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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MAY 28, 1996
ANDOVER TOGS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-14674 13-5677957
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(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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ONE PENN PLAZA, NEW YORK, NEW YORK 10119
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 244-0700
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On May 28, 1996, the Registrant and its pre-existing bank lenders, Fleet Bank,
N.A. and Chemical Bank, entered into a Post-Petition Revolving Credit and
Security Agreement for Debtor-in-Possession financing through December 31, 1996.
The terms of this agreement were approved by the United States Bankruptcy Court
for the Southern District of New York under Case Nos. 96-B41437 through
B41440(TLB) in an Order dated May 21, 1996.
The facility provides the Registrant with an aggregate of up to $12.5 million,
consisting of up to $11.0 million of revolving credit (with a $3.0 million
sublimit for documentary letters of credit) and an additional amount up to $1.5
million in the event "cash equivalent" collateral is pledged by a third party
funder. Advances under the facility are based upon a borrowing base formula. The
facility is secured by substantially all of the assets of the Registrant and its
subsidiaries.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
Exhibit No.
10 Post-Petition Revolving Credit and Security Agreement among Chemical Bank
and Fleet Bank, N.A. as lenders, Fleet Bank, N.A. as agent and the
Registrant dated May 28, 1996.
99 Second Financing Order Approving Debtor-in-Possession Financing Facility
approved by the United States Bankruptcy Court for the Southern District of
New York under Case Nos. 96-B41437 through B41440(TLB) dated May 21, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 11, 1996
ANDOVER TOGS, INC.
/s/ WILLIAM L. COHEN
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William L. Cohen
Chairman of the Board, President
and Chief Executive Officer
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as ........................SS
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POST-PETITION
REVOLVING CREDIT
AND
SECURITY AGREEMENT
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CHEMICAL BANK,
FLEET BANK, N.A.
AS LENDERS
FLEET BANK, N.A., AS AGENT
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WITH
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ANDOVER TOGS, INC.
A Debtor and Debtor-in-Possession
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Dated as of
May 15, 1996
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Table of Contents
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I. DEFINITIONS.............................................................................. 2
1.1. Accounting Terms............................................................. 2
1.2. General Terms................................................................ 2
1.3. Uniform Commercial Code Terms................................................ 15
1.4. Certain Matters of Construction.............................................. 15
1.5. Use Restriction.............................................................. 15
II. ADVANCES, PAYMENTS....................................................................... 16
2.1. Revolving Advances........................................................... 16
2.2. Procedure for Revolving Advances Borrowing................................... 16
2.3. Disbursement of Advance Proceeds............................................. 17
2.4. Maximum Advances............................................................. 17
2.5. Repayment of Advances........................................................ 17
2.6. Repayment of Excess Advances................................................. 18
2.7. Statement of Account......................................................... 18
2.8. Letters of Credit............................................................ 18
2.9. Issuance of Letters of Credit................................................ 19
2.10. Requirements For Issuance of Letters of Credit............................... 19
2.11. Additional Payments.......................................................... 21
2.12. Manner of Borrowing and Payment.............................................. 21
2.13. Mandatory Prepayments........................................................ 23
III. INTEREST AND FEES........................................................................ 23
3.1. Interest..................................................................... 23
3.2. Letter of Credit Fees........................................................ 24
3.3. (a) Reserved............................................................. 24
(b) Facility Fee......................................................... 24
3.4. (a) Collateral Evaluation Fee............................................ 24
(b) Collateral Monitoring Fee............................................ 24
3.5. Computation of Interest and Fees............................................. 25
3.6. Maximum Charges.............................................................. 25
3.7. Increased Costs.............................................................. 25
3.8. Capital Adequacy............................................................. 26
3.9. Administrative Priority...................................................... 26
IV. COLLATERAL: GENERAL TERMS............................................................... 26
4.1. Security Interest in the Collateral.......................................... 27
4.2. Perfection of Security Interest.............................................. 27
4.3. Disposition of Collateral.................................................... 27
4.4. Preservation of Collateral................................................... 28
4.5. Ownership of Collateral...................................................... 28
4.6. Defense of Agent's and Lender's Interests.................................... 28
4.7. Books and Records............................................................ 29
4.8. Financial Disclosure......................................................... 29
4.9. Compliance with Laws......................................................... 30
4.10. Inspection of Premises....................................................... 30
4.11. Insurance.................................................................... 30
4.12. Failure to Pay Insurance..................................................... 31
4.13. Payment of Taxes............................................................. 31
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4.14. Payment of Leasehold Obligations............................................. 32
4.15. Receivables.................................................................. 32
(a) Nature of Receivables................................................ 32
(b) Solvency of Customers................................................ 32
(c) Locations of Debtor.................................................. 32
(d) Collection of Receivables............................................ 32
(e) Notification of Assignment of Receivables............................ 33
(f) Power of Agent to Act on Debtor's Behalf............................. 33
(g) No Liability......................................................... 34
(h) Establishment of a Lockbox Account,
Dominion Account..................................................... 34
(i) Adjustments.......................................................... 34
4.16. Inventory.................................................................... 34
4.17. Maintenance of Equipment..................................................... 34
4.18. Exculpation of Liability..................................................... 35
4.19. Environmental Matters........................................................ 35
4.20. Limitations on Financing Statements.......................................... 37
4.21. No Filings Required.......................................................... 37
4.22. Survival..................................................................... 38
V. REPRESENTATIONS AND WARRANTIES........................................................... 38
5.1. Authority.................................................................... 38
5.2. Formation and Qualification.................................................. 39
5.3. Reserved..................................................................... 39
5.4. Tax Returns.................................................................. 39
5.5. The Projections.............................................................. 39
5.6. Reserved .................................................................... 40
5.7. O.S.H.A. and Environmental Compliance........................................ 40
5.8. No Litigation, Violation, Indebtedness or Default............................ 40
5.9. Reserved..................................................................... 41
5.10. Licenses and Permits......................................................... 41
5.11. Reserved .................................................................... 41
5.12. Reserved .................................................................... 41
5.13. No Burdensome Restrictions................................................... 42
5.14. No Labor Disputes............................................................ 42
5.15. Margin Regulations........................................................... 42
5.16. Investment Company Act....................................................... 42
5.17. Disclosure................................................................... 42
5.18. Reserved ................................................................... 42
5.19. Conflicting Agreements....................................................... 42
5.20. Application of Certain Laws and Regulations.................................. 42
5.21. Business and Property of Debtor.............................................. 43
VI. AFFIRMATIVE COVENANTS.................................................................... 43
6.1. Payment of Fees.............................................................. 43
6.2. Conduct of Business and Maintenance of Existence
and Assets................................................................... 43
6.3. Violations................................................................... 43
6.4. Reserved..................................................................... 43
6.5. Reserved..................................................................... 43
6.6. Reserved..................................................................... 44
6.7. Reserved..................................................................... 44
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6.8. Reserved..................................................................... 44
6.9. Execution of Supplemental Instruments........................................ 44
6.10. Reserved..................................................................... 44
6.11. Reserved..................................................................... 44
6.12. Operating Account............................................................ 44
VII. NEGATIVE COVENANTS....................................................................... 44
7.1. Merger, Consolidation, Acquisition and Sale of
Assets....................................................................... 44
7.2. Creation of Liens............................................................ 44
7.3. Guaranties................................................................... 44
7.4. Investments.................................................................. 45
7.5. Loans........................................................................ 45
7.6. Capital Expenditures......................................................... 45
7.7. Dividends.................................................................... 45
7.8. Indebtedness................................................................. 45
7.9. Nature of Business........................................................... 46
7.10. Transactions with Affiliates................................................. 46
7.11. Leases....................................................................... 46
7.12. Subsidiaries................................................................. 46
7.13. Fiscal Year and Accounting Changes........................................... 46
7.14. Pledge of Credit............................................................. 47
7.15. Amendment of Articles of Incorporation, By-Laws.............................. 47
7.16. Compliance with ERISA........................................................ 47
7.17. Prepayment of Indebtedness................................................... 47
VIII. CONDITIONS PRECEDENT..................................................................... 47
8.1. Conditions to Initial Advances............................................... 47
(a) Note................................................................. 48
(b) Filings, Registrations and Recordings................................ 48
(c) Corporate Proceedings of Debtor...................................... 48
(d) Incumbency Certificates of Debtor.................................... 48
(e) Certificates......................................................... 48
(f) Good Standing Certificates........................................... 48
(g) Reserved............................................................. 48
(h) No Litigation........................................................ 49
(i) Fees................................................................. 49
(j) Insurance............................................................ 49
(k) Payment Instructions................................................. 49
(l) Reserved;............................................................ 49
(m) Consents............................................................. 49
(n) Bankruptcy Court Order............................................... 49
(o) Reserved............................................................. 49
(p) Reaffirmations....................................................... 49
(r) Other................................................................ 50
8.2. Conditions to Each Advance................................................... 50
(a) Representations and Warranties....................................... 50
(b) No Default........................................................... 50
(c) Bankruptcy Court Order............................................... 50
(d) Maximum Advances..................................................... 50
(e) Borrowing Base Certificate........................................... 51
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IX. INFORMATION AS TO DEBTOR................................................................. 52
9.1. Disclosure of Material Matters............................................... 52
9.2. Schedules.................................................................... 52
9.3. Reserved .................................................................... 52
9.4. Litigation................................................................... 52
9.5. Material Occurrences......................................................... 52
9.6. Reserved .................................................................... 53
9.7. Reserved .................................................................... 53
9.8. Reserved .................................................................... 53
9.9. Reserved .................................................................... 53
9.10. Financial Reports and Other Reports.......................................... 53
9.11. Additional Information....................................................... 53
9.12. Projected Operating Budget................................................... 53
9.13. ERISA Notices and Requests................................................... 53
9.14. Additional Documents......................................................... 54
X. EVENTS OF DEFAULT........................................................................ 54
XI. LENDERS' RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT...................................... 56
11.1. Rights and Remedies.......................................................... 56
11.2. Lender's Discretion.......................................................... 57
11.3. Setoff....................................................................... 58
11.4. Rights and Remedies not Exclusive............................................ 58
XII. WAIVERS AND JUDICIAL PROCEEDINGS......................................................... 58
12.1. Waiver of Notice............................................................. 58
12.2. Delay........................................................................ 58
12.3. Jury Waiver.................................................................. 58
XIII. EFFECTIVE DATE AND TERMINATION........................................................... 58
13.1. Term......................................................................... 58
13.2. Termination.................................................................. 59
XIV. REGARDING AGENT.......................................................................... 59
14.1. Appointment.................................................................. 59
14.2. Nature of Duties............................................................. 60
14.3. Lack of Reliance on Agent and Resignation.................................... 60
14.4. Reserved..................................................................... 60
14.5. Reserved..................................................................... 60
14.6. Reserved..................................................................... 60
14.7. Indemnification.............................................................. 60
14.8. Agent in its Individual Capacity............................................. 61
14.9. Reserved..................................................................... 61
14.10. Debtor's Undertaking to Agent................................................ 61
XV. MISCELLANEOUS............................................................................ 61
15.1. Governing Law................................................................ 61
15.2. Entire Understanding......................................................... 62
15.3. Successors and Assigns; Participations; New
Lenders...................................................................... 63
15.4. Application of Payments...................................................... 64
15.5. Indemnity.................................................................... 64
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15.6. Notice....................................................................... 64
15.7. Survival..................................................................... 65
15.8. Severability................................................................. 65
15.9. Expenses..................................................................... 66
15.10. Injunctive Relief............................................................ 66
15.11. Consequential Damages........................................................ 66
15.12. Captions..................................................................... 66
15.13. Counterparts; Telecopied Signatures.......................................... 66
15.14. Construction................................................................. 66
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REVOLVING CREDIT
AND
SECURITY AGREEMENT
Revolving Credit and Security Agreement dated as of May 15, 1996
between ANDOVER TOGS, INC., DEBTOR AND DEBTOR-IN-POSSESSION, CHEMICAL BANK and
FLEET BANK, N.A. f/k/a NATWEST BANK N.A., (collectively, the "Lenders" and
individually a "Lender") and FLEET BANK, N.A. ("Fleet"), a nationally charted
banking institution, as collateral agent for the Lenders (Fleet in such
capacity, the "Agent").
BACKGROUND
RECITALS
Andover Togs, Inc. (as in existence prior to the Chapter 11 Case
(as hereafter defined) referred to as "Debtor") and Lenders are parties to
various agreements, documents and instruments as more fully described in Exhibit
A attached hereto pursuant to which Debtor granted to Lenders and Agent for the
ratable benefit of Lenders a security interest in substantially all its personal
property and fixtures and a mortgage lien on real property located in Alabama as
more specifically set forth therein and in connection therewith Debtor executed
notes in favor of Lenders (collectively, "Original Notes" and together with all
such other documents, the "Pre-Petition Financing Agreements"). As of the Filing
Date (as hereinafter defined), pursuant to the Pre-Petition Financing
Agreements, Debtor was indebted to Lenders in the amount of $18,689,706.24 (the
"Pre-Petition Loans"). Each of Debtor's wholly owned subsidiaries, Springdale
Fashions, Inc. ("Springdale"), Tortoni Manufacturing Corp. ("Tortoni") and
Stonehenge Financial Corp ("Stonehenge") (each such entity a "Guarantor" and
collectively, the "Guarantors") guaranteed the repayment to Lenders of the
Pre-Petition Loans and executed security agreements in favor of Agent for the
ratable benefit of Lenders pursuant to which Guarantors granted security
interests in substantially all of its personal property (collectively, the
"Subsidiary Security Agreements") (the liens granted under the (i) Pre-Petition
Financing Agreements, and (ii) the Subsidiary Security Agreements shall
collectively be referred to as the "Pre-Petition Liens" and the collateral
pledged pursuant thereto is collectively referred to as the "Pre-Petition
Collateral").
On March 19, 1996 (the "Filing Date"), Debtor and the Guarantors
filed Petitions for Relief Under Chapter 11 of title 11 of the United States
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
Southern District of New York.
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Debtor is in need of financing in order to continue its
operations, and Debtor has requested that the Lenders make a credit facility
available to Debtor and Lenders are willing to do so on the terms and conditions
set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, Debtor and Lenders hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note (as
hereinafter defined), or any certificate, report or other document made or
delivered pursuant to this Agreement, accounting terms not defined in Section
1.2 or elsewhere in this Agreement and accounting terms partly defined in
Section 1.2 to the extent not defined, shall have the respective meanings given
to them under GAAP (as hereinafter defined); provided, however, whenever such
accounting terms are used for the purposes of determining compliance with
financial covenants in this Agreement, such accounting terms shall be defined in
accordance with GAAP applied in preparation of the audited financial statements
of Debtor for the fiscal year ended.
1.2 General Terms. For purposes of this Agreement the following
terms shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Advance Rates" shall have the meaning set forth in Section 2.1
hereof.
"Advances" shall mean and include the Revolving Advances, Letters
of Credit, Standby Letters of Credit, Airway Releases and Steamship Guaranties.
"Affiliate" of any Person shall mean any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote
10% or more of the securities having ordinary voting power for the election
of directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agreed Administrative Expense Priorities" shall mean with
respect to administrative expenses of the Debtors, the following order of
priority:
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first, all Obligations provided, however, if sufficient funds are
not otherwise available from the Debtor's estate, solely upon the (i) occurrence
of an Event of Default or (ii) expiration of the Term, funds shall be made
available by Lenders from the liquidation of the Collateral to pay (a) the
statutory fees of the United States Trustee pursuant to 28 U.S.C. SS.1930(a) and
(b) the reasonable fees and expenses of professionals retained by Debtors and
any Official Committee of Unsecured Creditors appointed pursuant to order of the
Bankruptcy Court in an aggregate amount not to exceed $1,000,000 exclusive of
any prepetition retainers but inclusive of the Carve-Out as set forth in the
First Financing Order (as hereinafter defined) plus all fees accrued by the
Professionals but unpaid upon the occurrence of an Event of Default up to a
maximum amount of an additional $800,000 for a total of $1,800,000 which fees
and expenses (i) have been approved by final order of the Bankruptcy Court and
(ii) were not incurred in connection with any challenge to the validity, extent,
priority, perfection and enforceability of the Pre-Petition Liens; provided,
however, that any investigation by the professionals retained by the unsecured
creditors' committee of the validity, extent, priority, perfection and
enforceability of the Pre-Petition Liens or Post-Petition Liens shall be
included in this carve-out; provided, further, so long as an Event of Default
has not occurred, Debtor shall be permitted to pay from availability under this
facility the fees and expenses of professionals during the Term as such may be
allowed and become due and payable by order of the Bankruptcy Court pursuant to
Bankruptcy Code SS.SS.330 and 331 and such payments shall not be applied against
the "Carve-Out" as defined in the Bankruptcy Court Order, and
second, all other allowed administrative expenses.
"Airway Releases" shall mean any airway release issued after the
Filing Date on behalf of the Debtors.
"Authority" shall have the meaning set forth in Section 4.19(d)
hereof.
"Bankruptcy Code" shall mean Title 11, United States Code.
"Bankruptcy Court" shall mean the United States Bankruptcy Court
for the Southern District of New York or such other court having jurisdiction
over Debtor's Chapter 11 Case.
"Bankruptcy Court Order" shall mean an order of the Bankruptcy
Court in the form of Exhibit 8.1(n) attached hereto and made a part hereof, as
the same may be amended, modified or supplemented from time to time with the
express written joinder or consent of Lenders approving this Agreement.
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"Borrowing Base Certificate" shall mean the borrowing base
certificate in the form attached hereto as Exhibit B.
"Business Day" shall mean any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. SS.SS.9601 et seq.
"Chapter 11 Case" shall mean Debtor's reorganization case under
chapter 11 of the Bankruptcy Code pending in the Bankruptcy Court.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property
taxes, custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, Debtor or any
Guarantors.
"Closing Date" shall mean the date on which the Bankruptcy Court
Order is entered or such other date as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated thereunder.
"Collateral" shall mean all property of the Debtor including but
not limited to:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all of Debtor's right, title and interest in and to (i)
its goods and other property including, but not
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limited to, all merchandise returned or rejected by Customers, relating to or
securing any of the Receivables; (ii) all of Debtor's rights as a consignor, a
consignee, an unpaid vendor, mechanic, artisan, or other lienor, including
stoppage in transit, setoff, detinue, replevin, reclamation and repurchase;
(iii) all additional amounts due to Debtor from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing the Obligations under this Agreement; (v) all of Debtor's
contract rights, rights of payment which have been earned under a contract
right, instruments, documents, chattel paper, warehouse receipts, deposit
accounts, money and securities; (vi) if and when obtained by Debtor, all real
and personal property of third parties in which Debtor has been granted a lien
or security interest as security for the payment or enforcement of Receivables;
and (vii) any other goods, personal property or real property now owned or
hereafter acquired in which Debtor has expressly granted a security interest or
may in the future grant a security interest to Agent hereunder, or in any
amendment or supplement hereto, or under any other agreement between Agent and
Debtor;
(g) all of Debtor's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by Debtor or in which it has an interest), computer programs,
tapes, disks and documents relating to clauses (a), (b), (c), (d), (e), (f),
(g), or (h) of this definition; and
(h) all claims against affiliates and subsidiaries and
recoveries from third parties (including without limitation, recoveries from
actions pursuant to Bankruptcy Code SS.SS.544 through and including 550, and
SS.553 but excluding any recovery from such actions against the Lenders); and
(i) all proceeds and products of the items specified in
clauses (a), (b), (c), (d), (e), (f), (g), (h) and (i) of this definition in
whatever form, including, but not limited to: cash, deposit accounts (whether or
not comprised solely of proceeds), certificates of deposit, insurance proceeds
(including but not limited to hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds;
subject to the limitation set forth in Section 4.1 hereof.
"Commitment Percentage" of any Lender shall mean the percentage
set forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof.
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"Committee Counsel" shall mean the counsel retained pursuant to
order of the Bankruptcy Court and Bankruptcy Code SS.1103, to represent any
Official Committee of Unsecured Creditors appointed in the Chapter 11 Case.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
Debtor's business, including, without limitation, any Consents required under
all applicable federal, state or other applicable law.
"Contract Rate" shall mean, as applicable, the Revolving Interest
Rate or the Default Rate.
"Controlled Group" shall mean all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Debtor, are treated as a single employer
under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect
to any Receivable and/or the prospective purchaser of goods, services or both
with respect to any contract or contract right, and/or any party who enters into
or proposes to enter into any contract or other arrangement with Debtor,
pursuant to which Debtor is to deliver any personal property or perform any
services.
"Debtor" shall have the meaning set forth in the Recitals to this
Agreement and shall extend to all permitted successors and assigns of Debtor.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Notice" shall mean the giving of notice to Debtor of an
Event of Default hereunder.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the symbol "$" shall mean lawful currency of the
United States of America.
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"Eligible Inventory" shall mean and include finished goods
Inventory (excluding work in process, piece goods and raw materials), valued at
the lower of cost or market value, determined on a first-in-first-out basis
after appropriate reserves determined in accordance with Debtor's normal
business practices.
"Eligible Receivables" shall mean each Receivable arising in the
ordinary course of Debtor's business. A Receivable shall not be deemed eligible
unless such Receivable is subject to Agent's perfected security interest and to
no other Lien other than Permitted Encumbrances, and is evidenced by an invoice
or other documentary evidence satisfactory to Agent. In addition, no Receivable
shall be an Eligible Receivable if:
(a) it arises out of a sale made by Debtor to an Affiliate of
Debtor or to a Person controlled by an Affiliate of Debtor;
(b) it is due or unpaid more than ninety (90) days after the
original invoice due date but not more than one hundred fifty (150) days after
the original invoice date;
(c) fifty percent (50%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing, provided,
however, a Receivable due from a Customer which was created subsequent to the
commencement of a case under Chapter 11 of the Bankruptcy Code by or against
that Customer shall not be deemed ineligible solely by virtue of this clause
(e);
(f) the sale is to a Customer whose place of business is outside
the continental United States of America, other than Hawaii, Puerto Rico and the
Virgin Islands, unless the sale is
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on letter of credit, guaranty or acceptance terms, in each case acceptable to
Agent in its reasonable discretion;
(g) the sale to the Customer is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(h) Reserved
(i) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them but only to the extent
that the aggregate face amount of the subject Receivables so owed exceed ten
percent (10%) of the aggregate amount of all of Debtor's Receivables (the
"Excess Receivables"), unless as to any such Excess Receivables Debtor assigns
its right to payment of such Receivable to Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41
U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable
statutes or ordinances;
(j) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the Customer or the services giving
rise to such Receivable have not been performed by Debtor or the Receivable
otherwise does not represent a final sale;
(k) Reserved
(l) the Receivable is subject to any offset, deduction, defense,
dispute arising out of non-product related claims for which additional
documentation is requested to the extent such dispute is not resolved within 150
days of the original invoice date or counterclaim or the Customer is also a
creditor or supplier or the Receivable is contingent in any respect or for any
reason;
(m) shipment of the merchandise or the rendition of services has
not been completed;
(n) to the extent any return, rejection or repossession of the
merchandise has occurred; or
(o) such Receivable is not payable to Debtor.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use,
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storage, treatment, generation, transportation, processing, handling, production
or disposal of Hazardous Substances and the rules, regulations, policies,
guidelines, interpretations, decisions, orders and directives of federal, state
and local governmental agencies and authorities with respect thereto.
"Equipment" shall mean and include all of Debtor's goods
(excluding Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery, apparatus,
motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories
and all replacements and substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Event of Default" shall mean the occurrence and continuance of
any of the events set forth in Article X hereof.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent.
"Filing Date" shall mean March 19, 1996.
"Formula Amount" shall have the meaning set forth in Section 2.1
hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include all of Debtor's
general intangibles, whether now owned or hereafter acquired, including, without
limitation, all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refunds, tax refund claims, computer programs, all claims
under guaranties, security interests or other security held by or granted to
Debtor to secure payment of any of the Receivables by a Customer, all rights of
indemnification
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and all other intangible property of every kind and nature (other than
Receivables).
"Governmental Body" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
"Guaranties" shall mean the guaranties of the obligations of
Debtor executed by the Guarantors in favor of the Lenders.
"Guarantors" shall have the meaning set forth in the Recitals to
this Agreement.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated byphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person (i) for borrowed money, (ii) for all guaranties,
(iii) for all indebtedness secured by a Lien on assets owned by such Person,
whether or not such indebtedness actually shall have been created, assumed or
incurred by such Person, (iv) with respect to capitalized lease Obligations and
(v) for reimbursement Obligations with respect to the Letters of Credit
including the Standby Letter of Credit, Steamship Guaranties and Airway
Releases. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
"Inventory" shall mean all of Debtor's now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials including piece goods,
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work in process, finished goods and materials and supplies of any kind, nature
or description which are or might be used or consumed in Debtor's business or
used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(ii) hereof.
"Lender" and "Lenders" shall have the meanings ascribed to such
terms in the Preamble to this Agreement and shall include each person which is a
transferee, successor or assign of any Lender or any Purchasing Lender.
"Letter of Credit Fees" shall have the meaning set forth in
Section 3.2 hereof.
"Letters of Credit" shall have the meaning set forth in Section
2.8 hereof.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the condition, operations, assets, business or prospects of the applicable
Person or Persons, (b) Debtor's ability to pay the Obligations in accordance
with the terms thereof, (c) the value of the Collateral, the Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Agent and Lenders' rights and remedies under this Agreement and
the Other Documents.
"Maximum Revolving Advance Amount" shall mean $11,000,000 or the
amount determined after any reduction pursuant to Section 2.13 hereof.
"Mortgage" shall mean the mortgage on the Real Property dated
March 8, 1996 securing the original principal amount of $1,400,000 together with
all extensions, renewals, amendments, supplements, modifications, substitutions
and replacements thereto and thereof.
"Net Cash Proceeds" shall mean the proceeds of the sale of
Non-Core Collateral net of all reasonable costs and
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expenses incurred in connection therewith, including but not limited to,
brokerage commissions, taxes otherwise senior to the lien of Lenders, and
discharge of liens otherwise senior to the lien of Lenders.
"Non-Core Collateral" shall have the meaning set forth in Section
2.13 hereof.
"Note" shall mean the Revolving Credit Notes.
"Obligations" shall mean and include any and all of Debtor's
Indebtedness and/or liabilities to Agent or the Lenders or any corporation that
directly or indirectly controls or is controlled by or is under common control
with any Lender (other than any existing creditor of the Debtors other then
Lenders) of every kind, nature and description, direct or indirect, secured or
unsecured, joint, several, joint and several, absolute or contingent, due or to
become due, now existing or hereafter arising, contractual, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of Debtor's
Indebtedness and/or liabilities under this Agreement, Bankruptcy Court Order,
the Pre-Petition Financing Agreement or under any other agreement between Agent
or the Lenders and Debtor and all obligations of Debtor to Agent or the Lenders
to perform acts or refrain from taking any action, except for the Debtor's
obligations in respect of the Industrial Revenue Bond relating to the Debtor's
Pisgah, Alabama facility.
"Other Documents" shall mean the Mortgage, the Note, and any and
all other agreements, instruments and documents, including, without limitation,
guaranties, pledges, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed by Debtor and/or delivered to Agent or any
Lender in respect of the transactions contemplated by this Agreement.
"Out-of-Pocket Expenses" shall have the meaning set forth in the
Bankruptcy Court Order.
"Overadvance Amount" shall mean an amount equal to the dollar
value of the Special Collateral up to an aggregate maximum principal amount of
$1,500,000 which may include the amount of any Overadvance that has been
collateralized by Special Collateral.
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly, at least 50% of the shares of stock or other
ownership interests having voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.
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"Participant" shall mean each Person who shall be granted the
right by any Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.
"Payment Office" shall mean initially 175 Water Street, New York,
New York 10038; thereafter, such other office of Agent, if any, which it may
designate by notice to Debtor and each Lender to be the Payment Office.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent
for the benefit of the Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Debtor; provided, that, such Lien shall have no effect on the priority
of the Liens in favor of Agent or the value of the assets in which Agent has
such a Lien and a stay of enforcement of any such Lien shall be in effect; (c)
Liens in existence on the Filing Date; (d) deposits or pledges to secure
obligations under worker's compensation, social security or similar laws, or
under unemployment insurance; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of Debtor's business; (f) judgment Liens that
have been stayed or bonded and mechanics', worker's, materialmen's or other like
Liens arising in the ordinary course of Debtor's business with respect to
obligations which are not due or which are being contested in good faith by
Debtor; (g) Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien shall not
encumber any other property of Debtor and (y) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases during
any fiscal year after the date hereof shall not exceed the amount provided for
in Section 7.6; (h) other Liens incidental to the conduct of Debtor's business
or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and which do not in the aggregate materially detract from Agent's rights in and
to the Collateral or the value of Debtor's property or assets or which do not
materially impair the use thereof in the operation of Debtor's business; and (i)
Liens disclosed on Schedule 1.2.
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
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"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Debtor or any member of the
Controlled Group or any such Plan to which Debtor or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Pre-Petition Loans" shall have the meaning set forth in the
Recitals to this Agreement.
"Prime Rate" shall mean the prime commercial lending rate of the
Agent as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by the Agent as
a means of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by the Agent to any particular class or
category of customers of the Agent.
"Purchasing Lender" shall have the meaning set forth in Section
15.3 hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. SS.SS. 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Debtor's right, title and
interest in and to the four pieces of real property located in Jackson County,
Alabama.
"Receivables" shall mean and include all of Debtor's accounts,
contract rights, instruments (including those evidencing indebtedness among
Debtor and its Affiliates), documents, chattel paper, general intangibles
relating to accounts, drafts and acceptances, and all other forms of obligations
owing to Debtor arising out of or in connection with the sale of Inventory in
the ordinary course of business or the rendition of services, all guarantees and
other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to the Agent
hereunder.
"Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(i) hereof.
"Related Person" shall mean as to any Person, any other Person
which, together with such Person, is treated as a single employer under Section
414(c) of the Code.
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
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"Required Lenders" shall mean Lenders holding one hundred percent
(100%) of the Advances.
"Revolving Advances" shall mean Advances other than Letters of
Credit, Standby Letter of Credit, Airway Releases and Steamship Guaranties.
"Revolving Credit Note" shall mean the promissory notes referred
to in Section 2.1 hereof.
"Revolving Interest Rate" shall mean an interest rate per annum
equal to the sum of the Prime Rate plus two percent (2%).
"Scottsboro Indenture" shall have the meaning set forth in
Section 4.1 of this Agreement.
"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Special Collateral" shall mean the cash, cash equivalents or
marketable securities at appropriate margin value for each such security based
on industry standards (which cash equivalents or marketable securities must be
reasonably satisfactory to Lenders in all respects) pledged by persons other
than the Debtor or the Guarantors as security for the Overadvance Amount and in
which Agent has obtained a first priority security interest for the ratable
benefit of the Lenders.
"Standby Letter of Credit" shall mean the Standby Letter of
Credit issued prior to the Filing Date but assumed and ratified by the Debtors
in the outstanding face amount of $610,000.
"Steamship Guaranties" shall mean any steamship guaranties issued
after the Filing Date on behalf of the Debtors.
"Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Term" shall mean the Closing Date through December 31, 1996, as
same may be extended in accordance with the provisions of Section 13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of either Debtor
or any member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a
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"substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
providing of notice of intent to terminate a Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Plan or Multiemployer Plan; (v) any event or
condition (a) which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of either
Debtor or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on
the Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. SS.SS. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Transferee" shall have the meaning set forth in Section 15.3(b)
hereof.
"Week" shall mean the time period commencing with a Wednesday and
ending on the following Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and
defined in the Uniform Commercial Code as adopted in the State of New York shall
have the meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include the
plural and vice versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations. All
references to any instruments or agreements, including, without limitation,
references to any of the Other Documents shall include any and all modifications
or amendments thereto and any and all extensions or renewals thereof.
1.5. Use Restriction. Advances made available to the Debtor shall
be used to refinance all Indebtedness owed to the Lenders under the Pre-Petition
Financing Agreements and the First Financing Order (as defined in the Bankruptcy
Court Order) and for working capital purposes (which shall include payment of
the Agreed
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Administrative Expense Priorities) and not for any acquisitions or bulk asset
purchases outside the ordinary course of business without Lenders' prior written
consent.
II. ADVANCES, PAYMENTS.
2.1. Revolving Advances. Subject to the terms and conditions set
forth in this Agreement, each Lender, severally and not jointly, will make new
Revolving Advances to Debtor from time to time equal to such Lender's Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance Amount plus the
Overadvance Amount less the aggregate amount of outstanding Advances or (y) an
amount equal to the sum of:
(i) 85% ("Receivables Advance Rate") of Eligible Receivables,
plus
(ii) 50% ("Inventory Advance Rate"), of the value of the
Eligible Inventory (the Receivables Advance Rate and the
Inventory Advance Rate shall be referred to collectively, as
the "Advance Rates"); provided, however, the maximum amount
of outstanding Advances against Eligible Inventory (exclusive
of Eligible Inventory to be purchased pursuant to Letters of
Credit) shall not exceed $4,000,000 in the aggregate at any
one time, plus
(iii) the Overadvance Amount, plus
(iv) the product of (a) the aggregate amount of outstanding
documentary Letters of Credit issued with respect to the
purchase of Eligible Inventory multiplied by (b) the
Inventory Advance Rate, minus
(v) the aggregate amount of outstanding Advances.
The amount derived from the sum of Sections 2.1(i), (ii), (iii)
and (iv) at any time and from time to time shall be referred to as the "Formula
Amount". The Revolving Advances shall be evidenced by the secured promissory
notes ("Revolving Credit Notes") substantially in the form attached hereto as
Exhibit 2.1.
2.2. Procedure for Revolving Advances Borrowing.
Debtor must notify Agent prior to 11:30 a.m. (New York time)
on a Business Day of its request to incur, on that day, a Revolving Advance
hereunder. Should any amount required to be paid as interest hereunder, or as
fees or other charges under this Agreement or any other agreement with Agent or
Lenders, or with respect to any other Obligation including the Letters of Credit
become due, same shall be deemed a request for a Revolving Advance
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as of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other agreement
with Agent or Lenders, and such request shall be irrevocable.
2.3. Disbursement of Advance Proceeds. All Advances shall be
disbursed from whichever office or other place Agent may designate from time to
time and, together with any and all other Obligations of Debtor to Agent or
Lenders, shall be charged to Debtor's account on Agent's books. During the Term,
Debtor may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Debtor or deemed to have been requested by Debtor
under Section 2.2 hereof shall, with respect to requested Revolving Advances to
the extent the Lenders make such Revolving Advances, be made available to Debtor
on the day so requested by way of credit to Debtor's operating account at Fleet,
or such other bank as Debtor may designate following notification to Agent, in
federal funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested, be disbursed to Agent to be applied to
the outstanding Obligations giving rise to such deemed request.
2.4. Maximum Advances. The aggregate balance of Advances
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount plus the Overadvance Amount or (b) the Formula Amount.
2.5. Repayment of Advances.
(a) The Advances shall be due and payable in full on the last
day of the Term subject to earlier prepayment as herein provided.
(b) Debtor recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Debtor's account as
of the Business Day on which Agent receives those items of payment, Debtor
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by Agent on account of the Obligations within two (2)
business days of receipt unless otherwise returned for any reason except for any
payment from Walmart Stores, Inc. which shall be applied immediately. Agent is
not, however, required to credit Debtor's account for the amount of any item of
payment which is unsatisfactory to Agent in its reasonable business judgment and
Agent may charge Debtor's account for the amount of any item of payment which is
returned to Agent unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements
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shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York
Time) on the due date therefor in lawful money of the United States of America
in federal funds or other funds immediately available to Agent. Agent shall have
the right to effectuate payment on any and all Obligations due and owing
hereunder by charging Debtor's account or by making Advances as provided in
Section 2.2 hereof.
(d) Subject to the Bankruptcy Court Order, Debtor shall pay
principal, interest, and all other amounts payable hereunder, or under any Other
Documents, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
2.6. Repayment of Excess Advances. The aggregate balance of
Advances outstanding at any time in excess of (a) the sum of (i) the Maximum
Revolving Advance Amount and (ii) the Overadvance Amount or (b) the Formula
Amount, if any, (the "Overadvance") shall be immediately due and payable without
the necessity of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred. Debtor shall immediately notify Lenders of the
existence of any such Overadvances as soon as Debtor becomes aware such
Overadvance exists. The foregoing shall be subject to the right of Debtor to
deposit Special Collateral in an amount sufficient to secure the Overadvance to
cure any Default as provided in the Bankruptcy Court Order; provided, however,
in no event shall the aggregate balance of Advances outstanding at any time
exceed (a) the Maximum Revolving Advance Amount plus the Overadvance Amount or
(b) the Formula Amount.
2.7. Statement of Account. Agent shall maintain, in accordance
with its customary procedures, a loan account in the name of Debtor in which
shall be recorded the date and amount of each Advance made by Lenders and the
date and amount of each payment in respect thereof; provided, however, the
failure by Agent to record the date and amount of any Advance shall not
adversely affect Agent or any Lender. Each month, Agent shall send to Debtor a
statement showing the accounting for the Advances made, payments made or
credited in respect thereof, and other transactions between Lenders and Debtor,
during such month and shall include the interest rate applicable from time to
time during such period as well as the fees payable pursuant to Section 6.1,
hereof. The monthly statements shall be deemed correct and binding upon Debtor
in the absence of manifest error and shall constitute an account stated between
Lenders and Debtor unless Agent receives a written statement of Debtor's
specific exceptions thereto within thirty (30) days after such statement is
received by Debtor. The records of Agent with respect to the loan account shall
be prima facie evidence of the amounts of Advances and other charges thereto and
of payments applicable thereto; provided that the amount of Out-of-Pocket Costs
(as defined in the Bankruptcy Court Order) shall not
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be deemed payable unless and until they are payable under the terms of the
Bankruptcy Court Order.
2.8. Letters of Credit. Subject to the terms and conditions
hereof, Agent shall issue or cause the issuance of Letters of Credit or the
replacement or modification of the Standby Letter of Credit (together with the
outstanding letters of credit listed on Schedule A to the Bankruptcy Court Order
(as same may be modified by the Debtor) the "Letters of Credit") provided,
however, that Agent will not be required to issue or cause to be issued any
Letters of Credit, Standby Letter of Credit, Steamship Guaranties or Airway
Releases to the extent that the face amount of such Letters of Credit and
Standby Letter of Credit, Steamship Guaranties or Airway Releases would then
cause the Advances (with the requested Letter of Credit being deemed to be
outstanding for purposes of this calculation) to exceed the lesser of (x) the
sum of (i) the Maximum Revolving Advance Amount and (ii) the Overadvance Amount,
or (y) the Formula Amount. The maximum amount of outstanding Letters of Credit
(exclusive of the Standby Letter of Credit) and Steamship Guaranties and Airway
Releases shall not exceed Three Million Dollars ($3,000,000) in the aggregate at
any time. All disbursements or payments related to Letters of Credit shall be
deemed to be Revolving Advances and shall bear interest at the Revolving
Interest Rate; Letters of Credit that have not been drawn upon shall not bear
interest. Letters of Credit shall be subject to the terms and conditions set
forth in the Letter of Credit and Security Agreement attached hereto as Exhibit
2.9.
2.9. Issuance of Letters of Credit.
(a) Debtor may request Agent to issue or cause the issuance
of a Letter of Credit by delivering to Agent at the Payment Office, Agent's
standard form of Letter of Credit and Security Agreement together with Agent's
standard form of Letter of Credit Application (collectively, the "Letter of
Credit Application") completed to the satisfaction of Agent and paying all
appropriate fees as set forth in Section 3.2 hereof; and, such other
certificates, documents and other papers and information as Agent may reasonably
request.
(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than six (6) months
after such Letter of Credit's date of issuance and in no event later than the
last day of the Term. Each Letter of Credit Application and each Letter of
Credit shall be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
and any amendments or revision thereof and, to the extent not inconsistent
therewith, the laws of the State of New York.
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2.10. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit
Debtor shall indemnify, save and hold Agent and each Lender harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent and any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created for Debtor. Debtor shall be bound by Agent's or any
issuing or accepting bank's regulations and good faith interpretations of any
Letter of Credit issued or created for Debtor's account, although this
interpretation may be different from Debtor's own, and, neither Agent nor any
Lender, the bank which opened the Letter of Credit, nor any of its
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Debtor's instructions or those contained
in any Letter of Credit or of any modifications, amendments or supplements
thereto or in issuing or paying any Letter of Credit except for Agent's or any
Lender's or such correspondents' willful misconduct.
(b) Debtor shall authorize and direct any bank which issues a
Letter of Credit to name Debtor as the "Account Party" therein and to deliver to
Agent all instruments, documents, and other writings and property received by
the bank pursuant to the Letter of Credit and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit, and the application.
(c) In connection with all Letters of Credit issued or caused
to be issued by Agent under this Agreement, Debtor hereby appoints Agent, or its
designee, as its attorney, with full power and authority (i) to sign and/or
endorse Debtor's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Debtor's name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of Debtor or Lender or Lender's designee, and to sign
and deliver to Customs officials powers of attorney in the name of Debtor for
such purpose; and (iv) to complete in Debtor's name or Agent's, or in the name
of Agent's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Agent nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Agent's or its
attorney's willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(d) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all disbursements made
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with respect to the Letters of Credit be deemed to have irrevocably purchased an
undivided participation in each Revolving Advance made as a consequence of such
disbursement. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of (i) the sum of (a) the Maximum Revolving Advance
Amount and (b) the Overadvance Amount or (ii) the Formula Amount and such
disbursement is not reimbursed by Debtor within two (2) Business Days, Agent
shall promptly notify each Lender and upon Agent's demand each Lender shall pay
to Agent such Lender's proportionate share of such unreimbursed disbursement
together with such Lender's proportionate share of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from Debtor of any amount disbursed by Agent for which Agent had
already been reimbursed by the Lenders, Agent shall deliver to each of the
Lenders that Lender's pro rata share of such repayment. Each Lender's
participation commitment shall continue until the last to occur of any of the
following events: (A) Agent ceases to be obligated to issue Letters of Credit
hereunder; (B) no Letter of Credit issued hereunder remains outstanding and
uncancelled or (C) all Persons (other than Debtor) have been fully reimbursed
for all payments made under or relating to Letters of Credit.
(e) Each Letter of Credit (except the Standby Letter of
Credit or any replacement or modification thereof) shall be issued solely for
the purchase of imported inventory and shall provide that airway bills shall be
consigned to Agent and that ocean bills of lading shall be consigned to the
order of Agent and the documents state that the goods subject to that Letter of
Credit will be delivered to a port in the United States.
2.11. Additional Payments. Any sums expended by Agent or any
Lender due to Debtor's failure to perform or comply with its obligations under
this Agreement or any Other Document including, without limitation, Debtor's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Debtor's account as a Revolving Advance and added to the Obligations.
2.12. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of the Lenders.
(b) Each payment (including each prepayment) by Debtor on
account of the principal of and interest on the Revolving Credit Note, shall be
applied to the Revolving Advances pro rata according to the Commitment
Percentages of the Lenders. Except as expressly provided herein or in the
Bankruptcy Court Order, all payments (including prepayments) to be made by
Debtor on account of principal, interest and fees shall be made without set-off
or counterclaim and shall be made to Agent on behalf of the Lenders to
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the Payment Office, in each case on or prior to 1:00 P.M., New York time, in
Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Section 2.13 hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Advances shall be advanced by Agent
and each payment by Debtor on account of Revolving Advances shall be applied to
those Revolving Advances made by Agent. On or before 1:00 P.M., New York time,
on each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and the Lenders shall make certain payments as follows: (I)
if the aggregate amount of new Revolving Advances made by Agent during the
preceding Week exceeds the aggregate amount of repayments applied to outstanding
Revolving Advances during such preceding Week, then each Lender shall provide
Agent with funds in an amount equal to its Commitment Percentage of the
difference between (w) such Revolving Advances and (x) such repayments and (II)
if the aggregate amount of repayments applied to outstanding Revolving Advances
during such Week exceeds the aggregate amount of new Revolving Advances made
during such Week, then Agent shall provide each Lender with its Commitment
Percentage of the difference between (y) such repayments and (z) such Revolving
Advances.
(ii) Each Lender shall be entitled to earn interest at
the Contract Rate on outstanding Revolving Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent
shall submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted Lender")
shall at any time receive any payment of all or part of its Advances, or
interest thereon, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily or by set-off) in a greater proportion than any
such payment to and Collateral received by any other Lender, if any, in respect
of such other Lender's Advances, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such benefitted Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Advances, or shall provide such other
Lender with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such Collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
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recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Debtor a corresponding amount. Agent will promptly notify Debtor of
its receipt of any such notice from a Lender. If such amount is made available
to Agent on a date after a Settlement Date, such Lender shall pay to Agent on
demand an amount equal to the product of (i) the daily average Federal Funds
Rate (computed on the basis of a year of 360 days) during such period as quoted
by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph (e) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to Revolving Advances hereunder, on demand
from Debtor; provided, however, that Agent's right to such recovery shall not
prejudice or otherwise adversely affect Debtor's rights (if any) against such
Lender.
2.13. Mandatory Prepayments.
Should Debtor or any Guarantor individually or collectively
sell or otherwise dispose of any Collateral (other than Receivables and Eligible
Inventory) ("Non-Core Collateral") in the ordinary course of business, Debtor
shall repay or cause such Guarantor to repay the then outstanding Advances in an
amount equal to the Net Cash Proceeds of such sale, such repayments to be made
promptly but in no event more than one (1) Business Day following receipt of
such Net Cash Proceeds, and until the date of payment, such proceeds shall be
held in trust for Lender. The foregoing shall not be deemed to be implied
consent to any such sale otherwise prohibited by the terms and conditions
hereof. Notwithstanding the foregoing, (i) the first $300,000 of such Net Cash
Proceeds shall be retained by Agent, not applied to the Obligations but held in
a separate interest bearing account to be held for application in payment of the
Carve-out as set forth in the Bankruptcy Court Order and (ii) one half of all
Net Cash Proceeds resulting from sales of Non-Core Collateral in excess of the
first $300,000 will be remitted to Agent for application to the Obligations and
to permanently reduce the Maximum Revolving Advance
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Amount and the balance will be used to reduce the Obligations but shall be
readvanced to the Debtors upon appropriate request provided that the Debtor is
entitled to a Revolving Advance under Section 2.1 hereof. Notwithstanding the
foregoing, to the extent that piece goods are sold in the ordinary course of
business up to $25,000 in the aggregate the Net Cash Proceeds of such Non-Core
Collateral shall not be applied to reduce the Maximum Revolving Advance Amount
nor applied to Section 2.13(i) above.
III. INTEREST AND FEES.
3.1. Interest. Interest on Revolving Advances shall be payable in
arrears on the last day of each month. Interest charges shall be computed on the
actual principal of Revolving Advances outstanding during the month (the
"Monthly Advances") at a rate per annum equal to the Revolving Interest Rate.
Whenever, subsequent to the date of this Agreement, the Prime Rate is increased
or decreased, the Revolving Interest Rate shall be similarly changed without
notice or demand of any kind by an amount equal to the amount of such change in
the Prime Rate during the time such change or changes remain in effect. Upon and
after the occurrence of an Event of Default, and during the continuation
thereof, the Obligations shall bear interest at the Revolving Interest Rate plus
two (2%) percent per annum (the "Default Rate").
3.2. Letter of Credit Fees.
Debtor shall pay to Agent or Lender (i) for the ratable
benefit of the Lenders (A) for issuing or causing the issuance of a replacement
or modification to the Standby Letter of Credit, a fee computed at the rate of
two (2%) percent per annum on the outstanding amount thereof payable quarterly
and (B) for issuing or causing the issuance of a Letter of Credit, a fee equal
to Seventy-Five Dollars ($75.00) per Letter of Credit plus a payment commission
equal to 1/4 of 1% of the payment amount of such letter of credit outstanding
from time to time (the fees set forth in (A) and (B) above referred to as the
"Letter of Credit Fees"), and (ii) Agent's or Lender's other customary charges
payable in connection with Letters of Credit as the case may be, as in effect
from time to time (which charges shall be furnished to Debtor by Agent upon
request). Such fees and charges shall be payable in the case of any Letter of
Credit, on its opening and at the time of each increase in payment amount
thereof. Any such charge in effect at the time of a particular transaction shall
be the charge for that transaction, notwithstanding any subsequent change in
Agent's prevailing charges for that type of transaction. All Letter of Credit
Fees payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or proration
upon the termination of this Agreement for any reason.
3.3. (a) Reserved
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(b) Facility Fee. Debtor shall pay a facility fee (i) in
equal monthly installments of $20,000.00 beginning August 1, 1996 through
November 1, 1996 plus (ii) $30,000.00 due on December 1, 1996.
3.4. (a) Collateral Evaluation Fee. Debtor shall pay Agent a
collateral evaluation fee equal to $1,500.00 per month commencing on the first
day of the month following the Closing Date and on the first day of each month
thereafter during the Term. The collateral evaluation fee shall be deemed earned
in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any
reason.
(b) Collateral Monitoring Fee. Debtor shall pay to Agent (for
the ratable benefit of Lenders) on the first day of each month, a collateral
monitoring fee in an amount equal to $750 per month, plus all costs and
disbursements reasonably incurred by Agent's employees in the performance of
such examination or analysis.
(c) In no event shall the fees described in clauses (a) and
(b) above exceed $2,250 per month except no such limitation shall be applicable
following acceleration of all sums due and owing hereunder and enforcement of
Lenders' remedies hereunder.
3.5. Computation of Interest and Fees. Interest and fees
hereunder shall be computed on the basis of a year of 360 days and for the
actual number of days elapsed. If any payment to be made hereunder becomes due
and payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the Revolving Interest Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that a court determines that Agent or any Lender
has received interest and other charges hereunder in excess of the highest rate
permissible hereto, such excess amount shall be first applied to any unpaid
principal balance owed by Debtor, and if the then remaining excess amount is
greater than the previously unpaid principal balance, the Lenders shall promptly
refund such excess amount to Debtor and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.7. Increased Costs. In the event that any applicable law,
treaty or governmental regulation, or any change therein or in the
interpretation or application thereof, or compliance by any Lender (for
purposes of this Section 3.7, the term "Lender" shall include Agent or any
Lender and any corporation or bank controlling
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Agent or any Lender) with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or other
authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or change the basis of taxation of
payments to Agent or any Lender of principal, fees, interest or any other amount
payable hereunder or under any Other Documents (except for changes in the rate
of tax on the overall net income of Agent or any Lender by the jurisdiction in
which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with
respect to this Agreement, any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Debtor shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be. Agent or such Lender shall certify
the amount of such additional cost or reduced amount to Debtor, and such
certification shall be conclusive absent manifest error.
3.8. Capital Adequacy.
(a) In the event that Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.8, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on Agent or any Lender's capital as a consequence of its obligations hereunder
to a level below that which Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into
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consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Debtor shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this Section
3.8 shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be reasonably necessary to compensate Agent or such
Lender with respect to Section 3.8(a) hereof when delivered to Debtor shall be
conclusive absent manifest error.
3.9. Administrative Priority. The Obligations shall constitute
allowed administrative expenses in the Chapter 11 Case having priority over all
administrative expenses, charges against property and unsecured claims against
Debtor, now existing or hereafter arising, of any kind or nature whatsoever,
including without limitation all administrative expenses or charges against
property of the kind specified in Sections 503(b), 506(c), 507(a) and 507(b) of
the Bankruptcy Code, subject, as to priority, only to allowed administrative
expenses having priority over the Obligations to the extent set forth in the
Agreed Administrative Expense Priorities.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, Debtor
hereby assigns, pledges and grants to Agent for the ratable benefit of each
Lender a continuing security interest in and to all of the Collateral whether
now owned or existing or hereafter acquired or arising and wheresoever located
subject only to valid liens (i) otherwise senior to Lenders as of the Filing
Date except that with respect to the assets which secured that Mortgage and
Indenture of Trust dated as of April 1, 1989 between the Industrial Development
Board of the City of Scottsboro, Alabama and South Trust Bank of Alabama,
National Association, as Trustee (the "Scottsboro Indenture"), as to which
assets Lenders shall only receive a security interest in the proceeds, if any,
of such asset which exceed the amount required to retire indebtedness secured by
such assets, and (ii) not subject to avoidance by a trustee under the Bankruptcy
Code.
Debtor shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
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4.2. Perfection of Security Interest. Debtor shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may reasonably specify, and stamping or marking, in such manner as
Agent may reasonably specify, any and all chattel paper, instruments, letters of
credits and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into lockbox and other custodial arrangements
reasonably satisfactory to Agent, and (v) executing and delivering financing
statements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance reasonably satisfactory to Agent, relating to the
creation, validity, perfection, maintenance or continuation of Agent's security
interest under the Uniform Commercial Code or other applicable law. All charges,
expenses and fees Agent may incur in doing any of the foregoing, and any local
taxes relating thereto, shall be charged to Debtor's account as a Revolving
Advance and added to the Obligations.
4.3. Disposition of Collateral. Debtor will safeguard and protect
all Collateral and make no disposition thereof whether by sale, lease or
otherwise except (a) the sale of Inventory in the ordinary course of business,
(b) upon the written consent of the Lender or (c) pursuant to order of the
Bankruptcy Court on notice to Lender.
4.4. Preservation of Collateral. Following the occurrence of an
Event of Default but only so long as the Event of Default is continuing in
addition to the rights and remedies set forth in Section 11.1 hereof, Agent: (a)
may at any time take such steps as Agent deems necessary to protect Agent's
interest in and to preserve the Collateral, including the hiring of such
security guards or the placing of other security protection measures as Agent
may reasonably deem appropriate; (b) may employ and maintain at any of Debtor's
premises a custodian who shall have full authority to do all acts necessary to
protect Agent's interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use any of
Debtor's owned or leased lifts, hoists, trucks and other facilities or equipment
for handling or removing the Collateral; and (e) shall have, and is hereby
granted, a right of ingress and egress to the places where the Collateral is
located, and may proceed over and through any of Debtor's owned or leased
property. Debtor shall cooperate fully with Agent's reasonable efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Agent reasonably may direct. Upon Debtor's receipt of reasonably
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detailed invoices therefor, Agent's expenses of preserving the Collateral,
including any expenses relating to the bonding of a custodian, shall be charged
to Debtor's account as a Revolving Advance and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at
the time the Collateral becomes subject to Agent's security interest: (a) Debtor
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first security interest in each and every item of the
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (b) each document
and agreement executed by Debtor or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all respects; (c)
all signatures and endorsements of Debtor that appear on such documents and
agreements shall be genuine and Debtor shall have full capacity to execute same;
and (d) Debtor's Equipment and Inventory shall be located as set forth on
Schedule 4.5 and shall not be removed from such location(s) without the prior
written consent of Agent except with respect to the sale of Inventory in the
ordinary course of business and the sale of Equipment to the extent permitted in
Section 4.3 hereof and the transfer of Equipment and Inventory in connection
with any relocation or consolidation of the Debtor's business operations. Debtor
shall provide Lenders with notification of any such relocation or consolidation.
4.6. Defense of Agent's and Lender's Interests. Until (a) payment
and performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect subject to the terms of this Agreement. During such period Debtor shall
not, except as provided in the Bankruptcy Court Order without Agent's prior
written consent or further order of the Bankruptcy Court, pledge, sell (except
Inventory in the ordinary course of business), assign, transfer, create or
suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in
any way except for Permitted Encumbrances, any part of the Collateral. Debtor
shall defend Agent's interests in the Collateral against any and all persons
whatsoever. Subject to the provisions of the Bankruptcy Court Order, at any time
following demand by Agent for payment of all Obligations, Agent shall have the
right to take possession of the indicia of the Collateral and the Collateral in
whatever physical form contained, including without limitation: labels,
stationery, documents, instruments and advertising materials. If Agent exercises
this right to take possession of the Collateral, Debtor shall, upon demand,
assemble it in the best manner possible and make it available to Agent at a
place reasonably convenient to Agent. In addition, with respect to all
Collateral, Agent and the Lenders shall be entitled, subject to the provisions
of the Bankruptcy Code and the Bankruptcy Court Order, to all of the rights and
remedies set forth herein and further provided by the
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Uniform Commercial Code or other applicable law. Debtor shall, and Agent may, at
its option, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent's order and if they shall come into Debtor's possession, they, and each of
them, shall be held by Debtor in trust as Agent's trustee, and Debtor will
immediately deliver them to Agent in their original form together with any
necessary endorsement.
4.7. Books and Records. Debtor (a) shall keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Debtor.
4.8. Financial Disclosure. Debtor hereby irrevocably authorizes
and directs all accountants and auditors employed by Debtor at any time during
the Term to exhibit and deliver to Agent and each Lender copies of any of
Debtor's financial statements, trial balances or other accounting records of any
sort in the accountant's or auditor's possession, and to disclose to Agent and
each Lender any information such accountants may have concerning Debtor's
financial status and business operations. Debtor hereby authorizes all federal,
state and municipal authorities to furnish to Agent and each Lender copies of
reports or examinations relating to Debtor, whether made by Debtor or otherwise;
however, Agent and each Lender will attempt to obtain such information or
materials directly from Debtor prior to obtaining such information or materials
from such accountants or such authorities. Agent will provide Debtor with one
business days prior notice of the exercise of its rights under this provision.
4.9. Compliance with Laws. Debtor shall comply in all material
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the Collateral or any
part thereof or to the operation of Debtor's business the non-compliance with
which might reasonably be expected to have a Material Adverse Effect on Debtor.
Debtor may, however, contest or dispute any acts, rules, regulations, orders and
directions of those bodies or officials in
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any reasonable manner, provided that any related lien is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of the
Lenders to protect Agent's Lien on or security interest in the Collateral. The
Collateral at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the Collateral
so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent and
each Lender shall have full access to and the right to audit, check, inspect and
make abstracts and copies from Debtor's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of Debtor's
business. Agent, any Lender and their agents may enter upon any of Debtor's
premises upon 30 hours prior notice at any time during business hours and at any
other reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of
Debtor's business. Agent, any Lender and their agents may be physically present
on Debtor's premises no more than one day each week for the purpose of
inspecting the Collateral and any and all records pertaining thereto and the
operation of Debtor's business and such reasonable period of time to conduct
periodic audits.
4.11. Insurance. Debtor shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At Debtor's own cost and
expense in amounts and with carriers acceptable to Agent, Debtor shall (a) keep
all its insurable properties and properties in which Debtor has an interest
insured against the hazards of fire, flood, sprinkler leakage, those hazards
covered by extended coverage insurance and such other hazards, and for such
amounts, as is customary in the case of companies engaged in businesses similar
to Debtor's including, without limitation, business interruption insurance;, (b)
maintain a bond in such amounts as is customary in the case of companies engaged
in businesses similar to Debtor's insuring against larceny, embezzlement or
other criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of Debtor either directly or through authority to draw upon such funds or
to direct generally the disposition of such assets; (c) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which Debtor is engaged in business; (e) furnish Agent with (i)
copies of all policies and evidence of the maintenance of such policies by the
renewal thereof at least thirty (30) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a) and (b) above,
and providing (A) that
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all proceeds thereunder shall be payable to Agent, (B) no such insurance shall
be affected by any act or neglect of the insured or owner of the property
described in such policy, and (C) that such policy and loss payable clauses may
not be cancelled, amended or terminated unless at least thirty (30) days' prior
written notice is given to Agent. In the event of any loss thereunder, the
carriers named therein hereby are directed by Agent and Debtor to make payment
for such loss to Agent and not to Debtor and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to Debtor and Agent
jointly, Agent may endorse Debtor's name thereon and do such other things as
Agent may deem advisable to reduce the same to cash. Agent is hereby authorized
to adjust and compromise claims under insurance coverage referred to in clauses
(a) and (b) above. All loss recoveries received by Agent upon any such insurance
shall be applied to the Obligations, as provided in Section 2.13 or otherwise
provided in this Agreement. Any surplus shall be paid by Agent to Debtor or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Debtor to Agent, on demand. Notwithstanding the foregoing or any
provision hereof to the contrary, nothing herein shall affect the rights of the
indenture trustee with respect to the Debtor's Pisgah, Alabama facility and
industrial development bond nor the rights of any personal injury claimant.
4.12. Failure to Pay Insurance. If Debtor fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor for Debtor's
account, and charge Debtor's account therefor and such expenses so paid shall be
part of the Obligations.
4.13. Payment of Taxes. Debtor will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Debtor or any of
the Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes. If any tax by any governmental authority
is or may be imposed on or as a result of any transaction between Debtor and
Agent or any Lender which Agent or any Lender may be required to withhold or pay
or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent's or
Lender's opinion, may possibly create a valid Lien on the Collateral, Agent may
without notice to Debtor pay the taxes, assessments or other Charges and Debtor
hereby indemnifies and holds Agent and each Lender harmless in respect thereof.
The amount of any payment by Agent under this Section 4.13 shall be charged to
Debtor's account as a Revolving Advance and added to the Obligations and, until
Debtor shall furnish Agent with an indemnity therefor (or supply Agent with
evidence satisfactory to Agent that due provision for the payment thereof has
been made), Agent may hold without interest
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any balance standing to Debtor's credit and Agent shall retain its security
interest in any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. To the extent required
under the Bankruptcy Code, Debtor shall at all times pay, when and as due, its
rental obligations under all leases under which it is a tenant, and shall
otherwise comply, in all material respects, with all other terms of such leases
and keep them in full force and effect and, at Agent's request, will provide
evidence of having done so. Nothing herein shall affect the rights of the Debtor
to reject any leases under the Bankruptcy Code.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Debtor, or work, labor or services theretofore
rendered by Debtor as of the date each Receivable is created. Same shall be due
and owing in accordance with Debtor's standard terms of sale without dispute,
setoff or counterclaim except as may be stated on the accounts receivable
schedules delivered by Debtor to Agent.
(b) Solvency of Customers. Except for Customers currently in
proceedings under Chapter 11 of the Bankruptcy Code, each Customer, to the best
of Debtor's knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is obligated in
full when due.
(c) Locations of Debtor. Debtor's chief executive office is
located at One Penn Plaza, 46th Floor, New York, New York 10119. Until written
notice is given to Agent by Debtor of any other office at which it keeps its
records pertaining to Receivables, all such records shall be kept at such
executive office.
(d) Collection of Receivables. Until Debtor's authority to do
so is terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default), Debtor will, at Debtor's sole cost and
expense, but on Agent's behalf and for Agent's account, collect in trust for
Agent all amounts received on Receivables, and shall not commingle such
collections with Debtor's funds or use the same except to pay Obligations and
deposit all such collections into the Depository Account. Debtor shall, upon
request, deliver to Agent or the Depository Account in original form and on the
date of receipt thereof, all checks, drafts, notes, money orders, acceptances,
cash
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and other evidences of Indebtedness resulting from the collection of
Receivables.
(e) Notification of Assignment of Receivables. At any time
following the occurrence of an Event of Default, Agent shall have the right to
send notice of the assignment of, and Agent's security interest in, the
Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall have the sole
right to collect the Receivables, take possession of the Collateral, or both.
Agent's actual collection expenses, including, but not limited to, stationery
and postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be charged to
Debtor's account and added to the Obligations.
(f) Power of Agent to Act on Debtor's Behalf. At any time
following the occurrence of an Event of Default, Agent shall have the right to
receive, endorse, assign and/or deliver in the name of Agent or Debtor any and
all checks, drafts and other instruments for the payment of money relating to
the Receivables, and Debtor hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed. Debtor hereby constitutes Agent or
Agent's designee as Debtor's attorney with power (i) to endorse Debtor's name
upon any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral; (ii) to sign Debtor's name on any invoice or bill of
lading relating to any of the Receivables, drafts against Customers, assignments
and verifications of Receivables; (iii) to send verifications of Receivables to
any Customer; (iv) to sign Debtor's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the Collateral and to file
same; (v) to demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or [otherwise; (vii) to exercise all of
Debtor's rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign Debtor's name on a
proof of claim in bankruptcy or similar document against any Customer; (xi) to
prepare, file and sign Debtor's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done in bad
faith or with gross (not mere) negligence; this power being coupled with an
interest is irrevocable while any of the Obligations remain unpaid. Agent shall
have the right at any time following the occurrence of an
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Event of Default, to change the address for delivery of mail addressed to Debtor
to such address as Agent may designate.
In the event that Agent takes any such action it shall advise the Debtor of all
receipts and maintain books and records relating thereto.
(g) No Liability. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom. Following the occurrence of an Event of
Default Agent may, without notice or consent from Debtor, sue upon or otherwise
collect, extend the time of payment of, compromise or settle for cash, credit or
upon any terms any of the Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof. Agent is
authorized and empowered to accept following the occurrence of an Event of
Default the return of the goods represented by any of the Receivables, without
notice to or consent by Debtor, all without discharging or in any way affecting
Debtor's liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All
proceeds of Collateral shall be remitted to a lockbox and then deposited into or
deposited by Debtor into a lockbox account with Agent ("Depository Account").
All funds deposited in such Depository Account shall immediately become the
property of Agent, subject to the Debtor's and Guarantors' rghts under the
Bankruptcy Court Order.
(i) Adjustments. Debtor will not, without Agent's consent,
compromise or adjust any Receivables for less than ninety- five (95%) percent of
the original invoice amount (or extend the time for payment thereof) or accept
any returns of merchandise or grant any additional discounts, allowances or
credits thereon except for those compromises, adjustments, returns, discounts,
credits and allowances as have been heretofore customary in the business of
Debtor.
4.16. Inventory. All Inventory has been, and will be, produced by
Debtor in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder to the extent
applicable.
4.17. Maintenance of Equipment. The Equipment shall be maintained
in good operating condition and repair (reasonable wear and tear excepted) and
all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved. Debtor shall not use or operate the Equipment in violation of any
law, statute, ordinance, code, rule or regulation.
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4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as Debtor's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of Debtor's obligations under any contract or agreement
assigned to Agent or such Lender, and neither Agent nor any Lender shall be
responsible in any way for the performance by Debtor of any of the terms and
conditions thereof.
4.19. Environmental Matters. Debtor will take reasonable steps to
ensure that the Real Property remains in compliance with all Environmental Laws
and it will not place or permit to be placed any Hazardous Substances on any
Real Property except as not prohibited by applicable law or appropriate
governmental authorities.
(b) Debtor will maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.
(c) Debtor will (i) employ in connection with its use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Debtor shall use its best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Debtor in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event Debtor obtains, gives or receives notice of
any Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or
Debtor's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person or entity, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Debtor
shall, within five (5) Business Days, give written notice of same to Agent
detailing facts
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and circumstances of which Debtor is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow Agent to protect its security interest in the Real Property and is not
intended to create nor shall it create any obligation upon Agent or any Lender
with respect thereto.
(e) Debtor shall promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by
Debtor to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between Debtor and the Authority regarding such claims to the
Lender until the claim is settled. Debtor shall promptly forward to Agent copies
of all documents and reports concerning a Hazardous Discharge at the Real
Property that Debtor is required to file under any Environmental Laws. Such
information is to be provided solely to allow Agent to protect Agent's security
interest in the Real Property and the Collateral.
(f) Debtor shall respond promptly to any Hazardous Discharge
or Environmental Complaint and take all reasonable steps necessary to safeguard
the health of any Person and to avoid subjecting the Collateral or Real Property
to any Lien. Subject to the rights of the Trustee under the Scottsboro
Indenture, if Debtor shall fail to respond promptly to any Hazardous Discharge
or Environmental Complaint or Debtor shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of the Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent's
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and the Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Revolving Advances shall be paid upon demand by Debtor, and
until paid shall be added to and become a part of the Obligations secured by the
Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender and Debtor.
(g) Promptly upon the reasonable written request of Agent
from time to time, Debtor shall provide Agent, at Debtor's expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a
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reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge shall be acceptable to Agent.
(h) Debtor shall defend and indemnify Agent and the Lenders
and hold Agent, the Lenders and their respective employees, agents, directors
and officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or the Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Debtor's obligations
under this Section 4.19 shall arise upon the discovery of the presence of any
Hazardous Substances at the Real Property, whether or not any federal, state, or
local environmental agency has taken or threatened any action in connection with
the presence of any Hazardous Substances. Debtor's obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Debtor's right, title and
interest in and to its owned and leased premises.
4.20. Limitations on Financing Statements. Except as respects the
financing statements filed by Agent and the financing statements described on
Schedule 1.2, no financing statement covering any of the Collateral or any
proceeds thereof is on file in any public office.
4.21. No Filings Required. The liens and security interests
referred to in this Agreement, and in the Other Documents shall be deemed valid
and perfected by entry of the Bankruptcy Court Order, which entry has duly
occurred. Agent shall not be required to file any financing statements,
mortgages, notices of lien or similar instruments in any jurisdiction or filing
office, or to take possession of any Collateral, or to take any other action in
order to validate or perfect the liens and security interests granted by or
pursuant to this Agreement, the Bankruptcy Court Order or any Other Document. If
Agent shall, in its sole discretion, from time to time choose to file such
financing
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statements, mortgages, notices of lien or similar instruments, take possession
of any Collateral, or take any other action to validate or perfect any such
security interests or liens, all such documents shall be deemed to have been
filed or recorded at the time and on the date of entry of the Bankruptcy Court
Order and such Liens and security interests in the Collateral shall be prior to
any other Liens and security interests, other than Permitted Senior Liens.
4.22. Survival. The liens, security interests, lien priorities,
administrative priorities and other rights and remedies granted to Agent
pursuant to this Agreement, the Bankruptcy Court Order and the Other Documents
(specifically including but not limited to the existence, perfection and
priority of the liens and security interests provided herein and therein, and
the administrative priority provided herein and therein) shall not be modified,
altered or impaired in any manner by any other financing or extension of credit
or incurrence of debt by Debtor (pursuant to Section 364 of the Bankruptcy Code
or otherwise), or by any dismissal or conversion of the Chapter 11 Case, or by
any other act or omission whatever. Without limitation, notwithstanding any such
order, financing, extension, incurrence, dismissal, conversion, act or omission:
(1) except for allowed administrative expenses having priority over
the Obligations to the extent set forth in the Agreed
Administrative Expense Priorities, no costs or expenses of
administration which have been or may be incurred in the Chapter 11
Case or any conversion of the same or in any other proceedings
related thereto, and no priority claims, are or will be prior to or
on a parity with any claim of Agent or Lenders against Debtor in
respect of any Obligation,
(2) the liens and security interests in favor of Agent set forth
herein, and in the Other Documents shall constitute valid and
perfected first priority liens and security interests and shall be
prior to all other liens and interests, now existing or hereafter
arising, in favor of any other creditor or any other Person
whatever, and
(3) the liens and security interests in favor of Agent set forth in
this Agreement and in the Other Documents shall continue valid and
perfected without the necessity that Agent file financing
statements or otherwise perfect its liens and security interests
under applicable nonbankruptcy law except, although Agent shall
have a valid security interest in and lien on the Collateral, the
foregoing provisions releasing Agent from any obligation to take
any action to perfect such security interest or lien by filings or
recordings shall not apply as to such Collateral as is or may
hereafter be located outside of the territorial limits of the
United States of America to the extent that the same
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may not be subject to the jurisdiction of the Bankruptcy Court.
V. REPRESENTATIONS AND WARRANTIES.
Debtor represents and warrants as follows:
5.1. Authority. Subject to the Bankruptcy Court Order, Debtor has
full power, authority and legal right to enter into this Agreement and the Other
Documents and perform all Obligations hereunder and thereunder. The execution,
delivery and performance hereof and of the Other Documents to which Debtor is a
party (a) are within Debtor's corporate powers, have been duly authorized, are
not in contravention of law or the terms of Debtor's by-laws, certificate of
incorporation or other applicable documents relating to Debtor's formation or to
the conduct of Debtor's business or of any material agreement or undertaking to
which Debtor is a party or by which Debtor is bound except as set forth in
Schedule 5.1 annexed hereto, and (b) will not conflict with nor result in any
breach in any of the provisions of or constitute a default under or result in
the creation of any Lien except Permitted Encumbrances upon any asset of Debtor
under the provisions of any agreement, charter document, instrument, by-law, or
other instrument to which Debtor or its property is a party or by which it may
be bound.
5.2. Formation and Qualification. Debtor is duly incorporated and
in good standing under the laws of the State of Delaware and is qualified to do
business and is in good standing in the states listed on Schedule 5.2 which
constitute all states in which qualification and good standing are necessary for
Debtor to conduct its business and own its property and where the failure to so
qualify might reasonably be expected to have a Material Adverse Effect on
Debtor. Debtor has delivered to Agent true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Agent of any
amendment or changes thereto.
(b) The only Subsidiaries of Debtor are listed on Schedule
5.2.
5.3. Reserved.
5.4. Tax Returns. Debtor's federal tax identification number is
13-5671757. Debtor has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid all taxes, assessments, fees
and other governmental charges that are due and payable except any which are
contested. Federal, state and local income tax returns of Debtor have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending November 30, 1990. The provision for taxes on the books of
Debtor are adequate for all
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years not closed by applicable statutes, and for its current fiscal year, and
Debtor has no knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.
5.5. The Projections.
The Receipts and Disbursements Schedule prepared by the Debtors
for the period ending December 31, 1996 reflect, as of the date hereof, the
reasonable estimates of Debtor of the information projected therein, based on
the assumptions accompanying such projections which while subject to changing
conditions beyond Debtor's control are reasonable assumptions (a) predicated on
historical financial and operating results of the Debtor and (b) in light of
reasonably foreseeable business conditions.
5.6. Reserved
5.7. O.S.H.A. and Environmental Compliance.
(a) Debtor has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there are no outstanding citations, notices or orders of non-compliance
issued to Debtor or relating to its business, assets, property, leaseholds or
equipment under any such laws, rules or regulations.
(b) Debtor has been issued all required material federal,
state and local licenses, certificates or permits relating to all applicable
Environmental Laws.
(c) To Debtor's knowledge, except as disclosed on Schedule
5.7(c), there are no visible signs of releases, spills, discharges, leaks or
disposal (collectively referred to as "Releases") of Hazardous Substances at,
upon, under or within any Real Property or any premises leased by Debtor; there
are no underground storage tanks or polychlorinated biphenyls on the Real
Property or any premises leased by Debtor; neither the Real Property nor any
premises leased by Debtor has ever been used as a treatment, storage or disposal
facility of Hazardous Waste; and no Hazardous Substances are present on the Real
Property or any premises leased by Debtor, excepting such quantities as are
handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of Debtor or of its tenants.
5.8. No Litigation, Violation, Indebtedness or Default.
(a) Except as disclosed in Schedule 5.8(a), Debtor has no
pending or threatened litigation, arbitration, actions or
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proceedings which might reasonably be expected to have a Material Adverse Effect
on Debtor, or the ability of Debtor to perform this Agreement.
(b) Debtor is not in violation of any applicable statute,
regulation or ordinance in any respect which might reasonably be expected to
have a Material Adverse Effect on Debtor nor is Debtor in violation of any order
of any court, governmental authority or arbitration board or tribunal.
(c) Neither Debtor nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and Debtor and each member of
the Controlled Group has met all applicable minimum funding require- ments under
Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) neither Debtor nor any member
of the Controlled Group has incurred any liability to the PBGC other than for
the payment of premiums, and there are no premium payments which have become due
which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof or by the PBGC, and there is no occurrence which would cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Plan, (v) at this
time, the current value of the assets of each Plan equals or exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither
Debtor nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued
benefits and other liabilities, (vi) neither Debtor nor any member of the
Controlled Group has breached any of the responsibilities, obligations or duties
imposed on it by ERISA with respect to any Plan, (vii) neither Debtor nor any
member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which could
give rise to any such liability, (viii) neither Debtor nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged
in a "prohibited transaction" described in Section 406 of the ERISA or Section
4975 of the Code nor taken any action which would constitute or result in a
Termination Event with respect to any such Plan which is subject to ERISA, (ix)
Debtor and each member of the Controlled Group has made all contributions due
and payable by it with respect to each Plan, (x) there exists no event described
in Section 4043(b) of ERISA, for which the thirty (30) day notice period
contained in 29 CFR SS.2615.3 has not been waived, (xi) neither Debtor nor any
member of the Controlled Group has any fiduciary responsibility for investments
with respect to
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any plan existing for the benefit of persons other than employees or former
employees of Debtor and any member of the Controlled Group, and (xii) neither
Debtor nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980.
5.9. Reserved
5.10. Licenses and Permits. Except as set forth in Schedule 5.10,
Debtor (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits might reasonably be
expected to have a Material Adverse Effect on Debtor.
5.11. Reserved
5.12. Reserved
5.13. No Burdensome Restrictions. Debtor has not agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien which is not a Permitted Encumbrance.
5.14. No Labor Disputes. Debtor is not involved in any labor
dispute; there are no strikes or walkouts or union organization of any of
Debtor's employees threatened or in existence and no labor contract is scheduled
to expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. Debtor is not engaged, nor will it
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" within the respective meanings of each of the quoted terms under
Regulation U or Regulation G of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.
5.16. Investment Company Act. Debtor is not an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by Debtor in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith
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contains, to Debtor's knowledge, any untrue statement of a material fact or
omits to state any material fact necessary to make the statements herein or
therein not misleading in light of the circumstances in which they were made.
There is no fact known to Debtor or which reasonably should be known to Debtor
which Debtor has not disclosed to Agent in writing with respect to the
transactions contemplated by this Agreement which might reasonably be expected
to have a Material Adverse Effect on Debtor.
5.18. Reserved
5.19. Conflicting Agreements. Except as set forth on Schedule 5.1,
no provision of any mortgage, indenture, contract, agreement, judgment, decree
or order binding on Debtor or affecting the Collateral conflicts with, or
requires any Consent which has not already been obtained to, or would in any way
prevent the execution, delivery or performance of, the terms of this Agreement
or the Other Documents.
5.20. Application of Certain Laws and Regulations. Neither Debtor
nor any Subsidiary of Debtor is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services except any applicable usury or fraudulent conveyance statutes.
5.21 Business and Property of Debtor. Upon and after the Closing
Date, Debtor does not propose to engage in any business other than that business
which is presently being conducted and activities necessary to conduct such
business. On the Closing Date, Debtor will own or have the right to use all the
property and possess all of the rights and Consents necessary for the conduct of
the business of Debtor.
VI. AFFIRMATIVE COVENANTS.
Debtor shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and
customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge the account of Debtor for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working
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order and condition (reasonable wear and tear excepted and except as may be
disposed of in accordance with the terms of this Agreement), including, without
limitation, all licenses, patents, copyrights, design rights, tradenames, trade
secrets and trademarks and take all actions necessary to enforce and protect the
validity of any intellectual property right or other right included in the
Collateral; (b) keep in full force and effect its existence and comply in all
material respects with the laws and regulations governing the conduct of its
business where the failure to do so might reasonably be expected to have a
Material Adverse Effect on Debtor; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof where the failure to do so might reasonably be expected to
have a Material Adverse Effect on Debtor.
6.3. Violations. Promptly notify Agent in writing of receipt of
notice of any material violation of any law, statute, regulation or ordinance of
any Governmental Body, or of any agency thereof, applicable to Debtor which
might reasonably be expected to have a Material Adverse Effect on Debtor.
6.4. Reserved
6.5. Reserved
6.6. Reserved
6.7. Reserved
6.8. Reserved
6.9. Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.10. Reserved
6.11. Reserved.
6.12. Operating Account. During the Term of this Agreement, Debtor
shall and shall cause each Guarantor to maintain at Agent all of their principal
operating accounts and cash management facilities or provide Lenders with a
complete listing of all other existing accounts maintained by Debtor or such
Guarantor and notify Lender immediately of the establishment of any additional
accounts; provided further, that these accounts
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maintained by Debtor or the Guarantors shall be utilized by Debtor or the
Guarantors in the normal course of their business.
VII. NEGATIVE COVENANTS.
Debtor shall not, from and after the date hereof until
satisfaction in full of the Obligations and termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person (other than a Guarantor) or acquire
all or a substantial portion of the assets or stock of any Person (other than a
Guarantor) or permit any other Person (other than a Guarantor) to consolidate
with or merge with it except to the extent approved by order of the Bankruptcy
Court.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business or subject
to order of the Bankruptcy Court.
7.2. Creation of Liens. Create or suffer to exist any Lien or
transfer upon or against any of its property or assets now owned or hereafter
acquired, except Permitted Encumbrances.
7.3. Guaranties. Become liable upon the obligations of any Person
by assumption, endorsement or guaranty thereof or otherwise (other than to
Lenders) except (a) as disclosed on Schedule 7.3, and (b) the endorsement of
checks in the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or
any other interest in, any Person, except (a) obligations issued or guaranteed
by the United States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency; (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof; and (e) as permitted by SS.354 of the Bankruptcy Code.
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7.5. Loans. Make advances, loans or extensions of credit to any
Person, including without limitation, any Parent, Subsidiary or Affiliate except
with respect to (a) the extension of commercial trade credit in connection with
the sale of Inventory in the ordinary course of its business, (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $25,000 at any time outstanding and (c) advances for travel and related
expenses incurred in the ordinary course of business.
7.6. Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including capitalized
leases) during the term in an amount in excess of $250,000; provided, however,
that if any capital asset is destroyed or otherwise damaged and the Debtor
receives insurance proceeds for said casualty then the Debtor may replace such
capital asset (provided there is availability under this Agreement) with a
similar or like item without reducing the cap on capital expenditures set forth
in this paragraph; provided, however, that if the costs of the similar or like
items exceeds the amount of the insurance proceeds received by the Debtor for
said item, the excess shall be charged to the cap for capital expenditures set
forth in this paragraph.
7.7. Dividends. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of Debtor (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of Debtor.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of Debtor except in respect of
Indebtedness to Lenders; Indebtedness incurred for capital expenditures
permitted under Section 7.6 hereof; Indebtedness listed on the schedules and
statements filed by Debtor in the Chapter 11 Case and Indebtedness listed on
Schedule 5.1 annexed hereto.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.10. Transactions with Affiliates. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate, except transactions in the
ordinary course of business,
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on an arm's-length basis on terms no less favorable than terms which would have
been obtainable from a Person other than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $400,000 in any one fiscal year; provided, however, the
Debtor shall be permitted to renegotiate or renew leases existing as of the
Filing Date or enter into new leases subsequent to the date hereof for items in
replacement of or substantially similar to the items leased prior to the Filing
Date for an amount not exceeding the amount of the existing leases for such
items without affecting the limitation set forth herein; provided, further that
any renegotiated, renewed or new lease entered into by the Debtor as set forth
in the preceding sentence that is in excess of the annual lease obligations for
the same or similar items will have that excess charged to the $400,000 cap set
forth in this paragraph 7.11 hereof; provided, however, that if any leased asset
is destroyed or otherwise damaged then the Debtor may replace such leased asset
(provided there is availability under this Agreement) with a similar or like
item at the same cost without reducing the cap on leases set forth in this
paragraph; provided, however, that if the annual lease obligations for such
replacement assets exceeds the prior lease obligation the excess shall be
charged to the cap set forth in this section.
7.12. Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year
from November 30th or make any significant change (i) in accounting treatment
and reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law.
7.14. Pledge of Credit. Now or hereafter pledge any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Debtor's business as conducted on the
date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend,
modify or waive any term or material provision of its Articles of Incorporation
or By-Laws unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any
member of the Controlled Group to maintain, or (y) become
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obligated to contribute, or permit any member of the Controlled Group to become
obligated to contribute, to any Plan, other than those Plans disclosed on
Schedule 5.8(d); (ii) engage, or permit any member of the Controlled Group to
engage, in any non-exempt "prohibited transaction", as that term is defined in
section 406 of ERISA and Section 4975 of the Code; (iii) incur, or permit any
member of the Controlled Group to incur, any "accumulated funding deficiency",
as that term is defined in Section 302 of ERISA or Section 412 of the Code; (iv)
terminate, or permit any member of the Controlled Group to terminate, any Plan
where such event could result in any liability of Debtor or any member of the
Controlled Group or the imposition of a lien on the property of Debtor or any
member of the Controlled Group pursuant to Section 4068 of ERISA; (v) assume, or
permit any member of the Controlled Group to assume, any obligation to
contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d); (vi)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vii) fail promptly to notify the Lender of
the occurrence of any Termination Event; (viii) fail to comply, or permit a
member of the Controlled Group to fail to comply, with the requirements of ERISA
or the Code or other applicable laws in respect of any Plan; (ix) fail to meet,
or permit any member of the Controlled Group to fail to meet, all minimum
funding requirements under ERISA or the Code or postpone or delay or allow any
member of the Controlled Group to postpone or delay any funding requirement with
respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or
indirectly, prepay any Indebtedness (other than to Lender or in connection with
providing adequate protection as required by the Bankruptcy Code and order of
the Bankruptcy Court), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of Debtor.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to
make the initial Advances requested to be made on the Closing Date is subject to
the satisfaction, or waiver by Lenders, immediately prior to or concurrently
with the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Notes duly executed
and delivered by an authorized officer of Debtor;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by the Agent to be filed, registered or recorded in order to create,
in favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each
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jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) Corporate Proceedings of Debtor. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of Debtor authorizing (i) the execution,
delivery and performance of this Agreement, the Notes, any related agreements,
(collectively the "Documents") and (ii) the granting by Debtor of the security
interests in and liens upon the Collateral in each case certified by the
Secretary or an Assistant Secretary of Debtor as of the Closing Date; and, such
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Debtor. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Debtor,
dated the Closing Date, as to the incumbency and signature of the officers of
Debtor executing this Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Articles or Certificate of Incorporation of Debtor, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation together with copies of the By-Laws of Debtor and
to the best of Debtor's knowledge all agreements of Debtor's shareholders
certified as accurate and complete by the Secretary of Debtor;
(f) Good Standing Certificates. To the extent possible, Agent
shall have received good standing certificates for Debtor dated not more than 30
days subsequent to the Closing, issued by the Secretary of State or other
appropriate official of Debtor's jurisdiction of incorporation and each
jurisdiction where the conduct of Debtor's business activities or the ownership
of its properties necessitates qualification;
(g) Reserved;
(h) No Litigation. Other than the Chapter 11 Case, No
litigation, investigation or proceeding before or by any arbitrator or
Governmental Body shall be continuing or threatened against Debtor or against
the officers or directors of Debtor (A) in connection with the Documents or any
of the transactions contemplated thereby and which, in the reasonable opinion of
the Lenders, is deemed material or (B) which if adversely determined,
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could, in the reasonable opinion of the Lenders, might reasonably be expected to
have a Material Adverse Effect on Debtor; and no injunction, writ, restraining
order or other order of any nature materially adverse to Debtor or the conduct
of its business or inconsistent with the due consummation of the transaction
contemplated hereunder (the "Transactions") shall have been issued by any
Governmental Body;
(i) Fees. Agent shall have received any fees required to be
paid at Closing under the terms of this Agreement on or prior to the Closing
Date pursuant to Article III hereof;
(j) Insurance. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Debtor's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Debtor's liability insurance policies, together with endorsements naming Agent
as a co-insured;
(k) Payment Instructions. Agent shall have received written
instructions from Debtor directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(l) Reserved;
(m) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(n) Bankruptcy Court Order. The Bankruptcy Court Order in the
form of Exhibit 8.1(n) hereto shall have been entered by the Bankruptcy Court
and Lenders shall have received a certified copy of the same, and such order
shall be in full force and effect, and shall not have been reversed, stayed,
modified or amended without the express written joinder or actual consent of
Lenders which in Lender's reasonable judgment might reasonably be expected to
have a Material Adverse Effect on Debtor;
(o) Reserved
(p) Reaffirmations. Agent shall have received reaffirmations
from each of the Guarantors with respect to the Guaranties and any Subsidiary
Security Agreements;
(q) Borrowing Base Certificate. Concurrent delivery to Lender
of a Borrowing Base Certificate.
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(r) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to Agent,
the Lenders and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make
any Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by Debtor in or pursuant to this Agreement
and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date other
than any such representations or warranties that, by their terms, refer to a
date other than the date of such borrowing or issuance;
(b) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Lenders
in their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) Bankruptcy Court Order. On the date of such Advance, the
Bankruptcy Court Order shall be in full force and effect and shall not have been
materially (in Lenders' sole discretion) reversed, stayed, modified or amended,
unless expressly consented to in writing by Lenders. Unless Lenders shall have
joined in or expressly consented in writing to the same, there shall be no
motion pending: (i) to reverse, modify or amend the Bankruptcy Court Order, or
(ii) to permit any administrative expense or unsecured claim against Debtor, now
existing or hereafter arising, of any kind or nature whatsoever, to have
administrative priority as to Debtor equal or superior to the priority of Lender
in respect of the Obligations, except for allowed administrative expenses having
priority over the Obligations to the extent set forth in the Agreed
Administrative Expense Priorities, or (iii) to grant or permit the grant of a
Lien on any property or asset of Debtor having priority equal or superior to the
liens and security interests in favor of Lender in respect of the Obligations,
except for Permitted Encumbrances; and
(c) Maximum Advances. In the case of any Advances requested
to be made, after giving effect thereto, the aggregate
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Advances shall not exceed the maximum Advances permitted under Section 2.1
hereof; and
(e) Borrowing Base Certificate. Concurrent delivery to Lender
of a Borrowing Base Certificate.
Each request for an Advance by Debtor hereunder shall constitute a
representation and warranty by Debtor as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
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IX. INFORMATION AS TO DEBTOR.
Debtor shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Agent and Chemical Bank ("Chemical") all matters materially
affecting the value, enforceability or collectibility of any portion of the
Collateral, including, without limitation, Debtor's reclamation or repossession
of, or the return to Debtor of, a material amount of goods or claims or disputes
asserted by any Customer or other obligor, or transactions with Affiliates.
9.2. Schedules. Deliver to Agent and Chemical on or before the
fifteenth (15th) day of each month as and for the prior month, all in form and
substance satisfactory to the Agent (a) accounts receivable agings, (b) accounts
payable schedules and (c) Inventory reports. In addition, Debtor will deliver to
Agent and Chemical at such intervals as Agent may require such further
schedules, documents and/or information regarding the Collateral as Agent may
require including, without limitation, trial balances test verifications, weekly
accounts receivable summary and monthly accounts receivable detail runs. Agent
shall have the right to confirm and verify all Receivables by any manner and
through any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder. The items to be provided under
this Section are to be in form satisfactory to Agent and executed by Debtor and
delivered to Agent from time to time solely for Agent's convenience in
maintaining records of the Collateral, and Debtor's failure to deliver any of
such items to Agent shall not affect, terminate, modify or otherwise limit
Agent's Lien with respect to the Collateral.
9.3. Reserved
9.4. Litigation. Promptly notify Agent and Chemical in writing
upon its knowledge of any litigation, suit or administrative proceeding
affecting Debtor, whether or not the claim is covered by insurance, and of any
suit or administrative proceeding, which might reasonably be expected to have a
Material Adverse Effect on Debtor.
9.5. Material Occurrences. Promptly notify Agent and Chemical in
writing upon its knowledge of the occurrence of (a) any Event of Default or
Default; (b) any event, development or circumstance whereby any financial
statements or other reports furnished to Agent fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Debtor as of the date of such statements; (c)
any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not
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corrected as provided in Section 4971 of the Internal Revenue Code, could
subject Debtor to a tax imposed by Section 4971 of the Internal Revenue Code;
(d) each and every default by Debtor which might result in the acceleration of
the maturity of any Indebtedness, including the names and addresses of the
holders of such Indebtedness with respect to which there is a default existing
or with respect to which the maturity has been or could be accelerated, and the
amount of such Indebtedness; and (e) any other development in the business or
affairs of Debtor or any Guarantor which might reasonably be expected to have a
Material Adverse Effect on the Debtor; in each case describing the nature
thereof and the action Debtor proposes to take with respect thereto.
9.6. Reserved
9.7. Reserved
9.8. Reserved
9.9. Reserved
9.10. Financial Reports and Other Reports. Furnish Agent and
Chemical as soon as available, but in any event within ten (10) days after the
issuance thereof, with copies of any final version of financial statements and
reports generated by the Debtor or sent to its stockholders.
9.11. Additional Information. Furnish Agent and Chemical with such
additional information as Agent and Lenders shall reasonably request in order to
enable Agent and Lenders to determine whether the terms, covenants, provisions
and conditions of this Agreement and the Notes have been complied with by Debtor
including, without limitation and without the necessity of any request by Agent,
(a) copies of all environmental audits and reviews, (b) at least thirty (30)
days prior thereto, notice of Debtor's opening of any new office or place of
business or Debtor's closing of any existing office or place of business, and
(c) promptly upon Debtor's learning thereof, notice of any labor dispute to
which Debtor may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
Debtor is a party or by which Debtor is bound.
9.12. Projected Operating Budget. Furnish Agent and Chemical, no
later than the twentieth (20) day after the beginning of each month, with an
analysis of the immediately preceding month by comparison of the projected
operating budget and cash flow of Debtor for such month to actual results for
such month, and a discussion and analysis by management with respect to
variances to the budget for the previous month as compared to actual results.
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9.13. ERISA Notices and Requests. Furnish Agent with immediate
written notice in the event that (i) Debtor or any member of the Controlled
Group knows or has reason to know that a Termination Event has occurred,
together with a written statement describing such Termination Event and the
action, if any, which Debtor or member of the Controlled Group has taken, is
taking, or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, Department of Labor or PBGC
(as hereinafter defined) with respect thereto, (ii) Debtor or any member of the
Controlled Group knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Internal Revenue Code) has
occurred together with a written statement describing such transaction and the
action which Debtor or any member of the Controlled Group has taken, is taking
or proposes to take with respect thereto, (iii) a funding waiver request has
been filed with respect to any Plan together with all communications received by
Debtor or any member of the Controlled Group with respect to such request, (iv)
any increase in the benefits of any existing Plan or the establishment of any
new Plan or the commencement of contributions to any Plan to which Debtor or any
member of the Controlled Group was not previously contributing shall occur, (v)
Debtor or any member of the Controlled Group shall receive from the PBGC a
notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) Debtor or any
member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Internal Revenue Code,
together with copies of each such letter; (vii) Debtor or any member of the
Controlled Group shall receive a notice regarding the imposition of withdrawal
liability, together with copies of each such notice; (viii) Debtor or any member
of the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Internal Revenue Code on or before the
due date for such installment or payment; (ix) Debtor or any member of the
Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b)
the administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.
9.14. Additional Documents. Execute and deliver to Agent, upon
request, such documents and agreements as Agent may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
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10.1. failure by Debtor to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided herein or under the Note when due;
10.2. any representation or warranty made or deemed made by Debtor
in this Agreement or in any certificate, document or financial or other
statement furnished at any time in connection herewith shall prove to have been
misleading in any material respect on the date when made and such breach of
representation or warranty is not cured or waived within four (4) Business Days
after the Default Notice is given to Debtor and Debtors' counsel by Lenders;
10.3. failure by Debtor to (i) furnish financial information when
due or when requested hereunder, or (ii) permit the inspection of its books or
records as required hereunder; provided, however, that said failure shall not be
deemed an Event of Default if cured by Debtors within four (4) Business Days
after the Default Notice is given to Debtor and Debtors' counsel by Lenders;
10.4. Reserved;
10.5. any lien purported to be created by this Agreement, the
Other Documents, the Bankruptcy Court Order in any of the Collateral shall, for
any reason, cease to be valid or any action is commenced by Debtor which
contests the validity, perfection or enforceability of any pre-petition liens of
Lender or any lien created by this Agreement, the Other Documents or the
Bankruptcy Court Order;
10.6. an order shall be entered by the Bankruptcy Court, (i)
appointing a trustee in the Chapter 11 Case; or (ii) appointing an examiner in
the Chapter 11 Case with the authority to perform the duties of a trustee in
respect of the possession or management of the property of the estate of Debtor
or the operation of the business of Debtor in addition to those duties set forth
in subsections 1106(a)(3) and 1106(a)(4) of the Bankruptcy Code;
10.7. an order shall be entered by the Bankruptcy Court,
dismissing the Chapter 11 Case or converting to a Chapter 7 case the Chapter 11
Case;
10.8. an order shall be entered by the Bankruptcy Court confirming
a plan of reorganization of Debtor that does not provide for the payment in full
to Lenders on the effective date of any such plan;
10.9. Reserved;
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10.10. the reversal, vacatur, stay, amendment, supplementation
or other modification of the Bankruptcy Court Order in a manner which shall, in
the reasonable opinion of Agent, materially and adversely affect the rights of
Lenders hereunder or shall materially and adversely affect the priority of any
or all of Agent's liens, security interests or claims and a Default Notice
thereof is given;
10.11. the occurrence of a materially adverse change, as
determined by Lenders in good faith, in the financial condition of Debtor and a
Default Notice thereof is given, provided, however, that said occurrence shall
not be deemed an Event of Default if cured by the Debtor within four (4)
business days after the Default Notice is given by Lenders;
10.12. material non-compliance or default by Debtor with any of
the terms and provisions of the Bankruptcy Court Order, this Agreement, the
Other Documents and a Default Notice thereof is given, provided, however, that
said non-compliance or default shall not be deemed an Event of Default if cured
by Debtor within four (4) Business Days after the Default Notice is given by
Agent;
10.13. Debtor shall cease operating in the ordinary course of
business or sell or liquidate substantially all of its assets without the prior
written consent of Lenders or provision for the payment in full of Lenders from
such sale proceeds or take any action for the purpose of effecting the foregoing
and a Default Notice thereof is given;
10.14. termination of any Guaranty executed and delivered to
Lenders in connection with the Obligations of Debtor (after giving effect to any
applicable grace period), or if any Guarantor attempts to terminate, challenges
the validity of, or its liability under, any such Guaranty or similar agreement;
or
10.15. an event or condition specified in Sections 7.16 or 9.13
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, either
Debtor or any member of the Controlled Group shall incur, or in the opinion of
Lender be reasonably likely to incur, a liability to a Plan or the Pension
Benefit Guaranty Corp. (or both) which, in the reasonable judgment of Lender,
might reasonably be expected to have a Material Adverse Effect upon the
Collateral or the ability of Debtor to perform its Obligations under this
Agreement.
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XI. LENDERS' RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of an Event of
Default and at any time thereafter (such default not having previously been
cured), at the option of the Required Lenders all Obligations shall be
immediately due and payable and the Lenders shall have the right to immediately
cease making Advances under this Agreement and to move, on not less than five
(5) days written notice to Debtors and Debtors' counsel and all other parties
entitled to notice, for relief from the restriction of Bankruptcy Code SS.362 to
exercise its rights and remedies pursuant to the Bankruptcy Court Order. Upon
the occurrence of any Event of Default, the grant of relief from the provisions
of Section 362 of the Bankruptcy Code and in accordance with the terms of the
Bankruptcy Court Order, (a) Lenders shall have the right to exercise any and all
other rights and remedies provided for herein, under the Uniform Commercial Code
and at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process; (b) Lenders
may enter any of Debtor's premises or other premises without legal process and
without incurring liability to Debtor therefor, (c) Lenders may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Lenders may deem advisable, (d)
Lenders may require Debtor to make the Collateral available to Lenders at a
convenient place, and (e) with or without having the Collateral at the time or
place of sale, Lenders may sell the Collateral, or any part thereof, at public
or private sale, at any time or place, in one or more sales, at such price or
prices, and upon such terms, either for cash, credit or future delivery, as
Lenders may elect, provided that such sale is made in a commercially reasonable
manner. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Lenders shall give Debtor reasonable notification of such
sale or sales, it being agreed that in all events written notice mailed to
Debtor at least five (5) days prior to such sale or sales is reasonable
notification. At any public sale Lenders may bid for and become the purchaser,
and Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by Debtor. In connection with the exercise of the
foregoing remedies, Lenders are granted permission to use (a) all of Debtor's
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods. The proceeds
realized from the sale of any Collateral shall be distributed in
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accordance with the provisions of the Bankruptcy Court Order. If any deficiency
shall arise, Debtor shall remain liable to Agent and the Lenders therefor.
Notwithstanding anything to the contrary in the foregoing provisions, Lender
shall have no right to take any action with respect to Special Collateral until
the earlier of (A) twelve (12) months from the occurrence of a Termination Event
or (B) all Collateral has been disposed of and shall apply the proceeds of
Collateral first to the Obligations in excess of the Maximum Revolving Advance
Amount; provided, further, that if the Lender utilizes the Special Collateral to
satisfy its Obligations, once the Obligations to Lender are satisfied in full
the parties providing the Special Collateral shall be subrogated to the rights
of Lender hereunder to the extent of the Special Collateral.
11.2. Lender's Discretion. Lenders shall have the right in their
sole discretion to determine which rights, Liens, security interests or remedies
Lenders may at any time pursue, relinquish, subordinate, or modify or to take
any other action with respect thereto and such determination will not in any way
modify or affect any of Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which any Lender may
have under applicable law, upon the occurrence of an Event of Default hereunder,
Agent and such Lender shall have a right to apply any of Debtor's cash or cash
equivalents held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Debtor hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein or in the
Bankruptcy Court Order.
12.2. Delay. No delay or omission on Agent's or any Lender's part
in exercising any right, remedy or option shall operate as a waiver of such or
any other right, remedy or option or of any default.
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12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of
and shall be binding upon the respective successors and permitted assigns of
each of Debtor, Agent and each Lender, shall become effective on the date hereof
and shall continue in full force and effect until the last day of the Term
unless sooner terminated as herein provided, provided the term may be extended
upon mutual agreement of the parties subject to appropriate order of the
Bankruptcy Court.
13.2. Termination. The termination of the Agreement shall not
affect any of Debtor's, Agent's or any Lender's rights, or any of the
Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and the Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Debtor's
account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of Debtor have been paid or performed in full after the
termination of this Agreement or Debtor has furnished Agent and the Lenders with
an indemnification satisfactory to Agent and the Lenders with respect thereto.
Accordingly, Debtor waives any rights which it may have under Section 9-404(1)
of the Uniform Commercial Code to demand the filing of termination statements
with respect to the Collateral, and Agent shall not be required to send such
termination statements to Debtor, or to file them with any filing office, unless
and until this Agreement shall have been terminated in accordance with its terms
or all Obligations have been paid in full in immediately
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available funds and, with respect to the cash collateral securing the Carve-Out,
the Carve-Out has been satisfied.
13.3. Release and Satisfaction. Upon the date on which the
Obligations shall have been fully and finally paid in full, and this Agreement
has terminated, Agent and Lenders shall release and terminate (i) any and all
liens, security interests and mortgages granted by Debtor or any Guarantor
pursuant to this Agreement, the Guaranties, the Subsidiary Security Agreements,
the Mortgage and the Bankruptcy Court Order, and (ii) all rights in the
Collateral (except to the extent of Collateral which secures the Carve-Out); all
of which released interests and rights shall revert to the Debtor and the
Guarantors in accordance with their respective rights thereto. Upon such release
and termination, the Agent and the Lenders, at the Debtor's expense, shall
execute and deliver to the Debtor and the Guarantors such documents prepared by
the Debtor or the Guarantors and delivered to the Agent and the Lenders as the
Debtor or the Guarantors shall reasonably request to evidence such release and
termination. After satisfaction of the Carve-Out, any Collateral remaining shall
be promptly delivered to the Debtor once the Obligations have been paid in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates Fleet to act as
Agent for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and in accordance with the
terms of the Administration Agreement dated as of the date hereof
("Administration Agreement") between Lenders.
14.2. Nature of Duties. Agent shall have no duties or
responsibilities except those expressly set forth in the Administration
Agreement.
14.3. Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Debtor in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
Debtor. Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before making of the
Advances or at any time or times thereafter except as shall
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be provided by Debtor pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Other Document, or of the financial condition of Debtor, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement, the Note, the
Other Documents or the financial condition of Debtor, or the existence of any
Event of Default or any Default.
14.4 Reserved.
14.5. Reserved.
14.6. Reserved.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Debtor, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct or gross (not mere)
negligence.
14.8. Agent in its Individual Capacity. With respect to the
obligation of Agent to lend under this Agreement, the Advances made by it shall
have the same rights and powers hereunder as any other Lender and as if it were
not performing the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Debtor as if it were not performing the duties specified herein, and may accept
fees and other consideration from Debtor for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
14.9. Reserved.
14.10. Debtor's Undertaking to Agent. Without prejudice to its
obligations to the Lenders under the other provisions of this Agreement, Debtor
hereby undertakes with Agent to pay to Agent from
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time to time on demand all amounts from time to time due and payable by it for
the account of Agent or the Lenders or any of them pursuant to this Agreement to
the extent not already paid. Any payment made pursuant to any such demand shall
pro tanto satisfy Debtor's obligations to make payments for the account of the
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. MISCELLANEOUS.
15.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against Debtor with respect to any of the Obligations,
this Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, Debtor accepts for itself and in
connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Debtor hereby
waives personal service of any and all process upon it and consents that all
such service of process may be made by registered mail (return receipt
requested) directed to Debtor at its address set forth in Section 15.6. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of the Lenders to bring proceedings against Debtor in the
courts of any other jurisdiction. Debtor waives any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens if an
action is brought in any court of competent jurisdiction in the City of New
York, State of New York or United States of America. Any judicial proceeding by
Debtor against the Lenders involving, directly or indirectly, any matter or
claim in any way arising out of, related to or connected with this Agreement or
any related agreement, shall be brought only in a federal or state court located
in the City of New York, State of New York.
15.2. Entire Understanding. This Agreement and the documents
executed concurrently herewith contain the entire understanding between Debtor,
Agent and each Lender and supersedes all prior agreements and understandings,
if any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have
no force and effect unless in writing, signed by Debtor's, Agent's and each
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended,
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waived, supplemented, discharged, cancelled or terminated orally or by any
course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Debtor acknowledges that it has been advised
by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing
of the Required Lenders, and Debtor may, subject to the provisions of this
Section 15.2 (b), from time to time enter into written supplemental agreements
to this Agreement, the Notes or the Other Documents executed by Debtor, for the
purpose of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of the Lenders, Agent or Debtor thereunder or
the conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all the Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for
any amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Debtor to Lenders pursuant to this Agreement or waive any Default or
Event of Default.
(iii) alter the definition of the term Required Lenders
or alter, amend or modify this Section 15.2(b).
(iv) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Debtor, the Lenders and Agent and all future holders of
the Obligations. In the case of any waiver, Debtor, Agent and the Lenders shall
be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
15.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Debtor, Agent, each Lender, all future holders of the Note and their
respective successors and assigns, except that Debtor may not assign or transfer
any of its rights or obligations under this Agreement without the prior written
consent of Agent and each Lender.
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(b) Debtor acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Debtor shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its Advances or other
Obligations payable hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall Debtor be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Transferee. Debtor hereby grants to any
Transferee a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Transferee as security for the
Transferee's interest in the Advances.
(c) Any Lender may sell, assign or transfer all or any part
of its rights under this Agreement and the Other Documents to (a) one or more
additional banks or financial institutions with a satisfied minimum capital
surplus of $250,000,000 and (b) with the consent of the Debtor, which consent
shall not be unreasonably withheld or delayed, to any other person, and one or
more additional banks, financial institutions or parties may commit to make
Advances hereunder (each a "Purchasing Lender"), in minimum amounts of not less
than $1,000,000. Upon execution and delivery of the appropriate document, (i)
Purchasing Lender thereunder shall be a party hereto have the rights and
obligations of a Lender thereunder with a Commitment Percentage as set forth
therein, and (ii) the transferor Lender thereunder shall, be released from its
obligations under this Agreement. Debtor hereby consents to the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Debtor and Lenders shall execute and deliver such further
documents and do such further acts and things in order to effectuate the
foregoing.
(d) Reserved.
(e) Debtor authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Debtor which has been delivered to such Lender by or on behalf of Debtor
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Debtor.
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15.4. Application of Payments. Subject to the Bankruptcy Court
Order and Sections 15.6, 15.9 and 15.11 of this Agreement, to the extent that
Debtor makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Debtor's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
15.5 Indemnity. Debtor shall indemnify Agent and each Lender and
their officers, employees and agents from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against Agent or any Lender in any litigation, proceeding or
investigation instituted or conducted by any governmental agency or
instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement, whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing arises out of the willful misconduct, bad faith
or gross negligence of the party being indemnified.
15.6. Notice. Any notice or request hereunder may be given to
Debtor or to Agent or any Lender at their respective addresses set forth below
or at such other address as may hereafter be specified in a notice designated as
a notice of change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight courier, (c) telex
or telegram, subsequently confirmed by registered or certified mail, or (e)
telecopy to the number set out below (or such other number as may hereafter be
specified in a notice designated as a notice of change of address) with
telephone communication to a duly authorized officer of the recipient confirming
its receipt as subsequently confirmed by registered or certified mail. Any
notice or other communication required or permitted pursuant to this Agreement
shall be deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, or (b) upon actual receipt thereof when sent by a
recognized overnight delivery service or (c) upon actual receipt thereof when
sent by telecopier to the number set forth below with telephone communication
confirming receipt and subsequently confirmed by registered, certified or
overnight mail to the address set forth below, in each case addressed to each
party at its address set forth below or at such other address as has been
furnished in writing by a party to the other by like notice:
<TABLE>
<S> <C>
(A) If to Agent or Fleet Bank, N.A.
</TABLE>
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<TABLE>
<S> <C>
Fleet at: 175 Water Street
New York, New York
Attention: Ted Janeczko
Telephone: (212) 602-1805
Telecopier: (212) 602-2211
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Daniel J. Krauss, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to Chemical
Bank at Chemical Bank
270 Park Avenue
New York, New York
Attention: Patrick Daniello
Telephone: (212) 270-1484
Telecopier: (212) 270-5784
(C) If to Debtor, at: Andover Togs, Inc.
1 Penn Plaza
New York, New York 10119
Attention: William Cohen
Telephone: 212-244-0700
Telecopier: 212-244-0205
with a copy to: Whitman, Breed, Abbott & Morgan
200 Park Avenue
New York, New York 10166
Attention: Norman N. Kinel, Esq.
Telephone: (212) 351-3313
Telecopier: (212) 351-3131
</TABLE>
15.7. Survival. The obligations of Debtor under Sections 3.7, 3.8
and 3.9 shall survive termination of this Agreement and the Other Documents and
payment in full of the Obligations.
15.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.9. Expenses. Subject to the Bankruptcy Court Order, all costs
and expenses including, without limitation, reasonable attorneys' fees and
disbursements incurred by Agent, Agent on behalf of the Lenders and the Lenders
(a) in all efforts made to enforce payment of any Obligation or effect
collection of any Collateral, or (b) in connection with the entering into,
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modification, amendment, administration and enforcement of this Agreement or any
consents or waivers hereunder and all related agreements, documents and
instruments, or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent's security interest in or Lien on any of the Collateral,
whether through judicial proceedings or otherwise, or (d) in defending or
prosecuting any actions or proceedings arising out of or relating to Agent's or
any Lender's transactions with Debtor, or (e) in connection with any advice
given to Agent or any Lender with respect to its rights and obligations under
this Agreement and all related agreements, may be charged to Debtor's account
and shall be part of the Obligations, except and to the extent that any such
costs and expenses are incurred in connection with action taken in violation of
the Bankruptcy Court Order or the willful misconduct, gross negligence or bad
faith of Agent or the Lenders.
15.10. Injunctive Relief. Debtor recognizes that, in the event
Debtor 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 Lenders; therefore, each Lender, if such Lender so requests, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving that actual damages are not an adequate remedy.
15.11. Consequential Damages. Neither Lenders nor any agent or
attorney for any of them shall be liable to Debtor for consequential damages
arising from the establishment, administration or collection of the Obligations
except to the extent of the willful misconduct, bad faith or gross negligence of
Lenders, their agents or attorneys.
15.12. Captions. The captions at various places in this Agreement
are intended for convenience only and do not constitute and shall not be
interpreted as part of this Agreement.
15.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14. Construction. The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits thereto.
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<PAGE>
<PAGE>
Each of the parties has signed this Agreement as of the day and
year first above written.
ANDOVER TOGS, INC.
Debtor and Debtor-In-Possession
By: /s/ William L. Cohen
________________________________
Its: President
_______________________________
[SEAL]
One Penn Plaza
New York, New York 10119
FLEET BANK, N.A., as Lender and as
Agent
By: /s/ Theodore Janeczko
_______________________________
Its: V.P.
______________________________
175 Water Street
New York, New York 10038
Commitment Percentage: 60%
CHEMICAL BANK
By: /s/ Patrick A. Daniello
________________________________
Its: Vice President
______________________________
270 Park Avenue
New York, New York 10017
Commitment Percentage: 40%
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<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 28th day of May, 1996, before me personally came
William L. Cohen, to me known, who, being by me duly sworn, did
depose and say that he is the President of Andover Togs, Inc., the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order.
/s/ Mark S. Indelicato
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 28th day of May, 1996, before me personally came
Theodore Janeczko, to me known, who, being by me duly sworn, did
depose and say that he is the Vice President of Fleet Bank, National
Association, the corporation described in and which executed the foregoing
instrument and that he signed his name thereto by order of the board of
directors of said corporation.
/s/ Mark S. Indelicato
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 28th day of May, 1996, before me personally came
Patrick A. Daniello, to me known, who, being by me duly sworn, did
depose and say that he is the Vice President of Chemical Bank, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
/s/ Mark S. Indelicato
------------------------------
NOTARY PUBLIC
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<PAGE>
Schedules and exhibits not submitted.
<PAGE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------X Jointly Administered
In re
: Chapter 11
ANDOVER TOGS, INC., et al.,
: Case No. 96-B-41437(TLB)
Debtors. through 96-B-41440(TLB)
- ------------------------------X
SECOND FINANCING ORDER APPROVING
DEBTOR-IN-POSSESSION FINANCING FACILITY
WHEREAS, on March 19, 1996 (the "Petition Date"), Andover Togs,
Inc. ("Andover" or "Debtor"), and three of its wholly-owned subsidiaries,
Springdale Fashions, Inc. ("Springdale"), Tortoni Manufacturing Corp.
("Tortoni") and Stonehenge Financial Corp. ("Stonehenge") (collectively the
"Debtors") filed voluntary petitions for reorganization pursuant to Chapter 11
of Title 11, United States Code (the "Bankruptcy Code") as debtors and
debtors-in-possession; and
WHEREAS, the Debtors have filed a motion with this Court (the
"Motion") for, among other things, authorization, pursuant to Bankruptcy Code
SS. 364(c), to enter into a new post-petition financing arrangement with, and
obtain debtor-in- possession financing from, Fleet Bank, N.A. f/k/a NatWest
Bank, N.A. ("Fleet") and Chemical Bank ("Chemical", and together with Fleet,
"Lender"), pursuant to the terms and conditions of (a) that certain
post-petition revolving credit and security
<PAGE>
<PAGE>
agreement (the "Agreement") and related agreements, (collectively, with the
Agreement, the "Agreements"), substantially in the form annexed as Exhibit "A"
hereto, pursuant to which, among other things, the Debtors will grant to Lender
liens, mortgages and security interests in substantially all of the Debtors'
assets including without limitation the Debtors' accounts, contract rights,
inventory, general intangibles, including tax refunds, real property, machinery
and equipment as security for all advances under the Agreements as set forth in
greater detail below (the "Collateral"), and (b) this Order (collectively, the
"Second Financing Arrangement"); and
WHEREAS, Andover entered into a letter agreement (the "Loan
Agreement") with Fleet and Chemical, as successor by merger with Manufacturers
Hanover Trust Company, dated February 26, 1990 (which amended, consolidated and
restated a letter agreement with Fleet dated August 1, 1988 and accepted August
8, 1988) pursuant to which Lender made loans, issued letters of credit and made
other extensions of credit. By letter agreement dated March 15, 1991, Andover
and Lender amended the Loan Agreement to extend the credit facility, decrease
the amount of availability and otherwise modify the terms; and
WHEREAS, the obligations of Andover under the Loan Agreement were
guaranteed by each of its wholly-owned subsidiaries, Anchor Apparel, Inc.
("Anchor")(1), Springdale,
- -------------------
(1) Anchor is no longer a subsidiary of Andover and is not
(continued...)
-2-
<PAGE>
<PAGE>
Stonehenge and Tortoni (Anchor, Springdale, Stonehenge
and Tortoni being referred to collectively as the "Guarantors") pursuant to
certain Guaranties dated February 26, 1990 (the "Guaranties"). Each of
Stonehenge and Springdale also entered into a Subsidiary Security Agreement
dated February 26, 1990 (collectively, the "Subsidiary Security Agreements")
with Fleet as collateral agent for Lender ("Agent"); and
WHEREAS, to secure the obligations of Andover under the Loan
Agreement, by Amended and Restated Borrower Security Agreement dated February
26, 1990, as amended by Amendment Number One to Amended and Restated Borrower
Security Agreement dated March 15, 1991 (the "Borrower Security Agreement"),
Andover granted a security interest in (a) all equipment (other than equipment
described in a certain Mortgage and Indenture of Trust dated as of April 1, 1989
between the Industrial Development Board of the City of Scottsboro, Alabama and
South Trust Bank of Alabama, National Association, as Trustee (the "Scottsboro
Indenture")), (b) all accounts receivable arising out of (i) inventory sold or
leased by it or one of its subsidiaries or affiliates or (ii) advances or loans
to customers and all guaranties and security interests therefor and the proceeds
thereof, (c) finished goods imported inventory ("Foreign Inventory") shipped
under or pursuant to letters of credit issued by a Lender and all shipping
documents, overhead receipts,
- -------------------
(...continued)
one of the Debtors herein.
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<PAGE>
<PAGE>
policies or certificates of insurance and other documents accompanying drafts,
(d) all chattel paper, instruments, general intangibles, credits, claims,
demands and any other obligations for the payment of money, and (e) the proceeds
and products thereof; and
WHEREAS, pursuant to the Subsidiary Security Agreements each of
Stonehenge and Springdale granted a security interest in (a) equipment, (b)
accounts receivable arising out of (i) inventory sold or leased by it or (ii)
advances or loans made by it to customers and all guaranties thereof and
security therefor, (c) all chattel paper, instruments, general intangibles,
credits, claims, demands and any other obligations for the payment of money, and
(d) the proceeds and products thereof; and
WHEREAS, pursuant to the Loan Agreement, Andover's ability to
obtain loans and other extensions of credit was subject to a Borrowing Base
limitation equal to the sum of (1) 85% of Andover's Eligible Receivables (as
defined in the May 31, 1995 letter agreement) and (2) the Overadvance as set
forth in the May 31, 1995 letter agreement; and
WHEREAS, on March 8, 1996, Andover entered into a letter
agreement (the "New Financing Agreement") with Lender pursuant to which Lender
agreed to make loans to Andover of approximately $1,400,000 (the "New
Financing"), and Andover agreed to secure its obligations to repay such amounts
under the New Financing by granting to Lender additional security interests in
its domestic inventory, tax refunds, choses in action,
-4-
<PAGE>
<PAGE>
trademarks, books and records, documents of title, policies and certificates of
insurance, and chattel paper pursuant to that certain agreement entitled
Security Interest In Inventory and General Intangibles dated March 8, 1996 (the
"Inventory Security Agreement"). To further secure the New Financing, Andover
also entered into a Mortgage and Security Agreement dated March 8, 1996 (the
"Mortgage and Security Agreement") granting to Lender a mortgage lien on four
pieces of real property located in Jackson County, Alabama; and
WHEREAS, this Court entered the Financing Order Authorizing
Borrowing with Priority Over Administrative Expenses and Secured by Liens on
Property of the Estate Pursuant to Section 364(c) of the Bankruptcy Code on
April 9, 1996 (the "First Financing Order") which provided the Debtors with a
post-petition financing arrangement through May 10, 1996; and
WHEREAS, the Debtors in the First Financing Order confirmed the
validity, extent and priority of the liens, security interests and mortgages
granted to Lender in assets of the Debtors (the "Prepetition Collateral")
pursuant to the Pre- Petition Agreements (as defined herein) including but not
limited to (a) the Borrower Security Agreement, (b) the Inventory Security
Agreement, (c) the Mortgage and Security Agreement and (d) the Subsidiary
Security Agreements (collectively with the Loan Agreement, the Guaranties and
the New Financing Agreement, the "Pre-Petition Agreements") to secure repayment
of the obligations as defined in the Loan Agreement, the Guaranties and
-5-
<PAGE>
<PAGE>
the New Financing Agreement, as well as the existence and enforceability of all
pre-petition rights of setoff exercised by the Lender; and
WHEREAS, the Debtors acknowledged, in the First Financing Order,
that as of the Petition Date, the Debtors were indebted to Lender in the
aggregate principal amount of $18,689,706.24 inclusive of all stand-by and
documentary letters of credit, in accordance with the terms of the Pre-Petition
Agreements, which obligations were secured by the Pre-Petition Collateral as
provided in the Pre-Petition Agreements; and
WHEREAS, the Debtors and Lender have agreed to extend the
post-petition financing arrangement through December 31, 1996 on the terms and
conditions set forth in the Second Financing Arrangement; and
WHEREAS, timely and proper notice of the Motion and the relief
requested therein having been given pursuant to Bankruptcy Rule 4001(c), an
interim hearing having been held before this Court on May 16, 1996 and a final
hearing having been held before this Court on May 21, 1996, and after due
deliberation;
THIS COURT HEREBY FINDS AND DETERMINES THAT:
(a) Lender is willing to advance monies to the Debtors only
upon the conditions contained in this Order;
(b) the Debtors are unable to obtain sufficient levels of
unsecured credit allowable under Bankruptcy Code
-6-
<PAGE>
<PAGE>
SS. 503(b)(1) as an administrative expense to maintain and conduct
their businesses;
(c) the Debtors are unable to obtain secured credit allowable
only under Bankruptcy Code SS. 364(c)(1) and (c)(2), except under the
terms and conditions provided in this Order;
(d) the credit and financial accommodations to be extended
under the Second Financing Arrangement are being extended by Lender in
good faith and Lender is entitled to the protection of Bankruptcy Code
SS. 364(e);
(e) it is in the best interest of the Debtors' estates that
the Debtors be allowed to finance their operations under the terms
and conditions set forth herein, as such financing is necessary to
prevent a disruption of their businesses and to permit the Debtors
to attempt to achieve a successful reorganization;
(f) absent approval of the Second Financing Arrangement, the
Debtors' estates will be immediately and irreparably harmed;
(g) sufficient and adequate notice of the relief sought by
the Motion and the hearings with respect thereto has been given
pursuant to Bankruptcy Rule 4001(c) and Bankruptcy Code SS. 102(1) as
required by Bankruptcy Code SS. 364(c), and no further notice of, or
hearing on, the relief sought in the Motion is required; and
-7-
<PAGE>
<PAGE>
(h) good and sufficient cause exists for the issuance of this
Order, to prevent irreparable harm to the Debtors' estates;
NOW, THEREFORE, IT IS HEREBY
ORDERED, that the Debtors are hereby authorized to enter into the
Agreements, including the liabilities and obligations to Lender incurred
thereunder and the liens and security interests granted to Lender thereunder;
and it is further
ORDERED, that (a) the Debtors are hereby authorized (1) to
enter into the Agreements, substantially in the form annexed as Exhibit "A"
hereto, (2) to borrow funds from and incur other obligations to Lender pursuant
to the terms and conditions of the Second Financing Arrangement, from and after
the date of this Order, whether prior or subsequent to the execution and
delivery of the Agreements, and (3) to immediately grant to Lender the liens and
security interests provided for under the Agreements and this Order which liens
and security interests shall be effective from and after the date of this Order,
whether prior or subsequent to the execution and delivery of the Agreements, (b)
the Second Financing Arrangement is hereby approved in all respects, and (c)
Lender shall have the rights and the obligations set forth in the Second
Financing Arrangement to make loans and advances in accordance therewith, and
pursuant to the other terms and conditions thereof and hereof, provided,
however,
-8-
<PAGE>
<PAGE>
new Revolving Advances (as defined in the Agreement) made by Lender to the
Debtors shall not exceed the lesser of (x) the Maximum Revolving Advance Amount
(as defined in the Agreement) plus the Overadvance Amount (as defined in the
Agreement) less the aggregate amount of outstanding Advances (as defined in the
Agreement) or (y) an amount equal to the sum of:
(i) 85% ("Receivables Advance Rate") of Eligible
Receivables, plus
(ii) 50% ("Inventory Advance Rate"), of the value of the
Eligible Inventory; provided, however, the maximum amount
of outstanding Advances against Eligible Inventory
(exclusive of Eligible Inventory to be purchased pursuant
to Letters of Credit) shall not exceed $4,000,000 in the
aggregate at any one time, plus
(iii) the Overadvance Amount, plus
(iv) the product of (a) the aggregate amount of
outstanding documentary Letters of Credit issued with
respect to the purchase of Eligible Inventory multiplied
by (b) the Inventory Advance Rate, minus
(v) the aggregate amount of outstanding Advances; and
further provided that only the first three hundred thousand dollars ($300,000)
of Out-of-Pocket Costs as hereinafter defined shall be utilized in calculating
compliance with the Debtor's availability as determined under the Borrowing Base
Certificate for any advances hereunder but not until August 1, 1996; and it is
further
ORDERED, that the Second Financing Arrangement will permit Lender
to issue sight documentary Letters of Credit on behalf of Debtors in an amount
not to exceed three million
-9-
<PAGE>
<PAGE>
dollars ($3,000,000) in the aggregate based on the Debtors' availability under
the Borrowing Base Certificate at the time of issuance; and it is further
ORDERED, that the Second Financing Arrangement shall be in effect
for the period (the "Term") commencing with the termination of the First
Financing Order on May 15, 1996 through and including December 31, 1996 (the
"Expiration Date") unless otherwise extended by Lender, in its discretion,
pursuant to a Stipulation to be "So Ordered" by this Court or otherwise
terminated in accordance with this Financing Order; and it is further
ORDERED, that the maximum amount of the financing permitted under
the terms of the Second Financing Arrangement shall not exceed twelve million
five hundred thousand dollars ($12,500,000) ("Maximum Borrowing Amount");
provided, however, Lender shall not be obligated nor required to advance to
Debtors above the Borrowing Base Original Availability Sublimit (as hereinafter
defined) unless the principal stockholders of the Debtors ("Principals") or
entities controlled by the Principals (collectively, the "Third Party") pledge
or otherwise hypothecate to Lender, on terms and conditions reasonably
satisfactory to Lender, cash, cash equivalents or marketable securities at
appropriate margin value for each such security based on industry standards
(which cash equivalents and marketable securities must be reasonably
satisfactory to Lender in all respects) ("Additional Collateral") equal to any
amounts (the "Overadvance
-10-
<PAGE>
<PAGE>
Amount") Debtors want Lender to advance in excess of the Borrowing Base limit
not secured by Additional Collateral which will initially be set in the
Agreement at eleven million ($11,000,000) dollars ("Borrowing Base Original
Availability Sublimit"); and it is further
ORDERED, that in the event that the Third Party provides the
Additional Collateral, the Debtors shall be entitled to enter into one or more
agreements on terms reasonably satisfactory to the Third Party, Lender and the
Debtors to provide for such funding subject to such Court approvals as may be
required to effectuate the transaction; and it is further
ORDERED, that any amounts advanced by the Lender in excess of the
Borrowing Base Original Availability Sublimit, including any Overadvance (as
hereinafter defined) will be repaid to the Lender from the first available
collections or proceeds of Collateral and provided the Debtors are in compliance
with the Borrowing Base Formula after giving effect to any repayment of the
Additional Collateral pledged or otherwise hypothecated to the Lender by the
Third Party to secure advances above the Borrowing Base Original Availability
Sublimit or as reduced to the Borrowing Base Availability Sublimit (as
hereinafter defined) up to the Maximum Borrowing Amount shall be released by
Lender to the Third Party to the extent of the repayments; and it is further
ORDERED, that as adequate protection for any post-petition
diminution in value of Lender's interests in the Pre-
-11-
<PAGE>
<PAGE>
Petition Collateral, including without limitation that caused by the Debtors'
use of the Pre-Petition Collateral and/or Lender's Cash Collateral, as such term
is defined in Bankruptcy Code SS. 363(a), and as provided in this Order and the
First Financing Order, (a) Lender is hereby granted post-petition secured and
superpriority administrative expense claims against the Debtors' estates and (b)
monthly cash payments of interest on the outstanding principal amount of the
Pre-petition Obligations due under the Pre-Petition Agreements and (c) all
reasonable out-of-pocket costs and expenses incurred by Lender whether pre or
post-petition ("Out-of-Pocket Costs") in connection with the enforcement and
protection of its rights in and to the Pre- Petition Collateral, including
without limitation, the reasonable fees and disbursements of counsel and any
third party consultants, including financial consultants or auditors advising
Lender as provided below (collectively, the "Adequate Protection Claim"); and it
is further
ORDERED, that (a) any and all Obligations, as such term is
defined in the Pre-Petition Agreements and the Agreements, of the Debtors to
Lender pursuant to the Second Financing Arrangement arising subsequent to the
Petition Date including any Overadvance (the "Post-Petition Obligations") and
(b) the Adequate Protection Claim (collectively, the "Post-Petition Claim"),
shall have priority in payment over any other obligations now in existence or
incurred hereafter by the Debtors, and over all administrative expenses or
charges against
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<PAGE>
property of the kind specified in Bankruptcy Code SS.SS. 503(b), 506(c), 507(a)
and 507(b), whether arising in the Debtors' Chapter 11 cases or in any
superseding Chapter 7 case, subject only to (y) the statutory fees of the United
States Trustee pursuant to 28 U.S.C. SS. 1930(a) and (z) the "Carve-out", as
such term is hereinafter defined; and it is further
ORDERED, that pursuant to Bankruptcy Code SS.SS. 362, 363(e) and
364(c), as security for the Post-Petition Claim, the Debtors are hereby
authorized to and do grant to Lender a valid, binding, enforceable and perfected
first-priority lien, mortgage and security interest in the Collateral (to the
extent acquired after the Petition Date, the "Post-Petition Collateral"),
wherever located, including, without limitation: (a) inventory, accounts
receivable, contract rights, purchase orders, documents, instruments, chattel
paper, fixed assets, machinery and equipment (including machinery and equipment
held for lease), real estate, real estate leases, goods, general intangibles
including, but not limited to any claim the Debtors may have against customers
which do not constitute receivables, patents, licenses, trademarks, rights to
payment and tax refunds, and the proceeds thereof, subject only to valid liens
(i) otherwise senior to Lender as of the Petition Date (except that with respect
to the liens granted under the Scottsboro Indenture for which Lenders shall only
receive a security interest in the proceeds, if any, of the assets that secure
the indebtedness issued under the Scottsboro Indenture which exceed the amount
required to retire
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<PAGE>
indebtedness secured by such assets), and (ii) not subject to avoidance by a
trustee under the Bankruptcy Code (liens described in (i) and (ii) being
hereinafter referred to as "Liens"), (b) claims against corporate affiliates and
subsidiaries, (c) recoveries from third parties (including without limitation,
recoveries from actions brought pursuant to Bankruptcy Code SS.SS. 544 through
550, inclusive and Bankruptcy Code SS. 553 but excluding any recoveries from
such actions against the Lender) and (d) the proceeds and products thereof;
provided, further, that any equity of the Debtors in the Pre-Petition Collateral
shall be additional security for the Post-Petition Claim; and it is further
ORDERED, that all of the Debtors' assets other than Accounts
Receivable and Eligible Inventory shall be deemed Non-core Collateral; and it is
further
ORDERED, that notwithstanding (a) the liens, mortgages, security
interests and the Post-Petition Claim recognized or granted to Lender under the
Second Financing Arrangement or (b) any other provision of this Order, the cash
proceeds of the Collateral may be used by the Debtors to pay:
(a) the statutory fees of the United States Trustee pursuant to 28
U.S.C. SS. 1930(a) and fees required by the Clerk of the Court to the extent
required by statute; and
(b) the reasonable fees and expenses of professionals retained by
the (i) Debtors pursuant to order of this Court (the "Debtors' Professionals"),
and (ii) Official Committee
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<PAGE>
of Unsecured Creditors pursuant to order of this Court (the "Committee's
Professionals" and collectively with the Debtors' Professionals, the
"Professionals"), after a Termination Event or the Expiration Date as defined in
the Agreements up to an aggregate amount not to exceed $1,000,000 exclusive of
any prepetition retainers but inclusive of the Carve-Out contained in the First
Financing Order plus all unpaid fees and expenses accrued by the Professionals
up to the occurrence of a Termination Event or the Expiration Date (the
"Professionals Accruals") up to a maximum amount of an additional $800,000 for a
total of $1,800,000, which fees and expenses (1) have been approved by order of
this Court, and (2) were not incurred in connection with any challenge to the
validity, extent, priority, perfection or enforceability of the liens, mortgages
and security interests granted to Lender by the Debtors prior to the Petition
Date (the "Carve-Out"), provided that if Professionals Accruals exceed $800,000
nothing herein shall preclude the payment of all Professionals Accruals so long
as the aggregate paid under the Carve-Out does not exceed $1,800,000 and
provided further that so long as a Termination Event has not occurred or is
cured or waived, Debtors shall be permitted to pay from availability fees and
expenses of Professionals during the Term as such may be allowed and become due
and payable by order of the Bankruptcy Court pursuant to Bankruptcy Code
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<PAGE>
SS.SS.330 and 331 and such payments shall not be applied against the Carve-out
and such fees and expenses included in the Carve-Out shall be paid promptly
after approval by this Court; and it is further
ORDERED, that the first three hundred thousand dollars ($300,000)
in Net Cash Proceeds (as defined in the Agreement) from the liquidation or sale
of any Collateral (other than Receivables and Eligible Inventory) (the "Non-Core
Collateral") in the ordinary course of business shall be turned over by Debtors
to Lender and retained by Lender in a separate interest bearing collateral
account to partially secure Lender's obligations under the Carve-out and
provided further that these Net Cash Proceeds shall be used only to satisfy
Lender's obligations under the Carve-Out or to reduce the Obligations once the
Professionals have been paid in full and for no other purpose by the Debtors;
provided, however, that the sale of the first $25,000 in the aggregate of piece
goods sold by the Debtor in the ordinary course of business shall not be
considered Non-Core Collateral for purposes of this decretal paragraph nor shall
it be applied to reduce the Borrowing Base Original Sublimit or the Borrowing
Base Availability Sublimit; and it is further
ORDERED, that the balance of the Net Cash Proceeds generated from
the sale or liquidation of the Non-core Collateral shall be remitted to the
Lender in reduction of the outstanding Obligations and fifty percent of that
amount over $300,000 shall be used by the Lenders to permanently reduce the
Borrowing Base
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<PAGE>
Original Availability Sublimit (such reduced amount herein, the "Borrowing Base
Availability Sublimit"); and it is further
ORDERED, that Debtors shall continue to pay their payroll and all
related taxes and charges associated therewith on a current basis; and it is
further
ORDERED, that the liens, mortgages and security interests granted
to Lender hereunder to secure the Obligations shall not be subject to any lien,
mortgage or security interest or any other interest which is avoided and which
would otherwise be preserved for the benefit of the Debtors' estates under
Bankruptcy Code SS. 551, and the liens, mortgages and security interests granted
to Lender hereunder shall encumber and constitute a prior lien, mortgage and
security interest in and to any property of the Debtors encumbered by a lien,
mortgage, security interest or interest which is avoided and which would
otherwise be so preserved for the benefit of the Debtors' estates; and it is
further
ORDERED, that the Debtors hereby irrevocably waive all rights, if
any, they might otherwise have to assert a claim against the Collateral pursuant
to Bankruptcy Code SS.506(c); and it is further
ORDERED, that no entity in the course of this bankruptcy case
shall be permitted to recover from the Collateral any cost or expense of
preservation or disposition of the Collateral, including, without limitation,
expenses and charges
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<PAGE>
as provided in Bankruptcy Code SS.506(c) without the prior written consent of
Lender; and it is further
ORDERED, that so long as there are any Obligations outstanding to
Lender under the Second Financing Arrangement, unless Lender shall have given
its prior written consent, or this Court enters an order, upon proper notice to
Lender and a hearing, requiring that all of the Debtors' Obligations to Lender
be immediately satisfied in full, there shall not at any time be entered in the
Debtors' Chapter 11 cases any further orders which authorize the obtaining of
credit or the incurring of indebtedness pursuant to Bankruptcy Code SS.SS.
364(d) or 364(c), or any other grant of rights against the Debtors and/or their
estates, secured by a lien, mortgage or security interest in the Collateral held
by Lender either senior, equal or junior to the lien, mortgage or security
interest granted to Lender hereunder, provided, however, that the Debtors may
grant a junior lien, mortgage or security interest so long as the holder of such
junior lien, mortgage or security interest agrees not to take any action against
any asset which secures the Obligations without the prior written consent of
Lender unless the Obligations have been paid in full, or entitled to priority
administrative status which is equal or superior to that granted to Lender
herein, or the return of goods by the Debtors pursuant to Bankruptcy Code
SS.546; and it is further
ORDERED, that in addition to any rights granted to Lender under
the Second Financing Arrangement, after the Court's
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approval thereof, Lender shall be entitled to charge the Debtors' accounts or
receive reimbursement thereof, on ten (10) business days written notice to the
Debtors and the Debtors' counsel, Counsel to the Committee and the United States
Trustee (the "Fee Notice"), but without application to the Court, for: (a) all
Out-of-Pocket Costs incurred subsequent to the Petition Date, including without
limitation the counsel and consultant fees incurred in negotiating, closing,
documenting and obtaining Court approval of the Second Financing Arrangement and
all proceedings in connection with the interpretation, amendment, modification,
enforcement or carrying out of the Second Financing Arrangement or this Order at
any time, and all reasonable expenses, costs and charges in any way or respect
arising in connection therewith or related thereto including filing and
recording fees and title insurance premiums; and (b) Lender's facility fee of
$110,000 shall either be paid by the Debtors or charged to their account at the
rate of (i) $20,000 per month beginning August 1, 1996 through November 1, 1996
plus (ii) $30,000 being due on December 1, 1996 and such other reasonable and
customary bank charges including account maintenance fees, cash management fees
and customary letter of credit fees or collateral monitoring fees not to exceed
$2,250 per month in the aggregate as set forth in the Agreement; and such fees
and expenses in the foregoing subparagraphs (a) and (b) may be funded by Lender,
charged to the Debtors' account and shall constitute a part of the Debtors'
obligations to Lender; provided, however, that with respect to
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the fees and expenses of Lender's outside counsel and other independent
professionals, said Fee Notice shall be submitted for payment monthly, together
with copies of such professionals' invoices to Lender accompanied by detailed
time and disbursement records, subject to redaction against disclosure of
privileged and/or confidential information, and such invoices shall be charged
to the Debtors' account as provided for hereinabove unless, prior to the
expiration of the ten (10) business day period, appropriate pleadings objecting
thereto are filed with the Court on notice to Lender whereupon Debtors'
obligations to Lender with respect to such fees and expenses shall be subject to
and only payable upon entry of a Court order approving all or any portion of
such fees and expenses; and it is further
ORDERED, that Debtors, at their expense, shall (a) continue to
keep the Pre-Petition Collateral and Collateral insured in the same amounts and
manner as existed prior to the Petition Date against all loss, peril and hazard
and make Lender loss payee as its interests appear under such policies, and (b)
pay any and all post-petition taxes, assessments and governmental charges with
respect to such collateral all as provided under the Second Financing
Arrangement, and will provide Lender with proof thereof within three (3)
business days of written demand and will give Lender access to their records in
this regard; and it is further
ORDERED, that the automatic stay provisions of Bankruptcy Code SS.
362 are hereby modified to permit (a) the
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Debtors to implement the terms of the Second Financing Arrangement, and (b) the
Debtors to create, and Lender to perfect, any and all liens, mortgages and
security interests granted hereunder; provided, however, that Lender shall not
be required to file UCC financing statements or other instruments with any other
filing authority to perfect any lien, mortgage or security interest granted by
this Order or take any other action to perfect such liens, mortgages and
security interests; if, however, Lender shall, in its sole discretion, elect for
any reason to file, record or serve any such financing statements or other
similar documents with respect to such liens and security interests, the Debtors
shall execute same upon request and the filing, recording or service thereof (as
the case may be) shall be deemed to have been made on the Petition Date; and it
is further
ORDERED, that the time of payment of any and all Obligations of
the Debtors to Lender arising out of or incurred pursuant to the Second
Financing Arrangement shall not be altered, extended or impaired by any plan or
plans of reorganization that may hereafter be accepted or confirmed or any
further order of the Court which may hereafter be entered; and it is further
ORDERED, that Lender agrees to waive the defaults of any financial
covenants contained in the Pre-Petition Agreements during the Term and provided,
further that during the Term, Debtors shall not be bound by the Events of
Default or
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Termination Events contained in the First Financing Arrangement but shall be
bound only by the Events of Default and Termination Events contained in this
Second Financing Arrangement; and it is further
ORDERED, that payment of any and all Obligations of the Debtors to
Lender arising out of or incurred pursuant to the Second Financing Arrangement
shall be immediately due and payable, Lender shall have no obligation to make
loans and advances to the Debtors, and the Second Financing Arrangement shall be
terminated, upon the occurrence of (1) the Expiration Date, or (2) any of the
following events ("Termination Events") and the giving of written notice thereof
to the Debtors and the Debtors' counsel by Lender (the "Termination Notice") to
the extent required in subparagraphs "d", "e", "f", "g" and "j" below:
(a) the Debtors' Chapter 11 cases are either dismissed or
converted to Chapter 7 cases;
(b) a trustee is appointed in the Andover Chapter 11 Case;
(c) any plan of reorganization of the Debtors is confirmed which
does not provide for payment in full of the Obligations on the effective
date of the plan;
(d) the Debtors cease substantially all operations of their
present businesses without the prior written consent of Lenders or
provision for the payment in full of Lenders from sale proceeds or take
any material action for the
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purpose of effecting the foregoing without the prior written consent
of Lenders or provision for the payent in full of Lenders from sale
proceeds and a Termination Notice thereof is given;
(e) this Order is reversed, vacated, stayed, amended, supplemented
or otherwise modified in a manner which shall, in the reasonable opinion
of Lender, materially and adversely affect the rights of Lender hereunder
or shall materially and adversely affect the priority of any or all of
Lender's claims, liens or security interests and a Termination Notice
thereof is given;
(f) the occurrence of a materially adverse change, as determined
by Lender in good faith, in the financial condition of the Debtors and a
Termination Notice thereof is given, provided, however, that said
occurrence shall not be deemed a Termination Event if cured by the
Debtors within four (4) business days after the Termination Notice is
given by Lender to Debtors and Debtors' counsel; and
(g) material non-compliance or default by the Debtors with any of
the terms and provisions of this Order, provided, however, that said
non-compliance or default shall not be deemed a Termination Event if
cured by the Debtors within four (4) business days after the Termination
Notice is given to Debtor and the Debtors' counsel by Lender;
(h) Lender is required to pay on any outstanding pre-petition
documentary letters of credit other than those
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listed on Exhibit "B" hereto prior to receiving an indemnification or
stand-by letter of credit or other arrangement reasonably satisfactory
to Lender from a financial institution or other person acceptable to
Lender to eliminate Lender's credit risk; and
(i) termination of the engagement of Zolfo Cooper LLP as the
Debtors' financial advisors by the Debtors; provided, however, if Zolfo
Cooper LLP is terminated for any reason by the Debtors or resigns and the
Debtors retain another financial advisor reasonably acceptable to the
Lender within five (5) business days, such termination or resignation
shall not be a Termination Event;
(j) failure of the Debtors to be in compliance with the
availability under the Borrowing Base Certificate (the amount by which
the advances to the Debtors exceed the availability under the Borrowing
Base Certificate hereinafter the "Overadvance"), provided, however, that
said non-compliance or default shall not be deemed a Termination Event if
cured by the Debtors within four (4) business days after the Termination
Notice is given to the Debtors' counsel by Lender and provided further
that such default may be cured by the deposit of Additional Collateral in
an amount determined in the manner provided above equivalent to pay the
Overadvance, which Additional Collateral shall be released by the Lender
promptly upon reduction of any Overadvance provided the Debtors are in
compliance with the
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Borrowing Base Certificate after giving effect to such repayment and
provided further that such release will be made in amounts equal to the
reduction of the Overadvance; and it is further
ORDERED, that upon the occurrence of a Termination Event, and the
giving of the Termination Notice, but only with respect to the Termination
Events set forth in subparagraphs (d), (e), (f), (g) or (j) of the preceding
decretal paragraph, failure to timely cure said Termination Event, or upon the
occurrence of the Expiration Date, as such term is hereinafter defined:
(a) Lender shall have the right to immediately stop making
Advances under the Second Financing Arrangement and move, on not less
than five (5) days written notice to Debtors and Debtors' counsel and
all other parties entitled to notice, for relief from the restrictions
of Bankruptcy Code SS. 362, to exercise its rights and remedies
pursuant to the Second Financing Arrangement and/or applicable law as
to all or such part of the Collateral as Lender, in its sole
discretion, shall elect, and to the extent relief from the stay is
granted, the Debtors shall, without cost or expense to Lender except
for the reasonable costs to the extent related to the liquidation of
the Collateral, grant Lender:
(A) access to all its premises to take peaceful
possession of the Collateral as well as conduct a sale at the
Debtors' various locations of the Collateral through public or
private sale;
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(B) permission to use all of the Debtors'
trademarks, tradestyles, tradenames, licenses,
franchises and other proprietary rights for the purpose
of disposing of the Collateral; and
(C) permission to use all of the Debtors' equipment,
subject to the rights of any senior secured parties, for the
purpose of completing the manufacture of work in process;
(b) Lender shall have no right to take any action with
respect to Additional Collateral until the earlier of (A) twelve (12) months
from the occurrence of a Termination Event or (B) all Collateral has been
disposed of and shall apply the proceeds of Collateral first to the Obligations
in excess of (A) the Borrowing Base Availability Original Sublimit or (B) if
reduced, to the Borrowing Base Availability Sublimit; provided, further, that if
the Lender utilizes the Additional Collateral to satisfy its Obligations, once
the Obligations to Lender are satisfied in full the Third Party shall be
subrogated to the rights of Lender hereunder to the extent of the Additional
Collateral; and it is further
ORDERED, that notwithstanding the provisions of this Order,
the Debtors reserve their right to seek to utilize Lender's Cash Collateral
pursuant to Bankruptcy Code SS. 363 upon the occurrence of the Expiration Date
or Termination Event as set forth in subparagraphs (d) through (j) of the second
preceding decretal paragraph or any other Event of Default as defined in
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the Agreement and nothing contained herein shall be deemed to be a consent by
Lender to Debtors' use of its Cash Collateral; and it is further
ORDERED, that the Debtors shall provide Lender with (a) a
revised Borrowing Base Certificate with each request for a loan advance under
the Second Financing Arrangement but not less than one time each calendar week,
(b) no later than the twentieth day after the end of each month during the Term
a comparison of the projected operating budget of Debtors to the actual
performance achieved by the Debtors on a monthly basis, (c) accounts receivable
aging on a weekly basis and a monthly accounts receivable detail run, (d) an
inventory aging on a monthly basis, and (e) such other written reports,
certified by the president or vice-president of the Debtors to be accurate to
his knowledge, information and belief, as are required under the Agreements, and
such additional written reports as Lender, in its reasonable discretion, shall
require; and it is further
ORDERED, that the Debtors shall not compromise any account
receivable for less than ninety-five (95%) percent of the original invoice
amount of that account receivable without the prior written consent of Lender
and Debtors shall provide Lender with a listing of all accounts receivable
compromised on a weekly basis; and it is further
ORDERED, that for any action to be taken by the Debtors in
accordance with this Order which requires Lender's consent, Debtors shall
provide said request to Lender in writing and
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Lender shall have four (4) business days to respond except as otherwise
specified herein. Debtors may seek relief from the Bankruptcy Court on shortened
notice to take such action if Lender has not responded within said time frame;
and it is further
ORDERED, that the Debtors shall not sell any Collateral below
cost, at a cash discount, outside of the ordinary course of business or outside
historical selling terms or practices without the prior written consent of
Lender and the Committee; provided, however, if the Lender or the Committee
shall fail to give their consent Debtors shall be permitted, on three (3)
business days notice, to seek approval of such sale from the Bankruptcy Court;
and it is further
ORDERED, that the Debtors shall notify Lender within two (2)
business days of receipt of any written offer for (a) the sale of all or any
substantial part of the Debtors' businesses or group of assets or (b) a
recapitalization of the Debtors, or (c) an equity investment in excess of
$250,000; and it is further
ORDERED, that any tax refund due to the Debtors for any tax
year prior to the Petition Date, represents Lender's Pre-Petition Collateral
which, when collected, will be immediately remitted to Lender for application in
accordance with the terms of this Order; and it is further
ORDERED, that the Debtors are directed to keep their books and
records of original entry, including without limitation, records of sale,
credits authorized (whether or not
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credit memoranda have been issued), purchases, accounts receivable, bills of
lading, cash receipts, and cash disbursements, current and updated in the
ordinary course of business; and it is further
ORDERED, that Lender shall have the right, upon thirty hours'
telephone and facsimile-transmitted written notice to the Debtors, at any time
during the Debtors' normal business hours, to inspect, audit, examine, check,
make copies of or extracts from the books, accounts, checks, orders, invoices,
bills of lading, correspondence and other records of the Debtors, and the
Debtors shall make all of same available to Lender and its respective
representatives or consultants, for such purposes and shall provide Lender and
its representative or consultants with any other information reasonably
requested which will assist Lender or its representatives or consultants in its
analysis of the Collateral; and it is further
ORDERED, that if Lender so directs, Debtors hereby consent to
Lender having a representative physically on Debtors' premises during normal
business hours not more than one (1) day each week without Debtors' further
consent, which consent shall not be unreasonably withheld, to monitor the
Debtors' operations and the Collateral and conduct any on-site inspections as
are reasonable to protect the interests of Lender; and it is further
ORDERED, that (a) all Proceeds (as hereinafter defined) of
Collateral received by or on behalf of the Debtors shall be remitted by the
Debtors to Fleet, as agent for Lender, and (b)
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the pre-petition clearing accounts and payment procedures under which the
clearing accounts are maintained at Fleet for the collection of receivables and
sales of inventory pursuant to the Pre-Petition Agreements shall continue in
full force and effect unless otherwise directed by Lender; and it is further
ORDERED, that Lender shall have full dominion and control over
the proceeds of (a) the Collateral, including but not limited to Debtors'
accounts receivable and inventory and the funds deposited by the Debtors into
the lock box as set forth in the Second Financing Arrangement, and, (b) subject
to the rights of other entities under the Bankruptcy Code and applicable law,
all other Collateral; and it is further
ORDERED, that Debtors and any successor to the Debtors,
including without limitation any successor trustee or trustees, shall
immediately deliver or arrange for delivery of any and all payments or proceeds
realized upon the sale, liquidation, collection or disposition of the Collateral
("Proceeds") to Lender, in the form received; and it is further
ORDERED, that subject to the Avoidance Rights (as hereinafter
defined) Lender is authorized to accrue interest on the outstanding balance of
the Obligations of the Debtors as of the Petition Date (the "Pre-Petition
Obligations") pursuant to the Pre-Petition Agreements at the rate set forth in
the Pre-Petition Agreements and on the outstanding balance of the Post-
Petition Obligations pursuant to the First Financing Arrangement at the rate set
forth in the First Financing Order and on the
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outstanding balance of the Post-Petition Obligations pursuant to this Second
Financing Arrangement at the prime rate established by Fleet from time to time
plus two (2%) percent per annum, and to apply remittances from the Debtors
against interest as set forth herein; and it is further
ORDERED, that Lender is authorized, notwithstanding the
provisions of Bankruptcy Code SS. 362, (a) subject to the provisions concerning
(i) the Additional Collateral, (ii) application of the proceeds of Non-Core
Collateral and (iii) the Carve-Out contained herein and in the Agreement to
retain and apply the Proceeds of the Collateral, after the payment of current
interest on the Post-Petition Obligations and any unpaid Facility Fee as
provided herein, to the repayment of the Pre-Petition Obligations as follows,
first Out-of-Pocket Costs and interest on the Pre-Petition Obligations, and then
to pre-petition principal, and (b) once the Pre-Petition Obligations have been
satisfied in full, the Proceeds of Collateral shall be retained for the
repayment of the Post-Petition Obligations, first to Out-of-Pocket Costs
authorized by the Second Financing Arrangement, then to post-petition interest
to the extent not otherwise paid hereunder and then to post-petition principal;
and it is further
ORDERED, that from the initial advances under the Second
Financing Arrangement, Debtors shall satisfy in full the balance of the
Pre-Petition Obligations and the Post-Petition
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Obligations incurred under the First Financing Arrangement; and it is further
ORDERED, that such applications of the Proceeds shall be free
and clear of any claim, charge, assessment or other liability including, without
limitation, any such claim or charge arising out of or based on, directly or
indirectly, Bankruptcy Code SS. 552(b); and it is further
ORDERED, that the validity, extent, priority, perfection and
enforceability of Lender's pre-petition liens, claims, mortgages, security
interests and set-offs in and to the Debtors' assets and any payments made to
Lender prior to the Petition Date shall not be subject to challenge by the
Debtors, provided, however, that any Official Committee of Unsecured Creditors
shall have from the earlier of sixty days from the date of their appointment or
May 30, 1996 to commence an adversary proceeding against Lender for the purpose
of challenging the validity, extent, priority, perfection and enforceability of
Lender's pre-petition liens, mortgages, security interests and set-offs in and
to the Debtors' assets or any such payments to Lender prior to the Petition Date
and provided, further, that any other party in interest shall have until August
7, 1996 for the same purposes as the Official Committee of Unsecured Creditors,
any such litigation by such party in interest to be commenced only after the
Court has approved the party in interest to represent the estate (the "Avoidance
Rights"); and it is further
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ORDERED, that pursuant to the provisions of Bankruptcy Code
SS. 364(e), the liens, mortgages and security interests granted under or
ratified by this Order shall be binding on the Debtors and any successor trustee
or trustees even if this Order is reversed or modified on appeal; and it is
further
ORDERED, that the Debtors are hereby authorized and directed
to do and perform all acts and to make, execute and deliver all instruments and
documents which may be required or necessary for the performance of the Second
Financing Arrangement including, without limitation, the delivery to Lender of
the original checks or other forms of remittance received by the Debtors which
are the proceeds of the Collateral, the payment by the Debtors of all sums
required to be paid to Lender under the Second Financing Arrangement; and it is
further
ORDERED, that notwithstanding Bankruptcy Rule 7062, the terms
and conditions of this Order shall be: (a) immediately enforceable pursuant to
Bankruptcy Rule 8005; and (b) not be stayed absent (1) an application by a party
in interest for such stay in conformance with such Bankruptcy Rule 8005, and (2)
a hearing upon notice to the Debtors and Lender; and it is further
ORDERED, that the provisions of this Order and any actions
taken pursuant hereto shall survive entry of any order which may be entered
converting this case from Chapter 11 to Chapter 7 of the Bankruptcy Code;
provided, further, that the terms and provisions of this Order, as well as the
liens, mortgages and security interests and the Post-Petition Claim
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granted under the Second Financing Arrangement, shall continue in this or any
superseding case under the Bankruptcy Code and such liens, mortgages and
security interests and the Post-Petition Claim shall maintain their priority as
provided by this Order until the Debtors' Obligations to Lender are satisfied in
full; and it is further
ORDERED, that to the extent that any of the provisions of this
Order shall conflict with any of the provisions of the Agreements, this Order is
deemed to control and shall supersede the conflicting provision(s) in said
agreement(s).
Dated: New York, New York
May 21, 1996
/s/
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CHIEF UNITED STATES BANKRUPTCY JUDGE
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