UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For fiscal year ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ___________ to
__________.
Commission File Number 000-22385
ITHACA INDUSTRIES, INC.
(Exact name of issuer as specified in its charter)
Delaware 56-1385842
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation organization)
Highway 268 West, P.O. Box 620, Wilkesboro, North Carolina 28697
---------------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (336) 667-5231
--------------
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class Name of each exchange on which registered:)
-------------------- -------------------------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Title and class
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period than the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant cannot be determined in the manner called for by Form 10-K. See Item
5.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. YES |X| NO |_|
The number of shares of the Registrant's common stock outstanding as of April
24, 1998 was 10,400,000.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10, 11, and 12) of this
Form 10-K is incorporated by reference to the Registrant's definitive proxy
statement relating to its annual meeting of stockholders to be held on June 10,
1998, which was filed the same day this Form 10-K was filed with the Commission
The Exhibit Index is located on page 44.
<PAGE>
PART I
Special Note Regarding Forward-Looking Statements
Certain statements in this report including information set forth under
"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
Industries, Inc., a Delaware corporation (the "Company" or "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 included in this report, 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 52% of the Company's total net
sales for the 52-week period ended January 31, 1998; (2) the Company'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 Mexico and other foreign nations where the
Company currently or in the future sources its products; (7) the success of the
Company's Business Plan (as defined below) and reorganization, particularly the
success of the Company's ongoing efforts to consolidate its women's hosiery
operations and to successfully integrate its recent acquisition of Glendale
Hosiery Company 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 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; or (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
filings with the Securities and Exchange Commission (the "Commission") 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.
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For purposes of presenting financial information in this report (other
than the Financial Statements included in Item 8), 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 ended on the Saturday nearest such date.
ITEM 1. Business
General
Ithaca is a leading designer, marketer and manufacturer of private brand
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 brand men's underwear and women's hosiery products and
the second largest private brand manufacturer of women's underwear 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 to supply a wide variety of product
offerings at a number of price points, to maintain a strong presence in multiple
channels of distribution, to maintain close customer relationships by developing
products and programs that suit individual customer needs, and to maintain a low
cost and flexible manufacturing capability.
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 (336) 667-5231.
Plan of Reorganization
On December 16, 1996, the Company emerged from bankruptcy pursuant to the
Plan of Reorganization, dated as of August 29, 1996 (the "Plan of
Reorganization"). As a result of the reorganization, the Company significantly
reduced its debt and simplified its capital structure. Pursuant to the Plan of
Reorganization, prior equity interests in the company were canceled, 10,000,000
shares of the Company's common stock, par value $0.01 (the "Common Stock") were
distributed to the holders of the Company's outstanding 11.125% Senior
Subordinated Notes due 2002 (the "Notes"), the Notes were retired, the Company
ceased to be a subsidiary of Ithaca Holdings, Inc., the Company's bank credit
agreement, which was subsequently replaced on March 24, 1998, was amended and
restated and general unsecured claims, administrative claims, tax claims,
priority claims and general secured claims allowed by the Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court") were paid in full.
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. 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.
On January 31, 1998 the capital structure of the Company consisted of
approximately $53.5 million of long-term debt exclusive of current maturities,
and approximately $20.9 million of net equity.
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Fresh Start Reporting
The Company adopted Fresh Start Reporting on November 22, 1996, the day
the Plan of Reorganization was confirmed by the Bankruptcy Court. Accordingly,
the Company's Consolidated Balance Sheets as of January 31, 1998 and February 1,
1997 and its Consolidated Statements of Operations, Consolidated Statements of
Stockholders' Equity (Deficit) and Consolidated Statements of Cash Flows for the
year ended January 31, 1998 and the 10-week period ended February 1, 1997 will
not be comparable to the prior periods included elsewhere herein.
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 brand 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 and outerwear T-shirts accounted for
approximately 62% of the Company's net sales in the 52-week period ending
January 31, 1998, 51% of the Company's net sales in the 10-week period ended
February 1, 1997, 56% in the 42-week period ended November 22, 1996, and 52% in
fiscal 1996.
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 14% of the
Company's net sales in the 52-week period ending January 31, 1998, 17% in the
10-week period ended February 1, 1997, 17% in the 42-week period ended November
22, 1996, and 19% in fiscal 1996.
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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.
Women's hosiery sales accounted for approximately 21% of the Company's net
sales in the 52-week period ending January 31, 1998, 29% in the 10-week period
ended February 1, 1997, 25% for the 42-week period ended November 22, 1996, and
27% in fiscal 1996.
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 its 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 13 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 3.0 times in the 52-week period ending January 31,
1998. 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 59% of the
Company's men's and boys' and women's and girls' products are either assembled
off-shore from components that are cut in the United States or sourced from the
Far East. Approximately 89% of the Company's women's hosiery products are
produced domestically.
Trademarks, Licenses and Patents
Ithaca's products are predominantly sold under the private brand names or
trade names of its customers. The Company usually seeks to obtain trademark
registration protection for those private brand names developed by the Company,
although such protection generally is not as critical as with branded products.
The Company has registered over 48 trademarks in the United States, and has 5
trademark applications pending as of April 24, 1998.
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. Ithaca has a license
agreement with International Licensing Corporation to use
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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
Labeling 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.
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 52-week period ended January 31, 1998, J.C. Penney accounted for
approximately 52% of the total net sales of the Company, compared to nearly 48%
in fiscal 1997. No other customers accounted for 10% or more of net sales in the
52-week period ended January 31, 1998, or the 10-week period ended February 1,
1997 or 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.
Backlog
The dollar amount of backlog of orders believed to be firm is not material
for an understanding of the business of the Company.
Competition
The underwear and women's hosiery markets in the United States are highly
competitive. The Company's products compete with products manufactured by other
private brand suppliers as well as with products manufactured under recognized
name brands.
Ithaca believes it is the largest manufacturer of private brand
merchandise in its men's underwear and women's hosiery business and the second
largest manufacturer in its women's underwear line, offering a broad selection
of styles, sizes and colors. The private brand 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 brand manufacturers with substantial resources. Ithaca's principal
private brand competitors include: Beltex, Springford, Nantucket, Oneita, Tultex
and Delta Woodside in men's and boys'
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underwear or outerwear T-shirts; Fitzgerald and Wundies Industries Inc. in
women's and girls' underwear; and Americal Corp., Holt, 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 brand 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
offers a higher level of merchandising and marketing services to retailers
implementing private brand programs.
Imports and Export Sales
Ithaca's products compete with goods produced worldwide. Over the past
decade, US imports of underwear and hosiery have increased substantially. US
manufacturers have responded to the influx of lower cost products by shifting
production offshore. Ithaca's management believes that a significant portion of
US imports represent goods for which cut components have been shipped overseas
for assembly. Given the variety of sources for industry data and differences in
categorization, it is difficult to compare retail spending categories to
imports, but according to the American Apparel Manufacturers Association
("AAMA"), imports represented approximately 49% of underwear and 13% of sheer
hosiery sales in calendar 1997, up from approximately 29% and 5%, respectively,
in 1994. 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 continued 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 sources certain products from the Far East.
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.
Less than 1% of the Company's sales for the 52-week period ended January
31, 1998 were made to firms outside the United States. The Company believes that
changes in the level of sales outside of the United States would not have a
material adverse effect on Ithaca's Results of Operations.
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.
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Employees
The Company employed approximately 5,500 people as of March 31, 1998, of
which approximately 5,020 were engaged in manufacturing and approximately 480
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.
ITEM 2. 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 its women's and girls' underwear at its owned
facilities in Cairo, Georgia. 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 two owned plants in the southeastern United
States and at three 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.
ITEM 3. 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.
ITEM 4. Submission of Matters to a Vote of Holders of the Common Stock
No matters have been submitted to a vote of the holders of Common Stock
during the fourth quarter of the Registrant's 1998 fiscal year.
PART II
ITEM 5. Market for Registrant's Common Stock and Related Stockholder Matters
Through the date hereof, there has been no established public trading
market for the Common Stock. Application was made to list the Common Stock on
NASDAQ National Market. This application was withdrawn because the Company was
advised by NASDAQ that it would not qualify. The company intends to reapply as
soon as it believes it meets the criteria. There can be no assurance that this
will occur or 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.
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On December 16, 1996, 10,000,000 shares of Common Stock were issued in
reliance upon the exemption provided by 11 USC 1145. These shares were
registered under the Securities Act of 1934, as amended, by means of a
Registration Statement on Form S-1 declared effective on April 4, 1997. An
additional 400,000 shares were issued on March 24, 1998 as part of the purchase
agreement for Glendale Hosiery, Co.
As of April 24, 1998, there were approximately 11 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 927,679 shares of Common Stock, including the options granted to
Alvarez & Marsal, Inc., issuable under the Company's 1996 Long Term Stock
Incentive Plan (the "LTIP"), of which options to purchase 486,049 shares are
currently exercisable.
The Company has not paid any cash dividends on the Common Stock and does
not anticipate that it will do so in the foreseeable future. The Credit
Agreement restricts the Company's ability to pay dividends on the Common Stock.
Any determination to pay cash dividends in the foreseeable future will be at the
discretion of the Company's Board of Directors (the "Board" or the "Board of
Directors") and will be dependent upon the Company's results of operations,
financial condition, contractual restrictions and other factors deemed relevant
by the Board. 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.
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ITEM 6. Selected Financial Data
The following table sets forth selected financial information with respect
to the Company for the year ended January 31, 1998, the 10-week period ended
February 1, 1997, the 42-week period ended November 22, 1996 and each of the
three fiscal years prior to the fiscal year ended February 1, 1997 and is
derived from and should be read in conjunction with the Company's audited
Consolidated Financial Statements and related notes included in Item 8 of this
report. Net income per share for periods prior to November 22, 1996 is not
meaningful because during such periods the Company was a wholly owned subsidiary
of Ithaca Holdings, Inc.
The selected financial information set forth below is qualified by and
should be read in conjunction with Item 8 the "Financial Statements" and the
notes thereto and Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this report. The Company's
Results of Operations for the 10-week period ended February 1, 1997 and 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. Results of Operations of the Company
for the year ended January 31, 1998 and the 10-week period ended February 1,
1997 will generally not be comparable to the prior periods due to the effects of
the Plan of Reorganization.
<TABLE>
<CAPTION>
Post-Confirmation Preconfirmation
----------------- --------------------------------------------------------------
10-Week 42-Week Fiscal Year Ended
Year Ended Period Ended Period Ended January 31,
January 31, February 1, November 22, --------------------------------------------
1998 1997 1996 1996 1995 1994
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $237,021 $42,708 $297,603 $398,819 $414,800 $414,671
Gross profit 34,653 4,487 42,060 44,882 72,859 68,072
Selling, general and 26,052 7,354 27,670 43,486 37,075 39,711 (1)
administrative expenses
(Recovery of) provision for -- -- (2,964) 51,591 (2) -- --
asset write-downs and
restructuring
Operating income (loss) 8,601 (2,867) 17,354 (50,195) 35,784 28,361
Interest expense - net(3) 6,875 1,385 17,489 26,905 23,147 23,455
Reorganization items -- -- (1,176) (4) -- -- --
Income (loss) before income taxes 2,339 (4,157) 1,666 (76,802) 13,166 4,968
and extraordinary items
Income tax (expense) benefit (803) 1,400 (4,218) 27,157 (5,653) (2,086)
Income (loss) before 1,536 (2,757) (2,552) (49,644) 7,513 2,882
extraordinary item
Extraordinary item (5) -- -- 67,924 -- -- --
Net income (loss) $ 1,536 $(2,757) $ 65,372 $(49,644) $ 7,513 $ 2,882
======== ======= ======== ======== ======== ========
Net income (loss) per $ .15 $ (0.28) n/a n/a n/a n/a
======== ======= ======== ======== ======== ========
Balance Sheet Data (at end
of period) (7) : Post-Confirmation Preconfirmation
----------------- --------------------------------------------
Working capital (deficit) $ 51,496 $ 63,523 $ 75,591 $(145,909) $113,028 $123,222
Total assets 115,990 133,687 155,993 208,642 224,471 235,997
Long-term debt exclusive of 53,519 66,069 77,255 n/a (6) 221,819 242,785
current maturities
Total stockholders' equity 20,895 19,359 22,116 (93,558) (43,914) (51,427)
(deficit)
</TABLE>
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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
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 canceled 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) 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.
(7) Amounts prior to November 22, 1996 do no reflect the consummation of the
Plan of Reorganization.
(8) Net income (loss) per share amounts for periods prior to the Plan of
Reorganization effective date of November 22, 1996 are not presented since
they do not reflect the new capitalization using fresh start reporting.
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
General
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the related notes included in Item 8 of
this report.
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>
Post-Confirmation Preconfirmation
----------------- ---------------
Fiscal Year Ended 10-Week Period Ended 42-Week Period Ended Fiscal Year Ended
January, 31, 1998 February 1, 1997 November 22, 1996 January 31, 1996
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net sales:
Men's & boys' underwear 61.8% 51.2% 56.4% 52.0%
and T-shirts
Women's and girls' 13.5 17.1 17.2 18.7
underwear
Women's hosiery 21.3 28.6 24.5 27.3
Other 3.4 3.1 1.9 2.0
--------------------- ------------------------ -------------------------- ---------------------
Total 100.0% 100.0% 100.0% 100.0%
Cost of sales 85.4% 89.5% 85.9% 88.7%
--------------------- ------------------------ -------------------------- ---------------------
Gross profit 14.6 10.5 14.1 11.3
Selling, general and 11.0 17.2 9.3 10.9
administrative expenses
(Recovery of) provisions for -- -- (1.0)% 12.9%
asset write-downs and
restructuring
--------------------- ------------------------ -------------------------- ---------------------
Operating income (loss) 3.6 (6.7) 5.8 (12.6)
Interest expense-net (2.9) (3.2) (5.9) (6.6)
Other net 0.3 0.2 0.2 --
Reorganization items -- -- 0.4 --
--------------------- ------------------------ -------------------------- ---------------------
Income (loss) before 1.0 (9.7) 0.5 (19.2)
income taxes and
extraordinary items
Income tax (expense) (0.4) 3.3 (1.4) 6.8
benefit
Extraordinary item-gain -- -- 22.8 --
on debt discharge
--------------------- ------------------------ -------------------------- ---------------------
Net income (loss) 0.6% (6.4)% 21.9% (12.4)%
===================== ======================== ========================== =====================
</TABLE>
Page 11
<PAGE>
Results of Operations
Comparison of fiscal 1998 to the combined 10-week period ended February 1, 1997
and the 42-week period ended November 22, 1996.
Net sales declined 30% to $237.0 million. This decline reflected, in part,
the Company's previously announced decision to exit unprofitable lines of
business. Sales of continuing products also decreased reflecting lower sales to
the Company's major customers. The 1998 fiscal year's revenue included $5.3
million in sales of discontinued products compared to $45.5 million in the
comparable period last year. Men's and boys' underwear and T-shirt sales were
down 22.8%, women's and girls' underwear sales were down 45.3% and women's
hosiery sales were down 40.6%. Unit volume was down 35.3% with men's and boys'
underwear and T-shirts down 23.7%, women's and girls' underwear down 48.6% and
women's hosiery down 41.1%. The average selling price per dozen for fiscal 1998
was $21.89 versus $20.32 in the comparable period last year, primarily
reflecting a change in the mix among product lines. There were no significant
pricing changes to the Company's customers during fiscal 1998.
Gross profit declined $11.9 million or 25.6% as compared to the comparable
period last year as a direct result of the lower sales volume. Gross profit
margins for fiscal 1998 improved to 14.6% of net sales from 13.7% in the prior
period. The improved margins resulted from the elimination of revenues with low
gross margins, the continuing emphasis of moving production to lower-cost,
offshore locations, and decreased depreciation expense as a result of fresh
start reporting.
Selling, general and administrative expenses decreased by $9.0 million or
25.7% in fiscal 1998 versus the comparable period last year. This decrease was a
result of reduced employee related costs and reduced overhead support cost for
the discontinued sales revenues. As a percentage of net sales, selling, general
and administrative expense increased to 11.0% in fiscal 1998 against 10.3% in
the comparable period last year reflecting the impact of lower sales on
operating leverage.
Net interest expense fell to $6.9 million for fiscal 1998, a decrease of
$12.0 million or 63.4% for the comparable period last year. This decrease
resulted from the conversion of $125 million of senior subordinated notes into
common stock as part of the Company's financial restructuring, which was
recorded on November 22, 1996, and lower average levels of borrowings.
The income tax expense for fiscal 1998 was 34% of income before income
taxes compared to a benefit of 34% on the pre-tax loss incurred in the prior
year's post confirmation period.
Comparison of the 10-week period ended February 1, 1997 to the 10-week period
ended February 2, 1996.
Net sales declined 33.0% to $42.7 million in the 10-week period ended
February 1, 1997, from $63.7 million in the 10-week period ended February 2,
1996. Men's and boys' underwear and T-shirt sales were down 30.8%, women's and
girls' underwear sales were down 34.2% and women's hosiery sales were down
36.4%. Unit volume was down 29.8% with men's and boys' underwear and T-shirts
down 20.3%, women's and girls' underwear down 39.8% and women's hosiery down
32.0%. The average selling price per dozen in the 10-week period ended February
1,
Page 12
<PAGE>
1997 decreased to $18.75 from $19.63 in the comparable prior period, primarily
reflecting a change in the mix among product lines.
The sales declines reflect, in part, the implementation of the Company's
Business Plan, which was designed in part to eliminate unprofitable products.
While the Company does not consider its business to be seasonal, the relative
level of sales for the 10-week period ended February 1, 1997, proportionate to
the Company's sales in other periods, is consistent with the Company's past
experience as that period is traditionally a period of relatively low sales
activity. The sales level is not believed to be representative of the Company's
sales level and financial results on an annualized basis. Net sales in the
10-week period ended February 1, 1997 included approximately $3.8 million of
sales resulting from the wind-down of discontinued products, which will not
recur in future periods. Sales of discontinued products were not included in the
projections made in the Business Plan as it only included sales of products
which the Company intended to sell in future periods.
Gross profit, excluding provisions for asset write-down and restructuring
charges incurred in the 10-week period ended February 2, 1996, increased by $4.7
million from ($0.2) million to $4.5 million during the 10-week period ended
February 1, 1997, compared to the 10-week period ended February 2, 1996; with
gross margin improving to 10.5% of sales from (0.3%) in the comparable prior
period, as product costs fell proportionately faster than the sales decline. The
improved gross margin was principally attributable to lower costs of production
resulting from the offshore sourcing of men's and boys' underwear and outerwear
T-shirts and women's and girls' underwear and improved efficiencies in hosiery
operations.
The Company recorded provisions for workforce reductions and asset
write-downs of $37.4 million in the 10-week period ended February 2, 1996. There
were no provisions for workforce reductions and asset write-downs in the 10-week
period ended February 1, 1997.
Selling, general, and administrative expenses, excluding the provisions
for workforce reductions and asset write-downs incurred in the 10-week period
ended February 2, 1996, decreased by $2.3 million (23.2%) in the 10-week period
ended February 1, 1997 to $7.3 million from $9.5 million in the 10-week period
ended February 2, 1996. Shipping expense was $1.6 million lower in the 10-week
period ended February 1, 1997 as compared to the 10-week period ended February
2, 1996. Lower shipping costs were realized, in part, because during the 10-week
period ended February 1, 1997 the Company's consolidated distribution centers
were fully operational, while in the comparable prior period, the Company's
consolidated distribution centers could not be fully utilized. In addition, the
Company experienced lower sales levels in the current period compared to the
comparable prior period. Selling costs were $1.4 million lower in the current
period, reflecting staffing reductions implemented early in fiscal 1997.
Interest expense, net of interest income, decreased to $1.4 million in the
10-week period ended February 1, 1997 compared to $4.9 million in the 10-week
period ended February 2, 1996. The decrease in the 10-week period ended February
1, 1997, compared to the 10-week period ended February 2, 1996, was due to lower
average borrowings, including the effect of the retirement of the Notes pursuant
to the Plan of Reorganization, partially offset by higher interest rates.
Page 13
<PAGE>
The income tax benefit in the 10-week period ended February 1, 1997 was
34% of the loss before income taxes, compared to a benefit of 46% of the loss
before income taxes in the 10-week period ended February 2, 1996.
Comparison of 42-week period ended November 22, 1996 to 43-week period ended
November 24, 1995.
Net sales declined 11.2% to $297.6 million in the 42-week period ended
November 22, 1996 from $335.1 million in the 43-week period ended November 24,
1995. 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 the 42-week period ended November 22, 1996 increased to $20.57 from
$20.18, primarily reflecting a mix change among product lines.
The sales declines reflected, in part, the implementation of the Company's
Business Plan which was designed, among other objectives, to eliminate
unprofitable products. Net sales in the 42-week period ended November 22, 1996
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 the 42-week period ended
November 22, 1996 compared to the 43-week period ended November 24, 1995;
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 the 42-week
period ended November 22, 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 1,500
manufacturing and overhead jobs were eliminated by these closings in the 42-week
period ended November 22, 1996. Women's hosiery was favorably impacted by
improved production efficiency and progress in eliminating unprofitable
products.
The Company recorded a reversal in the 42-week period ended November 22,
1996 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
43-week period ended November 24, 1995.
Selling, general and administrative expenses decreased by $6.3 million
(18.5%) in the 42-week period ended November 22, 1996 to $27.7 million from
$34.0 million in 43-week period ended November 24, 1995, which represented a
decrease from 10.9% as a percentage of sales in the 43-week period ended
November 24, 1995 to 9.3% as a percentage of sales in the 42-week period ended
November 22, 1996. The primary component of this decrease was lower employee
related costs, resulting from headcount reductions early in fiscal 1997.
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
Page 14
<PAGE>
and lower sales levels in the 42-week period ended November 22, 1996 as compared
to the 43-week period ended November 24, 1995.
Interest expense, net of interest income, decreased to $17.5 million for
the 42-week period ended November 22, 1996 compared to $22.0 million in fiscal
1996. The decrease in the 42-week period ended November 22, 1996 was due to
nonaccrual of bondholder interest after August 29, 1996 ($3.2 million lower than
the 43-week period ended November 24, 1995) and lower average borrowings in
fiscal 1997, partially offset by higher interest rates during the period.
Income tax expense in the 42-week period ended November 22, 1996 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.
Liquidity and Capital Resources
On March 24, 1998, the Company completed the acquisition of Glendale
Hosiery Company for a combination of stock, cash and the assumption of certain
indebtedness. In conjunction with the acquisition, the Company's existing Credit
Agreement was replaced by a $110.0 million new credit facility. One part of the
new facility provides for a term loan ("Term Loan") of $25.0 million and a
revolving loan facility of up to $70.0 million. A separate part of the new
credit facility provides for an additional $15.0 million term loan. The
revolving loan facility includes a sub-limit of $15.0 million for the issuance
of letters of credit. As of April 15, 1998, the Company had $39.8 million of
Term Loans outstanding, $29.5 million of borrowings under the revolving loan
facility, and $5.0 million of outstanding letters of credit. The Company at
April 15, 1998 had $ 21.9 million of availability under its revolving loan
facility.
At January 31, 1998 the Company's net working capital was $51.5 million
and the current ratio was 2.8:1. At February 1, 1997 the Company's net working
capital was $63.5 million and the current ratio was 2.9:1. 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.
Capital additions were $ 4.2 million for the fiscal year ended January 31,
1998 and were related primarily to purchases of machinery and equipment. Capital
additions of the comparable prior year period were $ 4.0 million and were also
primarily related to purchases of machinery and equipment. In fiscal year 1996,
capital additions of $ 13.9 million related principally to the Company's new
centralized distribution facilities.
The Company's cash on hand as of January 31, 1998 was $0.7 million
compared with $0.1 million at February 1, 1997. The increase in cash was due to
slightly higher bank balances from outstanding bank borrowings.
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
Page 15
<PAGE>
promptly pass on cost increases to its customers, principally due to time of raw
materials purchases and customer orders as well as competitive pressures.
Impact of Year 2000 ("Y2K")
Some of the Company's computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
similar normal business activities.
The Company's focus and goal has been to identify all Y2K issues and to
develop plans to resolve those issues. The primary plan for remediation of the
Company's legacy systems, is to replace those systems as part of its overall
implementation of its Enterprise Resource Planning ("ERP") system. The ERP
project is supervised and supported by senior management. Areas outside the
scope of the ERP project such as time clocks, phone systems and manufacturing
machines, are also being addressed.
The project is estimated to be completed not later than March 31, 1999,
which is prior to any anticipated impact on its operating systems. The Company
believes that with modifications to existing software and a conversion to new
software, the Y2K issue will not pose significant operational problems for its
computer systems. However, if such modifications and conversions are not made,
or are not completed timely, the Y2K issue could have a material impact on the
operations of the Company.
The Company has had formal communications with its major customers and
suppliers regarding standardizing systems for Y2K compliance. There is no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect on the
Company's systems.
The incremental cost of the Y2K project is not material and the date on
which the Company believes it will complete the Y2K modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and costs of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
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.
The Company emerged from bankruptcy on December 16, 1996 and a final order
was issued by the Bankruptcy Court on April 7, 1997. Pursuant to the Plan of
Reorganization, the Company has repaid all of the secured and unsecured claims
allowed by the Bankruptcy Court as
Page 16
<PAGE>
follows: general unsecured claims were 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 canceled,
annulled and extinguished. Administrative claims were paid in full, in cash, in
the ordinary course of business. Tax claims were paid in full. Priority claims
were paid in full. The Credit Agreement was amended and restated. General
secured claims were paid in full. Each holder of an allowed general secured
claim was either paid in full on December 16, 1996 (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. 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
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 produced, 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 anticipated by the
Business Plan and was unable 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 on the first page of this report.
Page 17
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Index to Financial Statements
Page
----
Independent Auditors' Report................................................ 19
Consolidated Balance Sheets as of January 31, 1998 and February 1, 1997..... 20
Consolidated Statements of Operations for the Year ended January 31,
1998; the 10-Week Period ended February 1, 1997; the 42-Week
Period ended November 22, 1996; and for the Year ended February
2, 1996................................................................. 21
Consolidated Statements of Stockholders' Equity (Deficit) for the Year
ended January 31, 1998; the 10-Week Period ended February 1, 1997;
the 42-Week Period ended November 22, 1996; and for the Year ended
February 2, 1996........................................................ 22
Consolidated Statements of Cash Flows for the Year ended January 31, 1998;
the 10-Week Period ended February 1, 1997; the 42-Week Period ended
November 22, 1996; and for the Year ended February 2, 1996.............. 23
Notes to Consolidated Financial Statements.................................. 25
Page 18
<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 January 31, 1998 and February 1, 1997,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the year ended January 31, 1998; the 10-week
period ended February 1, 1997; the 42-week period ended November 22, 1996; and
the year ended February 2, 1996. In connection with our audits, we have also
audited the related financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule 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 January 31, 1998 and February 1, 1997, and the
results of their operations and their cash flows for the year ended January 31,
1998; the 10-week period ended February 1, 1997; the 42-week period ended
November 22, 1996; and the year ended February 2, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
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.
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 financial statements as of
January 31, 1998 and the year then ended and as of February 1, 1997 and for the
ten-week period then ended present the financial position, results of
operations, and cash flows of the reorganized entity and are, therefore, not
comparable to the consolidated financial statements for periods prior to the
Company's emergence from bankruptcy.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 27, 1998
Page 19
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1998 and February 1, 1997
(In thousands, except share data)
<TABLE>
<CAPTION>
January 31, February 1,
Assets (Note 5) 1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 680 $ 66
Trade accounts receivable, net of allowance for
doubtful accounts of $765 at January 31, 1998
and $1,256 at February 1, 1997 (note 8) 21,561 26,486
Inventories (note 3) 57,036 65,680
Prepaid expenses and other current assets 454 876
Assets held for disposition, net of estimated
reserves (notes 3 and 12) 213 3,755
----------- -----------
Total current assets 79,944 96,863
----------- -----------
Net property, plant, and equipment (note 4) 34,115 35,531
Other assets:
Intangible assets, net of accumulated amortization
of $374 and $91 at January 31, 1998 and February 1,
1997, respectively 980 362
Other, net 951 931
----------- -----------
$ 115,990 $ 133,687
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt (notes 5, 9, and 13) $ 13 $ 70
Accounts payable 10,102 10,742
Accrued payroll and related expenses 7,860 11,396
Accrued restructuring costs (note 12) 995 2,106
Income taxes payable (note 6) 3,667 3,073
Deferred income taxes (note 6) 4,424 2,255
Other accrued expenses 1,387 3,698
----------- -----------
Total current liabilities 28,448 33,340
Long-term debt, excluding current installments, due to
related parties (notes 5, 9, and 13) 20,036 9,710
Long-term debt, excluding current installments (notes 5, 9,
and 13) 33,483 56,359
Deferred income taxes (note 6) 13,128 14,919
----------- -----------
Total liabilities 95,095 114,328
----------- -----------
Stockholders' equity (deficit):
Preferred stock, $.01 par value 2,500,000 shares
authorized, none issued -- --
Common stock of $.01 par value; authorized 27,500,000
shares; issued and outstanding 10,000,000 shares at
January 31, 1998 and February 1, 1997 100 100
Additional paid-in capital 22,016 22,016
Accumulated deficit (1,221) (2,757)
----------- -----------
Total stockholders' equity 20,895 19,359
Commitments and contingencies (notes 5, 8, 10, and 11) ----------- -----------
$ 115,990 $ 133,687
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 20
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Year ended January 31, 1998; 10-Week Period
ended February 1, 1997; 42-Week Period ended
November 22, 1996; and Year ended February 2, 1996
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
----------------- ---------------
Year 10-Week 42-Week
ended Period ended Period ended Year ended
January 31, February 1, November 22, February 2,
1998 1997 1996 1996
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales (note 8) $ 237,021 $ 42,708 $ 297,603 $ 398,819
Cost of sales (note 3) 202,368 38,221 255,543 353,937
------------ ------------ ------------ ------------
Gross profit 34,653 4,487 42,060 44,882
Selling, general, and administrative expenses
(notes 7, 10, and 11) 26,052 7,354 27,670 43,486
(Recovery of) provision for asset write-downs and
restructuring (note 12) -- -- (2,964) 51,591
------------ ------------ ------------ ------------
Operating income (loss) 8,601 (2,867) 17,354 (50,195)
------------ ------------ ------------ ------------
Other income (deductions):
Interest expense - related parties (contractual interest
of $3,252 at November 22, 1996) (1,781) (196) (2,597) (3,918)
Interest and other, net of interest income of $95,
$81, $164, and $237, at January 31, 1998;
February 1, 1997; November 22, 1996; and
February 2, 1996, respectively (contractual
interest of $17,512 at November 22, 1996) (5,094) (1,189) (14,892) (22,987)
Other, net 613 95 625 299
------------ ------------ ------------ ------------
(6,262) (1,290) (16,864) (26,606)
------------ ------------ ------------ ------------
Income (loss) before reorganization items,
income taxes, and extraordinary item 2,339 (4,157) 490 (76,801)
Reorganization items:
Adjustments to fair value -- -- 3,765 --
Professional fees and other -- -- (2,589) --
------------ ------------ ------------ ------------
Income (loss) before income taxes
and extraordinary item 2,339 (4,157) 1,666 (76,801)
Income tax (expense) benefit (note 6) (803) 1,400 (4,218) 27,157
------------ ------------ ------------ ------------
Income (loss) before extraordinary item 1,536 (2,757) (2,552) (49,644)
Extraordinary item - gain on debt discharge of $90,980
before income taxes of $23,056 at November 22,
1996 (notes 1 and 6) -- -- 67,924 --
------------ ------------ ------------ ------------
Net income (loss) $ 1,536 $ (2,757) $ 65,372 $ (49,644)
============ ============ ============ ============
Basic and dilutive net income (loss) per common share $ .15 $ (.28)
============ ============
Weighted-average common shares outstanding 10,000,000 10,000,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 21
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
Year ended January 31, 1998; 10-Week Period
ended February 1, 1997; 42-Week Period ended
November 22, 1996; and Year ended February 2, 1996
(In thousands, except share data)
<TABLE>
<CAPTION>
Shares Total
---------------------------- Additional Retained stockholders'
Post- Common paid-in earnings equity
Preconfirmation confirmation stock capital (deficit) (deficit)
--------------- ------------ ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
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 preconfirmation shares (1,000) -- -- (9,000) -- (9,000)
Issuance of post-confirmation shares -- 10,000,000 100 22,016 -- 22,116
-------------- ---------- ---------- ---------- ---------- ----------
Balance at November 22, 1996
(Post-Confirmation) -- 10,000,000 100 22,016 -- 22,116
Net loss for 10-week period ended
February 1, 1997 -- -- -- -- (2,757) (2,757)
-------------- ---------- ---------- ---------- ---------- ----------
Balance at February 1, 1997 -- 10,000,000 100 22,016 (2,757) 19,359
Net income for year ended January 31, 1998 -- -- -- -- 1,536 1,536
-------------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 1998 -- 10,000,000 $ 100 $ 22,016 $ (1,221) $ 20,895
============== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 22
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year ended January 31, 1998; 10-Week Period
ended February 1, 1997; 42-Week Period ended
November 22, 1996; and Year ended February 2, 1996
(In thousands)
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
-------------------------- --------------------------
10-Week 42-Week
Year ended Period ended Period ended Year ended
January 31, February 1, November 22, February 2,
1998 1997 1996 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash provided by operating activities:
Net income (loss) $ 1,536 $ (2,757) $ 65,372 $ (49,644)
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) --
Net adjustments in accounts for fair value -- -- (3,765) --
Provision for reorganization items -- -- 2,589 --
Depreciation and amortization of property,
plant, and equipment 5,038 853 6,936 8,713
Provision for (recovery of) doubtful accounts (491) (252) 293 --
Amortization of intangible assets, deferred debt
expense, and discount on subordinated notes 374 91 1,568 5,521
Provision for deferred taxes 378 (1,396) 31,578 (15,486)
(Gain) loss on sale of property, plant, and
equipment (153) -- (292) 22
Changes in operating assets and liabilities before
the effects of restructuring reclassifications:
Trade accounts receivable 5,416 19,108 (13,011) 4,668
Inventories 8,644 3,026 (646) 12,071
Prepaid expenses and other assets (590) (264) 14,204 (13,495)
Assets held for disposition 3,542 (781) 18,523 --
Accounts payable (640) (1,744) (3,928) (725)
Accrued payroll and related expenses (3,536) (3,347) 4,408 (941)
Other accrued expenses (2,828) (1,811) 1,469 6,390
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities 16,690 10,726 31,354 (2,283)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment 740 59 949 219
Additions to property, plant, and equipment (4,209) (797) (3,248) (13,887)
Decrease (increase) in other assets -- -- -- 1,251
----------- ----------- ----------- -----------
Net cash used in investing activities (3,469) (738) (2,299) (12,417)
----------- ----------- ----------- -----------
</TABLE>
Page 23
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
-------------------------- --------------------------
10-Week 42-Week
Year ended Period ended Period ended Year ended
January 31, February 1, November 22, February 2,
1998 1997 1996 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Repayment of long-term debt $ (12,607) $ (11,251) $ (38,095) $ (19,462)
Proceeds from long-term debt -- -- -- 37,000
----------- ----------- ----------- -----------
Net cash (used in) provided by
financing activities (12,607) (11,251) (38,095) 17,538
----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 614 (1,263) (9,040) 2,838
Cash and cash equivalents at beginning of period 66 1,329 10,369 7,531
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 680 $ 66 $ 1,329 $ 10,369
=========== =========== =========== ===========
Supplemental disclosures - net cash paid (received)
during the period for:
Income taxes $ (165) $ (360) $ (16,835) $ 1,224
=========== =========== =========== ===========
Interest paid to related parties $ 1,782 $ 301 $ 379 $ 2,654
=========== =========== =========== ===========
Interest paid to others $ 4,450 $ 1,690 $ 7,632 $ 16,309
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 24
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1998 and February 1, 1997
(In thousands, except share data)
(1) Reorganization and Emergence from Chapter 11 Bankruptcy
On December 16, 1996 (the "Effective Date"), Ithaca Industries, Inc. (the
"Company") emerged from proceedings under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") pursuant to a Prepackaged Chapter 11 Plan
of Reorganization (the "Plan"), which was confirmed by United States
Bankruptcy Court for the District of Delaware (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, as a result of diminished operating performance and
profitability, 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. As a result of negotiations between the
Company's creditors, owners, and management, the parties agreed to effect
a financial restructuring and, accordingly, on October 8, 1996 (the
"Petition Date"), the Company filed a voluntary petition for relief under
Chapter 11 in the Bankruptcy Court. The Company filed the Plan to
consummate a financial restructuring that had been negotiated among the
Company, its Noteholders and parties to the Credit Agreement, and the sole
stockholder 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.
Page 25
<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 while under the supervision
of the Bankruptcy Court.
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
consolidated financial statements as of November 22, 1996. The
Post-Confirmation consolidated financial statements have been separated
from the Preconfirmation amounts by a bold line to signify that the
Post-Confirmation consolidated financial statements are those of a new
reporting entity and have been prepared on a basis not comparable to prior
periods.
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.
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. 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.
Page 26
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
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 at November 22, 1996. 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
==========
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 at November 22, 1996, and no further material
recourse to the Company is available to any person with respect to any
prepetition claims.
The effect of the Plan and the implementation of Fresh-Start Reporting on
the Company's consolidated balance sheet as of November 22, 1996 was as
follows:
<TABLE>
<CAPTION>
Post-
Preconfirmation Adjustments confirmation
balance sheet at to record the balance sheet at
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
========== ======== ======== =======
Current long-term debt $ 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.
Page 27
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(2) Summary of Significant Accounting Policies and Practices
(a) Description of Business and Basis of Presentation
The Company is a manufacturer of private-label underwear and women's
hosiery 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 has two principal product lines: men's and
women's underwear and outerwear T-shirts and women's hosiery. 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.
(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-earning
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 $680
and $66 at January 31, 1998 and February 1, 1997, 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) method.
(e) Property, Plant, and Equipment
Property, plant, and equipment acquired after November 22, 1996 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 at November 22, 1996 was recorded
at its estimated fair value and historical accumulated depreciation
was eliminated. Depreciation and amortization expense of property,
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
Page 28
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(f) Intangibles and Other Assets
Intangible and other assets consist of patents, organizational
costs, deferred debt expense, and deferred acquisition costs and 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.
Deferred debt expenses are amortized over the term of the loans to
which the expenses relate. As a result of the adoption of
Fresh-Start Reporting and the related amendment 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 former 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.
Page 29
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(i) Stock Option Plan
Effective November 22, 1996, with the adoption of its stock option
plan, the Company adopted Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), Accounting for Stock-Based
Compensation, which permits the Company 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 permits the Company
to apply the provisions of APB Opinion No. 25 where compensation
expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price of
the option and provide pro forma net income and pro forma income per
share disclosures for 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 apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosures required by
SFAS No. 123.
(j) Fiscal Year
The Company's fiscal year ends on the Saturday closest to the end of
January. The results of operations for the year ended January 31,
1998 reflect a 52-week period (fiscal 1998). The results of
operations for fiscal 1997 include the 10-week period ended February
1, 1997 (post-confirmation) and the 42-week period ended November
22, 1996 (preconfirmation). The results of operations for the year
ended February 2, 1996 reflect a 53-week period (fiscal 1996).
(k) 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 at period-end
and revenues and expenses for the periods ended to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(l) Net Income Per Share
In fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which established
new standards for computing and presenting earnings per share
information. Basic earnings per share are calculated based upon the
weighted-average number of common shares outstanding during the
year. Diluted earnings per share are based upon the weighted-average
number of common shares and dilutive common equivalent shares
outstanding during the year. All potential dilutive common
equivalent shares relate to the Company's stock option plan.
Potential dilutive common equivalent shares are excluded from
weighted-average shares outstanding where their impact is
antidilutive.
Page 30
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(3) Inventories
Inventories consist of the following:
January 31, February 1,
1998 1997
---- ----
Raw materials and supplies $ 13,142 15,607
Work-in-process 14,625 12,381
Finished goods 29,519 41,278
--------- ------
57,286 69,266
Less excess of FIFO over LIFO cost 250 -
Less inventory included in assets held for
disposition, net (note 13) - 3,586
--------- ------
$ 57,036 65,680
========= ======
Upon adoption of Fresh-Start Reporting at November 22, 1996, the excess of
first-in, first-out (FIFO) over LIFO cost was adjusted to zero as
inventories were restated to their estimated fair value. The adjustment
has been included in fair value adjustments in note 1.
During the year ended January 31, 1998, the 42-week period ended November
22, 1996, and the year ended February 2, 1996, LIFO inventory layers were
liquidated. This liquidation resulted in charging lower inventory costs
prevailing in prior years to cost of sales, thus reducing cost of sales by
$71, $1,367, and $271, respectively, which is lower than the amount that
would have resulted from replacing the liquidated inventory at end of
period prices on those dates.
(4) Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
January 31, February 1,
1998 1997
---- ----
Land 1,276 1,306
Buildings and improvements 18,104 18,359
Machinery and equipment 18,974 16,288
Vehicles 99 104
Construction in progress 1,372 327
-------- ------
39,825 36,384
Less accumulated depreciation and amortization 5,710 853
-------- ------
$ 34,115 35,531
======== ======
Page 31
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(5) Long-Term Debt
A summary of long-term debt follows:
January 31, February 1,
1998 1997
---- ----
Borrowings under credit agreements:
Revolving loans - base rate loans $ 17,500 13,000
Term loans - base rate loans 35,963 53,000
9.0% to 10.5% notes, maturing through 1998 69 139
--------- ------
53,532 66,139
Less current installments of long-term debt 13 70
--------- ------
$ 53,519 66,069
========= ======
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
common 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 required to be 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 Loan expires August 31, 1999.
At January 31, 1998 and February 1, 1997, there was $17,500 and $13,000
outstanding under the Revolving Loan provisions and $5,209 and $6,825
issued under the trade and standby letters of credit provisions of the
Amended Agreement, respectively. The availability as calculated under the
provisions of the Amended Agreement at January 31, 1998 was $28,358.
Page 32
<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 was reduced to $35,963 and $53,000 as a result of
payments during fiscal 1998 and the 10-week period ended February 1, 1997,
respectively. The remaining amounts are payable in installments of $4,000
on January 31, 1999 and $31,963 on August 31, 1999. At January 31, 1998,
$4,000 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 assets for
disposition, 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.
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, or (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%. On January 29, 1997, the
Company entered into a rate protection agreement which limits the base
interest rate payable on the first $45 million outstanding term loan
principal to 9.5% through July 28, 1998.
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 January 31, 1998, the
Company was in compliance with such covenants.
(6) Income Taxes
Components of income tax benefit (expense) consist of:
Post-confirmation Preconfirmation
------------------------- --------------------------
10-week 42-week
Year ended period ended period ended Year ended
January 31, February 1, November 22, February 2,
1998 1997 1996 1996
---- ---- ---- ----
Current:
Federal $ (326) 4 3,113 10,302
State (99) 1 1,191 1,369
Deferred (378) 1,395 (8,522) 15,486
-------- ----- ------ ------
$ (803) 1,400 (4,218) 27,157
======== ===== ====== ======
Page 33
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
Income tax benefit (expense) for the year ended January 31, 1998; the
10-week period ended February 1, 1997; the 42-week period ended November
22, 1996; and the year ended February 2, 1996 amounted to $(803), $1,400,
$(4,218), and $27,157, an effective rate of 34.3%, 33.7%, 253.0%, and
35.3%, respectively, which differs from the "expected" income tax expense
(computed by applying the U.S. Federal corporate income tax rate of 34% to
income (loss) before income taxes and extraordinary item) as follows:
<TABLE>
<CAPTION>
Post-confirmation Preconfirmation
-------------------------- ---------------------------
10-week 42-week
Year ended period ended period ended Year ended
January 31, February 1, November 22, February 2,
1998 1997 1996 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computed "expected" income tax
(expense) benefit $ (795) 1,455 (583) 26,881
State and local taxes, net of Federal
income tax benefit (73) 175 (45) 2,090
Amortization of intangible assets (127) - - (1,632)
Nondeductible expenses relating to
reorganization - (216) (744) -
Provision for resolution of tax audits and
adjustments to refund receivable - - (2,727) -
Other, net 192 (14) (119) (182)
-------- ----- ------ ------
$ (803) 1,400 (4,218) 27,157
======== ===== ====== ======
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
January 31, 1998 and February 1, 1997 are presented below:
<TABLE>
<CAPTION>
Post-confirmation
------------------------------
January 31, February 1,
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Nondeductible accruals $ 2,631 3,387
Inventory write-downs - 1,349
Accounts receivable reserves and allowances 45 173
Other 2 -
---------- -------
Deferred tax assets 2,678 4,909
---------- -------
Deferred tax liabilities:
Tax attribute reductions of inventory, receivables,
and property, plant, and equipment (17,090) (21,090)
Restructuring related reserves and write-downs
of inventory, receivables, and property, plant,
and equipment (259) -
State taxes (451) (579)
Inventory write-downs (543) -
Other (1,887) (414)
---------- -------
Deferred tax liabilities (20,230) (22,083)
---------- -------
Net deferred tax liability $ (17,552) (17,174)
========== =======
</TABLE>
Page 34
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(7) Related Party Transactions
During the 42-week period ended November 22, 1996 and the year ended
February 2, 1996, the Company engaged in transactions with related
parties, including (income) expenses incurred on behalf of the former
Parent company of approximately $(299) and $325 for those periods,
respectively.
Prior to November 22, 1996, long-term debt to related parties consisted of
notes held by parties which were stockholders, or their affiliates, of the
former Parent. After November 22, 1996, long-term debt due to related
parties consists of borrowings under the Amended Agreement held by a
stockholder of the Company.
In accordance with the Plan, 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 a license
agreement.
(8) Credit Concentrations
Most of the Company's sales are concentrated with national retailers. For
the year ended January 31, 1998; the 10-week period ended February 1,
1997; and the 42-week period ended November 22, 1996, one customer
individually accounted for 52%, 48%, and 47%, respectively, of net sales.
For the year ended February 2, 1996, two customers accounted for 42% and
11% of net sales, respectively.
At February 1, 1997, the Company had $659 of trade accounts receivable due
from customers that were believed to be moderate to high credit risks.
These accounts were factored under a nonrecourse non-notification
factoring arrangement which reduces the credit risk to the Company subject
to performance by the factor. There were no amounts factored at January
31, 1998.
(9) Fair Value of Financial Instruments
At January 31, 1998 and February 1, 1997, the fair value of the Company's
debt is equal to the carrying amount as it was subject to restructuring
and is based upon variable market rates. The carrying values of all other
financial instruments in the consolidated balance sheets approximate fair
values.
(10) 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 $3,844, $790, $3,881,
and $3,414, for the year ended January 31, 1998; the 10-week period ended
February 1, 1997; the 42-week period ended November 22, 1996; and the year
ended February 2, 1996, respectively. In addition, the Company is
responsible for payment of applicable real estate taxes, insurance, and
maintenance expenses.
Page 35
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
At January 31, 1998, future minimum annual rentals under these leases are
as follows:
Fiscal years ending in:
1999 $ 3,528
2000 2,794
2001 1,677
2002 1,287
2003 1,055
Thereafter 1,319
--------
$ 11,660
========
The Company has royalty agreements for certain licensed products. The
total royalty expense under these agreements amounted to approximately
$630, $92, $479, and $2,541 for the year ended January 31, 1998, the
10-week period ended February 1, 1997, the 42-week period ended November
22, 1996, and the year ended February 2, 1996, respectively. At January
31, 1998, the future minimum royalty expense for the fiscal year ending in
1999 is approximately $553.
(11) Employee Benefit Plans
In fiscal 1997, the Company adopted an incentive compensation plan under
which certain employees may receive discretionary bonus awards from a
bonus pool calculated based on achievement of specified targets
established by the Board of Directors. Bonus amounts expensed for the year
ended January 31, 1998; the 10-week period ended February 1, 1997; and the
42-week period ended November 22, 1996 were $489, $560, and $1,740,
respectively. No bonuses were earned for the year ended February 2, 1996.
On the Effective Date, the Company adopted the Stock Plan which permits
the Company's Board of Directors to grant stock options to officers and
key employees. The Stock Plan initially reserved 928,962 shares of
authorized but unissued common stock. Total shares available for grant may
be increased by the Board of Directors at their discretion. Stock options
may be granted at an exercise price equal to or less than fair market
value as stipulated in the applicable option agreement. Excluding a grant
of 109,290 options to certain outside consultants, certain options vest
one-third on the date of grant and one-third on the subsequent first and
second anniversaries from the date of grant. The remaining options are
performance based and vest in equal amounts based upon the achievement of
certain performance targets for each of the next three years.
Page 36
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
The following table summarizes stock option activity during each of the
last two reporting periods:
Weighted-
average
Number of exercise
shares price
------ -----
Options outstanding at November 22, 1996 -- $ --
Options granted 901,014 6.00
Options cancelled -- --
----------
Options outstanding at February 2, 1997 901,014 6.00
Options granted 17,500 6.00
Options cancelled (36,668) 6.00
----------
Options outstanding at January 31, 1998 881,846 6.00
==========
During the year ended January 31, 1998, 17,500 options were granted at $6
per share; of the 881,846 options outstanding, 492,718 were vested and
exercisable at January 31, 1998. The weighted-average contractual life of
options outstanding at January 31, 1998 is eight years. If the Company had
recognized compensation expense for the "fair value" of option grants
under the provisions of SFAS No. 123, the pro forma net income and net
income per share for the year ended January 31, 1998 would have been
$1,336 and $.13, respectively, based upon the following assumptions
related to the options: risk-free interest rate of 5.5%; dividend yield of
0%; expected volatility of 33%; and three-year expected lives.
During the 10-week period ended February 1, 1997, 901,014 options were
granted at $6 per share; of the 901,014 options outstanding, 240,994 were
vested and exercisable at February 1, 1997. The weighted-average
contractual life of options outstanding at February 1, 1997 is nine years.
Had compensation cost for the Company's stock option plan been determined
based upon the fair value at the grant date for awards under this plan
consistent with SFAS 123, the effect on the Company's net income and
income per share would not be material, based upon the following
assumptions related to the options: risk-free interest rate of 6.2%;
dividend yield of 0%; expected volatility of 33%; and three-year expected
lives.
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
claims costs and administrative expenses. Company contributions to the
plan were $4,645, $1,250, $5,604, and $8,585, for the year ended January
31, 1998; the 10-week period ended February 1, 1997; the 42-week period
ended November 22, 1996; and the year ended February 2, 1996,
respectively. Net assets available for plan benefits held in trust were
$777 at January 31, 1998 and $1,037 at February 1, 1997.
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 $226,
$53, $319, and $456, for the year ended January 31, 1998; the 10-week
period ended February 1, 1997; the 42-week period ended November 22, 1996;
and the year ended February 2, 1996, respectively.
Page 37
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(12) 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 to improve
operating performance and reduce costs. In connection with this
restructuring, 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 after related 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 1998, fiscal 1997, and fiscal 1996 of
approximately 4,900 employees, of which approximately 1,900, 1,900, and
1,100 occurred during fiscal 1998, fiscal 1997, and fiscal 1996,
respectively; and (v) the write-off of certain impaired intangible assets,
principally deferred debt expenses of $2,672 and goodwill of $2,395.
As of January 31, 1998 and February 1, 1997, assets held for disposition
consist of the following:
January 31, February 1,
1998 1997
---- ----
Property, plant, and equipment, net of estimated
reserve of $4,642 at January 31, 1998 and
$4,800 at February 1, 1997 $ 213 169
Inventory, net of obsolescence reserve of
$2,044 at February 1, 1997 - 3,586
-------- -----
$ 213 3,755
======== =====
The reserves reflect management's estimates of the recoverability of the
related assets.
(13) Subsequent Events (Unaudited)
On March 24, 1998, the Company completed the acquisition of Glendale
Hosiery Company (Glendale), an entity with annual revenues of
approximately $45 million. Consideration paid includes a cash payment
based upon Glendale's closing net worth plus $1.5 million in cash,
issuance of $2 million of Ithaca common stock (not to exceed 400,000
shares), subordinated notes, or a combination thereof. In addition, Ithaca
will refinance up to $9 million of Glendale's bank indebtedness. The
transaction, which will be accounted for using the purchase method of
accounting, was financed with the proceeds from the refinancing of the
Company's existing Credit Agreement with $110 million in new credit
facilities. The new credit facilities include $25 million and $15 million
term loans plus up to $70 million in revolving credit facilities.
Page 38
<PAGE>
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share data)
(14) Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Post-confirmation
----------------------------------------------
First Second Third Fourth
quarter quarter quarter quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended January 31, 1998:
Net sales $ 58,743 60,934 63,184 54,160
Gross profit 8,216 9,747 9,577 7,113
Net income (loss) (148) 1,004 793 (113)
======== ======== ======= =======
Basic and dilutive net income (loss) per
common share (.01) .10 .08 (.01)
=== === === ===
<CAPTION>
Preconfirmation Post-confirmation
--------------- -----------------
Fourth quarter - 1997
Preconfirmation -----------------------------------
---------------------------------- 3 weeks ended 10 weeks ended
First Second Third November 22, February 1,
quarter quarter quarter 1996 1997
------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Year ended February 1, 1997:
Net sales $ 97,619 78,883 98,624 22,477 42,708
Gross profit 12,691 11,707 13,367 4,295 4,487
Net income (loss) from continuing
operations before extraordinary item (1,298) 641 (1,303) (592) (2,757)
Extraordinary item - - - 67,924 -
Net income (loss) (1,298) 641 (1,303) 67,332 (2,757)
======== ======== ======= ====== ======
Basic and dilutive net loss per common
share(1) $ (.28)
======
</TABLE>
(1) Net income (loss) and per share amounts for periods prior to
November 22, 1996 have not been presented because they are not
meaningful due to the implementation of Fresh-Start Reporting and
the substantial change in the number of shares outstanding
subsequent to the consummation of the Plan.
Page 39
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by this Item 10 is incorporated by reference
herein from the material under the headings "Business Experience of Directors
and Executive Officers," "Proposal 1: Election of Directors - Meetings of the
Board of Directors," and "Section 16(a) Beneficial Ownership Reporting
Compliance" contained in the Company's definitive proxy statement filed with the
Commission relating to the annual meeting of stockholders to be held on June 10,
1998.
ITEM 11. Executive Compensation
The information required by this Item 11 is incorporated by reference
herein from the material under the headings "Remuneration of Directors and
Executive Officers," and "Compensation and Stock Option Committee Interlocks and
Insider Participation" contained in the Company's definitive proxy statement
filed with the Commission relating to the annual meeting of stockholders to be
held on June 10, 1998.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item 12 is incorporated by reference
herein from the material under the heading "Security Ownership of Certain
Beneficial Owners" contained in the Company's definitive proxy statement filed
with the Commission relating to the annual meeting of stockholders to be held on
June 10, 1998.
ITEM 13. Certain Relationships and Related Transactions
During the Company's last fiscal year there were no reportable
transactions or relationships.
Page 40
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports On Form 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. Financial Statements
A. Independent Auditor's Report
B. Consolidated Balance Sheets as of January 31, 1998 and February
1, 1997.
C. Consolidated Statements of Operations for the year ended January
31, 1998, the 10-Week Period ended February 1, 1997, the 42-Week
period ended November 22, 1996, and for the year ended February 2,
1996.
D. Consolidated Statements of Stockholders' Equity (Deficit) for the
year ended January 31, 1998, the 10-Week Period ended February 1,
1997, the 42-Week Period ended November 22, 1996 and for the year
ended February 2, 1996.
E. Consolidated Statements of Cash Flows for the year ended January
31, 1998, the 10-Week Period ended February 1, 1997, the 42-Week
Period ended November 22, 1996, and for the year ended February 2,
1996.
F. Notes to the Consolidated Financial Statements.
2. Financial Statement Schedule Page - 45
Schedule II Valuation and Qualifying Accounts--for the year ended
January 31, 1998, the 10-Week Period ended February 1, 1997, the
42-Week Period ended November 22, 1996 and the year ended February
2, 1996.
3. Exhibits
All Exhibits listed below are filed with this Annual Report on Form
10-K unless specifically stated to be incorporated by reference to
other documents previously filed with the Securities and Exchange
Commission.
Exhibit No. Description of Exhibits
- ----------- -----------------------
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1, dated March 17,
1997).
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit F of Exhibit 2.1 to the Company's Form
8-K, dated September 3, 1996).
Page 41
<PAGE>
4 Registration Rights Agreement, between the Company and various
stockholders (incorporated by reference to Exhibit H of
Exhibit 2.1 to the Company's Form 8-K, dated September 3,
1996).
10.1 Loan and Security Agreement among the Company, various banks,
NationsBank, N.A. as agent, NationsBanc Montgomery Securities
LLC as syndication agent and arranger and BankAmerica Business
Credit, Inc. as documentation agent, dated as of March 24,
1998.
10.2 Loan and Security Agreement among the Company, Foothill
Capital Corp. and NationsBank, N.A. as collateral agent, dated
as of March 24, 1998.
10.3 Ithaca Industries 1996 Long Term Stock Incentive Plan
(incorporated by reference to Exhibit I of Exhibit 2.1 to the
Company's Form 8-K, dated September 3, 1996).
10.4 Employment Agreement of Jim D. Waller (incorporated by
reference to Exhibit 10.4 of the Company's Registration
Statement on Form S-1, dated March 17, 1997).
21 List of Subsidiaries of the Company (incorporated by reference
to Exhibit 21 of the Company's Registration Statement on Form
S-1, dated March 17, 1997).
23 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included in the signature page of this
report).
27 Financial Data Schedule for the year ended January 31, 1998.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the Registrant during the
last quarter of the fiscal year ended January 31, 1998.
As of the date of the filing of this Annual Report on Form 10-K no
proxy materials have been furnished directly to security holders.
Proxy materials will be mailed on or about May 5, 1998 to security
holders.
Page 42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Wilkesboro, North
Carolina, on this 1st day of May, 1998.
ITHACA INDUSTRIES, INC.
By: /s/ Richard P. Thrush
----------------------------
RICHARD P. THRUSH
(Secretary, Chief Financial and Accounting Officer)
We, the undersigned officers and directors of Ithaca Industries, Inc.,
hereby severally constitute Jim D. Waller, and Richard P. Thrush, 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 reports, with all exhibits thereto and any and all documents in
connection therewith, 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 Exchange Act of 1934, 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 Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date(s)
--------- ----- -------
/s/ Jim D.Waller Chairman, Chief Executive Officer, April 23, 1998
- ------------------------ President and Director -------------------
Jim D. Waller
/s/ Walter J. Branson Director April 23, 1998
- ------------------------ -------------------
Walter J. Branson
/s/ Marvin B. Crow Director April 23, 1998
- ------------------------ -------------------
Marvin B. Crow
/s/ Francis Goldwyn Director April 23, 1998
- ------------------------ -------------------
Francis Goldwyn
/s/ Morton E. Handel Director April 23, 1998
- ------------------------ -------------------
Morton E. Handel
/s/ David N. Weinstein Director April 23, 1998
- ------------------------ -------------------
David N. Weinstein
/s/ James A. Williams Director April 23, 1998
- ------------------------ -------------------
James A. Williams
Page 43
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibits
- ----------- -----------------------
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1, dated March 17,
1997).
3.2 Amended and Restated By-Laws of the Company (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, between the Company and various
stockholders (incorporated by reference to Exhibit H of
Exhibit 2.1 to the Company's Form 8-K, dated September 3,
1996).
10.1 Loan and Security Agreement among the Company, various banks,
NationsBank, N.A. as agent, NationsBanc Montgomery Securities
LLC as syndication agent and arranger and BankAmerica Business
Credit, Inc. as documentation agent, dated as of March 24,
1998.
10.2 Loan and Security Agreement among the Company, various banks
and NationsBank, N.A. as collateral agent, dated as of March
24, 1998.
10.3 Ithaca Industries 1996 Long Term Stock Incentive Plan
(incorporated by reference to Exhibit I of Exhibit 2.1 to the
Company's Form 8-K, dated September 3, 1996).
10.4 Employment Agreement of Jim D. Waller (incorporated by
reference to Exhibit 10.4 of the Company's Registration
Statement on Form S-1, dated March 17, 1997).
21 List of Subsidiaries of the Company (incorporated by reference
to Exhibit 21 of the Company's Registration Statement on Form
S-1, dated March 17, 1997).
23 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included in the signature page of this
report).
27 Financial Data Schedule for the year ended January 31, 1998.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the Registrant during the
last quarter of the fiscal year ended January 31, 1998.
As of the date of the filing of this Annual Report on Form 10-K no
proxy materials have been furnished directly to security holders.
Proxy materials will be mailed on or about May 5, 1998 to security
holders.
Page 44
<PAGE>
Schedule II
ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Year ended January 31, 1998;
10-Week Period ended February 1, 1997, Post-Confirmation;
42-Week Period ended November 22, 1996;
and Year ended February 2, 1996, Preconfirmation
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning of cost and end of
Description year/period expenses Deductions year/period
----------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended January 31, 1998 (post-confirmation):
Allowance for doubtful accounts $ 1,256,137 475,673 966,810 765,000
Provision for claims and allowances 1,029,116 2,969,815 3,299,786 699,145
Provision for assets held for disposition and
reserve for plant closures 2,106,230 - 1,110,809 995,421
------------- ---------- ---------- ----------
Total $ 4,391,483 3,445,488 5,377,405 2,459,566
============= ========== ========== ==========
10-week period ended February 1, 1997 (post-confirmation):
Allowance for doubtful accounts $ 1,508,296 2,329 254,488 1,256,137
Provision for discounts 4,760 544,529 549,289 -
Provision for claims and allowances 1,244,737 893,886 1,109,507 1,029,116
Provision for assets held for disposition
and reserve for plant closures 12,204,000 - 10,097,770 2,106,230
------------- ---------- ---------- ----------
Total $ 14,961,793 1,440,744 12,011,054 4,391,483
============= ========== ========== ==========
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
Provision for assets held for disposition
and reserve for plant closures 37,093,000 - 24,889,000 12,204,000
------------- ---------- ---------- ----------
Total $ 39,662,780 6,839,240 31,540,227 14,961,793
============= ========== ========== ==========
Year ended February 2, 1996 (preconfirmation):
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
Provision for assets held for disposition and
reserve for plant closures - 51,591,000 14,498,000 37,093,000
------------- ---------- ---------- ----------
Total $ 2,735,182 60,953,331 24,025,733 39,662,780
============= ========== ========== ==========
</TABLE>
Page 45
================================================================================
LOAN AND SECURITY AGREEMENT
Dated as of March 24, 1998
Between
ITHACA INDUSTRIES, INC.
(the Borrower)
and
THE LENDERS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
NATIONSBANK, N.A.
(the Agent)
and
NATIONSBANC MONTGOMERY
SECURITIES LLC
(the Syndication Agent and Arranger)
and
BANKAMERICA BUSINESS CREDIT, INC.
(the Documentation Agent)
================================================================================
<PAGE>
TABLE OF CONTENTS(7)
Page
----
ARTICLE 1
DEFINITIONS.............................................................1
SECTION 1.1. Definitions...............................................1
ARTICLE 2
REVOLVING CREDIT FACILITY..............................................37
SECTION 2.1. Revolving Credit Loans...................................37
SECTION 2.2. Manner of Borrowing Revolving Credit Loans...............38
SECTION 2.3. Repayment of Revolving Credit Loans......................40
SECTION 2.4. Revolving Credit Note....................................40
SECTION 2.5. Extension of Revolving Credit Facility...................41
ARTICLE 3
LETTER OF CREDIT FACILITY..............................................41
SECTION 3.1. Agreement to Issue.......................................41
SECTION 3.2. Amounts..................................................41
SECTION 3.3. Conditions...............................................41
SECTION 3.4. Issuance of Letters of Credit............................42
SECTION 3.5. Duties of the Issuing Bank...............................43
SECTION 3.6. Payment of Reimbursement Obligations.....................43
SECTION 3.7. Participations...........................................43
SECTION 3.8. Indemnification, Exoneration.............................45
SECTION 3.9. Supporting Letter of Credit; Cash Collateral.............47
ARTICLE 4
TERM LOAN FACILITY.....................................................48
SECTION 4.1. Term Loan................................................48
SECTION 4.2. Manner of Borrowing Term Loan............................48
SECTION 4.3. Repayment of Term Loan...................................48
SECTION 4.4. Term Notes...............................................48
SECTION 4.5. Prepayment of Term Loan..................................49
- --------
(7) This Table of Contents is included for reference purposes only and does
not constitute part of the Loan and Security Agreement.
i
<PAGE>
Page
----
ARTICLE 5
GENERAL LOAN PROVISIONS................................................49
SECTION 5.1. Interest.................................................49
SECTION 5.2. Certain Fees.............................................51
SECTION 5.3. Manner of Payment........................................53
SECTION 5.4. General..................................................53
SECTION 5.5. Loan Accounts; Statements of Accounts....................54
SECTION 5.6. Termination of Agreement.................................54
SECTION 5.7. Making of Loans..........................................55
SECTION 5.8. Settlement Among Lenders.................................57
SECTION 5.9. Mandatory Prepayments....................................62
SECTION 5.10. Prepayment Fee..........................................64
SECTION 5.11. Payments Not at End of Interest Period; Failure
to Borrow.............................................65
SECTION 5.12. Assumptions Concerning Funding of Eurodollar Rate Loans.65
SECTION 5.13. Notice of Conversion or Continuation....................66
SECTION 5.14. Conversion or Continuation..............................66
SECTION 5.15. Duration of Interest Periods; Maximum Number of
Eurodollar Rate Loans; Minimum Increments.............66
SECTION 5.16. Changed Circumstances...................................67
SECTION 5.17. Cash Collateral Account.................................70
ARTICLE 6
CONDITIONS PRECEDENT...................................................71
SECTION 6.1. Conditions Precedent to Initial Loans and Letters
of Credit......................71
SECTION 6.2. All Loans; Letters of Credit.............................76
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER.............................77
SECTION 7.1. Representations and Warranties...........................77
SECTION 7.2. Survival of Representations and Warranties, Et...........89
ARTICLE 8
SECURITY INTEREST......................................................89
SECTION 8.1. Security Interest........................................89
SECTION 8.2. Continued Priority of Security Interest..................90
ii
<PAGE>
Page
----
ARTICLE 9
COLLATERAL COVENANTS...................................................91
SECTION 9.1. Collection of Receivables................................91
SECTION 9.2. Verification and Notification............................92
SECTION 9.3. Disputes, Returns and Adjustments........................92
SECTION 9.4. Invoices.................................................93
SECTION 9.5. Delivery of Instruments..................................93
SECTION 9.6. Sales of Inventory.......................................93
SECTION 9.7. Ownership and Defense of Title...........................93
SECTION 9.8. Insurance................................................94
SECTION 9.9. Location of Offices and Collateral.......................95
SECTION 9.10. Records Relating to Collateral..........................95
SECTION 9.11. Inspection..............................................95
SECTION 9.12. Information and Reports.................................96
SECTION 9.13. Power of Attorney.......................................97
SECTION 9.14. Additional Real Estate and Leases.......................97
SECTION 9.15. Assignment of Claims Act................................98
SECTION 9.16. Covenant to Guarantee Obligations and Give Security.....98
ARTICLE 10
AFFIRMATIVE COVENANTS..................................................99
SECTION 10.1. Preservation of Corporate Existence and
Similar Matters.......................................99
SECTION 10.2. Compliance with Applicable Laws.........................99
SECTION 10.3. Maintenance of Property................................100
SECTION 10.4. Conduct of Business....................................100
SECTION 10.5. Insurance..............................................100
SECTION 10.6. Payment of Taxes and Claims............................100
SECTION 10.7. Accounting Methods and Financial Records...............100
SECTION 10.8. Use of Proceeds........................................101
SECTION 10.9. Hazardous Waste and Substances; Environmental
Requirements....................................101
SECTION 10.10. Syndication...........................................102
SECTION 10.11. Interest Rate Protection Agreements...................102
ARTICLE 11
INFORMATION...........................................................102
SECTION 11.1. Financial Statements...................................102
SECTION 11.2. Accountants' Certificate...............................103
SECTION 11.3. Officer's Certificate..................................103
SECTION 11.4. Copies of Other Reports................................104
SECTION 11.5. Notice of Litigation and Other.........................104
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SECTION 11.6. ERISA..................................................105
SECTION 11.7. Accuracy of Information................................105
SECTION 11.8. Revisions or Updates to Schedules......................106
SECTION 11.9. Seller Subordinated Indebtedness Certificate...........106
ARTICLE 12
NEGATIVE COVENANTS....................................................106
SECTION 12.1. Financial Ratios.......................................106
SECTION 12.2. Indebtedness for Money Borrowed........................107
SECTION 12.3. Guarantees.............................................108
SECTION 12.4. Investments............................................108
SECTION 12.5. Capital Expenditures...................................108
SECTION 12.6. Restricted Payments, Et................................108
SECTION 12.7. Merger, Consolidation and Sale of Assets...............108
SECTION 12.8. Transactions with Affiliates...........................109
SECTION 12.9. Liens..................................................109
SECTION 12.10. Capitalized Lease Obligations.........................109
SECTION 12.11. Operating Lease Obligations...........................109
SECTION 12.12. Plans.................................................110
SECTION 12.13. Amendments of Other Agreements........................110
SECTION 12.14. Minimum Availability..................................110
SECTION 12.15. Fiscal Year...........................................110
SECTION 12.16. Limitation on Issuance of Capital Stock...............110
SECTION 12.17. Limitation on Certain Restrictions on Subsidiaries....110
ARTICLE 13
DEFAULT...............................................................111
SECTION 13.1. Events of Default......................................111
SECTION 13.2. Remedies...............................................115
SECTION 13.3. Application of Proceeds................................117
SECTION 13.4. Power of Attorney......................................118
SECTION 13.5. Miscellaneous Provisions...............................118
ARTICLE 14
ASSIGNMENTS...........................................................119
SECTION 14.1. Successors and Assigns; Participations.................119
SECTION 14.2. Representation of Lenders..............................122
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ARTICLE 15
AGENT.................................................................122
SECTION 15.1. Appointment of Agent...................................122
SECTION 15.2. Delegation of Duties...................................123
SECTION 15.3. Exculpatory Provisions.................................123
SECTION 15.4. Reliance by Agent......................................123
SECTION 15.5. Notice of Default......................................124
SECTION 15.6. Non-Reliance on Agent and Other Lenders................124
SECTION 15.7. Indemnification........................................124
SECTION 15.8. Agent in Its Individual Capacity.......................125
SECTION 15.9. Successor Agent........................................125
SECTION 15.10. Notices from Agent to Lenders.........................126
SECTION 15.11. Syndication Agent; Documentation Agent................126
SECTION 15.12. Intercreditor Agreement...............................126
ARTICLE 16
MISCELLANEOUS.........................................................126
SECTION 16.1. Notices................................................126
SECTION 16.2. Expenses...............................................127
SECTION 16.3. Stamp and Other Taxes..................................128
SECTION 16.4. Setoff.................................................128
SECTION 16.5. Litigation.............................................129
SECTION 16.6. Waiver of Rights.......................................129
SECTION 16.7. Consent to Advertising and Publicity...................130
SECTION 16.8. Reversal of Payments...................................130
SECTION 16.9. Injunctive Relief......................................130
SECTION 16.10. Accounting Matters....................................131
SECTION 16.11. Amendments; Waivers...................................131
SECTION 16.12. Assignment............................................133
SECTION 16.13. Performance of Borrower's Duties......................133
SECTION 16.14. Indemnification.......................................133
SECTION 16.15. All Powers Coupled with Interest......................134
SECTION 16.16. Survival..............................................134
SECTION 16.17. Titles and Captions...................................134
SECTION 16.18. Severability of Provisions............................134
SECTION 16.19. Governing Law.........................................135
SECTION 16.20. Counterparts..........................................135
SECTION 16.21. Reproduction of Documents.............................135
SECTION 16.22. Term of Agreement.....................................135
SECTION 16.23. Pro-Rata Participation................................135
SECTION 16.24. Receivables Securitization............................136
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SECTION 16.25. Final Agreement.......................................136
SECTION 16.26. Waiver of Consequential Damages, Etc..................136
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ANNEXES, EXHIBITS AND SCHEDULES
ANNEX I PERFORMANCE PRICING MATRIX
ANNEX II COMMITMENTS
EXHIBIT A-1 FORM OF REVOLVING CREDIT NOTE
EXHIBIT A-2 FORM OF TERM NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FORM OF OPINION OF COUNSEL FOR BORROWER
EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT E FORM OF SETTLEMENT REPORT
EXHIBIT F FORM OF COMPLIANCE CERTIFICATE
Schedule 1.1A Permitted Liens
Schedule 1.1B Excepted Accounts
Schedule 7.1(a) Organization
Schedule 7.1(c) Subsidiaries; Ownership of Stock
Schedule 7.1(e) Compliance with Laws
Schedule 7.1(f) Description of Business
Schedule 7.1(g) Governmental Approvals
Schedule 7.1(h) Title to Properties
Schedule 7.1(i) Liens
Schedule 7.1(j) Indebtedness and Guarantees
Schedule 7.1(k) Litigation
Schedule 7.1(l) Tax Matters
Schedule 7.1(p) ERISA
Schedule 7.1(t) Location of Offices and Receivables
Schedule 7.1(u) Locations of Inventory
Schedule 7.1(v) Locations of Equipment
Schedule 7.1(w) Real Estate
Schedule 7.1(x) Corporate and Fictitious Names
Schedule 7.1(aa) Employee Relations
Schedule 7.1(bb) Proprietary Rights
Schedule 7.1(cc) Trade Names
Schedule 10.8 Use of Proceeds
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<PAGE>
LOAN AND SECURITY AGREEMENT
Dated as of March 24, 1998
ITHACA INDUSTRIES, INC., a Delaware corporation, the Lenders party to this
Agreement from time to time, NATIONSBANK, N.A., a national banking association,
as agent for the Lenders, NATIONSBANC MONTGOMERY SECURITIES LLC, as syndication
agent for the Lenders (the "Syndication Agent") and as arranger (the
"Arranger"), and BANKAMERICA BUSINESS CREDIT, INC., as document agent (the
"Documentation Agent"), agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For the purposes of this Agreement:
"Account Debtor" means a Person who is obligated on a Receivable.
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit or
Investment by purchase, exchange, issuance of stock or other securities, or by
merger, reorganization or any other method.
"Acquired Assets" means the assets and business of the Seller
acquired by the Borrower from the Seller pursuant to the Acquisition Documents.
"Acquisition Agreement" means the Asset Purchase Agreement dated as
of March 13, 1998 between the Seller and the Borrower, as the same may be
amended up to and through the Effective Date with the consent of the Lenders.
"Acquisition Documents" means, collectively, the Acquisition
Agreement and all other documents, agreements and certificates executed in
connection with the consummation of the transactions contemplated by the
Acquisition Agreement.
"Acquisition Documents Assignment" means the Collateral Assignment
of Acquisition Documents, in form and substance satisfactory to the Agent, dated
on or about the Effective Date, made by the Borrower in favor of the Agent, for
the benefit of the Secured Creditors, as such agreement may be amended, modified
or supplemented from time to time.
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"Affiliate" means, with respect to a Person, (a) any partner,
officer, shareholder (if holding more than 10% of the outstanding shares of
capital stock of such Person), director, employee or managing agent of such
Person, (b) any other Person (other than a Subsidiary) that, (i) directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other voting interest of such Person or any Subsidiary of such
Person, or (iii) 10% or more of the voting stock or partnership or other voting
interest of which is directly or indirectly beneficially owned or held by such
Person or a Subsidiary of such Person. Notwithstanding the foregoing, when used
in subpart (g) and (p) of the definition of "Eligible Receivables", in subpart
(c) of the definition of "Restricted Payment", and in Section 12.8, "Affiliate"
means (a) any partner, officer, director, employee or managing agent of such
Person, (b) any other Person (other than a Subsidiary) that, (i) directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 50% or more of any class of voting stock or
partnership or other voting interest of such Person or any Subsidiary of such
Person, or (iii) 50% or more of the voting stock or partnership or other voting
interest of which is directly or indirectly beneficially owned or held by such
Person or a Subsidiary of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities or partnership or other voting interest, by contract or otherwise.
"Agency Account" means an account of the Borrower maintained by it
with a Clearing Bank pursuant to an Agency Account Agreement.
"Agency Account Agreement" means an agreement among the Borrower,
the Agent and a Clearing Bank, in form and substance reasonably satisfactory to
the Agent, concerning the collection of payments which represent the proceeds of
Receivables or of any other Collateral and the application of such payments to
the Secured Obligations.
"Agent" means NationsBank, N.A., a national banking association, and
any successor agent appointed pursuant to Section 15.9 hereof.
"Agent's Office" means the office of the Agent specified in or
determined in accordance with the provisions of Section 16.1.
"Agreement" means and includes this Agreement, including all
Annexes, Schedules, Exhibits and other attachments hereto, and all amendments,
modifications and supplements hereto and thereto.
"Agreement Date" means the date as of which this Agreement is dated.
<PAGE>
"Applicable Laws" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and of all
orders and decrees of all courts and arbitrators, including, without limitation,
Environmental Laws.
"Applicable Margin" means, as to the applicable Type and class of
Loan, the following:
Revolving Credit Loans
Prime Rate Margin = 0.75%
Eurodollar Rate Margin = 2.50%
Term Loan
Prime Rate Margin = 1.00%
Eurodollar Rate Margin = 2.75%
The Applicable Margin shall be adjusted in accordance with the performance
pricing matrix set forth on Annex I attached hereto based upon (a) the ratio of
Consolidated Funded Indebtedness as of the date of determination to Consolidated
Operating Cash Flow for the preceding four fiscal quarters, and (b) the
Consolidated Fixed Charge Coverage Ratio for the preceding four fiscal quarters.
Adjustments to the Applicable Margin shall be effective as of (i) the first day
of the calendar month after the Agent's receipt of the Borrower's audited
financial statements as of each fiscal year end (commencing with the financial
statements for the fiscal year ending on January 30, 1999) in conformance with
Section 11.1(b), together with the accountant's certificate described in Section
11.2 setting forth the calculations necessary to determine the ratios referred
to above, and (ii) the first day of the calendar month after the Agent's receipt
of the Borrower's financial statements as of the last day of each subsequent
fiscal quarter during each fiscal year in conformance with Section 11.1(c),
together with the officer's certificate described in Section 11.3 setting forth
the calculations necessary to determine the ratios referred to above; provided
no decrease in the Applicable Margin shall be made if a Default or Event of
Default exists as of the effective date of such scheduled adjustment. In the
event the Borrower fails to provide in a timely manner the financial statements
and certificates referred to above, and without prejudice to any additional
rights under Sections 5.1(d) and 13.2, the maximum Applicable Margin shall apply
to all Eurodollar Rate Loans and Prime Rate Loans until the first day of the
calendar month after the Agent's receipt of such financial statements and
certificates.
"Asset Disposition" means the disposition of any asset of the
Borrower or any of its Subsidiaries, other than sales of Inventory in the
ordinary course of business.
"Assignment and Acceptance" means an assignment and acceptance in
the form attached hereto as Exhibit D assigning all or a portion of a Lender's
interests, rights and obligations under this Agreement pursuant to Section 14.1.
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"Assignment of Factoring Proceeds" means an assignment by the
Borrower of the factoring proceeds payable to the Borrower pursuant to the terms
of the Non-Notification Factoring Agreement, executed by the Borrower, the
Agent, and the Factor.
"Availability" means at any time (a) the amount described in clause
(b) of the definition of Borrowing Base at such time minus (b) the aggregate
principal amount of Revolving Credit Loans outstanding at such time.
"Benefit Plan" means an "employee pension benefit plan" as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which
the Borrower or any Related Company is, or within the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA, including such
plans as may be established after the Agreement Date.
"Borrower" means Ithaca Industries, Inc., a Delaware corporation,
and its successors and permitted assigns.
"Borrowing" means a borrowing of Revolving Credit Loans bearing
interest at the same rate, made by all Lenders on the same date and, in the case
of Eurodollar Rate Loans, having a single Interest Period, and the continuation
or conversion of an existing Loan or Loans in whole or in part.
"Borrowing Base" means at any time an amount equal to the lesser of:
(a) the Revolving Credit Facility minus the Letter of Credit
Reserve, or
(b) an amount equal to
(i) 85% of the face value of Eligible Receivables due and
owing at such time, plus
(ii) the lesser of
(A) 55% (or, in the case of Eligible Inventory
consisting of work-in-process, the WIP Advance Rate) of the
lesser of cost determined on a FIFO (or first-in-first-out)
accounting basis and fair market value of Eligible Inventory,
net of the Borrower's reserve for obsolescence and any other
Inventory reserves of the Borrower at such time, plus 55% of
the Foreign Letter of Credit Amount at such time, and
(B) $40,000,000, minus
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(iii) the sum of
(A) the Letter of Credit Reserve, plus
(B) such other reserves as the Agent shall deem proper
in its reasonable judgment based on customary asset-based
lending practices.
"Borrowing Base Certificate" means a certificate in the form
attached hereto as Exhibit B.
"Business Day" means (a) any day other than a Saturday, Sunday or
other day on which banks in Atlanta, Georgia are authorized or required to close
and (b) in respect of any determination with respect to a Eurodollar Rate Loan,
any day referred to in clause (a) that is also a day on which tradings are
conducted in the London interbank eurodollar market.
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"Capital Expenditures" means all capitalized expenditures, plus all
capitalized Enterprise Resource Planning expenditures, in each case as
determined in accordance with GAAP, but excluding any such expenditure made (i)
to restore, replace or rebuild property to the condition of such property
immediately prior to any damage, loss, destruction or condemnation of such
property, to the extent such expenditure is made with insurance proceeds or
condemnation awards relating to any such damage, loss, destruction or
condemnation or (ii) proceeds from the sale exchange of property to the extent
utilized to purchase functionally equivalent property or equipment.
"Capitalized Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Cash Collateral" means collateral consisting of cash or Cash
Equivalents on which the Agent, for the benefit of the Secured Creditors, has a
first priority Lien.
"Cash Collateral Account" means a special interest-bearing deposit
account consisting of cash maintained at the principal office of the Agent and
under the sole dominion and control of the Agent, for the benefit of the Secured
Creditors, established pursuant to the provisions of Section 5.17 for the
purposes set forth therein.
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"Cash Equivalents" means
(a) direct obligations of the United States of America or any agency
or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in each case maturing no later than 90 days from
the date of acquisition;
(b) certificates of deposit maturing no later than 90 days from the
date of acquisition issued by U.S. commercial banks having a combined
capital and surplus of over $200,000,000 and having a long-term debt
rating of A- by S&P or A3 or better by Moody's;
(c) commercial paper of a domestic issuer rated A-1 by S&P and P-1
by Moody's and maturing not more than ninety days after the date of
acquisition;
(d) securities with maturities of 90 days or less from the date of
acquisition backed by standby letters of credit issued by any Lender or
any commercial bank satisfying the requirements of clause (b) of this
definition; and
(e) shares in money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through
(d) of this definition.
"Clearing Bank" means a banking institution with which an Agency
Account has been established pursuant to an Agency Account Agreement.
"Collateral" means and includes, collectively, all of the collateral
referred to in each of the Security Documents and all of the Borrower's right,
title and interest in and to each of the following, wherever located and whether
now or hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Real Estate,
(g) all goods and other property, whether or not delivered,
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<PAGE>
(i) the sale or lease of which gives or purports to give rise
to any Receivable, including, but not limited to, all merchandise
returned or rejected by or repossessed from customers, or
(ii) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lien or
(including, without limitation, stoppage in transit, replevin and reclamation)
with respect to such goods and other property,
(h) all mortgages, deeds to secure debt and deeds of trust on real
or personal property, guaranties, leases, security agreements, and other
agreements and property which secure or relate to any Receivable or other
Collateral, or are acquired for the purpose of securing and enforcing any
item thereof,
(i) all documents of title, policies and certificates of insurance,
securities, chattel paper and other documents and instruments evidencing
or pertaining to any and all items of Collateral,
(j) any demand, time, savings, passbook, money market or like
depository account, and all certificates of deposit, maintained with a
bank, savings and loan association, credit union or like organization,
other than an account evidenced by a certificate of deposit that is an
instrument under the UCC,
(k) all Pledged Stock and all securities accounts, all commodity
contracts and all commodity accounts,
(l) (i) any investment account maintained by or on behalf of the
Borrower with the Agent or any Lender or any Affiliate of the Agent or any
Lender, (ii) any agreement governing such account, (iii) all cash, money,
notes, securities, instruments, goods, accounts, documents, chattel paper,
general intangibles and other property now or hereafter held by the Agent
or any Lender or any Affiliate of the Agent or any Lender on behalf of the
Borrower in connection with such investment account or deposited by the
Borrower or on the Borrower's behalf to such investment account or
otherwise credited thereto for the Borrower's benefit, or distributable to
the Borrower from such investment account, together with all contracts for
the sale or purchase of the foregoing, (iv) all of the Borrower's right,
title and interest with respect to the deposit, investment, allocation,
disposition, distribution or withdrawal of the foregoing, (v) all of the
Borrower's right, title and interest with respect to the making of
amendments, modifications or additions of or to the terms and conditions
under which the investment account or investments maintained therein is to
be maintained by the Borrower, the Agent, any Lender or any Affiliate of
the Agent or any Lender on the Borrower's behalf, and (vi) all of the
Borrower's books, records and receipts pertaining to or confirming any of
the foregoing,
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<PAGE>
(m) all files, correspondence, computer programs, tapes, discs and
related data processing software which contain information identifying or
pertaining to any of the Receivables, or any Account Debtor, or showing
the amounts thereof or payments thereon or otherwise necessary or helpful
in the realization thereon or the collection thereof,
(n) all cash and Cash Equivalents deposited with the Agent or any
Lender or any Affiliate of the Agent or any Lender or which the Agent, for
the benefit of the Secured Creditors, or any Lender or such Affiliate is
entitled to retain or otherwise possess as collateral pursuant to the
provisions of this Agreement or any of the Security Documents, but
specifically excluding deposits in the Excepted Accounts, and
(o) any and all products and proceeds of the foregoing (including,
but not limited to, any claim to any item referred to in this definition,
and any claim against any third party for loss of, damage to or
destruction of any or all of, the Collateral or for proceeds payable
under, or unearned premiums with respect to, policies of insurance) in
whatever form, including, but not limited to, cash, negotiable instruments
and other instruments for the payment of money, chattel paper, security
agreements and other documents.
"Commitment" means, as to each Lender, the amount set forth on Annex
II attached hereto, representing such Lender's obligation, upon and subject to
the terms and conditions of this Agreement (including the applicable provisions
of Section 14.1), to make Revolving Credit Loans and the Term Loan and to
purchase participations in Letters of Credit or, from and after the date hereof,
in the Register (as defined in Section 14.1) representing such Lender's
obligation to make Revolving Credit Loans and to purchase participations in
Letters of Credit and in its corresponding interest in all obligations
outstanding under the Term Loan.
"Commitment Percentage" means, as to each Lender, the percentage of
the Total Commitment obtained by dividing such Lender's Commitment by the Total
Commitment.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (a)
Consolidated Operating Cash Flow less Unfunded Capital Expenditures (other than
Unfunded Capital Expenditures consisting of capitalized Enterprise Resource
Planning expenditures) less cash dividends paid less cash taxes paid to (b)
Consolidated Fixed Charges; provided, that, in calculating the Consolidated
Fixed Charge Coverage Ratio for any fiscal period which includes the period from
February 1, 1998 to and including the Effective Date, the Seller shall be deemed
to have been a Consolidated Subsidiary of the Borrower for the period from
February 1, 1998 to and including the Effective Date for all purposes except for
the calculation of cash dividends.
"Consolidated Fixed Charges" means, on a consolidated basis for the
Borrower and its Consolidated Subsidiaries, the sum of cash Interest Expense
(excluding the
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Agent's annual $75,000 fee described in Section 5.2(b)) and scheduled principal
payments, determined in accordance with GAAP.
"Consolidated Funded Indebtedness" means (a) all Indebtedness under
this Agreement and the Second Lien Senior Secured Facility and (b) all other
Indebtedness for Money Borrowed of the Borrower and its Consolidated
Subsidiaries.
"Consolidated Net Income" means, for any period, net income (income
after tax payments) determined on a consolidated basis for the Borrower and its
Consolidated Subsidiaries in accordance with GAAP; provided, however, that there
shall not be included in such Consolidated Net Income:
(a) any net income of any Person if such person is not a
Subsidiary, except that equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Person
to the Borrower or any of its Consolidated Subsidiaries as a
dividend or other distribution (subject, in the case of a dividend
or other distribution to a Consolidated Subsidiary, to the
limitation contained in clause (c) below);
(b) any net income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition;
(c) any net income of any Subsidiary if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary,
directly or indirectly, to the Borrower to the extent of such
restrictions, except that equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed
by such Subsidiary to the Borrower or any of its Consolidated
Subsidiaries during such period as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another
Subsidiary, to the limitation contained in this clause);
(d) any gain or loss realized upon the sale or other
disposition of any property, plant or equipment (including pursuant
to any sale-leaseback arrangement) which is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any capital stock of
any Person; or
(e) other extraordinary items.
"Consolidated Operating Cash Flow" means, in respect of any period,
the sum of (a) Consolidated Net Income for such period and (b) the amount of all
Interest Expense, depreciation, amortization and income taxes of the Borrower
and its Consolidated Subsidiaries, but only to the extent deducted in the
determination of Consolidated Net Income for such period; provided, that, in
calculating Consolidated
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<PAGE>
Operating Cash Flow (except as such term is used to calculate Excess Cash Flow)
for any fiscal period which includes the period from February 1, 1998 to and
including the Effective Date, the Seller shall be deemed to have been a
Consolidated Subsidiary of the Borrower for the period from February 1, 1998 to
and including the Effective Date.
"Consolidated Subsidiaries" means, as to the Borrower, the
Subsidiaries of the Borrower whose accounts are at the time in question
consolidated with those of the Borrower in accordance with GAAP.
"Consolidated Tangible Net Worth" means the consolidated
shareholders' equity of the Borrower as would be shown on a consolidated balance
sheet of the Borrower less the book value of all assets which would be shown as
intangible assets, all determined in accordance with GAAP.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Contingent Liability Reserve" means a reserve established by the
Agent against the Borrowing Base in an amount equal to the amount deducted from
the cash proceeds of any Asset Disposition pursuant to clauses (d) and (e) in
the definition of "Net Proceeds" for contingent liabilities relating to the
asset disposed.
"Contract Rights" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper.
"Copyrights" means and includes, in each case whether now existing
or hereafter arising, all of the Borrower's right, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations and copyright applications, (b) all renewals
of any of the foregoing, (c) all income, royalties, damages and payments now or
hereafter due and/or payable from third parties under any of the foregoing,
including, without limitation, damages or payments for past or future
infringements of any of the foregoing, (d) the right to sue for past, present
and future infringements of any of the foregoing, and (e) all rights
corresponding to any of the foregoing throughout the world.
"Default" means any of the events specified in Section 13.1 which
with the passage of time or giving of notice or both would constitute an Event
of Default.
"Default Margin" means 3%.
"Disbursement Account" means one or more accounts maintained by and
in the name of the Borrower with a Disbursing Bank for the purposes of
disbursing Revolving Credit Loan proceeds and amounts deposited thereto.
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"Disbursing Bank" means any commercial bank with which a Disburse
ment Account is maintained after the Effective Date.
"Dollar" and "$" means freely transferable United States dollars.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as in effect from time to time.
"Effective Date" means the later of (a) the Agreement Date, and (b)
the first date on which all of the conditions set forth in Article 6 shall have
been fulfilled or waived.
"Effective Interest Rate" means each rate of interest per annum on
the Revolving Credit Loans and the Term Loan in effect from time to time
pursuant to the provisions of Sections 5.1(a) and (b).
"Eligible Assignee" means (a) a commercial bank, commercial finance
company or other asset based lender, having total assets in excess of
$1,000,000,000; (b) any Lender listed on the signature page of this Agreement;
(c) any Affiliate of any Lender; and (d) if an Event of Default exists, any
Person reasonably acceptable to the Agent; provided in each case that the
representation contained in Section 14.2 hereof shall be applicable with respect
to such Person.
"Eligible Inventory" means Inventory of the Borrower which the
Agent, in its reasonable judgment, determines to meet all of the following
requirements:
(a) such Inventory is owned by the Borrower, is stored at a location
listed on Schedule 7.1(u), is subject to the Security Interest, which is
perfected as to such Inventory, and is subject to no other Lien whatsoever
other than a Permitted Lien,
(b) such Inventory is in good condition and meets all standards
imposed by any governmental agency, or department or division thereof,
having regulatory authority over such goods, their use or sale,
(c) such Inventory is currently either usable or salable, at prices
approximating at least cost, in the normal course of the Borrower's
business and is not discontinued, slow moving (as determined by Agent and
Borrower based on the Borrower's general ledger reserve) or stale,
(d) such Inventory is not obsolete or repossessed or used goods
taken in trade, and such Inventory is not returned goods, unless such
returned Inventory is saleable in the ordinary course of Borrower's
business,
(e) such Inventory is located within the United States at one of the
locations set forth in the most recent Schedule of Inventory,
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(f) such Inventory is in the possession and control of the Borrower
and not any third party or if the Inventory is held by a third party
bailee and a negotiable instrument has not been issued with respect to it
(i) a financing statement which names the third party bailee as the
debtor/bailee, names the Borrower as the secured party/bailor, names the
Agent as assignee of the secured party/bailor and contains a description
of such Inventory acceptable to the Agent and otherwise in compliance with
the requirements of Section 9-304(3) of the UCC has been filed in the
appropriate filing office and (ii) such other steps as the Agent may
reasonably require in order to establish and preserve the priority of the
Security Interest against secured creditors of the third party bailee or
the Borrower shall have been taken,
(g) if such Inventory is located in a warehouse or other facility
leased by the Borrower, the lessor has delivered to the Agent, on behalf
of the Lenders, a waiver and consent in form and substance satisfactory to
the Agent, and
(h) such Inventory is not determined by the Agent, on behalf of the
Lenders, in its reasonable judgment, based on customary asset-based
lending practices, to be ineligible for any other reason.
"Eligible Receivable" means a Receivable of the Borrower that
consists of the unpaid portion of the obligation stated on the invoice issued to
an Account Debtor with respect to Inventory sold and shipped to or services
performed for such Account Debtor in the ordinary course of business, net of any
credits or rebates owed by the Borrower to the Account Debtor and net of any
commissions payable by the Borrower to third parties and that the Agent, in its
reasonable judgment, determines to meet all of the following requirements:
(a) such Receivable is owned by the Borrower and represents a
complete bona fide transaction which requires no further act under any
circumstances on the part of the Borrower to make such Receivable payable
by the Account Debtor,
(b) such Receivable shall be no older than 90 days from the date of
invoice and have a due date no later than 60 days from the invoice date,
(c) the goods the sale of which gave rise to such Receivable were
shipped or delivered to the Account Debtor on an absolute sale basis, and
not on a bill and hold basis, a consignment sale basis, a guaranteed sale
basis, a sale or return basis, or on the basis of any other similar
understanding, and no material part of such goods has been returned or
rejected,
(d) such Receivable is not evidenced by chattel paper or an
instrument of any kind, or if such Receivable is evidenced by chattel
paper or an instrument, such chattel paper or instrument has been
collaterally assigned to the Agent, for
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the benefit of the Secured Creditors, pursuant to an assignment in form
and substance satisfactory to the Agent and is in the possession of the
Agent,
(e) the Account Debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened or pending,
which might, in the Agent's sole judgment, have a materially adverse
effect on such Account Debtor's ability to pay the Receivable, unless such
Receivable is covered by the Non-Notification Factoring Agreement and the
Assignment of Factoring Proceeds is in effect,
(f) such Receivable is not owing by an Account Debtor having 50% or
more in face value of its then-existing accounts owing to the Borrower
which do not meet the requirements set forth in clause (b) above,
(g) such Receivable is not owing by an Account Debtor whose
then-existing accounts owing to the Borrower (together with accounts owing
from Affiliates of such Account Debtor) exceed in face amount 15% (in the
case of J.C. Penney, 60%, and in the case of Sears, 25%) of the Borrower's
total Eligible Receivables, provided this restriction shall only exclude
the amount in excess of such concentration limit,
(h) if such Receivable arises from the performance of services, such
services have been fully rendered and do not relate to any warranty claim
or obligation,
(i) such Receivable is not owing by an Account Debtor that is
located outside of the United States of America (for this purpose, the
Commonwealth of Puerto Rico shall be considered located within the United
States of America) or Canada,
(j) such Receivable is a valid, legally enforceable obligation of
the Account Debtor with respect thereto and is not subject to any present
or contingent offset, deduction or counterclaim, dispute or other defense
on the part of such Account Debtor, except if the Person which is the
obligor under any such Receivable has disputed liability or made any claim
of offset, deduction, counterclaim or defense, only the portion of the
Receivable subject thereto shall be deemed ineligible under this clause
(j),
(k) such Receivable is subject to the first priority Security
Interest, which is perfected as to such Receivable, and is subject to no
other Lien whatsoever, other than Permitted Liens,
(l) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Agent,
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(m) the Receivable is not subject to the Assignment of Claims Act of
1940, as amended from time to time, or any Applicable Law now or hereafter
existing similar in effect thereto, or to any other prohibition (under
Applicable Laws, by contract or otherwise) against its assignment or
requiring notice of or consent to such assignment, unless all such
required notices have been given, all such required consents have been
received and all other procedures have been complied with such that such
Receivable shall have been duly and validly assigned to the Agent, for the
benefit of the Secured Creditors,
(n) the goods giving rise to such Receivable were not, at the time
of the sale thereof, subject to any Lien, except the Security Interest and
Permitted Liens,
(o) the Borrower is not in material breach of any express or implied
representation or warranty with respect to the goods the sale of which
gave rise to such Receivable nor in breach of any representation or
warranty, covenant or other agreement contained in the Loan Documents with
respect to such Receivable,
(p) such Receivable does not arise out of any transaction with any
Subsidiary, Affiliate, creditor, tenant, lessor or supplier of the
Borrower,
(q) the Borrower is not the beneficiary of any letter of credit
supporting such Receivable and the Account Debtor's obligations in respect
thereof, unless such letter of credit has been transferred to the Agent
under documents satisfactory to the Agent,
(r) such Receivable does not arise out of finance or similar charges
by the Borrower or other fees for the time value of money,
(s) the Account Debtor with respect to such Receivable is not
located in any state denying creditors access to its courts in the absence
of qualification to transact business in such state or the filing of a
notice of business activities report or other similar filing, unless the
Borrower has either qualified as a foreign corporation authorized to
transact business in such state or has filed a notice of business
activities report or similar filing with the applicable state agency for
the then current year, and
(t) neither the Account Debtor with respect to such Receivable, nor
such Receivable, is determined by the Agent in its reasonable judgment,
based on customary asset-based lending practices, to be ineligible for any
other reason.
"Environmental Indemnity Agreement" means the Environmental
Indemnity Agreement, dated as of the Effective Date, between the Borrower and
the Agent, for the ratable benefit of the Secured Creditors, pursuant to which
the Borrower
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agrees to indemnify the Agent and the Secured Creditors for certain matters
related to Environmental Laws, as amended, modified or supplemented from time to
time.
"Environmental Laws" means all federal, state, local and foreign
laws now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and any and
all regulations, notices or demand letters issued, entered, promulgated or
approved; such laws and regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as amended; the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended; the Toxic Substances Control Act, 15 U.S.C. ss.
2601 et seq., as amended; the Clean Air Act, 46 U.S.C. ss. 7401 et seq., as
amended; and state and federal lien and environmental cleanup programs.
"Environmental Lien" means a Lien in favor of any governmental
entity for (a) any liability under Environmental Laws or (b) damages arising
from, or costs incurred by such governmental entity in response to, a Release or
threatened Release of Contaminant into the environment.
"Equipment" means and includes, all machinery, apparatus, equipment,
motor vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in the Borrower's business operations or owned by the Borrower or in which
the Borrower has an interest, and all parts, accessories and special tools and
all increases and accessions thereto and substitutions and replacements
therefor.
"Eurodollar Rate" means, with respect to any Eurodollar Rate Loan
for the Interest Period applicable thereto, a simple per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
----------------------
1 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Eurodollar Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate, including any such Loans
continued as or converted into a Eurodollar Rate Loan on the same day by the
Lenders for the same Interest Period.
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"Eurodollar Rate Revolving Credit Loan" means a Eurodollar Rate Loan
outstanding under the Revolving Credit Facility.
"Eurodollar Rate Term Loan" means a Eurodollar Rate Loan outstanding
under the Term Loan Facility.
"Eurodollar Reserve Percentage" means that percentage (expressed as
a decimal) which is in effect from time to time under Regulation D of the Board
of Governors of the Federal Reserve System, as such regulation may be amended
from time to time, or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental, emergency,
special, or marginal reserves) applicable with respect to Eurocurrency
liabilities as that term is defined in Regulation D (or against any other
category of liabilities that includes deposits by reference to which the
interest rate of Eurodollar Rate Loans is determined), whether or not any Lender
has any Eurocurrency liabilities subject to such reserve requirement at that
time. Eurodollar Rate Loans shall be deemed to constitute Eurocurrency
liabilities and as such shall be deemed subject to reserve requirements without
benefits of credits for proration, exceptions or offsets that may be available
from time to time to any Lender.
"Event of Default" means any of the events specified in Section
13.1, provided that any requirement for notice or lapse of time or any other
condition has been satisfied.
"Excepted Accounts" means those certain depository and other bank
accounts listed on Schedule 1.1B, so long as (excluding the Borrower's payroll
accounts and Honduran Accounts) no more than $10,000 is on deposit in any such
account at any time. The Honduran Accounts shall be considered Excepted Accounts
so long as no more than $250,000 is on deposit in any such account for more than
5 consecutive Business Days; provided, however, a Honduran Account may, for no
more than 5 consecutive Business Days during the month of June of each year and
5 consecutive Business Days during the month of December of each year have
additional deposits of up to $1,500,000 for payment of extra payroll and other
benefit payments in accordance with the customs and practice of the Borrower's
Honduran Subsidiaries and still be considered an Excepted Account hereunder.
"Excess Cash Flow" means, for any fiscal year, (a) Consolidated
Operating Cash Flow less (b) the sum of the Borrower's and its Consolidated
Subsidiaries' cash Interest Expense, scheduled and mandatory principal payments,
cash taxes, Unfunded Capital Expenditures and WIP Deductions.
"Factor" means Republic Business Credit Corporation, its successors,
or another factor reasonably acceptable to the Agent.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve
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system arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of Atlanta, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by NationsBank from three federal funds brokers of
recognized standing selected by NationsBank.
"Fee Letter" has the meaning set forth in Section 5.2(a).
"Financial Officer" means the chief financial officer, treasurer or
controller of the Borrower.
"Financing Statements" means any and all Uniform Commercial Code
financing statements, in form and substance satisfactory to the Agent, executed
and delivered by the Borrower to the Agent, naming the Agent, for the benefit of
the Secured Creditors, as secured party and the Borrower as debtor, in
connection with this Agreement.
"Foreign Letter of Credit Amount" means the outstanding amount
available to be drawn under Letters of Credit issued in favor of third-party
contractors (or their designees) to support the production of goods for the
Borrower outside of the United States of America, which goods (a) are not owned
by the Borrower at the time of issuance of any such Letters of Credit, and (b)
will become In-Transit Inventory substantially simultaneously with the first
payment or disbursement by the Issuing Bank under such Letters of Credit.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and, when used with
reference to the Borrower or any Subsidiary, consistent with the prior financial
practice of the Borrower, as reflected on the financial statements referred to
in Section 7.1(n); provided, however, that, in the event that changes shall be
mandated by the Financial Accounting Standards Board or any similar accounting
authority of comparable standing, or shall be recommended by the Borrower's
independent public accountants, such changes shall be included in GAAP as
applicable to the Borrower only from and after such date as the Borrower, the
Required Lenders and the Agent shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants set forth in
Article 12. The parties hereto agree to promptly enter into reasonable
amendments in order to reflect such changes in GAAP.
"General Intangibles" means all of the Borrower's now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrower of every kind and
nature (other than Accounts), including, without limitation, all Proprietary
Rights, corporate or other business records, inventions, designs, blueprints,
plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, reversions or any rights
thereto and any other amounts payable to the Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to
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indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which the Borrower is
beneficiary and any letter of credit, guarantee, claims, security interest or
other security held by or granted to the Borrower to secure payment by an
Account Debtor of any of the Accounts.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local or foreign
national or provincial and all agencies thereof.
"Guaranty", "Guaranteed" or to "Guarantee" as applied to any
obligation of another Person shall mean and include
(a) a guaranty (other than by endorsement of negotiable instruments
for collection in the ordinary course of business), directly or
indirectly, in any manner, of any part or all of such obligation of such
other Person, and
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is
to assure the payment or performance (or payment of damages in the event
of nonperformance) of any part or all of such obligation of such other
Person whether by
(i) the purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the
purpose of enabling the obligor with respect to such obligation to
make any payment or performance (or payment of damages in the event
of nonperformance) of or on account of any part or all of such
obligation, or to assure the owner of such obligation against loss,
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such obligation,
(iv) repayment of amounts drawn down by beneficiaries of
letters of credit, or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a
Guaranty of any obligation or indemnifying or holding harmless, in
any way, such Person against any part or all of such obligation.
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"Honduran Account" means active deposit and other bank accounts of
the Borrower or the Borrower's Honduran Subsidiaries located in Honduras,
Central America, whether such accounts are now existing or established in the
future.
"Hosiery Inventory" means Inventory consisting of sheer and opaque
hosiery, tights and trouser socks.
"Indebtedness" of any Person means, without duplication, all (a)
Indebtedness for Money Borrowed, (b) redemption obligations (but excluding
redemption obligations that occur only upon the occurrence of a contingency if
such obligations are expressly subject to repayment in full of the Secured
Obligations) in respect of mandatorily redeemable preferred stock, but only if
the redemption obligations mature within six years of the Effective Date, (c)
liabilities for the deferred purchase price of acquired property (excluding
accounts payable not overdue by more than 60 days that arise in the ordinary
course of business, and excluding accounts payable overdue by more than 60 days
provided such accounts payable are being disputed in good faith by the Borrower,
but including all liabilities created through any conditional sale or title
retention agreement with respect to acquired property), (d) rentals capitalized
in accordance with GAAP under any Capitalized Lease, (e) all liabilities in
respect of unreimbursed draws under letters of credit or similar instruments,
(f) payment obligations with respect to interest rate swaps, currency swaps and
similar obligations which require payments, whether periodically or upon the
happening of a contingency, and (g) all Indebtedness or other obligations of
others with respect to which such Person has become liable through a Guarantee.
"Initial Loans" means the Revolving Credit Loans and the Term Loan
made to the Borrower on the Effective Date pursuant to the Initial Notice of
Borrowing.
"Initial Notice of Borrowing" means the Notice of Borrowing given by
the Borrower with respect to the Initial Loans which shall also specify the
method of disbursement.
"Installment Payment Date" means the first day of each month
commencing on April 1, 1998 to and including March 1, 2003.
"Interbank Offered Rate" means, with respect to any Eurodollar Rate
Loan for the Interest Period applicable thereto, the per annum rate of interest
determined by the Agent (each such determination to be conclusive and binding
absent manifest error) as of two Business Days prior to the first day of such
Interest Period as the effective rate at which deposits in immediately available
funds in Dollars are being offered or quoted to major banks in the London
interbank market for deposits for a term comparable to such Interest Period and
in the amount of such Eurodollar Rate Loan, which rate shall be determined from
the display designated as Page 3750 of Dow Services, Inc. In the event Page 3750
shall be unavailable for any reason, such rate may be determined by the Agent
from any other interest rate reporting service of recognized standing that the
Agent shall select.
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"Intercreditor Agreement" means the Intercreditor Agreement, dated
as of the Effective Date, between the Agent, the Lenders, the Syndication Agent,
the Arranger, the Documentation Agent, the Investor, and NationsBank, N.A. in
its capacity as the collateral agent under the Second Lienholder Loan Agreement.
"Interest Expense" means interest on Indebtedness during the period
for which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind and other non-cash interest.
"Interest Payment Date" means, (a) in the case of each Prime Rate
Loan, the first day of each calendar month commencing on April 1, 1998, and (b)
in the case of each Eurodollar Rate Loan, the last day of the Interest Period
applicable thereto (and, if an Interest Period is greater than three months, at
three month intervals after the first day of such Interest Period).
"Interest Period" with respect to each Eurodollar Rate Loan, the
period commencing on the date of the making or continuation of or conversion to
such Eurodollar Rate Loan and ending 1, 2, 3 or 6 months thereafter, as the
Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion
or Continuation; provided, that:
(a) any Interest Period that would otherwise end on a day that is
not a Business Day shall, subject to the provisions of clause (c) below,
be extended to the next succeeding Business Day unless such Business Day
falls in the next calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last Business Day
of a calendar month;
(c) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date;
(d) no Interest Period applicable to a Eurodollar Rate Term Loan may
end after the next scheduled principal repayment date unless the aggregate
principal amount of Prime Rate Term Loans and Eurodollar Rate Term Loans
having Interest Periods ending prior to such repayment date is at least
equal to the amount of the principal repayment due hereunder on such date;
and
(e) notwithstanding clause (c) above, no Interest Period shall have
a duration of less than one month and if any applicable Interest Period
would be for a shorter period, such Interest Period shall not be available
hereunder.
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"Interest Rate Protection Agreement" shall mean an interest rate
swap, cap or collar agreement or similar arrangement between the Borrower and a
Lender or an Affiliate of a Lender, or another financial institution acceptable
to the Agent, providing for the transfer or mitigation of interest risks either
generally or under specific contingencies.
"Internal Revenue Code" means the Internal Revenue Code of 1986.
"In-Transit Inventory" shall mean Inventory owned by the Borrower,
in the possession, custody or control of the Borrower or its agents, located
outside of, but in transit to, the United States of America and in which the
Borrower has granted to the Agent, for the benefit of the Secured Creditors, a
legal, valid, enforceable, fully perfected, 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 Agent and the Lenders (it being understood that such opinion
may contain customary exceptions or limitations).
"Inventory" means all inventory as such term is defined in the
Uniform Commercial Code and shall include, without limitation, (a) all goods
intended for sale or lease by the Borrower, or for display or demonstration, and
other products intended for sale by the Borrower to its customers, (b) all work
in process, (c) all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in the Borrower's business, and (d) all
documents evidencing and general intangibles relating to any of the foregoing.
"Investment" means, with respect to any Person, (a) the acquisition
or ownership by such Person of any share of capital stock, evidence of
Indebtedness or other security issued by any other Person, (b) any loan, advance
or extension of credit to, or contribution to the capital of, any other Person,
excluding advances to employees in the ordinary course of business for business
expenses and extensions of trade credit in the ordinary course of business, (c)
any Guaranty of the obligations of any other Person, (d) any other investment
(other than the Acquisition of a Business Unit) in any other Person, and (e) any
commitment or option to make any of the investments listed in clauses (a)
through (d) above if, in the case of an option, the consideration therefor
exceeds $100.
"Investor" means Foothill Capital Corporation and its successors and
assigns.
"IRS" means the Internal Revenue Service.
"Issuing Bank" means NationsBank or, if the Borrower shall elect to
use another Lender as the issuer of Letters of Credit under Article 3 and such
other Lender shall accept such role, such other Lender, provided that at all
times all outstanding
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Letters of Credit (other than those collateralized by cash or by another letter
of credit) must have been issued by the same Lender.
"Lender" means at any time any lender party to this Agreement at
such time, including any such Person becoming a party hereto pursuant to the
provisions of Article 14, and its successors and assigns, and "Lenders" means at
any time all of the lenders party to this Agreement at such time, including any
such Persons becoming parties hereto pursuant to the provisions of Article 14,
and their successors and assigns.
"Letter of Credit" means any Letter of Credit issued by the Issuing
Bank for the account of the Borrower pursuant to Article 3.
"Letter of Credit Amount" means, with respect to any Letter of
Credit, the aggregate maximum amount at any time available for drawing under
such Letter of Credit.
"Letter of Credit Facility" means the amount of $15,000,000.
"Letter of Credit Obligations" means, at any time, the sum of (a)
the Reimbursement Obligations of the Borrower at such time, plus (b) the
aggregate Letter of Credit Amount of Letters of Credit outstanding at such time,
plus (c) the aggregate Letter of Credit Amount of Letters of Credit the issuance
of which has been authorized by the Agent and the Issuing Bank pursuant to
Section 3.4(b) but that have not yet been issued, in each case as reasonably
determined by the Agent.
"Letter of Credit Reserve" means, at any time, the aggregate Letter
of Credit Obligations at such time, other than Letter of Credit Obligations that
are fully secured by Cash Collateral.
"Lien" as applied to the property of any Person means (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or similar
encumbrance of any kind in respect of any property of such Person, or upon the
income or profits therefrom, (b) any arrangement, express or implied, under
which any property of such Person is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person, and (c) the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
its equivalent in any jurisdiction, excluding informational financing statements
relating to property leased or intellectual property licensed by the Borrower.
"Loan" means any Revolving Credit Loan or Term Loan, as well as all
such loans collectively, as the context requires.
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"Loan Account" and "Loan Accounts" shall have the meanings ascribed
thereto in Section 5.5.
"Loan Documents" means collectively this Agreement, the Notes, the
Fee Letter, the Security Documents and each other instrument, agreement or
document executed by the Borrower or any Subsidiary of the Borrower in
connection with the making of any Loan under this Agreement, whether on or after
the Effective Date.
"Materially Adverse Effect" means any act, omission, situation,
circumstance, event or undertaking which would, singly or in any combination
with one or more other related acts, omissions, situations, circumstances,
events or undertakings have a materially adverse effect upon (a) the business,
assets, properties, liabilities, condition (financial or otherwise), results of
operations or business prospects of the Borrower and its Subsidiaries, taken as
a whole, (b) the value of the Collateral or the Real Estate taken as a whole,
(c) the Security Interest or the priority of the Security Interest, (d) the
ability of the Borrower or any of its Subsidiaries to perform in any material
respect any material obligations under this Agreement or any other Loan Document
to which it is a party, or (e) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or the
ability of the Agent or any Lender to enforce any material rights or remedies
under or in connection with any Loan Document.
"Minimum Commitment" means $10,000,000.
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable, and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the ordinary
course of business), (c) Indebtedness that constitutes a Capitalized Lease
Obligation, and (d) Indebtedness that is such by virtue of clause (h) of the
definition thereof, but only to the extent that the obligations Guaranteed are
obligations that would constitute Indebtedness for Money Borrowed.
"Moody's" means Moody's Investor Service, Inc. (or its successor).
"Mortgages" means and includes any and all of the mortgages,
leasehold mortgages, deeds of trust, deeds to secure debt, assignments and other
instruments executed and delivered by the Borrower pursuant to which the
Borrower grants to the Agent a Lien on all the Borrower's Real Estate (excluding
leasehold interests, other than the lease of the Borrower's Real Estate located
in Siler City, North Carolina and Qualifying Leases) and a collateral assignment
of the Borrower's interest under the lease of Borrower's Real Estate located in
Siler City, North Carolina and under Qualifying Leases, and all amendments,
modifications and supplements thereto.
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"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or a Related Company is
required to contribute or has contributed within the immediately preceding six
years.
"NationsBank" means NationsBank, N.A., and its successors and
permitted assigns.
"Net Outstandings" of any Lender means, at any time, the sum of (a)
all amounts paid by such Lender (other than pursuant to Section 15.7) to the
Agent in respect of Revolving Credit Loans or otherwise under this Agreement,
minus (b) all amounts paid by the Agent to such Lender which are received by the
Agent and which, pursuant to this Agreement, are paid over to such Lender for
application in reduction of the outstanding principal balance of the Revolving
Credit Loans.
"Net Proceeds" means proceeds received by the Borrower or any of its
Subsidiaries in cash from any Asset Disposition, net of: (a) the transaction
costs of such sale, lease, transfer or other disposition; (b) any tax liability
arising from such transaction; (c) amounts applied to repayment of Indebtedness
(other than the Secured Obligations) secured by a Lien on the asset or property
disposed; (d) reasonable reserves related to any contingent liability relating
to the asset or property disposed which the Borrower or its Subsidiaries will
retain following such Asset Disposition; and (e) amounts held in escrow pending
resolution of contingencies or the like until actually received.
"Net Worth" means, with respect to any Person, such Person's total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings, after deducting treasury stock) which would appear as such on
a balance sheet of such Person prepared in accordance with GAAP.
"Non-Notification Factoring Agreement" means an agreement regarding
the factoring of certain Receivables of the Borrower by and between the Factor
and the Borrower.
"Non-Ratable Loan" means a Revolving Credit Loan made by NationsBank
in accordance with the provisions of Section 5.8(c).
"Note" means any of the Revolving Credit Notes or Term Notes and
"Notes" means more than one such Note.
"Notice of Borrowing" means a written notice, or telephonic notice
followed by a confirming same-day written notice, requesting a Borrowing of
either a Prime Rate Loan or a Eurodollar Rate Loan, which is given by telex or
facsimile transmission in accordance with the applicable provisions of this
Agreement and which specifies (i) the amount of the requested Borrowing, (ii)
the date of the requested Borrowing, and (iii) if the requested Borrowing is of
a Eurodollar Rate Loan, the duration of the applicable Interest Period.
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"Notice of Conversion or Continuation" has the meaning specified in
Section 5.13.
"Operating Lease" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"Patent Assignment" means the Conditional Assignment and Patent
Security Agreement, dated on or about the Effective Date, by the Borrower to the
Agent for the benefit of the Secured Creditors, as the same may be amended,
modified or supplemented from time to time.
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of the Borrower's right, title and interest in and to (a)
any and all patents and patent applications, (b) inventions and improvements
described and claimed therein, (c) reissues, divisions, continuations, renewals,
extensions, continuations-in-part and continued prosecution applications
thereof, (d) income, royalties, damages, claims and payments now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past and future infringements thereof, (e)
rights to sue for past, present and future infringements thereof, and (f) all
rights corresponding to any of the foregoing throughout the world.
"Permitted Guarantees" means (a) Guarantees by the Borrower of
obligations of its Subsidiary Guarantors, (b) Guarantees by the Borrower of
obligations of its other Subsidiaries to the extent such Guarantees constitute a
"Permitted Investment" under clause (e) or (f) of the definition thereof, (c)
Guarantees by the Subsidiary Guarantors of the Borrower's obligations under the
Second Lien Senior Secured Facility, and (d) Guarantees by the Subsidiary
Guarantors of the Borrower's obligations under the Loan Agreement and the other
Loan Documents.
"Permitted Investments" means Investments in:
(a) direct obligations of the United States of America or any agency
or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in each case maturing no later than one year
from the date of acquisition;
(b) certificates of deposit maturing no later than one year from the
date of acquisition issued by U.S. commercial banks having a combined
capital and surplus of over $200,000,000 and having a long-term debt
rating of A- by S&P, or A3 or better by Moody's;
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(c) commercial paper of a domestic issuer rated A-1 by S&P and P-1
by Moody's and maturing not more than 270 days after the date of
acquisition;
(d) Investments in or to existing Subsidiary Guarantors;
(e) Investments in the ordinary course of business in the working
capital of Borrower's Honduran Subsidiaries, in an aggregate outstanding
amount not to exceed $4,000,000 at any time;
(f) Investments in other Subsidiaries in an aggregate outstanding
amount not to exceed $500,000 at any time;
(g) Investments made in the ordinary course of business;
(h) other Investments (in addition to clauses (a) through (g) above)
not exceeding at any time the greater of (i) $100,000, or (ii) the amount
that is available for Restricted Payments; and
(i) Investments received in connection with the settlement of
accounts receivable that arose in the ordinary course of business.
"Permitted Liens" means (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but in all cases only if payment shall not at
the time be required to be made in accordance with Section 10.6, (b) Liens
resulting from a judgment or award which is being contested in good faith by
appropriate proceedings and for which reserves in respect of the reasonably
anticipated liability therefor have been appropriately established, but only if
the enforcement of any such Lien has been stayed within 30 days by appropriate
proceedings, (c) Liens arising in the ordinary course of business that do not
secure the repayment of Indebtedness for Money Borrowed (i) to secure the
performance of bids, trade contracts, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature, (ii) in favor
of customs and revenue authorities arising as a matter of law to secure payment
of customs duties in connection with the importation of goods, (iii) consisting
of restrictions (other than pledges or other security interests) on the
transferability of Investments in favor of co-investors or the issuers of such
Investments or imposed by law, and (iv) on Trademarks, Patents, Copyrights and
other intellectual property (whether individually or as part of a group)
consisting of the license or similar disposition of such property made in the
ordinary course of business, (d) Liens constituting Permitted Encumbrances, as
defined in the Mortgages, and other Liens on the Borrower's Real Estate in the
nature of zoning restrictions, easements, and rights or restrictions of record
on the use of real property, which do not materially detract from the value of
such property or impair the use thereof in the business of the Borrower, (e)
Purchase Money Liens securing Permitted Purchase Money Indebtedness, (f) Liens
shown on Schedule 1.1A - Permitted
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Liens (and replacements, extensions and renewals of any such Lien upon or in the
same property theretofore subject thereto or the replacement, extension or
renewal (without increase in the amount or change in any direct or contingent
obligor) of the Indebtedness secured thereby), (g) Liens securing Indebtedness
owed by a Subsidiary to the Borrower or to a Subsidiary Guarantor, (h) Liens
securing the Second Lien Senior Secured Facility, provided such Liens are
subordinated to the Lien of the Agent, for the benefit of the Secured Creditors,
in accordance with the terms of the Intercreditor Agreement, (i) Liens on
Receivables arising under the Non-Notification Factoring Agreement, so long as
the Assignment of Factoring Proceeds is in full force and effect, and (j) Liens
of the Agent, for the benefit of the Secured Creditors, arising under this
Agreement and the other Loan Documents.
"Permitted Purchase Money Indebtedness" means Indebtedness of the
Borrower and its Subsidiaries (a) which is secured by a Purchase Money Lien, and
(b) which, when aggregated with the principal amount of all other such
Indebtedness and Capitalized Lease Obligations of the Borrower at the time
outstanding, does not exceed $10,000,000. For the purposes of this definition,
the principal amount of any Indebtedness consisting of Capitalized Leases shall
be computed as a Capitalized Lease Obligation.
"Person" means an individual, limited liability company,
corporation, partnership, association, trust or unincorporated organization, or
a government or any agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which the Borrower or any Related Company is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA, but only with respect to the time during such six-year period which the
Borrower or any Related Company was an "employer" with respect to a given
employee benefit plan.
"Pledged Stock" means all stock of the Borrower's Subsidiaries
assigned and pledged to the Agent, for the benefit of the Secured Creditors,
pursuant to the Stock Pledge Agreement and Section 9.16.
"Prime Rate" means on any day the interest rate per annum equal to
the rate of interest publicly announced by the Agent at its head office in
Atlanta, Georgia as its "prime" rate, as in effect on the last Business Day of
the calendar month immediately preceding the month in which such day falls. The
Agent lends at rates above and below the Prime Rate.
"Prime Rate Loan" means any Prime Rate Revolving Credit Loan or
Prime Rate Term Loan, and "Prime Rate Loans" means more than one such Loan.
"Prime Rate Revolving Credit Loan" means each Borrowing of Prime
Rate Loans under the Revolving Credit Facility on the same day, a specified
principal amount
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of Prime Rate Loans outstanding under the Revolving Credit Facility, and any
Non-Ratable Loan.
"Prime Rate Term Loan" means a Prime Rate Loan outstanding under the
Term Loan Facility.
"Pro Forma" means the pro forma balance sheet of the Borrower and
its Subsidiaries as at January 31, 1998, after giving effect to the transactions
contemplated by this Agreement, the Acquisition Agreement and the Acquisition
Documents.
"Projections" means the forecasted (a) balance sheets, (b) income
statements, (c) cash flow statements, and (d) Borrowing Base availability
calculations, of the Borrower and its Subsidiaries for the Borrower's 1999
through 2002 fiscal years, together with appropriate supporting details and a
statement of underlying assumptions.
"Proportionate Share" or "Ratable", as applied to a Lender, means
such Lender's share of an amount in Dollars or other property at the time of
determination equal to (i) the Commitment Percentage of such Lender, or (ii) if
the Commitments are terminated, the percentage of the total principal amount of
Loans (plus Letter of Credit Obligations) outstanding at such time obtained by
dividing the principal amount of the Loans (plus Letter of Credit Obligations)
then owing to such Lender by the total principal amount of all Loans (plus
Letter of Credit Obligations) then owing to all Lenders.
"Proprietary Rights" means all of the Borrower's now owned and
hereafter arising or acquired: Patents, Copyrights, Trademarks, including,
without limitation, those Proprietary Rights set forth on Schedule 7.1(bb)
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of any
of the foregoing, and all rights to sue for past, present and future
infringement of any of the foregoing.
"Purchase Money Lien" means any Lien incurred to secure the payment
of the purchase price or costs of construction incurred with the acquisition of,
or improvement to, fixed assets, including any Lien existing on such fixed
assets at the time of acquisition thereof or at the time of acquisition by the
Borrower or any of its Subsidiaries of any business entity then owning such
fixed assets (so long as they were not incurred or extended in contemplation of
such acquisition), provided that (a) such Lien shall attach solely to the fixed
assets acquired or purchased, (b) such Lien shall have been created or incurred
within 180 days of the date of acquisition of such fixed assets (with the
exception that in the case of construction or acquisition of improvements to
real estate, the land on which such improvements are located shall not be
required to have been acquired within such 180 day period), and (c) the
Indebtedness secured by such Lien does not exceed 100% of the purchase price of
assets so acquired.
"Qualifying Lease" means a lease of real estate entered into by the
Borrower or by a Subsidiary of the Borrower as lessee after the Effective Date,
provided such lease meets each of the following requirements: (a) either (i)
such lease has an
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initial term equal to or greater than five years from the date such lease is
executed, or (ii) such lease has a term (including both the initial term and any
renewal terms that are exercisable by the Borrower or the Borrower's Subsidiary
and are binding on the lessor if exercised) equal to or greater than ten years
from the date such lease is executed; (b) the aggregate dollar amount of lease
payments (including the aggregate amount of all required lessee payments of
taxes, insurance and maintenance charges, whether paid directly by the lessee or
reimbursed to the lessor) for any one year period of the lease term is at least
$50,000; and (c) the gross area leased pursuant to such lease exceeds 10,000
square feet.
"Real Estate" means all of the Borrower's now or hereafter owned or
leased estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of the Borrower's now or
hereafter owned or leased interests in the improvements and emblements thereon,
the fixtures attached thereto and the easements appurtenant thereto, including,
without limitation the real property described on Schedule 7.1(w).
"Receivables" means and includes (a) any and all rights to the
payment of money or other forms of consideration of any kind (whether classified
under the Uniform Commercial Code as accounts, contract rights, chattel paper,
general intangibles, or otherwise) including, but not limited to, accounts
receivable, letters of credit and the right to receive payment thereunder,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any Person, (b) all guarantees, security and
Liens for payment thereof, (c) all goods, whether now owned or hereafter
acquired, and whether sold, delivered, undelivered, in transit or returned,
which may be represented by, or the sale or lease of which may have given rise
to, any such right to payment or other debt, obligation or liability, and (d)
all proceeds of any of the foregoing.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System (or any successor).
"Reimbursement Agreement" means, with respect to a Letter of Credit,
such form of application therefor and form of reimbursement agreement therefor
(whether in a single document or several documents) as the Issuing Bank may
employ in the ordinary course of business for its own account, with such
modifications thereto as may be agreed upon by the Issuing Bank and the
Borrower, provided that such application and agreement and any modifications
thereto are not inconsistent with the terms of this Agreement.
"Reimbursement Obligations" means the reimbursement or repayment
obligations of the Borrower to the Issuing Bank pursuant to Section 3.6 or
pursuant to a Reimbursement Agreement, with respect to amounts that have been
drawn under Letters of Credit.
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"Related Company" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Borrower; (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Borrower; or (iii)
member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Borrower, any corporation described
in clause (i) above or any partnership, trade or business described in clause
(ii) above.
"Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water or
groundwater.
"Remedial Action" means actions required pursuant to Environmental
Laws to (i) clean up, remove, treat or in any other way address Contaminants in
the indoor or outdoor environment; (ii) prevent the Release or threat of Release
or minimize the further Release of Contaminants so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (iii) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for 30
days notice to the PBGC is waived under applicable regulations.
"Required Lenders" means, at any time, any combination of Lenders
the sum of whose Commitment Percentages at such time aggregate in excess of 50%;
provided, however, that if any Lender shall have failed to fund its
Proportionate Share of any Loan in accordance with the terms of this Agreement,
then, for so long as such failure continues, the term "Required Lenders" shall
mean Lenders (excluding such Lender whose failure to fund its Proportionate
Share of any Loan has not been cured) whose Commitment Percentages (computed
after excluding the defaulting Lender's Commitments from the Total Commitment)
at such time aggregate in excess of 50%; provided further, however, that if the
Commitments have been terminated, the term "Required Lenders" shall mean Lenders
(excluding each Lender whose failure to fund its Proportionate Share of any Loan
has not been cured) holding Loans (plus Letter of Credit Obligations)
representing in excess of 50% of the aggregate principal amount of Loans and
Letter of Credit Obligations (excluding the Loans and Letter of Credit
Obligations owing to the defaulting Lender) outstanding at such time.
"Restricted Dividend Payment" means any dividend, distribution or
payment on or with respect to (a) any shares of a Person's capital stock (other
than dividends payable solely in shares of its capital stock) or (b) any
partnership interest in a Person, excluding, however, any such dividend,
distribution or payment to the Borrower by any Subsidiary of the Borrower.
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"Restricted Payment" means (a) any redemption, retirement or payment
with respect to the Seller Subordinated Indebtedness other than in accordance
with the subordination provisions set forth in the Seller Subordinated Note, (b)
any prepayment of principal, interest or any other amount due under the Second
Lien Senior Secured Facility, (c) the payment by any Person of the principal
amount of or interest on any Indebtedness (other than trade debt) owing to any
Affiliate of the Borrower, and (d) the payment of any management, consulting or
similar fee by any Person to any Affiliate of such Person, other than payments
of amounts due under employment contracts in the ordinary course of business.
"Restricted Purchase" means any payment on account of the purchase,
redemption or other acquisition or retirement by a Person of any (a) shares of
such Person's capital stock (except shares acquired on the conversion thereof
into other shares of capital stock of such Person), (b) a partnership interest
in such Person, if such Person is a partnership, or (c) a membership interest in
such Person, if such Person is a limited liability company.
"Revolving Credit Facility" means (a) during the months of January
through May and October through December, the principal amount of $65,000,000
and (b) during the months of June through September, the principal amount of
$70,000,000, or such lesser or greater amounts as shall be agreed upon from time
to time in writing by the Agent, the Lenders and the Borrower.
"Revolving Credit Loans" means loans made to the Borrower pursuant
to Section 2.1.
"Revolving Credit Note" means each Revolving Credit Note made by the
Borrower payable to the order of a Lender evidencing the obligation of the
Borrower to pay the aggregate unpaid principal amount of the Revolving Credit
Loans made to it by such Lender (and any promissory note or notes that may be
issued from time to time in substitution, renewal, extension, replacement or
exchange therefor whether payable to such Lender or to a different Lender in
connection with a Person becoming a Lender after the Effective Date or
otherwise) substantially in the form of Exhibit A-1 hereto, with all blanks
properly completed, either as originally executed or as the same may from time
to time be supplemented, modified, amended, renewed, extended or refinanced.
"S&P" means Standard & Poor's Ratings Group, a Division of McGraw
Hill, Inc. (or its successors).
"Schedule of Equipment" means a schedule delivered by the Borrower
to the Agent pursuant to the provisions of Section 9.12(d).
"Schedule of Inventory" means a schedule delivered by the Borrower
to the Agent pursuant to the provisions of Section 9.12(b).
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"Schedule of Receivables" means a schedule delivered by the Borrower
to the Agent pursuant to the provisions of Section 9.12(a).
"Second Lien Senior Secured Facility" means the $15,000,000 of
second lien senior secured Indebtedness made available to the Borrower on the
Effective Date pursuant to the terms of the Second Lienholder Loan Agreement.
"Second Lienholder Loan Agreement" means the Loan and Security
Agreement dated of even date herewith between the Borrower, the Investor, and
NationsBank, N.A., as collateral agent.
"Secured Creditors" means, collectively, the Agent, the Syndication
Agent, the Arranger, the Documentation Agent, the Lenders, the Issuing Bank, and
each of their respective Affiliates.
"Secured Obligations" means, in each case whether now in existence
or hereafter arising, (a) the principal of, and interest and premium, if any,
on, the Loans, (b) the Reimbursement Obligations and all other obligations of
the Borrower to the Agent, the Issuing Bank or any Lender arising in connection
with the issuance of Letters of Credit, and (c) all indebtedness, liabilities,
obligations, covenants and duties of the Borrower to the Secured Creditors of
every kind, nature and description arising under or in respect of this
Agreement, the Notes or any of the other Loan Documents, or the Banking
Relationship, whether direct or indirect, absolute or contingent, due or not
due, contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money, including
without limitation, fees required to be paid pursuant to Article 5 and expenses
required to be paid or reimbursed pursuant to Section 16.2. As used herein,
"Banking Relationship" means obligations of the Borrower relating to or arising
out of (i) checking and operating account relationships among the Borrower and
any Lender (or any Affiliate of a Lender) in the ordinary course of business and
(ii) Interest Rate Protection Agreements.
"Security Documents" means each of the following:
(a) the Mortgages,
(b) the Financing Statements,
(c) the Acquisition Documents Assignment,
(d) the Trademark Assignment and the Patent Assignment, and
(e) each other writing executed and delivered by the Borrower or any
other Person securing the Secured Obligations.
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"Security Interest" means the Liens of the Agent, for the benefit of
the Secured Creditors, on and in the Collateral effected hereby or by any of the
Security Documents or pursuant to the terms hereof or thereof.
"Seller" means Glendale Hosiery Company, a North Carolina
corporation.
"Seller Subordinated Indebtedness" means the Indebtedness of the
Borrower evidenced by the Seller Subordinated Note, including principal thereof
and interest and premium, if any, thereon, together with any and all
Indebtedness related thereto.
"Seller Subordinated Note" means the Subordinated Promissory Note
dated the Effective Date, in an original principal amount not to exceed the
amount required under the Acquisition Agreement, executed by the Borrower in
favor of the Seller, as the same may be amended, modified, extended, renewed or
replaced from time to time with the consent of the Required Lenders.
"Settlement Date" means each Business Day after the Effective Date
selected by the Agent in its sole discretion subject to and in accordance with
the provisions of Section 5.8(c)(i) as of which a Settlement Report is delivered
by the Agent and on which settlement is to be made among the Lenders in
accordance with the provisions of Section 5.8.
"Settlement Report" means each report, substantially in the form
attached hereto as Exhibit E, prepared by the Agent and delivered to each Lender
and setting forth, among other things, as of the Settlement Date indicated
thereon and as of the next preceding Settlement Date, the aggregate principal
balance of all Revolving Credit Loans outstanding, each Lender's Commitment
Percentage thereof, each Lender's Net Outstandings and all Non-Ratable Loans
made, and all payments of principal, interest and fees received by the Agent
from the Borrower during the period beginning on such next preceding Settlement
Date and ending on such Settlement Date.
"Stock Pledge Agreement" means the Stock Pledge Agreement, dated as
of the Effective Date, executed by the Borrower pursuant to which the Borrower
assigns and pledges 65% of the capital stock of each of its foreign
Subsidiaries.
"Subsidiary"
(a) when used to determine the relationship of a Person to another
Person, means a Person of which an aggregate of 50% or more of the stock
of any class or classes or 50% or more of other ownership interests is
owned of record or beneficially by such other Person, or by one or more
Subsidiaries of such other Person, or by such other Person and one or more
Subsidiaries of such Person,
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(i) if the holders of such stock, or other ownership
interests, (A) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or
other individuals performing similar functions) of such Person, even
though the right so to vote has been suspended by the happening of
such a contingency, or (B) are entitled, as such holders, to vote
for the election of a majority of the directors (or individuals
performing similar functions) of such Person, whether or not the
right so to vote exists by reason of the happening of a contingency,
or
(ii) in the case of such other ownership interests, if such
ownership interests constitute a majority voting interest, and
(b) when used with respect to a Plan, ERISA or a provision of the
Internal Revenue Code pertaining to employee benefit plans, also means any
corporation, trade or business (whether or not incorporated) which is
under common control with the Borrower and is treated as a single employer
with the Borrower under Section 414(b) or (c) of the Internal Revenue Code
and the regulations thereunder.
(c) a Subsidiary will not cease to be considered wholly-owned by
reason of the issuance of capital stock as directors' qualifying shares.
"Subsidiary Guarantor" means each U.S. Subsidiary of the Borrower
which Guarantees the Secured Obligations, and grants the Agent, for the benefit
of the Secured Creditors, a first priority security interest in all of its
assets, in accordance with Section 9.16.
"Supermajority Lenders" means, at any time, any combination of
Lenders the sum of whose Commitment Percentages at such time aggregate in excess
of 66.6%; provided, however, that if any Lender shall have failed to fund its
Proportionate Share of any Loan in accordance with the terms of this Agreement,
then, for so long as such failure continues, the term "Supermajority Lenders"
shall mean Lenders (excluding such Lender whose failure to fund its
Proportionate Share of any Loan has not been cured) whose Commitment Percentages
(computed after excluding the defaulting Lender's Commitments from the Total
Commitment) at such time aggregate in excess of 66.6%; provided further,
however, that if the Commitments have been terminated, the term "Supermajority
Lenders" shall mean Lenders (excluding each Lender whose failure to fund its
Proportionate Share of any Loan has not been cured) holding Loans (plus Letter
of Credit Obligations) representing in excess of 66.6% of the aggregate
principal amount of Loans and Letter of Credit Obligations (excluding the Loans
and Letter of Credit Obligations owing to the defaulting Lender) outstanding at
such time.
"Term Loan" means each loan made to the Borrower pursuant to Section
4.1, as well as all such loans collectively, as the context requires.
"Term Loan Facility" means the principal amount of $25,000,000.
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"Term Note " means each Term Note made by the Borrower payable to
the order of a Lender evidencing the obligation of the Borrower to pay the
aggregate unpaid principal amount of the Term Loan made to it by such Lender
(and any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor whether
payable to such Lender or to a different Lender in connection with a Person
becoming a Lender after the Effective Date or otherwise) substantially in the
form of Exhibit A-2 hereto, with all blanks properly completed, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"Termination Date" means March 24, 2003, such earlier date as the
Secured Obligations shall have been accelerated pursuant to the provisions of
Section 13.2, such earlier date as all Secured Obligations shall have been
irrevocably paid in full and the Revolving Credit Facility shall have been
terminated, or such later date as to which the same may be extended pursuant to
the provisions of Section 2.5.
"Termination Event" means (a) a Reportable Event, or (b) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan amendment
as a termination under Section 4041 of ERISA, or (c) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the
appointment of a trustee to administer any Plan.
"Total Commitment" means the sum of the Commitments.
"Trademark Assignment" means the Conditional Assignment and
Trademark Security Agreement, dated on or about the Effective Date, executed and
delivered by the Borrower, as the same may be amended, modified or supplemented
from time to time.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of the Borrower's right, title and interest in and to (a)
trademarks (including service marks), trade names and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the trademarks, (b) licenses of the foregoing, whether as
licensee or licensor, (c) applications therefor and renewals and continued
prosecution applications thereof, (d) income, royalties, damages and payments
now or hereafter due and/or payable with respect thereto, including, without
limitation, damages, claims and payments for past and future infringements
thereof, (e) rights to sue for past, present and future infringements thereof,
including the right to settle suits involving claims and demands for royalties
owing, and (f) all rights corresponding to any of the foregoing throughout the
world.
"Type" when used in respect of any Loan or Borrowing, shall refer to
the rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined.
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"Unfunded Capital Expenditures" means all Capital Expenditures,
other than those which are paid for with the proceeds of Indebtedness for Money
Borrowed with a maturity of more than one year (other than the Revolving Credit
Loans) incurred to finance such Capital Expenditures and other than those
represented by Capitalized Lease Obligations with a maturity of more than one
year.
"Unfunded Vested Accrued Benefits" means with respect to any Plan at
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of Georgia.
"WIP Advance Rate" means, (a) in the case of work-in-process
Eligible Inventory consisting of Hosiery Inventory, 55%, and (b) in the case of
all other work-in-process Eligible Inventory, the applicable advance rate set
forth below:
Period Advance Rate
------ ------------
To and including first anniversary of the 55%
Agreement Date
From first anniversary of the Agreement 50%
Date to and including second anniversary
of the Agreement Date
From second anniversary of the Agreement 45%
Date to and including third anniversary
of the Agreement Date
From third anniversary of the Agreement 40%
Date to and including fourth anniversary
of the Agreement Date
From fourth anniversary of the Agreement 35%
Date to and including fifth anniversary
of the Agreement Date
"WIP Deductions" means, for any fiscal year (commencing with the
fiscal year ending in January 2000), 5% of the average amount of work-in-process
Eligible Inventory (other than work-in-process Eligible Inventory consisting of
Hosiery Inventory) during such fiscal year (determined from the month-end
Borrowing Base Certificates for such fiscal year).
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SECTION 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meaning ascribed thereto by GAAP.
Except as otherwise defined in Section 1.1, the terms accounts, chattel paper,
contract rights, documents, equipment, instruments, general intangibles and
inventory, as and when used in this Agreement or the Security Documents, shall
have the meanings given those terms in the Uniform Commercial Code. Unless
otherwise specified, a reference in this Agreement to a particular section or
subsection is a reference to that section or subsection of this Agreement, and
the words "hereof," "herein," "hereunder" and words of similar import, when used
in this Agreement, refer to this Agreement as a whole and not to any particular
provision, section or subsection of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the neuter. Words
denoting individuals include corporations and vice versa. References to any
legislation or statute or code, or to any provisions of any legislation or
statute or code, shall include any modification or reenactment of, or any
legislative, statutory or code provision substituted for, such legislation,
statute or code or provision thereof. References to any document or agreement
(including this Agreement) shall include references to such document or
agreement as amended, novated, supplemented, modified or replaced from time to
time, so long as and to the extent that such amendment, novation, supplement,
modification or replacement is either not prohibited by the terms of this
Agreement or is consented to by the Required Lenders and the Agent. References
to any Person include its successor or permitted substitutes and assigns.
ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. Upon the terms and subject to
the conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Lender agrees, severally, but not jointly, to make
Revolving Credit Loans to the Borrower from time to time from the Effective Date
to but not including the Termination Date, as requested or deemed requested by
the Borrower in accordance with the terms of Section 2.2, in amounts equal to
such Lender's Commitment Percentage of each such Loan requested or deemed
requested hereunder up to an aggregate amount at any one time outstanding equal
to such Lender's Commitment Percentage of the Borrowing Base; provided, however,
that the aggregate principal amount of all outstanding Revolving Credit Loans
(after giving effect to the Loans requested) shall not exceed the Borrowing
Base. It is expressly understood and agreed that the Lenders may and at present
intend to use the Borrowing Base as a maximum ceiling on Revolving Credit Loans
to the Borrower; provided, however, that it is agreed that should the Revolving
Credit Loans exceed the ceiling so determined or any other limitation set forth
in this Agreement, such Revolving Credit Loans shall nevertheless constitute
Secured Obligations and, as such, shall be entitled to all benefits thereof and
security therefor. The principal amount of any Revolving Credit Loan which is
repaid
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pursuant to Section 2.3(c) may be reborrowed by the Borrower, subject to the
terms and conditions of this Agreement, in accordance with the terms of this
Section 2.1. The Agent's and each Lender's books and records reflecting the date
and the amount of each Revolving Credit Loan and each repayment of principal
thereof shall constitute prima facie evidence of the accuracy of the information
contained therein, subject to the provisions of Section 5.8.
SECTION 2.2. Manner of Borrowing Revolving Credit Loans. Borrowings
under the Revolving Credit Facility shall be made as follows:
(a) Requests for Borrowing.
(i) Prime Rate Revolving Credit Loans. A request for the
Borrowing of a Prime Rate Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner:
(A) with respect to Revolving Credit Loans, the Borrower
shall give the Agent a Notice of Borrowing before 12:00 noon
(Atlanta time) on the proposed Borrowing date, all of which
notices shall be irrevocable,
(B) unless payment is otherwise made by the Borrower,
whenever a check or other item is presented to a Disbursing
Bank for payment against a Disbursement Account in an amount
greater than the then available balance in such account, such
Disbursing Bank shall, and is hereby irrevocably authorized by
the Borrower to, give the Agent notice thereof, which notice
shall be deemed to be an irrevocable request for a Prime Rate
Revolving Credit Loan on the date of such notice in an amount
equal to the excess of such check or other item over such
available balance,
(C) unless payment is otherwise made by the Borrower,
the becoming due of any amount required to be paid under this
Agreement or any of the Notes as interest shall be deemed to
be an irrevocable request for a Prime Rate Revolving Credit
Loan on the due date in the amount required to pay such
interest,
(D) unless payment is otherwise made by the Borrower,
the becoming due of any other Secured Obligation shall be
deemed to be an irrevocable request for a Prime Rate Revolving
Credit Loan on the due date in the amount then so due, and
such request shall be irrevocable, and
(E) the receipt by the Agent of notification from the
Issuing Bank to the effect that a drawing has been made under
a Letter of Credit and that the Borrower has failed to
reimburse the
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Issuing Bank therefor in accordance with the terms of the
Letter of Credit, the Reimbursement Agreement and Article 3,
shall be deemed to be an irrevocable request for a Prime Rate
Revolving Credit Loan on the date such notification is
received in the amount of such drawing which is so
unreimbursed.
(ii) Eurodollar Rate Revolving Credit Loans. The Borrower may
request a Eurodollar Rate Loan under the Revolving Credit Facility
by giving the Agent a Notice of Borrowing (which notice shall be
irrevocable) not later than 12:00 noon (Atlanta time) on the date
two Business Days before the day on which the requested Eurodollar
Rate Revolving Credit Loan is to be made; provided the Borrower
shall not be permitted to request, and the Lenders shall not be
required to make, Eurodollar Rate Revolving Credit Loans at any time
during the existence of an Event of Default.
(iii) Notification of Lenders. In the case of each Eurodollar
Rate Revolving Credit Loan and, unless the Agent has elected
periodic settlements pursuant to Section 5.8, in the case of each
Prime Rate Revolving Credit Loan, the Agent shall promptly notify
the Lenders of any Notice of Borrowing given or deemed given
pursuant to this Section 2.2(a) by 12:00 noon (Atlanta time) on the
proposed Borrowing date (in the case of Prime Rate Revolving Credit
Loans) or by 3:00 p.m. (Atlanta time) three Business Days before the
proposed Borrowing date (in the case of Eurodollar Rate Revolving
Credit Loans). Not later than 1:30 p.m. on the proposed Borrowing
date, each Lender will make available to the Agent, for the account
of the Borrower, at the Agent's Office in funds immediately
available to the Agent, an amount equal to such Lender's Commitment
Percentage of such Prime Rate Revolving Credit Loan or Eurodollar
Rate Revolving Credit Loan, as the case may be.
(b) Disbursement of Loans. The Borrower hereby irrevocably
authorizes the Agent to disburse the proceeds of each Borrowing requested,
or deemed to be requested, pursuant to this Section 2.2 as follows:
(i) the proceeds of each Borrowing requested under Section
2.2(a)(i)(A) (other than the Borrowing of the Initial Loans),
2.2(a)(i)(B) or 2.2(a)(ii) shall be disbursed by the Agent in
Dollars in immediately available funds by wire transfer to a
Disbursement Account or, in the absence of a Disbursement Account,
by wire transfer to such other account as may be agreed upon by the
Borrower and the Agent from time to time, and the proceeds of the
Initial Loans under Section 2.2(a)(i)(A) shall be disbursed in
accordance with the Initial Notice of Borrowing;
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(ii) the proceeds of each Borrowing deemed requested under
Section 2.2(a)(i)(C) or (D) shall be disbursed by the Agent by way
of direct payment of the relevant interest or Secured Obligation;
and
(iii) the proceeds of each Borrowing deemed requested under
Section 2.2(a)(i)(E) shall be disbursed by the Agent directly to the
Issuing Bank on behalf of the Borrower.
SECTION 2.3. Repayment of Revolving Credit Loans. The Revolving
Credit Loans will be repaid as follows:
(a) Whether or not any Default or Event of Default has occurred, the
outstanding principal amount of all the Revolving Credit Loans is due and
payable, and shall be repaid by the Borrower in full, not later than the
Termination Date;
(b) If at any time the aggregate outstanding unpaid principal amount
of the Revolving Credit Loans exceeds the Borrowing Base in effect at such
time, the Borrower shall repay the Revolving Credit Loans in an amount
sufficient to reduce the aggregate unpaid principal amount of such
Revolving Credit Loans by an amount equal to such excess, together with
accrued and unpaid interest on the amount so repaid to the date of
repayment;
(c) The Borrower hereby instructs the Agent to repay the Revolving
Credit Loans outstanding on any day in an amount equal to the amount, if
any, received by the Agent on such day pursuant to Section 5.9 (to the
extent amounts payable thereunder are to be applied to the Revolving
Credit Loans) and Section 9.1(b); provided that payments received in
excess of outstanding Revolving Credit Loans or payments received on
account of Eurodollar Rate Loans which would otherwise result in
prepayment of such Loans prior to the end of the Interest Period
applicable thereto shall be applied to the Cash Collateral Account; and
(d) Each Eurodollar Rate Loan is due and payable on the last day of
the Interest Period applicable thereto, except to the extent converted or
continued in accordance with Sections 5.13 and 5.14.
Repayments pursuant to Section 2.3(b) or (c) shall be applied first to the Prime
Rate Revolving Credit Loans and then, subject to the provisions of Section
2.3(c), to Eurodollar Rate Revolving Credit Loans.
SECTION 2.4. Revolving Credit Note. Each Lender's Revolving Credit
Loans and the obligation of the Borrower to repay such Revolving Credit Loans
shall also be evidenced by a Revolving Credit Note payable to the order of such
Lender. Each Revolving Credit Note shall be dated the Effective Date (or the
later "effective date"
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under any Assignment and Acceptance) and be duly and validly executed and
delivered by the Borrower.
SECTION 2.5. Extension of Revolving Credit Facility. Upon the
request of the Borrower, the Lenders may, in their sole discretion, effective as
of any anniversary of the Effective Date, agree to extend the Revolving Credit
Facility for a period of time beyond the then effective Termination Date. Each
such extension shall be effected by the Borrower's and Lenders' execution and
delivery of a written agreement evidencing such extension.
ARTICLE 3
LETTER OF CREDIT FACILITY
SECTION 3.1. Agreement to Issue. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, the Issuing Bank agrees to issue for the account of the
Borrower one or more Letters of Credit in accordance with this Article 3, from
time to time during the period commencing on the Effective Date and ending on
the Termination Date.
SECTION 3.2. Amounts. The Issuing Bank shall not have any obligation
to issue any Letter of Credit at any time:
(a) if, after giving effect to the issuance of the requested Letter
of Credit, (i) the aggregate Letter of Credit Obligations of the Borrower
would exceed the Letter of Credit Facility then in effect or (ii) the
aggregate principal amount of the Revolving Credit Loans outstanding would
exceed the Borrowing Base (after reduction for the Letter of Credit
Reserve in respect of such Letter of Credit); or
(b) which has a term longer than one calendar year or an expiration
date after the last Business Day prior to the Termination Date.
SECTION 3.3. Conditions. The obligation of the Issuing Bank to issue
any Letter of Credit is subject to the satisfaction of (i) the conditions
precedent contained in Section 6.2 and (ii) the following additional conditions
precedent in a manner satisfactory to the Agent and the Issuing Bank:
(a) the Borrower shall have delivered to the Issuing Bank and the
Agent at such times and in such manner as the Issuing Bank or the Agent
may prescribe an application in form and substance satisfactory to the
Issuing Bank and the Agent for the issuance of the Letter of Credit, a
Reimbursement Agreement and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed
Letter of Credit shall be satisfactory to the Issuing Bank and the Agent;
and
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(b) as of the date of issuance, no order of any court, arbitrator or
governmental authority having jurisdiction or authority over the Issuing
Bank shall purport by its terms to enjoin or restrain banks generally from
issuing letters of credit of the type and in the amount of the proposed
Letter of Credit, and no law, rule or regulation applicable to banks
generally and no request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over banks
generally shall prohibit, or request that the Issuing Bank refrain from,
the issuance of letters of credit generally or the issuance of such Letter
of Credit.
SECTION 3.4. Issuance of Letters of Credit.
(a) Request for Issuance. The Borrower shall give the Issuing Bank
and the Agent written notice of the Borrower's request for the issuance of
a Letter of Credit. Such notice shall be given by the Borrower no later
than six Business Days prior to the proposed date of issuance of any
standby Letter of Credit and no later than two Business Days prior to the
proposed date of issuance of any documentary Letter of Credit. Such notice
shall be irrevocable and shall specify the original face amount of the
Letter of Credit requested, the effective date (which date shall be a
Business Day) of issuance of such requested Letter of Credit, whether such
Letter of Credit may be drawn in a single or in multiple draws, the date
on which such requested Letter of Credit is to expire (which date shall be
a Business Day earlier than the Business Day prior to the Termination
Date), the purpose for which such Letter of Credit is to be issued and the
beneficiary of the requested Letter of Credit. The Borrower shall attach
to such notice the form of the Letter of Credit that the Borrower requests
to be issued.
(b) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested
effective date of issuance of the Letter of Credit set forth in the notice
from the Borrower pursuant to Section 3.4(a), the amount of the unused
Letter of Credit Facility and the Borrowing Base. If (i) the form of the
Letter of Credit delivered by the Borrower to the Agent is acceptable to
the Issuing Bank and the Agent in their reasonable judgment, (ii) the
undrawn face amount of the requested Letter of Credit is less than or
equal to the lesser of (A) the unused Letter of Credit Facility and (B)
the unused Borrowing Base, and (iii) the Agent and the Issuing Bank have
received a certificate from the Borrower stating that the applicable
conditions set forth in Article 6 have been satisfied, then the Issuing
Bank will cause the Letter of Credit to be issued.
(c) Notice of Issuance. Promptly after the issuance of any Letter of
Credit, the Issuing Bank shall give the Agent written or facsimile notice,
or telephonic notice confirmed promptly thereafter in writing, of the
issuance of such Letter of Credit, and the Agent shall give each Lender
written or facsimile notice, or telephonic notice confirmed promptly
thereafter in writing, of the issuance of such Letter of Credit.
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(d) No Extension or Amendment. No Letter of Credit shall be extended
or amended unless the requirements of this Section 3.4 are met as though a
new Letter of Credit were being requested and issued.
SECTION 3.5. Duties of the Issuing Bank. Any action taken or omitted
to be taken by the Issuing Bank under or in connection with any Letter of
Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not result in any liability of the Issuing Bank to any Lender
or relieve any Lender of its obligations hereunder to the Issuing Bank. In
determining whether to pay under any Letter of Credit, the Issuing Bank shall
have no obligation to any Lender other than to confirm that any documents
required to be delivered under such Letter of Credit in connection with such
drawing have been presented and appear on their face to comply with the
requirements of such Letter of Credit.
SECTION 3.6. Payment of Reimbursement Obligations.
(a) Payment to Issuer. Notwithstanding any provisions to the
contrary in any Reimbursement Agreement, the Borrower agrees to reimburse
the Issuing Bank for any drawings (whether partial or full) under each
Letter of Credit issued by the Issuing Bank (provided that the foregoing
shall in no way limit any rights and remedies that Borrower has against
the Issuing Bank for honoring wrongful drawings) and agrees to pay to the
Issuing Bank the amount of all other Reimbursement Obligations and other
amounts payable to the Issuing Bank under or in connection with such
Letter of Credit immediately when due, irrespective of any claim, set-off,
defense or other right which the Borrower may have at any time against the
Issuing Bank or any other Person.
(b) Recovery or Avoidance of Payments. In the event any payment by
or on behalf of the Borrower with respect to any Letter of Credit (or any
Reimbursement Obligation relating thereto) received by the Issuing Bank,
or by the Agent and distributed by the Agent to the Lenders on account of
their respective participations therein, is thereafter set aside, avoided
or recovered from the Issuing Bank or the Agent in connection with any
receivership, liquidation or bankruptcy proceeding, the Lenders shall,
upon demand by the Agent, pay to the Agent, for the account of the Agent
or the Issuing Bank, their respective Commitment Percentages of such
amount set aside, avoided or recovered together with interest at the rate
required to be paid by the Agent upon the amount required to be repaid by
it.
SECTION 3.7. Participations.
(a) Purchase of Participations. Immediately upon issuance by the
Issuing Bank of a Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received without recourse or
warranty, an undivided interest and participation in such Letter of
Credit, equal to such Lender's Commitment Percentage of the face amount
thereof (including,
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without limitation, all obligations of the Borrower with respect thereto,
other than amounts owing to the Issuing Bank under Section 5.2(d)(ii), and
any security therefor or guaranty pertaining thereto).
(b) Sharing of Letter of Credit Payments. In the event that the
Issuing Bank makes a payment under any Letter of Credit and the Issuing
Bank shall not have been repaid such amount pursuant to Sections
2.2(a)(i)(E) and 3.6, then the Issuing Bank shall be deemed to have made a
Prime Rate Revolving Credit Loan to the Borrower in the amount of such
payment, and to have purchased a 100% participation in each other Lender's
Commitment Percentage of such Prime Rate Revolving Credit Loan, and
notwithstanding the occurrence or continuance of a Default or Event of
Default at the time of such payment, such Prime Rate Revolving Credit Loan
shall be subject to the absolute obligations of each Lender, upon demand
by the Issuing Bank with notice to the Agent, to pay to the Issuing Bank,
as the repurchase of such participation, an amount equal to 100% of such
Lender's Commitment Percentage of the principal amount of such Prime Rate
Revolving Credit Loan.
(c) Sharing of Reimbursement Obligation Payments. Whenever the
Issuing Bank receives a payment from or on behalf of the Borrower on
account of a Reimbursement Obligation as to which the Agent has previously
received for the account of the Issuing Bank payment from a Lender
pursuant to this Section 3.7, the Issuing Bank shall promptly pay to the
Agent, for the benefit of such Lender, such Lender's Commitment Percentage
of the amount of such payment from the Borrower in Dollars. Each such
payment shall be made by the Issuing Bank on the Business Day on which the
Issuing Bank receives immediately available funds pursuant to the
immediately preceding sentence, if received prior to 12:00 noon (Atlanta
time) on such Business Day and otherwise on the next succeeding Business
Day.
(d) Documentation. Upon the request of any Lender, the Agent shall
furnish to such Lender copies of any Letter of Credit, Reimbursement
Agreement or application for any Letter of Credit and such other
documentation as may reasonably be requested by such Lender.
(e) Obligations Irrevocable. The obligations of each Lender to make
payments to the Agent with respect to any Letter of Credit and their
participations therein pursuant to the provisions of Section 5.8(c) hereof
or otherwise and the obligations of the Borrower to make payments to the
Issuing Bank or to the Agent, for the account of the Lenders, shall be
irrevocable, shall not be subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions
of this Agreement (assuming, in the case of the obligations of the Lenders
to make such payments, that the Letter of Credit has been issued in
accordance with Section 3.4), including, without limitation, any of the
following circumstances:
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(i) Any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting),
any Lender, the Issuing Bank or any other Person, whether in
connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions
(including any underlying transactions between the Borrower or any
other Person and the beneficiary named in any Letter of Credit);
(iii) Any draft, certificate or any other document presented
under the Letter of Credit upon which payment has been made in good
faith and according to its terms proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(iv) The surrender or impairment of any Collateral or any
other security for the Secured Obligations or the performance or
observance of any of the terms of any of the Loan Documents;
(v) The occurrence of any Default or Event of Default; or
(vi) The Agent's failure to deliver to the Lenders the notice
provided for in Section 3.4(c).
SECTION 3.8. Indemnification, Exoneration.
(a) Indemnification. In addition to amounts payable as elsewhere
provided in this Article 3, the Borrower agrees to protect, indemnify, pay
and save the Lenders and the Agent harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees but excluding taxes on the overall
net income of the Lenders and the Agent imposed by the United States of
America or any political subdivision thereof or any jurisdiction in which
a Lender or the Agent is organized or operates or any political
subdivision thereof) which any Lender or the Agent may incur or be subject
to as a consequence, directly or indirectly, of
(i) the issuance of any Letter of Credit, other than as a
result of any Lender's, the Agent's or the Issuing Bank's gross
negligence or willful misconduct, as determined by a court of
competent jurisdiction, or
(ii) the failure of the Issuing Bank to honor a drawing under
any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto
governmental
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authority (all such acts or omissions being hereinafter referred to
collectively as "Government Acts").
(b) Assumption of Risk by the Borrower. As among the Borrower, the
Lenders and the Agent, the Borrower assumes all risks of the acts and
omissions of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, subject to the provisions of the applications
for the issuance of Letters of Credit, the Lenders and the Agent shall not
be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any Person in connection
with the application for and issuance of and presentation of drafts
with respect to any of the Letters of Credit, even if it should
prove to be in any or all respects fraudulent or forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason;
(iii) the failure of the beneficiary of any Letter of Credit
to comply duly with conditions required in order to draw upon such
Letter of Credit (provided that the Borrower reserves all of its
rights and remedies against the Issuing Bank for improper payment
made by the Issuing Bank);
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of
Credit or of the proceeds thereof;
(vii) the misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit;
or
(viii) any consequences arising from causes beyond the control
of the Lenders or the Agent, including, without limitation, any
Government Acts. None of the foregoing shall affect, impair or
prevent the vesting of any of the Agent's rights or powers under
this Section 3.8.
(c) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken
or omitted by the
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Agent, the Issuing Bank or any Lender under or in connection with any of
the Letters of Credit or any related certificates, if taken or omitted in
good faith in conformity with the terms of any Letter of Credit, shall not
result in any liability of any Lender or the Agent to the Borrower or
relieve the Borrower of any of its obligations hereunder to any such
Person.
SECTION 3.9. Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of Section 3.2(b), any Letter of Credit is
outstanding on the Termination Date, then on or prior to such Termination Date,
or in any case upon the occurrence of an Event of Default, the Borrower shall,
promptly on demand by the Agent, deposit with the Agent, for the ratable benefit
of the Lenders, with respect to each Letter of Credit then outstanding, as the
Agent shall specify, either (a) a standby letter of credit (a "Supporting Letter
of Credit") in form and substance satisfactory to the Agent, issued by an issuer
reasonably satisfactory to the Agent in an amount equal to the greatest amount
for which such Letter of Credit may be drawn, under which Supporting Letter of
Credit the Agent is entitled to draw amounts necessary to reimburse the Agent
and the Lenders for payments made by the Agent and the Lenders under such Letter
of Credit or under any reimbursement or guaranty agreement with respect thereto,
or (b) Cash Collateral in an amount necessary to reimburse the Agent and the
Lenders for payments made by the Agent and the Lenders under such Letter of
Credit or under any reimbursement or guaranty agreement with respect thereto.
Such Supporting Letter of Credit or Cash Collateral shall be held by the Agent
for the benefit of the Lenders, as security for, and to provide for the payment
of, the Reimbursement Obligations. In addition, the Agent may at any time after
the Termination Date apply any or all of such Cash Collateral to the payment of
any or all of the Secured Obligations then due and payable. At the Borrower's
request, but subject to the Agent's reasonable approval, the Agent shall invest
any Cash Collateral consisting of cash or any proceeds of Cash Collateral
consisting of cash in Cash Equivalents, and any commissions, expenses and
penalties incurred by the Agent in connection with any investment and redemption
of such Cash Collateral shall be Secured Obligations hereunder secured by the
Collateral, shall bear interest at the rates provided herein for the Loans and
shall be charged to the Borrower's Loan Accounts, or, at the Agent's option,
shall be paid out of the proceeds of any earnings received by the Agent from the
investment of such Cash Collateral as provided herein or out of such cash
itself. The Agent makes no representation or warranty as to, and shall not be
responsible for, the rate of return, if any, earned on any Cash Collateral. Any
earnings on Cash Collateral shall be held as additional Cash Collateral on the
terms set forth in this Section 3.9.
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ARTICLE 4
TERM LOAN FACILITY
SECTION 4.1. Term Loan. Upon the terms and subject to the conditions
of, and in reliance upon the representations and warranties made under, this
Agreement, each Lender agrees severally, but not jointly, to make a Term Loan to
the Borrower on the Effective Date in a principal amount equal to such Lender's
Commitment Percentage of the Term Loan Facility.
SECTION 4.2. Manner of Borrowing Term Loan. The Borrower shall give
the Agent an Initial Notice of Borrowing with respect to the Term Loan not later
than 11:00 a.m. on the Effective Date, and such initial borrowing shall be a
Prime Rate Term Loan. Upon receipt of such notice from the Borrower, the Agent
shall promptly notify each Lender thereof. Each Lender will make the amount
equal to its Commitment Percentage of the aggregate principal amount of the Term
Loan available to the Agent, for the account of the Borrower, at the Agent's
Office, prior to 12:00 noon (Atlanta time) on the Effective Date in funds
immediately available to the Agent. Not later than 1:00 p.m. (Atlanta time) on
the Effective Date, upon satisfaction of the applicable conditions set forth in
Sections 6.1 and 6.2, the Agent will disburse the Term Loan on the Effective
Date, in same day funds in accordance with the terms of the Initial Notice of
Borrowing.
SECTION 4.3. Repayment of Term Loan. The principal amount of the
Term Loan is due and payable, and shall be repaid in full by the Borrower, in
consecutive monthly installments on successive Installment Payment Dates as set
forth below, together with a final payment of all unpaid principal on March 24,
2003:
Amount of Each
Monthly Payments Monthly Payment
---------------- ---------------
1-12 $ $166,666.66
13-24 $ 333,333.33
25-36 $ 416,666.66
37-48 $ 500,000.00
49-60 $ 666,666.66
The Borrower hereby irrevocably instructs the Agent to charge the Borrower's
Loan Account, on each Installment Payment Date and Interest Payment Date, for
all principal and interest due on the Term Loan, and each such charge shall be
deemed a Prime Rate Revolving Credit Loan.
SECTION 4.4. Term Notes. The Term Loan made by each Lender and the
obligation of the Borrower to repay such Loan shall also be evidenced by a Term
Note payable to the order of such Lender. Each such Term Note shall be dated the
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Effective Date (or the later "effective date" under any Assignment and
Acceptance) and be duly and validly executed and delivered by the Borrower.
SECTION 4.5. Prepayment of Term Loan.
(a) Voluntary Prepayment. The Borrower shall have the right at any
time and from time to time, upon at least one Business Day's prior written
notice to the Agent, to prepay the Term Loan in whole or in part on any
Business Day. Each partial prepayment of the Term Loan shall be in a
minimum amount of $1,000,000 and shall be applied pro rata to the
remaining principal installments of the Term Loan. On the prepayment date,
the Borrower shall pay interest on the amount prepaid, accrued to the
prepayment date, as well as all other amounts due hereunder with respect
to such prepayment, including all amounts due under Sections 5.10 and
5.11. Any notice of prepayment given by the Borrower hereunder shall be
irrevocable, and the amount to be prepaid (including accrued interest and
any prepayment fees) shall be due and payable on the date designated in
the notice.
(b) Mandatory Prepayment. In addition to mandatory prepayments of
the Term Loan required under Section 5.9, the Borrower shall also be
obligated to prepay the Term Loan in full, together with accrued and
unpaid interest thereon, as well as all other amounts due hereunder with
respect to such prepayment, including all amounts due under Sections 5.10
and 5.11, upon any termination of this Agreement pursuant to Section 5.6
or otherwise or upon any acceleration of the Term Loan pursuant to Article
13.
ARTICLE 5
GENERAL LOAN PROVISIONS
SECTION 5.1. Interest.
(a) Prime Rate Loans. Subject to the provisions of Section 5.1(d),
the Borrower will pay interest on the unpaid principal amount of each
Prime Rate Loan, for each day from the day such Loan is made until such
Loan is paid (whether at maturity, by reason of acceleration, or
otherwise) or is converted to a Loan of a different Type, at a rate per
annum equal to the sum of (i) the Applicable Margin and (ii) the Prime
Rate, payable monthly in arrears as it accrues on each Interest Payment
Date and when such Prime Rate Loan is due (whether at maturity, by reason
of acceleration or otherwise).
(b) Eurodollar Rate Loans. Subject to the provisions of Section
5.1(d), the Borrower will pay interest on the unpaid principal amount of
each Eurodollar Rate Loan for the applicable Interest Period at a rate per
annum equal to the sum of (i) the Applicable Margin and (ii) the
Eurodollar Rate,
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payable in arrears as it accrues on each Interest Payment Date and when
such Eurodollar Rate Loan is due (whether at maturity, by reason of
acceleration or otherwise).
(c) Other Secured Obligations. The Borrower will, to the extent
permitted by Applicable Laws, pay interest on the unpaid principal amount
of any Secured Obligation that is due and payable, other than the Loans,
in accordance with Sections 5.1(a) or (d), as applicable, as if such
Secured Obligation were a Prime Rate Revolving Credit Loan.
(d) Default Rate. If there shall occur and be continuing an Event of
Default, at the election of the Required Lenders, the unpaid principal
amount of the Loans and other Secured Obligations shall no longer bear
interest in accordance with the terms of Section 5.1(a), (b) or (c), but
shall bear interest for each day from the date of such Event of Default
until such Event of Default shall have been cured or waived at a rate per
annum equal to the sum of (i) the Default Margin and (ii) the rate
otherwise applicable to such Loan or other Secured Obligation, payable on
demand. The interest rate provided for in the preceding sentence shall, to
the extent permitted by Applicable Laws, apply to and accrue on the amount
of any judgment entered with respect to any Secured Obligation and shall
continue to accrue at such rate during any proceeding described in Section
13.1(g) or (h).
(e) Calculation of Interest. The interest rates provided for in
Sections 5.1(a), (b), (c) and (d) shall be computed on the basis of a year
of 360 days and the actual number of days elapsed.
(f) Maximum Rate. It is not intended by the Lenders, and nothing
contained in this Agreement, in the Notes or in any of the Mortgages shall be
deemed, to establish or require the payment of a rate of interest in excess of
the maximum rate permitted by Applicable Laws (the "Maximum Rate"). If, in any
month, the Effective Interest Rate, absent such limitation, would have exceeded
the Maximum Rate, then the Effective Interest Rate for that month shall be the
Maximum Rate, and, if in future months, the Effective Interest Rate would
otherwise be less than the Maximum Rate, then the Effective Interest Rate shall
remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event, upon payment in full of
the Secured Obligations, the total amount of interest paid or accrued under the
terms of this Agreement is less than the total amount of interest which would
have been paid or accrued if the Effective Interest Rate had at all times been
in effect, then the Borrower shall, to the extent permitted by Applicable Laws,
pay to the Lenders an amount equal to the excess, if any, of (i) the lesser of
(A) the amount of interest which would have been charged if the Maximum Rate
had, at all times, been in effect and (B) the amount of interest which would
have accrued had the Effective Interest Rate, at all times, been in effect and
(ii) the amount of interest actually paid or accrued under this Agreement. In
the event the Lenders receive, collect or apply as interest any sum in
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excess of the Maximum Rate, such excess amount shall be applied to the reduction
of the principal balance of the Secured Obligations, and if no such principal is
then outstanding, such excess or part thereof remaining, shall be paid to the
Borrower.
SECTION 5.2. Certain Fees.
(a) Closing Fees. As additional consideration for the extensions of
credit provided for hereunder, in addition to any interest due under this
Agreement, on the Effective Date, the Borrower shall pay to the Agent (for
its own account except as otherwise agreed in writing between the Agent
and the Lenders) a closing fee as set forth in that certain letter
agreement, dated as of January 29, 1998, between the Borrower and the
Agent (the "Fee Letter"). The closing fee provided for in the Fee Letter
shall compensate the Agent for the internal costs associated with the
origination, structuring, processing, approving and closing of the
transactions contemplated by this Agreement, but not including any
out-of-pocket expenses for which the Borrower has agreed to reimburse the
Agent and the other Lenders, including, without limitation, the Agent's
reasonable out-of-pocket expenses incurred in connection with its due
diligence examination of the Borrower and the closing of the transactions
contemplated by this Agreement. Such closing fee shall be fully earned on
the Effective Date and shall not be subject to refund or rebate.
(b) Agent Fee. For administration and other services performed by
the Agent in connection with its continuing administration of this
Agreement, the Borrower shall pay to the Agent, for its own account, and
not for the account of the Lenders, an annual fee of $75,000, payable on
the Effective Date and each anniversary thereof so long as any Loan or
outstanding Letter of Credit that is not collateralized by cash or by
another Letter of Credit acceptable to the Issuing Bank remains
outstanding or the Revolving Credit Facility shall not have been
terminated. The fee payable pursuant to this Section 5.2(b) shall be fully
earned by the Agent on the date payment thereof is due and shall not be
subject to refund or rebate. Payment of such fee shall not limit the
Borrower's obligations to reimburse the Agent for its out-of-pocket
expenses as set forth in Section 16.2.
(c) Commitment Fee. In connection with and as consideration for the
holding available for the use of the Borrower hereunder the full amount of
the Revolving Credit Facility, the Borrower will pay a fee to the Agent,
for the ratable benefit of the Lenders, for each day from the Effective
Date until the Termination Date, in an amount equal to 0.375% per annum of
the unused portion of the Revolving Credit Facility for such day. Such fee
shall be payable monthly in arrears on each Interest Payment Date and
shall be fully earned when due and payable and shall not be subject to
refund or rebate. Such fee is not, and shall not be deemed to be, interest
or a charge for the use of money. Such fee shall be calculated based on a
year of 360 days and the actual number of days elapsed.
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(d) Letter of Credit Fees.
(i) The Borrower agrees to pay to the Agent, for the ratable
benefit of the Lenders, Letter of Credit fees equal to (A) 0.75% per
annum, based on the average daily aggregate Letter of Credit Amount
of all documentary Letters of Credit from time to time outstanding
during the term of this Agreement, and (B) the Eurodollar Rate
Margin then applicable to Revolving Credit Loans (as set forth in
the definition of "Applicable Margin"), based on the average daily
aggregate Letter of Credit Amount of all standby Letters of Credit
from time to time outstanding during the term of this Agreement.
Such fees shall be payable to the Agent for the ratable benefit of
the Lenders in accordance with their respective Commitment
Percentages monthly in arrears and shall be calculated based on a
year of 360 days and the actual number of days elapsed.
(ii) The Borrower agrees to pay to the Agent, for the account
of the Issuing Bank, (A) a facing fee of 0.125% of the face amount
of each standby Letter of Credit issued by the Issuing Bank, such
fee being due and payable upon issuance of each standby Letter of
Credit, and (B) the standard fees and charges of the Issuing Bank
for issuing, administering, amending, renewing, paying and canceling
Letters of Credit, as and when assessed.
(e) Collection Fee. During the period from and including the
Effective Date to and including the Termination Date, the Borrower will
pay to the Agent for its own account, and not for the account of the
Lenders, on the first day of each month, an amount of interest computed at
the Effective Interest Rate applicable to Prime Rate Revolving Credit
Loans on each remittance (other than a remittance received via wire
transfer, automated clearinghouse transfer or otherwise in immediately
available funds) received by the Agent against Receivables during the
preceding month, from the close of business on the date of receipt of each
such remittance until the close of business on the first Business Day
following the receipt of the remittance, as compensation for delays in the
collection and clearance of checks and other remittances.
(f) General. All fees shall be fully earned by the identified
recipient thereof when due and payable and, except as otherwise set forth
herein or required by applicable law, shall not be subject to refund or
rebate. All fees provided for in this Section 5.2 are for compensation for
services and are not, and shall not be deemed to be, interest or a charge
for the use of money.
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SECTION 5.3. Manner of Payment.
(a) Except as otherwise expressly provided in Section 9.1(b), each
payment (including prepayments) by the Borrower on account of the
principal of or interest on the Loans or of any other amounts payable to
the Lenders under this Agreement or any Note shall be made not later than
1:30 p.m. (Atlanta time) on the date specified for payment under this
Agreement to the Agent, for the account of the Lenders, at the Agent's
Office, in Dollars, in immediately available funds and shall be made
without any setoff, counterclaim or deduction whatsoever. Any payment
received after such time but before the close of business on such day
shall be deemed a payment on such date for the purposes of Section 13.1,
but for all other purposes shall be deemed to have been made on the next
succeeding Business Day.
(b) During any Event of Default, the Borrower hereby irrevocably
authorizes each Lender and each Affiliate of such Lender and each
participant herein to charge any account of the Borrower maintained with
such Lender or such Affiliate or participant with such amounts as may be
necessary from time to time to pay any Secured Obligations (whether or not
owed to such Lender, Affiliate or participant) which are not paid when
due.
(c) Each Lender hereby severally (but not jointly) represents that,
under applicable law and treaties in effect on the date of this Agreement,
no United States federal taxes will be required to be withheld by the
Agent or the Borrower with respect to any payments to be made to such
Lender in respect of this Agreement. Each Lender that itself is not
incorporated under the laws of the United States or a state thereof agrees
severally (but not jointly) that, prior to the Effective Date and the date
that any such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form delivered by it to
the Borrower and the Agent, it will deliver to the Borrower and the Agent
two duly completed copies of either United States Internal Revenue Service
Form W-8, 1001 or 4224, or successor applicable form, certifying in each
case that such Lender is entitled to receive all payments under this
Agreement and the Notes payable to it without deduction or withholding of
any United States federal income taxes. The Borrower shall not have any
obligation under Section 5.3(a) to pay any amount to or for the account of
any Lender without any setoff, counterclaim or deduction to the extent
that such amount results from the failure of any Lender to comply with its
obligations pursuant to this Section 5.3(c).
SECTION 5.4. General. If any payment under this Agreement or any
Note shall be specified to be made upon a day which is not a Business Day, it
shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing interest, if any,
in accordance with such payment.
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SECTION 5.5. Loan Accounts; Statements of Accounts.
(a) Each Lender shall open and maintain on its books a loan account
in the Borrower's name (each, a "Loan Account" and collectively, the "Loan
Accounts"). Each such Loan Account shall show as debits thereto each Loan
made under this Agreement by such Lender to the Borrower and as credits
thereto all payments received by such Lender and applied to principal of
such Loan, so that the balance of the Loan Account at all times reflects
the principal amount due such Lender from the Borrower.
(b) The Agent shall maintain on its books a control account for the
Borrower in which shall be recorded (i) the amount of each disbursement
made hereunder, (ii) the amount of any principal or interest due or to
become due from the Borrower hereunder, and (iii) the amount of any sum
received by the Agent hereunder from the Borrower and each Lender's
ratable share therein.
(c) The entries made in the accounts pursuant to subsections (a) and
(b) shall be prima facie evidence, in the absence of manifest error, of
the existence and amounts of the obligations of the Borrower therein
recorded and in case of discrepancy between such accounts, in the absence
of manifest error, the accounts maintained pursuant to subsection (b)
shall be controlling.
(d) The Agent will account separately to the Borrower monthly with a
statement of Loans, charges and payments made to and by the Borrower
pursuant to this Agreement, and such accounts rendered by the Agent shall
be deemed final, binding and conclusive, save for manifest error, unless
the Agent is notified by the Borrower in writing to the contrary within 30
days of the date the account to the Borrower was so rendered. Such notice
by the Borrower shall be deemed an objection to only those items
specifically objected to therein. Failure of the Agent to render such
account shall in no way affect the rights of the Agent or of the Lenders
hereunder.
SECTION 5.6. Termination of Agreement. Subject to the provisions of
Section 5.10, the Borrower shall have the right, at any time, to terminate this
Agreement upon not less than 10 Business Days' prior written notice of its
intention to terminate this Agreement, which notice shall specify the effective
date of such termination. Upon receipt of such notice, the Agent shall promptly
notify each Lender thereof. On the date specified in such notice, such
termination shall be effected, provided that the Borrower shall, on or prior to
such date, pay to the Agent, for the account of the Secured Creditors, in same
day funds, an amount equal to all Secured Obligations then outstanding,
including, without limitation, all (i) accrued interest thereon, (ii) all
accrued fees provided for hereunder, and (iii) any amounts payable to the Agent
and the Secured Creditors pursuant to Sections 5.10, 5.11, 16.2, 16.3 and 16.14,
and, in addition thereto, shall deliver to the Agent, in respect of each
outstanding Letter of Credit, either the Supporting Letter of Credit or the Cash
Collateral as provided in Section 3.9. Following a notice of termination as
provided for in this Section 5.6 and upon payment in full of
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the amounts specified in this Section 5.6, this Agreement shall be terminated
and the Agent and the Lenders shall have no further obligations to the Borrower.
Borrower may, not later than one Business Day prior to the effective date of
such termination, provide the Agent and the Lenders written notice of withdrawal
of its notice of termination, whereupon such notice of termination shall be of
no further force or effect.
SECTION 5.7. Making of Loans.
(a) Nature of Obligations of Lenders to Make Loans. The obligations
of the Lenders under this Agreement to make the Loans are several and are
not joint or joint and several.
(b) Assumption by Agent. Subject to the provisions of Section 5.8
and notwithstanding the occurrence or continuance of a Default or Event of
Default or other failure of any condition to the making of Revolving
Credit Loans hereunder subsequent to the Revolving Credit Loans to be made
on the Effective Date, unless the Agent shall have received notice from
the Required Lenders in accordance with the provisions of Section 5.7(c)
prior to a proposed borrowing date that the Lenders will not make
available to the Agent such Lenders' ratable portion of the amount to be
borrowed on such date, the Agent may assume that the Lenders will make
such portion available to the Agent in accordance with Section 2.2(a), and
the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent any
Lender shall not make such ratable portion available to the Agent, such
Lender and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount, together with interest thereon for each
day from the date such amount is made available to the Borrower until the
date such amount is repaid to the Agent at the Effective Interest Rate or,
if lower, subject to Section 5.1(f), the Maximum Rate. If such Lender
shall repay to the Agent such corresponding amount, the amount so repaid
shall constitute such Lender's Commitment Percentage of the Loan made on
such borrowing date for purposes of this Agreement. The failure of any
Lender to make its Commitment Percentage of any Revolving Credit Loan
available shall not (without regard to whether the Borrower shall have
returned the amount thereof to the Agent in accordance with this Section
5.7) relieve it or any other Lender of its obligation, if any, hereunder
to make its Commitment Percentage of such Revolving Credit Loan available
on such borrowing date, but no Lender shall be responsible for the failure
of any other Lender to make its Commitment Percentage of such Revolving
Credit Loan available on the borrowing date.
(c) Delegation of Authority to Agent. Without limiting the
generality of Section 15.1, each Lender expressly authorizes the Agent to
determine on behalf of such Lender (i) the creation or elimination of any
reserves (other than the Letter of Credit Reserve) against the Revolving
Credit Facility and the Borrowing Base, and (ii) whether or not Inventory
or Receivables shall be deemed to constitute Eligible Inventory or
Eligible Receivables. Such
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authorization may be withdrawn by the Required Lenders by giving the Agent
written notice of such withdrawal signed by the Required Lenders;
provided, however, that unless otherwise agreed by the Agent such
withdrawal of authorization shall not become effective until the thirtieth
Business Day after receipt of such notice by the Agent. Thereafter, the
Required Lenders shall jointly instruct the Agent in writing regarding
such matters with such frequency as the Required Lenders shall jointly
determine. Unless and until the Agent shall have received written notice
from the Required Lenders as to the existence of a Default, an Event of
Default or some other circumstance which would relieve the Lenders of
their respective obligations to make Revolving Credit Loans hereunder,
which notice shall be in writing and shall be signed by the Required
Lenders and shall expressly state that the Lenders do not intend to make
available to the Agent such Lenders' ratable share of Revolving Credit
Loans made after the effective date of such notice, the Agent shall be
entitled to continue to make the assumptions described in Section 5.7(b).
The notice described in the preceding sentence shall become effective on
the third Business Day after receipt of such notice by the Agent unless
otherwise agreed by the Agent. The Agent shall not be required to make any
Loan as to which it shall have received notice by a Lender of such
Lender's intention not to make its ratable portion of such Loan available
to the Agent. Any withdrawal of authorization under this Section 5.7(c)
shall not affect the validity of any Loans made prior to the effectiveness
thereof.
(d) Overadvances. Notwithstanding anything to the contrary contained
elsewhere in this Section 5.7 or this Agreement or the other Loan
Documents, and whether or not a Default or Event of Default exists at the
time, unless otherwise notified by the Required Lenders in accordance with
Section 5.7(c), the Agent may in its discretion require all Lenders to
honor requests or deemed requests by the Borrower for Revolving Credit
Loans at a time that an Overadvance exists or which would result in an
Overadvance and each Lender shall be obligated to continue to make its
Proportionate Share of Revolving Credit Loans, up to a maximum amount
outstanding equal to its Commitment to make Revolving Credit Loans, so
long as such Overadvance is not known by the Agent to exceed the amount of
minimum Availability then required under Section 12.14 and so long as such
Overadvance is not outstanding for more than 90 consecutive days.
"Overadvance" shall mean, as of any date of determination, the amount, if
any, by which (i) the outstanding principal balance of Revolving Credit
Loans exceeds (ii) the amount determined under clause (b) of the
definition of "Borrowing Base" minus the minimum Availability required at
such time pursuant to Section 12.14.
(e) Replacement of Certain Lenders. If a Lender (the "Affected
Lender") shall have failed to fund its Proportionate Share of any Loan
requested (or deemed requested) by the Borrower which such Lender is
obligated to fund under the terms of this Agreement and which failure has
not been cured, then, in any such case and in addition to any other rights
and remedies that the Agent, any
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other Lender or the Borrower may have against such Affected Lender, the
Agent or the Borrower may make written demand on such Affected Lender
(with a copy to the Borrower) for the Affected Lender to assign, and such
Affected Lender shall assign pursuant to one or more duly executed
Assignment and Acceptances within 5 Business Days after the date of such
demand, to one or more Lenders willing to accept such assignment or
assignments, or to one or more Eligible Assignees designated by the Agent
or the Borrower (provided such Eligible Assignee is reasonably acceptable
to the Agent and the Borrower), all of such Affected Lender's rights and
obligations under this Agreement (including its Commitments and all Loans
owing to it) in accordance with Article 14. The Affected Lender shall be
entitled to receive, in cash and concurrently with the execution and
delivery of each such Assignment and Acceptance, all amounts owed to the
Affected Lender hereunder or under any other Loan Document, including the
aggregate outstanding principal amount of the Loans owed to such Lender,
together with accrued interest thereon through the date of such
assignment. Upon the replacement of any Affected Lender pursuant to this
Section 5.7(e), such Affected Lender shall cease to have any participation
in, entitlement to, or other right to share in the Security Interest or
any other Lien of the Agent in any Collateral and such Affected Lender
shall have no further liability to the Agent, any Lender or any other
Person under any of the Loan Documents (except as provided in Section 15.7
and elsewhere in this Agreement as to events or transactions which occur
prior to the replacement of such Affected Lender).
SECTION 5.8. Settlement Among Lenders.
(a) Term Loan. The Agent shall pay to each Lender on each Interest
Payment Date or Installment Payment Date, as the case may be, its Ratable
share, based on the principal amount of the Term Loan owing to such
Lender, of all payments received by the Agent hereunder in immediately
available funds in respect of the principal of, or interest on, the Term
Loan, net of any amounts payable by such Lender to the Agent, by wire
transfer of same day funds.
(b) Revolving Credit Loans. Each Lender's Net Outstandings are
intended by the Lenders to be equal at all times to such Lender's
Commitment Percentage of the aggregate principal amount of all Revolving
Credit Loans outstanding. Notwithstanding such agreement, the several and
not joint obligation of each Lender to fund Revolving Credit Loans made in
accordance with the terms of this Agreement ratably in accordance with
such Lender's Commitment Percentage and each Lender's right to receive its
ratable share of principal payments on Revolving Credit Loans in
accordance with its Commitment Percentage, the Lenders agree that, in
order to facilitate the administration of this Agreement and the Loan
Documents, settlement among them may take place on a periodic basis in
accordance with the provisions of this Section 5.8.
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(c) Settlement Procedures as to Revolving Credit Loans. To the
extent and in the manner hereinafter provided in this Section 5.8,
settlement among the Lenders as to Revolving Credit Loans may occur
periodically on Settlement Dates determined from time to time by the
Agent, which may occur before or after the occurrence or during the
continuance of a Default or Event of Default and whether or not all of the
conditions set forth in Section 6.2 have been met. On each Settlement Date
payments shall be made by or to NationsBank and the other Lenders in the
manner provided in this Section 5.8 in accordance with the Settlement
Report delivered by the Agent pursuant to the provisions of this Section
5.8 in respect of such Settlement Date so that as of each Settlement Date,
and after giving effect to the transactions to take place on such
Settlement Date, each Lender's Net Outstandings shall equal such Lender's
Commitment Percentage of the Revolving Credit Loans outstanding.
(i) Selection of Settlement Dates. If the Agent elects, in its
discretion, but subject to the consent of NationsBank, to settle
accounts among the Lenders with respect to principal amounts of
Revolving Credit Loans less frequently than each Business Day, then
the Agent shall designate periodic Settlement Dates which may occur
on any Business Day after the Effective Date; provided, however,
that the Agent shall designate as a Settlement Date any Business Day
which is an Interest Payment Date; and provided further, that a
Settlement Date shall occur at least once during each seven-day
period. The Agent shall designate a Settlement Date by delivering to
each Lender a Settlement Report not later than 12:00 noon (Atlanta
time) on the proposed Settlement Date, which Settlement Report will
be in the form of Exhibit E hereto and shall be with respect to the
period beginning on the next preceding Settlement Date and ending on
such designated Settlement Date.
(ii) Non-Ratable Loans and Payments. Between Settlement Dates,
the Agent shall request and NationsBank may (but shall not be
obligated to) advance to the Borrower out of NationsBank's own
funds, the entire principal amount of any Revolving Credit Loan
requested or deemed requested pursuant to Section 2.2(a) (any such
Revolving Credit Loan being referred to as a "Non-Ratable Loan").
The making of each Non-Ratable Loan by NationsBank shall be deemed
to be a purchase by NationsBank of a 100% participation in each
other Lender's Commitment Percentage of the amount of such
Non-Ratable Loan. All payments of principal, interest and any other
amount with respect to such Non-Ratable Loan shall be payable to and
received by the Agent for the account of NationsBank. Upon demand by
NationsBank, with notice thereof to the Agent, each other Lender
shall pay to NationsBank, as the repurchase of such participation,
an amount equal to 100% of such Lender's Commitment Percentage of
the principal amount of such Non-Ratable Loan. Any payments received
by the Agent between Settlement Dates which in accordance with the
terms of this Agreement are to be applied
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to the reduction of the outstanding principal balance of Revolving
Credit Loans, shall be paid over to and retained by NationsBank for
such application, and such payment to and retention by NationsBank
shall be deemed, to the extent of each other Lender's Commitment
Percentage of such payment, to be a purchase by each such other
Lender of a participation in the Revolving Credit Loans (including
the repurchase of participations in Non-Ratable Loans) held by
NationsBank. Upon demand by another Lender, with notice thereof to
the Agent, NationsBank shall pay to the Agent, for the account of
such other Lender, as a repurchase of such participation, an amount
equal to such other Lender's Commitment Percentage of any such
amounts (after application thereof to the repurchase of any
participations of NationsBank in such other Lender's Commitment
Percentage of any Non-Ratable Loans) paid only to NationsBank by the
Agent.
(iii) Net Decrease in Outstandings. If on any Settlement Date
the increase, if any, in the dollar amount of any Lender's Net
Outstandings which is required to comply with the first sentence of
Section 5.8(b) is less than such Lender's Commitment Percentage of
amounts received by the Agent but paid only to NationsBank since the
next preceding Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment Percentage
of such amounts to the increase in such Lender's Net Outstandings,
and NationsBank shall pay to the Agent, for the account of such
Lender, the excess allocable to such Lender.
(iv) Net Increase in Outstandings. If on any Settlement Date
the increase, if any, in the dollar amount of any Lender's Net
Outstandings which is required to comply with the first sentence of
Section 5.8(b) exceeds such Lender's Commitment Percentage of
amounts received by the Agent but paid only to NationsBank since the
next preceding Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment Percentage
of such amounts to the increase in such Lender's Net Outstandings,
and such Lender shall pay to the Agent, for the account of
NationsBank, any excess.
(v) No Change in Outstandings. If a Settlement Report
indicates that no Revolving Credit Loans have been made during the
period since the next preceding Settlement Date, then each Lender's
Commitment Percentage of any amounts received by the Agent but paid
only to NationsBank shall be paid by NationsBank to the Agent, for
the account of such Lender. If a Settlement Report indicates that
the increase in the dollar amount of a Lender's Net Outstandings
which is required to comply with the first sentence of Section
5.8(b) is exactly equal to such Lender's Commitment Percentage of
amounts received by the Agent but paid only to NationsBank since the
next preceding Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's
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Commitment Percentage of such amounts to the increase in such
Lender's Net Outstandings.
(d) General Settlement Procedures.
(i) Return of Payments. If any amounts received by NationsBank
in respect of the Secured Obligations are later required to be
returned or repaid by NationsBank to the Borrower or any other
obligor or their respective representatives or successors in
interest, whether by court order, settlement or otherwise, in excess
of NationsBank's Commitment Percentage of all such amounts required
to be returned by all Lenders, each other Lender shall, upon demand
by NationsBank with notice to the Agent, pay to the Agent for the
account of NationsBank, an amount equal to the excess of such
Lender's Commitment Percentage of all such amounts required to be
returned by all Lenders over the amount, if any, returned directly
by such Lender.
(ii) Payments to Agent, Lenders.
(A) Except as otherwise provided in this Agreement,
payment by any Lender to the Agent shall be made not later
than 1:00 p.m. (Atlanta time) on the Business Day such payment
is due, provided that if such payment is due on demand by
another Lender, such demand is made on the paying Lender not
later than 10:00 a.m. (Atlanta time) on such Business Day.
Except as otherwise provided in this Agreement, payment by the
Agent to any Lender shall be made by wire transfer, promptly
following the Agent's receipt of funds for the account of such
Lender and in the type of funds received by the Agent,
provided that if the Agent receives such funds at or prior to
1:00 p.m. (Atlanta time), the Agent shall pay such funds to
such Lender by 2:00 p.m. (Atlanta time) on such Business Day.
If a demand for payment is made after the applicable time set
forth above, the payment due shall be made by 2:00 p.m.
(Atlanta time) on the first Business Day following the date of
such demand.
(B) If a Lender shall, at any time, fail to make any
payment to the Agent required hereunder, the Agent may, but
shall not be required to, retain payments that would otherwise
be made to such Lender hereunder and apply such payments to
such Lender's defaulted obligations hereunder, at such time,
and in such order, as the Agent may elect in its sole
discretion.
(C) With respect to the payment of any funds under this
Section 5.8, whether from the Agent to a Lender or from a
Lender to the Agent, the party failing to make full payment
when due
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pursuant to the terms hereof shall, upon demand by the other
party, pay such amount together with interest on such amount
at the Federal Funds Effective Rate.
(e) Settlement of Other Secured Obligations. All other amounts
received by the Agent on account of, or applied by the Agent to the
payment of, any Secured Obligation owed to the Secured Creditors
(including, without limitation, fees payable to the Lenders pursuant to
Section 5.2 and proceeds from the sale of, or other realization upon, all
or any part of the Collateral following an Event of Default) that are
received by the Agent on or prior to 1:00 p.m. (Atlanta time) on a
Business Day will be paid by the Agent to each Secured Creditor on the
same Business Day, and any such amounts that are received by the Agent
after 1:00 p.m. (Atlanta time) will be paid by the Agent to each Secured
Creditor on the following Business Day. Unless otherwise stated herein,
the Agent shall distribute proceeds from the sale of, or other realization
upon, all or any part of the Collateral following an Event of Default
ratably to the Secured Creditors based on the amount of the Secured
Obligations then owing to each Secured Creditor.
(f) Allocation of Payments from Borrower. All monies to be applied
to the Secured Obligations, whether such monies represent voluntary
payments by the Borrower or are received pursuant to demand for payment or
realized from any disposition of Collateral, shall be allocated among the
Agent and such of the Lenders and other holders of the Secured Obligations
as are entitled thereto (and, with respect to monies allocated to the
Lenders, on a Ratable basis unless otherwise provided in this Section
5.8(f)): (i) first, to NationsBank to pay principal and accrued interest
on any portion of any Non-Ratable Loan which NationsBank may have advanced
on behalf of any Lender (other than itself) and for which NationsBank has
not been reimbursed by such Lender or the Borrower; (ii) second, to the
Agent to pay the amount of expenses that have not been reimbursed to the
Agent by the Borrower or the Lenders, together with interest accrued
thereon; (iii) third, to the Agent, the Syndication Agent, the Arranger
and the Documentation Agent to pay any indemnified amount that has not
been paid to them by the Borrower or the Lenders, together with interest
accrued thereon; (iv) fourth, to the Agent to pay any fees due and payable
to the Agent under this Agreement; (v) fifth, to the Lenders for any
indemnified amount that they have paid to the Agent and for any expenses
that they have reimbursed to the Agent; (vi) sixth, to the Lenders in
payment of the unpaid principal and accrued interest in respect of the
Loans and any other Secured Obligations arising under this Agreement (and
the other Loan Documents) then due and held by any Lender to be shared
among Lenders on a Ratable basis, or on such other basis as may be agreed
upon in writing by all of the Lenders (which agreement or agreements may
be entered into without notice to or the consent or approval of the
Borrower), and (vii) seventh, to the Lenders and their Affiliates in
payment of the unpaid amount of all Secured Obligations arising under or
in respect of the Banking Relationship to be shared on a pro rata basis.
The allocations set forth
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in this Section 5.8(f) are solely to determine the rights and priorities
of the Secured Creditors as among themselves and may be changed by the
Secured Creditors without notice or the consent of approval of the
Borrower or any other Person. Whenever allocation is made pursuant to this
Section 5.8(f) to the holder of Secured Obligations in which another
Lender acquires a participation, the monies received by such holder shall
be shared as between such holder and such participants on a Ratable basis.
SECTION 5.9. Mandatory Prepayments.
(a) Prepayments from Asset Dispositions.
(i) Within 2 Business Days of receipt by the Borrower or any
of its Subsidiaries of the Net Proceeds of the sale of the
Borrower's narrow fabrics business, the Borrower shall apply the Net
Proceeds to the outstanding balance of the Revolving Credit Loans.
Within 5 Business Days of the date of the Borrower's or any
Subsidiary's receipt of the Net Proceeds from such sale, the
Borrower shall make a prepayment of principal on the Term Loan in an
amount equal to 110% of the amount loaned to the Borrower under the
Term Loan with respect to the fixed assets subject to such sale,
which Term Loan prepayment shall be advanced by the Agent as a
Revolving Credit Loan. In the event a Contingent Liability Reserve
was deducted from the sale proceeds in order to calculate Net
Proceeds, the amount of such Contingent Liability Reserve shall be
reserved against the Borrowing Base by the Agent until such time as
the actual amount of liability is determined.
(ii) Within 2 Business Days of receipt by the Borrower or any
of its Subsidiaries of the Net Proceeds of any other permitted Asset
Disposition (including the disposition of plant and equipment held
for disposal as of the Agreement Date and the disposition of the
Borrower's hosiery plant located in Robbins, North Carolina), the
Borrower shall apply the Net Proceeds to the outstanding balance of
the Revolving Credit Loans. Within 5 Business Days of the date of
the Borrower's or any Subsidiary's receipt of the Net Proceeds from
such sale, if such sale was of assets other than Equipment, or
within 15 Business Days of the end of the fiscal month in which such
Equipment was sold, if such sale was of Equipment, the Borrower
shall make a prepayment of principal on the Term Loan in an amount
equal to 80% of the Net Proceeds from such Asset Disposition or, if
greater, the amount originally loaned to the Borrower under the Term
Loan with respect to the disposed assets, which Term Loan prepayment
shall be advanced by the Agent as a Revolving Credit Loan; provided
no such repayment of the Revolving Credit Loan or prepayment of the
Term Loan shall be required with respect to Net Proceeds not in
excess of $250,000 during any fiscal year from permitted Asset
Dispositions (other than the sale of Borrower's narrow fabrics
business,
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the disposition of plant and equipment held for disposal as of the
Agreement Date, and the disposition of the Borrower's hosiery plant
located in Robbins, North Carolina). In the event a Contingent
Liability Reserve was deducted from the sale proceeds in order to
calculate Net Proceeds, the amount of such Contingent Liability
Reserve shall be reserved against the Borrowing Base by the Agent
until such time as the actual amount of liability is determined.
(iii) Notwithstanding the foregoing, if the Borrower
reasonably expects the Net Proceeds of any permitted Asset
Disposition (other than the sale of Borrower's narrow fabrics
business, the disposition of plant and equipment held for disposal
as of the Agreement Date, and the disposition of the Borrower's
hosiery plant located in Robbins, North Carolina) to be reinvested
within six months in productive assets of a kind then used or
useable in the business of the Borrower and that are not subject to
any Lien other than Permitted Liens (other than Purchase Money
Liens) and Liens in favor of the Agent, for the benefit of the
Secured Creditors, then (A) to the extent such proceeds do not
exceed the balance from time to time of the Revolving Credit Loans,
such proceeds shall be applied to the repayment of the outstanding
balance of the Revolving Credit Loans and the Agent shall, until
such time as the reinvestment of such proceeds, establish a reserve
against the Borrowing Base in the amount of the proceeds so applied,
and (B)<0- 95>to the extent such proceeds exceed the balance from
time to time of the Revolving Credit Loans, the Borrower shall
deposit such proceeds with the Agent to be held as Cash Collateral
in which the Agent, for the ratable benefit of the Secured
Creditors, shall have a first priority security interest. Upon the
Borrower's reinvestment of such Net Proceeds as described above, the
Agent shall release its security interest in such Cash Collateral in
respect of the reinvested funds and shall eliminate the reserve
against the Borrowing Base. To the extent that the Borrower fails to
reinvest such proceeds within six months as provided above, the
Borrower authorizes and directs the Agent to eliminate such reserve,
to apply the amount of the Cash Collateral in respect of the
unreinvested amount to the prepayment of the Term Loan to the extent
required under clause (ii) above, to make Revolving Credit Loans in
an amount equal to the reserved amount that is not reinvested, and
to apply the proceeds of such Revolving Credit Loans to the
prepayment of the Term Loan to the extent required under clause (ii)
above.
(iv) Concurrently with the making of any prepayment under this
clause (a) or the disposition of any assets under clause (iii)
above, the Borrower shall deliver to Agent a certificate of the
Financial Officer demonstrating the calculations of the amount
required to be prepaid or, as the case may be, applied to the
Revolving Credit Loans or deposited as Cash Collateral.
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(b) Excess Cash Flow Recapture. Within 95 days after the end of each
fiscal year of the Borrower (commencing with the fiscal year ending on or
about January 31, 1999), but in any event within five Business Days after
delivery of the audited financial statements required under Section
11.1(b), the Borrower shall make a prepayment of the Term Loan in an
amount equal to 50% of Excess Cash Flow for the fiscal year with respect
to which such financial statements were delivered. Concurrently with the
making of any such payment, the Borrower shall deliver to the Agent and
each of the Lenders a certificate of the Financial Officer demonstrating
the calculation of the amount required to be paid.
(c) Application of Proceeds of Prepayments. All prepayments of the
Term Loan pursuant to this Section 5.9 shall be applied pro rata to the
outstanding principal balance of the Term Loan. Any amount that would be
required to be applied as a prepayment of the Term Loan pursuant to this
Section 5.9 that exceeds the outstanding balance of the Term Loan shall be
deposited with the Agent to be held as Cash Collateral for the Secured
Obligations and applied by the Agent from time to time to outstanding
Revolving Credit Loans or, after the Termination Date, to any of the
Secured Obligations in such manner as the Agent shall determine in its
sole discretion.
SECTION 5.10. Prepayment Fee.
(a) Termination and Prepayment. If the Borrower terminates this
Agreement prior to the second anniversary of the Agreement Date, the
Borrower shall pay to the Agent, for the ratable benefit of the Lenders,
on such date of termination, as liquidated damages and compensation for
the costs of making funds available to the Borrower under this Agreement,
and not as a penalty, an amount equal to (i) 2% of the sum of the maximum
amount of the Revolving Credit Facility plus the outstanding principal
balance of the Term Loan at the time of termination if such termination
occurs on or prior to the first anniversary of the Agreement Date, and
(ii) 1% of the sum of the maximum amount of the Revolving Credit Facility
plus the outstanding principal balance of the Term Loan at the time of
termination if such termination occurs after the first anniversary of the
Agreement Date but on or prior to the second anniversary of the Agreement
Date; provided, however, if this Agreement is terminated after the first
anniversary of the Agreement Date but on or prior to the second
anniversary of the Agreement Date in connection with the purchase (whether
through stock purchase, asset purchase, merger or consolidation) of the
Borrower by a strategic buyer, such early termination fee shall equal 1/2%
of the sum of the maximum amount of the Revolving Credit Facility plus the
outstanding principal balance of the Term Loan at the time of termination.
(b) Prepayment of Term Loan. If the Borrower voluntarily prepays the
Term Loan in whole or in part prior to the second anniversary of the
Agreement Date, other than in connection with a termination of this
Agreement described in clause (a) above, the Borrower shall pay to the
Agent, for the
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ratable benefit of the Lenders, on such date of prepayment, as liquidated
damages and compensation for the costs of making funds available to the
Borrower under this Agreement, and not as a penalty, an amount equal to
(i) 2% of the principal balance of the Term Loan prepaid if such
termination occurs on or prior to the first anniversary of the Agreement
Date, and (ii) 1% of the amount of the Term Loan prepaid if such
termination occurs after the first anniversary of the Agreement Date but
on or prior to the second anniversary of the Agreement Date. A prepayment
made pursuant to Section 5.9 shall not be deemed a voluntary prepayment
under this Section 5.10.
SECTION 5.11. Payments Not at End of Interest Period; Failure to
Borrow. If for any reason any payment of principal with respect to any
Eurodollar Rate Revolving Credit Loan is made on any day prior to the last day
of the Interest Period applicable to such Eurodollar Rate Revolving Credit Loan
other than in connection with repayment in full of the Secured Obligations, the
Borrower may, on the date of such payment, instruct the Agent to apply such
payment received on account of Eurodollar Rate Revolving Credit Loans which
would otherwise result in prepayment of such Loans prior to the end of the
applicable Interest Period to the Cash Collateral Account, such payment to be
subsequently applied to the applicable Eurodollar Rate Revolving Credit Loan on
the last day of the Interest Period applicable thereto (or, if earlier, the
acceleration or maturity of the Revolving Credit Loans). If for any reason any
payment of principal with respect to any Eurodollar Rate Term Loan is made on
any day prior to the last day of the Interest Period applicable to such
Eurodollar Rate Term Loan, or if any Eurodollar Rate Revolving Credit Loan is
repaid in full in connection with repayment in full of the Secured Obligations
on any day prior to the last day of the Interest Period applicable to such
Eurodollar Rate Revolving Credit Loan, or, after having given a Notice of
Borrowing with respect to any Eurodollar Rate Revolving Credit Loan or a Notice
of Conversion or Continuation with respect to any Loan to be continued as or
converted into a Eurodollar Rate Loan, such Loan is not made or is not continued
as or converted into a Eurodollar Rate Loan due to the Borrower's failure to
borrow or to fulfill the applicable conditions set forth in Article 6, or if the
Borrower fails to instruct the Agent to apply any payment of principal with
respect to any Eurodollar Rate Revolving Credit Loan prior to the last day of
the applicable Interest Period to the Cash Collateral Account in accordance with
the preceding sentence, the Borrower shall pay to each Lender upon the request
of the Agent or such Lender, in addition to any amounts that may be due under
Section 5.10, an amount (if a positive number) sufficient to compensate the
Agent and each Lender for any and all losses or expenses which the Agent or such
Lender has sustained or incurred as a consequence of the Borrower's payment of
principal of a Eurodollar Rate Loan prior to the last day of the Interest Period
applicable thereto or the Borrower's failure to borrow as described in this
Section.
SECTION 5.12. Assumptions Concerning Funding of Eurodollar Rate
Loans. Calculation of all amounts payable to the Lenders under this Article 5
shall be made as though each Lender had actually funded or committed to fund its
Eurodollar Rate Loans through the purchase of an underlying deposit in an amount
equal to the
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amount of its Eurodollar Rate Loans and having a maturity comparable to the
relevant Interest Period for such Eurodollar Rate Loans; provided, however, each
Lender may fund its Eurodollar Rate Loans in any manner it deems fit and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Article 5.
SECTION 5.13. Notice of Conversion or Continuation. Whenever the
Borrower desires, subject to the provisions of Section 5.14, to convert an
outstanding Loan into a Loan or Loans of a different Type or to continue all or
a portion of an outstanding Eurodollar Rate Loan for a subsequent Interest
Period, the Borrower shall notify the Agent by telephone or in writing by telex
or facsimile transmission (which notice shall be irrevocable) not later than
12:00 noon (Atlanta time) on the date two Business Days before the day on which
such proposed conversion or continuation is to be effective (and such effective
date of any continuation shall be the last day of the Interest Period for the
applicable Eurodollar Rate Loan); provided the Borrower shall not be permitted
to convert Loans into (or continue Loans as) Eurodollar Rate Loans at any time
during the existence of an Event of Default. Each such notice (a "Notice of
Conversion or Continuation") shall (i) identify the Loan to be converted or
continued, the aggregate outstanding principal balance thereof and, if a
Eurodollar Rate Loan, the last day of the Interest Period applicable to such
Loan, (ii) specify the effective date of such conversion or continuation, (iii)
specify the principal amount of such Loan to be converted or continued and, if
converted, the Type or Types into which the same is to be converted, and (iv)
the Interest Period to be applicable to the Eurodollar Rate Loan as converted or
continued, and shall, if notice thereof was originally given by telephone, be
immediately followed by a signed, written confirmation thereof by the Borrower
in a form acceptable to the Agent, provided that if such written confirmation
differs in any respect from the action taken by the Lenders, the records of the
Agent shall control absent manifest error.
SECTION 5.14. Conversion or Continuation. Provided that no Event of
Default shall have occurred and be continuing (but subject to the provisions of
Sections 5.13 and 5.16), the Borrower may request that all or any part of any
outstanding Loan be converted into a Loan or Loans of a different Type or be
continued as a Loan or Loans of the same Type, in the same aggregate principal
amount, on any Business Day (which, in the case of continuation of a Eurodollar
Rate Loan, shall be the last day of the Interest Period applicable to such
Loan), upon notice (which notice shall be irrevocable) given in accordance with
Section 5.13, provided that nothing in this Article 5 shall be construed to
permit the conversion of a Revolving Credit Loan to a Term Loan or vice versa.
SECTION 5.15. Duration of Interest Periods; Maximum Number of
Eurodollar Rate Loans; Minimum Increments.
(a) Subject to the provision of the definition "Interest Period",
the duration of each Interest Period applicable to a Eurodollar Rate Loan
shall be as specified in the applicable Notice of Borrowing or Notice of
Conversion or Continuation. The Borrower may elect a subsequent Interest
Period to be
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applicable to any Eurodollar Rate Loan by giving a Notice of Conversion or
Continuation with respect to such Loan in accordance with Section 5.13.
(b) If the Agent does not receive a notice of election in accordance
with Section 5.13 with respect to the continuation of a Eurodollar Rate
Loan within the applicable time limits specified in said Section 5.13, or
if, when such notice must be given, an Event of Default exists or such
Type of Loan is not available, the Borrower shall be deemed to have
elected to convert such Eurodollar Rate Loan in whole into a Prime Rate
Loan on the last day of the Interest Period therefor.
(c) Notwithstanding the foregoing, the Borrower may not select an
Interest Period that would end, but for the provisions of the definition
"Interest Period," after the Termination Date.
(d) In no event shall there be more than (i) six Eurodollar Rate
Revolving Credit Loans outstanding hereunder at any time, or (ii) three
Eurodollar Rate Term Loans outstanding at any time under the Term Loan
Facility. For the purpose of this subsection (d), each Eurodollar Rate
Revolving Credit Loan and each Eurodollar Rate Term Loan having a distinct
Interest Period shall be deemed to be a separate Loan hereunder.
(e) Each Eurodollar Rate Loan shall be in a minimum amount of
$2,000,000 and integral multiples of $250,000 in excess thereof.
SECTION 5.16. Changed Circumstances.
(a) If the introduction of or any change in or in the interpretation
of (in each case, after the date hereof) any law or regulation makes it
unlawful, or any governmental authority asserts, after the date hereof,
that it is unlawful, for any Lender to perform its obligations hereunder
to make Eurodollar Rate Loans or to fund or maintain Eurodollar Rate Loans
hereunder, such Lender shall notify the Agent of such event and the Agent
shall notify the Borrower of such event, and the right of the Borrower to
select Eurodollar Rate Loans for any subsequent Interest Period or in
connection with any subsequent conversion of any Loan shall be suspended
until the Agent shall notify the Borrower that the circumstances causing
such suspension no longer exist, and the Borrower shall forthwith prepay
in full all Eurodollar Rate Revolving Credit Loans then outstanding and
shall convert each Eurodollar Rate Term Loan into a Prime Rate Term Loan,
and shall pay all interest accrued thereon through the date of such
prepayment or conversion, unless the Borrower, within three Business Days
after such notice from the Agent, request the conversion of all Eurodollar
Rate Loans then outstanding into Prime Rate Loans; provided, that if the
date of such repayment or proposed conversion is not the last day of the
Interest Period applicable to such Eurodollar Rate Loan, the Borrower
shall also pay any amount due pursuant to Section 5.11.
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(b) If the Agent shall, at least one Business Day before the date of
any requested Loan or the effective date of any conversion or continuation
of an existing Loan to be made or continued as or converted into a
Eurodollar Rate Loan (each such requested Loan made and Loan to be
converted or continued, a "Pending Loan"), notify the Borrower that the
Eurodollar Rate will not adequately reflect the cost to the Lenders of
making or funding such Pending Loan as a Eurodollar Rate Loan or that the
Interbank Offered Rate is not reasonably determinable, including from any
interest rate reporting service of recognized standing, then the right of
the Borrower to select Eurodollar Rate Loans for such Pending Loan, any
subsequent Loan or in connection with any subsequent conversion or
continuation of any Loan shall be suspended until the Agent shall notify
the Borrower that the circumstances causing such suspension no longer
exist, and each Pending Loan and each such subsequent Loan requested to be
made, continued or converted shall be made or continued as or converted
into a Prime Rate Loan.
(c) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Reserve Percentage) in or in the interpretation
of, in each case after the date hereof, any law or regulation (except to
the extent such introduction, change or interpretation affects taxes
measured by net income or gross proceeds), or (ii) the compliance with a
guideline or request (except to the extent such guideline or request
affects taxes measured by net income or gross proceeds) from any central
bank or other governmental authority (whether nor not having the force of
law) made after the date hereof, there shall be any increase in the cost
to any Lender of agreeing to make or making, funding or maintaining
Eurodollar Rate Loans (other than as separately provided for in Section
5.16(d)), then the Borrower shall from time to time, within 30 days after
demand by such Lender (with a copy of such demand to the Agent), pay to
the Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost.
(d) If (i) the adoption of or change in, after the date hereof, any
law, rule, regulation or guideline regarding capital requirements for
banks or bank holding companies, or any change, after the date hereof, in
the interpretation or application thereof by any governmental authority
charged with the interpretation or administration thereof, or (ii)
compliance by such Lender with any guideline, request or directive, made
or promulgated after the date hereof, of any such entity regarding capital
adequacy (whether or not having the force of law) or increasing a
requirement by such Lender to allocate capital resources to such Lender's
Commitment to make Loans hereunder, has the effect of reducing the return
on a Lender's capital as a consequence of its maintaining its Loans or
commitment to make Loans hereunder to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy
immediately before such adoption, change or compliance and assuming the
full utilization of such Lender's
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capital immediately before such adoption, change or compliance) or if any
change in law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with
any guideline or request of any central bank or other governmental
authority (whether or not having the force of law) subjects a Lender to
any tax with respect to payments of principal or interest or any other
amounts payable hereunder by the Borrower or otherwise with respect to the
transactions contemplated hereby (except for taxes on the overall net
income of such Lender imposed by the United States of America or any
political subdivision thereof or any jurisdiction in which such Lender is
organized or operates or any political subdivision thereof), in each case
by any amount deemed by such Lender to be material, then such Lender shall
promptly after its determination of such occurrence notify the Borrower
and the Agent thereof. The Borrower agrees to pay to the Agent, for the
account of such Lender, as an additional fee from time to time, within 30
days after demand by such Lender, such amount as such Lender certifies to
be the amount that will compensate it for such reduction.
(e) Before giving any notice pursuant to Section 5.16(a) or making
any demand pursuant to Section 5.16(c) or (d), each Lender agrees to use
its reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different lending office if the
making of such a designation would avoid the need for such notice or
demand, or reduce the amount of such increased cost or reduction in return
and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. If circumstances subsequently change so
that it is no longer unlawful for an affected Lender to make or maintain
Eurodollar Rate Loans as contemplated hereunder, such Lender will, as soon
as reasonably practicable after such Lender knows of such change in
circumstances, notify the Borrower and the Agent, and upon receipt of such
notice, the obligations of such Lender to make or continue Eurodollar Rate
Loans shall be reinstated.
(f) Notwithstanding any other provision of this Section 5.16, no
Lender shall demand compensation for any increased cost or reduction
referred to above if it shall not at the time be the general policy or
practice of such Lender to demand such compensation in similar
circumstances under comparable provisions of other credit agreements, if
any.
(g) A certificate of any Lender claiming compensation under Section
5.16(c) or (d) shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to
such compensation, the additional amount or amounts to be paid to it
hereunder, and the method by which such amounts were determined. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods.
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SECTION 5.17. Cash Collateral Account. The Borrower shall establish
a Cash Collateral Account in which to deposit Collateral consisting of cash or
Cash Equivalents from time to time (a) representing payments received pursuant
to Sections 2.3(c), 5.9(a)(iii) and 5.11 in excess of then outstanding Revolving
Credit Loans or on account of Eurodollar Rate Loans which would otherwise result
in repayment of such Loans prior to the end of the Interest Period applicable
thereto, (b) with respect to Letter of Credit Obligations for the purposes set
forth in Section 5.6 in the event of termination of this Agreement, or (c) for
any other purpose specified under this Agreement to provide security for the
Secured Obligations. On the last day of the applicable Interest Period as to any
amounts deposited to the Cash Collateral Account pursuant to clause (a) above or
if a drawing under a Letter of Credit occurs with respect to any amounts
deposited to the Cash Collateral Account pursuant to clause (b) above, the
Borrower hereby authorizes the Agent to use the monies deposited in the Cash
Collateral Account to make payment to the payee with respect to such Loan or
drawing. The Cash Collateral Account shall be in the name of the Agent and the
Agent shall have sole dominion and control over, and sole access to, the Cash
Collateral Account. Neither the Borrower nor any Person claiming on behalf of or
through the Borrower shall have any right to withdraw any of the funds held in
the Cash Collateral Account. The Borrower agrees that it will not at any time
(i) sell or otherwise dispose of any interest in the Cash Collateral Account or
any funds held therein or (ii) create or permit to exist any Lien upon or with
respect to the Cash Collateral Account or any funds held therein, except as
provided in or contemplated by this Agreement. The Agent shall exercise
reasonable care in the custody and preservation of any funds held in the Cash
Collateral Account and shall be deemed to have exercised such care if such funds
are accorded treatment substantially equivalent to that which the Agent accords
its own funds, it being understood that the Agent shall not have any
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any funds held in the Cash Collateral Account. Subject
to the right of the Agent to withdraw funds from the Cash Collateral Account as
provided herein, the Agent will, so long as no Default or Event of Default shall
have occurred and be continuing, from time to time invest funds on deposit in
the Cash Collateral Account, reinvest proceeds of any such investments which may
mature or be sold, and invest interest or other income received from any such
investments, in each case, in Cash Equivalents, as the Borrower may direct prior
to the occurrence of a Default or Event of Default and as the Agent may select
after the occurrence and during the continuance of a Default or Event of
Default. Such proceeds, interest and income which are not so invested or
reinvested in Cash Equivalents shall be deposited and held by the Agent in the
Cash Collateral Account. The Agent makes no representation or warranty as to,
and shall not be responsible for, the rate of return, if any, earned in any Cash
Collateral. Any earnings on Cash Collateral shall be held as additional Cash
Collateral on the terms set forth in this Section 5.17.
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ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1. Conditions Precedent to Initial Loans and Letters of
Credit. Notwithstanding any other provision of this Agreement, neither the
Initial Loans will be made, nor the initial Letter of Credit issued, until the
fulfillment of each of the following conditions prior to or contemporaneously
with the making of the first to be made of such Loans and issuing of any such
Letter of Credit:
(a) Financial Condition. The Borrower shall have delivered to the
Agent a fair saleable value balance sheet, as of January 31, 1998,
prepared and certified to by the Financial Officer in form and substance
satisfactory to the Agent and the Lenders, and setting forth valuations of
the Borrower's assets, the Projections and the Pro Forma, together with a
certificate executed by the Financial Officer, in form and substance
satisfactory to the Agent, certifying that as of the Effective Date, after
giving effect to the consummation of the transactions contemplated by the
Acquisition Documents, the extension of the initial Revolving Credit Loan
and the Term Loan, the issuance of any Letters of Credit on the Effective
Date, and the payment of all fees and expenses in connection with such
transactions, the fair saleable value of the Borrower's assets will exceed
the amount required to pay its debts as they become absolute and matured
(including contingent, subordinated, unmatured and unliquidated
liabilities), the Borrower is able and anticipates that it will be able to
meet its debts as they mature, and the Borrower has adequate capital to
conduct the business in which it is or proposes to be engaged, together
with attachments demonstrating the basis of such conclusions.
(b) Syndication Market. There shall not have occurred any change
which is materially adverse in the market for syndicated bank credit
facilities, or a material disruption of, or a material adverse change in,
financial, banking or capital market conditions, in each case as
determined by the Agent and the Syndication Agent in their sole
discretion.
(c) Acquisition. On the Effective Date, (i) the Lenders shall have
received true and complete executed or conformed copies of the Acquisition
Documents and any amendments thereto; (ii) the Acquisition Documents shall
be in full force and effect and no material term or condition thereof
shall have been amended, modified or waived after the execution thereof
(other than solely to extend the date by which the Acquisition is required
to occur) except with the prior written consent of the Lenders; (iii) none
of the parties to any of the Acquisition Documents shall have failed to
perform any material obligation or covenant required by such Acquisition
Document to be performed or complied with by it on or before the Effective
Date; (iv) all representations and warranties of the Borrower and the
Seller contained in the Acquisition Agreement and the
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other Acquisition Documents shall be true and correct in all material
respects with the same effect as though made on and as of the Effective
Date; (v) all requisite approvals by governmental authorities and
regulatory bodies having jurisdiction over the parties to the Acquisition
Agreement in respect of the acquisition of the Acquired Assets shall have
been obtained by such parties, and no such approvals shall impose any
conditions to the consummation of the acquisition of the Acquired Assets;
(vi) the acquisition of the Acquired Assets shall have been consummated in
accordance with the terms and provisions of the Acquisition Agreement and
the other Acquisition Documents, without any amendment or waiver of any
material provision thereof; and (vii) the Lenders shall have received a
certificate from an officer of the Borrower, or other evidence
satisfactory to them, that each of the conditions set forth in clauses (i)
through (vi) above shall have been satisfied. In addition, all opinion
letters delivered in connection with the Acquisition Documents and the
transactions contemplated thereby shall be addressed to the Agent, the
Syndication Agent, the Arranger, the Documentation Agent and the Lenders,
or accompanied by a written authorization from the firm delivering such
opinion letter stating that such parties may rely on such opinion letter
as though it were addressed to them.
(d) Security Interests. The Agent shall have received satisfactory
evidence that the Agent (for the benefit of the Secured Creditors) has a
valid and perfected first priority security interest as of such date in
all of the Collateral, subject only to Permitted Liens.
(e) Closing Documents. The Agent shall have received each of the
following documents, all of which shall be satisfactory in form and
substance to the Agent and its counsel and to the Lenders:
(i) certified copies of the articles or certificate of
incorporation and bylaws of the Borrower as in effect on the
Effective Date,
(ii) certified copies of all corporate action, including
shareholder approval, if necessary, taken by the Borrower to
authorize the execution, delivery and performance of this Agreement,
the Loan Documents, the borrowings under this Agreement, and the
execution, delivery and performance of the Acquisition Agreement and
the Acquisition Documents,
(iii) certificates of incumbency and specimen signatures with
respect to each of the officers of the Borrower authorized to
execute and deliver this Agreement and the Loan Documents on behalf
of the Borrower and to request borrowings under this Agreement,
(iv) a certificate evidencing the good standing of the
Borrower in the jurisdiction of its incorporation and in each other
jurisdiction in which it
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is required to be qualified as a foreign corporation to transact its
business as presently conducted,
(v) copies of all financial statements referred to in Section
7.1(n) and meeting the requirements thereof,
(vi) a signed opinion of Paul, Weiss, Rifkind, Wharton &
Garrison, counsel for the Borrower, substantially in the form of
Exhibit C, and of such local counsel for the Borrower as may be
required, opining as to such matters in connection with the
transactions contemplated by this Agreement as the Agent or its
counsel may reasonably request, including local counsel opinions
regarding the Mortgages and the Real Estate,
(vii) the Financing Statements duly executed and delivered by
the Borrower and acknowledgment copies evidencing the filing of such
Financing Statements in each jurisdiction where such filing may be
necessary or appropriate to perfect the Security Interest,
(viii) a certification from the principal officers of the
Borrower as to such factual matters as shall be requested by the
Agent,
(ix) certificates or binders of insurance relating to each of
the policies of insurance covering any of the Collateral together
with loss payable clauses which comply with the terms of Section
9.8,
(x) a certificate of the President or a Financial Officer of
the Borrower stating that, to the best of his knowledge and based on
an examination sufficient to enable him to make an informed
statement,
(A) all of the representations and warranties made or
deemed to be made under this Agreement are true and correct as
of the Effective Date, after giving effect to the Initial
Loans to be made (and Letters of Credit to be issued) at such
time and the application of the proceeds thereof, and
(B) no Default or Event of Default exists,
(xi) a Borrowing Base Certificate as of January 31, 1998, a
Schedule of Inventory as of January 31, 1998 and a Schedule of
Receivables as of January 31, 1998,
(xii) copies of the Mortgages, duly executed and delivered by
the Borrower, in proper form for recording in the appropriate
jurisdiction, in order to create a valid first Lien on and security
title to the Real Estate described therein,
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(xiii) one or more fully paid unconditional commitments for
the issuance of mortgagee title insurance policies with all
requirements and conditions to the issuance of the final policy
deleted or marked satisfied, issued by First American Title
Insurance Company, each in an amount equal to not less than the fair
market value of the Real Estate subject to the Mortgage insured
thereby, insuring that such Mortgage creates a valid first lien on,
and security title to, all Real Estate described therein, with
exceptions only for the Permitted Encumbrances (as defined in each
Mortgage),
(xiv) such materials and information concerning the Real
Estate as the Agent may reasonably require, including, without
limitation, (A) current and accurate surveys satisfactory to the
Agent of the owned Real Estate, certified to the Agent and showing
the location of the 100-year and 50-year flood plains thereon, (B)
owner's affidavits as to such matters relating to the owned Real
Estate as the Agent may reasonably request, and (C) engineer's
reports as to the condition of the improvements on the Real Estate
and the compliance of the Real Estate with all Applicable Laws,
codes and ordinances as the Agent may reasonably request,
(xv) landlord's or mortgagee's waiver and consent agreements
duly executed on behalf of each landlord or mortgagee, as the case
may be, of Real Estate and any other real property on which any
Collateral is located, to the extent Borrower can obtain such
landlord's or mortgagee's waiver and consent agreements using all
reasonable efforts,
(xvi) the Acquisition Documents Assignment, duly executed by
the Borrower,
(xvii) Agency Account Agreements, each duly executed by the
Borrower and the Clearing Bank party thereto, with respect to each
bank account of the Borrower other than the Excepted Accounts,
(xviii) the Initial Notice of Borrowing, duly executed by the
Borrower,
(xix) certificates of title for all of the Borrower's motor
vehicles, trailers and other property for which a certificate of
title has been issued, subject to such exceptions as the Agent shall
reasonably approve, together with applications for the noting of the
Agent's security interest (on behalf of the Secured Creditors)
thereon, duly executed by the Borrower and in form appropriate for
submission to the applicable governmental authority that issued such
certificate of title;
(xx) copies of each of the other Loan Documents duly executed
by the parties thereto, and
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(xxi) such other documents and instruments as the Agent or any
Lender may reasonably request.
(f) Notes. Each Lender shall have received a Revolving Credit Note
and a Term Note, each duly executed and delivered by the Borrower,
complying with the terms of Sections 2.4 and 4.4, as applicable.
(g) Second Lien Senior Secured Facility. The Second Lien Senior
Secured Facility shall have closed, and the Borrower shall have received
the proceeds of the loan to be made thereunder, in accordance with the
terms of the Second Lienholder Loan Agreement.
(h) Intercreditor Agreement. The Second Lien Noteholders and the
collateral agent under the Second Lienholder Loan Agreement shall have
duly executed and delivered the Intercreditor Agreement, in form and
substance satisfactory to the Agent and the Lenders.
(i) Stock Pledge Agreement. The Agent shall have received the Stock
Pledge Agreement, and corresponding blank stock powers and stock
certificates, in form and substance satisfactory to the Agent and the
Lenders, duly executed and delivered by the Borrower.
(j) Other Security Documents. The Agent shall have received each
other Security Document, in form and substance satisfactory to the Agent
and the Lenders, duly executed and delivered by the Borrower.
(k) Seller Subordinated Note. The Agent shall have received a copy
of the Seller Subordinated Note, in form and substance satisfactory to the
Agent and the Lenders, duly executed and delivered by the Borrower.
(l) Environmental Indemnity Agreement. The Agent shall have received
the Environmental Indemnity Agreement, in form and substance satisfactory
to the Agent and the Lenders, duly executed and delivered by the Borrower.
(m) Availability. The Agent shall be provided with evidence
satisfactory to it that as of the Effective Date, after giving effect to
the consummation of the transactions contemplated by the Acquisition
Documents, the extension of the Initial Loans, the issuance of any Letters
of Credit on the Effective Date, and the payment of all fees and expenses
in connection with such transactions, Availability is not less than
$12,000,000.
(n) No Injunctions, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to
enjoin, restrain, or prohibit, or to obtain damages in respect of, or
which is related to or arises out
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of this Agreement, the Acquisition Documents, or the consummation of the
transactions contemplated hereby or thereby, or which, in the Agent's or
the Lenders' reasonable judgment, would make it inadvisable to consummate
the transactions contemplated by this Agreement.
(o) Material Adverse Change. Except as previously disclosed in
writing to the Agent and the Lenders, there shall not have occurred any
change which is materially adverse, in the Agent's or the Lenders'
reasonable judgment, to the assets, liabilities, businesses, operations,
condition (financial or otherwise) or prospects of the Borrower, the
Seller, and their respective Subsidiaries, from those presented by the
financial statements described in Section 7.1(n)(i)(A) and (ii)(A). (p)
Release of Security Interests. The Agent shall have received evidence
satisfactory to it of the release and termination of all Liens other than
Permitted Liens.
(q) Interest Rate Protection Agreements. The Borrower shall have, as
of the Effective Date, Interest Rate Protection Agreements acceptable to
the Agent and the Syndication Agent with Bankers Trust Company for an
aggregate amount equal to at least $45,000,000 notional principal amount
for a period expiring on or after 120 days after the Effective Date.
SECTION 6.2. All Loans; Letters of Credit. At the time of making of
each Loan, including the Initial Loans and all subsequent Loans, and the
issuance of each Letter of Credit:
(a) all of the representations and warranties made or deemed to be
made under this Agreement shall be true and correct in all material
respects at such time both with and without giving effect to the Loan to
be made at such time and the application of the proceeds thereof, except
that representations and warranties which by their terms are applicable
only to a particular date shall be deemed to be made only at and as of
such date,
(b) the corporate actions of the Borrower referred to in Section
6.1(e)(ii) shall remain in full force and effect and the incumbency of
officers shall be as stated in the certificates of incumbency delivered
pursuant to Section 6.1(e)(iii) or as subsequently modified and reflected
in a certificate of incumbency delivered to the Agent, and
(c) each request and deemed request for any borrowing hereunder
shall be deemed to be a certification by the Borrower to the Agent and the
Lenders as to the matters set forth in Section 6.2(a) and (b) and the
Agent may, without waiving either condition, consider the conditions
specified in Sections 6.2(a) and (b) fulfilled and a representation by the
Borrower to such effect made, if no written notice to the contrary is
received by the Agent prior to the making of the Loan then to be made.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1. Representations and Warranties. The Borrower represents
and warrants to the Agent and to the Lenders as follows:
(a) Organization; Power; Qualification. The Borrower and each of its
Subsidiaries is a corporation, duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, having
the power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted. The Borrower is duly
qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization except where the failure to be so qualified
would not have a Material Adverse Effect. The jurisdictions in which each
of the Borrower and each of its Subsidiaries is qualified to do business
as a foreign corporation on the Effective Date are listed on Schedule
7.1(a).
(b) Capitalization. The outstanding capital stock of the Borrower
has been duly and validly issued and is fully paid and nonassessable. The
issuance and sale of the Borrower's capital stock have been registered or
qualified under applicable federal and state securities laws or are exempt
therefrom.
(c) Subsidiaries. Schedule 7.1(c) correctly sets forth the name of
each Subsidiary of the Borrower, its jurisdiction of incorporation, the
name of its immediate parent or parents, and the percentage of its issued
and outstanding securities owned by the Borrower or any other Subsidiary
of the Borrower and indicating whether such Subsidiary is a Consolidated
Subsidiary, in each case as of the Effective Date. Except as set forth on
Schedule 7.1(c), (i) no Subsidiary of the Borrower has issued any
securities convertible into shares of such Subsidiary's capital stock or
any options, warrants or other rights to acquire any shares or securities
convertible into such shares, (ii) the outstanding stock and securities of
each Subsidiary of the Borrower are owned by the Borrower free and clear
of all Liens (other than Permitted Liens), warrants, options and rights of
others of any kind whatsoever, and (iii) the Borrower has no Subsidiaries,
other than Subsidiaries that it has created after the Effective Date in
compliance with this Agreement. The outstanding capital stock of each
Subsidiary of the Borrower has been duly and validly issued and is fully
paid and nonassessable by the issuer, and the number and owners of the
shares of such capital stock are set forth on Schedule 7.1(c) as the same
may hereafter be updated from time to time to reflect the creation of
Subsidiaries in accordance with this Agreement.
(d) Authorization of Agreement, Notes, Loan Documents and Borrowing.
The Borrower has the right and power, and has taken all necessary
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corporate action to authorize it, to execute, deliver and perform this
Agreement and each of the Loan Documents in accordance with their
respective terms. This Agreement and each of the Loan Documents have been
duly executed and delivered by the duly authorized officers of the
Borrower and each is, or each when executed and delivered in accordance
with this Agreement will be, a legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, and
other similar laws relating to or affecting creditor's rights generally,
general equitable principles and an implied covenant of good faith and
fair dealing.
(e) Compliance of Agreement, Notes, Loan Documents and Borrowing
with Laws, Etc. Except as set forth on Schedule 7.1(e), the execution,
delivery and performance of this Agreement and each of the Loan Documents
in accordance with their respective terms and the borrowings hereunder do
not and will not, by the passage of time, the giving of notice or
otherwise, (i) require any Governmental Approval or violate any Applicable
Law relating to the Borrower or any of its Subsidiaries, (ii) conflict
with, result in a breach of or constitute a default under the articles or
certificate of incorporation or by-laws of the Borrower or any of its
Subsidiaries, (iii) conflict with, result in a breach of or constitute a
default under any material provisions of any indenture, agreement or other
instrument to which the Borrower or any of its Subsidiaries is a party or
by which the Borrower, any of its Subsidiaries or any of the Borrower's or
such Subsidiaries' property may be bound or any Governmental Approval
relating to the Borrower or any of its Subsidiaries, or (iv) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower other than the
Security Interest.
(f) Business. The Borrower is engaged in the business described on
Schedule 7.1(f) and businesses related thereto.
(g) Compliance with Law; Governmental Approvals.
(i) Except as set forth in Schedule 7.1(g), the Borrower and
each of its Subsidiaries (A) has all Governmental Approvals,
including permits relating to federal, state and local Environmental
Laws, ordinances and regulations, required by any Applicable Law for
it to conduct its business, each of which is in full force and
effect, is final and not subject to review on appeal and is not the
subject of any pending or, to the knowledge of the Borrower,
threatened attack by direct or collateral proceeding, and (B) is in
compliance with each Governmental Approval applicable to it and in
compliance with all other Applicable Laws relating to it, including,
without being limited to, all Environmental Laws and all
occupational health and safety laws applicable to the Borrower, any
of its Subsidiaries or their respective properties, except for
instances of noncompliance which would not, singly or in the
aggregate, cause a Default or Event of Default
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or have a Materially Adverse Effect and in respect of which reserves
in respect of the Borrower's or such Subsidiary's reasonably
anticipated liability therefor have been established on the books of
the Borrower or such Subsidiary, as applicable, if such reserves
would be required by GAAP.
(ii) Without limiting the generality of the above, except as
disclosed on a report delivered pursuant to Section 6.1(e)(xix) or
(xx) or with respect to matters which could not reasonably be
expected to have, singly or in the aggregate, a Materially Adverse
Effect, (A) the operations of the Borrower and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws; (B) the Borrower and each of its Subsidiaries
has obtained all permits required pursuant to Environmental Laws and
necessary for its operation, and all such permits are in good
standing and the Borrower and each of its Subsidiaries is in
compliance in all material respects with all terms and conditions of
such permits; (C) neither the Borrower nor any of its Subsidiaries
nor any of their respective present or past property or operations
are subject to any order from or agreement with any public authority
or private party respecting (1) any Environmental Laws, (2) any
Remedial Action, or (3) any liabilities and costs arising from the
Release or threatened Release of a Contaminant into the environment;
(D) none of the operations of the Borrower or of any of its
Subsidiaries is subject to any judicial or administrative proceeding
alleging a violation of any Environmental Laws; (E) none of the
present nor past operations of the Borrower or any of its
Subsidiaries is the subject of any investigation by any public
authority evaluating whether any Remedial Action is needed to
respond to a Release or threatened Release of a Contaminant into the
environment; (F) neither the Borrower nor any of its Subsidiaries
has filed any notice under any requirement of Environmental Laws
indicating past or present treatment, storage or disposal of a
hazardous waste, as that term is defined under 40 CFR Part 261 or
any state equivalent; (G) neither the Borrower nor any of its
Subsidiaries has filed any notice under any requirement of
Environmental Law reporting a Release of a Contaminant into the
environment; (H) Except in compliance in all material respects with
applicable Environmental Laws, during the course of the Borrower's
or any of its Subsidiaries' ownership of or operations on the Real
Estate, there have been no (1) generation, treatment, recycling,
storage or disposal of hazardous waste, as that term is defined
under 40 CFR Part 261 or any state equivalent, (2) use of
underground storage tanks or surface impoundments, (3) use of
asbestos-containing materials, or (4) use of polychlorinated
biphenyls (PCB) used in hydraulic oils, electrical transformers or
other equipment; (I) neither the Borrower nor any of its
Subsidiaries has entered into any negotiations or agreements with
any Person (including, without limitation, any prior owner of any of
the Real Estate or other property of the Borrower or any of its
Subsidiaries)
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relating to any Remedial Action or environmental related claim; (J)
neither the Borrower nor any of its Subsidiaries has received any
notice or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release of a
Contaminant into the environment; (K) neither the Borrower nor any
of its Subsidiaries has any material contingent liability in
connection with any Release or threatened Release of any Contaminant
into the environment; (L) no Environmental Lien has attached to any
of the Real Estate or other property of the Borrower or of any of
its Subsidiaries; (M) the presence and condition of all
asbestos-containing material which is on or part of the Real Estate
(excluding any raw materials used in the manufacture of products or
products themselves) do not violate in any material respect any
currently applicable requirement of Applicable Laws; and (N) neither
the Borrower nor any of its Subsidiaries manufactures, distributes
or sells, and has never manufactured, distributed or sold, products
which contain asbestos-containing material.
(iii) The Borrower has notified the Lenders of the receipt by
it or by any of its Subsidiaries of any notice of a material
violation of any Environmental Laws and occupational health and
safety laws applicable to the Borrower, any of its Subsidiaries or
any of their respective properties.
(h) Title to Properties. Except for Permitted Liens and as otherwise
set forth in Schedule 7.1(h), the Borrower and each of its Subsidiaries
has valid and legal title to or leasehold interest in all personal
property, Real Estate owned and other assets used in its business.
(i) Liens. Except as set forth in Schedule 7.1(i), none of the
properties and assets of the Borrower or any Subsidiary of the Borrower is
subject to any Lien, except Permitted Liens. Other than financing
statements filed with respect to Permitted Liens and the Financing
Statements, no financing statement under the Uniform Commercial Code of
any State or other instrument evidencing a Lien which names the Borrower
or any Subsidiary of the Borrower as debtor has been filed (and has not
been terminated) in any State or other jurisdiction, and neither the
Borrower nor any Subsidiary of the Borrower has signed any such financing
statement or other instrument or any security agreement authorizing any
secured party thereunder to file any such financing statement or
instrument, except to perfect those Liens listed on Schedule 7.1(i).
Except for financing statements filed with respect to Permitted Liens, no
financing statement under the Uniform Commercial Code of any State or
other instrument evidencing a Lien which names the Seller as debtor and
covers any of the Acquired Assets has been filed (and has not been
terminated) in any State or other jurisdiction.
(j) Indebtedness and Guarantees. Schedule 7.1(j) is a complete and
correct listing of all Indebtedness for Money Borrowed and Guarantees of
the
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Borrower and each of its Subsidiaries as of the Effective Date. Each of
the Borrower and its Subsidiaries has performed in all material respects
and is in material compliance with all of the terms of such Indebtedness
and Guarantees and all instruments and agreements relating thereto, and no
default or event of default, or event or condition which with notice or
lapse of time or both would constitute such a default or event of default,
which in either event would constitute a Default or Event of Default
hereunder, exists with respect to any such Indebtedness or Guaranty.
(k) Litigation. Except as set forth on Schedule 7.1(k), there are no
actions, suits or proceedings pending (nor, to the knowledge of the
Borrower, are there any actions, suits or proceedings threatened, or any
reasonable basis therefor) against the Borrower or such Subsidiaries or
any of the Acquired Assets or any of the Borrower's or any of its
Subsidiaries' other properties in any court or before any arbitrator of
any kind or before or by any governmental body, except actions, suits or
proceedings of the character normally incident to the kind of business
conducted by the Borrower or any of its Subsidiaries which, if adversely
determined, would not singly or in the aggregate have a Materially Adverse
Effect, and there are no strikes or walkouts in progress, pending or
contemplated relating to any labor contracts to which the Borrower or any
of its Subsidiaries is a party, relating to any labor contracts being
negotiated, or otherwise.
(l) Tax Returns and Payments. Except as set forth on Schedule
7.1(l), all United States federal, state and local as well as material
foreign national, provincial and local and other tax returns of the
Borrower and each of its Subsidiaries required by Applicable Laws to be
filed have been duly filed, and all United States federal, state and local
and foreign national, provincial and local and other taxes, assessments
and other governmental charges or levies upon the Borrower and each of its
Subsidiaries and the Borrower's and any of its Subsidiaries' property,
income, profits and assets which are due and payable have been paid,
except any such nonpayment which is at the time permitted under Section
10.6. The charges, accruals and reserves on the books of the Borrower and
each of its Subsidiaries in respect of United States federal, state and
local and foreign national, provincial and local taxes for all fiscal
years and portions thereof since the organization of the Borrower are in
the judgment of the Borrower adequate, and the Borrower knows of no reason
to anticipate any additional assessments for any of such years which,
singly or in the aggregate, could reasonably be expected to have a
Materially Adverse Effect.
(m) Burdensome Provisions. Neither the Borrower nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other
instrument, or subject to any charter or corporate restriction,
Governmental Approval or Applicable Law compliance with the terms of which
could reasonably be expected to have a Materially Adverse Effect.
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(n) Financial Statements.
(i) The Borrower has furnished to the Agent and the Lenders
copies of (A) the Seller's consolidated audited balance sheet as of
December 28, 1996 and the related consolidated statements of
operations, cash flow and shareholders' equity for the fiscal year
then ended, and (B) the Seller's unaudited balance sheet as of
December 27, 1997 and the related statements of operations, cash
flow and shareholders' equity for the fiscal period then ended,
which financial statements present fairly in all material respects
in accordance with GAAP the financial position of the Seller and its
consolidated Subsidiaries as of such dates and the results of
operations of the Seller and its consolidated Subsidiaries for the
periods then ended, subject to, in the case of unaudited financial
statements, normal year-end adjustments and the absence of complete
footnotes,
(ii) The Borrower has furnished to the Agent and the Lenders
copies of (A) the Borrower's consolidated audited balance sheet as
of February 1, 1997 and the related consolidated statements of
operations, cash flows and shareholder's equity for the fiscal year
then ended, and (B) the Borrower's consolidated unaudited balance
sheet as of January 3, 1998 and the related consolidated statements
of operations, cash flow and shareholders' equity for the 11 fiscal
month period then ended, which financial statements present fairly
in all material respects in accordance with GAAP the financial
position of the Borrower and its Consolidated Subsidiaries as of
such dates and the results of operations of the Borrower and its
Consolidated Subsidiaries for the periods then ended.
(iii) The Borrower has furnished to the Agent and the Lenders
copies of the Pro Forma. The Pro Forma presents fairly, on a pro
forma basis, the financial position of the Borrower and its
Consolidated Subsidiaries as at January 31, 1998.
(iv) The Borrower has furnished to the Agent and the Lenders
copies of the Projections. The Projections have been be prepared by
the Borrower in good faith in light of the past operations of the
business of the Seller, the Borrower and their respective
Subsidiaries.
(v) Except as disclosed or reflected in the financial
statements described in clauses (i) and (ii) above, as of the
Effective Date, neither the Borrower nor any of its Consolidated
Subsidiaries has any material liabilities, contingent or otherwise,
and there were no material unrealized or anticipated losses of the
Borrower or any of its Consolidated Subsidiaries, in either case of
a type or nature required to be disclosed or reflected in such
financial statements.
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(o) Adverse Change. Since the date of the last financial statements
of the Borrower and the Seller delivered to the Agent and the Lenders
pursuant to Section 7.1(n)(i) and (ii), after giving effect to the
transactions reflected in the Pro Forma, (i) no material adverse change
has occurred in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower or its
Consolidated Subsidiaries, and (ii) no event has occurred or failed to
occur which has had, or may have, singly or in the aggregate, a Materially
Adverse Effect.
(p) ERISA. Except as set forth on Schedule 7.1(p):
(i) As of the Effective Date, neither the Borrower nor any
Related Company maintains or contributes to any Benefit Plan.
(ii) No Benefit Plan has been terminated or partially
terminated, and no Multiemployer Plan is insolvent or in
reorganization, nor have any proceedings been instituted to
terminate any Benefit Plan or to reorganize any Multiemployer Plan.
(iii) Neither the Borrower nor any Related Company has
withdrawn from any Benefit Plan or Multiemployer Plan, nor has a
condition occurred which if continued would result in a withdrawal.
(iv) Neither the Borrower nor any Related Company has incurred
any withdrawal liability, including contingent withdrawal liability,
to any Multiemployer Plan pursuant to Title IV of ERISA.
(v) Neither the Borrower nor any Related Company has incurred
any liability to the PBGC other than for required insurance premiums
which have been paid when due.
(vi) No Reportable Event has occurred with respect to a Plan.
(vii) No Benefit Plan has an "accumulated funding deficiency"
(whether or not waived) as defined in Section 302 of ERISA or in
Section 412 of the Internal Revenue Code.
(viii) Each Plan is in substantial compliance with ERISA, and
neither the Borrower nor any Related Company has received any
communication from a governmental agency asserting that a Plan is
not in compliance with ERISA.
(ix) Each Plan which is intended to be a qualified Plan has
been determined by the IRS to be qualified under Section 401(a) of
the Internal Revenue Code as currently in effect or will be
submitted to the IRS for such determination prior to the end of the
remedial amendment period
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under Section 401(b) of the Internal Revenue Code and the
regulations promulgated thereunder and neither the Borrower nor any
Related Company knows or has reason to know why each such Plan
should not continue to be so qualified, and each trust related to
such Plan that has been submitted to the IRS for determination of
exempt status has been determined to be exempt from federal income
tax under Section 501(a) of the Internal Revenue Code or will be
submitted to the IRS for a determination of exempt status.
(x) As of the Effective Date, neither the Borrower nor any
Related Company maintains or contributes to any employer welfare
benefit plan within the meaning of Section 3(l) of ERISA which
provides benefits to employees after termination of employment other
than as required by Section 601 of ERISA.
(xi) Schedule B to the most recent annual report filed with
the IRS with respect to each Benefit Plan and furnished to the
Lenders is complete and accurate. Since the date of each such
Schedule B, there has been no adverse change in funding status or
financial condition of the Benefit Plan relating to such Schedule B.
(xii) Neither the Borrower nor any Related Company has failed
to make a required installment under Subsection (m) of Section 412
of the Internal Revenue Code or any other payment required under
Section 412 of the Internal Revenue Code on or before the due date
for such installment or other payment.
(xiii) Neither the Borrower nor any Related Company is
required to provide security to a Benefit Plan under Section
401(a)(29) of the Internal Revenue Code due to a Benefit Plan
amendment that results in an increase in current liability for the
plan year.
(xiv) Neither the Borrower, nor any Related Company, nor any
other "party-in-interest" or "disqualified person" has engaged in a
nonexempt "prohibited transaction," as such terms are defined in
Section 4975 of the Internal Revenue Code and Section 406 of ERISA,
in connection with any Plan or has taken or failed to take any
action which would constitute or result in a Termination Event.
(xv) Neither the Borrower nor any Related Company has failed
to comply with the health care continuation coverage requirements of
Section 4980B of the Internal Revenue Code in respect of employees
and former employees of the Borrower or such Related Company and
their dependents and beneficiaries which alone or in the aggregate
would subject the Borrower or such Related Company to any material
liability.
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(xvi) Neither the Borrower nor any Related Company has (A)
failed to make a required contribution or payment to a Multiemployer
Plan or (B) made a complete or partial withdrawal under Sections
4203 or 4205 of ERISA from a Multiemployer Plan. To the best
knowledge of the Borrower after due inquiry, neither the Borrower
nor any Related Company shall have any obligation to (x) make
contributions to any Multiemployer Plan on or after the Effective
Date, or (y) pay withdrawal liability to any Multiemployer Plan in
an amount in excess of a "de minimis amount" as such term is defined
in Section 4209 of ERISA.
(q) Absence of Defaults. Neither the Borrower nor any of its
Subsidiaries is in default under its articles or certificate of
incorporation or by-laws and no event has occurred, which has not been
remedied, cured or waived, (i) which constitutes a Default or an Event of
Default, or (ii) which constitutes, or which with the passage of time or
giving of notice or both would constitute, a default or event of default
by the Borrower or any of its Subsidiaries under any material agreement
(other than this Agreement) or judgment, decree or order to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower,
any of its Subsidiaries or any of the Borrower's or any of its
Subsidiaries' properties may be bound or which would require the Borrower
or any of its Subsidiaries to make any payment under any thereof prior to
the scheduled maturity date therefor, except, in the case only of any such
agreement, for alleged defaults which are being contested in good faith by
appropriate proceedings and with respect to which reserves in respect of
the Borrower's or such Subsidiary's reasonably anticipated liability have
been established on the books of the Borrower or such Subsidiary.
(r) Accuracy and Completeness of Information.
(i) All written information, reports and other papers and data
produced by or on behalf of the Borrower (including information,
reports and other papers and data relating to the Seller) and
furnished to the Agent or any Lender were, at the time the same were
so furnished, complete and correct in all material respects. No fact
is known to the Borrower which has had, or could reasonably be
expected to have, a Materially Adverse Effect, which has not been
set forth in the financial statements or disclosure delivered prior
to the Agreement Date, in each case referred to in Section 7.1(n),
or in such written information, reports or other papers or data or
otherwise disclosed in writing to the Agent and the Lenders prior to
the Agreement Date. No document prepared by or on behalf of the
Borrower or written statement made by or on behalf of the Borrower
to the Agent or any Lender in connection with the negotiation,
preparation or execution of this Agreement or any of the Loan
Documents contains or will contain any untrue statement of a fact
material to the creditworthiness of the Borrower or omits or will
omit to state a material fact necessary in order to make the
statements contained therein not misleading.
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(ii) The Borrower has no reason to believe that any document
furnished or written statement made to the Agent or any Lender by
any Person other than the Borrower in connection with the
negotiation, preparation or execution of this Agreement or any of
the Loan Documents contained any incorrect statement of a material
fact or omitted to state a material fact necessary in order to make
the statements made, in light of the circumstances under which they
were made, not misleading.
(s) Solvency. In each case after giving effect to the Indebtedness
represented by the Loans outstanding and to be incurred, and the
transactions contemplated by this Agreement, the Acquisition Agreement and
the Acquisition Documents, the Borrower is solvent, having assets of a
fair salable value which exceeds the amount required to pay its debts as
they become absolute and matured (including contingent, subordinated,
unmatured and unliquidated liabilities), and the Borrower is able to and
anticipates that it will be able to meet its debts as they mature and has
adequate capital to conduct the business in which it is or proposes to be
engaged.
(t) Receivables. Each Receivable reflected in the computations
included in any Borrowing Base Certificate as of the date of such
Borrowing Base Certificate meets the criteria enumerated in the definition
of Eligible Receivables, except as disclosed in such Borrowing Base
Certificate or as disclosed in a timely manner in a subsequent Borrowing
Base Certificate or otherwise in writing to the Agent. The chief executive
office of the Borrower and the books and records relating to the
Receivables are located at the address or addresses set forth on Schedule
7.1(t). The Borrower has not maintained its chief executive office or
books and records relating to any Receivables at any other address at any
time during the five years immediately preceding the Agreement Date,
except as disclosed on Schedule 7.1(t) with respect to the Receivables of
the Borrower and the Seller.
(u) Inventory. All Inventory included in any Borrowing Base
Certificate as of the date of such Borrowing Base Certificate delivered to
the Agent pursuant to Section 9.12 meets the criteria enumerated in the
definition of Eligible Inventory, except as disclosed in such Borrowing
Base Certificate or as disclosed in a timely manner in a subsequent
Schedule of Inventory or Borrowing Base Certificate or otherwise in
writing to the Agent. All such Inventory is in merchantable condition,
meets all standards imposed by any governmental agency, or department or
division thereof, having regulatory authority over such goods, their use
or sale, and is currently either usable or salable in the normal course of
the Borrower's business, except to the extent reserved against in the
financial statements referred to in Section 7.1(n) or delivered pursuant
to Article 11 or as disclosed on a Schedule of Inventory delivered to the
Agent pursuant to Section 9.12. All Inventory is located on the premises
set forth on Schedule 7.1(u) or is Inventory in transit to one of such
locations or meets the requirements of clauses (a) and (f) of the
definition of Eligible Inventory, except
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as otherwise disclosed in writing to the Agent. Such Inventory has not, in
the last year, been located at premises other than those set forth on
Schedule 7.1(u).
(v) Equipment. All Equipment is in good order and repair in all
material respects and is located on the premises set forth on Schedule
7.1(v) and has been so located at all times during the last year.
(w) Real Property. The Borrower owns no Real Estate and leases no
Real Estate other than that described on Schedule 7.1(w) and other than
Real Estate acquired or leased after the Effective Date for which the
Borrower has complied with the requirements of Section 9.14.
(x) Corporate and Fictitious Names. Except as otherwise disclosed on
Schedule 7.1(x), during the five-year period preceding the Agreement Date,
neither the Borrower nor any predecessor thereof (including the Seller)
has been known as or used any corporate or fictitious name other than the
corporate name of the Borrower on the Effective Date.
(y) Federal Reserve Regulations. Neither the Borrower nor any of its
Subsidiaries is engaged and none will engage, principally or as one of its
important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" (as each of the quoted
terms is defined or used in Regulations G and U of the Board of Governors
of the Federal Reserve System). No part of the proceeds of any of the
Loans will be used for so purchasing or carrying margin stock or, in any
event, for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation G, T, U or X of such Board of
Governors. If requested by the Agent or any Lender, the Borrower will
furnish to the Agent and the Lenders a statement or statements in
conformity with the requirements of said Regulation G, T, U or X to the
foregoing effect.
(z) Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" (as each of
the quoted terms is defined or used in the Investment Company Act of 1940,
as amended).
(aa) Employee Relations. Neither the Borrower nor any of its
Subsidiaries as of the Effective Date, except as set forth on Schedule
7.1(aa), is party to any collective bargaining agreement nor has any labor
union been recognized as the representative of the Borrower's or any of
its Subsidiaries' employees, and the Borrower knows of no pending,
threatened or contemplated strikes, work stoppage or other labor disputes
involving the Borrower's or any of its Subsidiaries' employees that could
reasonably be expected to have a Material Adverse Effect.
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(bb) Proprietary Rights. Schedule 7.1(bb) sets forth a correct and
complete list, as of the Effective Date, of all of the Proprietary Rights.
As of the Effective Date, none of the Proprietary Rights is subject to any
licensing agreement or similar arrangement except as set forth on Schedule
7.1(bb) or as entered into in the sale or distribution of the Borrower's
Inventory in the ordinary course of business. To the best of the
Borrower's knowledge, none of the Proprietary Rights infringes on or
conflicts with any other Person's property, and no other Person's property
infringes on or conflicts with the Proprietary Rights, in either case in a
manner that will have a Material Adverse Effect. The Proprietary Rights
described on Schedule 7.1(bb) constitute all of the property of such type
necessary to the current and anticipated future conduct of the Borrower's
business.
(cc) Trade Names. All trade names or styles under which the Borrower
sells (or the Seller sold) Inventory or Equipment or creates Receivables,
or to which instruments in payment of Receivables are made payable, in
each case as of or prior to the Effective Date are listed on Schedule
7.1(cc).
(dd) Acquisition Agreement. The Borrower has heretofore furnished to
the Agent true, complete and correct copies of the Acquisition Agreement
(including any schedules, exhibits and annexes thereto) and each
Acquisition Document. The Acquisition Agreement has not been amended,
supplemented or modified except as previously disclosed in writing to the
Agent and, together with the other Acquisition Documents, copies of which
have been delivered to the Agent, constitute the complete understanding
between the Borrower and the Seller in respect of the acquisition of the
Acquired Assets and the other matters and transactions covered thereby. To
the Borrower's knowledge, the Acquisition Agreement and each of the other
Acquisition Documents has been duly executed and delivered by the Seller
and is a valid, legal and binding obligation of the Seller. The
representations and warranties of the Borrower contained in the
Acquisition Agreement and each of the other Acquisition Documents are (or
will be) true and correct in all material respects on the Effective Date
as if made on and as of such date, and the Agent and the Lenders are
entitled to rely on such representations and warranties with the same
force and effect as though they were incorporated in this Agreement and
made to the Agent and the Lenders directly. On and as of the Effective
Date, the Borrower knows of no reason to believe that the representations
and warranties of, and information concerning, the Seller contained in the
Acquisition Agreement and each of the other Acquisition Documents are not
true and correct in all material respects.
(ee) Consummation of Transactions. Upon the Effective Date, the
transactions contemplated by the Acquisition Agreement and the other
Acquisition Documents have been consummated in accordance with Applicable
Laws and, except as previously disclosed in writing to the Agent, in the
manner provided therein in accordance with the terms thereof without any
material waivers or amendments thereto, and each of the conditions to such
consummation set forth
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in the Acquisition Agreement and the other Acquisition Documents shall
have been fulfilled without any waiver of any thereof.
(ff) Seller Subordinated Indebtedness. The Borrower has delivered to
the Agent a complete and correct copy of all documents evidencing or
relating to the Seller Subordinated Indebtedness, and each of the
representations and warranties given by the Borrower therein is true and
correct in all material respects.
(gg) Foreign Letter of Credit Amount. Each Letter of Credit included
in the calculation of the Foreign Letter of Credit Amount in any Borrowing
Base Certificate was issued in favor of third-party contractors (or their
designees) or suppliers to support the production of goods for the
Borrower 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 the Issuing Bank
under such Letters of Credit.
SECTION 7.2. Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article 7 and all statements
contained in any certificate, financial statement, or other instrument,
delivered by or on behalf of the Borrower pursuant to or in connection with this
Agreement or any of the Loan Documents (including, but not limited to, any such
representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as of
the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to a
particular date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement,
any investigation made by or on behalf of the Agent or any Lender, or any
borrowing hereunder.
ARTICLE 8
SECURITY INTEREST
SECTION 8.1. Security Interest.
(a) To secure the payment, observance and performance of the Secured
Obligations, the Borrower hereby mortgages, pledges and assigns all of the
Collateral to the Agent, for the benefit of the Secured Creditors, and
grants to the Agent, for the benefit of the Secured Creditors, a
continuing security interest in, and a continuing Lien upon, all of the
Collateral.
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(b) As additional security for all of the Secured Obligations, the
Borrower grants to the Agent, for the benefit of the Secured Creditors, a
security interest in, and assigns to the Agent, for the benefit of the
Secured Creditors, all of the Borrower's right, title and interest in and
to, any deposits or other sums at any time credited by or due from each
Lender and each Affiliate of a Lender to the Borrower, or credited by or
due from any participant of any Lender to the Borrower, with the same
rights therein as if the deposits or other sums were credited by or due
from such Lender The Borrower hereby authorizes each Lender and each
Affiliate of such Lender and each participant to pay or deliver to the
Agent, for the account of the Lenders, without any necessity on the
Agent's or any Lender's part to resort to other security or sources of
reimbursement for the Secured Obligations, at any time during the
continuation of any Event of Default or in the event that the Agent, on
behalf of the Lenders, should make demand for payment hereunder and
without further notice to the Borrower (such notice being expressly
waived), any of the aforesaid deposits (general or special, time or
demand, provisional or final) or other sums for application to any Secured
Obligation, irrespective of whether any demand has been made or whether
such Secured Obligation is mature, and the rights given the Agent, the
Lenders, their Affiliates and participants hereunder are cumulative with
such Person's other rights and remedies, including other rights of
set-off. The Agent will promptly notify the Borrower of its receipt of any
such funds for application to the Secured Obligations, but failure to do
so will not affect the validity or enforceability thereof. The Agent may
give notice of the above grant of a security interest in and assignment of
the aforesaid deposits and other sums, and authorization, to, and make any
suitable arrangements with, any Lender, any such Affiliate of any Lender
or participant for effectuation thereof, and the Borrower hereby
irrevocably appoints Agent as its attorney to collect any and all such
deposits or other sums to the extent any such payment is not made to the
Agent or any Lender by such Lender, Affiliate or participant.
SECTION 8.2. Continued Priority of Security Interest.
(a) The Security Interest granted by the Borrower shall at all times
be valid, perfected and enforceable against the Borrower and all third
parties in accordance with the terms of this Agreement, as security for
the Secured Obligations, and the Collateral shall not at any time be
subject to any Liens that are prior to, on a parity with or junior to the
Security Interest, other than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all
action that may be reasonably necessary or desirable, or that the Agent
may reasonably request, so as at all times to maintain the validity,
perfection, enforceability and rank of the Security Interest in the
Collateral in conformity with the requirements of Section 8.2(a), or to
enable the Agent and the Lenders to exercise or enforce their rights
hereunder, including, but not limited to: (i) paying all taxes,
assessments and other claims lawfully levied or assessed on any of the
Collateral,
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except to the extent that such taxes, assessments and other claims
constitute Permitted Liens, (ii) using all reasonable efforts to obtain
landlords', mortgagees' and mechanics' releases, subordinations or
waivers, (iii) delivering to the Agent, for the benefit of the Secured
Creditors, endorsed or accompanied by such instruments of assignment as
the Agent may specify, and stamping or marking, in such manner as the
Agent may specify, any and all chattel paper, instruments, letters and
advices of guaranty and documents evidencing or forming a part of the
Collateral, and (iv) executing and delivering financing statements,
pledges, designations, hypothecations, notices and assignments in each
case in form and substance reasonably satisfactory to the Agent relating
to the creation, validity, perfection, maintenance or continuation of the
Security Interest under the Uniform Commercial Code or other Applicable
Laws.
(c) The Agent is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of or
in the name of the Borrower for any purpose described in Section 8.2(b).
The Agent will give the Borrower notice of the filing of any such
statements or amendments, which notice shall specify the locations where
such statements or amendments were filed. No representation or warranty is
made by the Borrower respecting the accuracy or adequacy of the foregoing.
A carbon, photographic, xerographic or other reproduction of this
Agreement or of any of the Security Documents or of any financing
statement filed in connection with this Agreement is sufficient as a
financing statement.
(d) The Borrower shall mark its books and records as directed by the
Agent and as may be necessary or appropriate to evidence, protect and
perfect the Security Interest and shall cause its financial statements to
reflect the Security Interest.
ARTICLE 9
COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full:
SECTION 9.1. Collection of Receivables.
(a) The Borrower will cause all monies, checks, notes, drafts and
other payments relating to or constituting proceeds of trade accounts
receivable and other Collateral to be deposited in an Agency Account for
application to the Secured Obligations in accordance with the procedures
set out in the corresponding Agency Account Agreement.
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(b) The Borrower and the Agent shall cause all collected balances
in each Agency Account to be transmitted daily by wire transfer,
depository transfer check or other means in accordance with the
procedures set forth in the corresponding Agency Account Agreement, to
the Agent at the Agent's Office: (i) for application, on account of the
Secured Obligations, as provided in Sections 2.3(c), 13.2, and 13.3,
such credits to be entered as of the Business Day they are received if
they are received prior to 1:30 p.m. (Atlanta time) and to be
conditioned upon final payment in cash or solvent credits of the items
giving rise to them, and (ii) with respect to the balance, so long as no
Default or Event of Default has occurred and is continuing, for transfer
by wire transfer or depository transfer check to a Disbursement Account.
SECTION 9.2. Verification and Notification. The Agent shall have the
right (a) at any time and from time to time, (i) in the name of the Agent, the
Lenders or in the name of the Borrower, to verify the validity, amount or any
other matter relating to any Receivables by mail, telephone, telegraph or
otherwise, and (ii) to review, audit and make extracts from all records and
files related to any of the Receivables; and (b) if an Event of Default exists,
to notify the Account Debtors or obligors under any Receivables of the
assignment of such Receivables to the Agent, for the benefit of the Secured
Creditors, and to direct such Account Debtor or obligors to make payment of all
amounts due or to become due thereunder directly to the Agent, for the account
of the Lenders, and, upon such notification and at the expense of the Borrower,
to enforce collection of any such Receivables and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as the Borrower might have done.
SECTION 9.3. Disputes, Returns and Adjustments.
(a) In the event any amounts due and owing under any Receivable for
an amount in excess of $500,000 are in dispute between the Account Debtor
and the Borrower, the Borrower shall provide the Agent with prompt written
notice thereof.
(b) The Borrower shall notify the Agent promptly of all returns and
credits in excess of $350,000 in respect of any Receivable, which notice
shall specify the Receivable affected.
(c) The Borrower may, in the ordinary course of business unless an
Event of Default has occurred and is continuing, grant any extension of
time for payment of any Receivable or compromise, compound or settle the
same for less than the full amount thereof, or release wholly or partly
any Person liable for the payment thereof, or allow any credit or discount
whatsoever therein; provided that no such action results in the reduction
of more than $500,000 in the amount payable with respect to any Receivable
(excluding the allowance of credits or discounts generally available to
Account Debtors in the ordinary course of the
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Borrower's business and appropriate adjustments to the accounts of Account
Debtors in the ordinary course of business).
SECTION 9.4. Invoices.
(a) The Borrower will not use any invoices other than invoices in
the form delivered to the Agent prior to the Agreement Date if the new
form of invoice uses any name for the Borrower other than Ithaca
Industries, Inc. without giving the Agent 15 days prior notice of the
intended use of a different form of invoice together with a copy of such
different form. The Borrower will promptly notify the Agent of its use of
any invoices other than invoices in the form delivered to the Agent prior
to the Agreement Date, and will promptly provide Agent with a copy of such
different form.
(b) Upon the occurrence of an Event of Default, upon the request of
the Agent, the Borrower shall deliver to the Agent, at the Borrower's
expense, copies of customers' invoices or the equivalent, original
shipping and delivery receipts or other proof of delivery, customers'
statements, customer address lists, the original copy of all documents,
including, without limitation, repayment histories and present status
reports, relating to Receivables and such other documents and information
relating to the Receivables as the Agent shall specify.
SECTION 9.5. Delivery of Instruments. In the event any Receivable is
at any time evidenced by a promissory note, trade acceptance or any other
instrument for the payment of money, the Borrower will immediately thereafter
deliver such instrument to the Agent, appropriately endorsed to the Agent, for
the benefit of the Secured Creditors.
SECTION 9.6. Sales of Inventory. All sales of Inventory will be made
in material compliance with all requirements of Applicable Laws.
SECTION 9.7. Ownership and Defense of Title.
(a) Except for Permitted Liens, the Borrower or its Subsidiaries
shall at all times be the sole owner or lessee of each and every item of
Collateral and shall not create any lien on, or sell, lease, exchange,
assign, transfer, pledge, hypothecate, grant a security interest or
security title in or otherwise dispose of, any of the Collateral or any
interest therein, except for sales of Inventory in the ordinary course of
business, for cash or on open account or on terms of payment ordinarily
extended to its customers, and except for dispositions that are otherwise
expressly permitted under this Agreement (including, without limitation,
such dispositions as permitted under Section 12.7(f) hereof). The
inclusion of "proceeds" of the Collateral under the Security Interest
shall not be deemed a consent by the Agent or the Lenders to any other
sale or other disposition of any part or all of the Collateral.
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(b) The Borrower shall defend its title or leasehold interest in and
to, and the Security Interest in, the Collateral against the claims and
demands of all Persons.
SECTION 9.8. Insurance.
(a) The Borrower shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft (excluding
theft by employees), burglary, pilferage, loss in transit and such other
hazards as the Agent shall reasonably specify, in amounts not to exceed
those obtainable at commercially reasonable rates and under policies
issued by insurers acceptable to the Agent in the exercise of its
reasonable judgment. All premiums on such insurance shall be paid by the
Borrower and copies of the policies delivered to the Agent upon request.
The Borrower will not use or permit the Inventory or Equipment to be used
in material violation of Applicable Laws or in any manner which might
render inapplicable any insurance coverage.
(b) All insurance policies required under Section 9.8(a) shall name
the Agent, for the benefit of the Lenders, as an additional insured and
shall contain loss payable clauses in the form submitted to the Borrower
by the Agent, or otherwise in form and substance reasonably satisfactory
to the Required Lenders, naming the Agent, for the benefit of the Lenders,
as loss payee, as its interests may appear, and providing that (i) all
proceeds thereunder shall be payable to the Agent, for the benefit of the
Lenders, (ii) no such insurance shall be affected by any act or neglect of
the insurer or owner of the property described in such policy, and (iii)
such policy and loss payable clauses may be canceled, amended or
terminated only upon at least 30 days prior written notice given to the
Agent.
(c) Any proceeds of insurance referred to in this Section 9.8 which
are paid to the Agent, for the account of the Lenders, shall be, at the
option of the Required Lenders in their sole discretion, either (i)
applied to replace the damaged or destroyed property, or (ii) applied to
the payment or prepayment of the Secured Obligations; provided, however,
if (A) no Event of Default exists hereunder, and (B) the amount of
insurance proceeds with respect to such loss is in an aggregate amount of
less than $5,000,000, and (C) the damaged or destroyed property is of the
type or nature that can be repaired or restored, and (D) the Borrower
provides the Agent with a certificate stating that the insurance proceeds
will be used to repair or restore the damaged or destroyed property within
a one-year period from the date of the loss, then such insurance proceeds
shall be held by the Agent, reserved against the Borrowing Base, and
disbursed to the Borrower for application to the costs and expenses of
such repair or restoration pursuant to a disbursement procedure, and under
such terms and conditions as shall be acceptable to Agent and the Lenders.
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SECTION 9.9. Location of Offices and Collateral.
(a) The Borrower will not change the location of its chief executive
office or the place where it keeps its books and records relating to the
Collateral or change its name, its identity or corporate structure without
giving the Agent 30 days prior written notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location or Inventory meeting the terms of clauses (a) and (f) of the
definition of Eligible Inventory, will at all times be kept by the
Borrower at the locations set forth in Schedule 7.1(u) (as updated from
time to time), and shall not, without the prior written consent of the
Agent, be removed therefrom except pursuant to sales of Inventory
permitted under Section 9.7(a).
(c) If any Inventory is in the possession or control of any of the
Borrower's agents or processors, the Borrower shall notify such agents or
processors of the Security Interest (and shall promptly provide copies of
any such notice to the Agent and the Lenders) and, upon the occurrence of
an Event of Default, shall instruct them (and cause them to acknowledge
such instruction) to hold all such Inventory for the account of the
account of the Lenders, subject to the instructions of the Agent.
SECTION 9.10. Records Relating to Collateral.
(a) The Borrower will at all times (i) keep complete and accurate
records of Inventory on a basis consistent with past practices of the
Borrower so as to permit comparison of Inventory records relating to
different time periods, itemizing and describing the kind, type and
quantity of Inventory and the Borrower's cost therefor and a current price
list for such Inventory, and (ii) keep complete and accurate records of
all other Collateral.
(b) The Borrower will prepare a physical listing of all Inventory
(other than documents evidencing and general intangibles relating to the
inventory that comprises the Borrower's Inventory), wherever located, at
least annually.
SECTION 9.11. Inspection. The Agent and each Lender (by any of their
officers, employees or agents) shall have the right, to the extent that the
exercise of such right shall be within the control of the Borrower, at any time
or times to (a) upon reasonable notice, if no Event of Default exists, and
without notice if an Event of Default does exist, visit the properties of the
Borrower and its Subsidiaries, inspect the Collateral and the other assets of
the Borrower and its Subsidiaries and inspect and make extracts from the books
and records of the Borrower and its Subsidiaries, including but not limited to
management letters prepared by independent accountants, all during customary
business hours at such premises; (b) discuss the Borrower's and its
Subsidiaries' business, assets, liabilities, financial condition, results of
operations and business prospects, insofar as the same are reasonably related to
the rights of the Agent or the
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Lenders hereunder or under any of the Loan Documents, with the Borrower's and
its Subsidiaries' (i) principal officers, (ii) independent accountants, and
(iii) any other Person (except that any such discussion with any third parties
shall be conducted only in accordance with the Agent's or such Lender's standard
operating procedures relating to the maintenance of the confidentiality of
confidential information of borrower); and (c) verify the amount, quantity,
value and condition of, or any other matter relating to, any of the Collateral
(other than Receivables) and in this connection to review, audit and make
extracts from all records and files related to any of the Collateral. The
Borrower will deliver to the Agent, for the benefit of the Lenders, any
instrument necessary for it to obtain records from any service bureau
maintaining records on behalf of the Borrower.
SECTION 9.12. Information and Reports.
(a) Schedule of Receivables. The Borrower shall deliver to the Agent
on or before the Effective Date and not later than the 15th Business Day
of each fiscal month thereafter a Schedule of Receivables which (i) shall
be as of the last Business Day of the immediately preceding fiscal month,
(ii) shall be reconciled to the Borrowing Base Certificate as of such last
Business Day, and (iii) shall set forth a detailed aged trial balance of
all its then existing Receivables, specifying the names, addresses and
balance due for each Account Debtor obligated on a Receivable so listed.
(b) Schedule of Inventory. The Borrower shall deliver to the Agent
on or before the Effective Date and not later than the 15th Business Day
of each fiscal month thereafter (other than the fiscal month that ends the
fiscal year) a Schedule of Inventory as of the last Business Day of the
immediately preceding fiscal month of the Borrower, itemizing and
describing the kind, type and quantity of Inventory, the Borrower's cost
thereof and the location thereof. For the last fiscal month of Borrower's
fiscal year, Borrower shall deliver the Schedule of Inventory not later
than 45 days after such fiscal year end.
(c) Schedule of Foreign Letter of Credit Amount. The Borrower shall
deliver to the Agent not later than the 15th Business Day of each fiscal
month a schedule setting forth the letter of credit number and undrawn
amount of each Letter of Credit (and, if the issuer thereof is not
NationsBank, the name of the Issuing Bank) included in the calculation of
the Foreign Letter of Credit Amount in the corresponding Borrowing Base
Certificate; provided that no schedule need be delivered if there has been
no change since the previous schedule delivered.
(d) Schedule of Equipment. The Borrower shall deliver to the Agent
on or before the Effective Date and thereafter on such subsequent dates
upon reasonable notice as may be requested by the Agent, a Schedule of
Equipment, describing each item of the Borrower's Equipment and the
location, cost and then current book value thereof.
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(e) Borrowing Base Certificate. The Borrower shall deliver to the
Agent on or before the 15th Business Day of each fiscal month after the
Effective Date a Borrowing Base Certificate prepared as of the close of
business on the last Business Day of the immediately preceding fiscal
month. For the last fiscal month of Borrower's fiscal year, Borrower shall
provide a Borrowing Base Certificate on or before the 15th Business Day of
the fiscal month, which Borrowing Base Certificate shall be subject to
such adjustments to calculations of Eligible Inventory as may be necessary
because of the fiscal year end, which adjustments shall be reflected in an
updated Borrowing Base Certificate to be provided to Agent as soon as
available but in no event later than 45 days after fiscal year end.
(f) Additional Information. The Agent may in its discretion from
time to time request that the Borrower deliver the schedules or
certificates described in Sections 9.12(a), (b), (c), (d) and (e) more or
less often and on different schedules than specified in such Sections and
the Borrower will use reasonable efforts to comply with such requests. The
Borrower will also furnish to the Agent and each Lender such other
information with respect to the Collateral as the Agent or the Required
Lenders may from time to time reasonably request.
SECTION 9.13. Power of Attorney. The Borrower hereby appoints the
Agent as its attorney, with power (a) during the existence of an Event of
Default (i) to endorse the name of the Borrower on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Agent's or any Lender's possession, and (ii) to sign the name of
the Borrower on any invoice or bill of lading relating to any Receivable,
Inventory or other Collateral, on any drafts against customers related to
letters of credit, on schedules and assignments of Receivables furnished to the
Agent or any Lender by the Borrower, on notices of assignment, financing
statements and other public records relating to the perfection or priority of
the Security Interest, and (b) at any time, to sign the name of the Borrower on
verifications of Receivables and notices to or from Account Debtors.
SECTION 9.14. Additional Real Estate and Leases.
(a) Promptly upon the Borrower's acquisition of any interest in any
Real Estate, including the Borrower's entry into any Qualifying Lease, the
Borrower shall deliver to the Agent, for the benefit of the Secured
Creditors, an executed Mortgage in form and substance reasonably
satisfactory to the Agent, conveying to the Agent, for the benefit of the
Secured Creditors, a first priority Lien on such Real Estate interest,
subject only to such prior Liens as the Agent shall consent to in writing.
If reasonably requested by the Agent, the Borrower shall also deliver to
the Agent, at the Borrower's expense, a mortgagee title insurance policy
in favor of the Agent and the Secured Creditors insuring such Mortgage to
create and convey such Lien, subject only to such exceptions consented to
by the Agent, and shall deliver to the Agent the other items set forth in
Section 6.1(e)(xiii), (xiv), and (xv) with respect to such Real Estate,
together
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with such environmental audits of such Real Estate as the Agent reasonably
requests, all in form and substance satisfactory to the Agent.
(b) Promptly upon the Borrower's entry into any other lease of Real
Estate (other than a Qualifying Lease), the Borrower shall use all
reasonable efforts to deliver to the Agent an executed landlord's waiver
and consent with respect to such lease in form and substance satisfactory
to the Agent.
SECTION 9.15. Assignment of Claims Act. Upon the request of the
Agent, the Borrower shall execute any documents or instruments and shall take
such steps or actions reasonably required by the Agent so that all monies due or
to become due under any contract with the United States of America, the District
of Columbia or any state, county, municipality or other domestic or foreign
governmental entity, or any department, agency or instrumentality thereof, will
be assigned to the Agent, for the benefit of the Secured Creditors, and notice
given thereof in accordance with the requirements of the Assignment of Claims
Act of 1940, as amended, or any other laws, rules or regulations relating to the
assignment of any such contract and monies due to or to become due.
SECTION 9.16. Covenant to Guarantee Obligations and Give Security.
Upon the formation or acquisition of any new direct or indirect Subsidiaries by
the Borrower, then the Borrower shall, within 10 days after such formulation or
acquisition, at its expense:
(a) cause each such U.S. Subsidiary to duly execute and deliver to
the Agent a Guaranty, in form and substance satisfactory to the Agent,
guaranteeing the payment in full of the Secured Obligations and the
performance of all of the Borrower's obligations under the Loan Documents
(each a "Subsidiary Guaranty"),
(b) cause each such U.S. Subsidiary to duly execute and deliver to
the Agent mortgages, pledges, assignments and other security agreements,
as specified by and in form and substance consistent with this Agreement
and otherwise reasonably satisfactory to the Agent, securing such
Subsidiary's obligations under its Subsidiary Guaranty and constituting
first priority Liens on all of such Subsidiary's assets (real and
personal, including Qualifying Leases), subject only to Permitted Liens,
(c) duly execute and deliver to the Agent a stock pledge agreement
and blank stock power, as specified by and in form and substance
satisfactory to the Agent, securing the Secured Obligations and
constituting a first priority Lien on, in the case of U.S. Subsidiaries,
all of each such U.S. Subsidiary's capital stock, and in the case of
foreign Subsidiaries, 65% of each such foreign Subsidiary's capital stock,
subject only to Permitted Liens,
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(d) take, and cause such Subsidiary to take, such action (including,
without limitation, the recording of mortgages, the filing of Uniform
Commercial Code financing statements, and the delivery of original stock
certificates) as may be reasonably necessary or advisable in the opinion
of the Agent to vest in the Agent, for the benefit of the Secured
Creditors, valid and subsisting perfected Liens on the properties
purported to be subject to the mortgages, pledges, assignments and
security agreements delivered pursuant to this Section 9.16, enforceable
against all third parties in accordance with their terms, subject only to
Permitted Liens,
(e) deliver to the Agent, upon the request of the Agent in its sole
discretion, a signed copy of a favorable opinion of counsel for the
Borrower and such Subsidiary, addressed to the Agent and the other Secured
Creditors, acceptable to the Agent as to the matters contained in clauses
(a), (b), (c) and (d) above, as to such guaranties, mortgages, pledges,
assignments and security agreements being legal, valid and binding
obligations of each party thereto enforceable in accordance with their
terms, and as to such other matters as the Agent may reasonably request,
and
(f) deliver to the Agent, upon the request of the Agent in its sole
discretion, with respect to each parcel of real property owned or held by
such Subsidiary, all items set forth in Section 6.1(e)(xiii), (xiv), and
(xv) with respect to such real property, together with such environmental
audits of such real property as the Agent reasonably requests, all in form
and substance reasonably satisfactory to the Agent.
ARTICLE 10
AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, the Borrower will, and will cause
each of its Subsidiaries to:
SECTION 10.1. Preservation of Corporate Existence and Similar
Matters. Preserve and maintain its corporate existence, and its material rights,
franchises, licenses and privileges in the jurisdiction of its incorporation and
qualify and remain qualified as a foreign corporation and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization.
SECTION 10.2. Compliance with Applicable Laws. Comply with all
Applicable Laws relating to the Borrower or such Subsidiary except respecting
matters that could not reasonably be expected to have a Material Adverse Effect,
except to the extent being contested in good faith by appropriate proceedings
and for which reserves
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in respect of the Borrower's or such Subsidiary's reasonably anticipated
liability therefor have been appropriately established.
SECTION 10.3. Maintenance of Property. In addition to, and not in
derogation of, the requirements of Section 9.7 and of the Security Documents,
(a) protect and preserve all properties material to its business, including
copyrights, patents, trade names and trademarks, and maintain in good repair,
working order and condition in all material respects, with reasonable allowance
for wear and tear, all tangible properties, and (b) from time to time make or
cause to be made all needed and appropriate repairs, renewals, replacements and
additions to such properties necessary for the conduct of its business, so that
the business carried on in connection therewith may be properly conducted at all
times.
SECTION 10.4. Conduct of Business. At all times carry on its
business in an efficient manner and engage in the business described on Schedule
7.1(f) and businesses related thereto.
SECTION 10.5. Insurance. Maintain, in addition to the coverage
required by Section 9.8 and the Security Documents, insurance with responsible
insurance companies against such risks and in such amounts as is customarily
maintained by similar businesses or as may be required by Applicable Laws, and
from time to time deliver to the Agent or any Lender upon its request a detailed
list of the insurance then in effect, stating the names of the insurance
companies, the amounts and rates of the insurance, the dates of the expiration
thereof and the properties and risks covered thereby.
SECTION 10.6. Payment of Taxes and Claims. Pay or discharge when due
(a) all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any properties belonging to it, except that
real property ad valorem taxes shall be deemed to have been so paid or
discharged if the same are paid before they become delinquent, and (b) all
lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and
other similar Liens for labor, materials, supplies and rentals which, if unpaid,
might become a Lien on any of its properties; except that this Section 10.6
shall not require the payment or discharge of any such tax, assessment, charge,
levy or claim which is being contested in good faith by appropriate proceedings
and for which reserves in respect of the reasonably anticipated liability
therefor have been appropriately established.
SECTION 10.7. Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP.
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SECTION 10.8. Use of Proceeds.
(a) Use the proceeds of (i) the initial Revolving Credit Loan and
the Term Loan to pay amounts indicated on Schedule 10.8 to the Persons
indicated thereon, and (ii) all subsequent Loans only for working capital,
and general business purposes and other purposes not prohibited under this
Agreement.
(b) Not use any part of such proceeds to purchase or, to carry or
reduce or retire or refinance any credit incurred to purchase or carry,
any margin stock (within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System) or, in any event, for any purpose
which would involve a violation of such Regulation G or U or of Regulation
T or X of such Board of Governors, or for any purpose prohibited by law or
by the terms and conditions of this Agreement.
SECTION 10.9. Hazardous Waste and Substances; Environmental
Requirements.
(a) In addition to, and not in derogation of, the requirements of
Section 10.2 and of the Security Documents, comply in all material
respects with all Environmental Laws and all Applicable Laws relating to
occupational health and safety (except for instances of noncompliance that
are being contested in good faith by appropriate proceedings if reserves
in respect of the Borrower's or such Subsidiary's reasonably anticipated
liability therefor have been appropriately established and would be
required by GAAP), promptly notify the Agent of its receipt of any notice
of a material violation of any such Environmental Laws or other such
Applicable Laws and indemnify and hold the Agent and the Lenders harmless
from all loss, cost, damage, liability, claim and expense incurred by or
imposed upon the Agent or any Lender on account of the Borrower's failure
to perform its obligations under this Section 10.9.
(b) Whenever the Borrower gives notice to the Agent pursuant to this
Section 10.9 with respect to a matter that reasonably could be expected to
result in liability to the Borrower or such Subsidiary in excess of
$500,000 in the aggregate, the Borrower shall, at the Agent's request and
the Borrower's expense (i) cause an independent environmental engineer
acceptable to the Agent to conduct an assessment, including tests where
necessary, of the site where the noncompliance or alleged noncompliance
with Environmental Laws has occurred and prepare and deliver to the Agent
a report setting forth the results of such assessment, a proposed plan to
bring the Borrower or such Subsidiary into compliance with such
Environmental Laws (if such assessment indicates noncompliance) and an
estimate of the costs thereof, and (ii) provide to the Agent a
supplemental report of such engineer whenever the scope of the
noncompliance, or the response thereto or the estimated costs thereof,
shall materially adversely change.
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SECTION 10.10. Syndication. Cooperate fully with the Agent and the
Syndication Agent (a) through meetings with and providing requested information
to prospective assignees of the Commitments, and in such other matters as the
Agent and the Syndication Agent may reasonably request, in connection with the
syndication of the Commitments, and (b) in considering in good faith any
amendment to this Agreement or any other Loan Document as the Agent or the
Syndication Agent may reasonably request in order to assure a satisfactory
syndication of the Commitments, provided the Agent and the Syndication Agent
shall use their good faith efforts to syndicate the Commitments on the terms set
forth herein.
SECTION 10.11. Interest Rate Protection Agreements. On or prior to
the expiration of the Interest Rate Protection Agreement with Bankers Trust
Company described in Section 6.1(q), but in any event within 150 days after the
Effective Date, enter into Interest Rate Protection Agreements acceptable to the
Agent and the Syndication Agent establishing a fixed or maximum interest rate
acceptable to the Agent for an aggregate amount equal to at least $25,000,000
notional principal amount for a period expiring on or after 2 years from the
Effective Date.
ARTICLE 11
INFORMATION
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, the Borrower will furnish to the
Agent and to each Lender at the offices then designated for such notices
pursuant to Section 16.1:
SECTION 11.1. Financial Statements.
(a) Opening Balance Sheet. As soon as available, but in any event
within 90 days after the Effective Date, a copy of the Final Audit and the
Statement (as such terms are defined in the Acquisition Agreement)
required to be delivered pursuant to Sections 3.2(a) and (b) of the
Acquisition Agreement, and, as soon as available, any final determination
of Closing Net Worth delivered by the Accounting Firm (as such terms are
defined in the Acquisition Agreement) pursuant to Section 3.2(b) of the
Acquisition Agreement;
(b) Audited Year-End Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year of the Borrower,
copies of the consolidated balance sheets of the Borrower and its
Consolidated Subsidiaries as at the end of such fiscal year and the
related statements of operations, cash flow and shareholders' equity for
such fiscal year, in each case setting forth in comparative form the
figures for the previous fiscal year of the Borrower, reported on without
qualification as to the scope of the audit or the status of the Borrower
and its Consolidated Subsidiaries as a "going concern", by independent
certified public accountants of nationally recognized standing;
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(c) Monthly Financial Statements. As soon as available after the end
of each month, but in any event within 45 days after the end of each
month, copies of the unaudited consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as at the end of such month and the
related unaudited consolidated statements of operations, cash flow and
shareholders' equity for the Borrower and its Consolidated Subsidiaries
for such month and for the portion of the fiscal year through such month,
certified by a Financial Officer as presenting fairly the financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries; and
(d) Annual Budget. As soon as available, but in any event at least
30 days prior to the beginning of each fiscal year, an operating budget
for the Borrower and its Consolidated Subsidiaries for such fiscal year,
in the form customarily prepared by management of the Borrower consistent
with past practice, together with a statement of the assumptions upon
which such budget was prepared.
All such financial statements delivered pursuant to clauses (b) and (c) shall
present fairly in all material respects the financial position of the Borrower
and its Consolidated Subsidiaries as of such dates and results of operations for
such period and shall be prepared in accordance with GAAP (except, with respect
to interim financial statements, for the omission of footnotes and for the
effect of normal year-end audit adjustments) applied consistently throughout the
periods reflected therein.
SECTION 11.2. Accountants' Certificate. Together with the financial
statements referred to in Section 11.1(b), the Borrower shall deliver a
certificate of such accountants addressed to the Agent having attached the
calculations, prepared by the Borrower and reviewed by such accountants,
required to establish whether or not the Borrower is in compliance with the
covenants contained in Section 12.1 as at the date of such financial statements.
SECTION 11.3. Officer's Certificate. At the time that the Borrower
furnishes the financial statements pursuant to Section 11.1(c) for any month
that is the last month of a fiscal quarter of the Borrower, the Borrower shall
also furnish a certificate of its President or a Financial Officer, in the form
attached hereto as Exhibit F,
(a) setting forth as at the end of such fiscal quarter or fiscal
year, as the case may be, the calculations required to establish whether
or not the Borrower was in compliance with the requirements of Sections
12.1, 12.2, 12.5, 12.6, 12.10, 12.11 and 12.14, as at the end of each
respective period,
(b) stating that the information on the schedules to this Agreement
are complete and accurate as of the date of such certificate or, if such
is not the case, attaching to such certificate updated schedules, and
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(c) stating that, based on a reasonably diligent examination, no
Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the
Borrower with respect to such Default or Event of Default.
SECTION 11.4. Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent
public accountants, including, without limitation, any management letters
and management reports.
(b) As soon as practicable, copies of all financial statements and
reports that the Borrower shall send to its shareholders generally and of
all registration statements and all regular or periodic reports which the
Borrower shall file with the Securities and Exchange Commission or any
successor commission.
(c) From time to time and as soon as reasonably practicable
following each request, such forecasts, data, certificates, reports,
statements, documents or further information regarding the business,
assets, liabilities, financial condition, results of operations or
business prospects of the Borrower or any of its Subsidiaries as the Agent
or any Lender may reasonably request and that the Borrower has or without
unreasonable expense can obtain; provided, however, that the Lenders
shall, to the extent reasonably practicable, coordinate examinations of
the Borrower's records by their respective internal auditors. The rights
of the Agent and the Lenders under this Section 11.4 are in addition to
and not in derogation of their rights under any other provision of this
Agreement or of any other Loan Document.
(d) If requested by the Agent or any Lender, the Borrower will
furnish to the Agent and the Lenders statements in conformity with the
requirements of Federal Reserve Form G-3 or U-1 referred to in Regulation
G and U, respectively, of the Board of Governors of the Federal Reserve
System.
SECTION 11.5. Notice of Litigation and Other. Prompt notice of:
(a) the commencement, to the extent the Borrower is aware of the
same, of all proceedings and investigations by or before any governmental
or nongovernmental body and all actions and proceedings in any court or
before any arbitrator against or in any other way relating to or affecting
the Borrower, any of its Subsidiaries or any of the Borrower's or any of
its Subsidiaries' properties, assets or businesses, which might, singly or
in the aggregate, result in the occurrence of a Default or an Event of
Default, or have a Materially Adverse Effect,
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(b) any amendment of the articles of incorporation or by-laws of the
Borrower or any of its Subsidiaries,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower or
any of its Subsidiaries which has had or is reasonably likely to have,
singly or in the aggregate, a Materially Adverse Effect, and any change in
the executive officers of the Borrower, and
(d) any Default or Event of Default or any event which constitutes
or which with the passage of time or giving of notice or both would
constitute a default or event of default by the Borrower or any of its
Subsidiaries under any material agreement (other than this Agreement) to
which the Borrower or any of its Subsidiaries is a party or by which the
Borrower, any of its Subsidiaries or any of the Borrower's or any of its
Subsidiaries' properties may be bound.
SECTION 11.6. ERISA. As soon as possible and in any event within 30
days after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Plan has occurred or
will occur, or
(b) any Plan has a funded current liability percentage, as defined
in Section 302(d)(8) of ERISA, less than 90% or the aggregate present
value of the Unfunded Vested Accrued Benefits under all Plans is equal to
an amount in excess of $500,000, or
(c) the Borrower or any of its Subsidiaries is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan required by reason of the Borrower's or such
Subsidiary's complete or partial withdrawal (as described in Section 4203
or 4205 of ERISA) from such Multiemployer Plan,
a certificate of the President or a Financial Officer of the Borrower setting
forth the details of such event and the action which is proposed to be taken
with respect thereto, together with any notice or filing which may be required
by the PBGC or other agency of the United States government with respect to such
event.
SECTION 11.7. Accuracy of Information. All written information,
reports, statements and other papers and data furnished to the Agent or any
Lender by or on behalf of the Borrower, whether pursuant to this Article 11 or
any other provision of this Agreement or of any other Loan Document, shall be,
at the time the same is so furnished, complete and correct in all material
respects to the extent necessary to give the Agent and the Lenders materially
true and accurate knowledge of the subject matter.
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SECTION 11.8. Revisions or Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, the Borrower shall
deliver to the Agent and the Lenders as part of the officer's certificate
required pursuant to Section 11.3(b) such revisions or updates to such
Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s), provided that no such revisions or updates to any Schedule(s) shall
be deemed to have amended, modified or superseded such Schedule(s) as originally
attached hereto, or to have cured any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule(s), unless
and until the Required Lenders in their sole and absolute discretion, shall have
accepted in writing such revisions or updates to such Schedule(s).
SECTION 11.9. Seller Subordinated Indebtedness Certificate. Not less
than five Business Days prior to any payment of any principal of, or interest or
other amounts on, the Seller Subordinated Indebtedness, and as a condition
precedent to making such payment, the Borrower shall furnish to the Agent a
certificate of the Financial Officer stating: (a) that no Default or Event of
Default is in existence as of the date of the certificate or will be in
existence as of the date of such payment, both with and without giving effect to
the making of such payment, and (b) the amount of principal and interest to be
paid.
ARTICLE 12
NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, the Borrower will not directly or
indirectly and, in the case of Sections 12.2 through 12.18, will not permit its
Subsidiaries to:
SECTION 12.1. Financial Ratios.
(a) Minimum Tangible Net Worth. Permit Consolidated Tangible Net
Worth of the Borrower and its Consolidated Subsidiaries, as of any fiscal
quarter end, to be less than $16,000,000 plus 75% of Consolidated Net
Income (without deduction for any net loss) on a cumulative basis from the
first day of fiscal year 1999 to and including such fiscal quarter end.
(b) Minimum Cash Flow. Permit Consolidated Operating Cash Flow,
measured as of the end of the second fiscal quarter of fiscal year 1999 on
a fiscal year to date basis, to be less than $7,500,000.
(c) Minimum Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio, as of the end of any fiscal quarter,
calculated on a rolling four-quarter basis (except for the calculation as
of the end of the third fiscal quarter of fiscal year 1999, which shall be
on a fiscal year to date basis),
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to be less than 1.0 to 1 as of the end of the third fiscal quarter of
fiscal year 1999, or 1.1 to 1 as of the end of any fiscal quarter
thereafter.
(d) Maximum Funded Indebtedness to Cash Flow Ratio. Permit the ratio
of (i) Consolidated Funded Indebtedness as of any fiscal quarter end to
(ii) Consolidated Operating Cash Flow to be greater than: 5.5 to 1.0 as of
the end of the second fiscal quarter of fiscal year 1999; 4.75 to 1.0 as
of the end of the third fiscal quarter of fiscal year 1999; 3.75 to 1.0 as
of fiscal year end 1999 or the end of any of the first three fiscal
quarters of fiscal year 2000; 3.5 to 1.0 as of fiscal year end 2000 or the
end of any of the first three fiscal quarters of fiscal year 2001; 3.25 to
1.0 as of fiscal year end 2001 or the end of any of the first three fiscal
quarters of fiscal year 2002; or 3.0 to 1.0 as of fiscal year end 2002 or
the end of any fiscal quarter thereafter. Consolidated Operating Cash Flow
shall be calculated on an annualized fiscal year to date basis in the case
of the calculation of this covenant as of the end of the second and third
fiscal quarters of fiscal year 1999, and on a rolling four-quarter basis
for all calculations thereafter. Consolidated Operating Cash Flow, for the
purpose of this covenant, will include, or exclude, as applicable, the
effect of acquisitions and divestitures on a proforma basis as if such
acquisitions or divestitures occurred on the first day of such applicable
period.
SECTION 12.2. Indebtedness for Money Borrowed. Create, assume, or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding, any Indebtedness for
Money Borrowed, except that this Section 12.2 shall not apply to:
(a) Indebtedness represented by the Loans, the Notes and the other
Loan Documents,
(b) Indebtedness incurred on the Effective Date under the Second
Lien Senior Secured Facility in an aggregate principal amount not to
exceed $15,000,000,
(c) Indebtedness of a Subsidiary of the Borrower owing to the
Borrower or a wholly-owned Subsidiary Guarantor,
(d) Indebtedness for Money Borrowed reflected on Schedule 7.1(j),
excluding any such Indebtedness that is to be paid in full on the
Effective Date (the "Surviving Indebtedness"), and any Indebtedness
extending the maturity of, or refinancing, in whole or in part, any
Surviving Indebtedness, provided that the principal amount of such
Surviving Indebtedness shall not be increased above the principal amount
thereof outstanding immediately prior to such extension or refinancing,
(e) Permitted Purchase Money Indebtedness,
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(f) Indebtedness of any Subsidiary existing at the time such
Subsidiary becomes a Subsidiary, provided that the incurrence of such
Indebtedness was not in anticipation of the acquisition of such Subsidiary
and no Default or Event of Default shall result therefrom, and
(g) Other unsecured Indebtedness in an aggregate outstanding amount
not to exceed $1,000,000 at any time.
SECTION 12.3. Guarantees. Become or remain liable with respect to
any Guaranty of any obligation of any other Person, other than Permitted
Guarantees.
SECTION 12.4. Investments. Acquire, after the Agreement Date, any
Business Unit or Investment, provided, that if no Default or Event of Default
exists or would result therefrom, the Borrower may make Permitted Investments.
SECTION 12.5. Capital Expenditures. Make or incur any Capital
Expenditures in the aggregate (for the Borrower and its Subsidiaries) in excess
of the amount set forth below for the fiscal year set forth opposite such
amount:
Fiscal Year Amount
----------- ------
1999 $11,000,000
2000 $ 7,500,000
2001 $ 6,000,000
2002 $ 6,000,000
2003 $ 6,000,000
Notwithstanding the foregoing, up to 50% of the unused portion of the limit set
forth above with respect to any fiscal year may be carried forward and utilized
in the immediately succeeding fiscal year.
SECTION 12.6. Restricted Payments, Etc. Declare, make or become
obligated to make any Restricted Dividend Payment, Restricted Payment or
Restricted Purchase; provided, that (a) the Borrower's Subsidiaries may make
dividends, distributions and other payments to the Borrower, (b) if no Default
or Event of Default exists or would result therefrom, the Borrower may make
Restricted Dividend Payments, Restricted Payments and Restricted Purchases
during any fiscal year in an aggregate amount not to exceed 10% of Excess Cash
Flow for the previous fiscal year, and (c) in any fiscal year, up to $250,000 of
capital stock or options owned by Borrower's terminated employees may be
repurchased by the Borrower.
SECTION 12.7. Merger, Consolidation and Sale of Assets. Merge or
consolidate with any other Person, or sell, lease, transfer or otherwise dispose
of any of its assets (including stock of any Subsidiary) to any Person, other
than:
(a) of inventory in the ordinary course of business;
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(b) merger or consolidation of any Subsidiary into the Borrower or
any Subsidiary Guarantor that is wholly owned by the Borrower;
(c) sale, lease or other disposal of assets by a Subsidiary to the
Borrower or any Subsidiary Guarantor that is wholly owned by the Borrower;
(d) sale of Borrower's narrow fabrics business, the disposition of
plant and equipment held for disposal as of the Agreement Date, and the
disposition of the Borrower's hosiery plant located in Robbins, North
Carolina, provided the Net Proceeds of any such sale or disposition are
applied as set forth in Section 5.9;
(e) disposition of fixed assets the proceeds of which the Borrower
reasonably expects to reinvest within six months in productive assets of a
kind then used or useable in the business of the Borrower and that are not
subject to any Lien other than Permitted Liens or Liens in favor of the
Agent, for the benefit of the Secured Creditors, provided the Net Proceeds
of any such disposition are applied as set forth in Section 5.9; and
(f) disposition of other fixed assets in an aggregate amount not to
exceed $1,000,000 in any fiscal year, provided the Net Proceeds of any
such disposition are applied as set forth in Section 5.9.
Upon the sale or other disposition of assets of the Borrower or any
Subsidiary as permitted in this Agreement, Agent shall execute and deliver to
Borrower any mortgage release, UCC termination statement, or other instrument or
document reasonably requested by Borrower for the release of the Agent's lien on
such assets upon the actual sale or other disposition of such assets.
SECTION 12.8. Transactions with Affiliates. Effect any transaction
with any Affiliate on a basis less favorable to it than would be the case if
such transaction had been effected with a Person not an Affiliate.
SECTION 12.9. Liens. Create, assume or permit or suffer to exist or
to be created or assumed any Lien on any of the Collateral or its other assets,
other than Permitted Liens.
SECTION 12.10. Capitalized Lease Obligations. Incur or permit to
exist any Capitalized Lease Obligation if such Capitalized Lease Obligation,
when added to existing Capitalized Lease Obligations and Permitted Purchase
Money Indebtedness, would exceed $10,000,000 in the aggregate.
SECTION 12.11. Operating Lease Obligations. Enter into any Operating
Lease if the aggregate annual rental payable under all Operating Leases of the
Borrower and its Subsidiaries would exceed $15,000,000 in the aggregate.
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SECTION 12.12. Plans. Permit any condition to exist in connection
with any Plan which might constitute grounds for the PBGC to institute
proceedings to have such Plan terminated or a trustee appointed to administer
such Plan, and any other condition, event or transaction with respect to any
Plan which could result in the incurrence by the Borrower or any of its
Subsidiaries of any material liability, fine or penalty.
SECTION 12.13. Amendments of Other Agreements. Amend in any way (a)
the subordination provisions applicable to the Seller Subordinated Indebtedness,
or (b) the interest rate (or formula pursuant to which such interest rate is
determined) or principal amount or schedule of payments of principal and
interest with respect to the Seller Subordinated Indebtedness or the Second Lien
Senior Secured Facility other than to reduce the interest rate or extend the
schedule of payments with respect thereto.
SECTION 12.14. Minimum Availability. Except as permitted by the
Agent under Section 5.7(d), permit Availability to be less than $5,000,000 at
any time after the Effective Date.
SECTION 12.15. Fiscal Year. Change the end of its fiscal year from
the Saturday nearest January 31 of each year.
SECTION 12.16. Limitation on Issuance of Capital Stock. Permit any
Subsidiary to issue any stock of such Subsidiary (except for the purpose of
qualifying directors and except for issuances of stock by foreign Subsidiaries
to other foreign Subsidiaries that are wholly-owned (other than directors'
qualifying shares), directly or indirectly, by the Borrower), except to the
Borrower or a wholly-owned Subsidiary Guarantor or to satisfy the rights of
minority shareholders to receive issuances of stock which are non-dilutive to
the Borrower and/or any Subsidiary.
SECTION 12.17. Limitation on Certain Restrictions on Subsidiaries.
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 Indebtedness 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 restrictions existing under or by
reason of (i) Applicable Laws, (ii) this Agreement and the other Loan Documents,
(iii) the Second Lienholder Loan Agreement, (iv) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of the Borrower or a Subsidiary of the Borrower, and (v) customary provisions
restricting assignment of any licensing agreement entered into by the Borrower
or a Subsidiary of the Borrower in the ordinary course of business.
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ARTICLE 13
DEFAULT
SECTION 13.1. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any governmental or nongovernmental body:
(a) Default in Payment. The Borrower shall default in any payment of
principal of or interest on any Loan or any Note when and as due (whether
at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the
payment, as and when due, of principal of or interest on, any other
Secured Obligation, and such default shall continue for a period of five
days after written notice thereof has been given to the Borrower by the
Agent.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by the Borrower under this Agreement or any Loan Document, or
any amendment hereto or thereto, shall at any time prove to have been
incorrect or misleading in any material respect when made.
(d) Default in Performance. The Borrower shall default in the
performance or observance of any term, covenant, condition or agreement to
be performed by the Borrower, contained in:
(i) Articles 8 or 12 or Sections 9.1, 9.2, 9.7, 9.11, 9.13,
10.1 (insofar as it requires the preservation of the corporate
existence of the Borrower), 10.8, 11.5 or 11.9;
(ii) Sections 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.10, 9.12, 9.14,
9.16, 11.1, 11.2 or 11.3 and such default shall continue for a
period of 10 days after the earlier of the date on which an officer
of the Borrower becomes aware of such default and written notice
thereof has been given to the Borrower by the Agent; provided the
Borrower shall not be permitted to cure more than two defaults under
either Section 9.12 or 11.1 during any consecutive 12-month period;
or
(iii) any other provision of this Agreement (other than as
specifically provided for otherwise in this Section 13.1) and such
default shall continue for a period of 30 days after the earlier of
the date on which an officer of the Borrower becomes aware of such
default and written notice thereof has been given to the Borrower by
the Agent.
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(e) Indebtedness Cross-Default.
(i) The Borrower or any Subsidiary of the Borrower shall fail
to pay when due and payable the principal of or interest on any
Indebtedness for Money Borrowed (other than the Loans) in an amount
in excess of $1,000,000, or
(ii) the maturity of any such Indebtedness for Money Borrowed
shall have been accelerated in accordance with the provisions of any
indenture, contract or instrument providing for the creation of or
concerning such Indebtedness, or
(iii) any default shall have occurred and be continuing which
would permit any holder or holders of such Indebtedness for Money
Borrowed, any trustee or agent acting on behalf of such holder or
holders or any other Person so to accelerate such maturity, and the
Borrower shall have failed to cure such default prior to the
expiration of any applicable cure or grace period, or
(iv) The Borrower and any Subsidiary of the Borrower shall
have, in the aggregate, more than $1,000,000 of accounts payable
that are past due by more than 60 days and that are not being
disputed in good faith by the Borrower or the applicable Subsidiary.
(f) Other Cross-Defaults. The Borrower or any of its Subsidiaries
shall default in the payment when due, or in the performance or
observance, of any obligation or condition of any agreement, contract or
lease (other than this Agreement, the Security Documents or any such
agreement, contract or lease relating to Indebtedness for Money Borrowed)
if the existence of any such defaults, singly or in the aggregate, could
in the reasonable judgment of the Agent have a Materially Adverse Effect;
provided, however, that for the purposes of this provision where such a
default could result only in a monetary loss, a Material Adverse Effect
shall not be deemed to have occurred unless the aggregate of such losses
would exceed $1,000,000.
(g) Voluntary Bankruptcy Proceeding. The Borrower or any of its
Subsidiaries shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition
seeking to take advantage of any other laws, domestic or foreign, relating
to bankruptcy, insolvency, reorganization, winding up or composition for
adjustment of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case
under such bankruptcy laws or other laws, (iv) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or
the taking of possession by, a receiver, custodian, trustee, or liquidator
of itself or of a substantial part of its property, domestic or foreign,
(v) admit in writing its inability to pay its debts as they become due,
(vi) make a
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general assignment for the benefit of creditors, or (vii) take any
corporate action authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against the Borrower or any of its Subsidiaries in any
court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of the Borrower, any of its
Subsidiaries or of all or any substantial part of the assets, domestic or
foreign, of the Borrower or any of its Subsidiaries, and such case,
proceeding or appointment shall continue undismissed or unstayed for a
period of 60 consecutive calendar days, or an order granting the relief
requested in such case or proceeding against the Borrower or any of its
Subsidiaries (including, but not limited to, an order for relief under
such federal bankruptcy laws) shall be entered.
(i) Failure of Agreements. The Borrower shall challenge the validity
and binding effect of any provision of any Loan Document after delivery
thereof hereunder or shall state its intention to make such a challenge in
writing, or any Loan Document, after delivery thereof hereunder, shall for
any reason (except to the extent permitted by the terms thereof) cease to
create a valid and perfected first priority Lien (except for Permitted
Liens) on, or security interest in, any of the Collateral purported to be
covered thereby.
(j) Judgment. One or more judgments or orders for the payment of
money in an amount that exceeds $500,000 individually or in the aggregate
shall be entered against the Borrower or any of its Subsidiaries by any
court and such judgments or orders shall continue undischarged or unstayed
for 30 days.
(k) Attachment. One or more warrants or writs of attachment or
execution or similar process which exceeds $500,000 individually or in the
aggregate in value shall be issued against any property of the Borrower or
any of its Subsidiaries and such warrants or process shall continue
undischarged or unstayed for 30 days.
(l) Loan Documents. Any event of default under any Loan Document
shall occur or the Borrower shall default in the performance or observance
of any term, covenant, condition or agreement contained in, or the payment
of any other sum covenanted to be paid by the Borrower under, any Loan
Document; provided, however that no event of default under any Loan
Document shall be deemed to have occurred until any notice required under
such Loan Document has been given and any grace period granted under such
Loan Document has expired.
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(m) ERISA.
(i) Any Termination Event with respect to a Plan shall occur
that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Plan with respect to which a
Termination Event occurs on the same day (but only to the extent
that such excess is the property of the Borrower) over (B) the
present value on such day of all vested nonforfeitable benefits
under such other Plan, results in an Unfunded Vested Accrued Benefit
in excess of $0.00, or
(ii) any Plan shall incur an "accumulated funding deficiency"
(as defined in Section 412 of the Internal Revenue Code or Section
302 of ERISA) for which a waiver has not been obtained in accordance
with the applicable provisions of the Internal Revenue Code and
ERISA, or
(iii) the Borrower or any of its Subsidiaries is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from the Borrower's or any such
Subsidiary's complete or partial withdrawal (as described in Section
4203 or 4205 of ERISA) from such Multiemployer Plan.
(n) Change in Control. At any time after the Agreement Date, (i) a
Person or "group" of Persons (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder), shall acquire, beneficially or of record, 50% or more of the
outstanding voting stock (stock entitled to vote for election of directors
excluding rights subject to a contingency) 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 approved by a vote
of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the directors of the Borrower, as the case may
be, then in office.
(o) Change in Management. For any reason the Borrower's chief
executive officer is no longer actively involved in such role, unless a
replacement reasonably satisfactory to the Required Lenders is appointed
within 120 days.
(p) General Insecurity. The occurrence of any act, omission,
circumstance, event or condition or series of acts, omissions,
circumstances, events or conditions which could reasonably be expected to
have, either individually or in the aggregate, a Materially Adverse
Effect.
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SECTION 13.2. Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon the
occurrence of an Event of Default specified in Section 13.1(g) or (h), (i)
the principal of and the interest on the Loans and any Note at the time
outstanding, and all other amounts owed to the Agent or the Lenders under
this Agreement or any of the Loan Documents and all other Secured
Obligations, shall thereupon become due and payable without presentment,
demand, protest, or other notice of any kind, all of which are expressly
waived, anything in this Agreement or any of the Loan Documents to the
contrary notwithstanding, and (ii)_the Revolving Credit Facility and the
right of the Borrower to request borrowings under this Agreement shall
immediately terminate.
(b) Other Remedies. If any Event of Default shall have occurred, and
during the continuance of any such Event of Default, the Agent may, and at
the direction of the Required Lenders in their sole and absolute
discretion shall, do any of the following:
(i) declare the principal of and interest on the Loans and any
Note at the time outstanding, and all other amounts owed to the
Agent or the Lenders under this Agreement or any of the Loan
Documents and all other Secured Obligations, to be forthwith due and
payable, whereupon the same shall immediately become due and payable
without presentment, demand, protest or other notice of any kind,
all of which are expressly waived, anything in this Agreement or the
Loan Documents to the contrary notwithstanding;
(ii) terminate the Revolving Credit Facility and any other
right of the Borrower to request borrowings hereunder;
(iii) notify, or request the Borrower to notify, in writing or
otherwise, any Account Debtor or obligor with respect to any one or
more of the Receivables to make payment to the Agent for the benefit
of the Lenders, or any agent or designee of the Agent, at such
address as may be specified by the Agent and if, notwithstanding the
giving of any notice, any Account Debtor or other such obligor shall
make payments to the Borrower, the Borrower shall hold all such
payments it receives in trust for the Agent, for the account of the
Lenders, without commingling the same with other funds or property
of, or held by, the Borrower, and shall deliver the same to the
Agent or any such agent or designee of the Agent immediately upon
receipt by the Borrower in the identical form received, together
with any necessary endorsements;
(iv) settle or adjust disputes and claims directly with
Account Debtors and other obligors on Receivables for amounts and on
terms which the Agent considers advisable and in all such cases only
the net amounts
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received by the Agent, for the account of the Lenders, in payment of
such amounts, after deductions of costs and attorneys' fees, shall
constitute Collateral and the Borrower shall have no further right
to make any such settlements or adjustments or to accept any returns
of merchandise;
(v) enter upon any premises in which Inventory or Equipment
may be located and, without resistance or interference by the
Borrower, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any
part thereof to such other place or places as the Agent shall
choose, without being liable to the Borrower on account of any loss,
damage or depreciation that may occur as a result thereof, so long
as the Agent shall act reasonably and in good faith;
(vi) require the Borrower to and the Borrower shall, without
charge to the Agent or any Lender, assemble the Inventory and
Equipment and maintain or deliver it into the possession of the
Agent or any agent or representative of the Agent at such place or
places as the Agent may designate and as are reasonably convenient
to both the Agent and the Borrower;
(vii) at the expense of the Borrower, cause any of the
Inventory and Equipment to be placed in a public or field warehouse,
and the Agent shall not be liable to the Borrower on account of any
loss, damage or depreciation that may occur as a result thereof, so
long as the Agent shall act reasonably and in good faith;
(viii) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of the Borrower's
premises and, without breach of the peace, until the Agent, on
behalf of the Secured Creditors, completes the enforcement of its
rights in the Collateral, take possession of such premises or place
custodians in exclusive control thereof, remain on such premises and
use the same and any of the Borrower's Equipment, for the purpose of
(A) completing any work in process, preparing any Inventory for
disposition and disposing thereof, and (B) collecting any
Receivable, and the Agent for the benefit of the Lenders is hereby
granted a license or sublicense and all other rights as may be
necessary, appropriate or desirable to use the Proprietary Rights in
connection with the foregoing, and the rights of the Borrower under
all licenses, sublicenses and franchise agreements shall inure to
the Agent for the benefit of the Lenders (provided, however, that
any use of any federally registered trademarks as to any goods shall
be subject to the control as to the quality of such goods of the
owner of such trademarks and the goodwill of the business symbolized
thereby);
(ix) exercise any and all of its rights under any and all of
the Security Documents;
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(x) apply any Collateral consisting of cash to the payment of
the Secured Obligations as set forth herein or use such cash in
connection with the exercise of any of its other rights hereunder or
under any of the Security Documents;
(xi) establish or cause to be established one or more
lockboxes or other arrangement for the deposit of proceeds of
Receivables, and, in such case, the Borrower shall cause to be
forwarded to the Agent at the Agent's Office, on a daily basis,
copies of all checks and other items of payment and deposit slips
related thereto deposited in such lockboxes, together with
collection reports in form and substance satisfactory to the Agent;
and
(xii) exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code and under any other
Applicable Law, including, without limitation, the right, without
notice except as specified below and with or without taking the
possession thereof, to sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any location
chosen by the Agent, for cash, on credit or for future delivery, and
at such price or prices and upon such other terms as the Agent may
deem commercially reasonable. The Borrower agrees that, to the
extent notice of sale shall be required by law, at least 10 days
notice to the Borrower of the time and place of any public sale or
the time after which any private sale is to be made shall constitute
reasonable notification, but notice given in any other reasonable
manner or at any other reasonable time shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which
it was so adjourned.
SECTION 13.3. Application of Proceeds. All proceeds from each sale
of, or other realization upon, all or any part of the Collateral following an
Event of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including reasonable
attorneys' fees,
(b) Second: to the payment of the Secured Obligations (with the
Borrower remaining liable for any deficiency) as set forth in Section
5.8(f),
(c) Third: the balance (if any) of such proceeds shall be paid to
the Borrower, subject to any duty imposed by law, or otherwise to
whomsoever shall be entitled thereto.
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The Borrower shall remain liable and will pay, on demand, any deficiency
remaining in respect of the Secured Obligations, together with interest thereon
at a rate per annum equal to the highest rate then payable hereunder on such
Secured Obligations, which interest shall constitute part of the Secured
Obligations.
SECTION 13.4. Power of Attorney. In addition to the authorizations
granted to the Agent under Section 9.13 or under any other provision of this
Agreement or of any other Loan Document, during the continuance of an Event of
Default, the Borrower hereby irrevocably designates, makes, constitutes and
appoints the Agent (and all Persons designated by the Agent from time to time)
as the Borrower's true and lawful attorney, and agent in fact, and the Agent, or
any agent of the Agent, may, without notice to the Borrower, and at such time or
times as the Agent or any such agent in its sole discretion may determine, in
the name of the Borrower, the Agent or the Lenders, (i) demand payment of the
Receivables, (ii) enforce payment of the Receivables by legal proceedings or
otherwise, (iii) exercise all of the Borrower's rights and remedies with respect
to the collection of Receivables, (iv) settle, adjust, compromise, extend or
renew any or all of the Receivables, (v) settle adjust or compromise any legal
proceedings brought to collect the Receivables, (vi) discharge and release the
Receivables, or any of them, (vii) prepare, file and sign the name of the
Borrower on any proof of claim in bankruptcy or any similar document against any
Account Debtor, (viii) prepare, file and sign the name of the Borrower on any
notice of Lien, assignment or satisfaction of Lien, or similar document in
connection with any of the Collateral, (ix) endorse the name of the Borrower
upon any chattel paper, document, instrument, notice, freight bill, bill of
lading or similar document or agreement relating to the Receivables, the
Inventory or any other Collateral, (x) use the stationery of the Borrower and
sign the name of the Borrower to verifications of the Receivables and on any
notice to the Account Debtors, (xi) open the Borrower's mail, (xii) notify the
post office authorities to change the address for delivery of the Borrower's
mail to an address designated by the Agent, and (xiii) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Receivables, Inventory or other Collateral to which
the Borrower has access.
SECTION 13.5. Miscellaneous Provisions.
(a) Rights Cumulative. The rights and remedies of the Agent and the
Lenders under this Agreement, the Notes and each of the Loan Documents
shall be cumulative and not exclusive of any rights or remedies which it
or they would otherwise have. In exercising such rights and remedies the
Agent and the Lenders may be selective and no failure or delay by the
Agent or any Lender in exercising any right shall operate as a waiver of
it, nor shall any single or partial exercise of any power or right
preclude its other or further exercise or the exercise of any other power
or right.
(b) Waiver of Marshaling. The Borrower hereby waives any right to
require any marshaling of assets and any similar right.
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(c) Limitation of Liability. Nothing contained in this Article 13 or
elsewhere in this Agreement or in any of the Loan Documents shall be
construed as requiring or obligating the Agent, any Lender or any agent or
designee of the Agent or any Lender to make any demand, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or
to present or file any claim or notice or take any action, with respect to
any Receivable or any other Collateral or the monies due or to become due
thereunder or in connection therewith, or to take any steps necessary to
preserve any rights against prior parties, and the Agent, the Lenders and
their agents or designees shall have no liability to the Borrower for
actions taken pursuant to this Article 13, any other provision of this
Agreement or any of the Loan Documents so long as the Agent or such Lender
shall act reasonably and in good faith.
(d) Appointment of Receiver. In any action under this Article 13,
the Agent shall be entitled during the continuance of an Event of Default
to the appointment of a receiver, without notice of any kind whatsoever,
to take possession of all or any portion of the Collateral and to exercise
such power as the court shall confer upon such receiver.
ARTICLE 14
ASSIGNMENTS
SECTION 14.1. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes, and
their respective permitted successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Each Lender may, with the consent of both the Borrower (whose
consent shall not be unreasonably withheld or delayed, and whose consent
shall not be required if an Event of Default exists) and the Agent, assign
to one or more Eligible Assignees all or a portion of its rights,
obligations, interests, or rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments or its
Loans at the time owing to it and the Notes held by it); provided,
however, that (i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations
under this Agreement, (ii) the amount of the Commitment of the assigning
Lender that is subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered
to the Agent) shall in no event be less than the Minimum Commitment,
unless (a) such assigning Lender holds less than the Minimum Commitment
and is assigning all of its Commitment, or (b) such assignment is to
another Lender, or
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(c) there is an Event of Default under this Agreement, (iii) in the case
of a partial assignment, the amount of the Commitment that is retained by
the assigning Lender (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent)
shall in no event be less than the Minimum Commitment, (iv) the parties to
each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as hereinafter defined), an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and such assignee's pro rata share of the Agent's syndication
expenses, (v) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or the
Notes under the blue sky laws of any state, (vi) the representation
contained in Section 14.2 hereof shall be true with respect to any such
proposed assignee, and (vii) the parties to such assignment shall deliver
to the Agent a processing fee of $5,000. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in
each Assignment and Acceptance, which effective date shall, unless the
Agent otherwise consents, be at least five Business Days after the
execution thereof, (x) the assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder, and (y) the Lender assignor
thereunder shall, to the extent provided in such assignment, be released
from its obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other
than the representation and warranty that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse
claim, such Lender assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such Lender assignor makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower
of any of its obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 11.1 and such
other documents and information (including a copy of the Intercreditor
Agreement) as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
Lender assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and
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authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as
are delegated to the Agent by the terms hereof and thereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names
and addresses of the Lenders and the Commitment Percentage of, and
principal amount of the Loans owing to, each Lender from time to time (the
"Register"), and shall provide a copy thereof to the Borrower. The entries
in the Register shall be conclusive, in the absence of manifest error, and
the Borrower, the Agent and the Lenders may treat each person whose name
is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection and copying by
the Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee together with any Note or Notes
subject to such assignment, the fee described in clause (vii) of Section
14.1(b) and the written consent to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in the form of
Exhibit D, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, (iii) give prompt notice
thereof to the Lenders and the Borrower, and (iv) promptly deliver a copy
of such Acceptance and Assignment to the Borrower. Within five Business
Days after receipt of notice, the Borrower shall execute and deliver to
the Agent in exchange for the surrendered Note or Notes a new Note or
Notes to the order of such Eligible Assignee in amounts equal to the
Commitments assumed by such Eligible Assignee pursuant to such Assignment
and Acceptance and a new Note or Notes to the order of the assigning
Lender in an amount equal to the Commitment retained by it hereunder. Such
new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the assigned Notes delivered to
the assignor Lender. Each surrendered Note or Notes shall be canceled and
returned to the Borrower.
(f) Each Lender may sell participations to one or more Persons in
all or a portion of its rights, obligations or rights and obligations
under this Agreement (including all or a portion of its Commitments or its
Loans); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participant shall be entitled to the benefit of the
yield protection provisions and the rights of set-off contained in this
Agreement, and (iv) the Borrower shall continue to deal solely
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and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole
right to enforce the obligations of the Borrower relating to its Loans and
its Note and to approve any amendment, modification, or waiver of any
provision of this Agreement (other than amendments, modifications, or
waivers decreasing the amount of principal of or the rate at which
interest is payable on such Loans or Note, extending any scheduled
principal payment date or date fixed for the payment of interest on such
Loans or Note, or extending its Commitment).
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its
Loans and its Note to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from
its obligations hereunder.
(h) Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this
Section 14.1, disclose to the assignee, participant, proposed assignee or
proposed participant, any information relating to the Borrower furnished
to such Lender by or on behalf of the Borrower; provided that, prior to
any such disclosure, each such assignee, proposed assignee, participant or
proposed participant shall agree with the Borrower or such Lender (which
in the case of an agreement with only such Lender, the Borrower shall be
recognized as a third party beneficiary thereof) to preserve the
confidentiality of any confidential information relating to the Borrower
received from such Lender and shall use such information solely for the
purpose of effecting the proposed assignment or participation and shall
make no other use thereof.
SECTION 14.2. Representation of Lenders. Each Lender hereby
represents that it will make each Loan hereunder as a commercial loan for its
own account in the ordinary course of its business; provided, however, that
subject to Section 14.1 hereof, the disposition of the Notes or other evidence
of the Secured Obligations held by any Lender shall at all times be within its
exclusive control.
ARTICLE 15
AGENT
SECTION 15.1. Appointment of Agent. Each of the Lenders hereby
irrevocably designates and appoints NationsBank, N.A. as the Agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes Agent, as the Agent for such Lender to take such action
on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of
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this Agreement and such other Loan Documents, including, without limitation, to
make determinations as to the eligibility of Inventory and Receivables, together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement or such other Loan
Documents, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Agent.
SECTION 15.2. Delegation of Duties. The Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 15.3. Exculpatory Provisions. Neither the Agent nor any of
its trustees, officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable to any Lender (or any Lender's participants) for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct), or (ii) responsible
in any manner to any Lender (or any Lender's participants) for any recitals,
statements, representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or the other Loan Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or the
other Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the other Loan Documents or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower.
SECTION 15.4. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the Agent. The
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with Section
14.1. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
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fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
SECTION 15.5. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders; provided
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) continue making Revolving Credit Loans to
the Borrower on behalf of the Lenders in reliance on the provisions of Section
5.7 and take such other action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 15.6. Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder or by the other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
SECTION 15.7. Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective
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Commitment Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or the other Loan Documents, or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Agent's gross negligence or willful misconduct or resulting solely from
transactions or occurrences that occur at a time after such Lender has assigned
all of its interests, rights and obligations under this Agreement pursuant to
Section 14.1 or, in the case of a Lender to which an assignment is made
hereunder pursuant to Section 14.1, at a time before such assignment. The
agreements in this subsection shall survive the payment of the Notes, the
Secured Obligations and all other amounts payable hereunder and the termination
of this Agreement.
SECTION 15.8. Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower and its Subsidiaries as if the Agent were not
the Agent hereunder. With respect to its Commitment, the Loans made or renewed
by it and any Note issued to it and any Letter of Credit issued by it, the Agent
shall have and may exercise the same rights and powers under this Agreement and
the other Loan Documents and is subject to the same obligations and liabilities
as and to the extent set forth herein and in the other Loan Documents for any
other Lender. The terms "Lenders" or "Required Lenders" or any other term shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity as a Lender or one of the Required Lenders.
SECTION 15.9. Successor Agent. The Agent may resign as Agent upon
five Business Days notice to the Lenders and the Borrower; provided, however,
that such resignation shall not take effect until a successor agent has been
appointed. If the Agent shall resign as Agent under this Agreement, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders which successor agent shall be approved by the Borrower (which approval
shall not be unreasonably withheld), whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent, and the term "Agent"
shall mean such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. If the Required Lenders
have failed to appoint a successor agent within 30 days after the resignation
notice given by the Agent as provided above, then the Agent shall be entitled to
appoint a successor agent from among the Lenders. After any retiring Agent's
resignation hereunder as Agent, the provisions of Article 15 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
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SECTION 15.10. Notices from Agent to Lenders. The Agent shall
promptly, upon request from any Lender, forward to such Lender copies of any
written notices, reports or other information supplied to it by the Borrower
(but which the Borrower is not required to supply directly to the Lenders).
SECTION 15.11. Syndication Agent; Documentation Agent. Each of the
parties to this Agreement acknowledges that, other than any rights and duties
explicitly assigned to the Syndication Agent and Documentation Agent under this
Agreement, neither the Syndication Agent nor the Documentation Agent has any
obligations hereunder and shall not be responsible or accountable to any other
party hereto for any action or failure to act hereunder.
SECTION 15.12. Intercreditor Agreement. Each Lender expressly
acknowledges that it has received a copy of the Intercreditor Agreement and that
the Intercreditor Agreement contains, among other provisions, provisions
relating to the sharing of proceeds of Collateral with the Investor, and
requiring the consent of the Investor with respect to certain releases of
Collateral, prior to the occurrence of an Event of Default.
ARTICLE 16
MISCELLANEOUS
SECTION 16.1. Notices.
(a) Method of Communication. Except as specifically provided in this
Agreement or in any of the Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by
telephone, subsequently confirmed in writing. Notices in writing shall be
delivered personally or sent by certified or registered mail, postage
pre-paid, or by overnight courier, telex or facsimile transmission and
shall be deemed received in the case of personal delivery, when delivered,
in the case of mailing, when receipted for, in the case of overnight
delivery, on the next Business Day after delivery to the courier, and in
the case of telex and facsimile transmission, upon transmittal. A
telephonic notice to the Agent, as understood by the Agent, will be deemed
to be the controlling and proper notice in the event of a discrepancy with
or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it
at the following addresses, or any other address of which all the other
parties are notified in writing
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If to the Borrower: Ithaca Industries, Inc.
Hwy. 268 West, P.O. Box 620
Wilkesboro, NC 28697
Attn.: Chief Financial Officer
Facsimile No.: 336-667-2979
If to the Agent: NationsBank, N.A.
Business Credit Division
600 Peachtree Street
13 Plaza
Atlanta, Georgia 30308
Attn.: John Bohan
Facsimile No.: 404-607-6437
If to a Lender: At the address of such Lender set forth on
the signature page hereof.
(c) Agent's Office. The Agent hereby designates its office located
at 600 Peachtree Street, Atlanta, Georgia 30308, or any subsequent office
which shall have been specified for such purpose by written notice to the
Borrower, as the office to which payments due are to be made and at which
Loans will be disbursed.
SECTION 16.2. Expenses. The Borrower agrees to pay or reimburse on
demand all out-of-pocket costs and expenses reasonably incurred by the Agent and
the Syndication Agent, including, without limitation, the reasonable fees and
disbursements of outside counsel, in connection with (a) the negotiation,
preparation, execution, delivery, administration, enforcement and termination of
this Agreement and each of the other Loan Documents, whenever the same shall be
executed and delivered, including, without limitation (i) the out-of-pocket
costs and expenses incurred in connection with the arrangement and closing of
the syndication referred to in Section 10.10 and the administration and
interpretation of this Agreement and the other Loan Documents; (ii) the costs
and expenses of appraisals of the Collateral; (iii) the costs and expenses of
lien and title searches and title insurance; (iv) the costs and expenses of
environmental reports with respect to the Real Estate; (v) taxes, fees and other
charges for recording the Mortgages, filing the Financing Statements and
continuations, and the costs and expenses of taking other actions to perfect,
protect, and continue the Security Interests (other than taxes based on gross
receipts, income or revenue); (b) the preparation, execution and delivery of any
waiver, amendment, supplement or consent by the Agent and the Lenders relating
to this Agreement or any of the Loan Documents; (c) sums paid or incurred to pay
any amount or take any action required of the Borrower under the Loan Documents
that the Borrower fails to pay or take; (d) costs of inspections and
verifications of the Collateral, including, without limitation, standard per
diem fees charged by the Agent for travel, lodging and meals for inspections of
the Collateral and the Borrower's operations and books and records by the
Agent's representatives and agents; (e) costs and expenses of forwarding loan
proceeds, collecting checks and other items of payment, and
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establishing and maintaining each Disbursement Account and Agency Account, to
the extent provided for in the applicable documents; (f) costs and expenses of
preserving and protecting the Collateral; and (g) consulting, after the
occurrence of a Default, with one or more Persons, including appraisers,
accountants and lawyers, concerning the value of any Collateral for the Secured
Obligations or the nature, scope or value of any right or remedy of the Agent or
any Lender hereunder or under any of the Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the fees
and disbursements of such Persons.
The Borrower further agrees to pay or reimburse on demand all costs and expenses
incurred by the Agent and the Lenders, including, without limitation, the
reasonable fees and disbursements of counsel, experts and other consultants to
the Agent and any Lender, in connection with (a) any Default or Event of Default
or any modification, amendment, waiver, restructuring or forbearance with
respect to any of the Loan Documents in connection with such Default or Event of
Default, and (b) any actions taken to obtain payment of the Secured Obligations,
enforce the Security Interests, sell or otherwise realize upon the Collateral,
and otherwise enforce the provisions of the Loan Documents, or to prosecute or
defend any claim in any way arising out of, related to or connected with, this
Agreement or any of the Loan Documents.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrower. The Borrower
hereby authorizes the Agent and the Lenders to debit the Borrower's Loan
Accounts (by increasing the principal amount of the Revolving Credit Loan) in
the amount of any such costs and expenses owed by the Borrower when due;
provided, however, debiting the Borrower's Loan Account shall not be deemed
conclusive evidence of the accuracy of the cost or expense so debited.
SECTION 16.3. Stamp and Other Taxes. The Borrower will pay any and
all stamp, registration, recordation and similar taxes, fees or charges (other
than taxes based on gross receipts, income or revenue) and shall indemnify the
Agent, the Syndication Agent and the Lenders against any and all liabilities
with respect to or resulting from any delay in the payment or omission to pay
any such taxes, fees or charges, which may be payable or determined to be
payable in connection with the execution, delivery, performance or enforcement
of this Agreement and any of the Loan Documents or the perfection of any rights
or security interest thereunder, including, without limitation, the Security
Interest.
SECTION 16.4. Setoff. In addition to any rights now or hereafter
granted under Applicable Laws and not by way of limitation of any such rights,
during the continuance of any Event of Default, each Lender, any participant
with such Lender in the Loans and each Affiliate of each Lender are hereby
authorized by the Borrower at any time or from time to time, without notice to
the Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
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indebtedness at any time held or owing by any Lender or any Affiliate of any
Lender or any participant to or for the credit or the account of the Borrower
against and on account of the Secured Obligations irrespective or whether or not
(a) the Agent or such Lender shall have made any demand under this Agreement or
any of the Loan Documents, or (b) the Agent or such Lender shall have declared
any or all of the Secured Obligations to be due and payable as permitted by
Section 13.2 and although such Secured Obligations shall be contingent or
unmatured.
SECTION 16.5. Litigation. THE BORROWER, THE SYNDICATION AGENT, THE
AGENT AND EACH LENDER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN
WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE BORROWER, THE SYNDICATION
AGENT, THE AGENT AND SUCH LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL
OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER
BETWEEN THE BORROWER AND THE AGENT, THE SYNDICATION AGENT, OR ANY LENDER OF ANY
KIND OR NATURE. THE BORROWER, THE SYNDICATION AGENT, THE AGENT AND THE LENDERS
HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT
THE OPTION OF THE AGENT, THE SYNDICATION AGENT OR ANY LENDER, ANY COURT IN WHICH
THE AGENT OR SUCH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE
NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE BORROWER AND THE AGENT, THE SYNDICATION AGENT OR SUCH LENDER, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER
ARISING THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY
WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
THE BORROWER AT THE ADDRESS OF THE BORROWER SET FORTH IN SECTION 16.1.
SECTION 16.6. Waiver of Rights. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH BORROWER HAS UNDER CHAPTER
14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR PROVISION OF
APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A
WRIT OF POSSESSION ENTITLING THE AGENT OR ANY LENDER, OR THE SUCCESSORS AND
ASSIGNS OF THE AGENT OR SUCH LENDER TO POSSESSION OF THE COLLATERAL UPON EVENT
OF DEFAULT. WITHOUT
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LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT
WHICH THE AGENT OR THE LENDERS MAY HAVE, THE BORROWER CONSENTS THAT IF THE AGENT
FILES A PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH SECTIONS
44-14-261 AND 44-14-262 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW, AND THIS WAIVER OR A COPY HEREOF IS ALLEGED IN SUCH
PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH SUCH PETITION IS FILED MAY
DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE FORTHWITH AN
IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE 44 OF THE
OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF
APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE
REQUIRED BY SECTION 44-14-263 OF THE OFFICIAL CODE OF GEORGIA OR BY ANY SIMILAR
PROVISION UNDER APPLICABLE LAW. THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS
READ AND FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT HEREOF.
SECTION 16.7. Consent to Advertising and Publicity. With the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, the Agent, on behalf of the Lenders, may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, including the name and address of the Borrower, the amount,
interest rate, maturity, collateral and a general description of the Borrower's
business.
SECTION 16.8. Reversal of Payments. The Agent and each Lender shall
have the continuing and exclusive right to apply, reverse and re-apply any and
all payments to any portion of the Secured Obligations in a manner consistent
with the terms of this Agreement. To the extent the Borrower makes a payment or
payments to the Agent, for the account of the Lenders, or any Lender receives
any payment or proceeds of the Collateral for the Borrower's benefit, which
payment(s) or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Secured Obligations or part thereof intended
to be satisfied shall be revived and continued in full force and effect, as if
such payment or proceeds had not been received by the Agent or such Lender.
SECTION 16.9. Injunctive Relief. The Borrower recognizes that, in
the event the Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law may prove to
be inadequate relief to the Agent and the Lenders; therefore, the Borrower
agrees that if any Event of Default shall have occurred and be continuing, the
Agent and the Lenders, if the Agent or any Lender so requests, shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damages.
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SECTION 16.10. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower to determine whether it is in compliance with any covenant contained
herein, shall, unless this Agreement otherwise provides or unless Required
Lenders shall otherwise consent in writing, be performed in accordance with
GAAP.
SECTION 16.11. Amendments; Waivers.
(a) Except as set forth in subsection (b) below, any term, covenant,
agreement or condition of this Agreement or any of the Loan Documents may
be amended or waived, and any departure therefrom may be consented to by
the Required Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders and, in the case of an
amendment (other than an amendment described in Section 16.11(d)), by the
Borrower, and in any such event, the failure to observe, perform or
discharge any such term, covenant, agreement or condition (whether such
amendment is executed or such waiver or consent is given before or after
such failure) shall not be construed as a breach of such term, covenant,
agreement or condition or as a Default or an Event of Default; provided
that:
(i) without the written consent of NationsBank and any other
Lender then serving as the Issuing Bank, no amendment or waiver
shall be made to any provision of Article 3 hereof or any of
NationsBank's or the Issuing Bank's rights or obligations with
respect to Letters of Credit,
(ii) without the written consent of NationsBank, no amendment
or waiver shall be made to any of NationsBank's rights or
obligations with respect to Non-Ratable Loans,
(iii) without the written consent of the Agent, no amendment
or waiver shall be made to any provision of Article 15 as such
provisions apply to the Agent or to any other provision of any Loan
Document as such provisions relate to the rights and obligations of
the Agent,
(iv) without the written consent of the Supermajority Lenders,
no amendment or waiver of this Agreement or the other Loan Documents
shall be made in order to (A) permit a Receivables securitization
described in Section 16.24, or (B) reduce the minimum Availability
required under Section 12.14 to any amount equal to or greater than
$2,000,000, and
(v) without the written consent of the Syndication Agent or
the Documentation Agent, as the case may be, no amendment or waiver
shall be made to Section 15.11 or to any other provision of any Loan
Document as such provisions relate to the rights and obligations of
the Syndication Agent or the Documentation Agent, as the case may
be.
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Unless otherwise specified in such waiver or consent, a waiver or consent
given hereunder shall be effective only in the specific instance and for
the specific purpose for which given. In the event that any such waiver or
amendment is requested by the Borrower, the Agent and the Lenders may
require and charge a fee in connection therewith and consideration thereof
in such amount as shall be determined by the Agent and the Required
Lenders in their discretion.
(b) Except as otherwise set forth in this Agreement, without the
prior unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall affect the amount or
extend the time of the obligation of the Lenders to make Loans, or
extend the originally scheduled time or times of payment of the
principal of any Loan, or alter the time or times of payment of
interest on any Loan or the amount of the principal thereof or the
rate of interest thereon or the amount of any commitment fee payable
hereunder, or permit any subordination of the principal or interest
on such Loan, or permit the subordination of the Security Interests
in any material Collateral (except as may occur as a result of a
transaction described in Section 16.24), or amend the provisions of
Article 13 or of this Section 16.11(b), or reduce the minimum
Availability required under Section 12.14 to an amount less than
$2,000,000,
(ii) no material Collateral shall be released by the Agent
other than in connection with a permitted disposition thereof or as
otherwise specifically permitted in this Agreement (provided that,
with the written consent of the Supermajority Lenders, material
Receivables may be released in connection with any Receivables
securitization consented to by the Supermajority Lenders),
(iii) no amendment shall be made to the definitions of
"Borrowing Base", "Commitment", "Commitment Percentage", "Eligible
Assignee", "Proportionate Share", "Ratable", "Required Lenders",
"Secured Obligations", "Supermajority Lenders", or "Total
Commitment", and
(iv) neither the Agent nor any Lender shall consent to any
amendment to or waiver of the amortization, deferral or
subordination provisions of the Seller Subordinated Note or any
other instrument or agreement evidencing or relating to obligations
of the Borrower that are expressly subordinate to any of the Secured
Obligations if such amendment or waiver would be adverse to the
Lenders in their capacities as Lenders hereunder;
provided, however, that anything herein to the contrary notwithstanding,
Required Lenders shall have the right to waive any Default or Event of
Default and the consequences hereunder of such Default or Event of Default
provided
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only that such Default or Event of Default does not arise under Section
13.1 (g) or (h) or out of a breach of or failure to perform or observe any
term, covenant or condition of this Agreement or any other Loan Document
(other than the provisions of Article 13 of this Agreement) the amendment
of which requires the unanimous consent of the Lenders. The Required
Lenders shall have the right, with respect to any Default or Event of
Default that may be waived by them, to enter into an agreement with the
Borrower providing for the forbearance from the exercise of any remedies
provided hereunder or under the other Loan Documents without waiving any
Default or Event of Default.
(c) The making of Loans hereunder by the Lenders during the
existence of a Default or Event of Default shall not be deemed to
constitute a waiver of such Default or Event of Default.
(d) Notwithstanding any provision of this Agreement or the other
Loan Documents to the contrary, no consent, written or otherwise, of the
Borrower shall be necessary or required in connection with any amendment
to Article 15 or Section 5.7, and any amendment to such provisions shall
be effected solely by and among the Agent and the Lenders, provided that
no such amendment shall impose any obligation on the Borrower.
SECTION 16.12. Assignment. All the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns, except that the Borrower may not
assign or transfer any of its rights under this Agreement, and except that
assignments of each Lender's rights under this Agreement shall be in accordance
with Section 14.1.
SECTION 16.13. Performance of Borrower's Duties.
(a) The Borrower's obligations under this Agreement and each of the
Loan Documents shall be performed by the Borrower at its sole cost and
expense.
(b) If the Borrower shall fail to do any act or thing which it has
covenanted to do under this Agreement or any of the Loan Documents, the
Agent, on behalf of the Lenders, may (but shall not be obligated to) do
the same or cause it to be done either in the name of the Agent or the
Lenders or in the name and on behalf of the Borrower, and the Borrower
hereby irrevocably authorizes the Agent so to act.
SECTION 16.14. Indemnification. The Borrower agrees to reimburse the
Agent, the Syndication Agent, the Arranger, the Documentation Agent and the
Lenders, and their Affiliates, agents, employees, officers, directors,
Subsidiaries, successors and assigns (the "Indemnitees"), for all costs and
expenses, including reasonable counsel fees and disbursements, incurred, and to
indemnify and hold the Indemnitees harmless from and against all losses suffered
by, any Indemnitee in connection with (i) the exercise by any Indemnitee of any
right or remedy granted to it under this Agreement or any of the
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Loan Documents, (ii) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Agreement or any of the Loan Documents,
including without limitation any claim relating to Environmental Laws, (iii) the
collection or enforcement of the Secured Obligations or any of them, and (iv)
any Acquisition or proposed Acquisition by the Borrower or any of its
Subsidiaries (including without limitation the Acquisition of the Acquired
Assets and any of the transactions contemplated thereby), other than such costs,
expenses and liabilities arising out of any Indemnitee's gross negligence or
willful misconduct.
SECTION 16.15. All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Agent, the Syndication Agent
and the Lenders and any Persons designated by the Agent, the Syndication Agent
or the Lenders pursuant to any provisions of this Agreement or any of the Loan
Documents shall be deemed coupled with an interest and shall be irrevocable so
long as any of the Secured Obligations remain unpaid or unsatisfied.
SECTION 16.16. Survival. Notwithstanding any termination of this
Agreement,
(a) until all Secured Obligations have been irrevocably paid in full
or otherwise satisfied, the Agent, for the benefit of the Secured
Creditors, shall retain its Security Interest and shall retain all rights
under this Agreement and each of the Security Documents with respect to
such Collateral as fully as though this Agreement had not been terminated,
(b) the indemnities to which the Agent and the Lenders are entitled
under the provisions of this Article 16 and any other provision of this
Agreement and the Loan Documents (including Section 15.7) shall continue
in full force and effect and shall protect the Agent and the Lenders
against events arising after such termination as well as before, and
(c) in connection with the termination of this Agreement and the
release and termination of the Security Interests, the Agent, on behalf of
itself as agent and the Lenders, may require such assurances and
indemnities as it shall reasonably deem necessary or appropriate to
protect the Agent and the Lenders against loss on account of such release
and termination, including, without limitation, with respect to credits
previously applied to the Secured Obligations that may subsequently be
reversed or revoked.
SECTION 16.17. Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 16.18. Severability of Provisions. Any provision of this
Agreement or any Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such
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prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 16.19. Governing Law. This Agreement and the Notes shall be
construed in accordance with and governed by the law of the State of Georgia
applicable to agreements made and to be performed entirely within such state.
SECTION 16.20. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 16.21. Reproduction of Documents. This Agreement, each of
the Loan Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Agent or any Lender, and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Agent or any Lender, may be reproduced by the Agent or such Lender by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and such Person may destroy any original document so produced.
Each party hereto stipulates that, to the extent permitted by Applicable Laws,
any such reproduction shall be as admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the original shall
be in existence and whether or not such reproduction was made by the Agent or
such Lender in the regular course of business), and any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 16.22. Term of Agreement. This Agreement shall remain in
effect from the Agreement Date through the Termination Date and thereafter until
all Secured Obligations shall have been irrevocably paid and satisfied in full.
No termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 16.23. Pro-Rata Participation.
(a) Each Lender agrees that if, as a result of the exercise of a
right of setoff, banker's lien or counterclaim or other similar right or
the receipt of a secured claim it receives any payment in respect of the
Secured Obligations, it shall promptly notify the Agent thereof (and the
Agent shall promptly notify the other Lenders). If, as a result of such
payment, such Lender receives a greater percentage of the Secured
Obligations owed to it under this Agreement than the percentage received
by any other Lender, such Lender shall purchase a participation (which it
shall be deemed to have purchased simultaneously upon the receipt of such
payment) in the Secured Obligations then held by such other Lenders so
that all such recoveries of principal and interest with respect to all
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Secured Obligations owed to each Lender shall be pro rata on the basis of
its respective amount of the Secured Obligations owed to all Lenders,
provided that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered by or on behalf
of the Borrower from such Lender, such purchase shall be rescinded and the
purchase price paid for such participation shall be returned to such
Lender to the extent of such recovery, but without interest.
(b) Each Lender which receives such a secured claim shall exercise
its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 16.23 to share in
the benefits of any recovery on such secured claim.
(c) The Borrower expressly consents to the foregoing arrangements
and agrees that any holder of a participation in any Secured Obligation so
purchased or otherwise acquired may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies
owing by the Borrower to such holder as fully as if such holder were a
holder of such Secured Obligation in the amount of the participation held
by such holder.
SECTION 16.24. Receivables Securitization. The Agent and each of the
Lenders hereby acknowledges that the Borrower is considering entering into a
securitization transaction with respect to its Receivables. The Borrower hereby
acknowledges that the consummation of such a securitization transaction will
require the prior written consent of the Supermajority Lenders.
SECTION 16.25. Final Agreement. This Agreement and the other Loan
Documents are intended by the parties hereto as the final, complete and
exclusive expression of the agreement among them with respect to the subject
matter hereof and thereof. This Agreement and the other Loan Documents supersede
any and all prior oral or written agreements between the parties hereto relating
to the subject matter hereof and thereof.
SECTION 16.26. Waiver of Consequential Damages, Etc. THE BORROWER
AGREES NOT TO ASSERT ANY CLAIM AGAINST THE AGENT, THE SYNDICATION AGENT, ANY
LENDER, ANY OF THEIR AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS AND AGENTS, ON ANY THEORY OF LIABILITY, FOR INDIRECT OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN OR IN ANY OTHER LOAN DOCUMENT OR THE ACTUAL OR
PROPOSED USE OF THE PROCEEDS OF THE LOANS.
-136-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers in several counterparts all as of the
day and year first written above.
BORROWER:
ITHACA INDUSTRIES, INC.
[Corporate Seal]
Attest: By: /s/ Richard P. Thrush
---------------------------
Name: Richard P. Thrush
--------------------
By:/s/ Carl L. Reisner Title: Senior VP
---------------------------- --------------------
Name: Carl L. Reisner
--------------------
Title: Ass't. Secretary
--------------------
LENDERS:
NATIONSBANK, N.A.
By: /s/ John F. Bohan
------------------------
Name: John F. Bohan
-----------------
Title: Vice President
-----------------
Address: 600 Peachtree Street, N.E.
13 Plaza
Atlanta, Georgia 30308
Attn: Business Credit
Facsimile No.: 404-607-6437
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Richard Levenson
----------------------------
Name: Richard Levenson
----------------------
Title: Vice President
----------------------
Address: 40 E. 52nd Street, 2nd Floor
New York, New York 10012
Attn: Kim Winslow
Facsimile No.: 212-836-5169
-137-
<PAGE>
NATIONAL BANK OF CANADA
By: /s/ Alex M. Council IV
---------------------------
Name: Alex M. Council IV
--------------------
Title: Vice President
--------------------
And: /s/ Charles Collie
--------------------------
Name: Charles Collie
-------------------
Title: Vice President
-------------------
Address: Two First Union Center, Suite 2020
Charlotte, North Carolina 28282
Attn: Alex Council
Facsimile No.: 704-335-0570
AGENT:
NATIONSBANK, N.A.
By: /s/ John F. Bohan
--------------------------------
Name: John F. Bohan
-------------------------
Title: Vice President
-------------------------
Address: 600 Peachtree Street, N.E.
13 Plaza
Atlanta, Georgia 30308
Attn: Business Credit
Facsimile No.: 404-607-6437
SYNDICATION AGENT AND ARRANGER:
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Barry Bobrow
-------------------------------
Name: Barry Bobrow
-------------------------
Title: Managing Director
-----------------------
-138-
<PAGE>
DOCUMENTATION AGENT:
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Richard Levenson
----------------------------
Name: Richard Levenson
----------------------
Title: Vice President
----------------------
-139-
<PAGE>
ANNEX I
Performance Pricing Matrix
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Ratio of Consolidated Funded Revolver Term Loan
Indebtedness to Consolidated
Operating
Cash Flow -------------------------------------------------------------
Prime Rate Eurodollar Prime Rate Eurodollar
Margin Rate Margin Margin Rate Margin
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4.5 to 1 or greater 1.75% 3.00% 2.00% 3.25%
- ------------------------------------------------------------------------------------------------------------
4.25 to 1 or greater but less 1.25% 2.75% 1.50% 3.00%
than 4.5 to 1
- ------------------------------------------------------------------------------------------------------------
3.5 to 1 or greater but less 0.75% 2.50% 1.00% 2.75%
than 4.25 to 1
- ------------------------------------------------------------------------------------------------------------
3.25 to 1 or greater but less 0.50%* 2.25%* 0.75%** 2.50%**
than 3.5 to 1
- ------------------------------------------------------------------------------------------------------------
3.0 to 1 or greater but less 0.375%* 2.00%* 0.625%** 2.25%**
than 3.25 to 1
- ------------------------------------------------------------------------------------------------------------
less than 3.0 to 1 0%*** 1.50%*** 0.25%**** 1.75%****
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* = provided that, if the Consolidated Fixed Charge Coverage Ratio is
less than 1 to 1, then the Prime Rate Margin shall be 0.75% and the
Eurodollar Rate Margin shall be 2.50%
** = provided that, if the Consolidated Fixed Charge Coverage Ratio is
less than 1 to 1, then the Prime Rate Margin shall be 1.00% and the
Eurodollar Rate Margin shall be 2.75%
*** = provided that, if the Consolidated Fixed Charge Coverage Ratio is
(a) less than 1.25 to 1 but equal to or greater than 1 to 1, the
Prime Rate Margin shall be 0.375% and the Eurodollar Rate Margin
shall be 2.00%, or (b) less than 1 to 1, the Prime Rate Margin shall
be 0.75% and the Eurodollar Rate Margin shall be 2.50%
**** = provided that, if the Consolidated Fixed Charge Coverage Ratio is
(a) less than 1.25 to 1 but equal to or greater than 1 to 1, the
Prime Rate Margin shall be 0.625% and the Eurodollar Rate Margin
shall be 2.25%, or (b) less than 1 to 1, the Prime Rate Margin shall
be 1.00% and the Eurodollar Rate Margin shall be 2.75%
<PAGE>
ANNEX II
Commitments
1. NationsBank, N.A.
Commitment $39,583,333.32
Commitment consists of the following:
(a) Revolving Credit Commitment $29,166,666.66
(b) Term Loan Commitment $10,416,666.66
2. BankAmerica Business Credit, Inc.
Commitment $39,583,333.32
Commitment consists of the following:
(a) Revolving Credit Commitment $29,166,666.66
(b) Term Loan Commitment $10,416,666.66
3. National Bank of Canada
Commitment $15,833,333.36
Commitment consists of the following:
(a) Revolving Credit Commitment $11,666,666.68
(b) Term Loan Commitment $ 4,166,666.68
<PAGE>
EXHIBIT A-1
FORM OF REVOLVING CREDIT NOTE
US $ _______________ Date: March __, 1998
FOR VALUE RECEIVED, on the Termination Date (as defined in the below
described Loan Agreement), ITHACA INDUSTRIES, Inc., a Delaware corporation (the
"Borrower"), promises to pay to the order of ____________________________
(hereinafter, together with any holder hereof, called "Holder"), at the Atlanta,
Georgia office of the Agent (as hereinafter defined) (or at such other place as
the Holder may designate in writing to the Borrower in accordance with the terms
of the Loan Agreement), the principal amount of ____________________________
($___________) or so much thereof as has been advanced hereunder.
The Borrower shall pay interest on the outstanding principal balance of
this Note as provided in that certain Loan and Security Agreement (as the same
may be amended, modified or supplemented from time to time, the "Loan
Agreement"), dated as of March __, 1998, among the Borrower, the lenders party
thereto from time to time (the "Lenders"), NationsBank, N.A., as agent for the
Lenders (the "Agent"), BankAmerica Business Credit, Inc., as documentation
agent, and NationsBanc Montgomery Securities LLC, as syndication agent and
arranger.
It is contemplated that the principal sum evidenced by this Note may be
reduced from time to time and that additional advances may be made from time to
time, as provided in the Loan Agreement.
This Note is subject to the terms and conditions of the Loan Agreement.
This Note is entitled to the benefits of the Security Documents (as defined in
the Loan Agreement). The Loan Agreement contains provisions for the acceleration
of the maturity hereof upon the happening of certain stated events.
No delay or failure on the part of the Holder in the exercise of any right
or remedy hereunder, under the Loan Agreement or at law or in equity shall
operate as a waiver thereof, and no single or partial exercise by the Holder of
any right or remedy hereunder, under the Loan Agreement or at law or in equity
shall preclude or estop another or further exercise thereof or the exercise of
any other right or remedy.
Principal and interest on this Note shall be payable and paid in lawful
money of the United States of America.
The Borrower waives presentment, notice of dishonor and protest.
<PAGE>
Time is of the essence of this Note and, in case this Note is collected by
law or through an attorney at law, or under advice therefrom, the Borrower
agrees to pay all costs of collection, including reasonable attorneys' fees if
collected by or through an attorney.
The provisions of this Note shall be construed and interpreted and all
rights and obligations of the parties hereunder determined in accordance with
the laws of the State of Georgia.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
sealed in its corporate name, by and through its duly authorized officers, as of
the day and year first above written.
ITHACA INDUSTRIES, Inc.
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
Attest:
-------------------------
Name:
-------------------------
Title:
-------------------------
[CORPORATE SEAL]
-2-
<PAGE>
EXHIBIT A-2
FORM OF TERM NOTE
US $ _______________ Date: March __, 1998
FOR VALUE RECEIVED, ITHACA INDUSTRIES, INC., a Delaware corporation
(the "Borrower") promises to pay to the order of ___________________________
(hereinafter, together with any holder hereof, called "Holder"), at the Atlanta,
Georgia office of the Agent (as hereinafter defined) (or at such other place as
the Holder may designate in writing to the undersigned), the principal amount of
$____________.
The Borrower shall pay the principal amount of this Note, and
interest thereon, as provided in that certain Loan and Security Agreement (as
the same may be amended, modified or supplemented from time to time, the "Loan
Agreement"), dated as of March __, 1998, among the Borrower, the lenders party
thereto from time to time (the "Lenders"), NationsBank, N.A., as agent for the
Lenders (the "Agent"), BankAmerica Business Credit, Inc., as documentation
agent, and NationsBanc Montgomery Securities LLC, as syndication agent and
arranger.
This Note is subject to the terms and conditions of the Loan
Agreement. This Note is entitled to the benefits of the Security Documents (as
defined in the Loan Agreement). The Loan Agreement contains provisions for the
acceleration of the maturity hereof upon the happening of certain stated events,
and provisions for voluntary and mandatory partial or full prepayments of this
Note.
No delay or failure on the part of the Holder in the exercise of any
right or remedy hereunder, under the Loan Agreement or at law or in equity shall
operate as a waiver thereof, and no single or partial exercise by the Holder of
any right or remedy hereunder, under the Loan Agreement or at law or in equity
shall preclude or estop another or further exercise thereof or the exercise of
any other right or remedy.
Principal and interest on this Note shall be payable and paid in
lawful money of the United States of America.
The Borrower waives presentment, notice of dishonor and protest.
Time is of the essence of this Note and, in case this Note is
collected by law or through an attorney at law or under advice therefrom, the
Borrower agrees to pay all costs of collection, including reasonable attorneys'
fees if collected by or through an attorney.
The provisions of this Note shall be construed and interpreted and
all rights and obligations of the parties hereunder determined in accordance
with the laws of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
and sealed in its corporate name, by and through its duly authorized officers,
as of the day and year first above written.
ITHACA INDUSTRIES, INC.
ITHACA INDUSTRIES, Inc.
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
Attest:
-------------------------
Name:
-------------------------
Title:
-------------------------
[CORPORATE SEAL]
2
<PAGE>
EXHIBIT B
Ithaca Industries Inc.
Form of Borrowing Base Certificate
Fiscal Month Ending ______ Certificate No._____
- --------------------------------------------------------------------------------
Accounts Receivable
- --------------------------------------------------------------------------------
A/R Balance per General Ledger (see attached summary)
Less Ineligible A/R:
Returns, Discounts, Claims, Credit and Allowances
Reserves affecting creditworthiness of Accounts
Invoices over 90 days past due
Cross ageing at 50%
Customer concentrations above limits
Intercompany or Affiliate receivables
Offsetting Payables
International sales
Other Ineligible (incl. sold to Factor) _________
Total Ineligible
Eligible Accounts Receivable
A/R Advance Rate
Accounts Receivable Availability =========
- --------------------------------------------------------------------------------
Inventory
- --------------------------------------------------------------------------------
Gross Dollar Value of Inventory (FIFO)-see attached summary _________
Work In Process-Hosiery ___________@55%
Other Work in Process _________
Less: Ineligibles __________
Net Other Work in Process __________ @_______%
Work in Process Availability
=========
Raw Materials
Less: Ineligible
Unscheduled _________
Sub-total
Advance Rate
Scheduled Raw Material Availability _________
Unscheduled
Advanced Rate
Unscheduled Raw Material Availability _________
Raw Material Availability
=========
Finished Goods
Less: Ineligible _________
Sub-total
Advance Rate _________
Finished Goods Availability
=========
Less: Reserves for Discontinued and Obsolete Goods
=========
Total Inventory Availability (Capped at $40,000M)
=========
1
<PAGE>
Ithaca Industries Inc.
Form of Borrowing Base Certificate
Fiscal Month Ending ______ Certificate No._____
- --------------------------------------------------------------------------------
Total Gross Availability: Lesser of $65,000M or
========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Revolving Loan Activity
- --------------------------------------------------------------------------------
Beginning Balance (ending balance last report)
Less: Transfers to Loan Account
Plus: Advances from _____ to _____
Plus/Minus Adjustments _________
Ending Balance _________
_________
- --------------------------------------------------------------------------------
Availability
- --------------------------------------------------------------------------------
Calculated Availability
Plus: Foreign Letter of Credit Amount_________________@55%
Less: Ending Revolv. Loan Balance
Letter of Credit Reserve
Other _________
Net Availability =========
I, the undersigned, Chief Financial Officer of Ithaca Industries, Inc., do
hereby certify that the computation of the Borrowing Base Certificate set forth
complies with all applicable provisions of the Loan and Security Agreement dated
as of (as amended and restated from time to time) between Ithaca Industries,
Inc. ("Borrower"), the financial institutions party thereto and NationsBank
N.A., as Agent. The data has been prepared from the books and records of the
Borrower in accordance with GAAP and 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
------------------------
Richard P. Thrush
Chief Financial Officer
2
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR BORROWER
[Letterhead of Counsel to Borrower]
February , 1998
To the Agent, the Syndication
Agent, the Arranger, and the Lenders
Party to the Loan Agreement
Described Below
Ladies and Gentlemen:
We have acted as general counsel to Ithaca Industries, Inc., a
Delaware corporation ("Borrower"), in connection with the closing of the
transactions contemplated by the Loan and Security Agreement dated as of
February , 1998 (the "Loan Agreement") among Borrower, the lenders party thereto
from time to time (the "Lenders"), NationsBank, N.A., as agent for the Lenders
(together with its successors and assigns, the "Agent"), and NationsBanc
Montgomery Securities LLC, as syndication agent (the "Syndication Agent") and
arranger (the "Arranger"). Capitalized terms used herein, unless otherwise
indicated, have the meanings indicated in the Loan Agreement.
In our capacity as counsel to Borrower, we have examined executed
copies of the following documents (the "Financing Documents"):
(i) the Loan Agreement;
(ii) the Revolving Credit Notes;
(iii) the Term Notes;
(iv) the Intercreditor Agreement;
(v) the Acquisition Documents Assignment;
(vi) the Mortgages described on Schedule 1 attached hereto;
(vii) the Environmental Indemnity Agreement;
(viii) the Trademark Assignment;
(ix) the Patent Assignment;
<PAGE>
(x) the Stock Pledge Agreement;
(xi) the Agency Account Agreements; and
(xii) the Financing Statements described on Schedule 2 attached
hereto.
In so acting, we have examined each of the Financing Documents and
originals or photostatic or certified copies of all such agreements, records,
communications, instruments, certificates of public officials, certificates of
officers of Borrower, financing statements, public records and such other
documents as we have deemed relevant and necessary as a basis for the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(a) Borrower is a corporation, duly organized, validly existing and
in good standing under the laws of its state of incorporation, and has all
requisite power and authority, corporate or otherwise to conduct its business,
to own and operate its properties, and to execute, deliver, and perform all of
its obligations under the Financing Documents. Borrower is duly qualified,
licensed or domesticated and in good standing as a foreign corporation duly
authorized to do business in all jurisdictions in which the character of its
properties owned or the nature of its activities conducted makes such
qualification, licensing or domestication necessary.
(b) The execution, delivery, and performance by Borrower of the
Financing Documents have been duly authorized by all necessary action, whether
corporate or otherwise, and do not and will not (a) require any consent or
approval of shareholders of Borrower or violate the articles of incorporation or
by-laws of Borrower, (b) violate any provision of any applicable law, rule,
regulation or, to the best of our knowledge, any order, writ, judgment,
injunction, decree, determination or award of any court, arbitrator or
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, (c) result, to the best of our knowledge,
in breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower is a
party or by which it or its properties may be bound or affected or (d) result
in, or require, to the best of our knowledge, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned or hereafter acquired by Borrower. To the best of our knowledge, except as
set forth in the Loan Agreement, Borrower is not in violation of any provision
of any of the items described in (b) above or in default under any provision of
any of the items described in (c) above.
(c) Except for the filing of the Financing Statements and recording
of the Mortgages in the appropriate offices, no authorization, consent,
approval, license, exemption of, or filing or registration with any court or
governmental department, commission, board, agency or other instrumentality, is
or will be necessary as a
2
<PAGE>
condition to the validity or enforceability of the Financing Documents or the
exercise by the Agent or the Lenders of their respective rights thereunder.
(d) The Financing Documents have each been duly executed and
delivered to you by Borrower.
(e) To the best of our knowledge, except as set forth on Schedule
7.1(k) to the Loan Agreement, there are no actions, suits or proceedings pending
or threatened against or affecting Borrower or any of its Subsidiaries, or the
properties of Borrower or any of its Subsidiaries, before any court, arbitrator
or governmental department, commission, board, bureau, agency or other
instrumentality, state, federal or foreign, which, if determined adversely to
Borrower or any of its Subsidiaries, would have a Materially Adverse Effect.
(f) The fees, charges and interest to be paid by Borrower under the
Financing Documents are not usurious under Applicable Law, whether or not any
usury savings clause in the Notes or other Financing Documents limiting the
payment or retention of interest is effective.
(g) Borrower is not subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935,
as amended, the Federal Power Act, or the Interstate commerce Act, or any other
federal, state or local law, rule or regulation which materially limits
Borrower's to incur indebtedness or to consummate the transactions contemplated
by the Loan Agreement.
(h) To our knowledge, Borrower has not received any notice to the
effect that it is not in full compliance with any of the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
regulations promulgated thereunder and, to the best of our knowledge, there
exists no event described in Section 4043 of ERISA, excluding Subsections
4043(b)(2) and 4043(b)(3) thereof.
(i) None of the transactions contemplated in the Loan Agreement
(including without limitation, the use of the proceeds of the Loans made to
Borrower thereunder) will violate or result in the violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U, or X of the Board
of Governors of the Federal Reserve System, 12 C.F.R., ss.ss. 207, 220, 221 and
224, respectively.
This opinion letter may be relied upon by you and your counsel only
in connection with the transactions contemplated by the Financing Documents.
This opinion letter may not be relied upon by any other Person, other than
Persons that become Lenders after the date hereof.
Very truly yours,
3
<PAGE>
-------------------------------
[ ], a partner
4
<PAGE>
Schedule 1
[List Mortgages]
<PAGE>
Schedule 2
[Filing Offices]
<PAGE>
EXHIBIT C
FORM OF OPINION OF NORTH/SOUTH CAROLINA COUNSEL
FOR BORROWER
[Letterhead of North/South Carolina Counsel to Borrower]
February ____, 1998
To the Agent, the Syndication
Agent, the Arranger, and the Lenders
Party to the Loan Agreement
Described Below
Ladies and Gentlemen:
We have acted as local North/South Carolina counsel to Ithaca
Industries, Inc., a Delaware corporation ("Borrower"), in connection with the
closing of the transactions contemplated by the Loan and Security Agreement
dated as of February , 1998 (the "Loan Agreement") among Borrower, the lenders
party thereto from time to time (the "Lenders"), NationsBank, N.A., as agent for
the Lenders (together with its successors and assigns, the "Agent"), and
NationsBanc Montgomery Securities LLC, as syndication agent (the "Syndication
Agent") and arranger (the "Arranger"). Capitalized terms used herein, unless
otherwise indicated, have the meanings indicated in the Loan Agreement.
In our capacity as local North/South Carolina counsel to Borrower,
we have examined executed copies of the following documents (the "Financing
Documents"):
(i) the Loan Agreement;
(ii) the Revolving Credit Notes;
(iii) the Term Notes;
(iv) the Intercreditor Agreement;
(v) the Acquisition Documents Assignment;
(vi) the Mortgages described on Schedule 1 attached hereto (the
"North/South Carolina Mortgages");
(vii) the Environmental Indemnity Agreement;
<PAGE>
(viii) the Trademark Assignment;
(ix) the Patent Assignment;
(x) the Stock Pledge Agreement;
(xi) the Agency Account Agreements;
(xii) the Financing Statements executed by Borrower with respect to
fixtures on form UCC-1 under the Uniform Commercial Code as in effect in the
State of North/South Carolina (the "UCC") for filing in the office(s) listed on
Schedule 2 attached hereto (the "Fixture Financing Statements"); and
(xiii) the Financing Statements executed by Borrower with respect to
personal property on form UCC-1 under the UCC for filing in the office(s) listed
on Schedule 3 attached hereto (the "Personal Property Financing Statements").
In so acting, we have examined each of the Financing Documents and
originals or photostatic or certified copies of all such agreements, records,
communications, instruments, certificates of public officials, certificates of
officers of Borrower, financing statements, public records and such other
documents as we have deemed relevant and necessary as a basis for the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(a) The execution, delivery, and performance by Borrower of the
Financing Documents do not and will not violate any provision of any applicable
law, rule or regulation.
(b) Except for the filing of the Financing Statements and recording
of the Mortgages as set forth in paragraphs 5 and 7 hereof, no authorization,
consent, approval, license, exemption of, or filing or registration with any
court or governmental department, commission, board, agency or other
instrumentality, is or will be necessary as a condition to the validity or
enforceability of the Financing Documents or the exercise by the Agent or the
Lenders of their respective rights thereunder.
(c) The fees, charges and interest to be paid by Borrower under the
Financing Documents are not usurious under applicable law, whether or not any
usury savings clause in the Notes or other Financing Documents limiting the
payment or retention of interest is effective.
(d) Each of the North/South Carolina Mortgages and Fixture Financing
Statements constitutes the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms. Each of the other
Financing Documents (the "Georgia Financing Documents") provides that it will be
governed by the laws of the State of Georgia. In any action or proceeding
arising out of the Georgia Financing
2
<PAGE>
Documents in any court of the State of North/South Carolina or federal court
sitting in the State of North/South Carolina, such court would recognize and
give effect to such choice of Georgia law, including all such laws relating to
interest and usury, unless application of Georgia law would violate the public
policy of the State of North/South Carolina. Notwithstanding the foregoing, if a
court of the State of North/South Carolina or a federal court sitting in the
State of North/South Carolina were to apply the laws of the State of North/South
Carolina to the Financing Documents, each of the Financing Documents would
constitute the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms.
(e) Each of the North/South Carolina Mortgages is in appropriate
form for recording as a deed of trust in the land records of the county in which
the property described therein is satisfied and is sufficient, as to form, to
create the encumbrance and security interest it purports to create in the real
property, including fixtures, described in such North/South Carolina Mortgage.
Upon the recording of the North/South Carolina Mortgages in the offices set
forth on Schedule 1 attached hereto, the filing of the Fixture Financing
Statements in the offices set forth on Schedule 2 attached hereto, and the
payment of the applicable filing fees and taxes described on Schedule 4 attached
hereto, the security interest created under the North/South Carolina Mortgages
in the real property, including fixtures, described therein will be a perfected
security interest.
(f) The Loan Agreement creates in favor of the Agent, for the
benefit of the Secured Creditors, a valid security interest in all right, title
and interest of Borrower in and to those items and types of Collateral described
in the Loan Agreement in which a security interest may be created under Article
9 of the UCC (the "UCC Collateral").
(g) Upon the filing of the Personal Property Financing Statements in
the offices set forth on Schedule 3 attached hereto, and the payment of the
applicable filing fees described on Schedule 4 attached hereto, the security
interest created under the Loan Agreement in the UCC Collateral will be a
perfected security interest.
(h) Neither the Agent nor any of the Lenders is required, solely by
reason of the transactions contemplated by the Financing Documents, to qualify
to do business in the State of North/South Carolina or to pay any taxes to the
State of North/South Carolina or any instrumentality thereof (other than the
recording taxes described in Schedule 3 attached hereto). The transactions
contemplated by the Financing Documents will not cause the Agent or any of the
Lenders to be subject to any "doing business" laws, rules or regulations of the
State of North/South Carolina and will not obligate the Agent or any of the
Lenders to report to any governmental agency of the State of North/South
Carolina or any political subdivision thereof.
(i) Except as set forth on Schedule 4 attached hereto, no recording
taxes, stamp taxes, intangibles taxes or other fees, charges or taxes are
required to be paid in connection with the Financing Documents or the recording
thereof.
3
<PAGE>
This opinion letter may be relied upon by you and your counsel only
in connection with the transactions contemplated by the Financing Documents.
This opinion letter may not be relied upon by any other Person, other than
Persons that become Lenders after the date hereof.
Very truly yours,
-------------------------------
[ ], a partner
4
<PAGE>
Schedule 1
[List Mortgages]
<PAGE>
Schedule 2
[Filing Offices for Fixture Financing Statements]
<PAGE>
Schedule 3
[Filing Offices for Personal Property Financing Statements]
8
<PAGE>
Schedule 4
[Fees / Taxes]
<PAGE>
EXHIBIT C
FORM OF OPINION OF GEORGIA COUNSEL FOR BORROWER
[Letterhead of Georgia Counsel to Borrower]
February , 1998
To the Agent, the Syndication
Agent, the Arranger, and the Lenders
Party to the Loan Agreement
Described Below
Ladies and Gentlemen:
We have acted as local Georgia counsel to Ithaca Industries, Inc., a
Delaware corporation ("Borrower"), in connection with the closing of the
transactions contemplated by the Loan and Security Agreement dated as of
February , 1998 (the "Loan Agreement") among Borrower, the lenders party thereto
from time to time (the "Lenders"), NationsBank, N.A., as agent for the Lenders
(together with its successors and assigns, the "Agent"), and NationsBanc
Montgomery Securities LLC, as syndication agent (the "Syndication Agent") and
arranger (the "Arranger"). Capitalized terms used herein, unless otherwise
indicated, shall have the meanings indicated in the Loan Agreement.
In our capacity as local Georgia counsel to Borrower, we have
examined executed copies of the following documents (the "Financing Documents"):
(i) the Loan Agreement;
(ii) the Revolving Credit Notes;
(iii) the Term Notes;
(iv) the Intercreditor Agreement;
(v) the Acquisition Documents Assignment;
(vi) the Mortgages described on Schedule 1 attached hereto (the
"Georgia Mortgages");
(vii) the Environmental Indemnity Agreement;
(viii) the Trademark Assignment;
<PAGE>
(ix) the Patent Assignment;
(x) the Stock Pledge Agreement;
(xi) the Agency Account Agreements;
(xii) the Financing Statements executed by Borrower with respect to
fixtures on forms UCC-1 and UCC-2 under the Uniform Commercial Code as in effect
in the State of Georgia (the "UCC") for filing in the office(s) listed on
Schedule 2 attached hereto (the "Fixture Financing Statements"); and
(xiii) the Financing Statements executed by Borrower with respect to
personal property on form UCC-1 under the UCC for filing in the office(s) listed
on Schedule 3 attached hereto (the "Personal Property Financing Statements").
In so acting, we have examined each of the Financing Documents and
originals or photostatic or certified copies of all such agreements, records,
communications, instruments, certificates of public officials, certificates of
officers of Borrower, financing statements, public records and such other
documents as we have deemed relevant and necessary as a basis for the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(a) The execution, delivery, and performance by Borrower of the
Financing Documents do not and will not violate any provision of any applicable
law, rule or regulation.
(b) Except for the filing of the Financing Statements and recording
of the Mortgages as set forth in paragraphs 5 and 7 hereof, no authorization,
consent, approval, license, exemption of, or filing or registration with any
court or governmental department, commission, board, agency or other
instrumentality, is or will be necessary as a condition to the validity or
enforceability of the Financing Documents or the exercise by the Agent or the
Lenders of their respective rights thereunder.
(c) The fees, charges and interest to be paid by Borrower under the
Financing Documents are not usurious under applicable law, whether or not any
usury savings clause in the Notes or other Financing Documents limiting the
payment or retention of interest is effective.
(d) Each of the Financing Documents constitutes the legal, valid and
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms.
(e) Each of the Georgia Mortgages is in appropriate form for
recording as a deed to secure debt in the land records of the county in which
the property described therein is situated and is sufficient, as to form, to
create the
2
<PAGE>
encumbrance and security interest it purports to create in the real property,
including fixtures, described in such Georgia Mortgage. Upon the recording of
the Georgia Mortgages in the offices set forth on Schedule 1 attached hereto,
the filing of the Fixture Financing Statements in the offices set forth on
Schedule 2 attached hereto, and the payment of the applicable filing fees and
taxes described on Schedule 4 attached hereto, the security interest created
under the Georgia Mortgages in the real property, including fixtures, described
therein will be a perfected security interest.
(f) The Loan Agreement creates in favor of the Agent, for the
benefit of the Secured Creditors, a valid security interest in all right, title
and interest of Borrower in and to those items and types of Collateral described
in the Loan Agreement in which a security interest may be created under Article
9 of the UCC (the "UCC Collateral").
(g) Upon the filing of the Personal Property Financing Statements in
the offices set forth on Schedule 3 attached hereto, and the payment of the
applicable filing fees described on Schedule 4 attached hereto, the security
interest created under the Loan Agreement in the UCC Collateral will be a
perfected security interest.
(h) The provisions of the Trademark Assignment create a valid
security interest in favor of the Agent, for the benefit of the Secured
Creditors, in the U.S. registered trademarks and trademark applications set
forth on Schedule A to the Trademark Assignment, and, to the extent that the
trademark laws of the United States are applicable thereto, such security
interests will be effective against third parties as of the date hereof upon
recordation of the Trademark Assignment with the United States Patent and
Trademark Office.
(i) The provisions of the Patent Assignment create a valid security
interest in favor of the Agent, for the benefit of the Secured Creditors, in the
U.S. registered patents and patent applications set forth on Schedule A to the
Patent Assignment, and, to the extent that the patent laws of the United States
are applicable thereto, such security interests will be effective against third
parties as of the date hereof upon recordation of the Patent Assignment with the
United States Patent and Trademark Office.
(j) The execution and delivery of the Stock Pledge Agreement creates
a valid lien on and a security interest in the "Pledge Collateral" (as such term
is defined in the Stock Pledge Agreement) which was duly perfected by the
delivery of the stock certificates evidencing the Borrower's ownership of the
Pledged Securities to the Agent. Assuming that the Agent has acquired its
security interest in the Pledged Securities in good faith and without notice of
any adverse claim, the Agent's security interest in the Pledged Securities will
not be subject to any adverse claim.
(k) The pledge of the Pledged Securities to the Agent by the
Borrower pursuant to the Stock Pledge Agreement will not violate or result in
the violation of
3
<PAGE>
Section 5 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereto, or any blue sky or similar state laws
applicable thereto.
(l) Neither the Agent nor any of the Lenders is required, solely by
reason of the transactions contemplated by the Financing Documents, to qualify
to do business in the State of Georgia or to pay any taxes to the State of
Georgia or any instrumentality thereof (other than the recording taxes described
in Schedule 3 attached hereto). The transactions contemplated by the Financing
Documents will not cause the Agent or any of the Lenders to be subject to any
"doing business" laws, rules or regulations of the State of Georgia and will not
obligate the Agent or any of the Lenders to report to any governmental agency of
the State of Georgia or any political subdivision thereof.
(m) Except as set forth on Schedule 4 attached hereto, no recording
taxes, stamp taxes, intangibles taxes or other fees, charges or taxes are
required to be paid in connection with the Financing Documents or the recording
thereof.
This opinion letter may be relied upon by you and your counsel only
in connection with the transactions contemplated by the Financing Documents.
This opinion letter may not be relied upon by any other Person, other than
Persons that become Lenders after the date hereof.
Very truly yours,
-------------------------------
[ ], a partner
4
<PAGE>
Schedule 1
[List Mortgages]
<PAGE>
Schedule 2
[Filing Offices for Fixture Financing Statements]
<PAGE>
Schedule 3
[Filing Offices for Personal Property Financing Statements]
8
<PAGE>
Schedule 4
[Fees / Taxes]
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT AND ACCEPTANCE
___________________, Assignee
Dated: _____________ ____, ______
Reference is made to the Loan and Security Agreement, dated as of
March __, 1998 (as amended to the date hereof, the "Loan Agreement"), by and
among ITHACA INDUSTRIES, INC., a Delaware corporation (the "Borrower"), the
lenders party to the Loan Agreement from time to time (the "Lenders"),
NATIONSBANK, N.A., a national banking association, as agent for the Lenders (the
"Agent"), BANKAMERICA BUSINESS CREDIT, INC., as documentation agent, and
NATIONSBANC MONTGOMERY SECURITIES LLC, as syndication agent and arranger. Terms
used herein that are defined in the Loan Agreement are used with the meanings
therein ascribed to them.
____________________________ (the "Assignor") and _______________
_________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, without recourse
(except with respect to any representation of the Assignor expressly set forth
herein or in the Loan Agreement), an interest in and to such of the Assignor's
rights and obligations as a Lender under the Loan Agreement as of the Effective
Date (as hereinafter defined) as represent a _____% interest in and to the
Assignor's Commitment as of the Effective Date and all of the outstanding rights
and obligations of the Assignor thereunder (including, without limitation, such
percentage interest in the Loans owing to the Assignor outstanding on the
Effective Date, and such percentage interest in the Notes owing to the
Assignor). The Assignee shall have no interest in any interest that is payable
with respect to a period prior to the Effective Date.
2. The Assignor (i) represents that as of the date hereof, its
Commitment under the Loan Agreement is $_____________, the outstanding balance
of its Revolving Credit Loans is $_____________, the outstanding balance of its
Term Loan is $___________, and the aggregate amount of its interest in Letter of
Credit Amounts is $____________ (in each case unreduced by any assignments
thereof which have not yet become effective); (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Agreement or any other instrument or document furnished
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any adverse claim, lien or encumbrance; and (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
<PAGE>
of the Borrower or any other Person or the performance or observance by the
Borrower or any other Person of any of its obligations under the Loan Agreement
or any other Loan Documents.
3. The Assignee (i) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (ii) confirms that it has received a
copy of the Loan Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 11.1 thereof and such other documents
and information (including a copy of the Intercreditor Agreement) as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (iii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Agreement; (iv) confirms that it is an Eligible Assignee; (v) appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Agreement as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (vi) agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Loan Agreement are required to be
performed by it as a Lender; and (vii) specifies as its address for notices the
office set forth beneath its name on the signature pages hereof.
4. The effective date for this Assignment and Acceptance shall be
_____________ ____, ______ (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent for acceptance
and recording by the Agent.
5. Upon such acceptance and recording, and the payment to the Agent
of the processing fee described in Section 14.1 of the Loan Agreement, from and
after the Effective Date, (i) the Assignee shall be a party to the Loan
Agreement and, to the extent provided in this Assignment and Acceptance, shall
have the rights and obligations of a Lender thereunder, and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released form its obligations under the Loan Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees and other amounts) to
the Assignee. The Assignor and the Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date by the Agent or
with respect to the making of this Assignment and Acceptance directly between
themselves.
2
<PAGE>
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Georgia, without
reference to any provision which would render such choice invalid.
ASSIGNOR:
By:
------------------------
Name:
-------------------
Title:
-------------------
ASSIGNEE:
By:
------------------------
Name:
-------------------
Title:
-------------------
Address:
Accepted and agreed to as of the date first written above:
NationsBank, N.A., as Agent
By:
------------------------
Name:
-------------------
Title:
-------------------
ITHACA INDUSTRIES, INC.
By:
------------------------
Name:
-------------------
Title:
-------------------
3
<PAGE>
EXHIBIT E
FORM OF SETTLEMENT REPORT
Pursuant to Section 5.8 of the Loan and Security Agreement dated as
of March __, 1998, as amended, restated, supplemented or otherwise modified
through and including the date hereof (the "Loan Agreement", terms defined in
the Loan Agreement and not otherwise defined herein being used herein as therein
defined), among ITHACA INDUSTRIES, INC., a Delaware corporation, as Borrower,
the lenders party to the Loan Agreement from time to time (the "Lenders"),
NationsBank, N.A., as agent for the Lenders (the "Agent"), BankAmerica Business
Credit, Inc., as documentation agent, and NationsBanc Montgomery Securities LLC,
as syndication agent and arranger, the Agent hereby delivers this report to the
Lenders for the ____________ ____, [199___/20___] Settlement Date.
1. Principal amount of Revolving Credit
Loans outstanding as of Settlement
Date (before settlement)
(a) NationsBank, N.A. $______________________
(b) ___________________ $______________________
(c) ___________________ $______________________
(d) ___________________ $______________________
(e) Total $______________________
2. Principal amount of Revolving
Credit Loans outstanding as of
preceding Settlement Date
(after settlement on such date)
(a) NationsBank, N.A. $______________________
(b) ___________________ $______________________
(c) ___________________ $______________________
(d) ___________________ $______________________
(e) Total $______________________
1
<PAGE>
3. Proportionate Share of outstanding
Revolving Credit Loans
of each Lender (line 1(e) x
Commitment Percentage)
(a) NationsBank $______________________
(b) ___________________ $______________________
(c) ___________________ $______________________
(d) ___________________ $______________________
(e) Total $______________________
4. Excess (shortfall) of each
Lender's Commitment
Percentage amount over its
outstandings
(a) NationsBank (line
3(a) minus line 1(a) $______________________
(b) _______________ (line)
3(b) minus line 1(b) $______________________
(c) ______________ (line)
3(c) minus line 1(c) $______________________
(d) ______________ (line)
3(d) minus line 1(d) $______________________
2
<PAGE>
5. Each Lender for which an excess (a positive dollar amount) is
shown in item 4 shall pay an amount equal to such excess to the Agent, for
payment by the Agent to each Lender for which a shortfall (a negative dollar
amount) is shown in item 4 to the extent of such shortfall.
NATIONSBANK, N.A., as Agent
By:
------------------------
Name:
-------------------
Title:
-------------------
4
<PAGE>
EXHIBIT F
FORM OF OFFICER'S CERTIFICATE
Ithaca Industries, Inc.
The undersigned, ___________________, the _______________ of Ithaca
Industries, Inc. (the "Company"), pursuant to that certain Loan and Security
Agreement dated as of March ___, 1998 (as amended from time to time, the
"Agreement"), among the Company, the lenders from time to time party thereto
(the "Lenders"), NationsBank, N.A., as agent for the Lenders (the "Agent"),
NationsBanc Montgomery Securities LLC, as syndication agent and arranger, and
BankAmerica Business Credit, Inc., as documentation agent, does hereby certify
in the name and on behalf of the Company to the Agent and the Lenders pursuant
to Section 11.3 of the Agreement that as of the date of this Certificate:
(a) based on a reasonably diligent examination, no Default or Event
of Default exists [or, if a Default or Event of Default exists: set forth on
Annex B attached hereto is complete and accurate information specifying the
Default or Event of Default, when it occurred, whether it is continuing and the
steps being taken by the Company with respect to such Default or Event of
Default]; and
(b) the information set forth on Annex A attached hereto is complete
and accurate.
Unless defined herein, capitalized terms used herein shall have the
meanings set forth in the Agreement.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate in the name and on behalf of the Company as of __________________,
____.
ITHACA INDUSTRIES, INC.
By:
------------------------
Name:
-------------------
Title:
-------------------
<PAGE>
ANNEX A
Financial Covenant Calculations
As at [fiscal quarter] [fiscal year] ended on _________, [19/20] _____:
Section 12.1(a)
Minimum Consolidated Tangible Net Worth Requirement $_________
Actual Consolidated Tangible Net Worth $_________
Section 12.1(b)
Minimum Consolidated Operating Cash Flow Requirement(1) $7,500,000
Actual Consolidated Operating Cash Flow $_________
Section 12.1(c)
Minimum Consolidated Fixed Charge Coverage
Ratio Requirement(2) ___ to 1
-
Adjusted Consolidated Operating Cash Flow = Consolidated Operating
Cash Flow minus Unfunded
Capital Expenditures (other
than Unfunded Capital
Expenditures consisting of
capitalized Enterprise
Resource Planning
expenditures) minus cash
dividends paid minus cash
taxes paid
Consolidated Operating Cash Flow = $ , minus
-----------------------
Cash Taxes Paid = $ , minus
-----------------------
Unfunded Capital Expenditures = $ , minus
-----------------------
Cash Dividends Paid = $
-----------------------
Adjusted Consolidated Operating Cash Flow = $
-----------------------
Consolidated Fixed Charges = cash Interest Expense
(excluding the Agent's
annual $75,000 fee) plus
scheduled payments of
principal
Cash Interest Expense = $ , plus
-----------------------
Scheduled payments of principal = $
Consolidated Fixed Charges = $
- --------
(1) Measured only as of the end of the second fiscal quarter of fiscal year
1999 on a fiscal year to date basis.
(2) Calculated on a rolling four-quarter basis, except for calculations as
of the end of the third fiscal quarter of fiscal year 1999, which shall
be on a year to date basis.
<PAGE>
Actual Consolidated Fixed Charge Coverage
Ratio = $ to $ (__ to 1)
------ ------
Section 12.1(d)
Maximum Consolidated Funded Indebtedness to
Consolidated Operating Cash Flow Ratio Requirement __ to 1
Consolidated Funded Indebtedness = all Indebtedness under the
Agreement plus all
Indebtedness under the Second
Lien Senior Secured Facility
plus all other Indebtedness
for Money Borrowed of the
Borrower and its
Consolidated Subsidiaries
Indebtedness under the Agreement = $ , plus
-----------
Indebtedness under the Second Lien
Senior Secured Facility = $ , plus
-----------
All other Indebtedness for Money Borrowed = $
-----------
Consolidated Funded Indebtedness = $
-----------
Consolidated Operating Cash Flow(3) = $
-----------
Actual Consolidated Funded
Indebtedness to Consolidated
Operating Cash Flow ratio = $ to $ (__ to 1)
----------- ------
Section 12.2(e)
Maximum Permitted Purchase Money Indebtedness
and Capitalized Lease Obligations Requirement $10,000,000
Actual Permitted Purchase Money Indebtedness = $ , plus
-----------
Actual Capitalized Lease Obligations = $
-----------
Actual Permitted Purchase Money
Indebtedness and Capitalized Lease Obligations $
-----------
Section 12.2(g)
Maximum other unsecured Indebtedness $ 1,000,000
Actual other unsecured Indebtedness $
-----------
- --------
(3) Calculated on an annualized fiscal year to date basis as of the end of
the second and third fiscal quarters for fiscal year 1999 and on a
rolling four-quarter basis for all calculations thereafter.
2
<PAGE>
Section 12.5(4)
Maximum fiscal year Capital Expenditures Requirement $
-----------
Actual fiscal year Capital Expenditures $
-----------
Section 12.6(b)(5)
Maximum Restricted Dividend Payments,
Restricted Payments and Restricted Purchases (10% of Excess
Cash Flow) $
-----------
Actual Restricted Dividend Payments,
Restricted Payments and Restricted Purchases $
-----------
Section 12.6(c)(6)
Maximum repurchase of stock or options owned by the Company's
terminated employees $ 250,000
Actual repurchase of stock or options owned by the Company's
terminated employees $
-----------
Section 12.10
See calculation for Section 12.2(e)
Section 12.11
Maximum annual rental payable under all Operating
Leases of the Borrower and its Subsidiaries Requirement $15,000,000
Actual annual rental payable under all Operating
Leases of the Borrower and its Subsidiaries $
-----------
Section 12.14
Minimum Availability $ 5,000,000
Actual Availability $
-----------
- --------
(4) Measured only on a fiscal year basis.
(5) Measured only on a fiscal year basis.
(6) Measured only on a fiscal year basis.
3
<PAGE>
ANNEX B
Defaults/Events of Default
================================================================================
LOAN AND SECURITY AGREEMENT
Dated as of March 24, 1998
Between
ITHACA INDUSTRIES, INC.
(the Borrower)
and
THE LENDERS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
NATIONSBANK, N.A.
(the Collateral Agent)
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS............................... 1
SECTION 1.1 Definitions.................................................... 1
SECTION 1.2 General........................................................ 24
ARTICLE 2
[INTENTIONALLY DELETED]......................... 24
ARTICLE 3
[INTENTIONALLY DELETED]......................... 24
ARTICLE 4
TERM LOAN FACILITY............................ 24
SECTION 4.1 Term Loan...................................................... 24
SECTION 4.2 Manner of Borrowing Term Loan.................................. 25
SECTION 4.3 Repayment of Term Loan......................................... 25
SECTION 4.4 Term Notes..................................................... 25
SECTION 4.5 Prepayment of Term Loan........................................ 25
ARTICLE 5
GENERAL LOAN PROVISIONS......................... 26
SECTION 5.1 Interest....................................................... 26
SECTION 5.2 Certain Fees................................................... 27
SECTION 5.3 Manner of Payment.............................................. 27
SECTION 5.4 General........................................................ 28
SECTION 5.5 Loan Accounts; Statements of Accounts.......................... 28
SECTION 5.6 Termination of Agreement....................................... 29
SECTION 5.7 [Intentionally Deleted......................................... 29
SECTION 5.8 Settlement..................................................... 29
SECTION 5.9 [Intentionally Deleted]........................................ 30
SECTION 5.10 Prepayment Fee................................................. 30
SECTION 5.11 [Intentionally Deleted]........................................ 31
SECTION 5.12 [Intentionally Deleted]........................................ 31
SECTION 5.13 [Intentionally Deleted]........................................ 31
SECTION 5.14 [Intentionally Deleted]........................................ 31
SECTION 5.15 [Intentionally Deleted]........................................ 31
SECTION 5.16 [Intentionally Deleted]........................................ 31
i
<PAGE>
ARTICLE 6
CONDITIONS PRECEDENT........................... 31
SECTION 6.1 Conditions Precedent to Loans.................................. 31
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER............... 36
SECTION 7.1 Representations and Warranties................................. 36
SECTION 7.2 [Intentionally Deleted]........................................ 47
ARTICLE 8
SECURITY INTEREST............................ 47
SECTION 8.1 Security Interest.............................................. 47
SECTION 8.2 Continued Priority of Security Interest........................ 48
ARTICLE 9
COLLATERAL COVENANTS........................... 49
SECTION 9.1 [Intentionally Deleted]........................................ 49
SECTION 9.2 Verification and Notification.................................. 49
SECTION 9.3 [Intentionally Deleted]........................................ 49
SECTION 9.4 [Intentionally Deleted]........................................ 49
SECTION 9.5 Delivery of Instruments........................................ 49
SECTION 9.6 Sales of Inventory............................................. 49
SECTION 9.7 Ownership and Defense of Title................................. 49
SECTION 9.8 Insurance...................................................... 50
SECTION 9.9 Location of Offices and Collateral............................. 51
SECTION 9.10 Records Relating to Collateral................................. 51
SECTION 9.11 Inspection..................................................... 52
SECTION 9.12 Information and Reports........................................ 52
SECTION 9.13 Power of Attorney.............................................. 52
SECTION 9.14 Additional Real Estate and Leases.............................. 53
SECTION 9.15 Assignment of Claims Act....................................... 53
SECTION 9.16 Covenant to Guarantee Obligations and Give Security............ 53
ARTICLE 10
AFFIRMATIVE COVENANTS.......................... 55
SECTION 10.1 Preservation of Corporate Existence and Similar
Matters........................................................ 55
SECTION 10.2 Compliance with Applicable Laws................................ 55
SECTION 10.3 Maintenance of Property........................................ 55
SECTION 10.4 Conduct of Business............................................ 55
ii
<PAGE>
SECTION 10.5 Insurance...................................................... 55
SECTION 10.6 Payment of Taxes and Claims.................................... 56
SECTION 10.7 Accounting Methods and Financial Records....................... 56
SECTION 10.8 Use of Proceeds................................................ 56
SECTION 10.9 Hazardous Waste and Substances; Environmental
Requirements................................................... 56
SECTION 10.10 [Intentionally Deleted]........................................ 57
SECTION 10.11 [Intentionally Deleted]........................................ 57
ARTICLE 11
INFORMATION............................... 57
SECTION 11.1 Financial Statements........................................... 57
SECTION 11.2 Accountants' Certificate....................................... 58
SECTION 11.3 Officer's Certificate.......................................... 58
SECTION 11.4 Copies of Other Reports........................................ 59
SECTION 11.5 Notice of Litigation and Other................................. 59
SECTION 11.6 ERISA.......................................................... 60
SECTION 11.7 Accuracy of Information........................................ 60
SECTION 11.8 Revisions or Updates to Schedules.............................. 60
SECTION 11.9 Seller Subordinated Indebtedness Certificate................... 61
ARTICLE 12
NEGATIVE COVENANTS............................ 61
SECTION 12.1 Financial Ratios............................................... 61
SECTION 12.2 Indebtedness for Money Borrowed................................ 62
SECTION 12.3 Guarantees..................................................... 63
SECTION 12.4 Investments.................................................... 63
SECTION 12.5 Capital Expenditures........................................... 63
SECTION 12.6 Restricted Payments, Etc....................................... 63
SECTION 12.7 Merger, Consolidation and Sale of Assets....................... 63
SECTION 12.8 Transactions with Affiliates................................... 64
SECTION 12.9 Liens.......................................................... 64
SECTION 12.10 Capitalized Lease Obligations.................................. 64
SECTION 12.11 Operating Lease Obligations.................................... 64
SECTION 12.12 Plans.......................................................... 65
SECTION 12.13 Amendments of Other Agreements................................. 65
SECTION 12.14 [Intentionally Deleted]........................................ 65
SECTION 12.15 Fiscal Year.................................................... 65
SECTION 12.16 Limitation on Issuance of Capital Stock........................ 65
SECTION 12.17 Limitation on Certain Restrictions on Subsidiaries............. 65
iii
<PAGE>
ARTICLE 13
DEFAULT................................. 66
SECTION 13.1 Events of Default.............................................. 66
SECTION 13.2 Remedies....................................................... 69
SECTION 13.3 Application of Proceeds........................................ 72
SECTION 13.4 Power of Attorney.............................................. 72
SECTION 13.5 Miscellaneous Provisions ...................................... 73
ARTICLE 14
ASSIGNMENTS............................... 74
SECTION 14.1 Successors and Assigns; Participations......................... 74
SECTION 14.2 Representation of Lenders...................................... 76
ARTICLE 15
COLLATERAL AGENT............................. 76
SECTION 15.1 Appointment of Collateral Agent................................ 76
SECTION 15.2 Delegation of Duties........................................... 77
SECTION 15.3 Exculpatory Provisions......................................... 77
SECTION 15.4 Reliance by Collateral Agent................................... 77
SECTION 15.5 Notice of Default.............................................. 78
SECTION 15.6 Non-Reliance on Collateral Agent and Other Lenders............. 78
SECTION 15.7 Indemnification................................................ 78
SECTION 15.8 Collateral Agent in Its Individual Capacity.................... 79
SECTION 15.9 Successor Collateral Agent..................................... 79
SECTION 15.10 [Intentionally Deleted]........................................ 80
SECTION 15.11 [Intentionally Deleted......................................... 80
SECTION 15.12 Intercreditor Agreement........................................ 80
ARTICLE 16
MISCELLANEOUS.............................. 80
SECTION 16.1 Notices........................................................ 80
SECTION 16.2 Expenses....................................................... 81
SECTION 16.3 Stamp and Other Taxes.......................................... 82
SECTION 16.4 Setoff......................................................... 82
SECTION 16.5 Litigation..................................................... 83
SECTION 16.6 Waiver of Rights............................................... 83
SECTION 16.7 Consent to Advertising and Publicity........................... 84
SECTION 16.8 Reversal of Payments........................................... 84
SECTION 16.9 Injunctive Relief.............................................. 84
SECTION 16.10 Accounting Matters............................................. 84
SECTION 16.11 Amendments; Waivers............................................ 85
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SECTION 16.12 Assignment..................................................... 86
SECTION 16.13 Performance of Borrower's Duties............................... 87
SECTION 16.14 Indemnification................................................ 87
SECTION 16.15 All Powers Coupled with Interest............................... 87
SECTION 16.16 Survival....................................................... 87
SECTION 16.17 Titles and Captions............................................ 88
SECTION 16.18 Severability of Provisions..................................... 88
SECTION 16.19 Governing Law.................................................. 88
SECTION 16.20 Counterparts................................................... 88
SECTION 16.21 Reproduction of Documents...................................... 88
SECTION 16.22 Term of Agreement.............................................. 89
SECTION 16.23 Pro-Rata Participation......................................... 89
SECTION 16.24 Receivables Securitization..................................... 89
SECTION 16.25 Final Agreement................................................ 90
SECTION 16.26 Waiver of Consequential Damages, Etc........................... 90
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ANNEXES, EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF TERM NOTE
EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE
Schedule 1.1A Permitted Liens
Schedule 1.1B Excepted Accounts
Schedule 7.1(a) Organization
Schedule 7.1(c) Subsidiaries; Ownership of Stock
Schedule 7.1(e) Compliance with Laws
Schedule 7.1(f) Description of Business
Schedule 7.1(g) Governmental Approvals
Schedule 7.1(h) Title to Properties
Schedule 7.1(i) Liens
Schedule 7.1(j) Indebtedness and Guarantees
Schedule 7.1(k) Litigation
Schedule 7.1(l) Tax Matters
Schedule 7.1(p) ERISA
Schedule 7.1(t) Location of Offices and Receivables
Schedule 7.1(u) Locations of Inventory
Schedule 7.1(v) Locations of Equipment
Schedule 7.1(w) Real Estate
Schedule 7.1(x) Corporate and Fictitious Names
Schedule 7.1(aa) Employee Relations
Schedule 7.1(bb) Proprietary Rights
Schedule 7.1(cc) Trade Names
Schedule 10.8 Use of Proceeds
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LOAN AND SECURITY AGREEMENT
Dated as of March 24, 1998
ITHACA INDUSTRIES, INC., a Delaware corporation, the Lenders party
to this Agreement from time to time, and NATIONSBANK, N.A., a national banking
association, as collateral agent for the Lenders, agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. For the purposes of this Agreement:
"Account Debtor" means a Person who is obligated on a Receivable.
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit or
Investment by purchase, exchange, issuance of stock or other securities, or by
merger, reorganization or any other method.
"Acquired Assets" means the assets and business of the Seller
acquired by the Borrower from the Seller pursuant to the Acquisition Documents.
"Acquisition Agreement" means the Asset Purchase Agreement dated as
of March 13, 1998 between the Seller and the Borrower, as the same may be
amended up to and through the Effective Date with the consent of the Lenders.
"Acquisition Documents" means, collectively, the Acquisition
Agreement and all other documents, agreements and certificates executed in
connection with the consummation of the transactions contemplated by the
Acquisition Agreement.
"Acquisition Documents Assignment" means the Collateral Assignment
of Acquisition Documents, in form and substance satisfactory to the Collateral
Agent, dated on or about the Effective Date, made by the Borrower in favor of
the Collateral Agent, for the benefit of the Secured Creditors, as such
agreement may be amended, modified or supplemented from time to time.
"Affiliate" means, with respect to a Person, (a) any partner,
officer, shareholder (if holding more than 10% of the outstanding shares of
capital stock of such Person), director, employee or managing agent of such
Person, (b) any other Person (other than a Subsidiary) that, (i) directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other voting interest of such Person or any Subsidiary of such
Person, or (iii) 10% or more of the voting stock or partnership
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or other voting interest of which is directly or indirectly beneficially owned
or held by such Person or a Subsidiary of such Person. Notwithstanding the
foregoing, when used in subpart (c) of the definition of "Restricted Payment",
and in Section 12.8, "Affiliate" means (a) any partner, officer, director,
employee or managing agent of such Person, (b) any other Person (other than a
Subsidiary) that, (i) directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such given
Person, (ii) directly or indirectly beneficially owns or holds 50% or more of
any class of voting stock or partnership or other voting interest of such Person
or any Subsidiary of such Person, or (iii) 50% or more of the voting stock or
partnership or other voting interest of which is directly or indirectly
beneficially owned or held by such Person or a Subsidiary of such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities or partnership or other voting
interest, by contract or otherwise.
"Agreement" means and includes this Agreement, including all
Annexes, Schedules, Exhibits and other attachments hereto, and all amendments,
modifications and supplements hereto and thereto.
"Agreement Date" means the date as of which this Agreement is dated.
"Applicable Laws" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and of all
orders and decrees of all courts and arbitrators, including, without limitation,
Environmental Laws.
"Asset Disposition" means the disposition of any asset of the
Borrower or any of its Subsidiaries, other than sales of Inventory in the
ordinary course of business.
"Assignment and Acceptance" means an assignment and acceptance in
the form attached hereto as Exhibit D assigning all or a portion of a Lender's
interests, rights and obligations under this Agreement pursuant to Section 14.1.
"Assignment of Factoring Proceeds" means an assignment by the
Borrower of the factoring proceeds payable to the Borrower pursuant to the terms
of the Non-Notification Factoring Agreement, executed by the Borrower, the
Collateral Agent, and the Factor.
"Benefit Plan" means an "employee pension benefit plan" as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which
the Borrower or any Related Company is, or within the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA, including such
plans as may be established after the Agreement Date.
"Borrower" means Ithaca Industries, Inc., a Delaware corporation,
and its successors and permitted assigns.
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"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia or Los Angeles, California are authorized
or required to close.
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"Capital Expenditures" means all capitalized expenditures, plus all
capitalized Enterprise Resource Planning expenditures, in each case as
determined in accordance with GAAP, but excluding any such expenditure made (i)
to restore, replace or rebuild property to the condition of such property
immediately prior to any damage, loss, destruction or condemnation of such
property, to the extent such expenditure is made with insurance proceeds or
condemnation awards relating to any such damage, loss, destruction or
condemnation or (ii) proceeds from the sale exchange of property to the extent
utilized to purchase functionally equivalent property or equipment.
"Capitalized Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Cash Equivalents" means
(a) direct obligations of the United States of America or any agency
or instrumentality of the United States of America, the payment or guarantee of
which constitutes a full faith and credit obligation of the United States of
America, in each case maturing no later than 90 days from the date of
acquisition;
(b) certificates of deposit maturing no later than 90 days from the
date of acquisition issued by U.S. commercial banks having a combined capital
and surplus of over $200,000,000 and having a long-term debt rating of A- by S&P
or A3 or better by Moody's;
(c) commercial paper of a domestic issuer rated A-1 by S&P and P-1
by Moody's and maturing not more than ninety days after the date of acquisition;
(d) securities with maturities of 90 days or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition;
and
(e) shares in money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (d) of
this definition.
"Collateral" means and includes, collectively, all of the collateral
referred to in each of the Security Documents and all of the Borrower's right,
title and interest in and to each
3
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of the following, wherever located and whether now or hereafter existing or now
owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Real Estate,
(g) all goods and other property, whether or not delivered,
(i) the sale or lease of which gives or purports to give rise
to any Receivable, including, but not limited to, all merchandise returned
or rejected by or repossessed from customers, or
(ii) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lien or
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to such goods and other property,
(h) all mortgages, deeds to secure debt and deeds of trust on real
or personal property, guaranties, leases, security agreements, and other
agreements and property which secure or relate to any Receivable or other
Collateral, or are acquired for the purpose of securing and enforcing any
item thereof,
(i) all documents of title, policies and certificates of insurance,
securities, chattel paper and other documents and instruments evidencing
or pertaining to any and all items of Collateral,
(j) any demand, time, savings, passbook, money market or like
depository account, and all certificates of deposit, maintained with a
bank, savings and loan association, credit union or like organization,
other than an account evidenced by a certificate of deposit that is an
instrument under the UCC,
(k) all Pledged Stock and all securities accounts, all commodity
contracts and all commodity accounts,
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<PAGE>
(l) (i) any investment account maintained by or on behalf of the
Borrower with the Collateral Agent or any Lender or any Affiliate of the
Collateral Agent or any Lender, (ii) any agreement governing such account,
(iii) all cash, money, notes, securities, instruments, goods, accounts,
documents, chattel paper, general intangibles and other property now or
hereafter held by the Collateral Agent or any Lender or any Affiliate of
the Collateral Agent or any Lender on behalf of the Borrower in connection
with such investment account or deposited by the Borrower or on the
Borrower's behalf to such investment account or otherwise credited thereto
for the Borrower's benefit, or distributable to the Borrower from such
investment account, together with all contracts for the sale or purchase
of the foregoing, (iv) all of the Borrower's right, title and interest
with respect to the deposit, investment, allocation, disposition,
distribution or withdrawal of the foregoing, (v) all of the Borrower's
right, title and interest with respect to the making of amendments,
modifications or additions of or to the terms and conditions under which
the investment account or investments maintained therein is to be
maintained by the Borrower, the Collateral Agent, any Lender or any
Affiliate of the Collateral Agent or any Lender on the Borrower's behalf,
and (vi) all of the Borrower's books, records and receipts pertaining to
or confirming any of the foregoing,
(m) all files, correspondence, computer programs, tapes, discs and
related data processing software which contain information identifying or
pertaining to any of the Receivables, or any Account Debtor, or showing
the amounts thereof or payments thereon or otherwise necessary or helpful
in the realization thereon or the collection thereof,
(n) all cash and Cash Equivalents deposited with the Collateral
Agent or any Lender or any Affiliate of the Collateral Agent or any Lender
or which the Collateral Agent, for the benefit of the Secured Creditors,
or any Lender or such Affiliate is entitled to retain or otherwise possess
as collateral pursuant to the provisions of this Agreement or any of the
Security Documents, but specifically excluding deposits in the Excepted
Accounts, and
(o) any and all products and proceeds of the foregoing (including,
but not limited to, any claim to any item referred to in this definition,
and any claim against any third party for loss of, damage to or
destruction of any or all of, the Collateral or for proceeds payable
under, or unearned premiums with respect to, policies of insurance) in
whatever form, including, but not limited to, cash, negotiable instruments
and other instruments for the payment of money, chattel paper, security
agreements and other documents.
"Collateral Agent" means NationsBank, N.A., a national banking
association, and any successor agent appointed pursuant to Section 15.9 hereof.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (a)
Consolidated Operating Cash Flow less Unfunded Capital Expenditures (other than
Unfunded Capital Expenditures consisting of capitalized Enterprise Resource
Planning expenditures) less cash
5
<PAGE>
dividends paid less cash taxes paid to (b) Consolidated Fixed Charges; provided,
that in calculating the Consolidated Fixed Charge Coverage Ratio for any fiscal
period which includes the period from February 1, 1998 to and including the
Effective Date, the Seller shall be deemed to have been a Consolidated
Subsidiary of the Borrower for the period from February 1, 1998 to and including
the Effective Date for all purposes except for the calculation of cash
dividends.
"Consolidated Fixed Charges" means, on a consolidated basis for the
Borrower and its Consolidated Subsidiaries, the sum of cash Interest Expense
(excluding the Collateral Agent's annual $75,000 fee described in Section 5.2(b)
of the Senior Loan Agreement) and scheduled principal payments, determined in
accordance with GAAP.
"Consolidated Funded Indebtedness" means (a) all Indebtedness under
this Agreement and the First Lien Senior Secured Facility and (b) all other
Indebtedness for Money Borrowed of the Borrower and its Consolidated
Subsidiaries.
"Consolidated Net Income" means, for any period, net income (income
after tax payments) determined on a consolidated basis for the Borrower and its
Consolidated Subsidiaries in accordance with GAAP; provided, however, that there
shall not be included in such Consolidated Net Income:
(a) any net income of any Person if such person is not a Subsidiary,
except that equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person to the Borrower or any
of its Consolidated Subsidiaries as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a
Consolidated Subsidiary, to the limitation contained in clause (c) below);
(b) any net income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition;
(c) any net income of any Subsidiary if such Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Subsidiary, directly or indirectly, to
the Borrower to the extent of such restrictions, except that equity in the
net income of any such Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary to the Borrower or any of its Consolidated
Subsidiaries during such period as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another
Subsidiary, to the limitation contained in this clause);
(d) any gain or loss realized upon the sale or other disposition of
any property, plant or equipment (including pursuant to any sale-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain or loss realized upon the sale or other
disposition of any capital stock of any Person; or
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<PAGE>
(e) other extraordinary items.
"Consolidated Operating Cash Flow" means, in respect of any period,
the sum of (a) Consolidated Net Income for such period and (b) the amount of all
Interest Expense, depreciation, amortization and income taxes of the Borrower
and its Consolidated Subsidiaries, but only to the extent deducted in the
determination of Consolidated Net Income for such period; provided, that, in
calculating Consolidated Operating Cash Flow (except as such term is used to
calculate Excess Cash Flow) for any fiscal period which includes the period from
February 1, 1998 to and including the Effective Date, the Seller shall be deemed
to have been a Consolidated Subsidiary of the Borrower for the period from
February 1, 1998 to and including the Effective Date.
"Consolidated Subsidiaries" means, as to the Borrower, the
Subsidiaries of the Borrower whose accounts are at the time in question
consolidated with those of the Borrower in accordance with GAAP.
"Consolidated Tangible Net Worth" means the consolidated
shareholders' equity of the Borrower as would be shown on a consolidated balance
sheet of the Borrower less the book value of all assets which would be shown as
intangible assets, all determined in accordance with GAAP.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Contract Rights" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper.
"Copyrights" means and includes, in each case whether now existing
or hereafter arising, all of the Borrower's right, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations and copyright applications, (b) all renewals
of any of the foregoing, (c) all income, royalties, damages and payments now or
hereafter due and/or payable from third parties under any of the foregoing,
including, without limitation, damages or payments for past or future
infringements of any of the foregoing, (d) the right to sue for past, present
and future infringements of any of the foregoing, and (e) all rights
corresponding to any of the foregoing throughout the world.
"Default" means any of the events specified in Section 13.1 which
with the passage of time or giving of notice or both would constitute an Event
of Default.
"Dollar" and "$" means freely transferable United States dollars.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as in effect from time to time.
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<PAGE>
"Effective Date" means the later of (a) the Agreement Date, and (b)
the first date on which all of the conditions set forth in Article 6 shall have
been fulfilled or waived.
"Effective Interest Rate" means each rate of interest per annum on
the Term Loan in effect from time to time pursuant to the provisions of Sections
5.1(a), (c), and (d).
"Eligible Assignee" means (a) a commercial bank, financial
institution or other "accredited investor" (as defined in Rule 501(a)(1), (2),
(3), or (7) of Regulation D of the Securities Act of 1933); (b) any Lender
listed on the signature page of this Agreement; and (c) any Affiliate of any
Lender, if such Affiliate is an "accredited investor".
"Environmental Indemnity Agreement" means the Environmental
Indemnity Agreement, dated as of the Effective Date, between the Borrower and
the Collateral Agent, for the ratable benefit of the Secured Creditors, pursuant
to which the Borrower agrees to indemnify the Collateral Agent and the Secured
Creditors for certain matters related to Environmental Laws, as amended,
modified or supplemented from time to time.
"Environmental Laws" means all federal, state, local and foreign
laws now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and any and
all regulations, notices or demand letters issued, entered, promulgated or
approved thereunder; such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq., as amended; the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et seq., as amended; the Clean Air Act, 46 U.S.C. ss. 7401 et
seq., as amended; and state and federal lien and environmental cleanup programs.
"Environmental Lien" means a Lien in favor of any governmental
entity for (a) any liability under Environmental Laws or (b) damages arising
from, or costs incurred by such governmental entity in response to, a Release or
threatened Release of Contaminant into the environment.
"Equipment" means and includes, all machinery, apparatus, equipment,
motor vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in the Borrower's business operations or owned by the Borrower or in which
the Borrower has an interest, and all parts, accessories and special tools and
all increases and accessions thereto and substitutions and replacements
therefor.
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"Event of Default" means any of the events specified in Section
13.1, provided that any requirement for notice or lapse of time or any other
condition has been satisfied.
"Excepted Accounts" means those certain depository and other bank
accounts listed on Schedule 1.1B, so long as (excluding the Borrower's payroll
accounts and Honduran Accounts) no more than $10,000 is on deposit in any such
account at any time. The Honduran Accounts shall be considered Excepted Accounts
so long as no more than $250,000 is on deposit in any such account for more than
5 consecutive Business Days; provided, however, a Honduran Account may, for no
more than 5 consecutive Business Days during the month of June of each year and
5 consecutive Business Days during the month of December of each year have
additional deposits of up to $1,500,000 for payment of extra payroll and other
benefit payments in accordance with the customs and practice of the Borrower's
Honduran Subsidiaries and still be considered an Excepted Account hereunder.
"Excess Cash Flow" means, for any fiscal year, (a) Consolidated
Operating Cash Flow less (b) the sum of the Borrower's and its Consolidated
Subsidiaries' cash Interest Expense, scheduled and mandatory principal payments,
cash taxes, Unfunded Capital Expenditures and WIP Deductions (as that term is
defined in the Senior Loan Agreement).
"Factor" means Republic Business Credit Corporation, its successors,
or another factor reasonably acceptable to the Collateral Agent.
"Financial Officer" means the chief financial officer, treasurer or
controller of the Borrower.
"Financing Statements" means any and all Uniform Commercial Code
financing statements, in form and substance satisfactory to the Lenders,
executed and delivered by the Borrower to the Collateral Agent, naming the
Collateral Agent, for the benefit of the Secured Creditors, as secured party and
the Borrower as debtor, in connection with this Agreement.
"First Lien Senior Secured Facility" means the $95,000,000 of first
lien senior secured Indebtedness of the Borrower pursuant to the terms of the
Senior Loan Agreement.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and, when used with
reference to the Borrower or any Subsidiary, consistent with the prior financial
practice of the Borrower, as reflected on the financial statements referred to
in Section 7.1(n); provided, however, that, in the event that changes shall be
mandated by the Financial Accounting Standards Board or any similar accounting
authority of comparable standing, or shall be recommended by the Borrower's
independent public accountants, such changes shall be included in GAAP as
applicable to the Borrower only from and after such date as the Borrower and the
Required Lenders shall have amended this Agreement to the extent necessary to
reflect any such changes in the financial covenants set forth in Article 12. The
parties hereto agree to promptly enter into reasonable amendments in order to
reflect such changes in GAAP.
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"General Intangibles" means all of the Borrower's now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrower of every kind and
nature (other than Accounts), including, without limitation, all Proprietary
Rights, corporate or other business records, inventions, designs, blueprints,
plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, reversions or any rights
thereto and any other amounts payable to the Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which the Borrower
is beneficiary and any letter of credit, guarantee, claims, security interest or
other security held by or granted to the Borrower to secure payment by an
Account Debtor of any of the Accounts.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local or foreign
national or provincial and all agencies thereof.
"Guaranty", "Guaranteed" or to "Guarantee" as applied to any
obligation of another Person shall mean and include
(a) a guaranty (other than by endorsement of negotiable instruments
for collection in the ordinary course of business), directly or
indirectly, in any manner, of any part or all of such obligation of such
other Person, and
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is
to assure the payment or per formance (or payment of damages in the event
of nonperformance) of any part or all of such obligation of such other
Person whether by
(i) the purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the purpose of
enabling the obligor with respect to such obligation to make any payment
or performance (or payment of damages in the event of nonperformance) of
or on account of any part or all of such obligation, or to assure the
owner of such obligation against loss,
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such obligation,
(iv) repayment of amounts drawn down by beneficiaries of
letters of credit, or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a Guaranty of
any obligation or
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indemnifying or holding harmless, in any way, such Person against any part
or all of such obligation.
"Honduran Account" means active deposit and other bank accounts of
the Borrower or the Borrower's Honduran Subsidiaries located in Honduras,
Central America, whether such accounts are now existing or established in the
future.
"Indebtedness" of any Person means, without duplication, all (a)
Indebtedness for Money Borrowed, (b) redemption obligations (but excluding
redemption obligations that occur only upon the occurrence of a contingency if
such obligations are expressly subject to repayment in full of the Secured
Obligations) in respect of mandatorily redeemable preferred stock, but only if
the redemption obligations mature within six years of the Effective Date, (c)
liabilities for the deferred purchase price of acquired property (excluding
accounts payable not overdue by more than 60 days that arise in the ordinary
course of business, and excluding accounts payable overdue by more than 60 days
provided such accounts payable are being disputed in good faith by the Borrower,
but including all liabilities created through any conditional sale or title
retention agreement with respect to acquired property), (d) rentals capitalized
in accordance with GAAP under any Capitalized Lease, (e) all liabilities in
respect of unreimbursed draws under letters of credit or similar instruments,
(f) payment obligations with respect to interest rate swaps, currency swaps and
similar obligations which require payments, whether periodically or upon the
happening of a contingency, and (g) all Indebtedness or other obligations of
others with respect to which such Person has become liable through a Guarantee.
"Installment Payment Date" means September 30, 2003.
"Intercreditor Agreement" means the Intercreditor Agreement, dated
as of the Effective Date, between the Collateral Agent, the Lenders, the Senior
Lenders, NationsBanc Montgomery Securities LLC, as syndication agent and
arranger under the Senior Loan Agreement, BankAmerica Business Credit, Inc., as
documentation agent under the Senior Loan Agreement, and NationsBank in its
capacity as the agent under the Senior Loan Agreement.
"Interest Expense" means interest on Indebtedness during the period
for which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind and other non-cash interest.
"Interest Payment Date" means the first day of each calendar month
commencing on April 1, 1998.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Inventory" means all inventory as such term is defined in the
Uniform Commercial Code and shall include, without limitation, (a) all goods
intended for sale or lease by the Borrower, or for display or demonstration, and
other products intended for sale by the
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Borrower to its customers, (b) all work in process, (c) all raw materials and
other materials and supplies of every nature and description used or which might
be used in connection with the manufacture, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
the Borrower's business, and (d) all documents evidencing and general
intangibles relating to any of the foregoing.
"Investment" means, with respect to any Person, (a) the acquisition
or ownership by such Person of any share of capital stock, evidence of
Indebtedness or other security issued by any other Person, (b) any loan, advance
or extension of credit to, or contribution to the capital of, any other Person,
excluding advances to employees in the ordinary course of business for business
expenses and extensions of trade credit in the ordinary course of business, (c)
any Guaranty of the obligations of any other Person, (d) any other investment
(other than the Acquisition of a Business Unit) in any other Person, and (e) any
commitment or option to make any of the investments listed in clauses (a)
through (d) above if, in the case of an option, the consideration therefor
exceeds $100.
"IRS" means the Internal Revenue Service.
"Lender" means at any time any lender party to this Agreement at
such time, including any such Person becoming a party hereto pursuant to the
provisions of Article 14, and its successors and assigns, and "Lenders" means at
any time all of the lenders party to this Agreement at such time, including any
such Persons becoming parties hereto pursuant to the provisions of Article 14,
and their successors and assigns.
"Lien" as applied to the property of any Person means (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or similar
encumbrance of any kind in respect of any property of such Person, or upon the
income or profits therefrom, (b) any arrangement, express or implied, under
which any property of such Person is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person, and (c) the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
its equivalent in any jurisdiction, excluding informational financing statements
relating to property leased or intellectual property licensed by the Borrower.
"Loan" means any Term Loan, as well as all such loans collectively,
as the context requires.
"Loan Account" and "Loan Accounts" shall have the meanings ascribed
thereto in Section 5.5.
"Loan Documents" means collectively this Agreement, the Notes, the
Security Documents and each other instrument, agreement or document executed by
the Borrower or any
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Subsidiary of the Borrower in connection with the making of any Loan under this
Agreement, whether on or after the Effective Date.
"Materially Adverse Effect" means any act, omission, situation,
circumstance, event or undertaking which would, singly or in any combination
with one or more other related acts, omissions, situations, circumstances,
events or undertakings have a materially adverse effect upon (a) the business,
assets, properties, liabilities, condition (financial or otherwise), results of
operations or business prospects of the Borrower and its Subsidiaries, taken as
a whole, (b) the value of the Collateral or the Real Estate taken as a whole,
(c) the Security Interest or the priority of the Security Interest, (d) the
ability of the Borrower or any of its Subsidiaries to perform in any material
respect any material obligations under this Agreement or any other Loan Document
to which it is a party, or (e) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or the
ability of the Collateral Agent or any Lender to enforce any material rights or
remedies under or in connection with any Loan Document.
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable, and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the ordinary
course of business), (c) Indebtedness that constitutes a Capitalized Lease
Obligation, and (d) Indebtedness that is such by virtue of clause (h) of the
definition thereof, but only to the extent that the obligations Guaranteed are
obligations that would constitute Indebtedness for Money Borrowed.
"Moody's" means Moody's Investor Service, Inc. (or its successor).
"Mortgages" means and includes any and all of the mortgages,
leasehold mortgages, deeds of trust, deeds to secure debt, assignments and other
instruments executed and delivered by the Borrower pursuant to which the
Borrower grants to the Collateral Agent a Lien on all the Borrower's Real Estate
(excluding leasehold interests, other than the lease of the Borrower's Real
Estate located in Siler City, North Carolina and Qualifying Leases) and a
collateral assignment of the Borrower's interest under the lease of Borrower's
Real Estate located in Silver City, North Carolina and under Qualifying Leases,
and all amendments, modifications and supplements thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or a Related Company is
required to contribute or has contributed within the immediately preceding six
years.
"NationsBank" means NationsBank, N.A., and its successors and
permitted assigns.
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"Net Proceeds" means proceeds received by the Borrower or any of its
Subsidiaries in cash from any Asset Disposition, net of: (a) the transaction
costs of such sale, lease, transfer or other disposition; (b) any tax liability
arising from such transaction; (c) amounts applied to repayment of Indebtedness
(other than the Secured Obligations) secured by a Lien on the asset or property
disposed; (d) reasonable reserves related to any contingent liability relating
to the asset or property disposed which the Borrower or its Subsidiaries will
retain following such Asset Disposition; and (e) amounts held in escrow pending
resolution of contingencies or the like until actually received.
"Net Worth" means, with respect to any Person, such Person's total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings, after deducting treasury stock) which would appear as such on
a balance sheet of such Person prepared in accordance with GAAP.
"Non-Notification Factoring Agreement" means an agreement regarding
the factoring of certain Receivables of the Borrower by and between the Factor
and the Borrower.
"Note" means any of the Term Notes and "Notes" means more than one
such Note.
"Operating Lease" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"Patent Assignment" means the Conditional Assignment and Patent
Security Agreement, dated on or about the Effective Date, executed and delivered
by the Borrower to the Collateral Agent, for the benefit of the Secured
Creditors, as the same may be amended, modified or supplemented from time to
time.
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of the Borrower's right, title and interest in and to (a)
any and all patents and patent applications, (b) inventions and improvements
described and claimed therein, (c) reissues, divisions, continuations, renewals,
extensions and continuations-in-part and continued prosecution applications
thereof, (d) income, royalties, damages, claims and payments now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past and future infringements thereof, (e)
rights to sue for past, present and future infringements thereof, and (f) all
rights corresponding to any of the foregoing throughout the world.
"Permitted Guarantees" means (a) Guarantees by the Borrower of
obligations of its Subsidiary Guarantors, (b) Guarantees by the Borrower of
obligations of its other Subsidiaries to the extent such Guarantees constitute a
"Permitted Investment" under clause (e) or (f) of the definition thereof, (c)
Guarantees by the Subsidiary Guarantors of the Borrower's
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obligations under the First Lien Senior Secured Facility, and (d) Guarantees by
the Subsidiary Guarantors of the Borrower's obligations under the Loan Agreement
and the other Loan Documents.
"Permitted Investments" means Investments in:
(a) direct obligations of the United States of America or any agency
or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in each case maturing no later than one year
from the date of acquisition;
(b) certificates of deposit maturing no later than one year from the
date of acquisition issued by U.S. commercial banks having a combined
capital and surplus of over $200,000,000 and having a long-term debt
rating of A- by S&P, or A3 or better by Moody's;
(c) commercial paper of a domestic issuer rated A-1 by S&P and P-1
by Moody's and maturing not more than 270 days after the date of
acquisition;
(d) Investments in or to existing Subsidiary Guarantors;
(e) Investments in the ordinary course of business in the working
capital of Borrower's Honduran Subsidiaries, in an aggregate outstanding
amount not to exceed $4,000,000 at any time;
(f) Investments in other Subsidiaries in an aggregate outstanding
amount not to exceed $500,000 at any time;
(g) Investments made in the ordinary course of business;
(h) other Investments (in addition to clauses (a) through (g) above)
not exceeding at any time the greater of (i) $100,000, or (ii) the amount
that is available for Restricted Payments; and
(i) Investments received in connection with the settlement of
accounts receivable that arose in the ordinary course of business.
"Permitted Liens" means (a) Liens securing taxes, assessments and
other govern mental charges or levies (excluding any Lien imposed pursuant to
any of the provisions of ERISA) or the claims of materialmen, mechanics,
carriers, warehousemen or landlords for labor, materials, supplies or rentals
incurred in the ordinary course of business, but in all cases only if payment
shall not at the time be required to be made in accordance with Section 10.6,
(b) Liens resulting from a judgment or award which is being contested in good
faith by appropriate proceedings and for which reserves in respect of the
reasonably anticipated liability therefor have been appropriately established,
but only if the enforcement of any such Lien has
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been stayed within 30 days by appropriate proceedings, (c) Liens arising in the
ordinary course of business that do not secure the repayment of Indebtedness for
Money Borrowed (i) to secure the performance of bids, trade contracts, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature, (ii) in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods, (iii) consisting of restrictions (other than pledges or
other security interests) on the transferability of Investments in favor of
co-investors or the issuers of such Investments or imposed by law, and (iv) on
Trademarks, Patents, Copyrights and other intellectual property (whether
individually or as part of a group) consisting of the license or similar
disposition of such property made in the ordinary course of business, (d) Liens
constituting Permitted Encumbrances, as defined in the Mortgages, and other
Liens on the Borrower's Real Estate in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property,
which do not materially detract from the value of such property or impair the
use thereof in the business of the Borrower, (e) Purchase Money Liens securing
Permitted Purchase Money Indebtedness, (f) Liens shown on Schedule 1.1A
Permitted Liens (and replacements, extensions and renewals of any such Lien upon
or in the same property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount or change in any direct or
contingent obligor) of the Indebtedness secured thereby), (g) Liens securing
Indebtedness owed by a Subsidiary to the Borrower or to a Subsidiary Guarantor,
(h) Liens securing the First Lien Senior Secured Facility, subject to the terms
of the Intercreditor Agreement, (i) Liens on Receivables arising under the Non-
Notification Factoring Agreement, so long as the Assignment of Factoring
Proceeds is in full force and effect, and (j) Liens of the Collateral Agent, for
the benefit of the Secured Creditors, arising under this Agreement and the other
Loan Documents.
"Permitted Purchase Money Indebtedness" means Indebtedness of the
Borrower and its Subsidiaries (a) which is secured by a Purchase Money Lien, and
(b) which, when aggregated with the principal amount of all other such
Indebtedness and Capitalized Lease Obligations of the Borrower at the time
outstanding, does not exceed $10,000,000. For the purposes of this definition,
the principal amount of any Indebtedness consisting of Capitalized Leases shall
be computed as a Capitalized Lease Obligation.
"Permitted Refinancing Indebtedness" means, with respect to the
First Lien Senior Secured Facility, the Indebtedness arising out of Borrower's
refinancing thereof that meets the following conditions: (a) the terms
(including advance rates, interest rates, amortization schedules, covenants,
defaults and lien subordination terms, and the like) shall be no less favorable
in any material respect to the Borrower and the Lenders than those contained in
the Senior Loan Agreement, in the reasonable determination of the Required
Lenders; (b) the sum of all revolving loan facility commitments and term loan
fundings, together with the fees and costs paid in respect thereof, under such
refinancing indebtedness shall not exceed the maximum revolving commitment and
outstanding term loan balance of the First Lien Senior Secured Facility on the
date of such refinancing; and (c) the collateral agent, if any, for the lenders
providing such financing, shall be reasonably acceptable to the Lenders.
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"Person" means an individual, limited liability company,
corporation, partnership, association, trust or unincorporated organization, or
a government or any agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which the Borrower or any Related Company is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA but only with respect to the time during such six-year period which the
Borrower or any Related Company was an "employer" with respect to a given
employee benefit plan.
"Pledged Stock" means all stock of the Borrower's Subsidiaries
assigned and pledged to the Collateral Agent, for the benefit of the Secured
Creditors, pursuant to the Stock Pledge Agreement and Section 9.16.
"Pro Forma" means the pro forma balance sheet of the Borrower and
its Subsidiaries as at January 31, 1998, after giving effect to the transactions
contemplated by this Agreement, the Acquisition Agreement and the Acquisition
Documents.
"Projections" means the forecasted (a) balance sheets, (b) income
statements, and (c) cash flow statements, of the Borrower and its Subsidiaries
for the Borrower's 1999 through 2002 fiscal years, together with appropriate
supporting details and a statement of underlying assumptions.
"Proportionate Share" or "Ratable", as applied to a Lender, means
such Lender's share of an amount in Dollars or other property at the time of
determination equal to (i) on the Effective Date, the amount set forth on Annex
II attached hereto, and (ii) after the funding of the Loans, the percentage of
the total principal amount of Loans outstanding at such time obtained by
dividing the principal amount of the Loans then owing to such Lender by the
total principal amount of all Loans then owing to all Lenders.
"Proprietary Rights" means all of the Borrower's now owned and
hereafter arising or acquired: Patents, Copyrights, Trademarks, including,
without limitation, those Proprietary Rights set forth on Schedule 7.1(bb)
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of any
of the foregoing, and all rights to sue for past, present and future
infringement of any of the foregoing.
"Purchase Money Lien" means any Lien incurred to secure the payment
of the purchase price or costs of construction incurred with the acquisition of,
or improvement to, fixed assets, including any Lien existing on such fixed
assets at the time of acquisition thereof or at the time of acquisition by the
Borrower or any of its Subsidiaries of any business entity then owning such
fixed assets (so long as they were not incurred or extended in contemplation of
such acquisition), provided that (a) such Lien shall attach solely to the fixed
assets acquired or purchased, (b) such Lien shall have been created or incurred
within 180 days of the date of acquisition of such fixed assets (with the
exception that in the case of construction or
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acquisition of improvements to real estate, the land on which such improvements
are located shall not be required to have been acquired within such 180 day
period), and (c) the Indebtedness secured by such Lien does not exceed 100% of
the purchase price of assets so acquired.
"Qualifying Lease" means a lease of real estate entered into by the
Borrower or by a Subsidiary of the Borrower as lessee after the Effective Date,
provided such lease meets each of the following requirements: (a) either (i)
such lease has an initial term equal to or greater than five years from the date
such lease is executed, or (ii) such lease has a term (including both the
initial term and any renewal terms that are exercisable by the Borrower or the
Borrower's Subsidiary and are binding on the lessor if exercised) equal to or
greater than ten years from the date such lease is executed, and (b) the
aggregate dollar amount of lease payments (including the aggregate amount of all
required lessee payments of taxes, insurance and maintenance charges, whether
paid directly by the lessee or reimbursed to the lessor) for any one year period
of the lease term is at least $50,000; and (c) the gross area leased pursuant to
such lease exceeds 10,000 square feet.
"Real Estate" means all of the Borrower's now or hereafter owned or
leased estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of the Borrower's now or
hereafter owned or leased interests in the improvements and emblements thereon,
the fixtures attached thereto and the easements appurtenant thereto, including,
without limitation the real property described on Schedule 7.1(w).
"Receivables" means and includes (a) any and all rights to the
payment of money or other forms of consideration of any kind (whether classified
under the Uniform Commercial Code as accounts, contract rights, chattel paper,
general intangibles, or otherwise) including, but not limited to, accounts
receivable, letters of credit and the right to receive payment thereunder,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any Person, (b) all guarantees, security and
Liens for payment thereof, (c) all goods, whether now owned or hereafter
acquired, and whether sold, delivered, undelivered, in transit or returned,
which may be represented by, or the sale or lease of which may have given rise
to, any such right to payment or other debt, obligation or liability, and (d)
all proceeds of any of the foregoing.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System (or any successor).
"Related Company" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Borrower; (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Borrower; or (iii)
member of the same affiliated service group (within the meaning of
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Section 414(m) of the Internal Revenue Code) as the Borrower, any corporation
described in clause (i) above or any partnership, trade or business described in
clause (ii) above.
"Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water or
groundwater.
"Remedial Action" means actions required pursuant to Environmental
Laws to (i) clean up, remove, treat or in any other way address Contaminants in
the indoor or outdoor environment; (ii) prevent the Release or threat of Release
or minimize the further Release of Contaminants so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (iii) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for 30
days notice to the PBGC is waived under applicable regulations.
"Required Lenders" means, at any time, any combination of Lenders
holding, in the aggregate, in excess of 50% of the aggregate principal amount of
the Term Loans outstanding at such time.
"Restricted Dividend Payment" means any dividend, distribution or
payment on or with respect to (a) any shares of a Person's capital stock (other
than dividends payable solely in shares of its capital stock) or (b) any
partnership interest in a Person, excluding, however, any such dividend,
distribution or payment to the Borrower by any Subsidiary of the Borrower.
"Restricted Payment" means (a) any redemption, retirement or payment
with respect to the Seller Subordinated Indebtedness other than in accordance
with the subordination provisions set forth in the Seller Subordinated Note, (b)
the payment by any Person of the principal amount of or interest on any
Indebtedness (other than trade debt) owing to any Affiliate of the Borrower, and
(c) the payment of any management, consulting or similar fee by any Person to
any Affiliate of such Person, other than payments of amounts due under
employment contracts in the ordinary course of business.
"Restricted Purchase" means any payment on account of the purchase,
redemption or other acquisition or retirement by a Person of any (a) shares of
such Person's capital stock (except shares acquired on the conversion thereof
into other shares of capital stock of such Person), (b) a partnership interest
in such Person, if such Person is a partnership, or (c) a membership interest in
such Person, if such Person is a limited liability company.
"S&P" means Standard & Poor's Ratings Group, a Division of McGraw
Hill, Inc. (or its successors).
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"Secured Creditors" means, collectively, the Collateral Agent, the
Lenders, and each of their respective Affiliates.
"Secured Obligations" means, in each case whether now in existence
or hereafter arising, (a) the principal of, and interest and premium, if any,
on, the Term Loans and (b) all indebtedness, liabilities, obligations, covenants
and duties of the Borrower to the Secured Creditors of every kind, nature and
description arising under or in respect of this Agreement, the Notes or any of
the other Loan Documents, whether direct or indirect, absolute or contin gent,
due or not due, contractual or tortious, liquidated or unliquidated, and whether
or not evidenced by any note, and whether or not for the payment of money,
including without limitation, fees required to be paid pursuant to Article 5 and
expenses required to be paid or reimbursed pursuant to Section 16.2.
"Security Documents" means each of the following:
(a) the Mortgages,
(b) the Financing Statements,
(c) the Acquisition Documents Assignment,
(d) the Trademark Assignment and the Patent Assignment, and
(e) each other writing executed and delivered by the Borrower or any
other Person securing the Secured Obligations.
"Security Interest" means the Liens of the Collateral Agent, for the
benefit of the Secured Creditors, on and in the Collateral effected hereby or by
any of the Security Documents or pursuant to the terms hereof or thereof.
"Seller" means Glendale Hosiery Company, a North Carolina
corporation.
"Seller Subordinated Indebtedness" means the Indebtedness of the
Borrower evidenced by the Seller Subordinated Note, including principal thereof
and interest and premium, if any, thereon, together with any and all
Indebtedness related thereto.
"Seller Subordinated Note" means the Subordinated Promissory Note
dated the Effective Date, in an original principal amount not to exceed the
amount required under the Acquisition Agreement, executed by the Borrower in
favor of the Seller, as the same may be amended, modified, extended, renewed or
replaced from time to time with the consent of the Required Lenders.
"Senior Lender" means a Lender, as that term is defined in the
Senior Loan Agreement.
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"Senior Loan Agreement" means the Loan and Security Agreement dated
of even date herewith between the Borrower, NationsBank, N.A., as agent, the
Senior Lenders, NationsBanc Montgomery Securities, LLC, as syndication agent and
arranger, and BankAmerica Business Credit, Inc., as documentation agent.
"Stock Pledge Agreement" means the Stock Pledge Agreement, dated as
of the Effective Date, executed by the Borrower pursuant to which the Borrower
assigns and pledges 65% of the capital stock of each of its foreign
Subsidiaries.
"Subsidiary"
(a) when used to determine the relationship of a Person to another
Person, means a Person of which an aggregate of 50% or more of the stock
of any class or classes or 50% or more of other ownership interests is
owned of record or beneficially by such other Person, or by one or more
Subsidiaries of such other Person, or by such other Person and one or more
Subsidiaries of such Person,
(i) if the holders of such stock, or other ownership
interests, (A) are ordinarily, in the absence of contingencies, entitled
to vote for the election of a majority of the directors (or other
individuals performing similar functions) of such Person, even though the
right so to vote has been suspended by the happening of such a
contingency, or (B) are entitled, as such holders, to vote for the
election of a majority of the directors (or individuals performing similar
functions) of such Person, whether or not the right so to vote exists by
reason of the happening of a contingency, or
(ii) in the case of such other ownership interests, if such
ownership interests constitute a majority voting interest, and
(b) when used with respect to a Plan, ERISA or a provision of the
Internal Revenue Code pertaining to employee benefit plans, also means any
corporation, trade or business (whether or not incorporated) which is
under common control with the Borrower and is treated as a single employer
with the Borrower under Section 414(b) or (c) of the Internal Revenue Code
and the regulations thereunder.
(c) a Subsidiary will not cease to be considered wholly-owned by
reason of the issuance of capital stock as directors' qualifying shares.
"Subsidiary Guarantor" means each U.S. Subsidiary of the Borrower
which Guarantees the Secured Obligations, and grants the Collateral Agent, for
the benefit of the Secured Creditors, a first priority security interest in all
of its assets, in accordance with Section 9.16.
"Supermajority Lenders" means, at any time, any combination of
Lenders holding Term Loans representing in excess of 66.6% of the aggregate
principal amount of Term Loans outstanding at such time.
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"Term Loan" means each loan made to the Borrower pursuant to Section
4.1, as well as all such loans collectively, as the context requires.
"Term Loan Facility" means the principal amount of $15,000,000.
"Term Note " means each Term Note made by the Borrower payable to
the order of a Lender evidencing the obligation of the Borrower to pay the
aggregate unpaid principal amount of the Term Loan made to it by such Lender
(and any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor whether
payable to such Lender or to a different Lender in connection with a Person
becoming a Lender after the Effective Date or otherwise) substantially in the
form of Exhibit A-2 hereto, with all blanks properly completed, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"Termination Date" means September 30, 2003, such earlier date as
the Secured Obligations shall have been accelerated pursuant to the provisions
of Section 13.2, such earlier date as all Secured Obligations shall have been
irrevocably paid in full, or such later date as to which the same may be
extended pursuant to the provisions of Section 2.5.
"Termination Event" means (a) a Reportable Event, or (b) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan amendment
as a termination under Section 4041 of ERISA, or (c) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the
appointment of a trustee to administer any Plan.
"Trademark Assignment" means the Conditional Assignment and
Trademark Security Agreement, dated on or about the Effective Date, executed and
delivered by the Borrower, as the same may be amended, modified or supplemented
from time to time.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of the Borrower's right, title and interest in and to (a)
trademarks (including service marks), trade names and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the trademarks, (b) licenses of the foregoing, whether as
licensee or licensor, (c) applications therefor and renewals and continued
prosecution applications thereof, (d) income, royalties, damages and payments
now or hereafter due and/or payable with respect thereto, including, without
limitation, damages, claims and payments for past and future infringements
thereof, (e) rights to sue for past, present and future infringements thereof,
including the right to settle suits involving claims and demands for royalties
owing, and (f) all rights corresponding to any of the foregoing throughout the
world.
"Unfunded Capital Expenditures" means all Capital Expenditures,
other than those which are paid for with the proceeds of Indebtedness for Money
Borrowed with a maturity of more than one year (other than the Revolving Credit
Loans (as defined in the Senior Loan Agreement)) incurred to finance such
Capital Expenditures and other than those represented by Capitalized Lease
Obligations with a maturity of more than one year.
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"Unfunded Vested Accrued Benefits" means with respect to any Plan at
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of Georgia.
SECTION 1.2 General. All terms of an accounting nature not
specifically defined herein shall have the meaning ascribed thereto by GAAP.
Except as otherwise defined in Section 1.1, the terms accounts, chattel paper,
contract rights, documents, equipment, instruments, general intangibles and
inventory, as and when used in this Agreement or the Security Documents, shall
have the meanings given those terms in the Uniform Commercial Code. Unless
otherwise specified, a reference in this Agreement to a particular section or
subsection is a reference to that section or subsection of this Agreement, and
the words "hereof," "herein," "hereunder" and words of similar import, when used
in this Agreement, refer to this Agreement as a whole and not to any particular
provision, section or subsection of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the neuter. Words
denoting individuals include corporations and vice versa. References to any
legislation or statute or code, or to any provisions of any legislation or
statute or code, shall include any modification or reenactment of, or any
legislative, statutory or code provision substituted for, such legislation,
statute or code or provision thereof. References to any document or agreement
(including this Agreement) shall include references to such document or
agreement as amended, novated, supplemented, modified or replaced from time to
time, so long as and to the extent that such amendment, novation, supplement,
modification or replacement is either not prohibited by the terms of this
Agreement or is consented to by the Required Lenders and the Collateral Agent.
References to any Person include its successor or permitted substitutes and
assigns.
ARTICLE 2
[INTENTIONALLY DELETED]
ARTICLE 3
[INTENTIONALLY DELETED]
ARTICLE 4
TERM LOAN FACILITY
SECTION 4.1 Term Loan. Upon the terms and subject to the conditions
of, and in reliance upon the representations and warranties made under, this
Agreement, each Lender
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agrees severally, but not jointly, to make a Term Loan to the Borrower on the
Effective Date in a principal amount equal to such Lender's Proportionate Share
of the Term Loan Facility.
SECTION 4.2 Manner of Borrowing Term Loan. The Borrower shall give
Lenders a notice of borrowing with respect to the Term Loan not later than 11:00
a.m. (Atlanta time) on the Effective Date. Not later than 1:00 p.m. (Atlanta
time) on the Effective Date, upon satisfaction of the applicable conditions set
forth in Sections 6.1 and 6.2, the Lenders will disburse the Term Loan, in same
day funds in accordance with the terms of the notice of borrowing.
SECTION 4.3 Repayment of Term Loan. The principal amount of the Term
Loan is due and payable, and shall be repaid in full by the Borrower, on
September 30, 2003.
The Borrower hereby irrevocably instructs the Collateral Agent, in its capacity
as agent under the Senior Loan Agreement, subject to the terms of the
Intercreditor Agreement, to charge the Borrower's Loan Accounts (as defined in
the Senior Loan Agreement), on each Installment Payment Date and Interest
Payment Date, for all principal and interest due on the Term Loan.
SECTION 4.4 Term Notes. The Term Loan made by each Lender and the
obligation of the Borrower to repay such Loan shall also be evidenced by a Term
Note payable to the order of such Lender. Each such Term Note shall be dated the
Effective Date (or the later "effective date" under any Assignment and
Acceptance) and be duly and validly executed and delivered by the Borrower.
SECTION 4.5 Prepayment of Term Loan.
(a) Voluntary Prepayment. The Borrower shall have the right at any
time and from time to time, upon at least one Business Day's prior written
notice to the Lenders, to prepay the Term Loan in whole or in part on any
Business Day. Each partial prepayment of the Term Loan shall be in a minimum
amount of $1,000,000. On the prepayment date, the Borrower shall pay interest on
the amount prepaid, accrued to the prepayment date, as well as all other amounts
due hereunder with respect to such prepayment, including all amounts due under
Section 5.10. Any notice of prepayment given by the Borrower hereunder shall be
irrevocable, and the amount to be prepaid (including accrued interest and any
prepayment fees) shall be due and payable on the date designated in the notice.
(b) Mandatory Prepayment. The Borrower shall also be obligated to
prepay the Term Loan in full, together with accrued and unpaid interest thereon,
as well as all other amounts due hereunder with respect to such prepayment,
including all amounts due under Section 5.10, upon any termination of this
Agreement pursuant to Section 5.6, or otherwise or upon any acceleration of the
Term Loan pursuant to Article 13.
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ARTICLE 5
GENERAL LOAN PROVISIONS
SECTION 5.1 Interest.
(a) Loans. Subject to the provisions of Section 5.1(d), the Borrower
will pay interest on the unpaid principal amount of each Loan, for each day from
the day such Loan is made until such Loan is paid (whether at maturity, by
reason of acceleration, or otherwise) at the rate of 15% per annum, payable
monthly in arrears as it accrues on each Interest Payment Date and when such
Loan is due (whether at maturity, by reason of acceleration or otherwise).
(b) [Intentionally Deleted]
(c) Other Secured Obligations. The Borrower will, to the extent
permitted by Applicable Laws, pay interest on the unpaid principal amount of any
Secured Obligation that is due and payable, other than the Loans, in accordance
with Sections 5.1(a) or (d), as applicable, as if such Secured Obligation were a
Loan.
(d) Default Rate. If there shall occur and be continuing an Event of
Default, at the election of the Required Lenders, the unpaid principal amount of
the Loans and other Secured Obligations shall no longer bear interest in
accordance with the terms of Section 5.1(a) or (c), but shall bear interest for
each day from the date of such Event of Default until such Event of Default
shall have been cured or waived at the rate of 17% per annum, payable on demand.
The interest rate provided for in the preceding sentence shall, to the extent
permitted by Applicable Laws, apply to and accrue on the amount of any judgment
entered with respect to any Secured Obligation and shall continue to accrue at
such rate during any proceeding described in Section 13.1(g) or (h).
(e) Calculation of Interest. The interest rates provided for in
Sections 5.1(a), (c) and (d) shall be computed on the basis of a year of twelve
30 day months and the actual number of days elapsed.
(f) Maximum Rate. It is not intended by the Lenders, and nothing
contained in this Agreement, in the Notes or in any of the Mortgages shall be
deemed, to establish or require the payment of a rate of interest in excess of
the maximum rate permitted by Applicable Laws (the "Maximum Rate"). If, in any
month, the Effective Interest Rate, absent such limitation, would have exceeded
the Maximum Rate, then the Effective Interest Rate for that month shall be the
Maximum Rate, and, if in future months, the Effective Interest Rate would
otherwise be less than the Maximum Rate, then the Effective Interest Rate shall
remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event, upon payment in full of
the Secured Obligations, the total amount of interest paid or accrued under the
terms of this Agreement is less than the total amount of interest which would
have been paid or accrued if the Effective Interest Rate had at all times been
in effect,
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then the Borrower shall, to the extent permitted by Applicable Laws, pay to the
Lenders an amount equal to the excess, if any, of (i) the lesser of (A) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect and (B) the amount of interest which would have accrued
had the Effective Interest Rate, at all times, been in effect and (ii) the
amount of interest actually paid or accrued under this Agreement. In the event
the Lenders receive, collect or apply as interest any sum in excess of the
Maximum Rate, such excess amount shall be applied to the reduction of the
principal balance of the Secured Obliga tions, and if no such principal is then
outstanding, such excess or part thereof remaining, shall be paid to the
Borrower.
SECTION 5.2 Certain Fees.
(a) Closing Fees. As additional consideration for the extensions of
credit provided for hereunder, in addition to any interest due under this
Agreement, on the Effective Date, the Borrower shall pay to the Lenders a
closing fee in the amount of $600,000. The closing fee shall compensate the
Lenders for the internal costs associated with the origination, structuring,
processing, approving and closing of the transactions contemplated by this
Agreement, but not including any out-of-pocket expenses for which the Borrower
has agreed to reimburse the Lenders, including, without limitation, the Lenders'
reasonable out-of-pocket expenses incurred in connection with its due diligence
examination of the Borrower and the closing of the transactions contemplated by
this Agreement. Such closing fee shall be fully earned on the Effective Date and
shall not be subject to refund or rebate.
(b) [Intentionally Deleted]
(c) [Intentionally Deleted]
(d) [Intentionally Deleted]
(e) [Intentionally Deleted]
(f) General. All fees shall be fully earned by the identified
recipient thereof when due and payable and, except as otherwise set forth herein
or required by Applicable Law, shall not be subject to refund or rebate. All
fees provided for in this Section 5.2 are for compensation for services and are
not, and shall not be deemed to be, interest or a charge for the use of money.
SECTION 5.3 Manner of Payment.
(a) Each payment (including prepayments) by the Borrower on account
of the principal of or interest on the Loans or of any other amounts payable to
each of the Lenders under this Agreement or any Note shall be made not later
than 1:30 p.m. (Atlanta time) on the date specified for payment under this
Agreement to each such Lender, at such Lender's office designated to the
Borrower, in Dollars, in immediately available funds and shall be made without
any setoff, counterclaim or deduction whatsoever. Any payment received after
such
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time but before the close of business on such day shall be deemed a payment on
such date for the purposes of Section 13.1, but for all other purposes shall be
deemed to have been made on the next succeeding Business Day.
(b) During any Event of Default, subject to the terms of the
Intercreditor Agreement, the Borrower hereby irrevocably authorizes each Lender
and each Affiliate of such Lender and each participant herein to charge any
account of the Borrower maintained with such Lender or such Affiliate or
participant with such amounts as may be necessary from time to time to pay any
Secured Obligations (whether or not owed to such Lender, Affiliate or
participant) which are not paid when due.
(c) Each Lender hereby severally (but not jointly) represents that,
under Applicable Law and treaties in effect on the date of this Agreement, no
United States federal taxes will be required to be withheld by the Borrower with
respect to any payments to be made to such Lender in respect of this Agreement.
Each Lender that itself is not incorporated under the laws of the United States
or a state thereof agrees severally (but not jointly) that, prior to the
Effective Date and the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
delivered by it to the Borrower, it will deliver to the Borrower two duly
completed copies of either United States Internal Revenue Service Form W-8, 1001
or 4224, or successor applicable form, certifying in each case that such Lender
is entitled to receive all payments under this Agreement and the Notes payable
to it without deduction or withholding of any United States federal income
taxes. The Borrower shall not have any obligation under Section 5.3(a) to pay
any amount to or for the account of any Lender without any setoff, counterclaim
or deduction to the extent that such amount results from the failure of any
Lender to comply with its obligations pursuant to this Section 5.3(c).
SECTION 5.4 General. If any payment under this Agreement or any Note
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day and such extension of
time shall in such case be included in computing interest, if any, in accordance
with such payment.
SECTION 5.5 Loan Accounts; Statements of Accounts.
(a) Each Lender shall open and maintain on its books a loan account
in the Borrower's name (each, a "Loan Account" and collectively, the "Loan
Accounts"). Each such Loan Account shall show as debits thereto each Loan made
under this Agreement by such Lender to the Borrower and as credits thereto all
payments received by such Lender and applied to principal of such Loan, so that
the balance of the Loan Account at all times reflects the principal amount due
such Lender from the Borrower.
(b) [Intentionally Deleted]
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(c) The entries made in the accounts pursuant to subsection (a)
shall be prima facie evidence, in the absence of manifest error, of the
existence and amounts of the obligations of the Borrower therein recorded.
(d) [Intentionally Deleted]
SECTION 5.6 Termination of Agreement. Subject to the provisions of
Section 5.10, the Borrower shall have the right, at any time, to terminate this
Agreement upon not less than 10 Business Days' prior written notice to the
Lenders of its intention to terminate this Agreement, which notice shall specify
the effective date of such termination. On the date specified in such notice,
such termination shall be effected, provided that the Borrower shall, on or
prior to such date, pay to the Lenders and the Collateral Agent, in same day
funds, an amount equal to all Secured Obligations then outstanding, including,
without limitation, all (i) accrued interest thereon, (ii) all accrued fees
provided for hereunder, and (iii) any amounts payable to the Collateral Agent
and the Secured Creditors pursuant to Sections 5.10, 16.2, 16.3 and 16.14.
Following a notice of termination as provided for in this Section 5.6 and upon
payment in full of the amounts specified in this Section 5.6, this Agreement
shall be terminated and the Collateral Agent and the Lenders shall have no
further obligations to the Borrower. Borrower may, not later than one Business
Day prior to the effective date of such termination, provide the Lenders written
notice of withdrawal of its notice of termination, whereupon such notice of
termination shall be of no further force or effect.
SECTION 5.7 [Intentionally Deleted]
SECTION 5.8 Settlement.
(a) [Intentionally Deleted]
(b) [Intentionally Deleted]
(c) [Intentionally Deleted]
(d) General Settlement Procedures.
(i) [Intentionally Deleted]
(ii) [Intentionally Deleted]
(e) Settlement of Other Secured Obligations. All proceeds from the
sale of, or other realization upon, all or any part of the Collateral following
an Event of Default that are received by the Collateral Agent on or prior to
1:00 p.m. (Atlanta time) on a Business Day, subject to the terms of the
Intercreditor Agreement, will be paid by the Collateral Agent to each Secured
Creditor on the same Business Day, and any such amounts that are received by the
Collateral Agent after 1:00 p.m. (Atlanta time) will be paid by the Collateral
Agent to each Secured Creditor on the following Business Day. Unless otherwise
stated herein, the Collateral
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<PAGE>
Agent shall, subject to the terms of the Intercreditor Agreement, distribute
proceeds from the sale of, or other realization upon, all or any part of the
Collateral following an Event of Default ratably to the Secured Creditors based
on the amount of the Secured Obligations then owing to each Secured Creditor.
(f) Allocation of Payments from Borrower. All monies to be applied
to the Secured Obligations, whether such monies represent voluntary payments by
the Borrower or are received pursuant to demand for payment or realized from any
disposition of Collateral, shall be allocated among the Collateral Agent and
such of the Lenders and other holders of the Secured Obligations as are entitled
thereto (and, with respect to monies allocated to the Lenders, on a Ratable
basis unless otherwise provided in this Section 5.8(f)): (i) first, to the
Collateral Agent to pay the amount of expenses that have not been reimbursed to
the Collateral Agent by the Borrower or the Lenders, together with interest
accrued thereon; (ii) second, to the Collateral Agent to pay any indemnified
amount that has not been paid to it by the Borrower or the Lenders, together
with interest accrued thereon; (iii) third, to the Lenders for any indemnified
amount that they have paid to the Collateral Agent and for any expenses that
they have reimbursed to the Collateral Agent; and (iv) fourth, to the Lenders in
payment of the unpaid principal and accrued interest in respect of the Loans and
any other Secured Obligations arising under this Agreement (and the other Loan
Documents) then due and held by any Lender to be shared among Lenders on a
Ratable basis, or on such other basis as may be agreed upon in writing by all of
the Lenders (which agreement or agreements may be entered into without notice to
or the consent or approval of the Borrower). The allocations set forth in this
Section 5.8(f) are solely to determine the rights and priorities of the Secured
Creditors as among themselves and may be changed by the Secured Creditors
without notice or the consent of approval of the Borrower or any other Person.
Whenever allocation is made pursuant to this Section 5.8(f) to the holder of
Secured Obligations in which another Lender acquires a participation, the monies
received by such holder shall be shared as between such holder and such
participants on a Ratable basis.
SECTION 5.9 [Intentionally Deleted]
SECTION 5.10 Prepayment Fee.
(a) [Intentionally Deleted]
(b) Prepayment of Term Loan. If the Borrower voluntarily prepays the
Term Loan in whole or in part prior to the third anniversary of the Agreement
Date, the Borrower shall pay to the Lenders, on such date of prepayment, as
liquidated damages and compensation for the costs of making funds available to
the Borrower under this Agreement, and not as a penalty, an amount equal to (i)
3% of the principal balance of the Term Loan prepaid if such prepayment occurs
prior to the first anniversary of the Agreement Date, (ii) 2% of the principal
balance of the Term Loan if such prepayment occurs after the first anniversary
of the Agreement Date but on or prior to the second anniversary of the Agreement
Date, and (iii) 1% of the amount of the Term Loan prepaid if such prepayment
occurs after the second anniversary of the Agreement Date but on or prior to the
third anniversary of the Agreement Date. If the
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Borrower prepays, or is required to prepay, the Term Loan upon the occurrence of
an Event of Default set forth in Sections 13.1(n) or (o), then (in lieu of any
other amount set forth in the preceding sentence if such Event of Default occurs
on or prior to the third anniversary of the Agreement Date) the Borrowers shall
pay to the Lenders, on such date of prepayment, as liquidated damages and
compensation for the costs of making funds available to the Borrower under this
Agreement, and not as a penalty, an amount equal to 1% of the principal balance
of the Term Loan prepaid.
SECTION 5.11 [Intentionally Deleted]
SECTION 5.12 [Intentionally Deleted]
SECTION 5.13 [Intentionally Deleted]
SECTION 5.14 [Intentionally Deleted]
SECTION 5.15 [Intentionally Deleted]
SECTION 5.16 [Intentionally Deleted]
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1 Conditions Precedent to Loans. Notwithstanding any other
provision of this Agreement, the Term Loans will not be made until the
fulfillment of each of the following conditions prior to or contemporaneously
with the making of the first to be made of such Loans:
(a) Financial Condition. The Borrower shall have delivered to the
Lenders a fair saleable value balance sheet, dated as of January 31, 1998,
prepared and certified to by the Financial Officer in form and substance
satisfactory to the Lenders, and setting forth valuations of the Borrower's
assets, the Projections and the Pro Forma, together with a certificate executed
by the Financial Officer, in form and substance satisfactory to the Lenders,
certifying that as of the Effective Date, after giving effect to the
consummation of the transactions contemplated by the Acquisition Documents, the
Senior Loan Agreement, the extension of the Term Loans, and the payment of all
fees and expenses in connection with such transactions, the fair saleable value
of the Borrower's assets will exceed the amount required to pay its debts as
they become absolute and matured (including contingent, subordinated, unmatured
and unliquidated liabilities), the Borrower is able and anticipates that it will
be able to meet its debts as they mature, and the Borrower has adequate capital
to conduct the business in which it is or proposes to be engaged, together with
attachments demonstrating the basis of such conclusions.
(b) [Intentionally Deleted]
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(c) Acquisition. On the Effective Date, (i) the Lenders shall have
received true and complete executed or conformed copies of the Acquisition
Documents and any amendments thereto; (ii) the Acquisition Documents shall be in
full force and effect and no material term or condition thereof shall have been
amended, modified or waived after the execution thereof (other than solely to
extend the date by which the Acquisition is required to occur) except with the
prior written consent of the Lenders; (iii) none of the parties to any of the
Acquisition Documents shall have failed to perform any material obligation or
covenant required by such Acquisition Document to be performed or complied with
by it on or before the Effective Date; (iv) all representations and warranties
of the Borrower and the Seller contained in the Acquisition Agreement and the
other Acquisition Documents shall be true and correct in all material respects
with the same effect as though made on and as of the Effective Date; (v) all
requisite approvals by governmental authorities and regulatory bodies having
jurisdiction over the parties to the Acquisition Agreement in respect of the
acquisition of the Acquired Assets shall have been obtained by such parties, and
no such approvals shall impose any conditions to the consummation of the
acquisition of the Acquired Assets; (vi) the acquisition of the Acquired Assets
shall have been consummated in accordance with the terms and provisions of the
Acquisition Agreement and the other Acquisition Documents, without any amendment
or waiver of any material provision thereof; and (vii) the Lenders shall have
received a certificate from an officer of the Borrower, or other evidence
satisfactory to them, that each of the conditions set forth in clauses (i)
through (vi) above shall have been satisfied. In addition, all opinion letters
delivered in connection with the Acquisition Documents and the transactions
contemplated thereby shall be addressed to the Lenders, or accompanied by a
written authorization from the firm delivering such opinion letter stating that
such parties may rely on such opinion letter as though it were addressed to
them.
(d) Security Interests. The Lenders shall have received satisfactory
evidence that the Collateral Agent (for the benefit of the Secured Creditors)
has a valid and perfected second priority security interest as of such date in
all of the Collateral, subject only to Permitted Liens.
(e) Closing Documents. The Lenders shall have received each of the
follow ing documents, all of which shall be satisfactory in form and substance
to the Lenders and their counsel:
(i) certified copies of the articles or certificate of
incorporation and bylaws of the Borrower as in effect on the Effective Date,
(ii) certified copies of all corporate action, including
shareholder approval, if necessary, taken by the Borrower to authorize the
execution, delivery and performance of this Agreement, the Loan Documents, the
borrowings under this Agreement, and the execution, delivery and performance of
the Acquisition Agreement and the Acquisition Documents,
(iii) certificates of incumbency and specimen signatures with
respect to each of the officers of the Borrower authorized to execute and
deliver this Agreement and
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the Loan Documents on behalf of the Borrower and to request borrowings under
this Agreement,
(iv) a certificate evidencing the good standing of the
Borrower in the jurisdiction of its incorporation and in each other jurisdiction
in which it is required to be qualified as a foreign corporation to transact its
business as presently conducted,
(v) copies of all financial statements referred to in Section
7.1(n) and meeting the requirements thereof,
(vi) a signed opinion of Paul, Weiss, Rifkind, Wharton &
Garrison, counsel for the Borrower, substantially in the form of Exhibit C to
the Senior Loan Agreement, and of such local counsel for the Borrower as may be
required, opining as to such matters in connection with the transactions
contemplated by this Agreement as the Lenders or their counsel may reasonably
request, including local counsel opinions regarding the Mortgages and the Real
Estate,
(vii) the Financing Statements duly executed and delivered by
the Borrower and acknowledgment copies evidencing the filing of such Financing
Statements in each jurisdiction where such filing may be necessary or
appropriate to perfect the Security Interest,
(viii) a certification from the principal officers of the
Borrower as to such factual matters as shall be requested by the Lenders,
(ix) certificates or binders of insurance relating to each of
the policies of insurance covering any of the Collateral together with loss
payable clauses which comply with the terms of Section 9.8,
(x) a certificate of the President or a Financial Officer of
the Borrower stating that, to the best of his knowledge and based on an
examination sufficient to enable him to make an informed statement,
(A) all of the representations and warranties made or
deemed to be made by the Borrower under this Agreement are true and
correct in all material respects as of the Effective Date, after giving
effect to the Term Loans to be made at such time and the application of
the proceeds thereof, and
(B) no Default or Event of Default exists,
(xi) [Intentionally Deleted]
(xii) copies of the Mortgages, duly executed and delivered by
the Borrower, in proper form for recording in the appropriate jurisdiction, in
order to create a valid first Lien on and security title to the Real Estate
described therein,
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(xiii) one or more fully paid unconditional commitments for
the issuance of mortgagee title insurance policies with all requirements and
conditions to the issuance of the final policy deleted or marked satisfied,
issued by First American Title Insurance Company, each in an amount equal to not
less than the fair market value of the Real Estate subject to the Mortgage
insured thereby, insuring that such Mortgage creates a valid first Lien on, and
security title to, all Real Estate described therein, with exceptions only for
the Permitted Encumbrances (as defined in each Mortgage),
(xiv) [Intentionally Deleted]
(xv) landlord's or mortgagee's waiver and consent agreements
duly executed on behalf of each landlord or mortgagee, as the case may be, of
Real Estate and any other real property on which any Collateral is located, to
the extent Borrower can obtain such landlord's or mortgagee's waiver and consent
agreements using all reasonable efforts,
(xvi) the Acquisition Documents Assignment, duly executed by
the Borrower,
(xvii)[Intentionally Deleted]
(xviii) a notice of borrowing, duly executed by the Borrower,
(xix) [Intentionally Deleted]
(xx) copies of each of the other Loan Documents duly executed
by the parties thereto, and
(xxi) such other documents and instruments as the Collateral
Agent or any Lender may reasonably request.
(f) Notes. Each Lender shall have received a Term Note, each duly
executed and delivered by the Borrower, complying with the terms of Section 4.4.
(g) First Lien Senior Secured Facility. All conditions to the
closing of the First Lien Senior Secured Facility (other than the funding of the
Term Loans) shall have been met, in accordance with the terms of the Senior Loan
Agreement, or waived by the Senior Lenders.
(h) Intercreditor Agreement. The Senior Lenders and NationsBank, as
their agent, shall have duly executed and delivered the Intercreditor Agreement,
in form and substance satisfactory to the Lenders.
(i) Stock Pledge Agreement. The Collateral Agent shall have received
the Stock Pledge Agreement, and corresponding blank stock powers and stock
certificates, in form and substance satisfactory to the Lenders, duly executed
and delivered by the Borrower.
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(j) Other Security Documents. The Collateral Agent shall have
received each other Security Document, in form and substance satisfactory to the
Lenders, duly executed and delivered by the Borrower.
(k) Seller Subordinated Note. The Lenders shall have received a copy
of the Seller Subordinated Note, in form and substance satisfactory to the
Lenders, duly executed and delivered by the Borrower.
(l) Environmental Indemnity Agreement. The Lenders shall have
received the Environmental Indemnity Agreement, in form and substance
satisfactory to the Lenders, duly executed and delivered by the Borrower.
(m) [Intentionally Deleted]
(n) No Injunctions, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
or prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement, the Acquisition Documents, or the consummation of
the transactions contemplated hereby or thereby, or which, in the Lenders'
reasonable judgment, would make it inadvisable to consummate the transactions
contemplated by this Agreement.
(o) Material Adverse Change. Except as previously disclosed in
writing to the Lenders, there shall not have occurred any change which is
materially adverse, in the Lenders' reasonable judgment, to the assets,
liabilities, businesses, operations, condition (financial or otherwise) or
prospects of the Borrower, the Seller, and their respective Subsidiaries, from
those presented by the financial statements described in Section 7.1(n)(i)(A)
and (ii)(A).
(p) Release of Security Interests. The Lenders shall have received
evidence satisfactory to them of the release and termination of all Liens other
than Permitted Liens.
(q) Representations and Warranties. all of the representations and
warranties made or deemed to be made under this Agreement shall be true and
correct in all material respects at such time both with and without giving
effect to the Loan to be made at such time and the application of the proceeds
thereof, except that representations and warranties which by their terms are
applicable only to a particular date shall be deemed to be made only at and as
of such date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1 Representations and Warranties. The Borrower represents
and warrants to the Collateral Agent and to the Lenders as follows:
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(a) Organization; Power; Qualification. The Borrower and each of its
Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, having the power
and authority to own its properties and to carry on its business as now being
and hereafter proposed to be conducted. The Borrower is duly qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization except where the failure to be so qualified would not have a
Material Adverse Effect. The jurisdictions in which each of the Borrower and
each of its Subsidiaries is qualified to do business as a foreign corporation on
the Effective Date are listed on Schedule 7.1(a).
(b) Capitalization. The outstanding capital stock of the Borrower
has been duly and validly issued and is fully paid and nonassessable. The
issuance and sale of the Borrower's capital stock have been registered or
qualified under applicable federal and state securities laws or are exempt
therefrom.
(c) Subsidiaries. Schedule 7.1(c) correctly sets forth the name of
each Subsidiary of the Borrower, its jurisdiction of incorporation, the name of
its immediate parent or parents, and the percentage of its issued and
outstanding securities owned by the Borrower or any other Subsidiary of the
Borrower and indicating whether such Subsidiary is a Consolidated Subsidiary, in
each case as of the Effective Date. Except as set forth on Schedule 7.1(c), (i)
no Subsidiary of the Borrower has issued any securities convertible into shares
of such Subsidiary's capital stock or any options, warrants or other rights to
acquire any shares or securities convertible into such shares, (ii) the
outstanding stock and securities of each Subsidiary of the Borrower are owned by
the Borrower free and clear of all Liens (other than Permitted Liens), warrants,
options and rights of others of any kind whatsoever, and (iii) the Borrower has
no Subsidiaries, other than Subsidiaries that it has created after the Effective
Date in compliance with this Agreement. The outstanding capital stock of each
Subsidiary of the Borrower has been duly and validly issued and is fully paid
and nonassessable by the issuer, and the number and owners of the shares of such
capital stock are set forth on Schedule 7.1(c) as the same may hereafter be
updated from time to time to reflect the creation of Subsidiaries in accordance
with this Agreement.
(d) Authorization of Agreement, Notes, Loan Documents and Borrowing.
The Borrower has the right and power, and has taken all necessary corporate
action to authorize it, to execute, deliver and perform this Agreement and each
of the Loan Documents in accordance with their respective terms. This Agreement
and each of the Loan Documents have been duly executed and delivered by the duly
authorized officers of the Borrower and each is, or each when executed and
delivered in accordance with this Agreement will be, a legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
and other similar laws relating to or affecting creditor's rights generally,
general equitable principles and an implied covenant of good faith and fair
dealing.
(e) Compliance of Agreement, Notes, Loan Documents and Borrowing
with Laws, Etc. Except as set forth on Schedule 7.1(e), the execution, delivery
and performance of
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this Agreement and each of the Loan Documents in accordance with their
respective terms and the borrowings hereunder do not and will not, by the
passage of time, the giving of notice or otherwise, (i) require any Governmental
Approval or violate any Applicable Law relating to the Borrower or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute a default
under the articles or certificate of incorporation or by-laws of the Borrower or
any of its Subsidiaries, (iii) conflict with, result in a breach of or
constitute a default under any material provisions of any indenture, agreement
or other instrument to which the Borrower or any of its Subsidiaries is a party
or by which the Borrower, any of its Subsidiaries or any of the Borrower's or
such Subsidiaries' property may be bound or any Governmental Approval relating
to the Borrower or any of its Subsidiaries, or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by the Borrower other than the Security Interest.
(f) Business. The Borrower is engaged in the business described on
Schedule 7.1(f) and businesses related thereto.
(g) Compliance with Law; Governmental Approvals.
(i) Except as set forth in Schedule 7.1(g), the Borrower and
each of its Subsidiaries (A) has all Governmental Approvals, including permits
relating to federal, state and local Environmental Laws, ordinances and
regulations, required by any Applicable Law for it to conduct its business, each
of which is in full force and effect, is final and not subject to review on
appeal and is not the subject of any pending or, to the knowledge of the
Borrower, threatened attack by direct or collateral proceeding, and (B) is in
compliance with each Governmental Approval applicable to it and in compliance
with all other Applicable Laws relating to it, including, without being limited
to, all Environmental Laws and all occupational health and safety laws
applicable to the Borrower, any of its Subsidiaries or their respective
properties, except for instances of noncompliance which would not, singly or in
the aggregate, cause a Default or Event of Default or have a Materially Adverse
Effect and in respect of which reserves in respect of the Borrower's or such
Subsidiary's reasonably anticipated liability therefor have been established on
the books of the Borrower or such Subsidiary, as applicable, if such reserves
would be required by GAAP.
(ii) Without limiting the generality of the above, except as
disclosed on an environmental report previously delivered to the Lenders or with
respect to matters which could not reasonably be expected to have, singly or in
the aggregate, a Materially Adverse Effect, (A) the operations of the Borrower
and each of its Subsidiaries comply in all material respects with all applicable
Environmental Laws; (B) the Borrower and each of its Subsidiaries has obtained
all permits required pursuant to Environmental Laws and necessary for its
operation, and all such permits are in good standing and the Borrower and each
of its Subsidiaries is in compliance in all material respects with all terms and
conditions of such permits; (C) neither the Borrower nor any of its Subsidiaries
nor any of their respective present or past property or operations are subject
to any order from or agreement with any public authority or private party
respecting (1) any Environmental Laws, (2) any Remedial Action, or (3) any
liabilities and costs arising from the Release or threatened Release of a
Contaminant
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into the environment; (D) none of the operations of the Borrower or of any of
its Subsidiaries is subject to any judicial or administrative proceeding
alleging a violation of any Environmental Laws; (E) none of the present nor past
operations of the Borrower or any of its Subsidiaries is the subject of any
investigation by any public authority evaluating whether any Remedial Action is
needed to respond to a Release or threatened Release of a Contaminant into the
environment; (F) neither the Borrower nor any of its Subsidiaries has filed any
notice under any requirement of Environmental Laws indicating past or present
treatment, storage or disposal of a hazardous waste, as that term is defined
under 40 CFR Part 261 or any state equivalent; (G) neither the Borrower nor any
of its Subsidiaries has filed any notice under any requirement of Environmental
Law reporting a Release of a Contaminant into the environment; (H) Except in
compliance in all material respects with applicable Environmental Laws, during
the course of the Borrower's or any of its Subsidiaries' ownership of or
operations on the Real Estate, there have been no (1) generation, treatment,
recycling, storage or disposal of hazardous waste, as that term is defined under
40 CFR Part 261 or any state equivalent, (2) use of underground storage tanks or
surface impoundments, (3) use of asbestos-containing materials, or (4) use of
polychlorinated biphenyls (PCB) used in hydraulic oils, electrical transformers
or other equipment; (I) neither the Borrower nor any of its Subsidiaries has
entered into any negotiations or agreements with any Person (including, without
limitation, any prior owner of any of the Real Estate or other property of the
Borrower or any of its Subsidiaries) relating to any Remedial Action or
environmental related claim; (J) neither the Borrower nor any of its
Subsidiaries has received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of a
Contaminant into the environment; (K) neither the Borrower nor any of its
Subsidiaries has any material contingent liability in connection with any
Release or threatened Release of any Contaminant into the environment; (L) no
Environmental Lien has attached to any of the Real Estate or other property of
the Borrower or of any of its Subsidiaries; (M) the presence and condition of
all asbestos- containing material which is on or part of the Real Estate
(excluding any raw materials used in the manufacture of products or products
themselves) do not violate in any material respect any currently applicable
requirement of Applicable Laws; and (N) neither the Borrower nor any of its
Subsidiaries manufactures, distributes or sells, and has never manufactured,
distributed or sold, products which contain asbestos-containing material.
(iii) The Borrower has notified the Lenders of the receipt by
it or by any of its Subsidiaries of any notice of a material violation of any
Environmental Laws and occupational health and safety laws applicable to the
Borrower, any of its Subsidiaries or any of their respective properties.
(h) Title to Properties. Except for Permitted Liens and as otherwise
set forth in Schedule 7.1(h), the Borrower and each of its Subsidiaries has
valid and legal title to or leasehold interest in all personal property, Real
Estate owned and other assets used in its business.
(i) Liens. Except as set forth in Schedule 7.1(i), none of the
properties and assets of the Borrower or any Subsidiary of the Borrower is
subject to any Lien, except Permitted Liens. Other than financing statements
filed with respect to Permitted Liens and the
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Financing Statements, no financing statement under the Uniform Commercial Code
of any State or other instrument evidencing a Lien which names the Borrower or
any Subsidiary of the Borrower as debtor has been filed (and has not been
terminated) in any State or other jurisdiction, and neither the Borrower nor any
Subsidiary of the Borrower has signed any such financing statement or other
instrument or any security agreement authorizing any secured party thereunder to
file any such financing statement or instrument, except to perfect those Liens
listed on Schedule 7.1(i). Except for financing statements filed with respect to
Permitted Liens, no financing statement under the Uniform Commercial Code of any
State or other instrument evidencing a Lien which names the Seller as debtor and
covers any of the Acquired Assets has been filed (and has not been terminated)
in any State or other jurisdiction.
(j) Indebtedness and Guarantees. Schedule 7.1(j) is a complete and
correct listing of all Indebtedness for Money Borrowed and Guarantees of the
Borrower and each of its Subsidiaries as of the Effective Date. Each of the
Borrower and its Subsidiaries has per formed in all material respects and is in
material compliance with all of the terms of such Indebtedness and Guarantees
and all instruments and agreements relating thereto, and no default or event of
default, or event or condition which with notice or lapse of time or both would
constitute such a default or event of default, which in either event would
constitute a Default or Event of Default hereunder, exists with respect to any
such Indebtedness or Guaranty.
(k) Litigation. Except as set forth on Schedule 7.1(k), there are no
actions, suits or proceedings pending (nor, to the knowledge of the Borrower,
are there any actions, suits or proceedings threatened, or any reasonable basis
therefor) against the Borrower or such Subsidiaries or any of the Acquired
Assets or any of the Borrower's or any of its Subsidiaries' other properties in
any court or before any arbitrator of any kind or before or by any governmental
body, except actions, suits or proceedings of the character normally incident to
the kind of business conducted by the Borrower or any of its Subsidiaries which,
if adversely determined, would not singly or in the aggregate have a Materially
Adverse Effect, and there are no strikes or walkouts in progress, pending or
contemplated relating to any labor contracts to which the Borrower or any of its
Subsidiaries is a party, relating to any labor contracts being negotiated, or
otherwise.
(l) Tax Returns and Payments. Except as set forth on Schedule
7.1(l), all United States federal, state and local as well as material foreign
national, provincial and local and other tax returns of the Borrower and each of
its Subsidiaries required by Applicable Laws to be filed have been duly filed,
and all United States federal, state and local and foreign national, provincial
and local and other taxes, assessments and other governmental charges or levies
upon the Borrower and each of its Subsidiaries and the Borrower's and any of its
Subsidiaries' property, income, profits and assets which are due and payable
have been paid, except any such nonpayment which is at the time permitted under
Section 10.6. The charges, accruals and reserves on the books of the Borrower
and each of its Subsidiaries in respect of United States federal, state and
local and foreign national, provincial and local taxes for all fiscal years and
portions thereof since the organization of the Borrower are in the judgment of
the Borrower adequate, and the Borrower knows of no reason to anticipate any
additional
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assessments for any of such years which, singly or in the aggregate, could
reasonably be expected to have a Materially Adverse Effect.
(m) Burdensome Provisions. Neither the Borrower nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other instrument,
or subject to any charter or corporate restriction, Governmental Approval or
Applicable Law compliance with the terms of which could reasonably be expected
to have a Materially Adverse Effect.
(n) Financial Statements.
(i) The Borrower has furnished to the Lenders copies of (A)
the Seller's consolidated audited balance sheet as of December 28, 1996 and the
related consolidated statements of operations, cash flow and shareholders'
equity for the fiscal year then ended, and (B) the Seller's unaudited balance
sheet as of December 27, 1997 and the related statements of operations, cash
flow and shareholders' equity for the fiscal period then ended, which financial
statements present fairly in all material respects in accordance with GAAP the
financial position of the Seller and its consolidated Subsidiaries as of such
dates and the results of operations of the Seller and its consolidated
Subsidiaries for the periods then ended, subject to, in the case of unaudited
financial statements, normal year-end adjustments and the absence of complete
footnotes,
(ii) The Borrower has furnished to the Lenders copies of (A)
the Borrower's consolidated audited balance sheet as of February 1, 1997 and the
related consolidated statements of operations, cash flows and shareholder's
equity for the fiscal year then ended, and (B) the Borrower's consolidated
unaudited balance sheet as of January 3, 1998 and the related consolidated
statements of operations, cash flow and shareholders' equity for the 11 fiscal
month period then ended, which financial statements present fairly in all
material respects in accordance with GAAP the financial position of the Borrower
and its Consolidated Subsidiaries as of such dates and the results of operations
of the Borrower and its Consolidated Subsidiaries for the periods then ended.
(iii) The Borrower has furnished to the Lenders copies of the
Pro Forma. The Pro Forma presents fairly, on a pro forma basis, the financial
position of the Borrower and its Consolidated Subsidiaries as at January 31,
1998.
(iv) The Borrower has furnished to the Lenders copies of the
Projections. The Projections have been be prepared by the Borrower in good faith
in light of the past operations of the business of the Seller, the Borrower and
their respective Subsidiaries.
(v) Except as disclosed or reflected in the financial
statements described in clauses (i) and (ii) above, as of the Effective Date,
neither the Borrower nor any of its Consolidated Subsidiaries has any material
liabilities, contingent or otherwise, and there were no material unrealized or
anticipated losses of the Borrower or any of its Consolidated Subsidiaries, in
either case of a type or nature required to be disclosed or reflected in such
financial statements.
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(o) Adverse Change. Since the date of the last financial statements
of the Borrower and the Seller delivered to the Lenders pursuant to Section
7.1(n)(i) and (ii), after giving effect to the transactions reflected in the Pro
Forma, (i) no material adverse change has occurred in the business, assets,
liabilities, financial condition, results of operations or business prospects of
the Borrower or its Consolidated Subsidiaries, and (ii) no event has occurred or
failed to occur which has had, or may have, singly or in the aggregate, a
Materially Adverse Effect.
(p) ERISA. Except as set forth on Schedule 7.1(p):
(i) As of the Effective Date, neither the Borrower nor any
Related Company maintains or contributes to any Benefit Plan.
(ii) No Benefit Plan has been terminated or partially
terminated, and no Multiemployer Plan is insolvent or in reorganization, nor
have any proceedings been instituted to terminate any Benefit Plan or to
reorganize any Multiemployer Plan.
(iii) Neither the Borrower nor any Related Company has
withdrawn from any Benefit Plan or Multiemployer Plan, nor has a condition
occurred which if continued would result in a withdrawal.
(iv) Neither the Borrower nor any Related Company has incurred
any withdrawal liability, including contingent withdrawal liability, to any
Multiemployer Plan pursuant to Title IV of ERISA.
(v) Neither the Borrower nor any Related Company has incurred
any liability to the PBGC other than for required insurance premiums which have
been paid when due.
(vi) No Reportable Event has occurred with respect to a Plan.
(vii) No Benefit Plan has an "accumulated funding deficiency"
(whether or not waived) as defined in Section 302 of ERISA or in Section 412 of
the Internal Revenue Code.
(viii) Each Plan is in substantial compliance with ERISA, and
neither the Borrower nor any Related Company has received any communication from
a governmental agency asserting that a Plan is not in compliance with ERISA.
(ix) Each Plan which is intended to be a qualified Plan has
been determined by the IRS to be qualified under Section 401(a) of the Internal
Revenue Code as currently in effect or will be submitted to the IRS for such
determination prior to the end of the remedial amendment period under Section
401(b) of the Internal Revenue Code and the regulations promulgated thereunder
and neither the Borrower nor any Related Company knows or has reason to know why
each such Plan should not continue to be so qualified, and each trust
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related to such Plan that has been submitted to the IRS for determination of
exempt status has been determined to be exempt from federal income tax under
Section 501(a) of the Internal Revenue Code or will be submitted to the IRS for
a determination of exempt status.
(x) As of the Effective Date, neither the Borrower nor any
Related Company maintains or contributes to any employer welfare benefit plan
within the meaning of Section 3(l) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
(xi) Schedule B to the most recent annual report filed with
the IRS with respect to each Benefit Plan and furnished to the Lenders is
complete and accurate. Since the date of each such Schedule B, there has been no
adverse change in funding status or financial condition of the Benefit Plan
relating to such Schedule B.
(xii) Neither the Borrower nor any Related Company has failed
to make a required installment under Subsection (m) of Section 412 of the
Internal Revenue Code or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or other
payment.
(xiii) Neither the Borrower nor any Related Company is
required to provide security to a Benefit Plan under Section 401(a)(29) of the
Internal Revenue Code due to a Benefit Plan amendment that results in an
increase in current liability for the plan year.
(xiv) Neither the Borrower, nor any Related Company, nor any
other "party-in-interest" or "disqualified person" has engaged in a nonexempt
"prohibited transaction," as such terms are defined in Section 4975 of the
Internal Revenue Code and Section 406 of ERISA, in connection with any Plan or
has taken or failed to take any action which would constitute or result in a
Termination Event.
(xv) Neither the Borrower nor any Related Company has failed
to comply with the health care continuation coverage requirements of Section
4980B of the Internal Revenue Code in respect of employees and former employees
of the Borrower or such Related Company and their dependents and beneficiaries
which alone or in the aggregate would subject the Borrower or such Related
Company to any material liability.
(xvi) Neither the Borrower nor any Related Company has (A)
failed to make a required contribution or payment to a Multiemployer Plan or (B)
made a complete or partial withdrawal under Sections 4203 or 4205 of ERISA from
a Multiemployer Plan. To the best knowledge of the Borrower after due inquiry,
neither the Borrower nor any Related Company shall have any obligation to (x)
make contributions to any Multiemployer Plan on or after the Effective Date, or
(y) pay withdrawal liability to any Multiemployer Plan in an amount in excess of
a "de minimis amount" as such term is defined in Section 4209 of ERISA.
(q) Absence of Defaults. Neither the Borrower nor any of its
Subsidiaries is in default under its articles or certificate of incorporation or
by-laws and no event has
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occurred, which has not been remedied, cured or waived, (i) which constitutes a
Default or an Event of Default, or (ii) which constitutes, or which with the
passage of time or giving of notice or both would constitute, a default or event
of default by the Borrower or any of its Subsidiaries under any material
agreement (other than this Agreement) or judgment, decree or order to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower, any of
its Subsidiaries or any of the Borrower's or any of its Subsidiaries' properties
may be bound or which would require the Borrower or any of its Subsidiaries to
make any payment under any thereof prior to the scheduled maturity date
therefor, except, in the case only of any such agreement, for alleged defaults
which are being contested in good faith by appropriate proceedings and with
respect to which reserves in respect of the Borrower's or such Subsidiary's
reasonably anticipated liability have been established on the books of the
Borrower or such Subsidiary.
(r) Accuracy and Completeness of Information.
(i) All written information, reports and other papers and data
produced by or on behalf of the Borrower (including information, reports and
other papers and data relating to the Seller) and furnished to the Collateral
Agent or any Lender were, at the time the same were so furnished, complete and
correct in all material respects. No fact is known to the Borrower which has
had, or could reasonably be expected to have, a Materially Adverse Effect, which
has not been set forth in the financial statements or disclosure delivered prior
to the Agreement Date, in each case referred to in Section 7.1(n), or in such
written information, reports or other papers or data or otherwise disclosed in
writing to the Lenders prior to the Agreement Date. No document prepared by or
on behalf of the Borrower or written statement made by or on behalf of the
Borrower to any Lender in connection with the negotiation, preparation or
execution of this Agreement or any of the Loan Documents contains or will
contain any untrue statement of a fact material to the creditworthiness of the
Borrower or omits or will omit to state a material fact necessary in order to
make the statements contained therein not misleading.
(ii) The Borrower has no reason to believe that any document
furnished or written statement made to any Lender by any Person other than the
Borrower in connection with the negotiation, preparation or execution of this
Agreement or any of the Loan Documents contained any incorrect statement of a
material fact or omitted to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
(s) Solvency. In each case after giving effect to the Indebtedness
represented by the Loans outstanding and to be incurred, and the transactions
contemplated by this Agree ment, the Senior Loan Agreement, the Acquisition
Agreement and the Acquisition Documents, the Borrower is solvent, having assets
of a fair salable value which exceeds the amount required to pay its debts as
they become absolute and matured (including contingent, subordinated, unmatured
and unliquidated liabilities), and the Borrower is able to and anticipates that
it will be able to meet its debts as they mature and has adequate capital to
conduct the business in which it is or proposes to be engaged.
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(t) Receivables. The chief executive office of the Borrower and the
books and records relating to the Receivables are located at the address or
addresses set forth on Schedule 7.1(t). The Borrower has not maintained its
chief executive office or books and records relating to any Receivables at any
other address at any time during the five years immediately preceding the
Agreement Date, except as disclosed on Schedule 7.1(t) with respect to the
Receivables of the Borrower and the Seller.
(u) Inventory. All Inventory included in any Borrowing Base
Certificate (as defined in the Senior Loan Agreement), is in merchantable
condition, meets all standards imposed by any governmental agency, or department
or division thereof, having regulatory authority over such goods, their use or
sale, and is currently either usable or salable in the normal course of the
Borrower's business, except to the extent reserved against in the financial
statements referred to in Section 7.1(n) or delivered pursuant to Article 11 or
as disclosed to the Lenders pursuant to Section 9.12. All Inventory is located
on the premises set forth on Schedule 7.1(u) or is Inventory in transit to one
of such locations, (or Collateral Agent has otherwise perfected its second
priority Lien therein, for the benefit of the Secured Creditors), except as
otherwise disclosed in writing to the Lenders. Such Inventory has not, in the
last year, been located at premises other than those set forth on Schedule
7.1(u).
(v) Equipment. All Equipment is in good order and repair in all
material respects and is located on the premises set forth on Schedule 7.1(v)
and has been so located at all times during the last year.
(w) Real Property. The Borrower owns no Real Estate and leases no
Real Estate other than that described on Schedule 7.1(w) and other than Real
Estate acquired or leased after the Effective Date for which the Borrower has
complied with the requirements of Section 9.14.
(x) Corporate and Fictitious Names. Except as otherwise disclosed on
Schedule 7.1(x), during the five-year period preceding the Agreement Date,
neither the Borrower nor any predecessor thereof (including the Seller) has been
known as or used any corporate or fictitious name other than the corporate name
of the Borrower on the Effective Date.
(y) Federal Reserve Regulations. Neither the Borrower nor any of its
Subsidiaries is engaged and none will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each of the quoted terms is
defined or used in Regulations G and U of the Board of Governors of the Federal
Reserve System). No part of the proceeds of any of the Loans will be used for so
purchasing or carrying margin stock or, in any event, for any purpose which
violates, or which would be inconsistent with, the provisions of Regulation G,
T, U or X of such Board of Governors. If requested by any Lender, the Borrower
will furnish to the Lenders a statement or statements in conformity with the
requirements of said Regulation G, T, U or X to the foregoing effect.
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(z) Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" (as each of the
quoted terms is defined or used in the Investment Company Act of 1940, as
amended).
(aa) Employee Relations. Neither the Borrower nor any of its
Subsidiaries as of the Effective Date, except as set forth on Schedule 7.1(aa),
is party to any collective bargaining agreement nor has any labor union been
recognized as the representative of the Borrower's or any of its Subsidiaries'
employees, and the Borrower knows of no pending, threatened or contemplated
strikes, work stoppage or other labor disputes involving the Borrower's or any
of its Subsidiaries' employees that could reasonably be expected to have a
Material Adverse Effect.
(bb) Proprietary Rights. Schedule 7.1(bb) sets forth a correct and
complete list, as of the Effective Date, of all of the Proprietary Rights. As of
the Effective Date, none of the Proprietary Rights is subject to any licensing
agreement or similar arrangement except as set forth on Schedule 7.1(bb) or as
entered into in the sale or distribution of the Borrower's Inventory in the
ordinary course of business. To the best of the Borrower's knowledge, none of
the Proprietary Rights infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with the
Proprietary Rights, in either case in a manner that will have a Material Adverse
Effect. The Proprietary Rights described on Schedule 7.1(bb) constitute all of
the property of such type necessary to the current and anticipated future
conduct of the Borrower's business.
(cc) Trade Names. All trade names or styles under which the Borrower
sells (or the Seller sold) Inventory or Equipment or creates Receivables, or to
which instruments in payment of Receivables are made payable, in each case as of
or prior to the Effective Date are listed on Schedule 7.1(cc).
(dd) Acquisition Agreement. The Borrower has heretofore furnished to
the Lenders true, complete and correct copies of the Acquisition Agreement
(including any schedules, exhibits and annexes thereto) and each Acquisition
Document. The Acquisition Agreement has not been amended, supplemented or
modified except as previously disclosed in writing to the Lenders and, together
with the other Acquisition Documents, copies of which have been delivered to the
Lenders, constitute the complete understanding between the Borrower and the
Seller in respect of the acquisition of the Acquired Assets and the other
matters and transactions covered thereby. To the Borrower's knowledge, the
Acquisition Agreement and each of the other Acquisition Documents has been duly
executed and delivered by the Seller and is a valid, legal and binding
obligation of the Seller. The representations and warranties of the Borrower
contained in the Acquisition Agreement and each of the other Acquisition
Documents are (or will be) true and correct in all material respects on the
Effective Date as if made on and as of such date, and the Lenders are entitled
to rely on such representations and warranties with the same force and effect as
though they were incorporated in this Agreement and made to the Lenders
directly. On and as of the Effective Date, the Borrower knows of no reason to
believe that the representations and warranties of, and
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information concerning, the Seller contained in the Acquisition Agreement and
each of the other Acquisition Documents are not true and correct in all material
respects.
(ee) Consummation of Transactions. Upon the Effective Date, the
transactions contemplated by the Acquisition Agreement and the other Acquisition
Documents have been consummated in accordance with Applicable Laws and, except
as previously disclosed in writing to the Lenders, in the manner provided
therein in accordance with the terms thereof without any material waivers or
amendments thereto, and each of the conditions to such consummation set forth in
the Acquisition Agreement and the other Acquisition Documents shall have been
fulfilled without any waiver of any thereof.
(ff) Seller Subordinated Indebtedness. The Borrower has delivered to
the Lenders a complete and correct copy of all documents evidencing or relating
to the Seller Subordinated Indebtedness, and each of the representations and
warranties given by the Borrower therein is true and correct in all material
respects.
(gg) [Intentionally Deleted]
SECTION 7.2 [Intentionally Deleted]
ARTICLE 8
SECURITY INTEREST
SECTION 8.1 Security Interest.
(a) To secure the payment, observance and performance of the Secured
Obligations, the Borrower hereby mortgages, pledges and assigns all of the
Collateral to the Collateral Agent, for the benefit of the Secured Creditors,
and grants to the Collateral Agent, for the benefit of the Secured Creditors, a
continuing security interest in, and a continuing Lien upon, all of the
Collateral.
(b) As additional security for all of the Secured Obligations, the
Borrower grants to the Collateral Agent, for the benefit of the Secured
Creditors, a security interest in, and assigns to the Collateral Agent, for the
benefit of the Secured Creditors, all of the Borrower's right, title and
interest in and to, any deposits or other sums at any time credited by or due
from each Lender and each Affiliate of a Lender to the Borrower, or credited by
or due from any participant of any Lender to the Borrower, with the same rights
therein as if the deposits or other sums were credited by or due from such
Lender The Borrower hereby authorizes each Lender and each Affiliate of such
Lender and each participant to pay or deliver to the Collateral Agent, for the
account of the Lenders, without any necessity on the Collateral Agent's or any
Lender's part to resort to other security or sources of reimbursement for the
Secured Obligations, at any time during the continuation of any Event of Default
or in the event that the Lenders should make demand for payment hereunder and
without further notice to the Borrower (such notice being expressly waived), any
of the aforesaid deposits (general or special, time or
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demand, provisional or final) or other sums for application to any Secured
Obligation, irrespective of whether any demand has been made or whether such
Secured Obligation is mature, and the rights given the Collateral Agent, the
Lenders, their Affiliates and participants hereunder are cumulative with such
Person's other rights and remedies, including other rights of set-off. The
Collateral Agent will promptly notify the Borrower of its receipt of any such
funds for application to the Secured Obligations, but failure to do so will not
affect the validity or enforceability thereof.
SECTION 8.2 Continued Priority of Security Interest.
(a) The Security Interest granted by the Borrower shall at all times
be valid, perfected and enforceable against the Borrower and all third parties
in accordance with the terms of this Agreement, as security for the Secured
Obligations, and the Collateral shall not at any time be subject to any Liens
that are prior to, on a parity with or junior to the Security Interest, other
than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all
action that may be reasonably necessary or desirable, or that the Collateral
Agent or the Lender may reasonably request, so as at all times to maintain the
validity, perfection, enforceability and rank of the Security Interest in the
Collateral in conformity with the requirements of Section 8.2(a), or to enable
the Collateral Agent and the Lenders to exercise or enforce their rights
hereunder, including, but not limited to: (i) paying all taxes, assessments and
other claims lawfully levied or assessed on any of the Collateral, except to the
extent that such taxes, assessments and other claims constitute Permitted Liens,
(ii) using all reasonable efforts to obtain landlords', mortgagees' and
mechanics' releases, subordinations or waivers, (iii) delivering to the
Collateral Agent, for the benefit of the Secured Creditors, endorsed or
accompanied by such instruments of assignment as the Collateral Agent may
specify, and stamping or marking, in such manner as the Collateral Agent may
specify, any and all chattel paper, instruments, letters and advices of guaranty
and documents evidencing or forming a part of the Collateral, and (iv) executing
and delivering financing statements, pledges, designations, hypothecations,
notices and assignments in each case in form and substance reasonably
satisfactory to the Collateral Agent and the Lenders relating to the creation,
validity, perfection, maintenance or continuation of the Security Interest under
the Uniform Commercial Code or other Applicable Laws.
(c) The Collateral Agent is hereby authorized to file one or more
financing or continuation statements or amendments thereto without the signature
of or in the name of the Borrower for any purpose described in Section 8.2(b).
The Collateral Agent will give the Borrower notice of the filing of any such
statements or amendments, which notice shall specify the locations where such
statements or amendments were filed. No representation or warranty is made by
the Borrower respecting the accuracy or adequacy of the foregoing. A carbon,
photographic, xerographic or other reproduction of this Agreement or of any of
the Security Documents or of any financing statement filed in connection with
this Agreement is sufficient as a financing statement.
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(d) The Borrower shall mark its books and records as directed by the
Collateral Agent and as may be necessary or appropriate to evidence, protect and
perfect the Security Interest and shall cause its financial statements to
reflect the Security Interest.
ARTICLE 9
COLLATERAL COVENANTS
Until the Secured Obligations have been paid in full:
SECTION 9.1 [Intentionally Deleted]
SECTION 9.2 Verification and Notification. The Lenders shall have
the right (a) at any time and from time to time after the First Lien Senior
Secured Facility has been paid in full, (i) in the name of the Lenders or in the
name of the Borrower, to verify the validity, amount or any other matter
relating to any Receivables by mail, telephone, telegraph or otherwise, and (ii)
to review, audit and make extracts from all records and files related to any of
the Receivables; and (b) subject to the terms of the Intercreditor Agreement, if
an Event of Default exists, to notify the Account Debtors or obligors under any
Receivables of the assignment of such Receivables to the Collateral Agent, for
the benefit of the Secured Creditors, and to direct such Account Debtor or
obligors to make payment of all amounts due or to become due thereunder directly
to the Collateral Agent, for the account of the Lenders, and, upon such
notification and at the expense of the Borrower, to enforce collection of any
such Receivables and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Borrower might have
done.
SECTION 9.3 [Intentionally Deleted].
SECTION 9.4 [Intentionally Deleted].
SECTION 9.5 Delivery of Instruments. In the event any Receivable is
at any time evidenced by a promissory note, trade acceptance or any other
instrument for the payment of money, the Borrower will immediately thereafter
deliver such instrument to the Collateral Agent, appropriately endorsed to the
Collateral Agent, for the benefit of the Secured Creditors.
SECTION 9.6 Sales of Inventory. All sales of Inventory will be made
in material compliance with all requirements of Applicable Laws.
SECTION 9.7 Ownership and Defense of Title.
(a) Except for Permitted Liens, the Borrower or its Subsidiaries
shall at all times be the sole owner or lessee of each and every item of
Collateral and shall not create any lien on, or sell, lease, exchange, assign,
transfer, pledge, hypothecate, grant a security interest or security title in or
otherwise dispose of, any of the Collateral or any interest therein, except for
sales of Inventory in the ordinary course of business, for cash or on open
account or on
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terms of payment ordinarily extended to its customers, and except for
dispositions that are otherwise expressly permitted under this Agreement
(including, without limitation, such dispositions as permitted under Section
12.7(f) hereof). The inclusion of "proceeds" of the Collateral under the
Security Interest shall not be deemed a consent by the Collateral Agent or the
Lenders to any other sale or other disposition of any part or all of the
Collateral.
(b) The Borrower shall defend its title or leasehold interest in and
to, and the Security Interest in, the Collateral against the claims and demands
of all Persons.
SECTION 9.8 Insurance.
(a) The Borrower shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft (excluding theft
by employees), burglary, pilferage, loss in transit and such other hazards as
the Senior Lenders (or, after the First Lien Senior Secured Facility and any
Permitted Refinancing Indebtedness has been paid in full, the Lenders) shall
reasonably specify, in amounts not to exceed those obtainable at commercially
reasonable rates and under policies issued by insurers acceptable to the Senior
Lenders (or, after the First Lien Senior Secured Facility and any Permitted
Refinancing Indebtedness has been paid in full, the Lenders) in the exercise of
their reasonable judgment. All premiums on such insurance shall be paid by the
Borrower and copies of the policies delivered to the Lenders upon request. The
Borrower will not use or permit the Inventory or Equipment to be used in
material violation of Applicable Laws or in any manner which might render
inapplicable any insurance coverage.
(b) All insurance policies required under Section 9.8(a) shall name
the Collateral Agent, for the benefit of the Senior Lenders and the Lenders (as
their interests may appear), as an additional insured and shall contain loss
payable clauses in the form submitted to the Borrower by the Collateral Agent,
or otherwise in form and substance reasonably satis factory to the Senior
Lenders (or, after the First Lien Senior Secured Facility and any Permitted
Refinancing Indebtedness has been paid in full, the Lenders), naming the
Collateral Agent, for the benefit of the Senior Lenders and the Lenders (as
their interests may appear), as loss payee, as its interests may appear, and
providing that (i) subject to the terms of the Intercreditor Agreement, all
proceeds thereunder shall be payable to the Collateral Agent, for the benefit of
the Senior Lenders and the Lenders (as their interests may appear), (ii) no such
insurance shall be affected by any act or neglect of the insurer or owner of the
property described in such policy, and (iii) such policy and loss payable
clauses may be canceled, amended or terminated only upon at least 30 days prior
written notice given to the Collateral Agent.
(c) Any proceeds of insurance referred to in this Section 9.8 which
are paid to the Collateral Agent, and which are, pursuant to the Intercreditor
Agreement, for the account of the Lenders, shall be, at the option of the
Required Lenders in their sole discretion, either (i) applied to replace the
damaged or destroyed property, or (ii) applied to the payment or prepayment of
the Secured Obligations; provided, however, if (A) no Event of Default exists
hereunder, and (B) the amount of insurance proceeds with respect to such loss is
in an aggregate amount of less than $5,000,000, and (C) the damaged or destroyed
property is of the type or
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nature that can be repaired or restored, and (D) the Borrower provides the
Lenders with a certificate stating that the insurance proceeds will be used to
repair or restore the damaged or destroyed property within a one-year period
from the date of the loss, then such insurance proceeds shall be held by the
Collateral Agent and disbursed to the Borrower for application to the costs and
expenses of such repair or restoration pursuant to a disbursement procedure, and
under such terms and conditions as shall be acceptable to Collateral Agent and
the Required Lenders.
SECTION 9.9 Location of Offices and Collateral.
(a) The Borrower will not change the location of its chief executive
office or the place where it keeps its books and records relating to the
Collateral or change its name, its identity or corporate structure without
giving the Collateral Agent and the Lenders 30 days prior written notice
thereof.
(b) All Inventory, other than Inventory in transit to any such
location or Inventory meeting the terms of clauses (a) and (f) of the definition
of Eligible Inventory (as defined in the Senior Loan Agreement), will at all
times be kept by the Borrower at the locations set forth in Schedule 7.1(u) (as
updated from time to time), and shall not, without the prior written consent of
the Collateral Agent, be removed therefrom except pursuant to sales of Inventory
permitted under Section 9.7(a).
(c) If any Inventory is in the possession or control of any of the
Borrower's agents or processors, the Borrower shall notify such agents or
processors of the Security Interest (and shall promptly provide copies of any
such notice to the Collateral Agent and the Lenders) and, upon the occurrence of
an Event of Default, shall instruct them (and cause them to acknowledge such
instruction) to hold all such Inventory for the account of the Lenders, subject
to the instructions of the Collateral Agent.
SECTION 9.10 Records Relating to Collateral.
(a) The Borrower will at all times (i) keep complete and accurate
records of Inventory on a basis consistent with past practices of the Borrower
so as to permit comparison of Inventory records relating to different time
periods, itemizing and describing the kind, type and quantity of Inventory and
the Borrower's cost therefor and a current price list for such Inventory, and
(ii) keep complete and accurate records of all other Collateral.
(b) The Borrower will prepare a physical listing of all Inventory,
(other than documents evidencing and general intangibles relating to the
inventory that comprises the Borrower's Inventory), wherever located, at least
annually.
SECTION 9.11 Inspection. The Collateral Agent and each Lender
holding at least $5,000,000 in principal amount of Term Loans (by any of their
officers, employees or agents) shall have the right, to the extent that the
exercise of such right shall be within the control of the Borrower, at any time
or times to (a) upon reasonable notice, if no Event of
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Default exists, and without notice if an Event of Default does exist, visit the
properties of the Borrower and its Subsidiaries, inspect the Collateral and the
other assets of the Borrower and its Subsidiaries and inspect and make extracts
from the books and records of the Borrower and its Subsidiaries, including but
not limited to management letters prepared by independent accounts, all during
customary business hours at such premises; (b) discuss the Borrower's and its
Subsidiaries' business, assets, liabilities, financial condition, results of
operations and business prospects, insofar as the same are reasonably related to
the rights of the Collateral Agent or the Lenders hereunder or under any of the
Loan Documents, with the Borrower's and its Subsidiaries' (i) principal
officers, (ii) independent accountants, and (iii) any other Person (except that
any such discussion with any third parties shall be conducted only in accordance
with the Collateral Agent's or such Lender's standard operating procedures
relating to the maintenance of the confidentiality of confidential information
of Borrower); and (c) verify the amount, quantity, value and condition of, or
any other matter relating to, any of the Collateral (other than Receivables) and
in this connection to review, audit and make extracts from all records and files
related to any of the Collateral. The Borrower will deliver to the Collateral
Agent, for the benefit of the Lenders, any instrument necessary for it to obtain
records from any service bureau maintaining records on behalf of the Borrower.
SECTION 9.12 Information and Reports.
(a) [Intentionally Deleted]
(b) [Intentionally Deleted]
(c) [Intentionally Deleted]
(d) [Intentionally Deleted]
(e) [Intentionally Deleted]
(f) Additional Information. The Borrower shall provide the Lenders
with copies of all schedules and reports in respect of the Collateral delivered
pursuant to the terms of the Senior Loan Agreement to the Senior Lenders or
their agents, at the same time each is delivered to such parties. The Borrower
will also furnish to the Collateral Agent and each Lender such other information
with respect to the Collateral as the Collateral Agent or the Required Lenders
may from time to time reasonably request.
SECTION 9.13 Power of Attorney. The Borrower hereby appoints the
Collateral Agent as its attorney, with power (a) during the existence of an
Event of Default (i) to endorse the name of the Borrower on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Collateral Agent's or any Lender's possession, and (ii) to sign
the name of the Borrower on any invoice or bill of lading relating to any
Receivable, Inventory or other Collateral, on any drafts against customers
related to letters of credit, on schedules and assignments of Receivables
furnished to the Collateral Agent or any Lender by the Borrower, on notices of
assignment, financing statements and other public
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records relating to the perfection or priority of the Security Interest, and (b)
at any time, to sign the name of the Borrower on verifications of Receivables
and notices to or from Account Debtors.
SECTION 9.14 Additional Real Estate and Leases.
(a) Promptly upon the Borrower's acquisition of any interest in any
Real Estate, including the Borrower's entry into any Qualifying Lease, the
Borrower shall deliver to the Collateral Agent, for the benefit of the Secured
Creditors, an executed Mortgage in form and substance reasonably satisfactory to
the Collateral Agent, conveying to the Collateral Agent, for the benefit of the
Secured Creditors, a second priority Lien on such Real Estate interest, subject
only to such prior Liens as the Lenders shall consent to in writing. If
reasonably requested by the Lenders, the Borrower shall also deliver to the
Collateral Agent, at the Borrower's expense, a mortgagee title insurance policy
in favor of the Collateral Agent and the Secured Creditors insuring such
Mortgage to create and convey such Lien, subject only to such exceptions
consented to by the Lenders, and shall deliver to the Collateral Agent the other
items set forth in Sections 6.1(e)(xiii) and (xv) with respect to such Real
Estate, together with such environmental audits of such Real Estate as the
Lenders reasonably request, all in form and substance satisfactory to the
Lenders.
(b) Promptly upon the Borrower's entry into any other lease of Real
Estate (other than a Qualifying Lease), the Borrower shall use all reasonable
efforts to deliver to the Collateral Agent an executed landlord's waiver and
consent with respect to such lease in form and substance satisfactory to the
Lenders.
SECTION 9.15 Assignment of Claims Act. Upon the request of the
Collateral Agent or the Lenders, the Borrower shall execute any documents or
instruments and shall take such steps or actions reasonably required by the
Collateral Agent or the Lenders so that all monies due or to become due under
any contract with the United States of America, the District of Columbia or any
state, county, municipality or other domestic or foreign governmental entity, or
any department, agency or instrumentality thereof, will be assigned to the
Collateral Agent, for the benefit of the Secured Creditors, and notice given
thereof in accordance with the requirements of the Assignment of Claims Act of
1940, as amended, or any other laws, rules or regulations relating to the
assignment of any such contract and monies due to or to become due.
SECTION 9.16 Covenant to Guarantee Obligations and Give Security.
Upon the formation or acquisition of any new direct or indirect Subsidiaries by
the Borrower, then the Borrower shall, within 10 days after such formulation or
acquisition, at its expense:
(a) cause each such U.S. Subsidiary to duly execute and deliver to
the Collateral Agent a Guaranty, in form and substance satisfactory to the
Lenders, guaranteeing the payment in full of the Secured Obligations and the
performance of all of the Borrower's obligations under the Loan Documents (each
a "Subsidiary Guaranty"),
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(b) cause each such U.S. Subsidiary to duly execute and deliver to
the Collateral Agent mortgages, pledges, assignments and other security
agreements, as specified by and in form and substance consistent with this
Agreement and otherwise reasonably satisfactory to the Lenders, securing such
Subsidiary's obligations under its Subsidiary Guaranty and constituting first
priority Liens on all of such Subsidiary's assets (real and personal, including
Qualifying Leases), subject only to Permitted Liens,
(c) duly execute and deliver to the Collateral Agent a stock pledge
agreement and blank stock power, as specified by and in form and substance
satisfactory to the Lenders, securing the Secured Obligations and constituting a
first priority Lien on, in the case of U.S. Subsidiaries, all of each such U.S.
Subsidiary's capital stock, and in the case of foreign Subsidiaries, 65% of each
such foreign Subsidiary's capital stock, subject only to Permitted Liens,
(d) take, and cause such Subsidiary to take, such action (including,
without limitation, the recording of mortgages, the filing of Uniform Commercial
Code financing statements, and the delivery of original stock certificates) as
may be reasonably necessary or advisable in the opinion of the Lenders to vest
in the Collateral Agent, for the benefit of the Secured Creditors, valid and
subsisting perfected Liens on the properties purported to be subject to the
mortgages, pledges, assignments and security agreements delivered pursuant to
this Section 9.16, enforceable against all third parties in accordance with
their terms, subject only to Permitted Liens,
(e) to the extent the same are requested by the Senior Lenders,
deliver to the Collateral Agent, upon the request of the Lenders in their sole
discretion, a signed copy of a favorable opinion of counsel for the Borrower and
such Subsidiary, addressed to the Collateral Agent and the other Secured
Creditors, acceptable to the Lenders as to the matters contained in clauses (a),
(b), (c) and (d) above, as to such guaranties, mortgages, pledges, assignments
and security agreements being legal, valid and binding obligations of each party
thereto enforceable in accordance with their terms, and as to such other matters
as the Lenders may reasonably request, and
(f) to the extent the same are requested by the Senior Lenders,
deliver to the Collateral Agent, upon the request of the Lenders in their sole
discretion, with respect to each parcel of real property owned or held by such
Subsidiary, all items set forth in Sections 6.1(e)(xiii) and (xv) with respect
to such real property, together with such environmental audits of such real
property as the Lenders reasonably request, all in form and substance reasonably
satisfactory to the Lenders.
ARTICLE 10
AFFIRMATIVE COVENANTS
Until all the Secured Obligations have been paid in full, the
Borrower will, and will cause each of its Subsidiaries to:
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SECTION 10.1 Preservation of Corporate Existence and Similar
Matters. Preserve and maintain its corporate existence, and its material rights,
franchises, licenses and privileges in the jurisdiction of its incorporation and
qualify and remain qualified as a foreign corporation and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization.
SECTION 10.2 Compliance with Applicable Laws. Comply with all
Applicable Laws relating to the Borrower or such Subsidiary except respecting
matters that could not reasonably be expected to have a Material Adverse Effect,
except to the extent being contested in good faith by appropriate proceedings
and for which reserves in respect of the Borrower's or such Subsidiary's
reasonably anticipated liability therefor have been appropriately established.
SECTION 10.3 Maintenance of Property. In addition to, and not in
derogation of, the requirements of Section 9.7 and of the Security Documents,
(a) protect and preserve all properties material to its business, including
copyrights, patents, trade names and trademarks, and maintain in good repair,
working order and condition in all material respects, with reasonable allowance
for wear and tear, all tangible properties, and (b) from time to time make or
cause to be made all needed and appropriate repairs, renewals, replacements and
additions to such properties necessary for the conduct of its business, so that
the business carried on in connection therewith may be properly conducted at all
times.
SECTION 10.4 Conduct of Business. At all times carry on its business
in an efficient manner and engage in the business described on Schedule 7.1(f)
and businesses related thereto.
SECTION 10.5 Insurance. Maintain, in addition to the coverage
required by Section 9.8 and the Security Documents, insurance with responsible
insurance companies against such risks and in such amounts as is customarily
maintained by similar businesses or as may be required by Applicable Laws, and
from time to time deliver to the Lenders upon their request a detailed list of
the insurance then in effect, stating the names of the insurance companies, the
amounts and rates of the insurance, the dates of the expiration thereof and the
properties and risks covered thereby.
SECTION 10.6 Payment of Taxes and Claims. Pay or discharge when due
(a) all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any properties belonging to it, except that
real property ad valorem taxes shall be deemed to have been so paid or
discharged if the same are paid before they become delinquent, and (b) all
lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and
other similar Liens for labor, materials, supplies and rentals which, if unpaid,
might become a Lien on any of its properties; except that this Section 10.6
shall not require the payment or discharge of any such tax, assessment, charge,
levy or claim which is being contested in good faith by appropriate proceedings
and for which reserves in respect of the reasonably anticipated liability
therefor have been appropriately established.
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SECTION 10.7 Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP.
SECTION 10.8 Use of Proceeds.
(a) Use the proceeds of the Term Loan to pay amounts indicated on
Schedule 10.8 to the Persons indicated thereon.
(b) Not use any part of such proceeds to purchase or, to carry or
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation G or U of the Board of Governors
of the Federal Reserve System) or, in any event, for any purpose which would
involve a violation of such Regulation G or U or of Regulation T or X of such
Board of Governors, or for any purpose prohibited by law or by the terms and
conditions of this Agreement.
SECTION 10.9 Hazardous Waste and Substances; Environmental
Requirements.
(a) In addition to, and not in derogation of, the requirements of
Section 10.2 and of the Security Documents, comply in all material respects with
all applicable Environmental Laws and all Applicable Laws relating to
occupational health and safety (except for instances of noncompliance that are
being contested in good faith by appropriate proceedings if reserves in respect
of the Borrower's or such Subsidiary's reasonably anticipated liability therefor
have been appropriately established and would be required by GAAP), promptly
notify the Collateral Agent and the Lenders of its receipt of any notice of a
material violation of any such Environmental Laws or other such Applicable Laws
and indemnify and hold the Collateral Agent and the Lenders harmless from all
loss, cost, damage, liability, claim and expense incurred by or imposed upon the
Collateral Agent or any Lender on account of the Borrower's failure to perform
its obligations under this Section 10.9.
(b) Whenever the Borrower gives notice to the Collateral Agent and
the Lenders pursuant to this Section 10.9 with respect to a matter that
reasonably could be expected to result in liability to the Borrower or such
Subsidiary in excess of $500,000 in the aggregate, the Borrower shall, at the
Collateral Agent's or the Lenders' request and the Borrower's expense (i) cause
an independent environmental engineer acceptable to the Collateral Agent to
conduct an assessment, including tests where necessary, of the site where the
noncompliance or alleged noncompliance with Environmental Laws has occurred and
prepare and deliver to the Collateral Agent and the Lenders a report setting
forth the results of such assessment, a proposed plan to bring the Borrower or
such Subsidiary into compliance with such Environmental Laws (if such assessment
indicates noncompliance) and an estimate of the costs thereof, and (ii) provide
to the Collateral Agent and the Lenders a supplemental report of such engineer
whenever the scope of the noncompliance, or the response thereto or the
estimated costs thereof, shall materially adversely change.
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SECTION 10.10 [Intentionally Deleted]
SECTION 10.11 [Intentionally Deleted]
ARTICLE 11
INFORMATION
Until the Secured Obligations have been paid in full, the Borrower
will furnish to each Lender at the offices then designated for such notices
pursuant to Section 16.1:
SECTION 11.1 Financial Statements.
(a) Opening Balance Sheet. As soon as available, but in any event
within 90 days after the Effective Date, a copy of the Final Audit and the
Statement (as such terms are defined in the Acquisition Agreement) required to
be delivered pursuant to Sections 3.2(a) and (b) of the Acquisition Agreement,
and, as soon as available, any final determination of Closing Net Worth
delivered by the Accounting Firm (as such terms are defined in the Acquisition
Agreement) pursuant to Section 3.2(b) of the Acquisition Agreement;
(b) Audited Year-End Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year of the Borrower, copies
of the consolidated balance sheets of the Borrower and its Consolidated
Subsidiaries as at the end of such fiscal year and the related statements of
operations, cash flow and shareholders' equity for such fiscal year, in each
case setting forth in comparative form the figures for the previous fiscal year
of the Borrower, reported on without qualification as to the scope of the audit
or the status of the Borrower and its Consolidated Subsidiaries as a "going
concern", by independent certified public accountants of nationally recognized
standing;
(c) Monthly Financial Statements. As soon as available after the end
of each month, but in any event within 45 days after the end of each month,
copies of the unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such month and the related unaudited
consolidated statements of operations, cash flow and shareholders' equity for
the Borrower and its Consolidated Subsidiaries for such month and for the
portion of the fiscal year through such month, certified by a Financial Officer
as presenting fairly the financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries; and
(d) Annual Budget. As soon as available, but in any event at least
30 days prior to the beginning of each fiscal year, an operating budget for the
Borrower and its Consolidated Subsidiaries for such fiscal year, in the form
customarily prepared by management of the Borrower consistent with past
practice, together with a statement of the assumptions upon which such budget
was prepared.
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All such financial statements delivered pursuant to clauses (b) and (c) shall
present fairly in all material respects the financial position of the Borrower
and its Consolidated Subsidiaries as of such dates and results of operations for
such period and shall be prepared in accordance with GAAP (except, with respect
to interim financial statements, for the omission of footnotes and for the
effect of normal year-end audit adjustments) applied consistently throughout the
periods reflected therein.
SECTION 11.2 Accountants' Certificate. Together with the financial
statements referred to in Section 11.1(b), the Borrower shall deliver a
certificate of such accountants addressed to the Lenders having attached the
calculations, prepared by the Borrower and reviewed by such accountants,
required to establish whether or not the Borrower is in compliance with the
covenants contained in Section 12.1 as at the date of such financial statements.
SECTION 11.3 Officer's Certificate. At the time that the Borrower
furnishes the financial statements pursuant to Section 11.1(c) for any month
that is the last month of a fiscal quarter of the Borrower, the Borrower shall
also furnish a certificate of its President or a Financial Officer,
substantially in the form attached to the Senior Loan Agreement as Exhibit F,
(a) setting forth as at the end of such fiscal quarter or fiscal
year, as the case may be, the calculations required to establish whether or not
the Borrower was in compliance with the requirements of Sections 12.1, 12.2,
12.5, 12.6, 12.10, 12.11 and 12.14, as at the end of each respective period,
(b) stating that the information on the schedules to this Agreement
are complete and accurate as of the date of such certificate or, if such is not
the case, attaching to such certificate updated schedules, and
(c) stating that, based on a reasonably diligent examination, no
Default or Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default and its nature, when it occurred, whether it is
continuing and the steps being taken by the Borrower with respect to such
Default or Event of Default.
SECTION 11.4 Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants, including, without limitation, any management letters and
management reports.
(b) As soon as practicable, but in any event within 15 days of their
becoming available, copies of all financial statements and reports that the
Borrower shall send to its shareholders generally and of all registration
statements and all regular or periodic reports which the Borrower shall file
with the Securities and Exchange Commission or any successor commission.
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(c) From time to time and as soon as reasonably practicable
following each request, such forecasts, data, certificates, reports, statements,
documents or further information regarding the business, assets, liabilities,
financial condition, results of operations or business prospects of the Borrower
or any of its Subsidiaries as any Lender may reasonably request and that the
Borrower has or without unreasonable expense can obtain; provided, however, that
the Lenders shall, to the extent reasonably practicable, coordinate examinations
of the Borrower's records by their respective internal auditors. The rights of
the Lenders under this Section 11.4 are in addition to and not in derogation of
their rights under any other provision of this Agreement or of any other Loan
Document.
(d) If requested by any Lender, the Borrower will furnish to the
Lenders statements in conformity with the requirements of Federal Reserve Form
G-3 or U-1 referred to in Regulation G and U, respectively, of the Board of
Governors of the Federal Reserve System.
SECTION 11.5 Notice of Litigation and Other. Prompt notice of:
(a) the commencement, to the extent the Borrower is aware of the
same, of all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating to or affecting the Borrower,
any of its Subsidiaries or any of the Borrower's or any of its Subsidiaries'
properties, assets or businesses, which might, singly or in the aggregate,
result in the occurrence of a Default or an Event of Default, or have a
Materially Adverse Effect,
(b) any amendment of the articles of incorporation or by-laws of the
Borrower or any of its Subsidiaries,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower or any of
its Subsidiaries which has had or is reasonably likely to have, singly or in the
aggregate, a Materially Adverse Effect, and any change in the executive officers
of the Borrower, and
(d) any Default or Event of Default or any event which constitutes
or which with the passage of time or giving of notice or both would constitute a
default or event of default by the Borrower or any of its Subsidiaries under any
material agreement (other than this Agreement) to which the Borrower or any of
its Subsidiaries is a party or by which the Borrower, any of its Subsidiaries or
any of the Borrower's or any of its Subsidiaries' properties may be bound.
SECTION 11.6 ERISA. As soon as possible and in any event within 30
days after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Plan has occurred or
will occur, or
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(b) any Plan has a funded current liability percentage, as defined
in Section 302(d)(8) of ERISA, less than 90% or the aggregate present value of
the Unfunded Vested Accrued Benefits under all Plans is equal to an amount in
excess of $500,000, or
(c) the Borrower or any of its Subsidiaries is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan required by reason of the Borrower's or such Subsidiary's
complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA)
from such Multiemployer Plan,
a certificate of the President or a Financial Officer of the Borrower setting
forth the details of such event and the action which is proposed to be taken
with respect thereto, together with any notice or filing which may be required
by the PBGC or other agency of the United States government with respect to such
event.
SECTION 11.7 Accuracy of Information. All written information,
reports, statements and other papers and data furnished to any Lender by or on
behalf of the Borrower, whether pursuant to this Article 11 or any other
provision of this Agreement or of any other Loan Document, shall be, at the time
the same is so furnished, complete and correct in all material respects to the
extent necessary to give the Lenders materially true and accurate knowledge of
the subject matter.
SECTION 11.8 Revisions or Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, the Borrower shall
deliver to the Lenders as part of the officer's certificate required pursuant to
Section 11.3(b) such revisions or updates to such Schedule(s) as may be
necessary or appropriate to update or correct such Schedule(s), provided that no
such revisions or updates to any Schedule(s) shall be deemed to have amended,
modified or superseded such Schedule(s) as originally attached hereto, or to
have cured any breach of warranty or representation resulting from the
inaccuracy or incompleteness of any such Schedule(s), unless and until the
Required Lenders in their sole and absolute discretion, shall have accepted in
writing such revisions or updates to such Schedule(s).
SECTION 11.9 Seller Subordinated Indebtedness Certificate. Not less
than five Business Days prior to any payment of any principal of, or interest or
other amounts on, the Seller Subordinated Indebtedness, and as a condition
precedent to making such payment, the Borrower shall furnish to the Lenders a
certificate of the Financial Officer stating: (a) that no Default or Event of
Default is in existence as of the date of the certificate or will be in
existence as of the date of such payment, both with and without giving effect to
the making of such payment, and (b) the amount of principal and interest to be
paid.
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ARTICLE 12
NEGATIVE COVENANTS
Until the Secured Obligations have been paid in full, the Borrower
will not directly or indirectly and, in the case of Sections 12.2 through 12.18,
will not permit its Subsidiaries to:
SECTION 12.1 Financial Ratios.
(a) Minimum Tangible Net Worth. Permit Consolidated Tangible Net
Worth of the Borrower and its Consolidated Subsidiaries, as of any fiscal
quarter end, to be less than $15,000,000 plus 75% of Consolidated Net Income
(without deduction for any net loss) on a cumulative basis from the first day of
fiscal year 1999 to and including such fiscal quarter end.
(b) Minimum Cash Flow. Permit Consolidated Operating Cash Flow,
measured as of the end of the second fiscal quarter of fiscal year 1999 on a
fiscal year to date basis, to be less than $7,500,000.
(c) Minimum Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio, as of the end of any fiscal quarter, calculated on
a rolling four-quarter basis (except for the calculation as of the end of the
third fiscal quarter of fiscal year 1999, which shall be on a fiscal year to
date basis), to be less than 1.0 to 1 as of the end of the third fiscal quarter
of fiscal year 1999, and as of the end of any fiscal quarter thereafter.
(d) Maximum Funded Indebtedness to Cash Flow Ratio. Permit the ratio
of (i) Consolidated Funded Indebtedness as of any fiscal quarter end to (ii)
Consolidated Operating Cash Flow to be greater than: 5.75 to 1.0 as of the end
of the second fiscal quarter of fiscal year 1999; 5.00 to 1.0 as of the end of
the third fiscal quarter of fiscal year 1999; 4.0 to 1.0 as of fiscal year end
1999 or the end of any of the first three fiscal quarters of fiscal year 2000;
3.75 to 1.0 as of fiscal year end 2000 or the end of any of the first three
fiscal quarters of fiscal year 2001; 3.50 to 1.0 as of fiscal year end 2001 or
the end of any of the first three fiscal quarters of fiscal year 2002; or 3.25
to 1.0 as of fiscal year end 2002 or the end of any fiscal quarter thereafter.
Consolidated Operating Cash Flow shall be calculated on an annualized fiscal
year to date basis in the case of the calculation of this covenant as of the end
of the second and third fiscal quarters of fiscal year 1999, and on a rolling
four-quarter basis for all calculations thereafter. Consolidated Operating Cash
Flow, for the purpose of this covenant, will include, or exclude, as applicable,
the effect of acquisitions and divestitures on a proforma basis as if such
acquisitions or divestitures occurred on the first day of such applicable
period.
SECTION 12.2 Indebtedness for Money Borrowed. Create, assume, or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding, any Indebtedness for
Money Borrowed, except that this Section 12.2 shall not apply to:
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(a) Indebtedness represented by the Loans, the Notes and the other
Loan Documents,
(b) Indebtedness incurred under the First Lien Senior Secured
Facility in an aggregate principal amount not to exceed $95,000,000 and any
Permitted Refinancing Indebtedness,
(c) Indebtedness of a Subsidiary of the Borrower owing to the
Borrower or a wholly-owned Subsidiary Guarantor,
(d) Indebtedness for Money Borrowed reflected on Schedule 7.1(j)
excluding any such Indebtedness that is to be paid in full on the Effective Date
(the "Surviving Indebtedness"), and any Indebtedness extending the maturity of,
or refinancing, in whole or in part, any Surviving Indebtedness, provided that
the principal amount of such Surviving Indebtedness shall not be increased above
the principal amount thereof outstanding immediately prior to such extension or
refinancing,
(e) Permitted Purchase Money Indebtedness,
(f) Indebtedness of any Subsidiary existing at the time such
Subsidiary becomes a Subsidiary, provided that the incurrence of such
Indebtedness was not in anticipation of the acquisition of such Subsidiary and
no Default or Event of Default shall result therefrom, and
(g) Other unsecured Indebtedness provided no Default or Event of
Default would result therefrom under any other section of this Agreement.
SECTION 12.3 Guarantees. Become or remain liable with respect to any
Guaranty of any obligation of any other Person, other than Permitted Guarantees.
SECTION 12.4 Investments. Acquire, after the Agreement Date, any
Business Unit or Investment, provided, that if no Default or Event of Default
exists or would result therefrom, the Borrower may make Permitted Investments.
SECTION 12.5 Capital Expenditures. Make or incur any Capital
Expenditures in the aggregate (for the Borrower and its Subsidiaries) in excess
of the amount set forth below for the fiscal year set forth opposite such
amount:
Fiscal Year Amount
----------- ------
1999 $13,000,000
2000 $ 9,500,000
2001 $ 8,000,000
2002 $ 8,000,000
2003 $ 8,000,000
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Notwithstanding the foregoing, up to 50% of the unused portion of the limit set
forth above with respect to any fiscal year may be carried forward and utilized
in the immediately succeeding fiscal year.
SECTION 12.6 Restricted Payments, Etc. Declare, make or become
obligated to make any Restricted Dividend Payment, Restricted Payment or
Restricted Purchase; provided, that (a) the Borrower's Subsidiaries may make
dividends, distributions and other payments to the Borrower, (b) if no Default
or Event of Default exists or would result therefrom, the Borrower may make
Restricted Dividend Payments, Restricted Payments and Restricted Purchases
during any fiscal year in an aggregate amount not to exceed 50% of Excess Cash
Flow for the previous fiscal year, and (c) in any fiscal year, up to $250,000 of
capital stock or options owned by Borrower's terminated employees may be
repurchased by the Borrower.
SECTION 12.7 Merger, Consolidation and Sale of Assets. Merge or
consolidate with any other Person, or sell, lease, transfer or otherwise dispose
of all or a substantial part of its assets (including stock of any Subsidiary)
to any Person, other than:
(a) sales of inventory in the ordinary course of business;
(b) the merger or consolidation of any Subsidiary with or into the
Borrower or any Subsidiary Guarantor that is wholly-owned by the Borrower;
(c) the sale, lease or other disposal of all or a substantial part
of its assets by a Subsidiary to the Borrower or any Subsidiary Guarantor that
is wholly-owned by the Borrower;
(d) the sale of Borrower's narrow fabrics business, the disposition
of plant and equipment held for disposal as of the Agreement Date, and the
disposition of the Borrower's hosiery plant located in Robbins, North Carolina,
provided the Net Proceeds of any such sale or disposition are applied as set
forth in Section 5.9 of the Senior Loan Agreement, or, if the Senior Loans have
been paid in full, applied to the Term Loans to the extent that it would have
been required to be applied to reduce the First Lien Senior Secured Facility;
(e) the disposition of fixed assets the proceeds of which the
Borrower reasonably expects to reinvest within six months in productive assets
of a kind then used or useable in the business of the Borrower and that are not
subject to any Lien other than Permitted Liens or Liens in favor of the
Collateral Agent, for the benefit of the Secured Creditors, provided the Net
Proceeds of any such disposition are applied as set forth in Section 5.9 of the
Senior Loan Agreement, or, if the Senior Loans have been paid in full, applied
to the Term Loans to the extent that it would have been required to be applied
to reduce the First Lien Senior Secured Facility; and
(f) the disposition of other fixed assets in an aggregate amount not
to exceed $1,000,000 in any fiscal year, provided the Net Proceeds of any such
disposition are applied as
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set forth in Section 5.9 of the Senior Loan Agreement, or, if the Senior Loans
have been paid in full, applied to the Term Loans to the extent that it would
have been required to be applied to reduce the First Lien Senior Secured
Facility.
Upon the sale or other disposition of assets of the Borrower or any
Subsidiary as permitted in this Agreement, Collateral Agent shall execute and
deliver to Borrower any mortgage release, UCC termination statement, or other
instrument or document reasonably requested by Borrower for the release of the
Collateral Agent's lien on such assets upon the actual sale or other disposition
of such assets.
SECTION 12.8 Transactions with Affiliates. Effect any transaction
with any Affiliate on a basis less favorable to it than would be the case if
such transaction had been effected with a Person not an Affiliate.
SECTION 12.9 Liens. Create, assume or permit or suffer to exist or
to be created or assumed any Lien on any of the Collateral or its other assets,
other than Permitted Liens.
SECTION 12.10 Capitalized Lease Obligations. Incur or permit to
exist any Capitalized Lease Obligation if such Capitalized Lease Obligation,
when added to existing Capitalized Lease Obligations and Permitted Purchase
Money Indebtedness, would exceed $10,000,000 in the aggregate.
SECTION 12.11 Operating Lease Obligations. Enter into any Operating
Lease if the aggregate annual rental payable under all Operating Leases of the
Borrower and its Subsidiaries would exceed $15,000,000 in the aggregate.
SECTION 12.12 Plans. Permit any condition to exist in connection
with any Plan which might constitute grounds for the PBGC to institute
proceedings to have such Plan terminated or a trustee appointed to administer
such Plan, and any other condition, event or transaction with respect to any
Plan which could result in the incurrence by the Borrower or any of its
Subsidiaries of any material liability, fine or penalty.
SECTION 12.13 Amendments of Other Agreements. Amend in any way (a)
the subordination provisions applicable to the Seller Subordinated Indebtedness,
(b) the interest rate (or formula pursuant to which such interest rate is
determined) or principal amount or schedule of payments of principal and
interest with respect to the Seller Subordinated Indebtedness other than to
reduce the interest rate or extend the schedule of payments with respect
thereto, (c) the interest rate (or formula pursuant to which such interest rate
is determined) or principal amount or schedule of payments (including mandatory
prepayments) of principal and interest with respect to the First Lien Senior
Secured Facility other than to reduce the interest rate or extend the schedule
of payments with respect thereto, (d) the aggregate revolving loan commitment
amounts or term loan principal balance outstanding under the First Lien Senior
Secured Facility, other than to reduce the same, (e) the definition of "Excess
Cash Flow" under the Senior Loan Agreement, or the percentages set forth in the
"Excess Cash Flow" recapture
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covenant in the Senior Loan Agreement, so as to increase the amount of the First
Lien Senior Secured Facility loans required to be prepaid therefrom, (f) the
advance rates as set forth in the Senior Loan Agreement, so as to increase the
amount of revolving loan availability under the Senior Loan Agreement.
SECTION 12.14 [Intentionally Deleted]
SECTION 12.15 Fiscal Year. Change the end of its fiscal year from
the Saturday nearest January 31 of each year.
SECTION 12.16 Limitation on Issuance of Capital Stock. Permit any
Subsidiary to issue any stock of such Subsidiary (except for the purpose of
qualifying directors and except for issuances of stock by foreign Subsidiaries
to other foreign Subsidiaries that are wholly-owned (other than directors'
qualifying shares), directly or indirectly, by the Borrower), except to the
Borrower or a wholly-owned Subsidiary Guarantor or to satisfy the rights of
minority shareholders to receive issuances of stock which are non-dilutive to
the Borrower and/or any Subsidiary.
SECTION 12.17 Limitation on Certain Restrictions on Subsidiaries.
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 Indebtedness 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 restrictions existing under or by
reason of (i) Applicable Laws, (ii) this Agreement and the other Loan Documents,
(iii) the Senior Loan Agreement and any Permitted Refinancing Indebtedness; (iv)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Borrower or a Subsidiary of the Borrower, and (v)
customary provisions restricting assignment of any licensing agreement entered
into by the Borrower or a Subsidiary of the Borrower in the ordinary course of
business.
ARTICLE 13
DEFAULT
SECTION 13.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any governmental or nongovernmental body:
(a) Default in Principal Payment. The Borrower shall default in any
payment of principal of or premium on any Loan or any Note when and as due
(whether at maturity, by reason of acceleration or otherwise).
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(b) Other Payment Default. The Borrower shall default in the
payment, as and when due, of interest on, or any other Secured Obligation, and
such default shall continue for a period of five days.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by the Borrower under this Agreement or any Loan Document, or any
amendment hereto or thereto, shall at any time prove to have been incorrect or
misleading in any material respect when made.
(d) Default in Performance. The Borrower shall default in the
performance or observance of any term, covenant, condition or agreement to be
performed by the Borrower, contained in this Agreement (other than as
specifically provided for otherwise in this Section 13.1) and such default shall
continue for a period of 30 days after the earlier of the date on which an
officer of the Borrower becomes aware of such default and written notice thereof
has been given to the Borrower by the Lenders.
(e) Indebtedness Cross-Default.
(i) The Borrower or any Subsidiary of the Borrower shall fail
to pay when due and payable the principal of or interest on any Indebtedness for
Money Borrowed (other than the Loans) in an amount in excess of $1,000,000, or
(ii) the maturity of any such Indebtedness for Money Borrowed
shall have been accelerated in accordance with the provisions of any indenture,
contract or instrument providing for the creation of or concerning such
Indebtedness, or
(iii) any default shall have occurred and be continuing which
would permit any holder or holders of such Indebtedness for Money Borrowed, any
trustee or agent acting on behalf of such holder or holders or any other Person
so to accelerate such maturity, and the Borrower shall have failed to cure such
default prior to the expiration of any applicable cure or grace period, or
(iv) The Borrower and any Subsidiary of the Borrower shall
have, in the aggregate, more than $1,000,000 of accounts payable that are past
due by more than 60 days and that are not being disputed in good faith by the
Borrower or the applicable Subsidiary.
(f) Other Cross-Defaults. The Borrower or any of its Subsidiaries
shall default in the payment when due, or in the performance or observance, of
any obligation or condition of any agreement, contract or lease (other than this
Agreement, the Security Documents or any such agreement, contract or lease
relating to Indebtedness for Money Borrowed) if the existence of any such
defaults, singly or in the aggregate, could in the reasonable judgment of the
Lenders have a Materially Adverse Effect; provided, however, that for the
purposes of this provision where such a default could result only in a monetary
loss, a Material Adverse Effect shall not be deemed to have occurred unless the
aggregate of such losses would exceed $1,000,000.
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(g) Voluntary Bankruptcy Proceeding. The Borrower or any of its
Subsidiaries shall (i) commence a voluntary case under the federal bankruptcy
laws (as now or hereafter in effect), (ii) file a petition seeking to take
advantage of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against the Borrower or any of its Subsidiaries in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower, any of its Subsidiaries or of all or any substantial part
of the assets, domestic or foreign, of the Borrower or any of its Subsidiaries,
and such case, proceeding or appointment shall continue undismissed or unstayed
for a period of 60 consecutive calendar days, or an order granting the relief
requested in such case or proceeding against the Borrower or any of its
Subsidiaries (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(i) Failure of Agreements. The Borrower shall challenge the validity
and binding effect of any provision of any Loan Document after delivery thereof
hereunder or shall state its intention to make such a challenge in writing, or
any Loan Document, after delivery thereof hereunder, shall for any reason
(except to the extent permitted by the terms thereof) cease to create a valid
and perfected first priority Lien (except for Permitted Liens) on, or security
interest in, any of the Collateral purported to be covered thereby.
(j) Judgment. One or more judgments or orders for the payment of
money in an amount that exceeds $500,000 individually or in the aggregate shall
be entered against the Borrower or any of its Subsidiaries by any court and such
judgments or orders shall continue undischarged or unstayed for 30 days.
(k) Attachment. One or more warrants or writs of attachment or
execution or similar process which exceeds $500,000 individually or in the
aggregate in value shall be issued against any property of the Borrower or any
of its Subsidiaries and such warrants or process shall continue undischarged or
unstayed for 30 days.
(l) Loan Documents. Any event of default under any Loan Document
shall occur or the Borrower shall default in the performance or observance of
any term, covenant, condition or agreement contained in, or the payment of any
other sum covenanted to be paid by the Borrower under, any Loan Document;
provided, however that no event of default under
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any Loan Document shall be deemed to have occurred until any notice required
under such Loan Document has been given and any grace period granted under such
Loan Document has expired.
(m) ERISA.
(i) Any Termination Event with respect to a Plan shall occur
that, after taking into account the excess, if any, of (A) the fair market value
of the assets of any other Plan with respect to which a Termination Event occurs
on the same day (but only to the extent that such excess is the property of the
Borrower) over (B) the present value on such day of all vested nonforfeitable
benefits under such other Plan, results in an Unfunded Vested Accrued Benefit in
excess of $0.00, or
(ii) any Plan shall incur an "accumulated funding deficiency"
(as defined in Section 412 of the Internal Revenue Code or Section 302 of ERISA)
for which a waiver has not been obtained in accordance with the applicable
provisions of the Internal Revenue Code and ERISA, or
(iii) the Borrower or any of its Subsidiaries is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from the Borrower's or any such Subsidiary's
complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA)
from such Multiemployer Plan.
(n) Change in Control. At any time after the Agreement Date, (i) a
Person or "group" of Persons (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder), shall acquire, beneficially or of record, 50% or more of the
outstanding voting stock (stock entitled to vote for election of directors
excluding rights subject to a contingency) 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 approved by a vote of a majority of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors of the Borrower, as the case
may be, then in office.
(o) Change in Management. For any reason the Borrower's chief
executive officer is no longer actively involved in such role, unless a
replacement reasonably satisfactory to the Required Lenders is appointed within
120 days.
(p) [Intentionally Deleted]
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SECTION 13.2 Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon the
occurrence of an Event of Default specified in Section 13.1(g) or (h), the
principal of and the interest on the Loans and any Note at the time outstanding,
and all other amounts owed to the Collateral Agent or the Lenders under this
Agreement or any of the Loan Documents and all other Secured Obligations, shall
thereupon become due and payable without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or any of the Loan Documents to the contrary notwithstanding.
(b) Other Remedies. If any Event of Default shall have occurred, and
during the continuance of any such Event of Default, the Required Lenders may,
in their sole and absolute discretion, declare the principal of and interest on
the Loans and any Note at the time outstanding, and all other amounts owed to
the Collateral Agent or the Lenders under this Agreement or any of the Loan
Documents and all other Secured Obligations, to be forthwith due and payable,
whereupon the same shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived,
anything in this Agreement or the Loan Documents to the contrary
notwithstanding. In addition, if any Event of Default, shall have occurred, and
during the continuance of any such Event of Default, the Collateral Agent shall,
at the direction of the Required Lenders:
(i) [Intentionally Deleted]
(ii) [Intentionally Deleted]
(iii) notify, or request the Borrower to notify, in writing or
otherwise, any Account Debtor or obligor with respect to any one or more of the
Receivables to make payment to the Collateral Agent for the benefit of the
Lenders, or any agent or designee of the Collateral Agent, at such address as
may be specified by the Collateral Agent and if, notwith standing the giving of
any notice, any Account Debtor or other such obligor shall make payments to the
Borrower, the Borrower shall hold all such payments it receives in trust for the
Collateral Agent, for the account of the Lenders, without commingling the same
with other funds or property of, or held by, the Borrower, and shall deliver the
same to the Collateral Agent or any such agent or designee of the Collateral
Agent immediately upon receipt by the Borrower in the identical form received,
together with any necessary endorsements;
(iv) settle or adjust disputes and claims directly with
Account Debtors and other obligors on Receivables for amounts and on terms which
the Collateral Agent considers advisable and in all such cases only the net
amounts received by the Collateral Agent, for the account of the Lenders, in
payment of such amounts, after deductions of costs and attorneys' fees, shall
constitute Collateral and the Borrower shall have no further right to make any
such settlements or adjustments or to accept any returns of merchandise;
(v) enter upon any premises in which Inventory or Equipment
may be located and, without resistance or interference by the Borrower, take
physical possession of
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any or all thereof and maintain such possession on such premises or move the
same or any part thereof to such other place or places as the Collateral Agent
shall choose, without being liable to the Borrower on account of any loss,
damage or depreciation that may occur as a result thereof, so long as the
Collateral Agent shall act reasonably and in good faith;
(vi) require the Borrower to and the Borrower shall, without
charge to the Collateral Agent or any Lender, assemble the Inventory and
Equipment and maintain or deliver it into the possession of the Collateral Agent
or any agent or representative of the Collateral Agent at such place or places
as the Collateral Agent may designate and as are reasonably convenient to both
the Collateral Agent and the Borrower;
(vii) at the expense of the Borrower, cause any of the
Inventory and Equipment to be placed in a public or field warehouse, and the
Collateral Agent shall not be liable to the Borrower on account of any loss,
damage or depreciation that may occur as a result thereof, so long as the
Collateral Agent shall act reasonably and in good faith;
(viii) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of the Borrower's premises
and, without breach of the peace, until the Collateral Agent, on behalf of the
Secured Creditors, completes the enforcement of its rights in the Collateral,
take possession of such premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of the Borrower's
Equipment, for the purpose of (A) completing any work in process, preparing any
Inventory for disposition and disposing thereof, and (B) collecting any
Receivable, and the Collateral Agent for the benefit of the Lenders is hereby
granted a license or sublicense and all other rights as may be necessary,
appropriate or desirable to use the Proprietary Rights in connection with the
foregoing, and the rights of the Borrower under all licenses, sublicenses and
franchise agreements shall inure to the Collateral Agent for the benefit of the
Lenders (provided, however, that any use of any federally registered trademarks
as to any goods shall be subject to the control as to the quality of such goods
of the owner of such trademarks and the goodwill of the business symbolized
thereby);
(ix) exercise any and all of its rights under any and all of
the Security Documents;
(x) apply any Collateral consisting of cash to the payment of
the Secured Obligations as set forth herein or use such cash in connection with
the exercise of any of its other rights hereunder or under any of the Security
Documents;
(xi) establish or cause to be established one or more
lockboxes or other arrangement for the deposit of proceeds of Receivables, and,
in such case, the Borrower shall cause to be forwarded to the Collateral Agent,
on a daily basis, copies of all checks and other items of payment and deposit
slips related thereto deposited in such lockboxes, together with collection
reports in form and substance satisfactory to the Collateral Agent; and
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(xii) exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code and under any other Applicable Law,
including, without limitation, the right, without notice except as specified
below and with or without taking the possession thereof, to sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any
location chosen by the Collateral Agent, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Borrower agrees that, to
the extent notice of sale shall be required by law, at least 10 days notice to
the Borrower of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification, but
notice given in any other reasonable manner or at any other reasonable time
shall constitute reasonable notification. The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
SECTION 13.3 Application of Proceeds. Subject to the terms of the
Intercreditor Agreement, all proceeds from each sale of, or other realization
upon, all or any part of the Collateral following an Event of Default shall be
applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including reasonable attorneys'
fees of counsel to Collateral Agent and counsel to the Lenders,
(b) Second: to the payment of the Secured Obligations (with the
Borrower remaining liable for any deficiency) as set forth in Section 5.8(f),
(c) Third: the balance (if any) of such proceeds shall be paid to
the Borrower, subject to any duty imposed by law, or otherwise to whomsoever
shall be entitled thereto.
The Borrower shall remain liable and will pay, on demand, any deficiency
remaining in respect of the Secured Obligations, together with interest thereon
at a rate per annum equal to the highest rate then payable hereunder on such
Secured Obligations, which interest shall constitute part of the Secured
Obligations.
SECTION 13.4 Power of Attorney. In addition to the authorizations
granted to the Collateral Agent under Section 9.13 or under any other provision
of this Agreement or of any other Loan Document, during the continuance of an
Event of Default, the Borrower hereby irrevocably designates, makes, constitutes
and appoints the Collateral Agent (and all Persons designated by the Collateral
Agent from time to time) as the Borrower's true and lawful attorney, and agent
in fact, and the Collateral Agent, or any agent of the Collateral Agent, may,
without notice to the Borrower, and at such time or times as the Collateral
Agent or any such agent in its sole discretion may determine, in the name of the
Borrower, the Collateral Agent or the Lenders, (i) demand payment of the
Receivables, (ii) enforce payment of the Receivables by legal proceedings or
otherwise, (iii) exercise all of the Borrower's rights and remedies with
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respect to the collection of Receivables, (iv) settle, adjust, compromise,
extend or renew any or all of the Receivables, (v) settle adjust or compromise
any legal proceedings brought to collect the Receivables, (vi) discharge and
release the Receivables, or any of them, (vii) prepare, file and sign the name
of the Borrower on any proof of claim in bankruptcy or any similar document
against any Account Debtor, (viii) prepare, file and sign the name of the Bor
rower on any notice of Lien, assignment or satisfaction of Lien, or similar
document in connection with any of the Collateral, (ix) endorse the name of the
Borrower upon any chattel paper, document, instrument, notice, freight bill,
bill of lading or similar document or agreement relating to the Receivables, the
Inventory or any other Collateral, (x) use the stationery of the Borrower and
sign the name of the Borrower to verifications of the Receivables and on any
notice to the Account Debtors, (xi) open the Borrower's mail, (xii) notify the
post office authorities to change the address for delivery of the Borrower's
mail to an address designated by the Collateral Agent, and (xiii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Receivables, Inventory or other
Collateral to which the Borrower has access.
SECTION 13.5 Miscellaneous Provisions.
(a) Rights Cumulative. The rights and remedies of the Collateral
Agent and the Lenders under this Agreement, the Notes and each of the Loan
Documents shall be cumulative and not exclusive of any rights or remedies which
it or they would otherwise have. In exercising such rights and remedies the
Collateral Agent and the Lenders may be selective and no failure or delay by the
Collateral Agent or any Lender in exercising any right shall operate as a waiver
of it, nor shall any single or partial exercise of any power or right preclude
its other or further exercise or the exercise of any other power or right.
(b) Waiver of Marshaling. The Borrower hereby waives any right to
require any marshaling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this Article 13 or
elsewhere in this Agreement or in any of the Loan Documents shall be construed
as requiring or obligating the Collateral Agent, any Lender or any agent or
designee of the Collateral Agent or any Lender to make any demand, or to make
any inquiry as to the nature or sufficiency of any payment received by it, or to
present or file any claim or notice or take any action, with respect to any
Receivable or any other Collateral or the monies due or to become due thereunder
or in connection therewith, or to take any steps necessary to preserve any
rights against prior parties, and the Collateral Agent, the Lenders and their
agents or designees shall have no liability to the Borrower for actions taken
pursuant to this Article 13, any other provision of this Agreement or any of the
Loan Documents so long as the Collateral Agent or such Lender shall act
reasonably and in good faith.
(d) Appointment of Receiver. In any action under this Article 13,
the Collateral Agent shall be entitled during the continuance of an Event of
Default to the appointment of a receiver, without notice of any kind whatsoever,
to take possession of all or
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any portion of the Collateral and to exercise such power as the court shall
confer upon such receiver.
ARTICLE 14
ASSIGNMENTS
SECTION 14.1 Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Collateral Agent, all future holders of the
Notes, and their respective permitted successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Lender.
(b) Each Lender may, with the consent of the Borrower (whose consent
shall not be unreasonably withheld or delayed, and whose consent shall not be
required if an Event of Default exists), assign to one or more Eligible
Assignees all or a portion of its rights, obligations, interests, or rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Loans at the time owing to it and the Notes held by it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Lender's rights and obligations under
this Agreement, (ii) the amount of the Loan of the assigning Lender that is
subject to each such assignment shall in no event be less than $5,000,000,
unless (a) such assigning Lender holds less than $5,000,000 and is assigning all
of its Loan, or (b) such assignment is to another Lender, or (c) there is an
Event of Default under this Agreement, (iii) in the case of a partial
assignment, the amount of the Term Loans that is retained by the assigning
Lender shall in no event be less than $5,000,000, (iv) the parties to each such
assignment shall execute and deliver an Assignment and Acceptance, (v) such
assignment shall not, without the consent of the Borrower, require the Borrower
to file a registration statement with the Securities and Exchange Commission or
apply to or qualify the Loans or the Notes under the blue sky laws of any state,
and shall be made in compliance with all applicable securities laws, and (vi)
the representation contained in Section 14.2 hereof shall be true with respect
to any such proposed assignee. Upon such execution, delivery and acceptance,
from and after the effective date specified in each Assignment and Acceptance,
(x) the assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder, and (y) the Lender assignor thereunder shall, to the extent provided
in such assignment, be released from its obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value
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of this Agreement or any other instrument or document furnished pursuant hereto;
(ii) such Lender assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements delivered pursuant to
Section 11.1 and such other documents and information (including a copy of the
Intercreditor Agreement) as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Collateral Agent,
such Lender assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Collateral Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other Loan Documents as
are delegated to the Collateral Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) [Intentionally Deleted]
(e) Within five Business Days after receipt of notice, the Borrower
shall execute and deliver to the assigning Lender and Eligible Assignee Lender
in exchange for the surrendered Note or Notes a new Note or Notes to the order
of such Eligible Assignee in amounts equal to the Loans assigned to such
Eligible Assignee pursuant to such Assignment and Acceptance and a new Note or
Notes to the order of the assigning Lender in an amount equal to the Loan
retained by it hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes delivered to the assigning Lender. Each surrendered Note or Notes shall be
canceled and returned to the Borrower.
(f) Each Lender may sell participations to one or more Persons in
all or a portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Loans); provided, however, that (i)
such Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participant shall be entitled to the
benefit of the rights of set-off contained in this Agreement, and (iv) the
Borrower shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to its Loans and its Note and to approve any amendment,
modification, or waiver of any provision of this Agreement (other than
amendments, modifications, or waivers decreasing the amount of principal of or
the rate at which interest is
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payable on such Loans or Note, extending any scheduled principal payment date or
date fixed for the payment of interest on such Loans or Note).
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its Loans and
its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(h) Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this Section
14.1, disclose to the assignee, participant, proposed assignee or proposed
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided that, prior to any such disclosure,
each such assignee, proposed assignee, participant or proposed participant shall
agree with the Borrower or such Lender (which in the case of an agreement with
only such Lender, the Borrower shall be recognized as a third party beneficiary
thereof) to preserve the confidentiality of any confidential information
relating to the Borrower received from such Lender and shall use such
information solely for the purpose of effecting the proposed assignment or
participation and shall make no other use thereof.
SECTION 14.2 Representation of Lenders. Each Lender hereby
represents that it will make each Loan hereunder as a commercial loan for its
own account in the ordinary course of its business; provided, however, that
subject to Section 14.1 hereof, the disposition of the Notes or other evidence
of the Secured Obligations held by any Lender shall at all times be within its
exclusive control.
ARTICLE 15
COLLATERAL AGENT
SECTION 15.1 Appointment of Collateral Agent. Each of the Lenders
hereby irrevocably designates and appoints NationsBank, N.A. as the Collateral
Agent of such Lender under this Agreement and the other Loan Documents, and each
such Lender irrevocably authorizes Collateral Agent, as the Collateral Agent for
such Lender to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Collateral Agent by the terms of
this Agreement and such other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Collateral Agent
shall not have any duties or responsibilities, except those expressly set forth
herein and therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or the other Loan Documents or
otherwise exist against the Collateral Agent. Each of the Lenders expressly
acknowledges that the Collateral Agent is acting as agent solely with respect to
the Collateral and that the Collateral Agent is not acting as agent in any other
capacity.
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SECTION 15.2 Delegation of Duties. The Collateral Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Collateral Agent shall not
be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 15.3 Exculpatory Provisions. Neither the Collateral Agent
nor any of its trustees, officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (i) liable to any Lender (or any
Lender's participants) for any action lawfully taken or omitted to be taken by
it or such Person under or in connection with this Agreement or the other Loan
Documents (except for its or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any Lender (or any Lender's
participants) for any recitals, statements, representations or warranties made
by the Borrower or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Collateral Agent under or in
connection with, this Agreement or the other Loan Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the other Loan Documents or for any failure of the Borrower to
perform its obligations hereunder or thereunder. The Collateral Agent shall not
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower.
SECTION 15.4 Reliance by Collateral Agent. The Collateral Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the Collateral
Agent. The Collateral Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless such Note shall have been transferred in
accordance with Section 14.1. The Collateral Agent shall be fully justified in
failing or refusing to take any action under this Agreement and the other Loan
Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the Notes in accordance with a
request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
SECTION 15.5 Notice of Default. The Collateral Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Collateral Agent has received notice from a Lender
or the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The Collateral
Agent shall take such action with respect to such Default or Event
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of Default as shall be reasonably directed by the Required Lenders; provided
that unless and until the Collateral Agent shall have received such directions,
the Collateral Agent may (but shall not be obligated to) take such other action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
SECTION 15.6 Non-Reliance on Collateral Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Collateral Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Collateral
Agent hereinafter taken, including any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by the Collateral
Agent to any Lender. Each Lender represents to the Collateral Agent that it has,
independently and without reliance upon the Collateral Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Collateral Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. The Collateral Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Borrower which may come into the possession of the Collateral Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION 15.7 Indemnification. The Lenders agree to indemnify the
Collateral Agent in its capacity as such (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so), ratably
according to their respective Proportionate Share from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Collateral Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Collateral
Agent under or in connection with any of the foregoing; provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Collateral Agent's gross negligence or
willful misconduct or resulting solely from transactions or occurrences that
occur at a time after such Lender has assigned all of its interests, rights and
obligations under this Agreement pursuant to Section 14.1 or, in the case of a
Lender to which an assignment is made hereunder pursuant to Section 14.1, at a
time before such assignment. The agreements in this subsection shall survive the
payment of the
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Notes, the Secured Obligations and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 15.8 Collateral Agent in Its Individual Capacity. The
Collateral Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower and its Subsidiaries
as if the Collateral Agent were not the Collateral Agent hereunder.
SECTION 15.9 Successor Collateral Agent. The Collateral Agent may
resign as Collateral Agent upon five Business Days notice to the Lenders and the
Borrower; provided, however, that (a) if any obligations remain outstanding
under the First Lien Senior Secured Facility, the Collateral Agent may only
resign hereunder if the Collateral Agent, in its capacity as agent under the
Senior Loan Agreement, is resigning under the Senior Loan Agreement, and (b)
such resignation shall not take effect until a successor agent has been
appointed. If the Collateral Agent shall resign as collateral agent under this
Agreement and in its capacity as agent under the Senior Loan Agreement, the
Lenders agree that they shall appoint as successor collateral agent the
successor agent appointed by the Senior Lenders under the Senior Loan Agreement,
provided such successor is reasonably acceptable to the Lenders. If the
Collateral Agent shall resign as Collateral Agent under this Agreement after the
payment in full of all obligations under the First Lien Senior Secured Facility,
then the Required Lenders shall appoint from among the Lenders a successor
collateral agent for the Lenders which successor collateral agent, if it is
other than Foothill Capital Corporation, shall be approved by the Borrower
(which approval shall not be unreasonably withheld or delayed). Any successor
collateral agent shall succeed to the rights, powers and duties of the
Collateral Agent, and the term "Collateral Agent" shall mean such successor
collateral agent effective upon its appointment, and the former Collateral
Agent's rights, powers and duties as Collateral Agent shall be terminated,
without any other or further act or deed on the part of such former Collateral
Agent or any of the parties to this Agreement or any holders of the Notes. If
the Required Lenders have failed to appoint, or the Borrower has failed to
approve, a successor collateral agent within 30 days after the resignation
notice given by the Collateral Agent as provided above, then the Collateral
Agent shall be entitled to appoint a successor collateral agent from among the
Lenders, and no such approval of Borrower shall be required. The Collateral
Agent and the Borrower agree to enter into all instruments and agreements,
execute any documents, and take any other action reasonably required or
requested by such successor collateral agent to effect the transfer of all Liens
in favor of the Collateral Agent to the successor collateral agent, in all such
cases at the sole cost and expense of the Borrower. After any retiring
Collateral Agent's resignation hereunder as Collateral Agent, the provisions of
Article 15 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent under this Agreement.
SECTION 15.10 [Intentionally Deleted]
SECTION 15.11 [Intentionally Deleted]
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SECTION 15.12 Intercreditor Agreement. Each Lender expressly
acknowledges that it has received a copy of the Intercreditor Agreement and that
the Intercreditor Agreement contains, among other provisions, provisions
relating to the subordination of the Lenders' security interest in the
Collateral, and allowing the Senior Lenders to direct the Collateral Agent as to
certain actions with respect to the Collateral.
ARTICLE 16
MISCELLANEOUS
SECTION 16.1 Notices.
(a) Method of Communication. Except as specifically provided in this
Agreement or in any of the Loan Documents, all notices and the communications
hereunder and thereunder shall be in writing or by telephone, subsequently
confirmed in writing. Notices in writing shall be delivered personally or sent
by certified or registered mail, postage pre-paid, or by overnight courier,
telex or facsimile transmission and shall be deemed received in the case of
personal delivery, when delivered, in the case of mailing, when receipted for,
in the case of overnight delivery, on the next Business Day after delivery to
the courier, and in the case of telex and facsimile transmission, upon
transmittal.
(b) Addresses for Notices. Notices to any party shall be sent to it
at the following addresses, or any other address of which all the other parties
are notified in writing
If to the Borrower: Ithaca Industries, Inc.
Hwy. 268 West, P.O. Box 620
Wilkesboro, NC 28697
Attn.: Chief Financial Officer
Facsimile No.: 336-667-2979
If to the Collateral Agent: NationsBank, N.A.
Business Credit Division
600 Peachtree Street
13 Plaza
Atlanta, Georgia 30308
Attn.: John Bohan
Facsimile No.: 404-607-6437
If to a Lender: At the address of such Lender set forth on
the signature page hereof.
(c) [Intentionally Deleted]
SECTION 16.2 Expenses. The Borrower agrees to pay or reimburse on
demand all out-of-pocket costs and expenses reasonably incurred by the
Collateral Agent, including,
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without limitation, the reasonable fees and disbursements of outside counsel, in
connection with (a) the negotiation, preparation, execution, delivery,
administration, enforcement and termination of this Agreement and each of the
other Loan Documents, whenever the same shall be executed and delivered,
including, without limitation (i) the administration and interpretation of this
Agreement and the other Loan Documents; (ii) the costs and expenses of
appraisals of the Collateral; (iii) the costs and expenses of lien and title
searches and title insurance; (iv) the costs and expenses of environmental
reports with respect to the Real Estate; (v) taxes, fees and other charges for
recording the Mortgages, filing the Financing Statements and continuations, and
the costs and expenses of taking other actions to perfect, protect, and continue
the Security Interests (other than taxes based on gross receipts, income or
revenue); (b) the preparation, execution and delivery of any waiver, amendment,
supplement or consent by the Collateral Agent and the Lenders relating to this
Agreement or any of the Loan Documents; (c) sums paid or incurred to pay any
amount or take any action required of the Borrower under the Loan Documents that
the Borrower fails to pay or take; (d) costs of inspections and verifications of
the Collateral, including, without limitation, standard per diem fees charged by
the Collateral Agent for travel, lodging and meals for inspections of the
Collateral and the Borrower's operations and books and records by the Collateral
Agent's representatives and agents; (e) costs and expenses of preserving and
protecting the Collateral; and (f) consulting, after the occurrence of a
Default, with one or more Persons, including appraisers, accountants and
lawyers, concerning the value of any Collateral for the Secured Obligations or
the nature, scope or value of any right or remedy of the Collateral Agent or any
Lender hereunder or under any of the Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the fees
and disbursements of such Persons.
The Borrower further agrees to pay or reimburse on demand all costs
and expenses incurred by the Collateral Agent and Foothill Capital Corporation,
including, without limitation, the reasonable fees and disbursements of counsel,
experts and other consultants to the Collateral Agent and any Lender, in
connection with (a) the negotiation, preparation, execution, delivery,
administration, enforcement and termination of this Agreement and each of the
other Loan Documents whenever the same shall be executed and delivered, (b) any
Default or Event of Default or any modification, amendment, waiver,
restructuring or forbearance with respect to any of the Loan Documents in
connection with such Default or Event of Default, and (c) any actions taken to
obtain payment of the Secured Obligations, enforce the Security Interests, sell
or otherwise realize upon the Collateral, and otherwise enforce the provisions
of the Loan Documents, or to prosecute or defend any claim in any way arising
out of, related to or connected with, this Agreement or any of the Loan
Documents.
The foregoing shall not be construed to limit any other provisions
of the Loan Documents regarding costs and expenses to be paid by the Borrower.
The Borrower hereby authorizes the Senior Lenders, and NationsBank as their
agent, to debit the Borrower's Loan Accounts (as defined in the Senior Loan
Agreement) (by increasing the principal amount of the Revolving Credit Loan (as
defined in the Senior Loan Agreement)) in the amount of any such costs and
expenses owed by the Borrower when due; provided, however, debiting such Loan
Account shall not be deemed conclusive evidence of the accuracy of the cost or
expense so debited.
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SECTION 16.3 Stamp and Other Taxes. The Borrower will pay any and
all stamp, registration, recordation and similar taxes, fees or charges (other
than taxes based on gross receipts, income or revenue) and shall indemnify the
Collateral Agent and the Lenders against any and all liabilities with respect to
or resulting from any delay in the payment or omission to pay any such taxes,
fees or charges, which may be payable or determined to be payable in connection
with the execution, delivery, performance or enforcement of this Agreement and
any of the Loan Documents or the perfection of any rights or security interest
thereunder, including, without limitation, the Security Interest.
SECTION 16.4 Setoff. In addition to any rights now or hereafter
granted under Applicable Laws and not by way of limitation of any such rights,
during the continuance of any Event of Default, each Lender, any participant
with such Lender in the Loans and each Affiliate of each Lender are hereby
authorized by the Borrower at any time or from time to time, without notice to
the Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
indebtedness at any time held or owing by any Lender or any Affiliate of any
Lender or any participant to or for the credit or the account of the Borrower
against and on account of the Secured Obligations irrespective or whether or not
(a) the Collateral Agent or such Lender shall have made any demand under this
Agreement or any of the Loan Documents, or (b) the Collateral Agent or such
Lender shall have declared any or all of the Secured Obligations to be due and
payable as permitted by Section 13.2 and although such Secured Obligations shall
be contingent or unmatured.
SECTION 16.5 Litigation. THE BORROWER, THE COLLATERAL AGENT AND EACH
LENDER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION
MAY BE COMMENCED BY OR AGAINST THE BORROWER, THE COLLATERAL AGENT AND SUCH
LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF
OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE BORROWER AND
THE COLLATERAL AGENT OR ANY LENDER OF ANY KIND OR NATURE. THE BORROWER THE
COLLATERAL AGENT AND THE LENDERS HEREBY AGREE THAT THE FEDERAL COURT OF THE
NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE COLLATERAL AGENT OR ANY
LENDER, ANY COURT IN WHICH THE COLLATERAL AGENT OR SUCH LENDER SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER AND THE COLLATERAL AGENT
OR SUCH LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN
DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED
IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR
OTHER
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PROCESS OR PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE BORROWER AT THE ADDRESS OF THE BORROWER SET FORTH IN SECTION
16.1.
SECTION 16.6 Waiver of Rights. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH BORROWER HAS UNDER CHAPTER
14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR PROVISION OF
APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A
WRIT OF POSSESSION ENTITLING THE COLLATERAL AGENT OR ANY LENDER, OR THE
SUCCESSORS AND ASSIGNS OF THE COLLATERAL AGENT OR SUCH LENDER TO POSSESSION OF
THE COLLATERAL UPON EVENT OF DEFAULT. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT WHICH THE COLLATERAL AGENT OR THE
LENDERS MAY HAVE, THE BORROWER CONSENTS THAT IF THE COLLATERAL AGENT FILES A
PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH SECTIONS 44-
14-261 AND 44-14-262 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW, AND THIS WAIVER OR A COPY HEREOF IS ALLEGED IN SUCH
PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH SUCH PETITION IS FILED MAY
DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE FORTHWITH AN
IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE 44 OF THE
OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF
APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE
REQUIRED BY SECTION 44-14-263 OF THE OFFICIAL CODE OF GEORGIA OR BY ANY SIMILAR
PROVISION UNDER APPLICABLE LAW. THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS
READ AND FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT HEREOF.
SECTION 16.7 Consent to Advertising and Publicity. With the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, the Collateral Agent or the Lenders may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, including the name and address of the Borrower, the amount,
interest rate, maturity, collateral and a general description of the Borrower's
business.
SECTION 16.8 Reversal of Payments. The Collateral Agent and each
Lender shall have the continuing and exclusive right to apply, reverse and
re-apply any and all payments to any portion of the Secured Obligations in a
manner consistent with the terms of this Agreement. To the extent any payment or
proceeds of the Collateral for the Borrower's benefit, which payment(s) or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause,
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then, to the extent of such payment or proceeds received, the Secured
Obligations or part thereof intended to be satisfied shall be revived and
continued in full force and effect, as if such payment or proceeds had not been
received by such Lender.
SECTION 16.9 Injunctive Relief. The Borrower recognizes that, in the
event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to the Collateral Agent and the Lenders; therefore, the
Borrower agrees that if any Event of Default shall have occurred and be
continuing, the Collateral Agent and the Lenders, if the Collateral Agent or any
Lender so requests, shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages.
SECTION 16.10 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower to determine whether it is in compliance with any covenant contained
herein, shall, unless this Agreement otherwise provides or unless Required
Lenders shall otherwise consent in writing, be performed in accordance with
GAAP.
SECTION 16.11 Amendments; Waivers.
(a) Except as set forth in subsection (b) below, any term, covenant,
agreement or condition of this Agreement or any of the Loan Documents may be
amended or waived, and any departure therefrom may be consented to by the
Required Lenders, if, but only if, such amendment, waiver or consent is in
writing signed by the Required Lenders and, in the case of an amendment (other
than an amendment described in Section 16.11(d)), by the Borrower, and in any
such event, the failure to observe, perform or discharge any such term,
covenant, agreement or condition (whether such amendment is executed or such
waiver or consent is given before or after such failure) shall not be construed
as a breach of such term, covenant, agreement or condition or as a Default or an
Event of Default; provided that:
(i) [Intentionally Deleted]
(ii) [Intentionally Deleted]
(iii) without the written consent of the Collateral Agent, no
amendment or waiver shall be made to any provision of Article 15 as such
provisions apply to the Collateral Agent or to any other provision of any Loan
Document as such provisions relate to the rights and obligations of the
Collateral Agent,
(iv) without the written consent of the Supermajority Lenders,
no amendment or waiver of this Agreement or the other Loan Documents shall be
made in order to permit a Receivables securitization described in Section 16.24,
and
(v) [Intentionally Deleted].
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Unless otherwise specified in such waiver or consent, a waiver
or consent given hereunder shall be effective only in the specific instance and
for the specific purpose for which given. In the event that any such waiver or
amendment is requested by the Borrower, the Collateral Agent and the Lenders may
require and charge a fee in connection therewith and consideration thereof in
such amount as shall be determined by the Collateral Agent and the Required
Lenders in their discretion.
(b) Except as otherwise set forth in this Agreement, without the
prior unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall affect the amount or
extend the originally scheduled time or times of payment of the principal of any
Loan, or alter the time or times of payment of interest on any Loan or the
amount of the principal thereof or the rate of interest thereon or the amount of
any commitment fee payable hereunder, or permit any subordination of the
principal or interest on such Loan, or permit the subordination of the Security
Interests in any material Collateral (except as may occur as a result of a
transaction described in Section 16.24), or amend the provisions of Article 13
or of this Section 16.11(b),
(ii) [Intentionally Deleted]
(iii) no amendment shall be made to the definitions of
"Eligible Assignee", "Proportionate Share", "Ratable", "Required Lenders",
"Secured Obligations", or "Supermajority Lenders", and
(iv) neither the Collateral Agent nor any Lender shall consent
to any amendment to or waiver of the amortization, deferral or subordination
provisions of the Seller Subordinated Note or any other instrument or agreement
evidencing or relating to obligations of the Borrower that are expressly
subordinate to any of the Secured Obligations if such amendment or waiver would
be adverse to the Lenders in their capacities as Lenders hereunder;
provided, however, that anything herein to the contrary notwithstanding,
Required Lenders shall have the right to waive any Default or Event of Default
and the consequences hereunder of such Default or Event of Default provided only
that such Default or Event of Default does not arise under Section 13.1 (g) or
(h) or out of a breach of or failure to perform or observe any term, covenant or
condition of this Agreement or any other Loan Document (other than the
provisions of Article 13 of this Agreement) the amendment of which requires the
unanimous consent of the Lenders. The Required Lenders shall have the right,
with respect to any Default or Event of Default that may be waived by them, to
enter into an agreement with the Borrower providing for the forbearance from the
exercise of any remedies provided hereunder or under the other Loan Documents
without waiving any Default or Event of Default.
(c) The making of Loans hereunder by the Lenders during the
existence of a Default or Event of Default shall not be deemed to constitute a
waiver of such Default or Event of Default.
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(d) Notwithstanding any provision of this Agreement or the other
Loan Documents to the contrary, no consent, written or otherwise, of the
Borrower shall be necessary or required in connection with any amendment to
Article 15 or Section 5.7, and any amendment to such provisions shall be
effected solely by and among the Collateral Agent and the Lenders, provided that
no such amendment shall impose any obligation on the Borrower.
SECTION 16.12 Assignment. All the provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns, except that the Borrower may not
assign or transfer any of its rights under this Agreement, and except that
assignments of each Lender's rights under this Agreement shall be in accordance
with Section 14.1.
SECTION 16.13 Performance of Borrower's Duties.
(a) The Borrower's obligations under this Agreement and each of the
Loan Documents shall be performed by the Borrower at its sole cost and expense.
(b) If the Borrower shall fail to do any act or thing which it has
covenanted to do under this Agreement or any of the Loan Documents, then the
Lenders, may (but shall not be obligated to) cause it to be done by the
Collateral Agent (to the extent consistent with this Agreement) or do the same
in the name of the Lenders or in the name and on behalf of the Bor rower, and
the Borrower hereby irrevocably authorizes the Collateral Agent and Lenders so
to act.
SECTION 16.14 Indemnification. The Borrower agrees to reimburse the
Collateral Agent and the Lenders, and their Affiliates, agents, employees,
officers, directors, Subsidiaries, successors and assigns (the "Indemnitees"),
for all costs and expenses, including reasonable counsel fees and disbursements,
incurred, and to indemnify and hold the Indemnitees harmless from and against
all losses suffered by, any Indemnitee in connection with (i) the exercise by
any Indemnitee of any right or remedy granted to it under this Agreement or any
of the Loan Documents, (ii) any claim, and the prosecution or defense thereof,
arising out of or in any way connected with this Agreement or any of the Loan
Documents, including without limitation any claim relating to Environmental
Laws, (iii) the collection or enforcement of the Secured Obligations or any of
them, and (iv) any Acquisition or proposed Acquisition by the Borrower or any of
its Subsidiaries (including without limitation the Acquisition of the Acquired
Assets and any of the transactions contemplated thereby), other than such costs,
expenses and liabilities arising out of any Indemnitee's gross negligence or
willful misconduct.
SECTION 16.15 All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Collateral Agent and the
Lenders and any Persons designated by the Collateral Agent or the Lenders
pursuant to any provisions of this Agreement or any of the Loan Documents shall
be deemed coupled with an interest and shall be irrevocable so long as any of
the Secured Obligations remain unpaid or unsatisfied.
SECTION 16.16 Survival. Notwithstanding any termination of this
Agreement,
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(a) until all Secured Obligations have been irrevocably paid in full
or otherwise satisfied, the Collateral Agent, for the benefit of the Secured
Creditors, shall retain its Security Interest and shall retain all rights under
this Agreement and each of the Security Documents with respect to such
Collateral as fully as though this Agreement had not been terminated,
(b) the indemnities to which the Collateral Agent and the Lenders
are entitled under the provisions of this Article 16 and any other provision of
this Agreement and the Loan Documents (including Section 15.7) shall continue in
full force and effect and shall protect the Collateral Agent and the Lenders
against events arising after such termination as well as before, and
(c) in connection with the termination of this Agreement and the
release and termination of the Security Interests, the Collateral Agent, on
behalf of itself as agent and the Lenders, may require such assurances and
indemnities as it shall reasonably deem necessary or appropriate to protect the
Collateral Agent and the Lenders against loss on account of such release and
termination, including, without limitation, with respect to credits previously
applied to the Secured Obligations that may subsequently be reversed or revoked.
SECTION 16.17 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 16.18 Severability of Provisions. Any provision of this
Agreement or any Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 16.19 Governing Law. This Agreement and the Notes shall be
construed in accordance with and governed by the law of the State of Georgia
applicable to agreements made and to be performed entirely within such state.
SECTION 16.20 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 16.21 Reproduction of Documents. This Agreement, each of the
Loan Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Collateral Agent or any Lender, and (c)
financial statements, certificates and other information previously or hereafter
furnished to the Collateral Agent or any Lender, may be reproduced by the
Collateral Agent or such Lender by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Person may
destroy any original
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document so produced. Each party hereto stipulates that, to the extent permitted
by Applicable Laws, any such reproduction shall be as admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or not
the original shall be in existence and whether or not such reproduction was made
by the Collateral Agent or such Lender in the regular course of business), and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 16.22 Term of Agreement. This Agreement shall remain in
effect from the Agreement Date through the Termination Date and thereafter until
all Secured Obligations shall have been irrevocably paid and satisfied in full.
No termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 16.23 Pro-Rata Participation.
(a) Each Lender agrees that if, as a result of the exercise of a
right of setoff, banker's lien or counterclaim or other similar right or the
receipt of a secured claim it receives any payment in respect of the Secured
Obligations, it shall promptly notify the Collateral Agent and the other Lenders
thereof. If, as a result of such payment, such Lender receives a greater
percentage of the Secured Obligations owed to it under this Agreement than the
percentage received by any other Lender, such Lender shall purchase a
participation (which it shall be deemed to have purchased simultaneously upon
the receipt of such payment) in the Secured Obligations then held by such other
Lenders so that all such recoveries of principal and interest with respect to
all Secured Obligations owed to each Lender shall be pro rata on the basis of
its respective amount of the Secured Obligations owed to all Lenders, provided
that if all or part of such proportionately greater payment received by such
purchasing Lender is thereafter recovered by or on behalf of the Borrower from
such Lender, such purchase shall be rescinded and the purchase price paid for
such participation shall be returned to such Lender to the extent of such
recovery, but without interest.
(b) Each Lender which receives such a secured claim shall exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section 16.23 to share in the benefits
of any recovery on such secured claim.
(c) The Borrower expressly consents to the foregoing arrangements
and agrees that any holder of a participation in any Secured Obligation so
purchased or otherwise acquired may exercise any and all rights of banker's
lien, set-off or counterclaim with respect to any and all monies owing by the
Borrower to such holder as fully as if such holder were a holder of such Secured
Obligation in the amount of the participation held by such holder.
SECTION 16.24 Receivables Securitization. The Collateral Agent and
each of the Lenders hereby acknowledges that the Borrower is considering
entering into a securitization transaction with respect to its Receivables. The
Borrower hereby acknowledges that the consummation of such a securitization
transaction will require the prior written consent of the Supermajority Lenders.
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SECTION 16.25 Final Agreement. This Agreement and the other Loan
Documents are intended by the parties hereto as the final, complete and
exclusive expression of the agreement among them with respect to the subject
matter hereof and thereof. This Agreement and the other Loan Documents supersede
any and all prior oral or written agreements between the parties hereto relating
to the subject matter hereof and thereof.
SECTION 16.26 Waiver of Consequential Damages, Etc. THE BORROWER
AGREES NOT TO ASSERT ANY CLAIM AGAINST THE COLLATERAL AGENT, ANY LENDER, ANY OF
THEIR AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
ATTORNEYS AND COLLATERAL AGENTS, ON ANY THEORY OF LIABILITY, FOR INDIRECT OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN OR IN ANY OTHER LOAN DOCUMENT OR THE ACTUAL OR
PROPOSED USE OF THE PROCEEDS OF THE LOANS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers in several counterparts all as of
the day and year first written above.
BORROWER:
ITHACA INDUSTRIES, INC.
[Corporate Seal]
By: /s/ Richard P. Thrush
----------------------------
Attest: Name: Richard P. Thrush
Title: Senior V.P.
By: /s/ Carl L. Reisner
--------------------------
Name: Carl L. Reisner
Title: Asst. Secretary
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LENDERS:
FOOTHILL CAPITAL CORPORATION
By: /s/ Karen S. Sandler
----------------------------
Name: Karen S. Sandler
Title: V.P.
Address: 11111 Santa Monica Blvd.,
Suite 1500
Los Angeles, California 90025-3333
Attn.: Ms. Karen Sandler
Facsimile No.: (310) 478-8785
COLLATERAL AGENT:
NATIONSBANK, N.A.
By: /s/ Hilary C. Candela
----------------------------
Name: Hilary C. Candela
Title: Assistant Vice President
Address: 600 Peachtree Street, N.E.
13 Plaza
Atlanta, Georgia 30308
Attn.: Business Credit
Facsimile No.: 404-607-6437
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ANNEX II
Proportionate
Share of Term Loans
-------------------
Foothill Capital Corporation $15,000,000
Annex II
1
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EXHIBIT A-2
FORM OF TERM NOTE
US $___________ Date: March __, 1998
FOR VALUE RECEIVED, ITHACA INDUSTRIES,INC., a Delaware corporation (the
"Borrower") promises to pay to the order of _______________________
(hereinafter, together with any holder hereof, called "Holder"), at [ insert
address ] (or at such other place as the Holder may designate in writing to the
undersigned), the principal amount of $____________.
The Borrower shall pay the principal amount of this Note, and interest
thereon, as provided in that certain Loan and Security Agreement (as the same
may be amended, modified or supplemented from time to time, the "Loan
Agreement"), dated as of March 24, 1998, among the Borrower, the lenders party
thereto from time to time (the "Lenders") and NationsBank, N.A., as collateral
agent for the Lenders.
This Note is subject to the terms and conditions of the Loan Agreement.
This Note is entitled to the benefits of the Security Documents (as defined in
the Loan Agreement). The Loan Agreement contains provisions for the acceleration
of the maturity hereof upon the happening of certain stated events, and
provisions for voluntary and mandatory partial or full prepayments of this Note.
No delay or failure on the part of the Holder in the exercise of any right
or remedy hereunder, under the Loan Agreement or at law or in equity shall
operate as a waiver thereof, and no single or partial exercise by the Holder of
any right or remedy hereunder, under the Loan Agreement or at law or in equity
shall preclude or estop another or further exercise thereof or the exercise of
any other right or remedy.
Principal and interest on this Note shall be payable and paid in lawful
money of the United States of America.
The Borrower waives presentment, notice of dishonor and protest.
Time is of the essence of this Note and, in case this Note is collected by
law or through an attorney at law or under advice therefrom, the Borrower agrees
to pay all costs of collection, including reasonable attorneys' fees if
collected by or through an attorney.
Exhibit A-2
1
<PAGE>
The provisions of this Note shall be construed and interpreted and all
rights and obligations of the parties hereunder determined in accordance with
the laws of the State of Georgia.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
sealed in its corporate name, by and through its duly authorized officers, as of
the day and year first above written.
ITHACA INDUSTRIES, INC.
By: ___________________________
Name: _________________________
Title: ________________________
Attest: _______________________
Name: _________________________
Title: ________________________
[CORPORATE SEAL]
Exhibit A-2
2
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT AND ACCEPTANCE
________________, Assignee
Dated: ______________________, _____
Reference is made to the Loan and Security Agreement, dated as of
March ___, 1998 (as amended to the date hereof, the "Loan Agreement"), by and
among ITHACA INDUSTRIES, INC., a Delaware corporation (the "Borrower"), the
lenders party to the Loan Agreement from time to time (the "Lenders"), and
NATIONSBANK, N.A., a national banking association, as collateral agent for the
Lenders (the "Collateral Agent"). Terms used herein that are defined in the Loan
Agreement are used with the meanings therein ascribed to them.
____________________ (the "Assignor") and _________________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, without recourse
(except with respect to any representation of the Assignor expressly set forth
herein or in the Loan Agreement), an interest in and to such of the Assignor's
rights and obligations as a Lender under the Loan Agreement as of the Effective
Date (as hereinafter defined) as represent a ___% interest in and to all of the
outstanding rights and obligations of the Assignor outstanding on the Effective
Date, and such percentage interest in the Notes owing to the Assignor). The
Assignee shall have not interest in any interest that is payable with respect to
a period prior to the Effective Date.
2. The Assignor (i) represents that as of the date hereof, the
outstanding balance of its Term Loan is $__________, (unreduced by any
assignments thereof which have not yet become effective); (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto, other than that it is the legal and beneficial owner
of the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim, lien or encumbrance; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any Person or the performance or
observance by the Borrower or any other Person of any of its obligations under
the Loan Agreement or any other Loan Documents.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Loan Agreement, together with copies of the most
recent financial statements delivered pursuant to
Exhibit D
1
<PAGE>
Section 11.1 thereof and such other documents and information (including a copy
of the Intercreditor Agreement) as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (iii)
agrees that it will, independently and without reliance upon the Collateral
Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Agreement; (iv)
confirms that it is an Eligible Assignee; (v) appoints and authorizes the
Collateral Agent to take such action as collateral agent on its behalf and to
exercise such powers under the Loan Agreement as are delegated to the Collateral
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (vi) agrees that it will perform in accordance with their
terms all obligations which by the terms of the Loan Agreement are required to
be performed by it as a Lender; and (vii) specifies as its address for notices
the office set forth beneath its name on the signature pages hereof.
4. The effective date for this Assignment and Acceptance shall be
_________, _____ (the "Effective Date").
5. From and after the Effective Date, (i) the Assignee shall be a
party to the Loan Agreement and, to the extent provided in this Assignment and
Acceptance, shall have the rights and obligations of a Lender thereunder, and
(ii) Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Borrower shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees and other amounts) to
the Assignee. The Assignor and the Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date by the
Collateral Agent or with respect to the making of this Assignment and Acceptance
directly between themselves.
Exhibit D
2
<PAGE>
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of California, without
reference to any provision which would render such choice invalid.
ASSIGNOR:
By: ___________________________
Name: _________________________
Title: ________________________
ASSIGNEE:
By: ___________________________
Name: _________________________
Title: ________________________
Address:
_______________________________
_______________________________
Acknowledged this ____ day of
__________, 199__.
NATIONSBANK, N.A.,
as Collateral Agent
By: ___________________________
Name: _________________________
Title: ________________________
ITHACA INDUSTRIES, INC.,
a Delaware corporation
By: ___________________________
Name: _________________________
Title: ________________________
Exhibit D
3
Independent Auditors' Consent
The Board of Directors
Ithaca Industries, Inc.
We consent to incorporation by reference in the registration statement (No.
333-32429) on Form S-8 of Ithaca Industries, Inc. of our report dated March 27,
1998, relating to the consolidated balance sheets of Ithaca Industries, Inc. and
subsidiaries as of January 31, 1998 and February 1, 1997 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the year ended January 31, 1998; the 10-week period ended February 1,
1997; the 42-week period ended November 22, 1996; and the year ended February 2,
1996, and the related financial statement schedule, which report appears in the
January 31, 1998 annual report on Form 10-K of Ithaca Industries, Inc.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Atlanta, Georgia
April 30, 1998
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
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0
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