remedies under any
partnership agreement to which the Assignor is a party or with respect to any
partnership of which the Assignor is a partner.
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1
of this Agreement.
"Instrument" shall have the meaning provided in Article 9 of the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Inter-Bank Revolving Credit Amount" shall have the meaning provided in
Section 7.4(b).
"Interest Rate Protection Agreements" shall have the meaning provided
in the first paragraph of this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production --from raw
<PAGE>
materials through work-in-process to finished goods -- and all products and
proceeds of whatever sort and wherever located and any portion thereof which may
be returned, rejected, reclaimed or repossessed by the Collateral Agent from the
Assignor's customers, and shall specifically include all "inventory" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York, now or hereafter owned by the Assignor.
"Marks" shall mean any trademarks and service marks now held or
hereafter acquired by the Assignor, which are registered in the United States
Patent and Trademark Office or in any similar office or agency of the United
States or any state thereof or any political subdivision thereof and any
application for such trademarks and service marks, as well as any unregistered
marks used by the Assignor in the United States and trade dress including logos,
designs, trade names, company names, business names, fictitious business names
and other business identifiers in connection with which any of these registered
or unregistered marks are used in the United States.
"Obligations" shall mean (i) (x) the principal of and interest on the
Notes issued, and Term Loans amended and restated and Revolving Loans made,
under the Credit Agreement, and all reimbursement obligations and Unpaid
Drawings with respect to the Letters of Credit under the Credit Agreement and
(y) all other obligations and indebtedness (in cluding, without limitation,
indemnities, Fees and interest thereon) of the Assignor to the Bank Creditors
now existing or hereafter incurred under, arising out of, or in connection with
the Credit Agreement and the other Credit Documents and the due performance and
compliance by the Assignor with all of the terms, conditions and agreements
contained in the Credit Agreement and the other Credit Documents (all such
principal, interest, obligations and liabilities being herein collectively
called the "Credit Agreement Obligations"); (ii) all obligations and liabilities
owing by the Assignor to the Other Creditors under, or with respect to, any
Interest Rate Protection Agreement, whether such Interest Rate Protection
Agreement is now in existence or hereafter arising, and the due performance and
compliance by the Assignor with all of the terms, conditions and agreements
contained therein (all such obligations and liabilities described in this clause
(ii) being herein collectively called the "Other Obligations"); (iii) any and
all sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve its secu rity interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities of the Assignor referred to in clauses (i) and (ii), after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs; and (v) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Section 8.1 of this
Agreement. It is acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding on the
date of this Agreement or extended from time to time after the date of this
Agreement.
"Original Security Agreement" shall have the meaning set forth in the
first paragraph of this Agreement.
"Other Creditors" shall have the meaning provided in the first
paragraph of this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
<PAGE>
"Patents" shall mean any United States patent now or hereafter owned by
the Assignor, as well as any application for a United States patent now or
hereafter owned by the Assignor.
"Permitted Filings" shall have the meaning provided in Section 2.1 of
this Agreement.
"Primary Obligations" shall have the meaning provided in Section 7.4(c)
of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section 7.4(c) of
this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or the Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to the Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any govern mental authority (or any person acting
under color of governmental authority) and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by the Assignor and, in any event, shall include,
but shall not be limited to, all of the Assignor's rights to payment for goods
sold or leased or services performed by the Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (i) all security
pledged, assigned, hypothecated or granted to or held by the Assignor to secure
the foregoing, (ii) all of the Assignor's right, title and interest in and to
any goods, the sale of which gave rise thereto, (iii) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, (iv) all
powers of attorney for the execution of any evidence
of indebtedness or security or other writing in connection therewith, (v) all
books, records, ledger cards, and invoices relating thereto, (vi) all evidences
of the filing of financing statements and other statements and the registration
of other instruments in connection therewith and amendments thereto, notices to
other creditors or secured parties, and certificates from filing or other
registration officers, (vii) all credit information, reports and memoranda
relating thereto, and (viii) all other writings related in any way to the
foregoing.
"Representative" shall have the meaning provided in Section
7.4 of this Agreement.
"Required Secured Creditors" shall mean (i) the Required Banks (or, to
the extent required by Section 13.12 of the Credit Agreement, the Supermajority
Banks, the Supermajority Revolving Loan Banks, the Required Term Loan Banks or
all of the Banks) under the Credit Agreement so long as any Credit Agreement
Obligations remain outstanding and (ii) in any situation not covered by
preceding clause (i), the holders of a majority of the outstanding principal
amount of the Other Obligations.
<PAGE>
"Requisite Creditors" shall have the meaning provided in
Section 11.2.
"Secondary Obligations" shall have the meaning provided in Section
7.4(c) of this Agreement.
"Secured Creditors" shall have the meaning provided in the first
paragraph of this Agreement.
"Significant Copyrights" shall mean those Copyrights which the Assignor
believes in its reasonable judgment to be material to its business.
"Significant Marks" shall mean those Marks which the Assignor believes
in its reasonable judgment to be material to its business.
"Significant Patents" shall mean those Patents which the Assignor
believes in its reasonable judgment to be material to its business.
"Termination Date" shall have the meaning provided in Section 11.9 of
this Agreement.
"Trade Secrets" shall mean any know-how, technology, product
formulations, procedures and product and manufacturing specifications or
standards now or hereafter utilized in the manufacture, production and packaging
of hosiery or underwear products.
10.
ARTICLE X
THE COLLATERAL AGENT
10.1. APPOINTMENT. The Secured Creditors, by their acceptance of the
benefits of this Agreement hereby irrevocably designate Bankers Trust Company,
as Collateral Agent, to act as specified herein. Each Secured Creditor hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note and by the acceptance of the benefits of this Agreement shall be deemed
irrevocably to authorize, the Collateral Agent to take such action on its behalf
under the provisions of this Agreement and any other instruments and agreements
referred to herein and to exercise such powers and to perform such duties
thereunder as are specifically delegated to or required of the Collateral Agent
by the terms hereof and such other powers as are reasonably incidental thereto.
The Collateral Agent may perform any of its duties hereunder or there under by
or through its authorized agents or employees.
10.2. NATURE OF DUTIES. (a) The Collateral Agent shall have no duties
or responsibilities except those expressly set forth in this Agreement. The
duties of the Collateral Agent shall be mechanical and administrative in nature;
the Collateral Agent shall not have by reason of this Agreement, any other
Credit Document or any Interest Rate Protection Agreement a fiduciary
relationship in respect of any Secured Creditor; and nothing in this Agreement,
any other Credit Document or any Interest Rate Protection Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon the
Collateral Agent any obligations in respect of this Agreement except as
expressly set forth herein.
<PAGE>
(b) The Collateral Agent shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments or discharging of
Liens upon the Collateral or otherwise as to the maintenance of the Collateral.
(c) The Collateral Agent shall not be required to ascertain or inquire
as to the performance by the Assignor of any of the covenants or agreements
contained in this Agreement, any other Credit Document or any Interest Rate
Protection Agreement.
(d) The Collateral Agent shall be under no obligation or duty to take
any action under this Agreement or any other Credit Document if taking such
action (i) would subject the Collateral Agent to a tax in any jurisdiction where
it is not then subject to a tax or (ii) would require the Collateral Agent to
qualify to do business in any jurisdiction where it is not then so qualified,
unless the Collateral Agent receives security or indemnity satisfactory to it
against such tax (or equivalent liability), or any liability resulting from such
qualification, in each case as results from the taking of such action under this
Agreement or any other Credit Document or (iii) would subject the Collateral
Agent to IN PERSONAM jurisdiction in any locations where it is not then so
subject.
(e) Notwithstanding any other provision of this Agreement, neither the
Collateral Agent nor any of its officers, directors, employees, affiliates or
agents shall, in its individual capacity, be personally liable for any action
taken or omitted to be taken by it in accordance with this Agreement except for
its own gross negligence or willful misconduct.
10.3. LACK OF RELIANCE ON THE COLLATERAL AGENT. Independently and
without reliance upon the Collateral Agent, each Secured Creditor confirms that,
to the extent it deems appropriate, it has made and shall continue to make (i)
its own independent investigation of the financial condition and affairs of the
Assignor and its Subsidiaries in connection with the making and the continuance
of the Obligations and the taking or not taking of any action in connection
therewith, and (ii) its own appraisal of the creditworthiness of the Assignor
and its Subsidiaries, and the Collateral Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Creditor with any credit or other information with respect thereto,
whether coming into its possession before the extension of any Obligations or
the purchase of any Notes or at any time or times thereafter. The Collateral
Agent shall not be responsible in any manner whatsoever to any Secured Creditor
for the correctness of 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, perfection, collectibility, priority or sufficiency of this
Agreement or the security interests granted hereunder or the financial condition
of the Assignor or any Subsidiary of the Assignor 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 financial condition of the
Assignor or any Subsidiary of the Assignor, or the existence or possible
existence of any Default or Event of Default. The Collateral Agent makes no
representations as to the value or condition of the Collateral or any part
thereof, or as to the title of the Assignor thereto or as to the security
afforded by this Agreement.
10.4. CERTAIN RIGHTS OF THE COLLATERAL AGENT. (a) No Secured Creditor
shall have the right to cause the Collateral Agent to take any action with
respect to the Collateral, with only the Required Secured Creditors having the
right to direct the Collateral Agent to take any such action. If the Collateral
<PAGE>
Agent shall request instructions from the Required Secured Creditors, with
respect to any act or action (including failure to act) in connection with this
Agreement, the Collateral Agent shall be entitled to refrain from such act or
taking such action unless and until it shall have received instructions from the
Required Secured Creditors and to the extent requested, appropriate
indemnification in respect of actions to be taken, and the Collateral Agent
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Secured Creditor shall have any right of action
whatsoever against the Collateral Agent as a result of the Collateral Agent
acting or refraining from acting hereunder in accordance with the instructions
of the Required Secured Creditors.
(b) The Collateral Agent shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request or
direction of any of the Secured Creditors, unless such Secured Creditors shall
have offered to the Collateral Agent reasonable security or indemnity against
the costs, expenses and liabilities that might be in curred by it in compliance
with such request or direction.
10.5. RELIANCE. The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
to this Agreement and the other Security Documents and its duties thereunder and
hereunder, upon advice of counsel selected by it.
10.6. INDEMNIFICATION. To the extent the Collateral Agent is not
reimbursed and indemnified by the Assignor under this Agreement, the Secured
Creditors will reimburse and indemnify the Collateral Agent, in proportion to
their respective outstanding principal amounts (including, for this purpose, the
Stated Amount of outstanding Letters of Credit and any unreimbursed drawings in
respect of Letters of Credit, as well as any unpaid Primary Obligations in
respect of Interest Rate Protection Agreements, as outstanding principal) of
Obligations, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Collateral Agent in performing its duties hereunder, or in
any way relating to or arising out of its actions as Collateral Agent in respect
of this Agreement except for those resulting solely from the Collateral Agent's
own gross negligence or willful misconduct. The indemnities set forth in this
Article X shall survive the repayment of all Obligations, with the respective
indemnification at such time to be based upon the outstanding principal amounts
(determined as described above) of Obliga tions at the time of the respective
occurrence upon which the claim against the Collateral Agent is based or, if
same is not reasonably determinable, based upon the outstanding principal
amounts (determined as described above) of Obligations as in effect immediately
prior to the termination of this Agreement. The indemnities set forth in this
Article X are in addition to any indemnities provided by the Banks to the
Collateral Agent pursuant to the Credit Agreement, with the effect being that
the Banks shall be responsible for indemnifying the Collateral Agent to the
extent the Collateral Agent does not receive payments pursuant to this Section
10.6 from the Secured Creditors (although in such event, and upon the payment in
full of all such amounts owing to the Collateral Agent, the respective Banks who
paid same shall be subrogated to the rights of the Collateral Agent to receive
payment from the Secured Creditors).
<PAGE>
10.7. THE COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY. With respect to
its obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Collateral Agent is a party, and to act as agent under
one or more of such Credit Documents, the Collateral Agent shall have the rights
and powers specified therein and herein for a "Bank," or an "Agent," as the case
may be, and may exercise the same rights and powers as though it were not
performing the duties specified herein; and the terms "Banks," "Required Banks,"
"holders of Notes," or any similar terms shall, unless the context clearly
otherwise indicates, include the Collateral Agent in its individual capacity.
The Collateral Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with the Assignor or any
Affiliate or Subsidiary of the Assignor as if it were not performing the duties
specified herein or in the other Credit Documents, and may accept fees and other
consideration from the Assignor for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Creditors.
10.8. HOLDERS. The Collateral Agent may deem and treat the payee of any
Note as the owner thereof for all purposes thereof unless and until written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Collateral Agent. Any request, authority or
consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note, shall be final and
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
10.9. RESIGNATION BY THE COLLATERAL AGENT. (a) The Collateral Agent may
resign from the performance of all of its functions and duties under this
Agreement at any time by giving 15 Business Days' prior or written notice to the
Assignor and the Banks. Such resignation shall take effect upon the appointment
of a successor Collateral Agent pursuant to clause (b) or (c) below.
(b) If a successor Collateral Agent shall not have been appointed
within said 15 Business Day period by the Required Secured Creditors, the
Collateral Agent, with the consent of the Assignor, which consent shall not be
unreasonably withheld (it being understood that any Bank Creditor is acceptable
to the Assignor), shall then appoint a successor Collateral Agent who shall
serve as Collateral Agent hereunder or thereunder until such time, if any, as
the Required Secured Creditors appoint a successor Collateral Agent as provided
above.
(c) If no successor Collateral Agent has been appointed pursuant to
clause (b) above by the 15th Business Day after the date of such notice of
resignation was given by the Collateral Agent, as a result of a failure by the
Assignor to consent to the appointment of such a successor Collateral Agent, the
Required Secured Creditors shall then appoint a successor Collateral Agent who
shall serve as Collateral Agent hereunder or thereunder until such time, if any,
as the Required Secured Creditors appoint a successor Collateral Agent as
provided above.
10.10. FEES AND EXPENSES OF COLLATERAL AGENT. (a) The Assignor (by its
execution and delivery hereof) hereby agrees that it shall pay to Bankers Trust
Company as the original Collateral Agent, such fees as have been separately
agreed to in writing with Bankers Trust Company for acting as Collateral Agent
hereunder. In the event a successor Collateral Agent is at any time appointed
pursuant to the preceding Section 10.9, the Assignor hereby agrees to pay such
<PAGE>
successor Collateral Agent such fees for acting as such as would customarily be
charged by such Collateral Agent for acting in such capacity in similar
situations. Absent manifest error, the determination by a successor Collateral
Agent of the fees owing to it shall be conclusive and binding upon the Assignor.
(b) In addition, the Assignor agrees to pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent in connection with this
Agreement and any actions taken by the Collateral Agent hereunder, and agrees to
pay all costs and expenses of the Collateral Agent in connection with the
enforcement of this Agreement and the documents and instruments referred to
herein (including, without limita tion, reasonable fees and disbursements of
counsel for the Collateral Agent).
11.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to the Assignor, at:
Ithaca Industries, Inc.
Highway 268 West
Wilkesboro, North Carolina 28697
Attention: Eric N. Hoyle
(b) if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Dana Klein
(c) if to any Bank Creditor, at such address as such Bank
Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor, either (x) to the Rep resentative for the
Other Creditors, at such address as such Representative may have provided to
the Assignor and the Collateral Agent from time to time, or (y) directly to
the Other Creditors at such address as the Other Creditors shall have
specified in writing to the Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
11.2. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Assignor and the Collateral Agent (with the
written consent of the Required Banks, or to the extent required by Section
13.12 of the Credit Agreement, the Supermajority Banks, the Supermajority
Revolving Loan Banks, the Required Term Loan Banks or all of the Banks)
PROVIDED, HOWEVER, that any change, waiver, modification or variance affecting
the rights and benefits of a single Class of Secured Creditors (and not all
<PAGE>
Secured Creditors in a like or similar manner) shall require the written consent
of the Requi site Creditors of such affected Class. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Creditors, I.E.,
whether (y) the Bank Creditors as holders of the Credit Agreement Obligations or
(z) the Other Creditors as the holders of the Other Obligations; and the term
"Requisite Creditors" of any Class shall mean each of (x) with respect to the
Credit Agreement Obligations, the Required Banks (or to the extent required by
Section 13.12 of the Credit Agreement, the Supermajority Banks or all of the
Banks) and (y) with respect to the Other Obligations, the holders of 51% of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements Agreements.
11.3. OBLIGATIONS ABSOLUTE. The obligations of the Assignor
hereunder shall remain in full force and effect without regard to, and
shall not be impaired by, (a) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or the
like of the Assignor; (b) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of this
Agreement, any other Credit Document or any Interest Rate Protection Agreement
except as specifically set forth in a waiver granted pursuant to Section 11.2
hereof; or (c) any amendment to or modification of any Credit Document of any
Interest Rate Protection Agreement or any security for any of the Obligations;
whether or not the Assignor shall have notice or knowledge of any of the
foregoing.
11.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Assignor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and each Secured Creditor and their respective successors and
assigns, provided that the Assignor may not transfer or assign any or all of its
rights or obligations hereunder without the written consent of all of the
Secured Creditors. All agreements, statements, representations and warranties
made by the As signor herein or in any certificate or other instrument delivered
by the Assignor or on its behalf under this Agreement shall be considered to
have been relied upon by the Secured Creditors and shall survive the execution
and delivery of this Agreement, the other Credit Documents and the Interest Rate
Protection Agreements regardless of any investigation made by the Secured
Creditors or on their behalf.
11.5. HEADINGS DESCRIPTIVE. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this
Agreement.
11.6. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CHOICE OF LAW PRINCIPLES THEREOF.
11.8. ASSIGNOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that the Assignor shall remain liable
<PAGE>
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, except to the extent directly resulting from the Collateral Agent's
gross negligence or willful misconduct, nor shall the Collateral Agent be
required or obligated in any manner to perform or fulfill any of the obligations
of the Assignor under or with respect to any Collateral.
11.9. TERMINATION; RELEASE. (a) After the Termination Date, this
Agreement shall terminate and the Collateral Agent, at the request and expense
of the Assignor, will execute and deliver to the Assignor a proper instrument or
instruments (including Uniform Commercial Code termination statements on form
UCC-3) acknowledging the satisfaction and termination of this Agreement, and
will duly assign, transfer and deliver to the Assignor (without recourse and
without any representation or warranty) such of the Collateral of the Assignor
as may be in the possession of the Collateral Agent and as has not theretofore
been sold or otherwise applied or released pursuant to this Agreement. As used
in this Agreement, "Termination Date" shall mean the date upon which the Total
Commitments and all Interest Rate Protection Agreements have been terminated, no
Note under the Credit Agreement is outstanding (and all Loans have been repaid
in full), all Letters of Credit have been terminated and all Obligations then
owing have been paid in full.
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by Section 9.02 of the Credit Agreement or otherwise
released at the direction of the Required Banks (or all Banks if required by
Section 13.12 of the Credit Agreement) and the proceeds of such sale or sales or
from such release are applied in accordance with the provisions of Section 4.02
of the Credit Agreement, to the extent required to be so applied, such
Collateral will be sold free and clear of the Liens created by this Agreement
and the Collateral Agent, at the request and expense of the Assignor, will duly
assign, transfer and deliver to the Assignor (without recourse and without any
representation or warranty) such of the Collateral as is then being (or has
been) so sold or released and as may be in the possession of the Collateral
Agent and has not theretofore been released pursuant to this Agreement.
(c) At any time that the Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the
Collateral Agent a certificate signed by its chief financial officer stating
that the release of the respective Collateral is permitted pursuant to Section
11.9(a) or (b). If requested by the Collateral Agent (although the Collateral
Agent shall have no obligation to make any such request), the Assignor shall
furnish appropriate legal opinions (from counsel acceptable to the Collateral
Agent) to the effect set forth in the immediately preceding sentence.
(d) The Collateral Agent shall have no liability whatsoever to any
Secured Creditor as a result of any release of Collateral by it in accordance
with this Section 11.9.
11.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with Assignor and the
Collateral Agent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
ADDRESSES
Highway 286 West ITHACA INDUSTRIES, INC.,
Wilkesboro, North Carolina 28697 as Assignor
Attention: Eric N. Hoyle
By
---------------------------
Name:
Title:
130 Liberty Street BANKERS TRUST COMPANY,
New York, New York 10006 as Collateral Agent
Attention: Jeffrey Bennett
By
---------------------------
Name:
Title:
<PAGE>
Exhibit H
---------
AMENDED AND RESTATED CASH COLLATERAL AGREEMENT
between
ITHACA INDUSTRIES, INC.
and
BANKERS TRUST COMPANY,
as Cash Collateral Agent
Originally dated as of December 4, 1995 and
amended and restated as of ______ , 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
SECURITY INTERESTS 2
0.1. Grant of Security Interests 2
0.2. Power of Attorney 3
ARTICLE II
1
GENERAL REPRESENTATIONS, WARRANTIES
AND COVENANTS 3
1.1. Necessary Filings 4
1.2. No Liens 4
1.3. Other Financing Statements 4
1.4. Recourse 4
1.5. Corporate Power and Authority 5
1.6. No Violation 5
1.7. Governmental Approvals 5
ARTICLE III
2
ESTABLISHMENT AND OPERATION
OF COLLATERAL ACCOUNT 6
2.1. Establishment of Collateral Account 6
2.2. Investments 6
ARTICLE IV
3
OTHER PROVISIONS CONCERNING COLLATERAL 7
3.1. Protection of Cash Collateral Agent's
Security 7
3.2. Further Actions 7
-i-
<PAGE>
3.3. Financing Statements 7
ARTICLE V
4
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 8
4.1. Remedies; Obtaining the Collateral
Upon Default 8
4.2. Remedies; Disposition of the Collateral 8
4.3. Waiver of Claims 9
4.4. Application of Proceeds 10
4.5. Remedies Cumulative 13
4.6. Discontinuance of Proceedings 13
ARTICLE VI
5
INDEMNITY 14
5.1. Indemnity 14
5.2. Indemnity Obligations Secured
by Collateral; Survival 15
ARTICLE VII
6
DEFINITIONS 16
ARTICLE VIII
7
THE CASH COLLATERAL AGENT 19
7.1. Appointment 19
7.2. Nature of Duties 19
7.3. Lack of Reliance on the Cash Collateral
Agent 20
7.4. Certain Rights of the Cash Collateral Agent 21
7.5. Reliance 22
7.6. Indemnification 22
7.7. The Cash Collateral Agent
in its Individual Capacity 23
7.8. Holders 23
<PAGE>
7.9. Resignation by the Cash Collateral Agent 23
7.10. Fees and Expenses of Cash Collateral Agent. 24
ARTICLE IX
8
MISCELLANEOUS 24
8.1. Notices 24
8.2. Waiver; Amendment 25
8.3. Obligations Absolute 26
8.4. Successors and Assigns 26
8.5. Headings Descriptive 26
8.6. Severability 26
8.7. GOVERNING LAW 27
8.8. Assignor's Duties 27
8.9. Termination; Release 27
8.10. Counterparts 28
8.11. Acknowledgement 28
-iii-
<PAGE>
AMENDED AND RESTATED CASH COLLATERAL AGREEMENT
AMENDED AND RESTATED CASH COLLATERAL AGREEMENT, originally dated as of
____ , 199_, between ITHACA INDUSTRIES, INC., a Delaware corporation (the
"Assignor"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as original Cash
Collateral Agent, and amended and restated as of December , 1997 by Assignor and
BANKERS TRUST COMPANY, as successor Cash Collater Agent (the "Cash Collateral
Agent") for the benefit of (x) the Banks, the Co-Agent and the Agent under, and
any other lenders from time to time party to, the Credit Agreement hereinafter
referred to (such Banks, the Agent, the Co-Agent and other lenders, if any, are
hereinafter called the "Bank Creditors") and (y) if one or more Banks enter into
one or more (i) interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements),
(ii) foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values and/or (iii) other types of hedging agreements from time to time
(collectively, the "Interest Rate Protection or Other Hedging Agreements") with,
or guaranteed by, the As signor, any such Bank or Banks (even if any such Bank
subse quently ceases to be a Bank under the Credit Agreement for any reason) so
long as any such Bank participates in the extension of such Interest Rate
Protection or Other Hedging Agreements and their subsequent assigns, if any
(collectively, the "Other Creditors" and, together with the Bank Creditors, are
hereinafter called the "Secured Creditors"). Except as otherwise defined herein,
terms used herein and defined in the Credit Agreement shall be used herein as so
defined.
W I T N E S S E T H :
WHEREAS, the Assignor, the lenders (the "Banks") from time to time
party thereto, Canadian Imperial Bank of Commerce, acting through one or more of
its agencies, affiliates or branches, as Co-Agent, and Bankers Trust Company, as
Agent (together with any successor agent, the "Agent"), have entered into a
Credit Agreement, originally dated as of December 1, 1992 and amended and
restated as of December , 1996, providing for the making of Loans and the
issuance of, and participation in, Letters of Credit as contemplated therein (as
used herein, the term "Credit Agreement" means the Credit Agreement described
above in this paragraph, as the same may be amended, modified, extended,
renewed, replaced, restated or supplemented from time to time, and including any
agreement extending the maturity of, restructuring (including, but not limited
to, the inclusion of additional borrowers thereunder that are Subsidiaries of
<PAGE>
the Assignor and whose obligations are guaranteed by the Assignor thereunder or
any increase in the amount borrowed) all or any portion of the Indebtedness
under such agreement or any successor agreements;
WHEREAS, the Assignor may at any time and from time to time enter into,
or guarantee obligations of its Subsidiaries under, one or more Interest Rate
Protection or Other Hedging Agreements with one or more Other Creditors;
WHEREAS, the Credit Agreement requires that this Agreement be executed
and delivered within 60 days following the Initial Borrowing Date;
WHEREAS, the Assignor desires to enter into this Agreement in order the
satisfy the requirement described in the preceding paragraph;
NOW, THEREFORE, in consideration of the execution and delivery of the
Credit Agreement, extensions of credit to be made to the Assignor and other
benefits accruing to the Assignor, the receipt and sufficiency of which are
hereby acknowledged, the Assignor hereby makes the following repre sentations
and warranties to the Cash Collateral Agent for the benefit of the Secured
Creditors and hereby covenants and agrees with the Cash Collateral Agent for the
benefit of the Secured Creditors as follows:
ARTICLE I
SECURITY INTERESTS
0.1. GRANT OF SECURITY INTERESTS. (a) As security for the prompt and
complete payment and performance when due of all of the Obligations, the
Assignor does hereby sell, assign and transfer unto the Cash Collateral Agent,
and does hereby grant to the Cash Collateral Agent for the benefit of the
Secured Creditors, a continuing security interest of first priority (subject to
Liens permitted under Section 9.01 of the Credit Agreement) in, all of the
right, title and interest of the Assignor in, to and under all of the following,
whether now existing or hereafter from time to time acquired:
(i) the Collateral Account;
(ii) all cash, checks, drafts, monies, certificates and other
instruments for deposit in the Col lateral Account from time to
time;
(iii) the Liquid Investments made pursuant to Section
3.2;
(iv) other monies and property of any kind of the Borrower in the
possession or under the control of the Cash Collateral Agent
(other than money and/or property in the possession or under the
<PAGE>
control of the Cash Collateral Agent to the ex
tent such money and/or property is subject to
any other Collateral Agreement); and
(v) all Proceeds of all or any of the foregoing (all
of the above, collectively, the "Collateral").
(b) The security interests granted herein are granted as security only
and shall not subject the Cash Collateral Agent or any Bank to, or transfer or
in any way affect or modify, any obligation or liability of the Borrower with
respect to any of the Collateral or any transaction in connection therewith.
(c) The security interests of the Cash Collateral Agent under this
Agreement extend to all Collateral of the kind which is the subject of this
Agreement which the Assignor may acquire at any time during the continuation of
this Agreement.
0.2. POWER OF ATTORNEY. The Assignor hereby consti tutes and appoints
the Cash Collateral Agent its true and lawful attorney, irrevocably, with full
power after the occurrence of and during the continuance of an Event of Default
(in the name of the Assignor or otherwise), in the Cash Collateral Agent's
discretion, to take any action and to execute any instrument which the Cash
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, which appointment as attorney is coupled with an
interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
1
The Assignor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
1.1. NECESSARY FILINGS. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted by the As signor to the Cash Collateral Agent hereby in respect
of the Collateral have been or shall have been accomplished and the security
interest granted to the Cash Collateral Agent pursuant to this Agreement in and
to the Collateral constitutes or shall constitute a perfected security interest
therein prior to the rights of all other Persons therein and subject to no other
Liens (except that the Collateral may be subject to Liens permitted under
Section 9.01 of the Credit Agreement) and is or shall be entitled to all the
rights, priorities and benefits afforded by the Uniform Commercial
<PAGE>
Code or other relevant law as enacted in any relevant jurisdiction to perfected
security interests.
1.2. NO LIENS. The Assignor is, and as to Collateral acquired by it
from time to time after the date hereof the Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby or permitted
under Section 9.01 of the Credit Agreement), and the Assignor shall defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to the Cash Collateral Agent.
1.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdic tion) on file or of record in any relevant jurisdiction
covering or purporting to cover any interest of any kind in the Collateral
(except for financing statements reflecting the Lien of the Collateral Agent for
the benefit of the Secured Creditors under the Security Agreement) and so long
as the Total Commitments have not been terminated or any Letter of Credit or
Note remains outstanding or any of the Obligations remain unpaid or any Interest
Rate Protection or Other Hedging Agreement remains in effect or any obligations
are owed with respect thereto, the Assignor will not execute or authorize to be
filed in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral, except financing statements filed or to be filed in
respect of and covering the security interests granted hereby by the Assignor.
1.4. RECOURSE. This Agreement is made with full recourse to the
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of the Assignor contained herein, in the other Credit
Documents, in the Interest Rate Protection or Other Hedging Agreements and
otherwise in writing in connection herewith or therewith.
1.5. CORPORATE POWER AND AUTHORITY. The Assignor has the corporate
power and authority to execute, deliver and perform the terms and provisions of
this Agreement and has taken all necessary corporate action to authorize the
execu tion, delivery and performance by it of this Agreement. The Assignor has
duly executed and delivered this Agreement, and this Agreement constitutes its
legal, valid and binding obligation enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
1.6. NO VIOLATION. Neither the execution, delivery
or performance by the Assignor of this Agreement, nor compli
ance by it with the terms and provisions hereof, (i) will
<PAGE>
contravene any provision of any law, statute, rule or regulation or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of Holdings, the Assignor or any Subsidiary of the
Assignor pursuant to the terms of any indenture, mortgage, deed of trust, credit
agreement or loan agreement, or any other material agreement, contract or
instrument, to which Holdings, the Assignor or any Subsidiary of the Assignor is
a party or by which it or any of its property or assets is bound or to which it
may be subject or (iii) will violate any provision of the Certificate of
Incorporation or By-Laws of Holdings, the Assignor or any Subsidiary of the
Assignor.
1.7. GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made prior to the Initial Borrowing Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of this Agreement or (ii) the legality,
validity, binding effect or enforceability of this Agreement.
ARTICLE III
ESTABLISHMENT AND OPERATION OF COLLATERAL ACCOUNT
2
2.1. ESTABLISHMENT OF COLLATERAL ACCOUNT. There is hereby established
with the Cash Collateral Agent one or more cash collateral accounts
(collectively, the "Collateral Ac count") under the exclusive dominion and
control of the Cash Collateral Agent into which the Assignor shall deposit cash
receipts (no later than one Business Day after the Assignor's receipt thereof),
and, subject to Article V hereof, from which the Assignor may make cash
disbursements, in the ordinary course of its business. The Collateral Account
shall be maintained in the name of "Cash Concentration Collateral Account for
the benefit of Bankers Trust Company." Any income received by the Cash
Collateral Agent with respect to the balance from time to time standing to the
credit of the Collateral Account, including any interest or capital gains on
Liquid Investments, shall remain, or be deposited, in the Collateral Account;
PROVIDED, HOWEVER, that such income may be withdrawn by the Assignor for use in
the ordinary course of business, subject to Article V hereof. All right, title
and interest in and to the cash amounts on deposit from time to time in the
Collateral Account together with any Liquid Investments from time to time made
pursuant to Section 3.2 shall vest in the Cash Collateral Agent, shall
<PAGE>
constitute part of the Collateral hereunder and shall not constitute payment of
the Obligations until applied thereto as hereinafter provided.
2.2. INVESTMENTS. Amounts on deposit in the Col lateral Account shall
be invested and re-invested from time to time in such Liquid Investments as the
Assignor shall determine, which Liquid Investments shall be held in the name and
be under the control of the Cash Collateral Agent. For this purpose, "Liquid
Investments" means Temporary Cash Investments; PROVIDED that (i) each Liquid
Investment shall mature within 30 days after it is acquired by the Cash
Collateral Agent and (ii) in order to provide the Cash Collateral Agent, for the
benefit of the Banks, with a perfected security interest therein, each Liquid
Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Cash Collateral Agent, which
(together with any appropriate instruments of transfer) are delivered to, and
held by, the Cash Collateral Agent or an agent thereof (which shall not be
the Borrower or any of its Affiliates); or
(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations and as
to which (in the opinion of counsel to the Cash Collateral Agent) appropriate
measure shall have been taken for perfection of the security interest hereby
granted.
ARTICLE IV
OTHER PROVISIONS CONCERNING COLLATERAL
3
3.1. PROTECTION OF CASH COLLATERAL AGENT'S SECURITY. The Assignor will
do nothing to impair the rights of the Cash Collateral Agent in the Collateral.
The Assignor assumes all liability and responsibility in connection with the
Collateral acquired by it and the liability of the Assignor to pay the
Obligations shall in no way be affected or diminished by reason of the fact that
such Collateral may be lost, destroyed, stolen, damaged or for any reason
whatsoever unavailable to the Assignor.
3.2. FURTHER ACTIONS. The Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or de liver to the Cash Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
docu ments of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer en dorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to the Collateral and other property or rights covered by the
security interest hereby granted, which the Cash Collateral Agent deems
reasonably appropriate or
<PAGE>
advisable to perfect, preserve or protect its security
interest in the Collateral.
3.3. FINANCING STATEMENTS. The Assignor agrees to execute and deliver
to the Cash Collateral Agent such financing statements, in form acceptable to
the Cash Collateral Agent, as the Cash Collateral Agent may from time to time
request or as are necessary or desirable in the opinion of the Cash Collateral
Agent to establish and maintain a valid, enforceable, first priority perfected
security interest in the Collateral as provided herein and the other rights and
security contemplated hereby all in accordance with the Uniform Commercial Code
as enacted in any and all relevant jurisdictions or any other relevant law. The
Assignor will pay, any applicable filing fees, recor dation taxes and related
expenses. The Assignor authorizes the Cash Collateral Agent to file any such
financing statements without the signature of the Assignor where permitted by
law.
ARTICLE V
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
4
4.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. The Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, subject to any mandatory requirements of applicable law
then in effect, the Cash Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Com mercial Code in all relevant jurisdictions and
may also:
(a) personally, or by agents or attorneys, imme diately retake
possession of the Collateral or any part thereof, from the Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon the Assignor's
premises where any of the Collateral is located and remove the same and use
in connection with such removal any and all services, supplies, aids and
other facilities of the Assignor; and
(b) instruct the obligor or obligors on any agree ment, instrument or
other obligation constituting the Col lateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to the
Cash Collateral Agent and may exercise any and all remedies of the Assignor
in respect of such Collateral; and
(c) withdraw all monies, securities and instruments in the Collateral
Account (including without limitation
<PAGE>
Liquid Investments) for application to the Obligations in accordance with
Section 5.4; and
(d) sell, assign or otherwise liquidate, or direct the Assignor to
sell, assign or otherwise liquidate, any or all of the Collateral or any part
thereof, and take possession of the proceeds of any such sale or liquidation.
4.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any Collateral
repossessed by the Cash Collateral Agent under or pursuant to Section 5.1 and
any other Collateral whether or not so repossessed by the Cash Collateral Agent,
may be sold, assigned, leased or otherwise disposed of under one or more
contracts or as an entirety, and without the necessity of gathering at the place
of sale the property to be sold, and in general in such manner, at such time or
times, at such place or places and on such terms as the Cash Collateral Agent
may, in compliance with any mandatory requirements of applicable law, determine
to be commercially reasonable. Any such disposition which shall be a private
sale or other private proceedings permitted by such requirements shall be made
upon not less than 10 days' written notice to the Assignor specifying the time
at which such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of the Assignor or any nominee of the Assignor to
acquire the Collateral involved at a price or for such other consideration at
least equal to the intended sale price or other consideration so specified. Any
such disposition which shall be a public sale permitted by such requirements
shall be made upon not less than 10 days' written notice to the Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Cash
Collateral Agent's option, be subject to reserve), after publication of notice
of such auction not less than 10 days prior thereto in two newspapers in general
circulation in the City of New York. To the extent permitted by any such
requirement of law, the Cash Collateral Agent and the Secured Creditors may bid
for and become the purchaser of the Collateral or any item thereof, offered for
sale in accordance with this Section without accountability to the Assignor. If,
under mandatory requirements of applicable law, the Cash Collateral Agent shall
be required to make disposition of the Collateral within a period of time which
does not permit the giving of notice to the Assignor as hereinabove specified,
the Cash Collateral Agent need give the Assignor only such notice of disposition
as shall be reasonably practicable in view of such mandatory requirements of
applicable law. The Assignor agrees to do or cause to be done all such other
acts and things as may be reasonably necessary to make such sale or sales of all
or any portion of the Collateral valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at the
Assignor's expense.
<PAGE>
4.3. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement,
THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE CASH COLLATERAL AGENT'S TAKING
POSSESSION OR THE CASH COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COL LATERAL,
INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NO TICE AND HEARING FOR ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD OTHERWISE
HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE,
and the Assignor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of posses sion except any
damages which are the direct result of the Cash Collateral Agent's gross
negligence or willful mis conduct;
(b) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Cash Collateral
Agent's rights hereun der; and
(c) all rights of redemption, appraisement, valua tion, stay, extension
or moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of
the Collateral or any portion thereof, and the Assignor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws. Any sale of, or the grant of
options to purchase, or any other realization upon, any Collateral shall
operate to divest all right, title, in terest, claim and demand, either at
law or in equity of the Assignor therein and thereto, and shall be a
perpetual bar both at law and in equity against the Assignor and against any
and all Persons claiming or attempting to claim the Collateral so sold,
optioned or realized upon, or any part thereof, from, through and under the
Assignor.
4.4. APPLICATION OF PROCEEDS. (a) All moneys col lected by the Cash
Collateral Agent upon any sale or other disposition of the Collateral, together
with all other moneys received by the Cash Collateral Agent hereunder, shall be
applied as follows:
(i) first, to the payment of all amounts owing the Cash Collateral Agent
of the type described in clauses (iii) and (iv) of the definition of
"Obligations" in Ar ticle VII hereof;
(ii) second, to the extent proceeds remain after the application pursuant
to the preceding clause (i), an amount equal to the outstanding Primary
Obligations shall be paid to the Secured Creditors as provided in Section
5.4(f),
<PAGE>
with each Secured Creditor receiving an amount equal to such outstanding
Primary Obligations or, if the proceeds are insufficient to pay in full all
such Primary Obligations, its Pro Rata Share of the amount remaining to be
distributed;
(iii) third, to the extent proceeds remain after the application pursuant
to the preceding clauses (i) and (ii), an amount equal to the outstanding
Secondary Obligations shall be paid to the Secured Creditors as provided in
Section 5.4(f), with each Secured Creditor receiving an amount equal to its
outstanding Secondary Obligations or, if the proceeds are insufficient to pay
in full all such Secondary Obligations, its Pro Rata Share of the amount
remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the application pursuant
to the preceding clauses (i) through (iii), inclusive, and following the
termination of this Agreement pursuant to Section 9.9(a) hereof, to the As
signor or to whomever may be lawfully entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's por tion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the
Credit Agreement Obligations, all principal of, and interest on, all Loans, all
Unpaid Drawings theretofore made (together with all interest accrued thereon),
and the aggregate Stated Amounts of all Letters of Credit issued (or deemed
issued) under the Credit Agreement, and all Fees and (ii) in the case of the
Other Obligations, all amounts due under the Interest Rate Protection or Other
Hedging Agreements (other than indemnities, fees (including, without limitation,
attorneys' fees) and similar obligations and liabilities) and (x) "Secondary
Obligations" shall mean all Obligations other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall
be applied (for purposes of making determinations under this Section 5.4 only)
(i) first, to their Primary Obligations and (ii) second, to their Secondary
Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any
distribution would result in overpayment to such Secured Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of the other Secured Creditors,
with each Secured Creditor whose Primary Obligations or Secondary Obligations,
as the case may be, have not been paid in full to receive an amount equal to
such
<PAGE>
excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such
Secured Creditor and the denominator of which is the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of all Secured Creditors entitled
to such distribution.
(d) Each of the Secured Creditors agrees and ac knowledges that if the
Bank Creditors are to receive a dis tribution on account of undrawn amounts with
respect to Letters of Credit issued (or deemed issued) under the Credit
Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Agent under the Credit Agreement and held by it,
for the equal and ratable benefit of the Bank Creditors, as cash security for
the repayment of Obligations owing to the Bank Creditors as such. If any amounts
are held as cash security pursuant to the immediately preceding sentence, then
upon the termination of all outstanding Letters of Credit, and after the
application of all such cash security to the repayment of all Obligations owing
to the Bank Creditors after giving effect to the termination of all such Letters
of Credit, if there remains any excess cash, such excess cash shall be returned
by the Agent to the Cash Collateral Agent for distribution in accordance with
Section 5.4(a) hereof.
(e) Except as set forth in Section 5.4(d), all pay ments required to be
made hereunder shall be made (x) if to the Bank Creditors, to the Agent under
the Credit Agreement for the account of the Bank Creditors, and (y) if to the
Other Creditors, to the trustee, paying agent or other similar representative
(each a "Representative") for the Other Creditors or, in the absence of such a
Representative, directly to the Other Creditors.
(f) For purposes of applying payments received in accordance with this
Section 5.4, the Cash Collateral Agent shall be entitled to rely upon (i) the
Agent under the Credit Agreement and (ii) the Representative for the Other
Creditors or, in the absence of such a Representative, upon the Other Creditors
for a determination (which the Agent, each Representative for any Secured
Creditors and the Secured Creditors agree (or shall agree) to provide upon
request of the Cash Collateral Agent) of the outstanding Primary Obligations and
Secondary Obligations owed to the Bank Creditors or the Other Creditors, as the
case may be. Unless it has actual knowledge (including by way of written notice
from a Bank Creditor or an Other Creditor) to the contrary, the Agent and each
Representative, in furnishing information pursuant to the preceding sentence,
and the Cash Collateral Agent, in acting hereunder, shall be entitled to assume
that no Secondary Obligations are outstanding. Unless it has actual knowledge
(including by way of written notice from an
<PAGE>
Other Creditor) to the contrary, the Cash Collateral Agent, in acting hereunder,
shall be entitled to assume that no Interest Rate Protection or Other Hedging
Agreements are in existence.
(g) It is understood and agreed that the Assignor shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the aggregate amount of the sums referred to in clauses
(i) through (iii), inclusive, of Section 5.4(a).
4.5. REMEDIES CUMULATIVE. Each and every right, power and remedy hereby
specifically given to the Cash Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection or Other Hedging Agreements, the other Credit Documents
or now or hereafter existing at law or in equity, or by statute and each and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Cash Collateral Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Cash Collateral
Agent in the exercise of any such right, power or remedy, renewal or extension
of any of the Obligations and no course of dealing between the Assignor and the
Cash Collateral Agent or any holder of any of the Obligations shall impair any
such right, power or remedy or shall be construed to be a waiver of any Default
or Event of Default or an acquiescence therein. No notice to or demand on the
Assignor in any case shall entitle it to any other or further notice or demand
in similar or other circumstances or constitute a waiver of any of the rights of
the Cash Collateral Agent to any other or further action in any circumstances
without notice or demand. In the event that the Cash Collateral Agent shall
bring any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Cash Collateral Agent may recover reasonable
expenses, including attorneys' fees, and the amounts thereof shall be included
in such judgment.
4.6. DISCONTINUANCE OF PROCEEDINGS. In case the Cash Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Cash Collateral Agent, then and in every such case
the Assignor, the Cash Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Cash Collateral Agent
shall continue as if no such proceeding had been instituted.
<PAGE>
ARTICLE VI
INDEMNITY
5
5.1. INDEMNITY. (a) The Assignor agrees to indem nify, reimburse and
hold the Cash Collateral Agent, each Se cured Creditor and their respective
successors, assigns, em ployees, agents and servants (hereinafter in this
Section 6.1 referred to individually as "Indemnitee," and collectively as
"Indemnities") harmless from any and all liabilities, obliga tions, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and all
costs, expenses or disbursements (including reasonable attorneys' fees and
expenses) (for the purposes of this Section 6.1 the foregoing are collectively
called "expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnities in any way relating to or arising out of this
Agreement, any Interest Rate Protection or Other Hedging Agreement, any other
Credit Document or any other document executed in connection herewith and
therewith or in any other way connected with the administration of the
transactions contemplated hereby and thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), any contract claim or, to the maximum extent permitted under
applicable law, the violation of the laws of any country, state or other
governmental body or unit, or any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage); provided that no Indemnitee shall be indemnified pursuant to this
Section 6.1(a) for expenses to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. The Assignor agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation,
damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor
shall assume full responsibility for the defense thereof. Each Indemnitee agrees
to use its best efforts to promptly notify the Assignor of any such assertion of
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 6.1(a), the Assignor
agrees to pay, or reimburse the Cash Collateral Agent for any and all fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Cash Collateral Agent's Liens on,
and security interest in, the Collateral, including, without limitation, all
fees and taxes in
<PAGE>
connection with the recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or Liens upon or in respect to the
Collateral, premiums for insurance with respect of the Collateral and all other
fees, costs and expenses in connection with protecting, maintaining or
preserving the Collateral and the Cash Collateral Agent's interest therein,
whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceeding arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 6.1(a) or (b), the
Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Assignor in this Agreement, any Interest Rate Protection or Other Hedging
Agreement, any other Credit Document or in any writing contemplated by or made
or delivered pursuant to or in connection with this Agreement, any Interest Rate
Protection or Other Hedging Agreement or any other Credit Document.
(d) If and to the extent that the obligations of the Assignor under
this Section 6.1 are unenforceable for any reason, the Assignor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
5.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignor contained in this Article VI shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection or Other Hedging Agreements and the payment of all other Obligations
and notwithstanding the discharge thereof.
ARTICLE VII
DEFINITIONS
6
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Additional Fees" shall mean all fees and expenses (other than Fees)
payable to the Bank Creditors under the Credit Agreement or any other Credit
Document.
"Agent" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
<PAGE>
"Agreement" shall mean this Cash Collateral Agreement as the same may
be modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the
first paragraph of this Agreement.
"Bank Creditor" shall have the meaning provided in the first paragraph
of this Agreement.
"Banks" shall have the meaning provided in the first WHEREAS clause of
this Agreement.
"Cash Collateral Agent" shall have the meaning pro vided in the first
paragraph of this Agreement.
"Class" shall have the meaning provided in Section 11.2.
"Collateral" shall have the meaning provided in Sec tion 1.1(a) of this
Agreement.
"Collateral Account" shall have the meaning provided in Section 3.1 of
this Agreement.
"Credit Agreement" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article VII.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"Indemnitee" shall have the meaning provided in Sec tion 8.1 of this
Agreement.
"Interest Rate Protection or Other Hedging Agreements" shall have the
meaning provided in the first paragraph of this Agreement.
"Liquid Investments" shall have the meaning provided
in Section 3.2
"Obligations" shall mean (i) (x) the principal of and interest on the
Notes issued, and Loans made, under the Credit Agreement, and all reimbursement
obligations and
<PAGE>
Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement
and (y) all other obligations and indebtedness (including, without limitation,
indemnities, Fees, Additional Fees and interest thereon) of the Assignor to the
Bank Creditors now existing or hereafter incurred under, arising out of, or in
connection with the Credit Agreement and the other Credit Documents and the due
performance and compliance by the Assignor with all of the terms, conditions and
agreements contained in the Credit Agreement and the other Credit Documents (all
such principal, interest, obligations and liabilities being herein collectively
called the "Credit Agreement Obligations"); (ii) all obligations and liabilities
owing by the Assignor to the Other Creditors under, or with respect to, any
Interest Rate Protection or other Hedging Agreement, whether such Interest Rate
Protection or Other Hedging Agreement is now in existence or hereafter arising,
and the due performance and compliance by the Assignor with all of the terms,
conditions and agreements contained therein (all such obligations and described
in this clause (ii) being herein collectively called the "Other Obligations");
(iii) any and all sums advanced by the Cash Collateral Agent in order to
preserve the Collateral or preserve its security interest in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Assignor referred to in clauses
(i) and (ii), after an Event of Default shall have occurred and be continuing,
the reasonable expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of any
exercise by the Cash Collateral Agent of its rights hereunder, together with
reasonable attorneys' fees and court costs; and (v) all amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement under
Section 6.1 of this Agreement. It is acknowledged and agreed that the
"Obligations" shall include extensions of credit of the types described above,
whether outstanding on the date of this Agreement or extended or incurred from
time to time after the date of this Agreement.
"Other Creditors" shall have the meaning provided in the first
paragraph of this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article VII.
"Primary Obligations" shall have the meaning provided in Section 5.4(b)
of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section 5.4(c) of
this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Cash Collateral Agent or the Assignor from
<PAGE>
time to time with respect to any of the Collateral, (ii) any and all payments
(in any form whatsoever) made or due and payable to the Assignor from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental authority
(or any person acting under color of governmental authority) and (iii) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Representative" shall have the meaning provided in
Section 5.4 of this Agreement.
"Required Secured Creditors" shall mean (i) the Re quired Banks (or, to
the extent required by Sections 14.04 or 14.12 of the Credit Agreement, all of
the Banks) under the Credit Agreement so long as any Credit Agreement
Obligations remain outstanding and (ii) in any situation not covered by
preceding clause (i), the holders of a majority of the outstanding principal
amount of the Other Obligations.
"Requisite Creditors" shall have the meaning provided
in Section 9.2.
"Secondary Obligations" shall have the meaning pro vided in Section
5.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the first
paragraph of this Agreement.
"Temporary Cash Investment" shall mean any investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Corporation and P-1 by Moody's Investors
Service, Inc., (iii) time deposits with, including certificates of deposit
issued by, any office located in the United States of any bank or trust company
which is organized under the laws of the United States or any state thereof and
has capital, surplus and undivided profits aggregating at least $500,000,000 or
(iv) repurchase agreements with respect to securities described in clause (i)
above entered into with an office of a bank or trust company meeting the
criteria specified in clause (iii) above.
"Termination Date" shall have the meaning provided in Section 9.9 of
this Agreement.
ARTICLE VIII
THE CASH COLLATERAL AGENT
7
<PAGE>
7.1. APPOINTMENT. The Secured Creditors, by their acceptance of the
benefits of this Agreement hereby irrevocably designate Bankes Trust Company, as
Cash Collateral Agent, to act as specified herein. Each Secured Creditor hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note and by the acceptance of the benefits of this Agreement shall be deemed
irrevocably to authorize, the Cash Collateral Agent to take such action on its
behalf under the provisions of this Agreement and any other instruments and
agreements referred to herein and to exercise such powers and to perform such
duties hereunder as are specifically delegated to or required of the Cash
Collateral Agent by the terms hereof and such other powers as are reasonably
incidental thereto. The Cash Collateral Agent may perform any of its duties
hereunder or thereunder by or through its authorized agents or employees.
7.2. NATURE OF DUTIES. (a) The Cash Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
The duties of the Cash Collateral Agent shall be mechanical and administrative
in nature; the Cash Collateral Agent shall not have by reason of this Agreement,
any other Credit Document or any Interest Rate Protection or Other Hedging
Agreement a fiduciary relationship in respect of any Secured Creditor; and
nothing in this Agreement, any other Credit Document or any Interest Rate
Protection or Other Hedging Agreement, expressed or implied, is intended to or
shall be so construed as to impose upon the Cash Collateral Agent any
obligations in respect of this Agreement except as expressly set forth herein.
(b) The Cash Collateral Agent shall not be responsi ble for insuring
the Collateral or for the payment of taxes, charges or assessments or
discharging of Liens upon the Collateral or otherwise as to the maintenance of
the Collateral.
(c) The Cash Collateral Agent shall not be required to ascertain or
inquire as to the performance by the Assignor of any of the covenants or
agreements contained in this Agreement, any other Credit Document or any
Interest Rate Protection or Other Hedging Agreement.
(d) The Cash Collateral Agent shall be under no ob ligation or duty to
take any action under this Agreement or any other Credit Document if taking such
action (i) would subject the Cash Collateral Agent to a tax in any jurisdiction
where it is not then subject to a tax or (ii) would require the Cash Collateral
Agent to qualify to do business in any jurisdiction where it is not then so
qualified, unless the Cash Collateral Agent receives security or indemnity
satisfactory to it against such tax (or equivalent liability), or any liability
resulting from such qualification, in each case as results from the taking of
such action under this Agreement or any other Credit Document or (iii) would
subject the Cash Collateral Agent to IN PERSONAM jurisdiction in any locations
where it is not then so subject.
<PAGE>
(e) Notwithstanding any other provision of this Agreement, neither the
Cash Collateral Agent nor any of its officers, directors, employees, affiliates
or agents shall, in its individual capacity, be personally liable for any action
taken or omitted to be taken by it in accordance with this Agreement except for
its own gross negligence or willful misconduct.
7.3. LACK OF RELIANCE ON THE CASH COLLATERAL AGENT. Independently and
without reliance upon the Cash Collateral Agent, each Secured Creditor, 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 Assignor
and its Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Assignor and its
Subsidiaries, and the Cash Collateral Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Creditor with any credit or other information with respect thereto,
whether coming into its possession before the extension of any Obligations or
the purchase of any Notes or at any time or times thereafter. The Cash
Collateral Agent shall not be responsible in any manner whatsoever to any
Secured Creditor for the correctness of 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, perfection, collectibility, priority or
sufficiency of this Agreement or the security interests granted hereunder or the
financial condition of the Assignor or any Subsidiary of the Assignor 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 financial
condition of the Assignor or any Subsidiary of the Assignor or the existence or
possible existence of any Default or Event of Default. The Cash Collateral Agent
makes no representations as to the value or condition of the Collateral or any
part thereof, or as to the title of the Assignor thereto or as to the security
afforded by this Agreement.
7.4. CERTAIN RIGHTS OF THE CASH COLLATERAL AGENT. (a) No Secured
Creditor shall have the right to cause the Cash Collateral Agent to take any
action with respect to the Collateral, with only the Required Secured Creditors
having the right to direct the Cash Collateral Agent to take any such action. If
the Cash Collateral Agent shall request instructions from the Required Secured
Creditors, with respect to any act or action (including failure to act) in
connection with this Agreement, the Cash Collateral Agent shall be entitled to
refrain from such act or taking such action unless and until it shall have
received instructions
<PAGE>
from the Required Secured Creditors and to the extent requested, appropriate
indemnification in respect of actions to be taken, and the Cash Collateral Agent
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Secured Creditor shall have any right of action
whatsoever against the Cash Collateral Agent as a result of the Cash Collateral
Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Secured Creditors.
(b) The Cash Collateral Agent shall be under no ob ligation to exercise
any of the rights or powers vested in it by this Agreement at the request or
direction of any of the Secured Creditors, unless such Secured Creditors shall
have offered to the Cash Collateral Agent reasonable security or indemnity
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
7.5. RELIANCE. The Cash Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
to this Agreement and the other Security Documents and its duties thereunder and
hereunder, upon advice of counsel selected by it.
7.6. INDEMNIFICATION. To the extent the Cash Col lateral Agent is not
reimbursed and indemnified by the Assignor under this Agreement, the Secured
Creditors will reimburse and indemnify the Cash Collateral Agent, in proportion
to their respective outstanding principal amounts (including, for this purpose,
the Stated Amount of outstanding Letters of Credit and any unreimbursed drawings
in respect of Letters of Credit, as well as any unpaid Primary Obligations in
respect of Interest Rate Protection or Other Hedging Agreements, as outstanding
principal) of Obligations, for and against any and all liabilities, obliga
tions, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature what soever which may be imposed on,
incurred by or asserted against the Cash Collateral Agent in performing its
duties hereunder, or in any way relating to or arising out of its actions as
Cash Collateral Agent in respect of this Agreement except for those resulting
solely from the Cash Collateral Agent's own gross negligence or willful
misconduct. The indemnities set forth in this Article VIII shall survive the
repayment of all Obligations, with the respective indemnification at such time
to be based upon the outstanding principal amounts (determined as described
above) of Obligations at the time of the respective occurrence upon which the
claim against the Cash Collateral Agent is based or, if same is not reasonably
determinable, based upon the outstanding principal amounts (determined as
described above) of Obligations as in effect immediately prior to the
<PAGE>
termination of this Agreement. The indemnities set forth in this Article VIII
are in addition to any indemnities provided by the Banks to the Cash Collateral
Agent pursuant to the Credit Agreement, with the effect being that the Banks
shall be responsible for indemnifying the Cash Collateral Agent to the extent
the Cash Collateral Agent does not receive payments pursuant to this Section 8.6
from the Secured Creditors (although in such event, and upon the payment in full
of all such amounts owing to the Cash Collateral Agent, the respective Banks who
paid same shall be subrogated to the rights of the Cash Collateral Agent to
receive payment from the Secured Creditors).
7.7. THE CASH COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY. With respect
to its obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Cash Collateral Agent is a party, and to act as agent
under one or more of such Credit Documents, the Cash Collateral Agent shall have
the rights and powers specified therein and herein for a "Bank", or an "Agent",
as the case may be, and may exercise the same rights and powers as though it
were not performing the duties specified herein; and the terms "Banks,"
"Required Banks," "holders of Notes," or any similar terms shall, unless the
context clearly otherwise indicates, include the Cash Collateral Agent in its
individual capacity. The Cash Collateral Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with the Assignor or any Affiliate or Subsidiary of the Assignor as if it were
not performing the duties specified herein or in the other Credit Documents, and
may accept fees and other consideration from the Assignor for services in
connection with the Credit Agreement, the other Credit Documents and otherwise
without having to account for the same to the Secured Creditors.
7.8. HOLDERS. The Cash Collateral Agent may deem and treat the payee of
any Note as the owner thereof for all pur poses hereof unless and until written
notice of the assign ment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Cash Collateral Agent. Any request, authority or
consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note, shall be final and
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
7.9. RESIGNATION BY THE CASH COLLATERAL AGENT. (a) The Cash Collateral
Agent may resign from the performance of all of its functions and duties under
this Agreement at any time by giving 15 Business Days' prior or written notice
to the Assignor and the Banks. Such resignation shall take effect upon the
appointment of a successor Cash Collateral Agent pursuant to clause (b) or (c)
below.
<PAGE>
(b) If a successor Cash Collateral Agent shall not have been appointed
within said 15 Business Day period by the Required Secured Creditors, the Cash
Collateral Agent, with the consent of the Assignor, which consent shall not be
unreasonably withheld, shall then appoint a successor Cash Collateral Agent who
shall serve as Cash Collateral Agent hereunder or thereunder until such time, if
any, as the Required Secured Creditors appoint a successor Cash Collateral Agent
as provided above.
(c) If no successor Cash Collateral Agent has been appointed pursuant
to clause (b) above by the 15th Business Day after the date of such notice of
resignation was given by the Cash Collateral Agent, as a result of a failure by
the Assignor to consent to the appointment of such a successor Cash Collateral
Agent, the Required Secured Creditors shall then appoint a successor Cash
Collateral Agent who shall serve as Cash Collateral Agent hereunder or
thereunder until such time, if any, as the Required Secured Creditors appoint a
successor Cash Collateral Agent as provided above.
7.10. FEES AND EXPENSES OF CASH COLLATERAL AGENT. (a) The Assignor (by
its execution and delivery hereof) hereby agrees that it shall pay, to Bankers
Trust Company as the original Cash Collateral Agent, such fees as have been
separately agreed to in writing with First Union National Bank of North Carolina
for acting as Cash Collateral Agent hereunder. In the event a successor Cash
Collateral Agent is at any time appointed pursuant to the preceding Section 8.9,
the Assignor hereby agrees to pay such successor Cash Collateral Agent such fees
for acting as such as would customarily be charged by such Cash Collateral Agent
for acting in such capacity in similar situations. Absent manifest error, the
determination by a successor Cash Col lateral Agent of the fees owing to it
shall be conclusive and binding upon the Assignor.
(b) In addition, the Assignor agrees to pay all rea sonable
out-of-pocket costs and expenses of the Cash Collateral Agent in connection with
this Agreement and any actions taken by the Cash Collateral Agent hereunder, and
agrees to pay all costs and expenses of the Cash Collateral Agent in connection
with the enforcement of this Agreement and the documents and instruments
referred to herein (including, without limitation, reasonable fees and
disbursements of counsel for the Cash Collateral Agent).
ARTICLE IX
MISCELLANEOUS
8
8.1. NOTICES. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is
<PAGE>
required or permitted to be given or made under this Agreement, addressed as
follows:
(a) if to the Assignor, at:
Ithaca Industries, Inc.
Highway 268 West
Wilkesboro, North Carolina 28697
Attention: Eric N. Hoyle
(b) if to the Cash Collateral Agent:
Bankers Trust Company
130 Liberty Street
30th Floor
New York, New York 10006
Attention: Dana Klein
(c) if to any Bank Creditor, either (x) to the Agent and the Co-Agent,
at their respective addresses specified in the Credit Agreement or (y) at
such address as such Bank Creditor shall have specified in the Credit
Agreement;
(d) if to any Other Creditor, either (x) to the Rep resentative for the
Other Creditors, at such address as such Representative may have provided to
the Assignor and the Cash Collateral Agent from time to time, or (y) di
rectly to the Other Creditors at such address as the Other Creditors shall
have specified in writing to the Assignor and the Cash Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
8.2. WAIVER; AMENDMENT. None of the terms and con ditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Assignor and the Cash Collateral Agent
(with the written consent of the Required Banks, or to the extent required by
Section 14.12 of the Credit Agreement, the Agent, the Co-Agent and/or all the
Banks); PROVIDED, HOWEVER, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class of Secured Creditors (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite Creditors of such affected Class. For the purpose of
this Agreement, the term "Class" shall mean each class of Secured Creditors,
I.E., whether (y) the Bank Creditors as holders of the Credit Agreement
Obligations or (z) the Other Creditors as the holders of the Other Obligations;
and the term "Requisite Creditors" of any Class shall mean each of (x) with
respect to the Credit Agreement Obligations, the Required Banks and (y) with
respect to the Other Obligations, the holders of 51%
<PAGE>
of all obligations outstanding from time to time under the Interest Rate
Protection Agreements or Other Hedging Agree ments.
8.3. OBLIGATIONS ABSOLUTE. The obligations of the Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection or Other Hedging Agreement except as specifically
set forth in a waiver granted pursuant to Section 9.2 hereof; or (c) any
amendment to or modification of any Credit Document or any Interest Rate
Protection or Other Hedging Agreement or any security for any of the
Obligations; whether or not the Assignor shall have notice or knowledge of any
of the foregoing.
8.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Assignor and its successors and assigns and shall inure to the benefit of the
Cash Collateral Agent and each Secured Creditor and their respective successors
and as signs, provided that the Assignor may not transfer or assign any or all
of its rights or obligations hereunder without the written consent of the
Required Secured Creditors. All agreements, statements, representations and
warranties made by the Assignor herein or in any certificate or other instrument
delivered by the Assignor or on its behalf under this Agreement shall be
considered to have been relied upon by the Secured Creditors and shall survive
the execution and delivery of this Agreement, the other Credit Documents and the
Interest Rate Protection or Other Hedging Agreements regardless of any
investigation made by the Secured Creditors or on their behalf.
8.5. HEADINGS DESCRIPTIVE. The headings of the sev eral sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construc tion of any provision of this Agreement.
8.6. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
8.8. ASSIGNOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding,
<PAGE>
that the Assignor shall remain liable to perform all of the obligations, if any,
assumed by it with respect to the Collateral and the Cash Collateral Agent shall
not have any obligations or liabilities with respect to any Collateral by reason
of or arising out of this Agreement, nor shall the Collateral Agent be required
or obligated in any manner to perform or fulfill any of the obligations of the
Assignor under or with respect to any Collateral except to the extent directly
resulting from the Cash Collateral Agent's gross negligence or willful
misconduct.
8.9. TERMINATION; RELEASE. (a) After the Termina tion Date, this
Agreement shall terminate and the Cash Collateral Agent, at the request and
expense of the Assignor, will execute and deliver to the Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on Form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Assignor (without
recourse and without any representation or warranty) such of the Collateral of
the Assignor as may be in the possession of the Cash Collateral Agent and as has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Commitments and all Interest Rate Protection or other
Hedging Agreements have been terminated, no Note under the Credit Agreement is
outstanding (and all Loans have been repaid in full), all Letters of Credit have
been terminated and all Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by Section 9.02 of the Credit Agreement or otherwise
released at the direction of the Required Banks (or all Banks if required by
Section 14.12(a)(ii) of the Credit Agreement) and the proceeds of such sale or
sales or from such release are applied in accordance with the provisions of
Section 4.02 of the Credit Agreement, to the extent required to be so applied,
such Collateral will be sold free and clear of the Liens created by this
Agreement and the Cash Collateral Agent, at the request and expense of the
Assignor, will duly assign, transfer and deliver to the Assignor (without
recourse and without any representation or warranty) such of the Collateral as
is then being (or has been) so sold or released and as may be in the possession
of the Cash Collateral Agent and has not theretofore been released pursuant to
this Agreement.
(c) At any time that the Assignor desires that the Cash Collateral
Agent take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 9.9(a) or (b), it shall deliver to the Cash
Collateral Agent a certificate signed by its chief financial
<PAGE>
officer stating that the release of the respective Collateral is permitted
pursuant to Section 9.9(a) or (b). If requested by the Cash Collateral Agent
(although the Cash Collateral Agent shall have no obligation to make any such
request), the Assignor shall furnish appropriate legal opinions (from counsel
acceptable to the Cash Collateral Agent, the Agent and the Co-Agent) to the
effect set forth in the immediately preceding sentence. The Cash Collateral
Agent shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 9.9.
(d) The Cash Collateral Agent shall have no liability whatsoever to any
Secured Creditor as a result of any release of Collateral by it in accordance
with this Section 9.9.
8.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with Assignor and the Cash
Collateral Agent.
8.11. ACKNOWLEDGEMENT. The parties hereto acknowl edge and agree that
(i) the Collateral constitutes Proceeds (as defined in the Security Agreement)
and (ii) nothing herein shall impair, modify, supersede, waive or otherwise
affect any right (under applicable law, by contract or otherwise) of the Cash
Collateral Agent in its individual capacity as a Bank to setoff against the
Collateral (subject to the sharing arrangements set forth in Section 14.06(b) of
the Credit Agreement).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly au thorized officers as of the date first
above written.
ADDRESSES
Highway 286 West ITHACA INDUSTRIES, INC.,
Wilkesboro, North Carolina 28697 as Assignor
Attention: Eric N. Hoyle
By
-------------------------------
Title:
130 Liberty Street BANKERS TRUST COMPANY,
30th Floor as Cash Collateral Agent
New York New York 10006
Attention: Dana Klein
By
-------------------------------
Title:
<PAGE>
Exhibit K
---------
OFFICER'S SOLVENCY CERTIFICATE
I, the undersigned, the Chief Financial Officer of ITHACA
INDUSTRIES, INC., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), do hereby certify on behalf of the Company
that:
1. This certificate is furnished pursuant to Section 5.15 (i) of the
Amended and Restated Credit Agreement, originally dated as of December 1, 1992,
and amended and restated as of December 16, 1996, among the Company, the lenders
from time to time party thereto (the "Banks"), Canadian Imperial Bank of
Commerce, acting through one or more of its agencies, branches or affiliates, as
Co-Agent and Bankers Trust Company as Agent (such Amended and Restated Credit
Agreement, as in effect on the date of this Certificate, being herein called the
"Credit Agreement"). Unless otherwise defined herein, capitalized terms used in
this Certificate shall have the meanings set forth in the Credit Agreement.
(a)
2. For purposes of this Certificate, the terms below shall have
the following definitions:
(a)
(a) "Fair Value"
The amount at which the assets, in their entirety, of the Company
would change hands between a willing buyer and a willing seller,
within a commercially reasonable period of time, each having
reasonable knowledge of the relevant facts, with neither being under
any compulsion to act.
(b) "Present Fair Salable Value"
The amount that could be obtained by an independent willing seller
from an independent willing buyer if the assets of the Company are
sold with reasonable promptness under normal selling conditions in a
current market.
(c) "New Financing"
The indebtedness incurred or to be incurred by the Company under the
Credit Documents (assuming the full utilization by the Company of
the Commitments under the Credit Agreement).
(d) "Stated Liabilities"
The recorded liabilities (including Contingent Liabilities that
would be recorded in accordance with generally accepted accounting
principles ("GAAP") consistently applied) of the Company at November
1, 1996, together with (i) the net change in long-term debt
(including current maturities) between November 1, 1996 and the date
hereof and (ii) without duplication, the amount of all New
Financing.
(e) "Contingent Liabilities"
Page 1 of 4
<PAGE>
The maximum estimated amount of liability reasonably likely to
result from pending litigation, asserted claims and assessments,
guaranties, uninsured risks and other contingent liabilities of the
Company (exclusive of such contingent Liabilities to the extent
reflected in Stated Liabilities).
(f) "Will be able to pay its Stated Liabilities, including Contingent
Liabilities, as they mature."
For the period from the date hereof through the stated maturity of
all New Financing, the Company will have sufficient assets and cash
flow to pay its respective Stated Liabilities and Contingent
Liabilities as those liabilities mature or otherwise become due.
(g) "Does not have Unreasonably Small Capital"
For the period from the date hereof through the stated maturity of
all New Financing, the Company, is a going concern and has
sufficient capital to ensure that it will continue to be a going
concern for such period and to remain a going concern despite
moderately negative deviations from the Projections discussed below.
3. For purposes of this Certificate, I , or officers of the company
under my direction and supervision, have performed the following procedures as
of and for the periods set forth below.
(a) I have reviewed the consolidated statements of financial
condition of the Company at February 2, 1996, and August 2, 1996,
and the related consolidated statements of income and cash flow and
changes in shareholders' equity of the Company for the fiscal year
and six month period ended on such date, as the case may be.
(b) I have reviewed the unaudited pro forma consolidated financial
statements of the Company for the period ending August 2, 1996
prepared in accordance with GAAP consistently applied after giving
effect to the plan of reorganization and the credit agreement, and
verified the mathematical accuracy of the application of the pro
forma adjustments to the amounts in the unaudited consolidated
financial statements.
(c) I have made inquiries of certain other officials of the Company
who have responsibility for financial and accounting matters
regarding:
1. whether the unaudited pro forma consolidated financial
statements referred to in paragraph (b) above are in conformity with
GAAP applied on a basis substantially consistent with that of the
unaudited financial statements as at August 2, 1996, and whether
omitted notes to the unaudited consolidated financial statements
would have disclosed any new information, except to update amounts
included in the notes to the August 2, 1996 unaudited consolidated
financial statements and
Page 2 of 4
<PAGE>
2. whether, at November 1, 1996, there were any decreases as
compared with August 2, 1996, in the consolidated net assets or the
excess of consolidated current assets over consolidated current
liabilities of the Company.
(d) I have read:
1. the Credit Documents and the respective Schedules and
Exhibits thereto.
(e) With respect to Contingent Liabilities, I:
1. inquired of certain officials of the Company who have
responsibility for legal, financial and accounting matters as to the
existence and estimated liability with respect to all Contingent
Liabilities know to them;
2. confirmed with senior officers of the Company that, to the
best of such officers' knowledge, (i) all appropriate items were
included in Stated Liabilities or Contingent Liabilities made known
to me in the course of my inquiry and that (ii) the amounts relating
thereto were the maximum estimated amount of liability reasonably
likely to result therefrom as of the date hereof;
3. I hereby certify that, to the best of my knowledge, all
material Contingent Liabilities that may arise from any pending
litigation, asserted claims and assessments, guarantees, uninsured
risks and other Contingent Liabilities of the Company (exclusive of
such Contingent Liabilities to the extent reflected in Stated
Liabilities) have been considered in making the certification set
forth in paragraph 4 below, and with respect to each such Contingent
Liability the estimable maximum estimated amount of liability with
respect thereto was used in making such certification.
(f) I have had the Projections, which have been previously delivered
to the Banks, prepared under my direction and have re-examined the
Projections on the date hereof and considered the effect thereon of
any changes since the date of the preparation thereof on the results
projected therein. After such review, I hereby certify that in my
opinion the Projections are reasonable and attainable. Furthermore,
the Projections support the conclusions contained in the last
paragraph of this Certificate.
(g) I have made inquiries of certain officers of the Company which
have responsibility for financial reporting and accounting matters
regarding whether they were aware of any events or conditions that,
as of the date hereof, would cause the Company, after giving effect
to the incurrence of the New Financing, to (i) have assets with a
Fair Value or Present Fair Salable Value that are less than the sum
of Stated Liabilities and Contingent Liabilities; (ii) have
Unreasonably Small Capital; or (iii) not be able to pay its Stated
Liabilities and Contingent Liabilities as they mature or otherwise
become due.
Page 3 of 4
<PAGE>
4. Based on and subject to the foregoing, I hereby certify on behalf
of the Company that, after giving effect to the Plan of Reorganization and the
amended and restated Credit Agreement, it is my informed opinion that as of the
date hereof (i) the Fair Value and Present Fair Salable Value of the company's
assets exceed its Stated Liabilities and Contingent Liabilities; (ii) the
Company will not have Unreasonably Small Capital; and (iii) the Company will be
able to pay its respective Stated Liabilities and Contingent Liabilities as they
mature or otherwise become due.
IN WITNESS WHEREOF, the Company has caused its duly authorized Chief
Financial Officer to execute and deliver this Certificate this day of
-----
, 1996.
- ---------------
ITHACA INDUSTRIES, INC.
By:
---------------------------
Name: Eric N. Hoyle
Title: Chief Financial Officer
Page 4 of 4
<PAGE>
Exhibit L
---------
TO THE CREDIT AGREEMENT
CT SYSTEM
1633 BROADWAY
NEW YORK, NY 10019
212-654-1665
December 1, 1992
To the Agent and the
Banks party to the
Credit Agreement referred to below:
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of December 1,
1992, among Ithaca Holdings, Inc. ("Holdings"), Ithaca Industries, Inc. (the
"Company"), the lenders (the "Banks") from time to time party thereto, Canadian
Imperial Bank of Commerce, acting through one or more of its agencies, branches
or affiliates and Kleinwort Benson Limited, as Co-Agents and Bankers Trust
Company, as Agent (the "Agent") (as such Credit Agreement may be modified,
supplemented or amended from time to time, the "Credit Agreement").
Each of Holdings and the Company, pursuant to Section 14.08 of the
Credit Agreement has irrevocably designated, appointed and empowered the
undersigned, CT Corporation System, with offices currently located at 1633
Broadway, New York, New York 10019, as its authorized designee, appointee and
agent to receive, accept and acknowledge for and on its behalf, and in respect
of its property, service of any and all legal process, summons, notices and
documents which may be served in any such legal action or proceeding with
respect to the Credit Agreement or any other Credit Document (as defined in the
Credit Agreement) in the courts of the State of New York or of the United States
of America for the Southern District of New York.
The undersigned hereby informs you that it irrevocably accepts such
appointment as agent as set forth in Section 14.08 of the Credit Agreement for
so long as all fees for our services are paid in a timely manner and agrees with
you that the undersigned (i) shall inform the Agent promptly in writing of any
change of its address in New York City, (ii) shall perform its obligations as
such process agent in accordance with the provisions of Section 14.08 of the
Credit Agreement and (iii) shall forward promptly to Holdings and the Company
any legal process received by the undersigned in its capacity as process agent.
<PAGE>
Page 2
December 2, 1992
Re: Agent for service of process for Ithaca Industries,
Inc. and Ithaca Holdings, Inc.
As process agent, the undersigned, and its successor or successors,
agree to discharge the above-mentioned obligations and will not refuse
fulfillment of such obligations under Section 14.08 of the Credit Agreement.
Very truly yours,
CT CORPORATION SYSTEM
By
--------------------------
Frieda Dawson
Service Representative
<PAGE>
Exhibit M
---------
ITHACA INDUSTRIES INC.
BORROWING BASE CERTIFICATE AS OF 11/01/96
(I) ACCOUNTS RECEIVABLE
Total Accounts Receivable Balances from aged trial balances 0.00
LESS:
- -----
Returns, Discounts, Claims, Credit and Allowances 0.00
Reserves affecting creditworthiness of accounts 0.00
(i) Bill and Hold Transactions 0.00
(ii) Contracts or Sales to Affiliates 0.00
(iii) Invoices over 30 days past due 0.00
(iv) Governmental Sales 0.00
(v) Offsetting Payables 0.00
(vi) International Sales 0.00
(vii) Receivable Sold Under Factoring Agreement 0.00
TOTAL ELIGIBLE ACCOUNTS RECEIVABLE 0.00
85% OF ELIGIBLE RECEIVABLES 0.00
(II) INVENTORY
Gross Dollar Value of the Inventory (FIFO) 0.00
Finished Goods 0.00
Work in Process 0.00
Raw Materials 0.00
LESS:
(i) Supplies, Spare Parts, Rejected Goods Returned 0.00
(ii) Advance payments 0.00
(iii) Inventory at locations outside U.S.
(other than in-transit) 0.00
<PAGE>
ITHACA INDUSTRIES INC.
BORROWING BASE CERTIFICATE AS OF 11/01/96
(iv) Inventory at U.S. locations not owned or leased 0.00
(v) Reserves for Discontinued & Obsolete Goods 0.00
SUB-TOTAL ELIGIBLE INVENTORY 0.00
50% OF ELIGIBLE INVENTORY 0.00
- -------------------------
(III) 50% OF FOREIGN LETTER OF CREDIT STATED AMOUNT 0.00
(IV) MAXIMUM OVERADVANCE AMOUNT (SEE ATTACHED) 0.00
BORROWING BASE 0.00
--------------
LESS PRINCIPAL AMOUNT OF REVOLVING LOANS AND 0.00
--------------------------------------------
SWINGLINE LOANS
LESS SUM OF LETTERS OF CREDIT OUTSTANDING 0.00
BORROWING BASE SURPLUS (DEFICIENCY) 0.00
I, the undersigned, Chief Financial Officer of Ithaca Industries, Inc., do
hereby certify that all of the information provided above is true and correct as
of the date first above written.
IN WITNESS WHEREOF, I have hereunto set my hand this day of , 19 .
--- ------ --
By
----------------------------
ERIC HOYLE
CHIEF FINANCIAL OFFICER
<PAGE>
ITHACA INDUSTRIES INC.
BORROWING BASE CERTIFICATE AS OF 11/01/96
MAXIMUM OVERADVANCE AMOUNT
Inventory at locations outside U.S. $0.00
(other than in-transit)
Inventory at U.S. locations
not owned or leased 0.00
----------------
Sub-Total
0.00
X 50% of Sub-Total $0.00
Maximum Amount 8,200,000.00
--------------
Amount in Excess of Maximum Amount $0.00
Maximum allowed for FY 01/31/97
3,500,000.00
--------------
Lesser Amount of Excess or Maximum Allowed $0
--------------
<PAGE>
Exhibit N
---------
[Date]
Bank Name
Attention
Addr
City, State Zip
RE: LIEN ON ACCOUNT
Dear Sir or Madam:
This letter is to inform you of certain agreements entered into by Ithaca
Industries, Inc. (the "Company") which refer to the account(s) entitled
"Disbursement", an active deposit or other bank account (the "Account")
maintained with you by the Company.
Reference is made hereby to that certain Waiver dated as of January 30, 1996
(the "Waiver") among Ithaca Holdings, Inc., the Company, the various lending
parties thereto, Canadian Imperial Bank of Commerce and Kleinwort Benson, as
Co-Agents, and Bankers Trust Company, as Agent.
The Company has agreed in the Waiver to take certain steps to convey ratably to
or for the benefit of certain secured creditors (the "Secured Creditors") a lien
on and security interest in such Account and the funds and other property
therein deposited from time to time by subsidiaries or obligors of the Company
in the Account and all other cash and property of the Company on deposit in the
Account.
Accordingly, by singing this letter agreement, you agree that from the date
hereof the Account shall be maintained, and shall be reflected on your books and
records as being maintained, for the exclusive benefit of First Union National
Bank of North Carolina (the "Cash Collateral Agent") on behalf of the Secured
Creditors except as provided herein. The Account shall be subject to written
instructions from the Cash Collateral Agent only as provided herein. Otherwise,
the Account shall be managed by the Company. You agree that, unless otherwise
instructed in writing by the Cash Collateral Agent, you will:
a) follow your usual operating procedures for the han
dling of any remittance which is received in the Ac
count, including without limitation endorsing and
<PAGE>
processing all eligible
checks and other remittance items, depositing such checks and other
remittance items in the Account and disbursing funds in the Account at
the direction of the Company; and
b) follow your usual operating procedure for maintaining a record
of all checks and other remittance items received in the
Account an deliver copies of the following to the Cash
Collateral Agent at its address set forth below (or such other
address as to which the Cash Collateral Agent may notify you
in writing): (i) your regular bank statement with respect to
the Account, and (ii) notices furnished to the Company with
respect to the Account.
Notwithstanding the foregoing you agree to transfer intact, following two) (2)
business days' written notice from the Cash Collateral Agent (with a copy of
such notice to the Company) of an Event of Default under that certain Amended
and Restated Credit Agreement, originally dated as of December 1, 1992 and
amended and restated as of December 16, 1996, as amended, between the Company,
the lenders from time to time party thereto, Canadian Imperial Bank of Commerce,
acting through one or more of its agencies, affiliates or branches, as Co-Agent,
and Bankers Trust Company, as Agent, which Event of Default is continuing and
has not been waived under the terms of such Credit Agreement (an "Unwaived Event
of De fault") (in same-day funds, if at all practicable), all funds then and
thereafter from time to time in the Account to the account specified by the Cash
Collateral Agent in such notice (the "Cash Collateral Account"). Between your
receipt of such notice and your transfer of funds to the Cash Collateral Account
in accordance therewith, you will not withdraw or transfer the Account or any
funds thereon. You also agree that you shall not nor will you allow the Company
to, make any charges or debits to the Account, or exercise any right of off-sets
or banker's lien with respect thereto except as provided herein. You may debit
the Account for any items deposited in the Account which may be returned or
otherwise not collected and for all charges, fees, commissions and expenses
incurred by you in providing other collection and disbursement services, or
otherwise in connection herewith, all in accordance with your customary
practices; you may charge the Account as permitted at such times as are in
accordance with your customary practices for the chargeback of returned items
and expenses.
Additionally, in order to enable the Cash Collateral Agent to reconcile
properly the records of the Company, upon notice from the Cash Collateral Agent
(with a copy of such notice from the Company), you irrevocably agree to provide,
during your regular business hours, reasonable access to the Cash Collateral
Agent to any and all of your records of, or relating to, the Company and its
accounts maintained by you, including without limita tion records of all
collections and disbursements and other transfers of any kind for the Company.
Notwithstanding any other provision of this letter agreement, unless you are
grossly negligent or do not act in good faith in performance or non-performance
in connection with this letter agreement and the Account, you shall not be
liable to the Company or the Cash Collateral Agent for any claims, damages,
losses, or expenses incurred by either of them in connection herewith; in the
event you breach the standard of care set forth herein, liability shall be
limited to damages directly caused by such breach and in no event shall you be
liable for any incidental, indirect, consequential or other damages hereunder.
You may terminate this letter agreement only upon thirty days' prior written
notice to that effect to the Company and the Cash Collateral Agent, and by
canceling the Account on the effective date of such notice and transferring all
funds, if any, then and from time to time thereafter in the Account to the
Company at the address set forth above or, upon notice from the Cash Collateral
Agent (with a copy of such notice to the Company) of an Unwaived Event of
Default, then two (2) business days' fol lowing receipt of such notice, to the
Cash Collateral Agent; provided, however, that between your receipt of such
notice and your transfer of funds to the Cash Collateral Account in accordance
therewith, you will not withdraw or transfer the Account or any funds therein.
This Letter Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York for contracts made and wholly performed within
that State.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
First Union National Bank Center, TWI8
Charlotte, NC 28288
Attention: Julia Bouhuys
By:
-------------------------------------
Title:
ITHACA INDUSTRIES, INC.
P.O. Box 620
Highway 268 West
Wilkesboro, North Carolina 28697
Attention: Eric Hoyle
By:
-------------------------------------
Title: Senior Vice President Finance and
Administration
ACCEPTED AND AGREED:
Name of Bank: Bank Name
By:
-------------------------------------
Title:
<PAGE>
Exhibit O
---------
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date , 19
---------- --
Reference is made to the Credit Agreement described in Item 2 of Annex
I hereto (as such Credit Agreement may here after be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"). Unless defined in
Annex I hereto, terms defined in the Credit Agreement are used herein as therein
defined. (the "Assignor") and
---------------------------------------------------
(the "Assignee") hereby agree as follows:
- -----------------------------------
1. The Assignor hereby sells and assigns to the As signee without
recourse and without representation or war ranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obliga tions
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstand ing rights and obligations under the Credit Agreement relat ing to
the facilities listed in Item 4 of Annex I hereto, in cluding, without
limitation, (x) in the case of any assignment of outstanding Term Loans, all
rights and obli gations with respect to the Assigned Share of such outstanding
Term Loans and (y) in the case of any assignment of all or any portion of the
Total Revolving Loan Commitment, all rights and obligations with respect to the
Assigned Share of the Revolving Loans and Letters of Credit. After giving effect
to such sale and assignment, the Assignee's Revolving Loan Commitment and the
amount of the outstanding Term Loans owing to the Assignee will be as set forth
in Item 4 of Annex I hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being as signed by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in con nection with the Credit
Agreement or the other Credit Docu ments or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or the
other Credit Documents or any other instrument or docu ment furnished pursuant
thereto; and (iii) makes no repre sentation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
the Borrower's Subsidiaries or the performance or observance by the Borrower or
the Borrower's Subsidiaries of any of
<PAGE>
their obligations under the Credit Agreement or the other Credit Documents to
which they are a party or any other instrument or document furnished pursuant
thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement and the other Credit Documents, together with copies of the financial
statements referred to therein and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Assumption Agree ment; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) confirms that it is an Eligible
Transferee under Section 13.04(b) of the Credit Agreement; (iv) appoints and
authorizes the Agent (including the Agent in its capacity as Collateral Agent),
the Co-Agent, the Original Cash Collateral Agent and the Successor Cash
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit Documents as are
delegated to the Agent, the Co-Agent, the Collateral Agent, the Original Cash
Collateral Agent or the Successor Cash Collateral Agent as the case may be, by
the terms thereof, together with such powers as are reasonably incidental
thereto; [and] (v) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required
to be per formed by it as a Bank; and (vi) to the extent legally en titled to do
so, attaches the forms described in the last sentence of Section 13.04(b) of the
Credit Agreement./1/
4. Following the execution of this Assignment and Assumption Agreement
by the Assignor and the Assignee, an ex ecuted original hereof (together with
all attachments) will be delivered to the Agent. The effective date of this
Assignment and Assumption Agreement shall be the date of execution hereof by the
Assignor and the Assignee and the receipt of the consent of BTCo to the extent
required by Section 13.04(b) of the Credit Agreement and receipt by the Agent of
the administrative fee referred to in such Section 13.04(b), unless otherwise
specified in Item 5 of Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original hereof to the Agent,
as of the Settlement Date, (i) the As signee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Assumption
Agreement, have the rights and obligations of a Bank thereunder and under the
other Credit Documents and (ii) the Assignor shall, to the extent provided in
this Assignment and Assumption Agreement, relinquish its rights and be released
from its
- -------------
/1/ Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
<PAGE>
EXHIBIT O
obligations under the Credit Agreement and the other Credit Documents.
6. It is agreed that the Assignee shall be entitled to (w) all interest
on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I;
(x) all Revolving Loan Commitment Commission (if applicable) on the Assigned
Share of the Total Revolving Loan Commitment at the rate specified in Item 7 of
Annex I hereto; and (y) all Letter of Credit Fees (if applicable) on the
Assignee's participation in all Letters of Credit at the rate specified in Item
8 of Annex I hereto, which, in each case, accrue on and after the Settlement
Date, such interest and, if applicable, Revolving Loan Commitment Commission and
Letter of Credit Fees, to be paid by the Agent directly to the Assignee. It is
further agreed that all payments of principal made on the Assigned Share of the
Loans which occur on and after the Settlement Date will be paid directly by the
Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay to the
Assignor an amount specified by the Assignor in writing which represents the
Assigned Share of the principal amount of the respective Loans made by the
Assignor pursuant to the Credit Agreement which are outstanding on the
Settlement Date, net of any closing costs, and which are being assigned
hereunder. The Assignor and the Assignee shall make all appropriate adjustments
in payments under the Credit Agreement for per iods prior to the Settlement Date
directly between themselves on the Settlement Date.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
Accepted this day [NAME OF ASSIGNOR]
-----
of , 19 as Assignor
-------------- --
By
-----------------------------
Title:
- ----------------------------------
[NAME OF ASSIGNEE]
as Assignee
<PAGE>
By
-----------------------------
Title:
- -----------------------------------
[Acknowledged and Agreed:
BANKERS TRUST COMPANY/2/
By
--------------------------
Title:
- -------------
/2/ The consent of Bankers Trust Company in its individual capacity is
required only for assignments which include any portion of the Assignor's
Revolving Loan Commitment.
<PAGE>
EXHIBIT O
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Ithaca Industries, Inc.
2. Name and Date of Credit Agreement:
Amended and Restated Credit Agreement, originally dated as of December 1,
1992 and amended and restated as of December __, 1996, among Ithaca
Industries, Inc., the Banks from time to time party thereto, Canadian
Imperial Bank of Commerce, acting through one or more of its agencies,
branches or affiliates, as Co-Agent and Bankers Trust Com pany, as Agent, as
amended to the date hereof.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
Outstanding Principal Revolving
OF TERM LOANS LOAN COMMITMENT
------------- ---------------
a. Aggregate Amount $
-------------
$
------------
for all Banks
b. Assigned Share/3/ % %
------- -------
c. Amount of $ $
----------- -----------
Assigned Share
5. Settlement Date:
6. Rate of Interest As set forth in Section
1.07
to the Assignee: of the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)4
- -------------
/3/
Percentage taken to 12 decimal places.
/4/ Ithaca Industries, Inc. and the Agent shall direct the entire
amount of the interest to the Assignee at the rate set forth in Section
1.07 of the Credit Agreement, with the Assignor and Assignee effecting
the agreed upon sharing of the interest through payments by the Assignee
to the Assignor.
<PAGE>
7. Revolving Loan As set forth in Section
3.01(a)
Commitment of the Credit Agreement (unless
Commission: otherwise agreed to by the As
signor and the Assignee)5
8. Letter of Credit As set forth in Section
3.01(b)
Fees to the of the Credit Agreement (unless
Assignee: otherwise agreed to by the As
signor and the Assignee)6
9. Commission: otherwise agreed to by
the Assignor and the
Assignee)
Notice:
ASSIGNOR:
----------------------------------
----------------------------------
----------------------------------
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
----------------------------------
----------------------------------
----------------------------------
-------- /5/ Insert "Not Applicable" in lieu of text if no portion of the
Total Revolving Loan Commitment is being assigned. Otherwise, Ithaca Industries,
Inc. and the Agent shall direct the entire amount of the Revolving Loan
Commitment Commission to the Assignee at the rate set forth in Section 3.01(a)
of the Credit Agreement, with the Assignor and the Assignee effecting the agreed
upon sharing of Revolving Loan Commitment Commission through payment by the
Assignee to the Assignor.
/6/ Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, Ithaca Industries, Inc.
and the Agent shall direct the entire amount of the Letter of Credit Fees to the
Assignee at the rate set forth in Section 3.01(b) of the Credit Agreement, with
the Assignor and the Assignee effecting the agreed upon sharing of Letter of
Credit Fees through payment by the Assignee to the Assignor.
<PAGE>
EXHIBIT O
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
----------------------------------
----------------------------------
----------------------------------
Attention:
Reference:
ASSIGNEE:
----------------------------------
----------------------------------
----------------------------------
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By By
------------------------- -------------------------
------------------------- -------------------------
(Print Name and Title) (Print Name and Title)
<PAGE>
EXHIBIT O
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date , 19
------------ --
Reference is made to the Credit Agreement described in Item 2 of Annex
I hereto (as such Credit Agreement may here after be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"). Unless defined in
Annex I hereto, terms defined in the Credit Agreement are used herein as therein
defined. (the "Assignor") and
---------------------------------------------------
(the "Assignee") hereby agree as follows:
- ---------------------------------------
1. The Assignor hereby sells and assigns to the As signee without
recourse and without representation or war ranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obliga tions
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstand ing rights and obligations under the Credit Agreement relat ing to
the facilities listed in Item 4 of Annex I hereto, in cluding, without
limitation, (x) in the case of any assignment of outstanding Term Loans, all
rights and obli gations with respect to the Assigned Share of such outstanding
Term Loans and (y) in the case of any assignment of all or any portion of the
Total Revolving Loan Commitment, all rights and obligations with respect to the
Assigned Share of the Revolving Loans and Letters of Credit. After giving effect
to such sale and assignment, the Assignee's Revolving Loan Commitment and the
amount of the outstanding Term Loans owing to the Assignee will be as set forth
in Item 4 of Annex I hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being as signed by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in con nection with the Credit
Agreement or the other Credit Docu ments or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or the
other Credit Documents or any other instrument or docu ment furnished pursuant
thereto; and (iii) makes no repre sentation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
<PAGE>
the Borrower's Subsidiaries or the performance or observance by the Borrower or
the Borrower's Subsidiaries of any of their obligations under the Credit
Agreement or the other Credit Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement and the other Credit Documents, together with copies of the financial
statements referred to therein and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Assumption Agree ment; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) confirms that it is an Eligible
Transferee under Section 13.04(b) of the Credit Agreement; (iv) appoints and
authorizes the Agent (including the Agent in its capacity as Collateral Agent),
the Original Cash Collateral Agent and the Successor Cash Collateral Agent to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement and the other Credit Documents as are delegated to the Agent,
the Collateral Agent, the Original Cash Collateral Agent or the Successor Cash
Collateral Agent as the case may be, by the terms thereof, together with such
powers as are reasonably incidental thereto; [and] (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank; and (vi)
to the extent legally entitled to do so, attaches the forms described in the
last sentence of Section 13.04(b) of the Credit Agreement.7
4. Following the execution of this Assignment and Assumption Agreement
by the Assignor and the Assignee, an ex ecuted original hereof (together with
all attachments) will be delivered to the Agent. The effective date of this
Assignment and Assumption Agreement shall be the date of execution hereof by the
Assignor and the Assignee and the receipt of the consent of BTCo to the extent
required by Section 13.04(b) of the Credit Agreement and receipt by the Agent of
the administrative fee referred to in such Section 13.04(b), unless otherwise
specified in Item 5 of Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original hereof to the Agent,
as of the Settlement Date, (i) the As signee shall be a party to the Credit
Agreement and, to the
- -------------
/7/ Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
<PAGE>
EXHIBIT O
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Bank thereunder and under the other Credit Documents and (ii)
the Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement and the other Credit Documents.
6. It is agreed that the Assignee shall be entitled to (w) all interest
on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I;
(x) all Revolving Loan Commitment Commission (if applicable) on the Assigned
Share of the Total Revolving Loan Commitment at the rate specified in Item 7 of
Annex I hereto; and (y) all Letter of Credit Fees (if applicable) on the
Assignee's participation in all Letters of Credit at the rate specified in Item
8 of Annex I hereto, which, in each case, accrue on and after the Settlement
Date, such interest and, if applicable, Revolving Loan Commitment Commission and
Letter of Credit Fees, to be paid by the Agent directly to the Assignee. It is
further agreed that all payments of principal made on the Assigned Share of the
Loans which occur on and after the Settlement Date will be paid directly by the
Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay to the
Assignor an amount specified by the Assignor in writing which represents the
Assigned Share of the principal amount of the respective Loans made by the
Assignor pursuant to the Credit Agreement which are outstanding on the
Settlement Date, net of any closing costs, and which are being assigned
hereunder. The Assignor and the Assignee shall make all appropriate adjustments
in payments under the Credit Agreement for per iods prior to the Settlement Date
directly between themselves on the Settlement Date.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
Accepted this day [NAME OF
------ ASSIGNOR]
of , 19 as Assignor
-------------- --
<PAGE>
By
--------------------------
Title:
[NAME OF ASSIGNEE]
as Assignee
By
--------------------------
Title:
[Acknowledged and Agreed:
BANKERS TRUST COMPANY/8/
By
--------------------------
Title:
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Ithaca Industries, Inc.
2. Name and Date of Credit Agreement:
Amended and Restated Credit Agreement, originally dated as of December 1,
1992 and amended and restated as of December __, 1996, among Ithaca
Industries, Inc., the Banks from time to time party thereto, Canadian
Imperial Bank of Commerce, acting through one or more of its agencies,
branches or affiliates, as Co-Agent and Bankers Trust Com pany, as Agent, as
amended to the date hereof.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
Outstanding Principal Revolving
- -------------
/8/ The consent of Bankers Trust Company in its individual capacity is
required only for assignments which include any portion of the Assignor's
Revolving Loan Commitment.
<PAGE>
EXHIBIT O
OF TERM LOANS LOAN COMMITMENT
------------- ---------------
a. Aggregate Amount $
------------------
$
-------------
for all Banks
b. Assigned Share/9/ % %
-------- --------
c. Amount of $ $
----------- -----------
Assigned Share
5. Settlement Date:
6. Rate of Interest As set forth in Section
1.07
to the Assignee: of the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)/10/
7. Revolving Loan As set forth in Section
3.01(b)
Commitment of the Credit Agreement (unless
Commission: otherwise agreed to by the As
signor and the Assignee)/11/
8. Letter of Credit As set forth in Section
3.01(b)
Fees to the of the Credit Agreement (unless
- -------------
/9/
Percentage taken to 12 decimal places.
/10/ Ithaca Industries, Inc. and the Agent shall direct the entire
amount of the interest to the Assignee at the rate set forth in Section
1.07 of the Credit Agreement, with the Assignor and Assignee effecting
the agreed upon sharing of the interest through payments by the Assignee
to the Assignor.
/11/ Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, Ithaca Industries, Inc.
and the Agent shall direct the entire amount of the Revolving Loan Commitment
Commission to the Assignee at the rate set forth in Section 3.01(b) of the
Credit Agreement, with the Assignor and the Assignee effecting the agreed upon
sharing of Revolving Loan Commitment Commission through payment by the Assignee
to the Assignor.
<PAGE>
Assignee: otherwise agreed to by the As
signor and the Assignee)/12/
9. Commission: otherwise agreed to by
the Assignor and the
Assignee)
Notice:
ASSIGNOR:
---------------------------
---------------------------
---------------------------
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
---------------------------
---------------------------
---------------------------
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
---------------------------
---------------------------
---------------------------
Attention:
Reference:
ASSIGNEE:
- -------------
/12/ Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, Ithaca Industries, Inc.
and the Agent shall direct the entire amount of the Letter of Credit Fees to the
Assignee at the rate set forth in Section 3.01(c) of the Credit Agreement, with
the Assignor and the Assignee effecting the agreed upon sharing of Letter of
Credit Fees through payment by the Assignee to the Assignor.
<PAGE>
EXHIBIT O
---------------------------
---------------------------
---------------------------
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By By
-------------------------- --------------------------
-------------------------- --------------------------
(Print Name and Title) (Print Name and Title)
<PAGE>
Exhibit R
---------
SECTION 4.04(B)(III) CERTIFICATE
Reference is hereby made to the Credit Agreement, originally dated as
of December 1, 1992, among Ithaca Industries, Inc., the lenders from time to
time party thereto, Canadian Imperial Bank of Commerce, acting through one or
more of its agencies, branches or affiliates, as Co-Agent and Bankers Trust
Company, as Agent, as amended and restated as of December 16, 1996, as amended
to the date hereof (the "Credit Agreement"). Pursuant to the provisions of
Section 4.04(b)(iii) of the Credit Agreement, the undersigned hereby certifies
that it is not a "bank" as such term is used in Section 881(c)(3)(A) of the
Internal Revenue Code of 1986, as amended.
[NAME OF BANK]
By:
--------------------------------
Title:
Date:
------------------------
Exhibit 10.3(a)
---------------
December 17, 1996
Mr. J.D. Waller
Chief Executive Officer
Ithaca Industries, Inc.
Highway 268 West
Wilkesboro, NC 28697
Dear Mr. Waller:
The purpose of this letter is to set forth the terms of this
engagement between Alvarez & Marsal, Inc. ("A&M") and Ithaca Industries, Inc.
("Ithaca") and to describe the scope of the management services to be performed
and the basis of compensation for those services.
1. DESCRIPTION OF SERVICES
The anticipated scope of A&M's services are as follows:
(a) Peter Cheston will serve as Acting Chief Operating Officer
of the Company, reporting to the Chief Executive Officer of the Company.
(b) Other members of A&M will provide consulting services on
an as-needed basis, as requested by Ithaca.
2. COMPENSATION
(a) PETER CHESTON. A&M will receive a monthly fee of $35,000
for the services provided by Peter Cheston. This fee could be adjusted downward
upon the mutual agreement of Peter Cheston and Ithaca if Peter Cheston devotes
less than 90 percent of his time to the management of the Company.
(b) OTHER MEMBERS OF A&M. To the extent other members of A&M
provide consulting services, A&M will receive fees based on the following hourly
rates:
<PAGE>
Page 2
December 17, 1996
Founding Managing Director $500
Managing Director $400
Director $250
Associate $200
In addition, A&M will be reimbursed for its reasonable out-of-pocket expenses.
All fees and expenses will be billed on a monthly basis.
A $50,000 retainer is required at the outset of the engagement. This
retainer will be returned or credited against the final bill.
In addition, A&M will be entitled to following incentive
compensation:
CASH BONUS PLAN
Incentive Compensation will begin to be earned upon
achievement of 85% of the Revised Plan EBITDA at 85% of the
Annual Amount and will be increased pro-rata as actual
performance meets or exceeds the Revised Business Plan target.
Annual Amounts: FY 1997 - $273
(at 100% of FY 1998 - Based on 65% of Peter
Revised Plan Cheston monthly fees earned.
EBITDA)
STOCK OPTION GRANT
Amount: Options for 1% of reorganized Ithaca.
Timing of Grant: Upon approval of Long-Term Employee
Incentive Plan by the Post-Reorganization.
Vesting: Immediately upon grant.
Pricing: Strike price based upon the fair market
value of the New Ithaca Common Stock as
determined by the Board of directors of
Reorganized Ithaca or by an independent third
party as designated by such Board.
3. TERM
This agreement will commence as of the date hereof and will continue
for a period of one year, unless terminated earlier by Ithaca. Ithaca may
terminate this agreement without cause by giving 30 days' written notice to A&M.
4. INDEMNIFICATION
<PAGE>
Page 3
December 17, 1996
The attached indemnification agreement is incorporated herein by
reference and shall be executed upon the acceptance of this letter agreement.
Very truly yours,
Alvarez & Marsal, Inc.
By: /s/ Peter C. Cheston
-------------------------------------
Peter C. Cheston
Accepted and Agreed
Ithaca Industries, Inc.
By: /s/ J.D. Waller
---------------------------
J.D. Waller
<PAGE>
Exhibit 10.3(b)
---------------
INDEMNIFICATION AGREEMENT
This indemnity is made part of an agreement, dated December 17, 1996
(which together with any renewals, modifications or extensions thereof, is
herein referred to as the "Agreement"), between and among Alvarez & Marsal, Inc.
("A&M") and Ithaca Industries, Inc. (the "Company") for services to be rendered
to the Company by A&M.
A. The Company agrees to indemnify and hold harmless A&M against any
and all losses, claims, damages, liabilities and expenses, including the
reasonable costs for counsel or others in investigating, preparing or defending
any action or claim, whether or not in connection with litigation in which A&M
is a party, caused by, relating to, based upon or arising out of (directly or
indirectly) A&M's acceptance of or the performance or non-performance of its
obligations under the Agreement; provided, however, such indemnity shall not
apply to any such loss, claim, damage, liability or expense to the extent it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted from the gross negligence or willful misconduct
of A&M. The Company also agrees that A&M shall not have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company for or in
connection with the engagement of A&M, except for any such liability for losses,
claims, damages, liabilities or expenses that are found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from A&M's gross negligence or willful misconduct. A&M
will not settle, compromise or consent to the entry of any judgment in any
proceeding or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder without the prior written consent of the
Company.
B. These indemnification provisions shall be in addition to any
liability which the Company may otherwise have to A&M or the persons identified
in the following sentence. These indemnification provisions shall extend to A&M,
its directors, officers, employees, agents and affiliates; all references to A&M
in these indemnification provisions shall be understood to include any and all
of the foregoing persons and entities.
C. If any action, proceeding or investigation is commenced to which
A&M proposes to demand indemnification hereunder, it will notify the Company
with reasonable promptness; provided, however, that any failure by A&M to notify
the Company will not relieve the Company from its obligations hereunder, except
to the extent that such failure shall have actually prejudiced the defense of
such action. The Company shall promptly pay expenses reasonably incurred by A&M
in defending or settling (in accordance with paragraph A above) any action,
proceeding or investigation in which A&M is a party or is threatened to be made
a party by reason of its relationship with the Company hereunder, in advance of
the final
<PAGE>
2
disposition of such action, proceeding, or investigation upon submission of
invoices therefor. A&M hereby undertakes, and the Company hereby accepts its
undertaking, to repay any and all such amounts so advanced if it shall
ultimately be determined that A&M is not entitled to be indemnified therefor.
The Company may, in lieu of advancing the expenses of separate counsel for A&M,
provide A&M with legal representation by the same counsel who represents the
Company, provided such counsel is reasonably satisfactory to A&M, at no cost to
A&M; provided, however, that if such counsel or counsel to A&M shall determine
that due to the existence of actual or potential conflicts of interest between
A&M and the Company such counsel is unable to represent both A&M and the
Company, then A&M shall be entitled to use a separate counsel of its own choice,
and the Company shall promptly advance its reasonable expenses of such separate
counsel upon submission of invoices therefor. Nothing herein shall prevent A&M
from using separate counsel of its own choice at its own expense.
D. In order to provide for just and equitable contribution if a
claim for indemnification pursuant to these indemnification provisions is made
but it is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) that such indemnification may not be enforced in such
case, even though the express provisions hereof provide for indemnification,
then the Company, on the one hand, and A&M, on the other hand, shall contribute
to the losses, claims, damages, liabilities and expenses so that A&M is
responsible in the aggregate for a percentage of losses, claims, damages,
liabilities and expenses equal to the relative fault of the Company, on the one
hand, and A&M, on the other hand, in connection with the statements, acts or
omissions which result in such losses, claims, damages, liabilities and costs;
and further provided that in no event will A&M's aggregate contribution for all
losses, claims, damages, liabilities and expenses with respect to which
contribution is available hereunder exceed the amount of fees actually received
by A&M pursuant to the Agreement. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution hereunder from any person
who is not also found liable for such fraudulent misrepresentation.
E. Neither termination of the Agreement nor completion of the
engagement of A&M shall affect these indemnification provisions, which shall
hereafter remain operative and in full force and effect. These indemnification
provisions shall apply to the engagement of A&M pursuant to the Agreement and to
any other engagement which A&M may perform for the Company.
F. The rights provided herein shall not be deemed exclusive of any
other rights to which A&M may be entitled under the certificate of incorporation
or
<PAGE>
3
bylaws of the Company, any other agreements, any vote of stockholders or
disinterested directors of the Company, any applicable law or otherwise.
Dated: Alvarez & Marsal, Inc.
By: /s/ Peter C. Cheston
--------------------------------
Peter C. Cheston
Dated: Ithaca Industries, Inc.
By: /s/ J.D. Waller
--------------------------------
J.D. Waller
Exhibit 10.4
------------
PWRW&G Draft of
1/9/97
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of January, 1997 (the "Agreement
Date"), between ITHACA INDUSTRIES, INC., a Delaware corporation ("Ithaca"), and
the undersigned individual (the "Executive").
The Executive has been employed by Ithaca for a number of years and
is currently employed as the Chief Executive Officer of Ithaca.
The Executive possesses an intimate knowledge of the business and
affairs of Ithaca, its policies, methods, personnel and operations.
The Board of Directors of Ithaca (the "Board") recognizes that the
Executive's contribution as an executive officer of Ithaca to the growth and
success of Ithaca has been substantial and desires to assure Ithaca of the
Executive's continued employment in an executive capacity and to compensate him
therefor.
The Executive is willing to commit himself to serve Ithaca on the
terms herein provided.
In consideration of the foregoing and of the respective covenants
and agreements of the parties herein contained, the parties hereto agree as
follows:
1. EMPLOYMENT
(a) Ithaca hereby agrees to employ the Executive, and the
Executive hereby agrees to serve Ithaca, on the terms and conditions set forth
herein.
(b) The employment of the Executive by Ithaca shall be for the
period commencing on the Agreement Date and expiring on December 31, 1999 or any
extension thereof agreed to in writing by Ithaca and the Executive (the
"Expiration Date"), unless such employment shall have been sooner terminated as
hereinafter set forth. For purposes of this Agreement, the term of the
Executive's employment hereunder shall mean the period commencing on the
Agreement Date and ending on the Date of Termination as defined in Section 7(e)
hereof.
2. POSITION AND DUTIES
During the term of the Executive's employment hereunder, the
Executive shall serve in the capacity of Chief Executive Officer of Ithaca. In
such capacity, the Executive shall have supervision over, and responsibility
for, the business of Ithaca and shall report to the Board, of which the
Executive shall be a member. In addition, the Executive shall have such other
powers, duties and
<PAGE>
2
responsibilities as may from time to time be prescribed by the Board; provided
that such other duties and responsibilities are consistent with the Executive's
position as Chief Executive Officer of Ithaca. The Executive shall perform and
discharge, faithfully, diligently and to the best of his ability, such duties
and responsibilities. The Executive shall devote substantially all his working
time and efforts to the business and affairs of Ithaca; provided that, to the
extent consistent with the needs of Ithaca, the Executive shall be entitled to
expend a reasonable amount of time on civic and philanthropic activities and the
management of his own and his family's business investments and activities,
subject to compliance with the provisions of Section 11 hereof.
3. PLACE OF PERFORMANCE
In connection with his employment by Ithaca, the Executive shall be
based at Ithaca's office at Highway 268 West, Wilkesboro, North Carolina,
subject to travel requirements in the ordinary course of the conduct of Ithaca's
business. Ithaca shall promptly pay (or reimburse the Executive for) all
reasonable moving expenses incurred by the Executive relating to a change of his
principal residence in connection with any relocation of such office to a
location more than 25 miles from the Wilkesboro, North Carolina.
4. COMPENSATION
(a) BASE SALARY. During the term of his employment hereunder,
the Executive shall receive a base salary at the rate of $490,000 per annum,
subject to increases, if any, in the sole discretion of the Board ("Base
Salary"). Base Salary shall be payable in substantially equal monthly
installments. Any increase in Base Salary or other compensation shall not,
without the consent of the Executive, limit or reduce any other obligation of
Ithaca hereunder and, once established at an increased specified annual rate,
the Executive's annual Base Salary hereunder shall not thereafter be reduced.
(b) INCENTIVE COMPENSATION. In addition to Base Salary, during
the term of his employment hereunder, the Executive shall be eligible to
participate in any incentive compensation arrangements maintained generally by
Ithaca from time to time for its other senior executive officers (the "Plans").
The amount of any additional compensation payable to the Executive pursuant to
this paragraph will be paid to the Executive in accordance with the terms of the
Plans.
(c) EXPENSES. During the term of his employment hereunder, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by him (in accordance with the policies and procedures
established by the Board from time to time for Ithaca's senior executive
officers) in performing services hereunder, provided that the Executive properly
accounts therefor in accordance with Ithaca's policy. Ithaca shall make
available to the Executive (or
<PAGE>
3
reimburse the Executive for the cost of leasing) an automobile (which shall be a
current model Lincoln Town car or another automobile of approximately the same
value) and shall reimburse the Executive for all expenses of operating such
automobile (less an appropriate allocation for personal use in accordance with
Ithaca's past practice).
(d) FRINGE BENEFITS. During the term of his employment
hereunder, the Executive shall be entitled to continue to participate in or
receive benefits under all of Ithaca's employee benefit plans and arrangements
in effect generally for other senior executive officers of Ithaca from time to
time. The Executive shall be entitled to participate in or receive benefits
under any life insurance, health and accident plan or arrangement made available
by Ithaca in the future to its executives and key management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Nothing paid to the Executive
under any Ithaca benefit plan or arrangement presently in effect or made
available by Ithaca in the future (other than any Plan referred to in Section
4(b) hereof) shall be deemed to be in lieu of compensation to the Executive
hereunder.
(e) VACATIONS. During the term of his employment hereunder,
the Executive shall be entitled to the number of paid vacation days in each
calendar year determined by the Board from time to time for Ithaca's senior
executive officers, but not less than four weeks in any fiscal year, and shall
also be entitled to all paid holidays given by Ithaca to its employees.
5. OFFICES
The Executive agrees to serve without additional compensation, if
elected or appointed thereto, in one or more offices or as a director of any of
Ithaca's subsidiaries; provided, however, that the Executive shall not be
required to serve as an officer or director of any subsidiary if such service
would expose him to adverse physical hazards or adverse financial consequences.
6. UNAUTHORIZED DISCLOSURE; INVENTIONS
(a) UNAUTHORIZED DISCLOSURE. The Executive shall not, without
the written consent of the Board or a person duly authorized thereby, or except
as may be required by law in connection with any judicial or administrative
proceeding or inquiry (provided written notice thereof is given by the Executive
to the Company), disclose to any person, other than an employee or professional
adviser of Ithaca or other person to whom disclosure is in the reasonable
judgment of the Executive necessary or appropriate in connection with the
performance by the Executive of his duties as an executive officer of Ithaca,
any material information known by him (or which should reasonably be known by
him) to be confidential and obtained by him while in the employ of Ithaca with
respect to any of Ithaca's
<PAGE>
4
products, improvements, formulae, designs or styles, processes, customers,
methods of distribution or methods of manufacture the disclosure of which he
knows or, in the exercise of reasonable care, should know will be damaging to
Ithaca; provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive) or any information not otherwise
considered by the Board to be confidential.
(b) INVENTIONS. Any and all inventions made, developed or
created by the Executive (whether at the request or suggestion of Ithaca or
otherwise, whether alone or in conjunction with others, and whether during
regular hours of work or otherwise) during the period of his employment by
Ithaca, which may be directly or indirectly useful in, or relate to, the
business of or tests being carried out by Ithaca or any of its subsidiaries or
affiliates, shall be promptly and fully disclosed by the Executive to an
appropriate executive officer of Ithaca and shall be Ithaca's property as
against the Executive, and the Executive shall promptly deliver to an
appropriate executive officer of Ithaca all papers, drawings, models, data and
other material relating to any invention made, developed or created by him as
aforesaid.
The Executive shall, upon Ithaca's request and without any
payment therefor, execute any documents necessary or advisable in the opinion of
Ithaca's counsel to direct issuance of patents or copyrights to Ithaca with
respect to such inventions as are to be Ithaca's exclusive property as against
the Executive under this subsection 6(b) or to vest in Ithaca title to such
inventions as against the Executive, the expense of securing any such patent or
copyright, however, to be borne by Ithaca.
7. TERMINATION
(a) DEATH. The Executive's employment hereunder shall
terminate upon his death.
(b) CAUSE. Ithaca may terminate the Executive's employment
hereunder for Cause. For the purposes of this Agreement, Ithaca shall have
"Cause" to terminate the Executive's employment hereunder upon the Executive's
(A) willful, material, continued and bad faith failure to perform and discharge
his duties and responsibilities hereunder after written notice by the Board,
specifying the alleged failure in reasonably detailed terms and including in
said notice the opinion of a majority of the entire membership of the Board
(excluding the Executive) or such officer that there has been such failure, or
(B) gross misconduct that is materially and demonstratively injurious to Ithaca,
or (C) conviction of a felony involving the personal dishonesty of the Executive
(unless such conviction is reversed in any final appeal thereof). The term
"Cause" shall not include a bona fide disagreement over corporate policy so long
as the Executive does not willfully and materially violate specific, lawful
written directions from the Board, with respect to
<PAGE>
5
policies adopted by the Board. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive (i) a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board (excluding the Executive) at a meeting of the Board duly
called and held for the purpose (after reasonable notice to the Executive and an
opportunity for him, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of such majority of the Board, the
Executive was guilty of conduct set forth above in clause (A), (B) or (C) above,
and specifying the particulars thereof; (ii) an affidavit of the Secretary or an
Assistant Secretary of Ithaca stating that such resolution was in fact adopted
by the affirmative vote of not less than a majority of the entire membership of
the Board (excluding the Executive); and (iii) delivery of a Notice of
Termination in the form specified in subsection (d) below.
(c) TERMINATION BY THE EXECUTIVE. The Executive may terminate
his employment hereunder upon thirty (30) days' prior written notice to Ithaca
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (A)
any assignment to the Executive of any duties significantly different from those
contemplated by, or any material limitation of the powers of the Executive not
contemplated by, this Agreement, (B) any removal of the Executive from, or any
failure to re-elect the Executive to, the position of Chief Executive Officer of
Ithaca, except in connection with termination of the Executive's employment for
Cause, or Executive's incapacity pursuant to Section 8, (C) a reduction in the
Executive's Base Salary or any other material failure by Ithaca to comply with
Section 4 hereof, (D) failure by Ithaca to comply with Section 3 hereof in any
significant respect, or (E) failure of Ithaca to obtain the assumption of this
Agreement by any successor as contemplated in Section 10 hereof. Notwithstanding
the foregoing, no event shall be deemed to constitute Good Reason unless the
Executive shall have delivered written notice to the Company describing the
event allegedly constituting Good Reason and the Company shall have failed to
cure such event within 10 days of its receipt of such written notice.
(d) NOTICE OF TERMINATION. Any termination by Ithaca pursuant
to subsection (b) above or by the Executive pursuant to subsection (c) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean the
earlier of (i) the Expiration Date or (ii) if the Executive's employment is
terminated (A) by his death, the date of his death, (B) pursuant to subsection
(b) or (c) above, the date specified in the Notice of Termination, and (C) for
any other reason, the date on which a Notice of Termination is given.
<PAGE>
6
8. INCAPACITY
If, as a result of the Executive's incapacity due to physical or
mental illness, the Executive shall have been absent from his duties hereunder
on a full-time basis for six (6) consecutive months or for an aggregate of nine
(9) months in any eighteen (18) month period, and within thirty (30) days after
Ithaca notifies the Executive in writing that it intends to replace him, the
Executive shall not have returned to the performance of his duties hereunder on
a full-time basis, Ithaca may replace the Executive without breaching this
Agreement. Such incapacity will not act to terminate the Executive's employment
under this Agreement.
If the Executive shall become incapacitated within the meaning of
this Section, Ithaca shall maintain in full force and effect, for the continued
benefit of the Executive for the full period ending on the Expiration Date, all
group health and medical employee benefit plans and programs in which the
Executive was entitled to participate immediately prior to the replacement date
provided that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs. If the Executive's
participation in any such plan or program is barred as a result of such
incapacity, Ithaca shall arrange to provide the Executive with benefits
substantially similar on an after tax basis to those which the Executive was
entitled to receive under such plan or program.
9. COMPENSATION UPON TERMINATION OR DURING INCAPACITY
(a) If the Executive's employment shall be terminated by
reason of his death, Ithaca shall pay to such person as the Executive shall have
designated in a notice filed with Ithaca, or, if no such person shall have been
designated, to his estate or personal or legal representatives, in substantially
equal monthly installments, an amount calculated at an annual rate equal to the
Executive's Base Salary at the rate in effect at the time of his death for a
period ending on the earlier of (i) the date one year from the last day of the
month of the Executive's death or (ii) the Expiration Date and Ithaca shall have
no further obligations to the Executive hereunder. This amount shall be
exclusive of and in addition to any payments the Executive's widow,
beneficiaries or estate may be entitled to receive pursuant to any employee
benefit plan or life insurance policy presently maintained by Ithaca.
(b) Notwithstanding any other provision of this Agreement,
during any period that the Executive fails to perform his duties hereunder as a
result of incapacity due to physical or mental illness, the Executive shall
continue to be paid his Base Salary until one (1) year after the Executive is
replaced in accordance with Section 8 hereof, and thereafter, but in no event
after the Expiration Date, the Executive shall be paid an annual amount equal to
fifty percent (50%) of his Base
<PAGE>
7
Salary, payable pursuant to Section 4 hereof and Ithaca shall have no further
obligations to Executive hereunder, other than as specified in Section 8.
(c) If the Executive's employment shall be terminated for
Cause or if the Executive terminates his employment for other than Good Reason,
Ithaca shall pay the Executive his full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
Ithaca shall have no further obligations to the Executive under this Agreement.
(d) If Ithaca shall terminate the Executive's employment other
than pursuant to Section 7(b) hereof or if the Executive shall terminate his
employment for Good Reason, then Ithaca shall pay to the Executive his Base
Salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given, and all legal fees and expenses, if any, incurred by
him in the enforcement of his rights under this Agreement. In addition, in lieu
of any further payments to the Executive for periods subsequent to the Date of
Termination, Ithaca shall pay as liquidated damages, or severance pay, or both,
to the Executive, in substantially equal monthly installments, from the Date of
Termination to the Expiration Date, an amount calculated at an annual rate equal
to (i) an amount equal to the Base Salary that the Executive would have received
in each of his remaining years of employment hereunder if his employment had not
been terminated, multiplied by (ii) Sixty-five percent (65%) for each of such
years, if the Executive's employment terminates during the fiscal year ending in
the third year prior to the Expiration Date, eighty percent (80%) for each of
such years, if the Executive's employment terminates during the fiscal year
ending in the second year prior to the Expiration Date, or one hundred percent
(100%) for each of such years, if the Executive's employment terminates
thereafter.
The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 9 by seeking other employment or
otherwise, nor will the amount of liquidated damages or severance pay payable to
the Executive under this Section be reduced by reason of his securing other
employment or for any other reason.
(e) Unless the Executive is terminated for Cause, due to
Executive's death or the Executive terminates his employment for other than Good
Reason, Ithaca shall maintain in full force and effect, for the continued
benefit of the Executive for the period ending on the Expiration Date all group
health and medical employee benefit plans and programs in which the Executive
was entitled to participate immediately prior to the Date of Termination,
provided that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs. If the Executive's
participation in any such plan or program is barred as a result of such
termination, Ithaca shall arrange to provide the Executive with benefits
substantially similar on an after tax basis to those which the Executive was
entitled to receive under such plan or program.
<PAGE>
8
10. SUCCESSORS; BINDING AGREEMENT
(a) Ithaca will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Ithaca, by agreement in form
and substance reasonably satisfactory to the Executive, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
Ithaca would be required to perform it if no such succession had taken place.
Failure of Ithaca to obtain such agreement by the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from Ithaca in the same amount and on the same terms as he would
be entitled to hereunder if he terminated his employment for Good Reason
pursuant to Section 7(c), except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Ithaca" shall mean
Ithaca as hereinbefore defined and any successor to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts are payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or, if there be no such
designee, to the Executive's estate.
11. NON-COMPETITION
The Executive agrees that, during the term of his employment
hereunder and for a period of twenty-four (24) months following the Date of
Termination, he will not, directly or indirectly, own, manage, operate, control
or participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director or otherwise with, or have
any financial interest in, or aid or assist anyone else in the conduct of, any
entity or business (a "Competitive Operation") which competes with any business
conducted by Ithaca or by any group, division or subsidiary of Ithaca, in any
area where such business is being conducted, or for which negotiations to
conduct business are pending, at the Date of Termination. It is understood and
agreed that, for the purposes of the foregoing provisions of this Section 11,
(i) no business shall be deemed to be a business conducted by Ithaca or any
group, division or subsidiary of Ithaca, unless not less than five percent (5%)
of Ithaca's consolidated gross sales or operating revenues is derived from, or
not less than five percent (5%) of Ithaca's consolidated assets are devoted to,
such business; (ii) no business conducted by any entity by which the Executive
is employed or in which he is interested or with which he is connected or
<PAGE>
9
associated shall be deemed competitive with any business conducted by Ithaca or
any group, division or subsidiary of Ithaca unless it is one from which five
percent (5%) or more of its consolidated gross sales or operating revenues is
derived, or to which five percent (5%) or more of its consolidated assets are
devoted; and (iii) no business which is conducted by Ithaca at the Date of
Termination and which subsequently is sold by Ithaca shall after such sale be
deemed to be a Competitive Operation within the meaning of this Section.
Ownership of up to five percent (5%) of the voting stock of any publicly held
corporation shall not constitute a violation of this Section 11.
(a) It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in this Section 11
to be reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive,
the provisions of this Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
12. NOTICE
For the purpose of this Agreement, notices and all other
communications to either party hereunder provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered or mailed
by United States certified or registered mail, return receipt requested, postage
prepaid, addressed, in the case of Ithaca, to Ithaca Industries, Inc., Highway
268 West, P.O. Box 620, Wilkesboro, North Carolina 28697, Attention: Secretary,
or, in the case of the Executive, to the Executive at the address set forth in
Section F of Appendix I hereto; or to such other address as either party shall
designate by giving written notice of such change to the other party.
13. MISCELLANEOUS
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is approved by the Board and
agreed to in writing signed by the Executive and such officer as may be
specifically authorized by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect
<PAGE>
10
to the subject matter hereof have been made by either party which are not set
forth expressly in this Agreement. For purposes of this Agreement, it is
understood that any references to duties, practices, procedures, places,
arrangements, or policies of Ithaca in effect on or prior to the Agreement Date
shall be deemed to be those of Ithaca. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the state referred to in Section F of Appendix I hereto.
14. VALIDITY
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. SURVIVAL
The provisions of this Agreement shall not survive the termination
of this Agreement or of employment hereunder, except that the provisions of
Sections 6, 8, 9, 10, and 11 hereof shall survive such termination and shall be
binding upon the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. Unless
otherwise agreed by the parties hereto in writing, any continuation of the
Executive's employment beyond the Expiration Date shall be an employment "at
will" and shall not be deemed to extend the provisions of this Agreement.
16. SPECIFIC PERFORMANCE.
Executive acknowledges and agrees that the Company's remedies at law
for a breach or threatened breach of any of the provisions of Section 11 would
be inadequate and, in recognition of this fact, Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at law,
the Company shall be entitled to seek equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available.
17. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
<PAGE>
11
18. EFFECTIVENESS
This Agreement shall be effective on the Agreement Date. On and
after the Agreement Date, this Agreement shall supersede any and all previously
existing employment or consulting agreements between the Executive, Ithaca or
any of its subsidiaries or affiliates, all such agreements shall become void and
shall have no force or effect whatsoever, and all rights, claims, duties and
obligations under, pursuant to or in connection with any or all such agreements
shall be deemed to have been waived by the Executive in all respects and shall
cease and be extinguished forever, except unpaid amounts that were accrued prior
to the Agreement Date and are not related to, or payable by virtue of,
termination of such agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
ITHACA INDUSTRIES, INC.
By /s/ Eric Hoyle
---------------------------------
Senior Vice President and Secretary
/s/ Jim Waller
---------------------------------
Executive
Exhibit 21
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Ithaca Industries, Inc.
Subsidiaries:
Robson Square 1800 Services Ltd.
Ithaca S.A.
Manufacturas Hondurenas S.A.
Modas Buena Vista, S.A.
Modas Hondurenas S.A.
Exhibit 23.2
------------
KPMG PEAT MARWICK LLP
303 PEACHTREE STREET
SUITE 2000
ATLANTA, GEORGIA 30308
The Board of Directors
Ithaca Industries, Inc.
The audits referred to in our report dated January 31, 1997, included the
related financial statement schedule for the 42-week period ended November 22,
1996 and for each of the years in the two-year period ended February 2, 1996,
included in the registration statement. These financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Our report dated January 31, 1997 contains an explanatory paragraph that states
that the Company emerged from bankruptcy and as of November 22, 1996, adopted
fresh-start reporting in accordance with the American Institute of Certified
Public Accountants Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code".
We consent to the use of our reports included herein and to the reference of our
firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 17, 1997
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