As filed with the Securities and Exchange Commission on September 18, 1997.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1997
--------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
------------- --------------
Commission File Number: 1-9474
FORSTMANN & COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1651326
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1155 Avenue of the Americas; New York, New York 10036
----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (212) 642-6900
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 4,384,436 shares of common stock, $.01 par value,
outstanding as of September 18, 1997.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1997
--------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-------------- ----------------
Commission File Number: 1-9474
FORSTMANN & COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1651326
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1155 Avenue of the Americas; New York, New York 10036
----------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (212) 642-6900
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 4,384,436 shares of common stock, $.01 par value,
outstanding as of September , 1997.
Total number of pages:[ ] pages.
<TABLE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Reorganized
Company Predecessor Company
----------- ---------------------------------------------------------------------
Period From Period From Period From
July 23, May 5, Thirteen November 4, Thirty-Nine
1997 to 1997 to Weeks Ended 1997 to Weeks Ended
August 3, July 22, July 28, July 22, July 28,
1997 1997 1996 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $8,016,000 $ 45,880,000 $58,009,000 $141,884,000 $153,402,000
Cost of goods sold 5,853,000 41,893,000 48,849,000 123,128,000 132,417,000
---------- ------------ ----------- ------------ ------------
Gross profit 2,163,000 3,987,000 9,160,000 18,756,000 20,985,000
Selling, general
and administrative
expenses 419,000 3,594,000 4,204,000 11,575,000 13,207,000
Provision for
uncollectible accounts 64,000 (177,000) 464,000 252,000 1,064,000
---------- ------------ ----------- ------------ ------------
Operating income 1,680,000 570,000 4,492,000 6,929,000 6,714,000
Interest expense 216,000 1,646,000 2,355,000 4,958,000 7,001,000
---------- ------------ ----------- ------------ ------------
Income (loss) before
reorganization items,
income taxes and
extraordinary item 1,464,000 (1,076,000) 2,137,000 1,971,000 (287,000)
Reorganization items - 25,076,000 3,259,000 33,401,000 7,692,000
---------- ------------ ----------- ------------ ------------
Income (loss) before
income taxes and
extraordinary item 1,464,000 (26,152,000) (1,122,000) (31,430,000) (7,979,000)
Income taxes not
payable in cash 571,000 - - - -
---------- ------------ ----------- ------------ ------------
Income (loss) before
extraordinary item 893,000 (26,152,000) (1,122,000) (31,430,000) (7,979,000)
Extraordinary item -
gain on debt
discharge - 24,135,000 - 24,135,000 -
---------- ------------ ----------- ------------ ------------
Net income (loss) $ 893,000 $ (2,017,000) $(1,122,000) $ (7,295,000) $ (7,979,000)
========== ============ =========== ============ ============
Per share and share information (Note 11)
See notes to financial statements.
</TABLE>
<TABLE>
FORSTMANN & COMPANY, INC.
CONDENSED BALANCE SHEETS
AUGUST 3, 1997 AND NOVEMBER 3, 1996
Reorganized Predecessor
Company Company
------------- ------------
(unaudited)
August 3, November 3,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 296,000 $ 48,000
Cash restricted for settlement of
unpaid claims 685,000 -
Accounts receivable, net of
allowance of $64,000 and
$4,205,000 56,020,000 35,890,000
Inventories 46,980,000 44,646,000
Current deferred tax assets - -
Other current assets 761,000 224,000
Property, plant and equipment
held for sale - 1,250,000
------------ ------------
Total current assets 104,742,000 82,058,000
Property, plant and equipment, net 25,248,000 65,664,000
Other assets 1,881,000 2,207,000
------------ ------------
Total $131,871,000 $149,929,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 5,661,000 $ 48,389,000
Accounts payable 2,096,000 2,173,000
Accrued liabilities 14,178,000 13,399,000
------------ ------------
Total current liabilities 21,935,000 63,961,000
Long-term debt 58,529,000 4,010,000
Deferred tax liabilities - -
Accrued additional pension
liability in excess of accumulated
benefit obligation 1,170,000 -
------------ ------------
Total liabilities not subject to compromise 81,634,000 67,971,000
Liabilities subject to compromise - 88,631,000
Redeemable preferred stock subject to
compromise - 2,655,000
Shareholders' Equity (Deficit):
New common stock 43,844 -
Old common stock - 5,619
Additional paid-in capital 49,300,156 26,564,381
Excess of additional pension liability
over unrecognized prior service cost - (1,107,000)
Retained earnings (deficit) 893,000 (34,791,000)
------------ ------------
Total shareholders' equity (deficit) 50,237,000 (9,328,000)
------------ ------------
Total $131,871,000 $149,929,000
============ ============
See notes to financial statements.
</TABLE>
<TABLE>
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Reorganized
Company Predecessor Company
------------ -------------------------------
Period From Period From
July 23, November 4, Thirty-Nine
1997 to 1997 to Weeks Ended
August 3, July 22, July 28,
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ 893,000 $ (7,295,000) $ (7,979,000)
------------ ------------ ------------
Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Depreciation and amortization 150,000 10,600,000 9,332,000
Income taxes not payable in cash 571,000 - -
Income taxes refunded (paid), net - (108,000) 286,000
Provision for uncollectible accounts 64,000 252,000 1,064,000
Loss from disposal, abandonment
and impairment of machinery
and equipment and other assets - 4,385,000 261,000
Adjustment of accounts
to fair value - 22,076,000 -
Gain on discharge of debt - (24,135,000) -
Changes in current assets
and current liabilities:
Accounts receivable (3,321,000) (18,461,000) (14,550,000)
Inventories 1,491,000 2,685,000 17,900,000
Other current assets 100,000 (996,000) 102,000
Accounts payable (1,868,000) 2,028,000 1,113,000
Accrued liabilities 410,000 3,678,000 1,627,000
Accrued interest payable 103,000 (2,884,000) 1,494,000
Operating liabilities subject
to compromise - (513,000) (945,000)
------------ ------------ ------------
Total adjustments (2,300,000) (1,393,000) 17,684,000
------------ ------------ ------------
Net cash provided (used) by
operating activities (1,407,000) (8,688,000) 9,705,000
------------ ------------ ------------
Cash flows provided (used) in <PAGE>
investing activities:
Capital expenditures (103,000) (1,036,000) (412,000)
Investment in computer
information systems (3,000) (289,000) (669,000)
Net proceeds from disposal of
property, plant and equipment - 2,612,000 50,000
------------ ------------- ------------
Net cash provided (used) in
investing activities (106,000) 1,287,000 (1,031,000)
------------ ------------- ------------
Cash flows from financing activities:
Net borrowings (repayments) under
the DIP Facility - (16,017,000) 31,673,000
Net repayments under the
GE Capital Facility - - (38,626,000)
Net borrowings under the
Revolving Loan Facility 1,763,000 26,244,000 -
Borrowings under the Term
Loan Facility - 31,450,000 -
Borrowings under financing
arrangements - 1,691,000 -
Repayment of CIT Equipment Facility
and other financing arrangements (1,000) (6,368,000) (1,391,000)
Repayment of Senior Secured Notes - (26,909,000) -
Deferred financing costs - (2,006,000) (327,000)
Other - - (6,000)
------------ ------------ ------------
Net cash provided (used) by
financing activities 1,762,000 8,085,000 (8,677,000)
------------ ------------ ------------
Net increase (decrease) in cash 249,000 684,000 (3,000)
Cash at beginning of period 732,000 48,000 52,000
------------ ------------ ------------
Cash at end of period $ 981,000 $ 732,000 $ 49,000
============ ============ ============
</TABLE>
<TABLE>
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
Reorganized
Company Predecessor Company
----------- ------------------------------
Period From Period From
July 23, November 4, Thirty-Nine
1997 to 1996 to Weeks Ended
August 3, July 22, July 28,
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow
information relating to the
Chapter 11 proceeding:
Cash paid during the period for
professional fees $519,000 $3,489,000 $3,084,000
======== ========== ========== <PAGE>
Cash paid during the period relating
to the rejection or amendment of
executory contracts $ - $ - $ 754,000
======== ========== ==========
Cash paid during the period for other
items $ 14,000 $ 530,000 $ 409,000
======== ========== ==========
See notes to financial statements.
</TABLE>
<TABLE>
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(unaudited)
Shares Pension Total
of Additional Liability Retained Shareholders'
Common Common Paid-In Over Prior Earnings Equity
Stock Stock Capital Service Cost (Deficit) (Deficit)
------ ------ -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
COMPANY:
Balance,
November 3, 1996 5,618,799 $ 5,619 $26,564,381 $(1,107,000) $(34,791,000) $ (9,328,000)
Loss for period
before debt
discharge and
refinancing
and fresh start
accounting - - - - (8,760,000) (8,760,000)
Adjustments for:
Cancellation of
old common
stock and
old
preferred
stock (5,618,799) (5,619) 2,660,619 - - 2,655,000
Discharge of
debt 4,384,436 43,844 62,697,156 - 24,135,000 86,876,000
Debt
refinancing
expense - - - - (594,000) (594,000)
Fresh start
accounting
adjustments:
Fair market
valuation
of assets
and
liabilities - - - - (22,076,000) (22,076,000)
Eliminate
retained
earnings
deficit
and pension
liability
over prior
service cost - - (43,193,000) 1,107,000 42,086,000 -
--------- ------- ----------- ---------- ------------ ------------
Balance,
July 22, 1997 4,384,436 $43,844 $48,729,156 $ - $ - $ 48,773,000
REORGANIZED
COMPANY:
Income for period - - - - 893,000 893,000
Income taxes not
payable in cash - - 571,000 - - 571,000
--------- ------- ----------- ----------- ------------ ------------
Balance,
August 3, 1997 4,384,436 $43,844 $49,300,156 $ - $ 893,000 $ 50,237,000
========= ======= =========== =========== ============= ============
See notes to financial statements.
</TABLE>
FORSTMANN & COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 3, 1997
(unaudited)
1. Forstmann & Company, Inc. (the "Company") is a leading designer, marketer and
manufacturer of innovative, high quality woolen, worsted and other fabrics
which are used primarily in the production of brand-name and private label
apparel for men and women, as well as specialty fabrics for use in billiard
tables, sports caps and school uniforms.
2. On September 22, 1995, the Company filed a voluntary petition for relief (the
"Bankruptcy Filing") under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code") with the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court"). From September 22,
1995 to July 22, 1997, the Company operated as a debtor-in-possession.
On May 14, 1997, the Company filed its First Amended Plan of Reorganization
(the "Plan of Reorganization") and an accompanying First Amended Disclosure
Statement Pursuant to Section 1125 of the Bankruptcy Code (the "Disclosure
Statement"). On May 15, 1997, the Bankruptcy Court entered an order
approving the Company's Disclosure Statement, and on or about May 28, 1997,
the Company began to solicit the vote of its creditors and stockholders with
respect to the Plan of Reorganization in accordance with the Bankruptcy Code.
On July 9, 1997, the Bankruptcy Court entered an order confirming the Plan of
Reorganization. On July 23, 1997 (the "Effective Date"), the Plan of
Reorganization was consummated by the Company.
The Plan of Reorganization is primarily an equity conversion plan, pursuant
to which all general unsecured claims against the Company were converted into
100% of common stock of the reorganized Company issued and outstanding on the
Effective Date based on a ratio of 50 shares per each $1,000 of allowed
unsecured claim. Secured claims against the Company aggregating
approximately $60.1 million were either refinanced, reinstated or
restructured as more fully described in Note 9 to the Financial Statements
contained herein. In addition, in connection with the Plan of
Reorganization, as of the Effective Date:
(i) holders of the Company's redeemable preferred stock received in the
aggregate warrants entitling them to purchase 43,878 shares of the
new common stock of the Company within two years of the Effective
Date at an exercise price of $23 per share, and the preferred stock
was canceled;
(ii) holders of the Company's old common stock received in the aggregate
warrants entitling them to purchase 43,878 shares of the new common
stock of the Company within two years of the Effective Date at an
exercise price of $23 per share, and the old common stock was
canceled;
(iii) holders of options to purchase common stock of the Company received
no distributions under the Plan, and the options were canceled;
(iv) an aggregate of 487,528 shares of common stock of the reorganized
Company were reserved for issuance upon exercise of options granted
or to be granted pursuant to the Company's Management Stock Option
Plan and, as of the Effective Date, 146,258 options were granted to
certain employees of the Company at an exercise price of $12.88 per
share;
(v) the Company entered into a Loan and Security Agreement dated as of
July 23, 1997 (the "Loan and Security Agreement") with BankAmerica
Business Credit, Inc. ("BABC"), as agent, and the financial
institutions named therein, the proceeds of which were used to repay
all amounts outstanding under the Company's GE Capital DIP Facility
(hereinafter defined) and CIT Equipment Facility (hereinafter
defined), repay the principal and a portion of the accrued and
unpaid interest due under the Senior Secured Notes (hereinafter
defined) and fund other amounts due pursuant to the Plan of
Reorganization and the Loan and Security Agreement.
Reference is made to the Exhibits attached to the Company's Report on Form 8-
K, dated July 9, 1997, for a copy of the Plan of Reorganization.
3. The condensed Financial Statements presented herein are unaudited and have
been prepared by the Company according to the rules and regulations of the
Securities and Exchange Commission and according to the principles of fresh
start accounting in accordance with the American Institute of Certified
Public Accountants Statement of Position 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code ("SOP 90-7"). As a
result of the consummation of the Plan of Reorganization and application of
"fresh start" accounting, the Company was required to report its financial
results for the thirteen and thirty-nine weeks ended August 3, 1997 in two
separate periods in this Form 10-Q. Moreover, as a result of the
consummation of the Plan of Reorganization and application of "fresh start"
accounting, the reorganized Company's condensed financial statements
(hereinafter defined) are not comparable to the Company's condensed financial
statements for prior periods.
The following table describes the periods presented in the condensed
financial statements and related notes thereto:
Period Referred to as
------ --------------
Results for the Reorganized
Company From July 23,
1997 to August 3, 1997 "Reorganized Company 1997 12-Day Period"
Results for the Predecessor
Company From May 5, 1997
to July 22, 1997 "Predecessor Company 1997 79-Day Period"
Results for the Predecessor
Company Thirteen Weeks
Ended July 28, 1996 "1996 Third Quarter"
Results for the Predecessor
Company From November 4,
1996 to July 22, 1997 "Predecessor Company 1997 261-Day Period"
Results for the Predecessor
Company Thirty-Nine Weeks
Ended July 28, 1996 "1996 Nine-Month Period"
Combined Reorganized Company
1997 12-Day Period and
Predecessor Company 1997
79-Day Period (Results for
the Thirteen Weeks Ended
August 3, 1997) "1997 Third Quarter"
Combined Reorganized Company
1997 12-Day Period and
Predecessor Company 1997
261-Day Period (Results
for the Thirty-Nine Weeks
Ended August 3, 1997) "1997 Nine-Month Period"
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of such
information have been made. These financial statements should be read
in conjunction with the financial statements and related notes contained
in the Company's Annual Report on Form 10-K for the fiscal year ended
November 3, 1996 (the "1996 Form 10-K"). Certain information normally
included in financial statements and related notes prepared in
accordance with generally accepted accounting principles has been
condensed or omitted.
Due to the seasonal nature of the Company's business, customer order
patterns, and the effects of the consummation of the Plan of
Reorganization and application of "fresh start" accounting, results for
the periods described above are not necessarily indicative of the
results for a full fiscal year.
The total reorganization value assigned to the reorganized Company's
assets was determined using several factors and by reliance on various
valuation methods, including discounting cash flow, as well as by
analyzing market cash flow multiples applied to the Company's pro forma
adjusted 12-month trailing cash flows. The factors considered by the
Company included :
(i) Forecasted operating and cash flow results which gave effect to
the estimated impact of : the restructuring and implementation
of the Company's strategic initiatives; limitations on the use
of available net operating loss carryovers and other tax
attributes resulting from consummation of the Plan of
Reorganization and other events;
(ii) the discounted residual value at the end of the forecast
period;
(iii) market share and position;
(iv) competition and general economic considerations;
(v) future potential profitability, and;
(vi) the Company's seasonality and working capital requirements.
Based on this analysis, the Company, after consultation with the
Company s creditors committee established by the Bankruptcy Court and
the creditors committee s independent firm specializing in
reorganizations, established the Company's reorganization value. Under
the principles of "fresh start" accounting, the Company's total assets
were recorded at this assumed reorganization value, with the
reorganization value allocated to identifiable tangible and intangible
assets on the basis of their estimated fair value. In accordance with
fresh start accounting, the difference between the assumed
reorganization value and the fair value of the identifiable tangible and
intangible assets resulted in a reduction in the value assigned to
property, plant and equipment. In addition, the Company's accumulated
deficit was eliminated.
The effect of the Plan of Reorganization and the application of "fresh
start" accounting to the Company's condensed balance sheet as of July
22, 1997 was as follows (in thousands):
<TABLE>
Pre-Fresh
Start Plan of Fresh Start
Balance Reorganization Fair Value Balance
Sheet Adjustments Adjustment Sheet
July 22, 1997 (A) (B) July 22, 1997
------------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 48 $ 684 $ - $ 732
Accounts receivable 52,764 - - 52,764
Inventory 41,961 - 6,510 48,471
Other current assets 1,220 (360) - 860
-------- ---------- --------- --------
Total current assets 95,993 324 6,510 102,827
Property, plant and equipment net 53,879 - (28,586) 25,293
Deferred financing costs 794 995 - 1,789
Other assets 91 - - 91
-------- --------- --------- --------
Total assets $150,757 $ 1,319 $(22,076) $130,000
======== ========= ======== ========
Current maturities of long-term debt $ 53,906 $(48,282) $ - $ 5,624
Accounts payable 3,964 - - 3,964
Accrued liabilities 17,043 (3,378) - 13,665
-------- --------- -------- ---------
Total current liabilities 74,913 (51,660) - 23,253
Long-term debt 2,690 54,114 - 56,804
Other long-term obligations 1,170 - - 1,170
Liabilities subject to compromise 87,417 (87,417) - -
Redeemable preferred stock 2,655 (2,655) - -
Stockholders equity (deficit) (18,088) 88,937 (22,076) 48,773
--------- --------- -------- ---------
Total liabilities and stockholders
equity $150,757 $ 1,319 $(22,076) $130,000
========= ========= ======== ========
(A) To record the transactions consummated pursuant to the Plan of
Reorganization as outlined in Note 2 and eliminate the deficit in
accumulated stockholders' deficit.
(B) To record the adjustments to state assets and liabilities at fair
value and adjust for the difference between the assumed
reorganization value and the fair value of the identifiable tangible
and intangible assets by reducing the value assigned to property,
plant and equipment.
4. One of the Company's customers accounted for approximately 15% of the
Company's revenues for the 1997 Nine-Month Period and another customer
accounted for approximately 9% of gross accounts receivable at August 3,
1997. No other customer represented more than 6% of revenue during the
1997 Nine-Month Period or 5% of gross accounts receivable at August 3,
1997. Generally, sales are recognized when goods are sold and then
shipped to the Company s customers. A portion of such sales is made on
extended terms of up to 240 days. At August 3, 1997, $18.1 million of
sales made on extended terms were included in accounts receivable under
terms of specific sales.
5. Inventories are stated at the lower of cost, determined principally by the
LIFO method, or market and consists of (in thousands):
August 3, November 3,
1997 1996
---- ----
Raw materials and supplies $ 8,113 $ 7,406
Work-in-process 28,301 32,007
Finished products 10,566 11,595
Less market reserves - (6,362)
------- -------
Total 46,980 44,646
Difference between LIFO carrying
value and current replacement
cost - 3,936
------- -------
Current replacement cost $46,980 $48,582
======= =======
During the 1997 Nine-Month Period, the Company sold certain yarn inventory
which had been previously identified as surplus or obsolete for its net
carrying value which was $3.0 million below its gross inventory value. This
transaction resulted in a release of yarn inventory market reserves of $3.0
million and did not give rise to any loss during the 1997 Nine-Month Period.
Additionally, the Company increased market reserves by $0.9 million for
inventory related to the converting fabrics product line which had been
discontinued as part of the product rationalization effort undertaken in
fiscal year 1996. Such reserve was necessary as a result of selling price
markdowns anticipated to sell off the remaining converting fabrics inventory
on hand. This expense was charged to reorganization expense during the 1997
Third Quarter.
In connection with the adoption of "fresh-start" accounting, the Company
revalued its inventories to fair market value as of July 22, 1997. This
revaluation resulted in the inventory carrying value being written up by $6.5
million.
6. Property, plant and equipment consist of the following at August 3, 1997 and
November 3, 1996 (in thousands):
August 3, November 3,
1997 1996
---- ----
Land $ 243 $ 840
Buildings 3,379 16,391
Machinery and equipment 20,636 85,977
Construction in progress 1,138 4,685
------- --------
Total 25,396 107,893
Less accumulated depreciation
and amortization (148) (42,229)
------- --------
Net $25,248 $ 65,664
======= ========
AS discussed in Note 4 to the Financial Statements in the 1996 Form 10-K,
during fiscal year 1996, the Company announced its intention to close its
Tifton facility. The closing commenced in late July 1996 and was completed
in November 1996. The Company incurred $0.4 million in expenses during
fiscal year 1996 and $0.1 million in expenses during the 1997 Nine-Month
Period in connection with the relocation of certain of its wool blending
machinery and equipment from the Tifton facility to the Dublin facility.
These expenses were reflected as reorganization items in the period incurred.
In November 1996, the Company entered into a Contract of Sale with the Tift
County Development Authority (the Development Authority ), providing for the
sale of the Tifton facility for $1.25 million. On July 18, 1997, the sale
was consummated and the net proceeds of $1.25 million were applied to a
portion of the accrued but unpaid interest due to the holders of the
Company's Senior Secured Notes. The selling price for the Tifton facility
was $1.1 million below the net book value for the facility and such loss was
accrued during fiscal year 1996.
In accordance with "fresh start" accounting, the difference between the
assumed reorganization value and the fair value of the identifiable tangible
and intangible assets resulted in a write-down in the value assigned to
property, plant and equipment of $28.6 million. During the 1997 Third
Quarter, the Company accelerated depreciation associated with impaired
property, plant and equipment. This resulted in a $0.4 million increase to
cost of goods sold and a $0.1 million increase to selling, general and
administrative expenses during the 1997 Third Quarter.
7. Other assets consist of (in thousands):
August 3, November 3,
1997 1996
---- ----
Computer information systems, net of
accumulated amortization of
$0 and $1,174 $ 32 $2,270
Deferred financing costs, net of
accumulated amortization of
$55 and $1,874 1,787 679
Other, including $0 and $246 of net
barter credits 62 354
------ ------
Total $1,881 $2,207
====== ======
During the 1997 Third Quarter, the Company evaluated its computer information
systems that were being internally developed and concluded that the majority
of such previously capitalized costs will not be recovered through future
operations and, accordingly, wrote off approximately $1.2 million of such
deferred software development costs.
Also during the 1997 Third Quarter, the Company wrote off approximately $0.2
million of deferred financing costs associated with debt agreements that were
fully paid in connection with the consummation of the Plan of Reorganization.
8. Accrued liabilities consist of (in thousands):
August 3, November 3,
1997 1996
---- ----
Salaries , wages and related
payroll taxes $ 774 $ 987
Incentive compensation 890 89
Confirmation and retention bonus 1,774 1,200
Vacation and holiday 1,145 1,616
Employee benefit plans 514 617
Interest on long-term debt 107 2,888
Medical insurance claims 1,810 1,330
Professional fees 1,853 2,346
Deferred rental and other lease
obligations 2,207 -
Environmental remediation 367 339
Other 2,737 1,987
------- -------
Total $14,178 $13,399
======= =======
9. Long-term debt consists of (in thousands):
August 3, November 3,
1997 1996
---- ----
Revolving Loans $28,007 $ -
Term Loan 31,450 -
Deferred Interest Rate Notes 1,571 -
Other note 603 -
CIT Equipment Facilities - 6,136
Capital lease obligations 2,559 3,337
GE Capital DIP Facility - 16,017
Senior Secured Notes - 26,909
Senior Subordinated Notes - 56,632
------- --------
Total debt 64,190 109,031
Current portion of long-term debt (5,661) (48,389)
Senior Subordinated Notes included in
liabilities subject to compromise - (56,632)
------- --------
Total long-term debt $58,529 $ 4,010
======= ========
On July 23, 1997, the Company entered into the Loan and Security Agreement
with a syndicate of financial institutions led by BABC. The Loan and
Security Agreement provides for a revolving line of credit (including a $10.0
million letter of credit facility), subject to a borrowing base formula, of
up to $85 million (the "Revolving Loan Facility") and term loans of
approximately $31.5 million (the "Term Loan Facility"). Borrowings on July
23, 1997 of $28.0 million under the Revolving Loan Facility plus the proceeds
from the Term Loan Facility were used to repay all borrowings outstanding
under the Company s GE Capital DIP Facility (hereinafter defined) and CIT
Equipment Facility (hereinafter defined), repay the principal and a portion
of the accrued and unpaid interest due under the Senior Secured Notes
(hereinafter defined) and fund other amounts due pursuant to the Plan of
Reorganization and the Loan and Security Agreement. The Revolving Loan
Facility and Term Loan Facility mature on July 22, 2000. If the Company
elects to terminate the Revolving Loan Facility prior to April 23, 2000, THE
Company must pay a termination fee. The fee will be $850,000 if the
termination occurs prior to the first anniversary of the Loan and Security
Agreement, $637,500 if the termination occurs between the first and second
anniversaries of the Loan and Security Agreement and $425,000 if the
termination occurs between the second anniversary of the Loan and Security
Agreement and April 23, 2000. The Term Loan Facility can be prepaid, at the
Company s election, without a termination fee at any time prior to maturity.
The Company s obligations under the Loan and Security Agreement are secured
by liens on substantially all of the Company's assets.
Outstanding borrowings (including outstanding letters of credit) under the
Revolving Loan Facility cannot exceed the sum of (1) 85% of eligible accounts
receivable (including eligible bill and hold receivables which cannot exceed
$17.6 million), plus (2) the lesser of $30.0 million or 65% of eligible
inventory, less (3) a reserve that is initially $6.5 million and declines by
$47,500 each month as payments under the Term Loan Facility are made.
Further, the Company's borrowing base is subject to other reserves which may
be established from time to time by BABC. At August 3, 1997, the Company's
loan availability as defined in the Loan and Security Agreement, in excess of
outstanding advances and letters of credit, was approximately $35.7 million.
Borrowings under the Revolving Loan Facility and the Term Loan Facility bear
interest, at the Company's option, at a floating rate (which is based on a
Bank of America reference rate ("PRIME")) or a fixed rate (which is based on
LIBOR), payable monthly. Under the Revolving Loan Facility, the floating
rate is 0.25% per annum above Prime and the fixed rate is 2.50% per annum
above LIBOR. Under the Term Loan Facility, the floating rate is 0.75% per
annum above Prime and the fixed rate is 3.00% per annum above LIBOR.
At August 3, 1997, there were fixed rate loans of approximately $28.0 million
outstanding under the Revolving Loan Facility and a fixed rate loan of
approximately $31.0 million outstanding under the Term Loan Facility. These
loans bore interest at 8.125% per annum and 8.625% per annum, respectively,
through August 28, 1997. Further, at August 3, 1997, approximately $450,000
of the Term Loan Facility bore floating rate interest at 9.25% per annum.
The Term Loan Facility requires monthly principal payments of approximately
$374,000 commencing August 31, 1997. Further, the Company is required to pay
50% of excess cash flow for each fiscal year, as defined in the Loan and
Security Agreement, as long as the outstanding principal balance under the
Term Loan Facility is greater than $23.3 million. Such excess cash flow
payments are due on April 30 of each year following the fiscal year for which
an excess cash flow payment is due. Such payments are to be applied
against the unamortized principal portion of the Term Loan Facility in the
inverse order of maturity.
In connection with entering into the Loan and Security Agreement, the Company
paid BABC approximately $728,000 as an underwriting fee and agreed to pay
BABC, as agent, an unused line fee of 0.50% per annum on the average unused
portion of the Revolving Loan Facility. The Company paid approximately
$582,000 as a facility fee to participants in the syndicate to the Loan and
Security Agreement. In addition, the Company pays BABC an agency fee of
$125,000 per annum, payable monthly commencing August 1, 1997, and pays
certain fees in connection with letters of credit. Further, the Company pays
BABC a loan administration fee of 0.25% per annum on the principal amount
outstanding under the Revolving Loan Facility and Term Loan Facility.
The Loan and Security Agreement contains certain restrictive covenants,
including limitations on the incurrence of indebtedness, the sale of assets,
the incurrence of liens, the making of certain restricted payments, the
making of specified investments, the payment of cash dividends and the making
of certain fundamental corporate changes and amendments to the Company's
corporate organizational and governance instruments. In addition, the
Company is required to satisfy, among other things, certain financial
performance criteria, including minimum interest and fixed charge coverage
ratios, minimum adjusted tangible net worth requirements and maximum capital
expenditure and software development costs.
Reference is made to the Company's annual Financial Statement in the 1996
Form 10-K for a discussion regarding the Company's GE Capital DIP Facility,
Senior Secured Notes, CIT Equipment Facility and Subordinated Notes.
In connection with the Bankruptcy Filing, the Company obtained debtor-in-
possession ("DIP") financing from General Electric Capital Corporation ("GE
Capital") under a revolving credit facility which was approved by the
Bankruptcy Court (the GE Capital DIP Facility ). In connection with
emerging from bankruptcy and entering into the Loan and Security Agreement,
the Company repaid all amounts outstanding under the GE Capital DIP Facility
and paid approximately $103,000 in unpaid amendment fees and legal fees and
expenses.
Prior to the commencement of its bankruptcy proceeding, the Company issued an
aggregate of $30 million of its Senior Secured Notes due October 30, 1997
(the "Senior Secured Notes"). The Company's obligations under the Senior
Secured Notes were secured by liens on substantially all of the Company's
assets. On the Effective Date, the outstanding principal portion of the
Senior Secured Notes was repaid in full and the Company issued subordinated
floating rate notes (the "Deferred Interest Rate Notes") in respect of
accrued but unpaid interest (approximately $1.6 million) due the holders of
the Senior Secured Notes. In connection with the issuance of the Deferred
Interest Rate Notes, the Company paid a closing fee of approximately $31,400.
Further, in accordance with the Plan of Reorganization, the Company paid
$157,000 in trustee fees and legal fees and expenses. The Deferred Interest
Rate Notes are due July 23, 2001 and bear interest at 4.5% per annum above
LIBOR, payable monthly. Subject to certain exceptions, the Deferred Interest
Rate Notes restrict, among other things, the incurrence of indebtedness and
liens.
Prior to the commencement of its bankruptcy proceeding, the Company was a
party to a loan and security agreement (the "CIT Equipment Facility") with
the CIT Group/Equipment Financing, Inc. ("CIT") which provided financing for
the acquisition of, and to refinance borrowings incurred to acquire various
textile machinery and equipment.
On the Effective Date, the outstanding principal and accrued but unpaid
interest due under the CIT Equipment Facility was repaid in full. Further,
in accordance with the Plan of Reorganization, the Company paid approximately
$36,000 in legal fees and expenses. In addition, pursuant to the Plan of
Reorganization, the Company restructured its obligations under certain
capital leases.
As discussed in Note 7 to the Financial Statements in the 1996 Form 10-K, on
April 20, 1989, through an underwritten public offering, the Company sold
$100 million of 14-3/4% Senior Subordinated Notes due April 15, 1999 (the
"Senior Subordinated Notes"). As of the Bankruptcy Filing, approximately
$56.6 million of Senior Subordinated Notes were outstanding and approximately
$3.6 million in accrued but unpaid interest was due the holders of the Senior
Subordinated Notes. The Senior Subordinated Notes were subordinated to all
existing and future senior indebtedness (as defined) of the Company. In
accordance with the Plan of Reorganization, the unsecured claims of the
Senior Subordinated Notes were settled through the issuance of 3,013,744
shares of common stock of the reorganized Company. Further, in accordance
with the Plan of Reorganization, the Company paid $80,000 in trustee fees
associated with the Senior Subordinated Notes.
Contractual interest expense during the 1997 Third Quarter and 1996 Third
Quarter was $3.7 million and $4.5 million, respectively. For the 1997 Nine-
Month Period and 1996 Nine-Month Period, contractual interest expense was
$11.4 million and $13.5 million, respectively.
Aggregate long-term debt maturities including capital lease obligations at
August 3, 1997 are as follows (in thousands):
Fiscal Year Amount
----------- ------
1997 $ 1,604
1998 5,414
1999 5,508
2000 50,093
2001 1,571
Thereafter -
-------
Total $64,190
=======
10. Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
and (b) operating loss and tax credit carryforwards. The tax effects of
significant items comprising the Company's net deferred tax liability at
August 3, 1997 and at November 3, 1996 are as follows (in thousands):
August 3, November 3,
1997 1996
---- ----
Deferred tax liabilities:
Differences between book
and tax basis of property,
plant and equipment $ - $ 9,915
Deferred interest payable - 1,054
Other - 27
------- -------
Total - 11,415
------- -------
Deferred tax assets:
Operating loss carryforwards (1,202) (10,187)
Alternative minimum tax carryforwards (923) (846)
Difference between book and tax basis of
computer information systems (267) (1,308)
Differences between book and tax basis
of property, plant and equipment (2,329) -
Accrued liabilities (2,739) (3,363)
Barter credit reserves (873) (631)
Allowance for uncollectible accounts (1,701) (1,181)
Inventories (717) (5,671)
Other (20) (290)
------- -------
Total (10,771) (23,477)
------- -------
Valuation allowance 10,771 12,062
------- -------
Net deferred tax liability $ - $ -
======= =======
At August 3, 1997, the Company had cumulative net operating loss
carryforwards for federal income tax purposes of approximately $3.0
million. For federal income tax purposes, the Company's net operating loss
carryforwards begin to expire in the year 2002. Under the Plan of
Reorganization, certain debt instruments were canceled in exchange for
shares in the reorganized Company's common stock as more fully described in
Note 9 to the Financial Statements contained herein. As a result, the
Company recognized a gain on extinquishment of debt of approximately $24.1
million in the 1997 Third Quarter. The Company had sufficient net
operating loss carryforwards to offset this gain and therefore, no income
tax was recorded.
Distribution of the new common stock of the Company to the Company's
unsecured creditors pursuant to the Plan of Reorganization is believed to
have resulted in an ownership change as defined in Section 382 of the
Internal Revenue Code. This ownership change limits the Company s ability
to utilize its net operating loss carryforwards. Such ownership change
further limits the Company's ability to utilize certain of its other carry-
forward tax attributes. Certain future events may result in such benefits
being utilized in the Company's future income tax returns, which the
Company will record as a reduction in the valuation allowance and, in
accordance with the principles of "fresh start" accounting, a credit to
additional paid-in-capital.
During fiscal year 1995, the Company fully utilized its net operating loss
carrybacks as permitted by the Internal Revenue Code. For the Predecessor
Company's 1997 79-Day Third Quarter, the Predecessor Company 1997 261-Day
Period, the 1996 Third Quarter and the 1996 Nine-Month Period, no income
tax benefit has been recognized from the realization of net operating
losses. In accordance with SOP 90-7, an income tax provision not payable
in cash was recognized for the Reorganized Company 1997 12-Day Period at an
effective income tax rate of 39.0%. Such provision was credited against
additional paid-in capital as net operating losses generated during the
Predecessor Company 1997 261-Day Period can be used to offset net taxable
income, if any, generated during the reorganized Company's fiscal period
ended November 2, 1997.
11. As of the Effective Date, the Company had authorized ten million shares of
common stock, par value $.01 per share.
At August 3, 1997, 4,384,436 shares of common stock were issued and
outstanding, including 255,212 shares of common stock held by the Company
as the Distribution Agent under the Plan of Reorganization in a Disputed
Claims Equity Reserve pending determination of the entitlement thereto of
holders of certain disputed claims against the Company.
On the Effective Date, pursuant to the Plan of Reorganization, the Company
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") with certain holders of its common stock. The Registration
Rights Agreement requires that the Company file a "shelf" registration of
the shares of common stock held by such holders pursuant to Rule 145 under
the Securities Act of 1933 within 120 days of the Effective Date or such
longer period no later than March 31, 1998 as may be determined by the
Board of Directors. The Company is also required to use its best efforts
to have the registration statement declared effective by the Securities and
Exchange Commission and to keep the registration statement effective for a
period of two years.
Also on the Effective Date, the Company issued warrants to holders of
record as of July 9, 1997 of its old common stock and its old preferred
stock. Eligible stockholders received warrants to purchase an aggregate of
87,756 shares of the Company's new common stock at an exercise price of $23
per share. The warrants may be exercised at any time prior to the second
anniversary of the Effective Date.
Pursuant to the Plan of Reorganization, the Company also adopted a
Management Stock Option Plan pursuant to which 487,528 shares of its new
common stock were reserved for future issuance upon the exercise of stock
options granted or to be granted pursuant to the Plan. On the Effective
Date, the Company granted options to purchase an aggregate of 146,258
shares of common stock at an exercise price of $12.28 per share to certain
employees. One quarter of these options vested on the Effective Date and
an additional quarter will vest on each of the first three anniversaries of
the Effective Date.
Per share and share information for the Company for all periods presented
in the condensed statement of operations have been omitted as such
information is not deemed to be meaningful.
12. As discussed in Note 12 to the Financial Statements in the 1996 Form 10-K,
the Company has accrued certain estimated costs for environmental matters.
The Company and J. P. Stevens & Co., Inc. ("J. P. Stevens") are subject to
two separate administrative orders dated December 29, 1995 issued by the
Environmental Protection Division of the Georgia Department of Natural
Resources (the "EPD") which relate to three sites at the Company s Dublin
facility, one related to TCE, one related to 1, 1-DCA and another related
to the Burn Area. With respect to the administrative orders, the Company
and J. P. Stevens were required to submit a compliance status report
("CSR") and compliance status certification pertaining to the TCE and 1, 1-
DCA sites and another CSR and compliance status certification pertaining to
the Burn Area site.
During fiscal year 1996, the Company and J. P. Stevens agreed to an
allocation of the work required under the administrative orders relating to
the three sites. Under the terms of the agreement, J. P. Stevens would
prepare and bear the costs of preparing the CSR for the Burn Area site and
the Company would prepare and bear the costs of preparing the CSR for the
TCE and 1, 1-DCA sites. The agreement, as amended, was entered into by the
Company and J. P. Stevens in January 1997.
After on-going discussions between the EPD and the Company, the Company
submitted the CSR and compliance status certification for the TCE and 1, 1-
DCA sites. Subsequently, the Company received a response from the EPD to
the Company's CSR that, among other things, asserted the EPD s position
that the Company's TCE site was not in compliance with a Type 4 risk
reduction standard. After further meetings and discussions between the EPD
and the Company, on March 26, 1997, the Company confirmed in a letter to
the EPD that the Company believes that the EPD has agreed to the continued
operation of the Company's existing groundwater recovery program as an
acceptable corrective action, subject, among other things, to the provision
by the Company to provide the EPD with a Corrective Action Plan ( CAP )
that demonstrates that the existing recovery system will achieve compliance
with cleanup standards acceptable to the EPD. The Company has submitted
the CAP to the EPD and to date the EPD has not responded to the Company's
CAP.
Throughout fiscal year 1996, the Company, J. P. Stevens and the EPD had on-
going discussions and J. P. Stevens and the EPD entered into a Consent
Order which obligated J. P. Stevens to prepare and submit to the EPD a
CSR for the Burn Area within 180 days of the effective date of the Consent
Order. Subsequently, J. P. Stevens submitted the CSR and compliance status
certification for the Burn Area certifying that the Burn Area site is in
compliance with a Type 4 risk reduction standard. To date the EPD has not
responded to J. P. Stevens' CSR and compliance status certification.
In January 1997, the Company was notified by the Development Authority, a
prospective purchaser (now owner, see Note 6 to the Financial Statements)
of the Company's Tifton facility, that soil and groundwater samples had
been taken from the Tifton facility. Based on the results of tests
conducted by an environmental consultant engaged by the purchaser, the
Company was informed that certain contaminants were present in the vicinity
of a settling tank at the Tifton facility. Subsequently, the Company
confirmed the presence of contaminants in groundwater samples taken at the
site, notified the EPD and removed the settling tank. The EPD has notified
the Company that a release exceeding a reportable quantity has occurred at
the site and that the site has been added to the Georgia Hazardous Site
Inventory. To date, the Company has not been informed by the EPD what, if
any, further action may be required at the site. In connection with the
sale of the Tifton facility, the Company and a tenant at the Tifton
facility entered into an Environmental Cost Sharing and Indemnity Agreement
(the Agreement ) which was approved by the Development Authority. The
Agreement, among other things, provides for the reimbursement by the tenant
of costs associated with certain environmental matters at the Tifton
facility. Such reimbursement of costs shall be at an amount that is the
lesser of (i) $150,000 or (ii) one-half of the costs actually paid by the
Company to perform remedial action associated with the site. All other
costs associated with the remediation of the contaminants found at the site
will be the obligation of the Company. During the second quarter of fiscal
year 1997, the accrual for environmental remediation was increased by $0.1
million to cover the Company s expected costs for environmental remediation
at the Tifton facility (net of expected reimbursement from the tenant).
This resulted in a $0.1 million increase to the loss on sale of the Tifton
facility and was charged to reorganization items during the second quarter
of the 1997 fiscal year.
At August 3, 1997, the Company had $0.4 million accrued for costs to be
incurred in connection with the TCE, 1, 1-DCA and Tifton facility
environmental matters. The Company, subject to the EPD concurring with the
Company s CAP relating to the TCE and 1, 1-DCA sites, EPD s response to J.
P. Stevens CSR and compliance status certification and the EPD s response
to the Tifton site, believes the accrual for environmental costs at August
3, 1997 is adequate.
13. Liabilities subject to compromise consists of (in thousands):
July 22, November 3,
1997 1996
---- ----
Subordinated Notes, including accrued
pre-petition interest $60,275 $60,330
Trade accounts payable 21,653 22,591
Priority tax claims - 293
Accrued severance 1,488 1,295
Deferred rental and other lease
obligations 1,689 2,735
Accrued additional pension liability
in excess of accumulated benefit
obligation - 1,170
Other 2,312 217
------- -------
Total $87,417 $88,631
======= =======
In accordance with the Plan of Reorganization, unsecured creditors with
allowed claims could elect to receive the lesser of $400 or the actual
amount of their allowed unsecured claim (the "Convenience Class").
Accordingly, on the Effective Date the Company paid $59,068 to the
Convenience Class. Further, in accordance with the Plan of Reorganization,
the Company was required to deposit into a reserve account (the "Disputed
Claims Cash Reserve") cash equal to 100% of the asserted amount of
administrative, priority and secured claims as to which the Company
disputes liability. On the Effective Date, the Company deposited $684,221
in the Disputed Claims Cash Reserve.
14. In accordance with SOP 90-7, professional fees, asset impairments and
restructuring charges directly related to the Company's bankruptcy and
related reorganization matters have been segregated from normal operations
during the 1997 Third Quarter and the 1996 Third Quarter and the 1997 Nine-
Month Period and the 1996 Nine-Month Period and consists of (in thousands):
1997 Third 1996 Third
Quarter Quarter
------- -------
Professional fees $ 1,273 $ 631
Impairment of assets 327 2,500
Expenses incurred due to the
rejection and amendment of
executory contracts 914 6
Default interest expense and
professional fees associated
with the Senior Secured Notes 185 100
Adjustment of accounts to fair value
(see Notes 5 and 6) 22,076 -
Other 301 22
------- ------
Total $25,076 $3,259
======= ======
1997 1996
Nine-Month Nine-Month
Period Period
------ ------
Professional fees $ 3,102 $3,206
Impairment of assets
(see Notes 5,7 and 14) 4,602 2,500
Expenses incurred due to the
rejection and amendment of
executory contracts 3,314 925
Default interest expense and
professional fees associated
with the Senior Secured Notes (388) 560
Adjustment of accounts to fair
value (see Notes 5 and 6) 22,076 -
Other 695 501
------- ------
Total $33,401 $7,692
======= ======
During the first quarter of fiscal 1997, the Company accrued a $3.0 million
loss for certain unerected equipment at the Company's Tifton facility which
was held for sale. During the Company's 1997 Third Quarter, such equipment
was sold and a gain of $0.1 million was realized.
During the second quarter of fiscal 1997, pre-petition unsecured
liabilities were increased by $3.3 million associated with contract
rejection damages relating to the Company's former headquarters and
marketing office leases ($1.7 million), the termination of a contract to
purchase certain equipment ($0.9 million) and two rejected contracts
relating to the former joint venture with, an Italian fabric designer ($0.7
million). These charges were recognized as reorganization items during the
second quarter of the 1997 Period. Such charges were partially offset by
the recognition of a $0.9 million net receivable from the Company's current
landlord related to its assumption of a portion of the Company's
obligations under its former headquarters lease.
During the 1997 Third Quarter, the Company fully reserved against amounts
receivable from its current landlord of its headquarters and marketing
offices lease relating to its assumption of a portion of the Company's
former headquarters lease as well as the remaining work allowance
receivable under its current lease. This charge was partially offset by a
reduction in the deferred rent liability account for its current lease due
to the adjustment of the work allowance receivable. Expense of $0.9
million was charged to reorganization expense during the 1997 Third Quarter
as a result of these items.
15. In October 1995, Statement of Financial Accounting Standards Board No. 123
"Accounting for Stock Based Compensation" ("SFAS 123") was issued. The
disclosures required by SFAS 123 will be included in the Company's fiscal
1997 year end financial statements.
Item 2.
FORSTMANN & COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the 1996 Form 10-K for a
discussion of the Company's financial condition as of November 3, 1996,
including a discussion of the Company's anticipated liquidity and working
capital requirements during its 1997 fiscal year. Reference is also made to
Notes to the Financial Statements contained in Item 1 of this Form 10-Q (the
"1997 Third Quarter Form 10-Q") .
Forward Looking Statements
- --------------------------
Certain statements contained in this 1997 Third Quarter Form 10-Q under Item 2.
and certain statements contained elsewhere herein, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 and are thus prospective. Such statements may relate, among other
things, to future economic performance of the Company, the plans and objectives
of management for future operations including plans or objectives relating to
the products of the Company, and projections of revenues, income, earnings, and
earnings per share, capital expenditures, capital structure or other financial
terms, and assumptions relating to the foregoing. Such forward looking
statements are subject to risk, uncertainties and other factors which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Those risks, uncertainties and
other factors include those accompanying such forward-looking statements, demand
for the Company's products, competition, the Company's production needs, wool
market conditions, the adequacy of the Company's current financing and any
unexpected financing requirements, as well as other factors contained herein and
in the Company's other securities filings.
Recent EVENTS
On May 14, 1997, the Company filed its Plan of Reorganization and Disclosure
Statement. On May 15, 1997, the Bankruptcy Court entered an order approving the
Company's Disclosure Statement and on or about May 28, 1997, the Company began
to solicit the vote of its creditors and stockholders with respect to the Plan
of Reorganization in accordance with the Bankruptcy Code. On July 9, 1997, the
Bankruptcy Court entered an order confirming the Plan of Reorganization. On
July 23, 1997 (the Effective Date), the Plan of Reorganization was consummated
by the Company.
The Plan of Reorganization is primarily an equity conversion plan pursuant to
which all general unsecured claims against the Company were converted into 100%
of common stock in the reorganized Company issued and outstanding on the
Effective Date based on a ratio of 50 shares per each $1,000 of allowed
unsecured claims. See Note 2 contained in this 1997 Third Quarter 10-Q for a
more detailed description of the effects of the consummation of the Plan of
Reorganization. Secured claims against the Company aggregating approximately
$60.1 million were either refinanced, reinstated or restructured as more fully
described in Note 9 contained in this 1997 Third Quarter Form 10-Q. Further,
pursuant to the Plan of Reorganization, administrative claims (which includes
reclamation claims and approved professional fees), priority claims and
convenience claims (unsecured claims in the amount of $400 or less) were paid in
full.
This analysis should be read in conjunction with the condensed financial
statements and related notes thereto included elsewhere in this 1997 Third
Quarter Form 10-Q. The condensed financial statements have been prepared
according to the principles of "fresh start" accounting in accordance with SOP
90-7. As a result of the consummation of the Plan of Reorganization and the
application of fresh start accounting, the Company was required to report its
financial results for the thirteen and thirty-nine weeks ended August 3, 1997 in
two separate periods in this 1997 Third Quarter Form 10-Q. Accordingly, the
reorganized Company's condensed financial statements are not comparable to the
Company's condensed financial statements for prior periods. The following table
describes the periods presented in the condensed financial statements and
related notes thereto contained elsewhere in this 1997 Third Quarter Form 10-Q
and discussed herein in Item 2 of this 1997 Third Quarter Form 10-Q -
Management's Discussion and Analysis of Financial Condition and Results of
Operations :
Period Referred to as
------- --------------
Results for the Reorganized
Company From July 23,
1997 to August 3, 1997 Reorganized Company 1997 12-Day Period
Results for the Predecessor
Company From May 5, 1997
to July 22, 1997 "Predecessor Company 1997 79-Day Period
Results for the Predecessor
Company Thirteen Weeks
Ended July 28, 1996 1996 Third Quarter
Results for the Predecessor
Company From November 4,
1996 to July 22, 1997 Predecessor Company 1997 261-Day Period
Results for the Predecessor
Company Thirty-Nine Weeks
Ended July 28, 1996 1996 Nine-Month Period
Combined Reorganized Company
1997 12-Day Period and
Predecessor Company 1997
79-Day Period (Results for
the Thirteen Weeks Ended
August 3, 1997) 1997 Third Quarter
Combined Reorganized Company
1997 12-Day Period and
Predecessor Company 1997
261-Day Period (Results
for the Thirty-Nine Weeks
Ended August 3, 1997) 1997 Nine-Month Period
Due to the seasonal nature of the Company's business, customer order patterns,
and the effects of the consummation of the Plan of Reorganization and
application of "fresh start" accounting, results for the periods defined above
are not necessarily indicative of the results for a full fiscal year.
Financial Condition and Liquidity
During the pendency of the bankruptcy case the Company, with the Bankruptcy
Court's approval, operated its business in the ordinary course, paid all post-
petition claims of the Company's general unsecured creditors and paid certain of
the Company's pre-petition obligations to its employees as well as certain
obligations relating to the importing and transporting of goods and materials.
The provisions of the Plan of Reorganization, which are discussed in Note 2 to
this 1997 Third Quarter Form 10-Q, will have an immediate beneficial impact on
the Company's financial condition, primarily as a result of significantly
deleveraging the Company's balance sheet. In addition, since the Bankruptcy
Filing, in response to continuing changes in market conditions, management of
the Company has formulated and implemented a business plan that focuses on
significantly reducing product offerings; tightening management of inventory
levels; enhancing cost controls; and reducing capital expenditures. All of
these actions have improved the Company's cash flows from operations and in
total. The Company is continuing to refine its strategies in response to
evolving circumstances.
On the Effective Date, as described in Note 9 to this 1997 Third Quarter Form
10-Q, the Company entered into the Loan and Security Agreement with a syndicate
of financial institutions led by BABC. The Loan and Security Agreement provides
for a Revolving Loan Facility (including a $10.0 million letter of credit
facility), subject to a borrowing base formula and certain borrowing base
limitations, of up to $85 million and the Term Loan Facility of approximately
$31.5 million. Borrowings on the Effective Date of $28.0 million under the
Revolving Loan Facility plus the proceeds from the Term Loan Facility were used
to repay borrowings outstanding under certain of the Company's secured
indebtedness and fund other amounts due pursuant to the Plan of Reorganization
and the Loan and Security Agreement. The Revolving Loan Facility and Term Loan
Facility mature on July 22, 2000. The Term Loan Facility requires monthly
principal payments of approximately $374,000 commencing August 31, 1997. At
August 3, 1997, the Company's availability, net of outstanding advances, letters
of credit and reserves, under the Revolving Loan Facility was $35.7 million.
Proceeds from the Company's operations (as defined) are applied to reduce the
principal amount of floating rate borrowings outstanding under the Revolving
Loan Facility. Unused portions of the Revolving Loan Facility may be borrowed
and reborrowed subject to availability in accordance with the then applicable
commitment and borrowing base limitations. The Company believes that cash
generated from operations and borrowings under the Revolving Loan Facility will
be sufficient to fund its remaining fiscal year 1997 working capital and capital
expenditures requirements. However, expected cash flow from operations is
dependent upon achieving sales expectations during fiscal year 1997 which are
influenced by market conditions, including apparel sales at retail, that are
beyond the control of the Company. Further, the collectibility of accounts
receivable is dependent upon the state of the economy and, in particular, the
financial condition of the apparel industry.
The Company's business is seasonal, with the vast majority of orders for woolen
fabrics placed from December through April for apparel manufacturers to produce
apparel for retail sale during the fall and winter months. This results in a
seasonal sales order and billing pattern which historically generates higher
sales during the Company's second and third fiscal quarters compared to the
Company s first and fourth quarter. This sales pattern places seasonal
constraints on the Company's manufacturing operations which results in increased
working capital requirements in the Company's first fiscal quarter relating to
the manufacture of certain components of inventory which are sold in the
Company's second and third fiscal quarters. The seasonal sales and order
pattern also results in increased levels of accounts receivable due to the
larger sales volume and dated sales to coating fabric customers which allows
for payment sixty (60) days from July 1 for invoices billed in January through
June. Accounts receivable with dated terms at August 3, 1997 were $18.1
million, an increase of $0.5 million compared to July 28, 1996.
Due to the seasonal nature of the Company's core woolen and worsted business,
the Company's borrowings under the Revolving Loan Facility will tend to increase
during the first three fiscal quarters of the Company's fiscal year until the
fourth quarter, when at year-end, borrowings tend to be the lowest. However,
for the reasons indicated above, borrowings at the end of fiscal year 1997 may
be higher than at the beginning of fiscal year 1997 or higher during various
times within fiscal year 1997 than comparable periods within fiscal year 1996.
The sales order backlog at August 31, 1997 was $47.5 million whereas at the
comparable time a year earlier the sales order backlog was $46.0 million. The
composition of the sales order backlog at August 3, 1997 reflects a stronger
woolen fabrics order position which is somewhat offset by a weaker worsted and
converting fabrics order position. The improvement in the woolen fabric backlog
position at August 3, 1997 is attributable to the favorable market conditions
for women s wear woolen fabrics and improved coating fabric market conditions
for domestic suppliers. The decline in the worsted fabrics sales order position
reflects a more competitive, price sensitive market for both men s and women s
wear worsted fabrics. The Company expects the worsted fabrics market to remain
competitive during the remainder of fiscal year 1997 due, in part, to an over
capacity in global worsted wool manufacturing which is attributable to the
continuing reduction in demand for certain of the Company's worsted products.
The decline in the converting fabrics backlog is due to the Company exiting the
converting fabrics business at the end of fiscal year 1996.
The Company purchases a significant amount of its raw wool inventory from
Australia. Since all of the Company's forward purchase commitments for raw wool
are denominated in U.S. dollars, there is no actual currency exposure on
outstanding contracts. However, future changes in the relative exchange rates
between the United States and Australian dollars can materially affect the
Company s results of operations for financial reporting purposes. The Company
expects wool costs during fiscal year 1997 to be slightly lower than fiscal year
1996. Recently wool costs have begun to increase above levels realized in
fiscal year 1996 and in the 1997 Nine-Month Period. Because of the Company's
existing forward purchase commitments for wool, the Company does not anticipate
that the recent increases in the wool market will adversely impact the remainder
of fiscal year 1997.
Results of Operations
The discussion below compares the results of operations for the 1997 Third
Quarter to the 1996 Third Quarter and the 1997 Nine-Month Period to the 1996
Nine-Month Period. Except as indicated in the following discussion, management
believes that the impact of the Plan of Reorganization and the application of
"fresh start" accounting did not significantly affect the results of operations
for the 1997 Third Quarter or the 1997 Nine-Month Period. Further, management
believes that the operating results of the Reorganized Company 12-Day Period and
the Predecessor Company 1997 79-Day Period is indicative of the results of
operations for the 1997 Third Quarter (thirteen weeks ended August 3,1997) and
that the results for the Reorganized Company 1997 12-Day Period and the
Predecessor Company 1997 261-Day Period is indicative of the results of
operations for the 1997 Nine-Month Period (thirty-nine weeks ended August 3,
1997). Due to the seasonal nature of the Company's business, customer order
patterns, and the effects of the consummation of the Plan of Reorganization
results for the periods defined above are not necessarily indicative of the
results for a full fiscal year.
The application of fresh start accounting resulted in property plant and
equipment being written down by $28.6 million which will result in an
approximate $6.4 million reduction in annual depreciation expense. Further,
annual amortization expense will be approximately $0.3 million lower and annual
rent expense will be approximately $23,000 higher, as a result of the Company
writing off certain intangible assets (primarily deferred software development
costs) and certain other assets and liabilities associated with the Company s
headquarters lease. The write off of the intangible assets occurred during the
1997 Third Quarter and was charged to operations ($0.9 million to cost of goods
sold and $0.3 million to selling, general and administrative expenses). The
write off of certain other assets and liabilities associated with the Company s
headquarters lease was charged to reorganization items during the 1997 Third
Quarter ($0.9 million). In addition, as described in Note 9 contained in this
1997 Third Quarter Form 10-Q, the Company incurred additional deferred financing
costs in connection with entering into the Loan and Security Agreement and other
financing arrangements and wrote off certain deferred financing costs associated
with the debt restructuring. The write off of deferred financing costs ($0.2
million) was charged to reorganization items during the 1997 Third Quarter.
The 1997 Thirty-Nine Weeks Ended August 3, 1997 (the 1997 Nine-Month Period )
compared to the Thirty-Nine Weeks Ended July 28, 1996 (the 1996 Nine-Month
Period ).
NET sales for the 1997 Nine-Months Period were $149.9 million, a decrease of
approximately 2.28% from the 1996 Nine-Month Period. Total yards of fabric sold
during the 1997 Nine-Month Period was approximately 20.3 million, a less than 1%
increase over the 1996 Nine-Month Period. The average per yard selling price
decreased to $7.40 from $7.62 due to shifts in product mix. The decline in net
sales is primarily due to an $11.7 million decline in worsted fabric sales
(attributable to a decline in women's worsted fabrics) and a $2.4 million
decline in sales of product lines discontinued during fiscal year 1996 (career
uniforms, converting and international). These declines were somewhat offset by
an increase of $9.9 million in woolen fabric sales and an increase in
government and other fabric sales of approximately $0.7 million. The majority
of the decline in net sales in the 1997 Nine-Month Period occurred during the
1997 Third Quarter. See the Results of Operation for the 1997 Third Quarter
compared to the 1996 Third Quarter contained elsewhere herein . Excluding
government sales ($6.5 million in the 1997 Nine-Month Period and $5.9 million in
the 1996 Nine-Month Period), net sales for the 1997 Nine-Month Period decreased
2.77% from the 1996 Nine-Month Period.
The decline in the worsted fabric sales reflects a more competitive, price
sensitive market for both men s and women s worsted fabrics. The Company
expects the worsted fabrics market to remain competitive during the remainder of
fiscal year 1997 due, in part, to an over capacity in global worsted wool
manufacturing which is attributable to the continuing reduction in demand for
certain of the Company's worsted products. Further, the Company expects the
women s and men s worsted business to remain very competitive and anticipates
that sales of women s and men s worsted fabrics for fiscal year 1997 will be
less than sales for fiscal year 1996 as a result of the increased competition.
The improvement in the woolen fabric sales is attributable to the favorable
market conditions for women s woolen fabrics and improved coating fabric market
conditions for domestic suppliers and less pressure from imports. Further, the
increase in women s woolen fabric sales is due, in part, to the Company offering
certain strategic customers favorable competitive pricing and terms on purchases
of certain woolen fabrics during the fourth quarter of its fiscal year 1996
which were manufactured and sold during the 1997 Nine-Month Period. The Company
expects the market trends in woolen fabric sales to continue during the
remainder of fiscal year 1997.
Cost of goods sold decreased $3.4 million during the 1997 Nine-Month Period
primarily as a result of lower sales, manufacturing cost reductions and shifts
in product mix. Gross profit was $20.9 million in the 1997 Nine-Month Period as
compared to $21.0 million in the 1996 Nine-Month Period. The gross profit
margin for the 1997 Nine-Month Period was 14.0% compared to 13.7% for the 1996
Nine-Month Period. Included in cost of goods sold in the 1997 Nine-Month Period
is higher group medical claims ($1.6 million) due to the Company s self-insured
plan experiencing approximately 11 individual claims in excess of $100,000
whereas, in the 1996 Nine-Month Period no individual claims exceeded $100,000;
the effect of the write off of certain intangible assets described above ($0.9
million); and, higher accelerated depreciation on plant and equipment which was
idled or otherwise identified as needing adjustment ($0.4 million). These
increases were somewhat offset by a reduction in depreciation expense during the
1997 Nine-Month Period due to the effect of fresh start accounting ($0.2
million) and the effect of the liquidation of LIFO inventory layers carried at
lower costs during the 1997 Nine-Month Period ($0.4 million). Beginning in
fiscal year 1996 and continuing in fiscal year 1997, the Company has
significantly reduced its inventory quantities on hand. This reduction has
resulted in the liquidation of LIFO layers carried at lower costs prevailing in
prior years. The effect of this liquidation during the 1997 Nine-Month Period
was $0.4 million as compared to $1.1 million in the 1996 Nine-Month Period.
The Company, in late 1995, began a product rationalization process which
assesses each of the Company's product's potential sales volume, manufacturing
complexity, margin contribution and other product specific factors. Through the
product rationalization process, the Company eliminated numerous product
offerings and the three product lines discussed above. The Company is beginning
to realize the effects of product rationalization as is evidenced by the
Company s improved gross profit which has also been significantly impacted by
cost reductions implemented since the Bankruptcy Filing.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, decreased 9.1% to $12.0 million in the 1997 Nine-Month
Period compared to $13.2 million in the 1996 Nine-Month Period. The majority of
the decrease in the 1997 Nine-Month Period is due to lower human resource
related expenses as a result of the Company's continuing efforts to reduce its
overhead in response to reduced sales and a decrease in professional services
expenses. The reduction in human resource related expenses is primarily
attributable to the Company aligning the organization to be more responsive to
customer needs and matching the Company's fixed overhead to market conditions
and expectations.
The provision for uncollectible accounts decreased from $1.1 million in the 1996
Nine-Month Period to $0.3 million in the 1997 Nine-Month Period. Such decrease
is primarily attributable to the Company decreasing its specific allowance for
uncollectible accounts during the Predecessor Company 1997 260-Day Period.
Interest expense for the 1997 Nine-Month Period was $5.2 million or $1.8 million
lower than the 1996 Nine-Month Period. This decrease is primarily attributable
to lower average borrowings under the Company's revolving credit facilities.
As a result of the foregoing, income before reorganization items, income tax and
extraordinary item during the 1997 Nine-Month Period was $3.4 million as
compared to a loss before reorganization items, income taxes and extraordinary
item of $0.3 million during the 1996 Nine-Month Period. Income before
depreciation and amortization, reorganization items, interest expense, income
taxes and extraordinary item during the 1997 Nine-Month Period was $18.6 million
as compared to $15.4 million during the 1996 Nine-Month Period.
Reorganization items which are more fully described in Note 14 contained in this
1997 Third Quarter Form 10-Q were $33.4 million during the 1997 Nine-Month
Period as compared to $7.7 million during the 1996 Nine-Month Period. Included
in the 1997 Nine-Month Period is the "fresh start" accounting adjustment of
$28.6 million to adjust the carrying value of property, plant and equipment in
accordance with SOP 90-70, a credit of $6.5 million to adjust inventory to fair
market value in accordance with SOP 90-7, the write off of certain assets and
liabilities of $0.9 million, net associated with the Company's headquarters
lease and the write off of certain deferred financing costs of $0.2 million
related to the refinancing and debt restructuring described above.
During fiscal year 1995, the Company fully utilized its net operating loss
carrybacks as permitted by the Internal Revenue code. For the Predecessor
Company 1997 261-Day Period and the 1996 Nine-Month Period, no income tax
benefit was recognized from the realization of net operating losses. In
accordance with SOP 90-7, an income tax provision not payable in cash was
recognized for the Reorganized Company 1997 12-Day Period at an effective income
tax rate of 39.0%. Such provision was credited against additional paid-in
capital as net operating losses generated during the Predecesor Company 1997
261-Day Period can be used to offset net taxable income, if any, generated
during the reorganized Company's fiscal period ended November 2, 1997.
As a result of the consummation of the Plan of Reorganization which resulted in
the exchange of the general unsecured claims against the Company for equity in
the reorganized Company, as more thoroughly described in Note 2 contained in
this 1997 Third Quarter Form 10-Q, the Company recognized an extraordinary gain
on debt discharge of $24.1 million during the Predecessor Company 1997 79-Day
Period. The Company had sufficient net operating loss carryforwards to offset
this gain and therefore, no income tax was recorded.
As a result of the foregoing, net loss for the 1997 Nine-Month Period was $6.4
million compared to a net loss of $8.0 million for the 1996 Nine-Month Period.
The Thirteen Week Period ended August 3, 1997 (the 1997 Third Quarter )
compared to the Thirteen Week Period ended July 28, 1996 (the 1996 Third
Quarter").
Net sales for the 1997 Third Quarter were $53.9 million, a decrease of
approximately 7.09% from the 1996 Third Quarter. Total yards of fabric sold
during the 1997 Third Quarter was approximately 7.0 million, a decrease of
approximately 4.75% from the 1996 Third Quarter. The average per yard selling
price decreased to $7.73 from $7.92 due to shifts in product mix. The decline
in net sales is primarily due to a $6.3 million decline in worsted fabric sales
(primarily attributable to a decline in women s worsted fabrics which was
further compounded by a decline in men s worsted fabrics), a $0.7 million
decline in sales of product lines discontinued during fiscal year 1996 (career
uniforms, converting and international) and a decline in other fabric sales of
approximately $0.2 million, which were somewhat offset by an increases of $2.0
million in woolen fabric sales and an increase in government fabric sales of
approximately $1.1 million. Excluding government sales ($3.0 million in the
1997 Third Quarter and $1.9 million in the 1996 Third Quarter), net sales for
the 1997 Third Quarter decreased 9.27% from the 1996 Third Quarter.
The factors contributing to the decline in sales during the 1997 Third Quarter
from the 1996 Third Quarter are similar to the factors contributing to the
decline in sales during the 1997 Nine-Month Period from the 1996 Nine-Month
Period, except that the decline in worsted fabric sales occurred not only in
women s wear fabric sales ($5.0 million) but also occurred in men s and
specialty fabrics ($1.3 million). The favorable woolen fabric sales trends in
the 1997 Nine-Month Period compared to the 1996 Nine-Month Period were also
realized during the 1997 Third Quarter compared to the 1996 Third Quarter.
Cost of goods sold decreased $1.1 million during the 1997 Third Quarter
primarily as a result of lower sales, manufacturing cost reductions and shifts
in product mix. Gross profit decreased to $6.2 million in the 1997 Third Quarter
from $9.2 million in the 1996 Third Quarter. The gross profit margin for the
1997 Third Quarter was 11.4% compared to 15.79% for the 1996 Third Quarter.
Included in cost of goods sold in the 1997 Third Quarter is higher group medical
claims ($1.6 million) due to the Company's self-insured plan experiencing
approximately 11 individual claims in excess of $100,000 whereas in the 1996
Third Quarter no individual claims exceeded $100,000; the effect of the write
off of certain intangible assets described above ($0.9 million); and higher
accelerated depreciation on plant and equipment which was idled or otherwise
identified as needing adjustment ($0.4 million). These increases were somewhat
offset by a reduction in depreciation expense during the 1997 Third Quarter due
to the effect of fresh start accounting ($0.2 million) and the effect of the
liquidation of LIFO inventory layers carried at lower costs during the 1997
Third Quarter ($0.3 million). Beginning in fiscal year 1996 and continuing in
fiscal year 1997, the Company has significantly reduced its inventory quantities
on hand. This reduction has resulted on the liquidation of LIFO layers carried
at lower costs prevailing in prior years. The effect of this liquidation during
the 1997 Third Quarter was $0.4 million as compared to $0.7 million in the 1996
Third Quarter.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, decreased 4.5% to $4.0 million in the 1997 Third Quarter
compared to $4.2 million in the 1996 Third Quarter. The factors contributing to
the decline in selling, general and administrative expenses during the 1997
Third Quarter from the 1996 Third Quarter are similar to the factors
contributing to the decline in selling, general and administrative expenses
during the 1997 Nine-Month Period from the 1996 Nine-Month Period.
The provision for uncollectible accounts decreased from $0.5 million in the 1996
Third Quarter to a credit of $0.1 million in the 1997 Third Quarter. Such
decrease is primarily attributable to the Company decreasing its specific
allowance for uncollectible accounts during the 1997 Third Quarter.
Interest expense for the 1997 Third Quarter was $1.9 million or $0.5 million
lower than the 1996 Third Quarter. This decrease is primarily attributable to
lower average borrowings under the Company's revolving credit facilities.
As a result of the foregoing, income before reorganization items, income tax and
extraordinary item during the 1997 Third Quarter was $0.4 million as compared to
$2.1 million during the 1996 Third Quarter. Income before depreciation and
amortization, reorganization items, interest expense, income taxes and
extraordinary item during the 1997 Third Quarter was $6.6 million as compared to
$7.4 million during the 1996 Third Quarter.
Reorganization items which are more fully described in Note 14 contained in this
1997 Third Quarter Form 10-Q, were $25.1 million during the 1997 Third Quarter
as compared to $3.3 million during the 1996 Third Quarter. Included in the 1997
Third Quarter is the "fresh start" accounting adjustment of $28.9 million to
adjust the carrying value of property, plant and equipment in accordance with
SOP 90-70, a credit of $6.5 million to adjust inventory to fair market value in
accordance with SOP 90-7, the write off of certain assets and liabilities of
$0.9 million, net associated with the Company s headquarters lease and the write
off of certain deferred financing costs of $0.4 million related to the
refinancing and debt restructuring described above.
During fiscal year 1995, the Company fully utilized its net operating loss
carrybacks as permitted by the Internal Revenue code. For the Predecessor
Company 1997 79-Day Period and the 1996 Third Quarter, no income tax benefit can
be recognized from the realization of net operating losses. In accordance with
SOP 90-7, an income tax provision not payable in cash was recognized for the
Reorganized Company 1997 12-Day Period at an effective income tax rate of 39.0%.
Such provision was credited against additional paid-in capital as net operating
losses generated during the Predecessor Company 1997 261-Day Period can be used
to offset net taxable income, if any, generated during the reorganized Company's
fiscal period ended November 2, 1997.
As a result of consummation of the Plan of Reorganization which resulted in the
exchange of the general unsecured claims against the Company for equity in the
reorganized Company, as more thoroughly described in Note 2 to contained in this
1997 Third Quarter Form 10-Q, the Company recognized an extraordinary gain on
debt discharge of $24.1 million during the 1997 Third Quarter. The Company had
sufficient net operating loss carry forwards to offset this gain and therefore,
no income tax was recorded.
As a result of the foregoing, net loss for the 1997 Third Quarter and 1996
Third Quarter was $1.1 million.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 2 and Note 12 to the Financial Statements
contained in Item 1 of Part 1 to this Form 10-Q, for a discussion of
the Company's bankruptcy proceeding and certain environmental
matters, respectively. Other than the Company s bankruptcy
proceeding and environmental matters, the Company has no material
pending legal proceedings.
Item 2. Pursuant to the Plan of Reorganization, on the Effective Date, all
theretofore outstanding shares of common stock, $.001 par value, and
redeemable preferred stock, $1.00 par value, were canceled in
exchange for warrants entitling holders of such warrants to purchase
in the aggregate 87,756 shares of the common stock of the
reorganized Company within two years of the Effective Date at an
exercise price of $23 per share. The Company filed an Amendment
Pursuant to Reorganization of the Articles of Incorporation
authorizing the issuance of 10,000,000 shares of common stock, par
value $.01 per share. The Company has no authority to issue non-
voting stock of any class. Each share of common stock has one vote
in connection with any matters presented to shareholders. The
common stock has no cumulative voting rights, pre-emptive rights or
sinking fund provisions. The Loan and Security Agreement and the
Deferred Interest Rate Notes prohibits the payment of cash dividends
(see Note 9 to the Financial Statements contained in Item 1 of Part
1 to this Form 10-Q).
On July 23, 1997, in connection with the consummation of the Plan of
Reorganization, the Company issued to its unsecured creditors an
aggregate of 4,384,436 shares of its common stock in cancellation of
all obligations to such creditors by the Company. The certificates
evidencing such shares were actually delivered after July 23, 1997.
An aggregate of $86,876,000 of indebtedness (including all
indebtedness outstanding under the Company's 14-3/4% Senior
Subordinated Notes due April 15, 1999) was canceled by the Company
in consideration for such stock. The shares were exempt from
registration under the Securities Act of 1933, as amended, by virtue
of the provisions of Section 3 (a) (10) thereof.
In addition, 487,528 shares of common stock of the reorganized
Company were reserved for issuance upon the exercise of options
granted or to be granted pursuant to the Company s Management Stock
Option Plan and, as of the Effective Date, 146,258 options were
granted to certain employees of the Company at an exercise price of
$12.88 per share.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits
Exhibits are set forth on the Index to Exhibits on page 39
hereof.
b) Reports on Form 8-K
Since the end of the second quarter of fiscal 1997, the
Company filed a Current Report on Form 8-K dated July 9, 1997,
reporting on Item 2.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act f 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORSTMANN & COMPANY, INC.
(Registrant)
/s/ Rodney Peckham
------------------
Rodney Peckham
Chief Financial Officer
September 18, 1997
- ------------------
Date
FORSTMANN & COMPANY, INC.
INDEX TO EXHIBITS
Exhibit No. Description
- ---------- ---------------
2 First Amended Plan of Reorganization (Exhibit 1 to Company s
Current Report on Form 8-K dated July 9, 1997).
3* Amendment Pursuant to Reorganization of the Articles of
Incorporation of Forstmann & Company, Inc., dated July 23,
1997.
4.1* Registration Rights Agreement, dated as of July 23, 1997,
between the Company and the holders of Common Stock named
therein.
4.2* Warrant Agreement, dated as of July 23, 1997, between the
Company and Norwest Bank Minnesota, N. A., as warrant agent.
4.3* Indenture, dated as of July 23, 1997, between the Company and
State Street Bank and Trust Company, as Trustee (Deferred
Interest Rate Notes). <PAGE>
4.4(a)** Loan Agreement, dated as of July 23, 1997, between the Company
and Schlafhorst Inc.
4.4(b)** Promissory Note, dated as of July 23, 1997, between the Company
and Schlafhorst Inc.
4.4(c)** Security Agreement, dated as of July 23, 1997, between the
Company and Schlafhorst Inc.
10.1(a)* Loan and Security Agreement, dated as of July 23, 1997, among
the Company, the lenders named therein, and BankAmerica
Business Credit, Inc., as agent (the "Agent").
10.1(b)* Trademark Security Agreement, dated as of July 23, 1997,
between the Company and the Agent.
10.1(c)* Patent Security Agreement, dated as of July 23, 1997, between
the Company and the Agent.
10.1(d)* Pledge Agreement, dated as of July 23, 1997, between the
Company and the Agent.
10.1(e)* Deed to Secure Debt, dated as of July 23, 1997, between the
Company and the Agent, with respect to the owned real property
located in Laurens County, Georgia.
10.1(f)* Deed to Secure Debt, dated as of July 23, 1997, between the
Company and the Agent, with respect to the owned real property
located in Baldwin County, Georgia.
10.1(g)* Deed to Secure Debt, dated as of July 23, 1997, between the
Company and the Agent, with respect to the owned real property
located in Jefferson County, Georgia.
10.2* Incentive Plan for Senior Managers, effective as of July 23,
1997.
10.3* Incentive Plan for Key Employees, effective as of July 23,
1997.
10.4* Executive Stock Option Plan, effective as of July 23, 1997.
10.5* Environmental Cost Sharing and Indemnity Agreement dated as of
July 18, 1997, among the Company, Tift County Development
Authority and Burlen Corporation.
11 Statement re computation of per share earnings - Per share and
share information for the Company for all periods presented in
the condensed statement of operations contained in Item 1 of
Part 1 to this Form 10-Q have been omitted as such information
is not deemed to be meaningful.
15* Independent Accountants Review Report, dated September 5, 1997
from Deloitte & Touche LLP to Forstmann & Company, Inc.
27* Financial Data Schedule.
* Filed herewith.
** Not filed herewith. Registrant has filed herewith an Undertaking to Furnish
Copy of Agreements Upon Request.
September 18, 1997
Undertaking to Furnish Copy of
Agreements Upon Request
Loan Agreement, dated as of July 23, 1997,
Between the Company and Schlafhorst Inc.
Promissory Note, dated as of July 23, 1997,
Between the Company and Schlafhorst Inc.
Security Agreement, dated as of July 23, 1997,
Between the Company and Schlafhorst Inc.
The total amount of the debt securities to which the above-referenced agreements
relate does not exceed 10% of the total assets of the registrant and,
consequently, the registrant is not filing the agreements pursuant to Paragraph
(b) (4) (iii) of Item 601 of Regulation S-K. The registrant will provide the
Securities and Exchange Commission with a copy of such agreements upon request.
Sincerely,
FORSTMANN & COMPANY, INC.
By /s/Rodney Peckham
------------------
Rodney Peckham
Chief Financial Officer
Exhibit 3
AMENDMENT PURSUANT TO REORGANIZATION
OF THE ARTICLES OF INCORPORATION OF
FORSTMANN & COMPANY, INC.
Pursuant to Georgia Business Corporation Code, Section 14-2-1008,
Forstmann & Company, Inc., a corporation organized under the laws of the State
of Georgia, executes the following AMENDMENT PURSUANT TO REORGANIZATION of its
Articles of Incorporation:
(i) The name of the corporation is Forstmann & Company, Inc.
(ii) Article V of the Articles of Incorporation of Forstmann &
Company, Inc. is hereby deleted in its entirety and replaced with the
following:
V.
1. The corporation shall have authority to issue ten million
(10,000,000) shares of common stock, par value $.01 per share.
2. The corporation shall not have authority to issue non-
voting stock of any class.<PAGE>
(iii) The following is inserted into the Articles of Incorporation as
new Article IX:
IX.
1. The corporation shall have a minimum of five and a
maximum of seven directors. The Board of Directors of the
corporation may, from time to time, within the minimum and
maximum, change the number of directors.
2. The Board of Directors shall have the authority to fill
any vacancy on the Board of Directors, including any vacancy
resulting from an increase in the number of directors pursuant
to paragraph one (1) of this Article IX.
(iv) The United States Bankruptcy Court of the Southern District of
New York (Garrity, J.), (the "U.S. Bankruptcy Court") has approved
the above amendments to the Articles of Incorporation by its Order
Confirming The Debtor's First Amended Plan of Reorganization and
Approving Related Agreements, dated July 9, 1997 (the "Order").
(v) The title of the proceeding under which the Order was
promulgated is: "In re Forstmann & Company, Inc.", Case No. 95 B
44190 (JLG) (the "Case").
(vi) The U.S. Bankruptcy Court had jurisdiction of the Case pursuant
to 28 U.S.C. section1334(b).
[The remainder of this page left intentionally blank]
IN WITNESS WHEREOF, Forstmann & Company, Inc. has caused this
Amendment to be executed and attested, all by duly authorized officers, on the
day of July, 1997.
FORSTMANN & COMPANY, INC.
By: /s/ Rodney Peckham
-------------------
Name:Rodney Peckham
Title:Chief Financial Officer
ATTEST:
By:/s/ Linda A. Filippone
----------------------
Name: Linda A. Filippone
Title: Assistant Secretary
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
by and among
FORSTMANN & COMPANY, INC.
and
THE HOLDERS NAMED HEREIN
Table of CONTENTS
- -----------------
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Shelf Registration Under the Securities Act . . . . . . . . . . . . . 3
(a) Preparation and Filing of Shelf Registration . . . . . . . . . 3
(b) Effective Shelf Registration Statement . . . . . . . . . . . . 3
3. Piggyback Registrations . . . . . . . . . . . . . . . . . . . . . . . 4
4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . 5
6. Underwritten Offerings . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Piggyback Underwritten Offerings; Priority . . . . . . . . . . 8
(b) Holders of Registrable Common Stock to be Parties to
Underwriting Agreement . . . . . . . . . . . . . . . . . 8
(c) Selection of Underwriters for Piggyback Underwritten Offering 9
(d) Holdback Agreements . . . . . . . . . . . . . . . . . . . . . 9
7. Preparation; Reasonable Investigation . . . . . . . . . . . . . . . . 9
(a) Registration Statements . . . . . . . . . . . . . . . . . . . 9
(b) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 9
8. Suspension of Offers and Sales . . . . . . . . . . . . . . . . . . 10
9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Indemnification by the Company . . . . . . . . . . . . . . . 10
(b) Indemnification by the Offerors and Sellers . . . . . . . . 11
(c) Notices of Losses, etc . . . . . . . . . . . . . . . . . . . 11
(d) Contribution . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Other Indemnification . . . . . . . . . . . . . . . . . . . 12
(f) Indemnification Payments . . . . . . . . . . . . . . . . . . 13
10. Registration Rights to Others . . . . . . . . . . . . . . . . . . 13
11. Adjustments Affecting Registrable Common Stock . . . . . . . . . . 13
12. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . 13
13. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 13
14. Nominees for Beneficial Owners . . . . . . . . . . . . . . . . . . 13
15. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
16. Calculation of Percentage or Number of Shares of Registrable
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . 14
(b) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) No Inconsistent Agreements . . . . . . . . . . . . . . . . . 14
(d) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 15
(f) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(g) Governing Law . . . . . . . . . . . . . . . . . . . . . . . 15
(h) Severability . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 15
SCHEDULES:
SCHEDULE A - HOLDERS OF REGISTRABLE COMMON STOCK
SCHEDULE B - NOTICES
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 23, 1997 (this
Agreement ), by and among Forstmann & Company, Inc., a Georgia corporation (the
Company ), and the holders of Registrable Common Stock (as hereinafter defined)
who are signatories to this Agreement.
RECITALS
This Agreement is being entered into in connection with the
acquisition of Common Stock (as hereinafter defined) on the date hereof by
certain holders pursuant to the Plan (as hereinafter defined). Upon the
issuance of the Common Stock, each such holder will own the number of shares of
Common Stock specified in Schedule A hereto.
To induce the holders of Registrable Common Stock (as
hereinafter defined) to vote in favor of the Plan and to accept the issuance of
the Common Stock by the Company under the Plan, the Company undertook to
register the resale of Registrable Common Stock under the Securities Act (as
hereinafter defined) and to take certain other actions with respect to the
Registrable Common Stock. This Agreement sets forth the terms and conditions
of such undertaking.
In consideration of the premises and the mutual agreements set
forth herein, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized
terms used herein and in the recitals above shall have the following meanings:
Affiliate of a Person means any Person that controls, is under
common control with, or is controlled by, such other Person. For purposes of
this definition, control means the ability of one Person to direct the
management and policies of another Person.
Business Day means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to be closed.
Commission means the U.S. Securities and Exchange Commission.
Common Stock means the shares of common stock, $.01 par value
per share, of the Company, as adjusted to reflect any merger, consolidation,
recapitalization, reclassification, split-up, stock dividend, rights offering or
reverse stock split made, declared or effected with respect to the Common Stock.
Effective Date means the effective date of the Plan pursuant
to the terms thereof.
Exchange Act means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, or any similar or successor
statute.
Expenses means all expenses incident to the Company s
performance of or compliance with its obligations under this Agreement,
including, without limitation, all registration, filing, listing, stock exchange
and NASD fees, all fees and expenses of complying with state securities or blue
sky laws (including fees, disbursements and other charges of counsel for the
underwriters in connection with blue sky filings), all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees,
disbursements and other charges of counsel for the Company and of its
independent public accountants, including the expenses incurred in connection
with cold comfort letters required by or incident to such performance and
compliance, any expenses of underwriters customarily paid by issuers or sellers
of securities and the reasonable fees, disbursements and other charges of one
firm of counsel (per registration prepared) to all Holders of Registrable Common
Stock covered by the Shelf Registration pursuant to Section 2 hereof or a
Piggyback Registration pursuant to Section 3 hereof (selected by the Holders
holding a majority of the shares of Registrable Common Stock covered by such
registration), but excluding underwriting discounts, commissions, underwriting
or advisory fees, brokers fees or fees of other similar securities industry
professionals relating to the distribution of Registrable Common Stock and
applicable transfer taxes, if any, which discounts, commissions, fees and
transfer taxes shall be borne by the seller or sellers of Registrable Common
Stock in all cases.
Holders means the Persons who are the original parties to this
Agreement (other than the Company) and Persons who acquire Registrable Common
Stock, directly or indirectly, from any of such original parties and who agree
in writing to be bound by this Agreement to the same extent as such original
party.
NASD means the National Association of Securities Dealers,
Inc.
NASDAQ means the National Association of Securities Dealers,
Inc. Automated Quotation System.
Other Equityholders has the meaning set forth in Section 6(a)
hereof.
Person means any individual, corporation, partnership, firm,
joint venture, association, joint stock company, trust, unincorporated
organization, governmental or regulatory body or subdivision thereof or other
entity.
Plan means the First Amended Plan of Reorganization under
Chapter 11 of the United States Bankruptcy Code for Forstmann & Company, Inc.,
as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
Piggyback Registration has the meaning set forth in Section 3
hereof.
Public Offering means a public offering and sale of Common
Stock pursuant to an effective registration statement under the Securities Act.
Registrable Common Stock means (i) any Common Stock issued and
delivered to the Holders pursuant to the Plan; (ii) any Common Stock otherwise
or hereafter purchased or acquired by the Holders or their Affiliates; and (iii)
any other securities of the Company (or any successor or assign of the Company,
whether by merger, consolidation, sale of assets or otherwise) which may be
issued or issuable to the Holders with respect to, in exchange for, or in
substitution of, Registrable Common Stock referenced in clauses (i) and (ii)
above by reason of any dividend or stock split, combination of shares, merger,
consolidation, recapitalization, reclassification, reorganization, sale of
assets or similar transaction. As to any particular Registrable Common Stock,
such securities shall cease to be Registrable Common Stock when (A) a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (B) such
securities are sold pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act, (C) such securities have been otherwise
transferred, a new certificate or other evidence of ownership for them not
bearing the legend restricting further transfer shall have been delivered by the
Company and subsequent public distribution of them shall not require
registration under the Securities Act, or (D) such securities shall have ceased
to be outstanding.
Requesting Holders has the meaning set forth in Section 3
hereof.
Securities Act means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar or successor statute.
Subsequent Holder has the meaning set forth in Section 7(a)
hereof.
Suspension Period has the meaning set forth in Section 8
hereof.
Transfer means any transfer, sale, assignment, pledge,
hypothecation or other disposition of any interest. Transferor and
Transferee have correlative meanings.
2. Shelf Registration Under the Securities Act.
(a) Preparation and Filing of Shelf Registration. The
Company shall (i) cause to be filed not later than 120 days after the Effective
Date a registration statement pursuant to RULE 415 PROMULGATED under the
Securities Act (a Shelf Registration ) providing for the resale of all shares
of Registrable Common Stock held by the Holders on a continuous basis from time
to time in the open market or otherwise, provided however, the Company shall
have the right for proper corporate reasons (including, without limitation, the
ineligibility of the Company to file a registration statement on Form S-3),
determined in good faith by its Board of Directors, to extend such 120 day
period to a date not later than March 31, 1998, and (ii) use its reasonable best
efforts to have such Shelf Registration declared effective as soon as
practicable after such filing. Subject to Section 8, the Company agrees to use
its reasonable best efforts to keep the Shelf Registration continuously
effective until the second anniversary of the date such Shelf Registration is
declared effective by the Commission or such shorter period which will terminate
when all of the Registrable Common Stock covered by the Shelf Registration has
been sold pursuant to the Shelf Registration. The Company further agrees, if
necessary, to supplement or amend the Shelf Registration, if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration or by the Securities Act or by any other
rules and regulations thereunder for shelf registration in order to permit the
resale of the Registrable Common Stock in accordance with the Holders intended
method of disposition thereof.
(b) Effective Shelf Registration. A Shelf Registration
shall not be deemed to have been effected pursuant to Section 2(a) hereof:
(i) unless a registration statement with respect
thereto has been declared effective by the Commission and remains effective in
compliance with the provisions of the Securities Act and the laws of any state
or other jurisdiction applicable to the disposition of all Registrable Common
Stock covered by such registration statement until such time as all of such
Registrable Common Stock has been disposed of in accordance with such
registration statement (provided that such period need not exceed two years from
the date such Shelf Registration is declared effective by the Commission); or
(ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental or regulatory agency or
court for any reason other than a violation of applicable law solely by any
Holder and has not thereafter become effective.
3. Piggyback Registrations. If the Company, at any time
after the termination of the Shelf Registration or the duration of any
Suspension Period (as hereinafter defined), proposes to register any of its
equity securities under the Securities Act by registration on any forms other
than Form S-4 or S-8 (or any successor or similar form(s)), whether or not
pursuant to registration rights granted to other holders of its securities and
whether or not for sale for its own account, which would permit registration of
Registrable Common Stock for sale to the public under the Securities Act, it
shall give prompt written notice to all of the Holders of its intention to do so
and of such Holders' rights (if any) under this Section 3, which notice, in any
event, shall be given at least 30 days prior to such proposed registration.
Upon the written request of any Holder receiving notice of such proposed
registration that is then a holder of Registrable Common Stock (a Requesting
Holder ) made within 20 days after the receipt of any such notice, which request
shall specify the Registrable Common Stock intended to be disposed of by such
Requesting Holder and the intended method of disposition, the Company shall,
subject to Section 6(b) hereof, use its best efforts to effect the registration
under the Securities Act (a Piggyback Registration ) of all Registrable Common
Stock which the Company has been so requested to register by the Requesting
Holders thereof to the extent required to permit the disposition (in accordance
with such intended method of disposition) of the Registrable Common Stock so
requested to be registered; provided, that:
(a) if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder and (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Common Stock in connection with such registration (but not from any obligation
of the Company to pay the Expenses in connection therewith), without prejudice,
however, to the rights of any Holder to include Registrable Common Stock in any
future registration (or registrations) pursuant to this Section 3, and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Common Stock for the same period as the delay in
registering such other securities; and
(b) if such registration involves an underwritten
offering, each Requesting Holder shall sell its Registrable Common Stock on the
same terms and conditions as those that apply to the Company or other holder of
its securities being sold pursuant to such registration.
4. Expenses. The Company shall pay all Expenses in
connection with any registration initiated pursuant to Section 2 or 3 hereof,
whether or not such registration shall become effective and whether or not all
or any portion of the Registrable Common Stock originally requested to be
included in such registration are ultimately included in such registration.
5. Registration Procedures. If and whenever the Company is
required to effect any registration under the Securities Act as provided in
Sections 2 and 3 hereof, the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use its
reasonable best efforts to cause such registration statement to become
effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Common Stock
covered by such registration statement until such time as all of such
Registrable Common Stock has been disposed of in accordance with the method of
disposition set forth in such registration statement; provided, however, except
with respect to any Shelf Registration, such period need not extend beyond 90
days after the effective date of the registration statement; and provided,
further, that with respect to the Shelf Registration, as provided in Section 2
hereof, such period need not extend beyond two years after the effective date of
such registration statement;
(c) furnish to each seller of Registrable Common Stock
covered by such registration statement such number of copies of such drafts and
final conformed versions of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits and any
documents incorporated by reference), such number of copies of such drafts and
final versions of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such seller may
reasonably request in writing;
(d) use its reasonable best efforts (i) to register or
qualify all Registrable Common Stock and other securities covered by such
registration statement under such other securities or blue sky laws of such
states or other jurisdictions of the United States of America as the sellers of
Registrable Common Stock covered by such registration statement shall reasonably
request in writing, (ii) to keep such registration or qualification in effect
for so long as such registration statement remains in effect and (iii) to take
any other action that may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subsection
(d) be obligated to be so qualified, to subject itself to taxation in such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause all Registrable Common
Stock and other securities covered by such registration statement to be
registered with or approved by such other federal or state governmental agencies
or authorities as may be necessary in the opinion of counsel to the Company and
counsel to the seller or sellers of Registrable Common Stock to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Common Stock;
(f) use its best efforts to obtain and, if obtained,
furnish to each seller of Registrable Common Stock, and each such seller's
underwriters, if any:
(i) a signed opinion of counsel for the Company,
dated the effective date of such registration statement (and, if such
registration involves an underwritten offering, dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and substance
to such seller and such seller s underwriter; and
(ii) a comfort letter, dated the effective date of
such registration statement (and, if such registration involves an underwritten
offering, dated the date of the closing under the underwriting agreement) and
signed by the independent public accountants who have certified the Company's
financial statements included or incorporated by reference in such registration
statement, reasonably satisfactory in form and substance to such seller and such
seller s underwriter;
in each case, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' comfort letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to underwriters in
underwritten Public Offerings of securities and, in the case of the accountants'
comfort letter, such other financial matters, as the sellers of the Registrable
Common Stock covered by such registration statement or the underwriters, if any,
may reasonably request;
(g) except during any Suspension Period, notify each
seller of Registrable Common Stock and other securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such seller
of Registrable Common Stock, promptly prepare and furnish to it a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus, as supplemented or amended, shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and any other governmental
agency or authority having jurisdiction over the offering, and make available to
the Holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and
furnish to each seller of Registrable Common Stock at least ten days prior to
the filing thereof a copy of any amendment or supplement to such registration
statement or prospectus;
(i) upon a request of the Holders of a majority of the
shares of Registrable Common Stock requested to be included in a registration
pursuant to Section 2 or 3 hereof, use its best efforts to cause all such
Registrable Common Stock covered by such registration statement to be listed on
any securities exchange or other system on which the equity securities of the
Company are then listed or, if no such equity securities are then listed, (i)
to be listed on the NASDAQ National Market System or (ii) if the Company fails
to meet the listing requirements of the NASDAQ National Market system, then on
such national securities exchange or other system on which the Company s Common
Stock may be listed; and
(j) provide a transfer agent and registrar for such
Registrable Common Stock covered by such Registration Statement no later than
the effective date thereof.
The Company may require each seller of Registrable Common Stock
as to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of the securities covered
by such registration statement as the Company may from time to time reasonably
request in writing and as is required by applicable laws and regulations. Each
Holder agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading. If any such information with respect
to any selling Holder so requested by the Company a reasonable period of time
prior to the date of the filing of the Registration Statement hereunder is not
furnished prior to the filing of the Registration Statement hereunder, the
Company may exclude such selling Holder s Registrable Common Stock from such
Registration Statement.
Each Holder agrees that as of the date that a final prospectus
is made available to it for distribution to prospective purchasers of
Registrable Common Stock it shall cease to distribute copies of any preliminary
prospectus prepared in connection with the offer and sale of such Registrable
Common Stock. Each Holder further agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in subsection
(g) of this Section 5 or upon notice of commencement of any Suspension Period,
such Holder shall forthwith discontinue such Holder's disposition of Registrable
Common Stock pursuant to the registration statement relating to such Registrable
Common Stock until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by subsection (g) of this Section 5 or until it
is advised in writing by the Company that the use of the applicable prospectus
may be resumed and, if so directed by the Company, shall deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Registrable Common
Stock current at the time of receipt of such notice.
6. Underwritten Offerings.
(a) Piggyback Underwritten Offerings; Priority. If the
Company proposes to register any of its equity securities under the Securities
Act as contemplated by Section 3 hereof which would permit registration of
Registrable Common Stock for sale to the public under the Securities Act, and
such securities are to be distributed by or through one or more underwriters,
the Company shall, if requested by any Requesting Holders, use its best efforts
to arrange for such underwriters to include all of the Registrable Common Stock
to be offered and sold by such Requesting Holders among the securities of the
Company to be distributed by such underwriters; provided, that, if the managing
underwriter of such underwritten offering shall advise the Company in writing
(with a copy to the Requesting Holders) that if all the Registrable Common Stock
requested to be included in such registration were so included, in its opinion,
the number and type of securities proposed to be included in such registration
would exceed the number and type of securities which could be sold in such
offering within a price range acceptable to the Company (such writing to state
the basis of such opinion and the approximate number and type of securities
which may be included in such offering without such effect), then the Company
shall include in such registration, to the extent of the number and type of
securities which the Company is so advised can be sold in such offering, (i)
first, securities that the Company proposes to issue and sell for its own
account and (ii) second, Registrable Common Stock requested to be registered by
Requesting Holders pursuant to Section 3 hereof, pro rata among the Requesting
Holders on the basis of the number of shares of Registrable Common Stock
requested to be registered by all such Requesting Holders; provided, however,
that if the Company undertakes such registration on behalf of holders of equity
securities of the Company other than the Holders (the Other Equityholders )
pursuant to contractual demand registration rights granting such Other
Equityholders priority in the registration of their securities over those held
by other securityholders, then the Company shall include in such registration,
to the extent of the number and type of securities which the Company is so
advised can be sold in such offering, (i) first, the number of equity securities
requested to be included therein by the Other Equityholders and (ii) second,
Registrable Common Stock requested to be registered by Requesting Holders
pursuant to Section 3 hereof, pro rata among the Requesting Holders on the basis
of the number of shares of Registrable Common Stock requested to be registered
by all Requesting Holders.
Any Requesting Holder may withdraw its request to have all or
any portion of its Registrable Common Stock included in any such offering by
notice to the Company within 10 Business Days after receipt of a copy of a
notice from the managing underwriter pursuant to this Section 6 (a).
(b) Holders of Registrable Common Stock to be Parties to
Underwriting Agreement. The Holders of Registrable Common Stock to be
distributed by underwriters in an underwritten offering pursuant to a Piggyback
Registration contemplated by subsection (a) of this Section 6 shall be parties
to the underwriting agreement between the Company and such underwriters and any
such Holder, at its option, may require that any or all of the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the benefit
of such Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holders. No such Holder shall be required
to make any representations or warranties to or agreements with the Company or
the underwriters other than representations, warranties or agreements regarding
such Holder, such Holder's Registrable Common Stock, such Holder's intended
method of distribution and any other representation required by law.
(c) Selection of Underwriters for Piggyback Underwritten
Offering. The underwriter or underwriters of each underwritten offering
pursuant to a Piggyback Registration contemplated by this Section 6 shall be a
nationally recognized underwriter (or underwriters) selected by the Company.
(d) Holdback Agreements. Each Holder agrees, if so
required by the managing underwriter for any underwritten offering not to effect
any sale or distribution of any equity securities of the Company or securities
convertible into or exchangeable or exercisable for equity securities of the
Company issued after the data hereof, including any sale under Rule 144 under
the Securities Act, during the 10 days prior to the date on which an
underwritten registration of Registrable Common Stock pursuant to Section 2 or 3
hereof has become effective and until 120 days after the effective date of such
underwritten registration, except as part of such underwritten registration.
The Company agrees (i) not to effect any Public Offering or
distribution of any equity securities of the Company or securities convertible
into or exchangeable or exercisable for equity securities of the Company, during
the 10 days prior to the date on which any underwritten registration pursuant to
Section 2 or 3 hereof has become effective and until 120 days after the
effective date of such underwritten registration, except as part of such
underwritten registration and except pursuant to registrations on Form S-4 and
Form S-8, or any successor or similar forms thereto, and (ii) to cause each
holder of any equity securities, or securities convertible into or exchangeable
or exercisable for equity securities, in each case, acquired from the Company at
any time on or after the date of this Agreement (other than in a Public
Offering), to agree not to effect any Public Offering or distribution of such
securities, during such period, except as part of such underwritten registration
if permitted.
7. Preparation; Reasonable Investigation.
(a) Registration Statements. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company shall give each Holder of Registrable
Common Stock registered under such registration statement, the underwriters, if
any, and their respective counsel and accountants the reasonable opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and shall give each such Holder who is an original party
hereto or any Transferee who holds a number of shares of Registrable Common
Stock equal to at least 5% of the total number of shares of Common Stock then
outstanding (each such original Holder or Transferee, a Significant Holder )
such reasonable access to its books and records and such reasonable
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the reasonable opinion of any such Significant Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
(b) Confidentiality. Each Holder of Registrable Common
Stock shall maintain the confidentiality of any confidential information
received from or otherwise made available by the Company to such Holder of
Registrable Common Stock and identified in writing by the Company as
confidential. Information that (i) is or becomes available to a Holder of
Registrable Common Stock from a public source, (ii) is disclosed to a Holder of
Registrable Common Stock by a third-party source who the Holder of Registrable
Common Stock reasonably believes has the right to disclose such information or
(iii) is or becomes required to be disclosed by a Holder of Registrable Common
Stock by law, including by court order, shall not be deemed to be confidential
information for purposes of this Agreement. The Holders of Registrable Common
Stock shall not grant access, and the Company shall not be required to grant
access, to information under this Section 7 to any Person who will not agree in
writing to maintain the confidentiality (to the same extent a Holder is required
to maintain confidentiality) of any confidential information received from or
otherwise made available to it by the Company or the Holders of Registrable
Common Stock under this Agreement and identified in writing by the Company as
confidential.
8. Suspension of Offers and Sales.
The Company shall not be obligated to file any registration
statement other than the Shelf Registration, or file any amendment or supplement
to any registration statement other than the Shelf Registration, and may suspend
for a period of time (the Suspension Period ) any Holder s rights to make sales
pursuant to any effective registration statement, at any time when the Company,
in the good faith judgment of its Board of Directors, reasonably believes that
the offering of securities pursuant thereto would adversely affect a pending or
proposed public offering of the Company's securities, a material financing, or a
material acquisition, merger, recapitalization, consolidation, reorganization or
similar transaction, or negotiations, discussions or pending proposals with
respect thereto. The Holders shall cease to make sales pursuant to any
effective registration statement immediately upon receipt of a written
notification of commencement of any Suspension Period. The Holders rights to
make sales pursuant to an effective registration statement cannot be suspended
pursuant to the provisions of the preceding sentence for a period longer than 60
days after the date of the Board's determination referenced in the preceding
sentence or, if earlier, the period ending on the tenth (10) day after the
abandonment or consummation of the foregoing proposals or transactions. If the
Company suspends the sellers' rights to make sales pursuant hereto, the
applicable registration period shall be extended by the number of days of such
suspension.
9. Indemnification.
(a) Indemnification by the Company. In connection with
any registration statement filed by the Company pursuant to Section 2 or 3
hereof, the Company shall, and hereby agrees to, indemnify and hold harmless,
each Holder and seller of any Registrable Common Stock covered by such
registration statement and each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such Holder or seller or any such underwriter, and their respective
directors, officers, partners, agents and Affiliates (each, a Company
Indemnitee for purposes of this Section 9(a)), against any losses, claims,
damages, liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof and whether or not such Indemnified Party is a
party thereto), joint or several, and expenses, including, without limitation,
the reasonable fees, disbursements and other charges of legal counsel and
reasonable costs of investigation, to which such Company Indemnitee may become
subject under the Securities Act or otherwise (collectively, a Loss or
Losses ), insofar as such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered or otherwise
offered or sold under the Securities Act or otherwise, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto (collectively, Offering Documents ), or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in the light of the
circumstances in which they were made not misleading; provided, that, the
Company shall not be liable in any such case to the extent that any such Loss
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Offering Documents in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such Company Indemnitee specifically
stating that it is expressly for use therein; and provided, further, that the
Company shall not be liable to any Person who participates as an underwriter or
a selling Holder in the offering or sale of Registrable Common Stock or any
other Person, if any, who controls such underwriter or a selling Holder, in any
such case to the extent that any such Loss arises out of such Person's failure
to send or give a copy of the final prospectus (including any documents
incorporated by reference therein), as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Registrable Common Stock to such Person if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Company Indemnitee and shall survive the transfer of such securities by such
Company Indemnitee.
(b) Indemnification by the Offerors and Sellers. In
connection with any registration statement filed by the Company pursuant to
Section 2 or 3 hereof in which a Holder has registered for sale Registrable
Common Stock, each such Holder or seller of Registrable Common Stock shall, and
hereby agrees to, indemnify and hold harmless the Company and each of its
directors, officers, employees and agents, each other Person, if any, who
controls the Company and each other seller and such seller's directors,
officers, stockholders, partners, employees, agents and affiliates (each, a
Holder Indemnitee for purposes of this Section 9(b)), against all Losses
insofar as such Losses arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any Offering Documents
(or any document incorporated by reference therein) or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in the light of circumstances in which
they were made not misleading, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Holder or seller of Registrable Common stock
specifically stating that it is expressly for use therein; provided, however,
that the liability of such indemnifying party under this Section 9(b) shall be
limited to the amount of the net proceeds received by such indemnifying party in
the offering giving rise to such liability. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Holder Indemnitee and shall survive the transfer of such securities by such
Holder.
(c) Notices of Losses, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a Loss referred to in the preceding subsections of this Section 9,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subsections of this Section 9, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such Loss, to
assume and control the defense thereof, in each case at its own expense, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
its assumption of the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall be liable for
any settlement of any such action or proceeding effected without its written
consent, which shall not be unreasonably withheld. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such Loss or which requires action
on the part of such indemnified party or otherwise subjects the indemnified
party to any obligation or restriction to which it would not otherwise be
subject.
(d) Contribution. If the indemnification provided
for in this Section 9 shall for any reason be unavailable to an indemnified
party under subsection (a) or (b) of this Section 9 in respect of any Loss,
then, in lieu of the amount paid or payable under subsection (a) or (b) of this
Section 9, the indemnified party and the indemnifying party under subsection (a)
or (b) of this Section 9 shall contribute to the aggregate Losses (including
legal or other expenses reasonably incurred in connection with investigating the
same) (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Common Stock covered by
the registration statement which resulted in such Loss or action in respect
thereof, with respect to the statements, omissions or action which resulted in
such Loss or action in respect thereof, as well as any other relevant equitable
considerations, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company, on the one hand, and such
prospective sellers, on the other hand, from their sale of Registrable Common
Stock; provided, that, for purposes of this clause (ii), the relative benefits
received by the prospective sellers shall be deemed not to exceed the amount
received by such sellers. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The obligations, if any, of the selling holders of
Registrable Common Stock to contribute as provided in this subsection (d) are
several in proportion to the relative value of their respective Registrable
Common Stock covered by such registration statement and not joint. In addition,
no Person shall be obligated to contribute hereunder any amounts in payment for
any settlement of any action or Loss effected without such Person's consent.
(e) Other Indemnification. The Company and, in
connection with any registration statement filed by the Company pursuant to
Section 2(a), each Holder shall, and, in connection with any registration
statement filed by the Company pursuant to Section 3, each Holder who has
registered for sale Registrable Common Stock shall, with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority other than the Securities Act,
indemnify Holder Indemnitees and Company Indemnitees, respectively, against
Losses, or, to the extent that indemnification shall be unavailable to a Holder
Indemnitee or Company Indemnitee, contribute to the aggregate Losses of such
Holder Indemnitee or Company Indemnitee in a manner similar to that specified in
the preceding subsections of this Section 9 (with appropriate modifications).
(f) Indemnification Payments. The indemnification
and contribution required by this Section 9 shall be made by periodic payments
of the amount thereof during the course of any investigation or defense, as and
when bills are received or any Loss is incurred.
10. Registration Rights to Others.
If the Company shall at any time hereafter provide to any holder
of any securities of the Company rights with respect to the registration of such
securities under the Securities Act or the Exchange Act, such rights shall not
be in conflict with or adversely affect any of the rights provided in this
Agreement to the Holders of Registrable Common Stock.
11. Adjustments Affecting Registrable Common Stock.
The Company shall not effect or permit to occur any combination,
subdivision or reclassification of Registrable Common Stock that would
materially adversely affect the ability of the Holders to include such
Registrable Common Stock in any registration of its securities under the
Securities Act contemplated by this Agreement.
12. Rule 144 and Rule 144A.
The Company shall take all actions reasonably necessary to
enable Holders to sell Registrable Common Stock without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, (b)
Rule 144A under the Securities Act, as such Rule may be amended from time to
time, or (c) any similar rules or regulations hereafter adopted by the
Commission, including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed under the Exchange Act.
Upon the request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
13. Amendments and Waivers.
Any provision of this Agreement may be amended, modified or
waived if, but only if, the written consent to such amendment, modification or
waiver has been obtained from (i) except as provided in clauses (ii) and (iii)
below, the Holder or Holders of at least 66-2/3% of the shares of Registrable
Common Stock affected by such amendment, modification or waiver, (ii) in the
case of any amendment, modification or waiver of Section 8 hereof, the written
consent of the Holder or Holders of at least 66-2/3% of the shares of
Registrable Common Stock and the written consent of each Significant Holder and
(iii) in the case of any amendment, modification or waiver of any provision of
Section 4 hereof or this Section 13 or any provisions as to the percentages of
Holders required for any amendment, modification or waiver, the written consent
of each Holder so affected.
14. Nominees for Beneficial Owners.
In the event that any Registrable Common Stock is held by a
nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its election in writing delivered to the Company, be treated as the Holder of
such Registrable Common Stock for purposes of any request or other action by any
Holder or Holders pursuant to this Agreement or any determination of the number
or percentage of shares of Registrable Common Stock held by any Holder or
Holders contemplated by this Agreement. If the beneficial owner of any
Registrable Common Stock so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Common Stock.
15. Assignment.
The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Any Holder may assign to any permitted Transferee (as
permitted under applicable law) of its Registrable Common Stock its rights and
obligations under this Agreement, provided that such Transferee (i) holds upon
completion of such assignment a number of shares of Registrable Common Stock
equal to at least 1% of the total number of shares of Common Stock outstanding
at the time of such assignment and (ii) shall agree in writing with the parties
hereto prior to the assignment to be bound by this Agreement as if it were an
original party hereto, whereupon such assignee shall for all purposes be deemed
to be a Holder under this Agreement. Except as provided above or otherwise
permitted by this Agreement, neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by any Holder without the prior written consent of the other parties
hereto. The Company may not assign this Agreement or any right, remedy,
obligation or liability arising hereunder or by reason hereof.
16. Calculation of Percentage or Number of Shares of
Registrable Common Stock.
For purposes of this Agreement, all references to a percentage
or number of shares of Registrable Common Stock or Common Stock shall be
calculated based upon the number of shares of Registrable Common Stock or Common
stock, as the case may be, outstanding at the time such calculation is made and
shall exclude any Registrable Common Stock or Common Stock, as the case may be,
owned by the Company or any subsidiary of the Company.
17. Miscellaneous.
(a) Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated hereby.
(b) Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
(c) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement which is inconsistent with the rights granted
to the Holders in this Agreement.
(d) Remedies. Each Holder, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and the Company hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(e) Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to the subject matter hereof.
(f) Notices. Any notices or other communications to be
given hereunder by any party to another party shall be in writing, shall be
delivered personally, by telecopy, by certified or registered mail, postage
prepaid, return receipt requested, or by Federal Express or other comparable
delivery service, to the address of the party set forth on Schedule B hereto or
to such other address as the party to whom notice is to be given may provide in
a written notice to the other parties hereto, a copy of which shall be on file
with the Secretary of the Company. Notice shall be effective when delivered if
given personally, when receipt is acknowledged if telecopied, three days after
mailing if given by registered or certified mail as described above, and one
business day after deposit if given by Federal Express or comparable delivery
service.
(g) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made to be performed entirely in such State.
(h) Severability. Notwithstanding any provision of this
Agreement, neither the Company nor any other party hereto shall be required to
take any action which would be in violation of any applicable Federal or state
securities law. The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of any other provision of this Agreement in such jurisdiction or
the validity, legality or enforceability of this Agreement, including any such
provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
(i) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
FORSTMANN & COMPANY, INC.
By: /s/ Rodney Peckham
-------------------
Name:Rodney Peckham
Title: Chief Financial Officer
HOLDERS:
GRACE BROTHERS LTD.
By: Bradford T. Whitmore
---------------------
Name: Bradford T. Whitmore
Title: General Partner
CREDIT SUISSE FIRST BOSTON SECURITIES CORP.
By: /s/ Donna P. Alderman
----------------------
Name: Donna P. Alderman
Title: Director
DAYSTAR PARTNERS
By:/s/ Bruce W. Gregory
---------------------
Name: Bruce Gregory
Title: Managing Director
SCHEDULE A
HOLDERS OF REGISTRABLE COMMON STOCK
Number of
Holder Shares Owned
Grace Brothers Ltd. . . . . . . . . . . . . . . . . . . . . . . . . .
Credit Suisse First Boston Securities Corp. . . . . . . . . . . . . .
Daystar Partners . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE B
NOTICES
If to the Company, to:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, NY 10036
If to the Holders, to:
Credit Suisse First Boston Securities Corp.
11 Madison Avenue, 4th Floor
New York, NY 10010
Grace Brothers Ltd.
1560 Sherman Avenue
Suite 900
Evanston, IL 60201
Daystar Partners
411 Theodore Fremd Avenue
Rye, NY 10580
If to Holders who are Transferees of the original Holders, to such Holders at
their respective addresses or to their respective telephone or telecopy numbers
reflected in the Company's books and records.
Exhibit 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of July 23, 1997, between FORSTMANN &
COMPANY, INC., a Georgia corporation (the "Company"), and NORWEST BANK
MINNESOTA, N.A., as warrant agent (the "Warrant Agent"), for the benefit of the
Persons holding Warrants hereunder from time to time.
W I T N E S S E T H:
WHEREAS, in connection with the consummation of the Company's First
Amended Plan of Reorganization, dated May 14, 1997 (the "Plan"), as confirmed by
Final Order of the United States Bankruptcy Court for the Southern District of
New York, dated July 9, 1997 (the "Confirmation Date"), the Company shall issue
in accordance with the provisions of the Plan, to the holders of Allowed
Interests in Classes 7 and 8 an aggregate of up to 87,756 warrants (the
"Warrants"), each Warrant initially entitling the registered holder thereof to
purchase one share of the Company's New Common Stock, par value $.01 per share
(each, a "Share", the term Share shall also refer to any share or shares of any
other class or series of capital stock into which the Shares hereafter may be
changed);
WHEREAS, under the terms of the Plan, each holder of an Allowed
Interest in Classes 7 and 8 has been allocated a number of Warrants determined
in accordance with Sections 5.7 or 5.8 of the Plan, as applicable;
NOW, THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the record holders of the
Warrants, the Company and the Warrant Agent each hereby agrees as follows:
SECTION 1. Definitions. All capitalize terms
-----------
used but not defined herein shall have the respective meanings ascribed to them
in the Plan.
SECTION 2. Appointment of Warrant Agent. The
----------------------------
Company hereby appoints the Warrant Agent to act as agent for the Company in
accordance with the terms and conditions hereinafter set forth and the Warrant
Agent hereby accepts such appointment.
SECTION 3. Execution, Delivery and Registration
------------------------------------
of Warrant Certificates. (a) Each Warrant shall be
- -----------------------
evidenced by a certificate (each, a "Warrant Certificate") substantially in the
form set forth in Exhibit A hereto. Each Warrant Certificate shall be dated the
date it is countersigned by the Warrant Agent and shall have such letters,
numbers, or other marks of identification or designation and such legends or
endorsements stamped, printed, lithographed or engraved thereon as the officers
of the Company executing the same may approve (the execution thereof to be
conclusive evidence of such approval) and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation, or to conform to usage. The Warrant Certificates
shall be signed on behalf of the Company by its Chief Executive Officer, its
President, its Chief Financial Officer or one of its Vice-Presidents under its
corporate seal reproduced thereon and attested by its Secretary or an Assistant
Secretary. The signatures of any such officers may be manual or facsimile. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
No Warrant Certificates shall be valid for any purpose until such
Warrant Certificate has been countersigned by the manual signature of the
Warrant Agent. Such signature by the Warrant Agent upon any Warrant Certificate
executed by the Company shall be conclusive evidence that the Warrant
Certificate so countersigned has been duly issued hereunder.
In case any officer of the Company who shall have signed any of the
Warrant Certificates either manually or by facsimile signature shall cease to be
an officer before the Warrant Certificates so signed shall have been
countersigned and delivered by the Warrant Agent, such Warrant Certificates
nevertheless may be countersigned and delivered with the same force and effect
as though such person had not ceased to be such officer of the Company, and any
Warrant Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Warrant Certificate, shall be the
proper officer of the Company to sign such Warrant Certificate, although at the
date of the execution of this Agreement any such person was not such officer.
The Warrant Agent will keep or cause to be kept, at its principal
office, books for registration and transfer of the Warrant Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Warrant Certificates, the number of Warrants evidenced on its
face by each of the Warrant Certificates, and the date of each of the Warrant
Certificates.
(b) On the Effective Date, or as soon thereafter as practicable, the
Company shall issue and, upon countersigning by the Warrant Agent, deliver to
the transfer agent for the New Common Stock (the "Transfer Agent") Warrant
Certificates representing the aggregate number of Warrants allocated to the
holders of the Allowed Interests in Classes 7 and 8 under the Plan. Such
Warrant Certificates shall be delivered by the Transfer Agent to the Persons
entitled to such delivery in accordance with the provisions of the Plan.
SECTION 4. Exercise of Warrants; Purchase Price.
------------------------------------
(a) Each registered holder of a Warrant Certificate may exercise the Warrants
evidenced thereby in whole or in part immediately upon issuance and until 5:00
p.m., New York time, on July 23, 1999 (the "Final Expiration Date"), upon
surrender of such Warrant Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Warrant Agent at the principal
office of the Warrant Agent, together with payment of the Purchase Price for
each Share as to which the Warrants are exercised,
(b) The Purchase Price for each Share pursuant to the exercise of a
Warrant shall be $23, subject to adjustment as provided in Section 10 hereof.
The aggregate Purchase Price shall be payable in cash or by certified or
official bank or bank cashier's check payable to the order of the Company.
(c) Upon receipt of a Warrant Certificate representing exercisable
Warrants, with the form of election to purchase duly executed, accompanied by
payment of the aggregate Purchase Price for the Shares to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
such Warrant Certificate in accordance with Section 8 hereof, the Warrant Agent
shall thereupon promptly (i) requisition from any transfer agent of the New
Common Stock certificates for the number of Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests and (ii) after receipt of such certificates cause the same to be
delivered to or upon the order of the registered holder of such Warrant
Certificate, registered in such name or names as may be designated by such
holder.
(d) If the registered holder of any Warrant Certificate shall
exercise less than all the Warrants evidenced thereby, a new Warrant Certificate
evidencing warrants equivalent to the Warrants remaining unexercised shall be
issued by the Warrant Agent to the registered holder of such Warrant Certificate
or to his duly authorized assigns, subject to the provisions of Section 12
hereof.
SECTION 5. Transfer, Split Up, Combination and
-----------------------------------
Exchange of Warrant Certificates; Mutilated, Destroyed, Lost
- -----------------------------------------------------------
or Stolen Warrant Certificates. Subject to the provisions
- ------------------------------
of Section 12 hereof, at or prior to the Final Expiration Date, any Warrant
Certificate, with or without other Warrant Certificates, may be transferred,
split up, combined or exchanged for another Warrant Certificate or Warrant Cer-
tificates, entitling the registered holder to purchase a like number of Shares
as the Warrant Certificate or Warrant Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Warrant Certificate shall make such request in writing
delivered to the Warrant Agent, and shall surrender the Warrant Certificate or
Warrant Certificates to be transferred, split up, combined or exchanged at the
principal office of the Warrant Agent. Thereupon the Warrant Agent shall
countersign and deliver to the person entitled thereto a Warrant Certificate or
Warrant Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Warrant Certificates.
Upon receipt by the Company and the Warrant Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Warrant Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Warrant Agent of all reasonable expenses
incidental thereto, and upon surrender to the Warrant Agent and cancellation of
the Warrant Certificate if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor to the Warrant Agent for delivery to the
registered owner in lieu of the Warrant Certificate so lost, stolen, destroyed
or mutilated.
SECTION 6. Subsequent Issue of Warrant Cer-
--------------------------------
tificates. Subsequent to their original issuance, no War
- ---------
rant Certificates shall be issued except (a) Warrant Certificates issued upon
any transfer, combination, split up or exchange of Warrant Certificates pursuant
to Section 5 hereof, (b) Warrant Certificates issued in replacement of
mutilated, destroyed, lost or stolen Warrant Certificates pursuant to Section 5
hereof, (c) Warrant Certificates issued pursuant to Section 4(d) hereof upon the
partial exercise of any Warrant Certificate to evidence the unexercised portion
of such Warrant Certificate, and (d) Warrant Certificates issued pursuant to
Section 19 hereof.
SECTION 7. Cancellation and Destruction of War-
------------------------------------
rant Certificates. All Warrant Certificates surrendered for
- -----------------
the purpose of exercise, exchange, substitution, transfer, split up or
combination shall, if surrendered to the Company or to any of its agents, be
delivered to the Warrant Agent for cancellation or in canceled form, or, if
surrendered to the Warrant Agent, shall be canceled by it, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Warrant Agreement. The Company shall deliver to
the Warrant Agent for cancellation and retirement, and the Warrant Agent shall
so cancel and retire, any other Warrant Certificates purchased or acquired by
the Company otherwise than upon the exercise thereof. The Warrant Agent shall
deliver all canceled Warrant Certificates to the Company.
SECTION 8. Reservation and Availability of
-------------------------------
Shares. (a) There have been reserved, and the Company
- ------
covenants and agrees at all times to keep reserved and available out of its
authorized and unissued shares of New Common Stock or its authorized and issued
shares of New Common Stock held in its treasury, the number of Shares that will
be sufficient to permit the exercise in full of all outstanding Warrants.
(b) So long as the New Common Stock issuable upon the exercise of
Warrants may be listed on any national securities exchange, the Company shall
use its best efforts to cause all Shares reserved for such issuance to be listed
as expeditiously as possible on such exchange upon official notice of issuance
upon such exercise.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Shares delivered upon exercise of
the Warrants shall, at the time of delivery of the certificates for such Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable Shares.
(d) The Company covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Warrant Certificates or of
any Shares upon the exercise of the Warrants. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Warrant Certificates to a person other than, or the
issuance or delivery of certificates for New Common Stock in a name other than
that of, the registered holder of the Warrant Certificate evidencing Warrants
surrendered for exercise or to issue or deliver any certificates for Shares upon
the exercise of any Warrants until any such tax shall have been paid (any such
tax being payable by the holder of such Warrant Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 9. Common Stock Record Date. Each person
------------------------
in whose name any certificate for Shares is issued upon the exercise of a
Warrant shall for all purposes be deemed to have become the holder of record of
the New Common Stock represented thereby on, and such certificate shall be
dated, the date upon which the Warrant Certificate evidencing such Warrants was
duly surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the New Common Stock transfer books of the Company
are closed, such person shall be deemed to have become the record holder of such
Shares on, and such certificate shall be dated, the next succeeding business day
on which the New Common Stock transfer books of the Company are open.
SECTION 10. Antidilution Provisions. In order to
-----------------------
prevent dilution of the rights granted to registered holders of the Warrant
Certificates under this Agreement, the Purchase Price and the number and kind of
Shares purchasable upon exercise of each Warrant are subject to adjustment from
time to time only upon the occurrence of the following events:
(a) Stock Dividends, Splits, Combinations and
-----------------------------------------
Reclassifications. If at any time after the Effective Date,
- -----------------
the Company shall (i) issue any stock as a dividend or distribution on the
Shares, (ii) subdivide or reclassify the Shares into a greater number of Shares,
or (iii) combine or reclassify the Shares into a smaller number of Shares, then
(A) the number of Shares purchasable upon the exercise of each Warrant
immediately prior to the record date for such dividend or distribution, or the
effective date of such subdivision, combination or reclassification, shall be
adjusted so that the holder of a Warrant exercised after that date shall be
entitled to receive the number and kind of Shares which such holder would have
owned and been entitled to receive as a result of the dividend, distribution,
subdivision, combination or reclassification had the Warrant been exercised
immediately prior to that date, and (B) the Purchase Price in effect immediately
prior to such adjustment shall be adjusted by multiplying such Purchase Price by
a fraction, the numerator of which is the aggregate number of Shares purchasable
on the exercise of all Warrants outstanding immediately prior to such adjustment
and the denominator of which is the aggregate number of Shares purchasable on
the exercise of all Warrants outstanding immediately thereafter.
(b) Certain Distributions to Stockholders. If at
-------------------------------------
any time after the Effective Date, the Company shall make any distribution in
respect of its Shares of any property (including, without limitation, cash,
securities of other issuers, or any preferred stock or evidence of indebtedness
of the Company), whether by means of a dividend or distribution in partial
liquidation or otherwise (other than a distribution referred to in Section
10(a)), then the Purchase Price shall be adjusted immediately thereafter by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, the numerator of which is the difference between the Adjusted Company
Value immediately preceding the date of such distribution and the aggregate Fair
Market Value of the property so distributed, and the denominator of which is the
Adjusted Company Value immediately preceding the date of such distribution.
For purposes of this Section, (i) "Adjusted Company Value" shall
mean $98.9 million, being the value of the Company on the Confirmation Date
determined by the Company (with the consent of the Creditors' Committee) and as
reduced for asset sales or dispositions made prior to the Effective Date, which
amount shall be reduced from time to time by the Fair Market Value of any such
distribution and (ii) "Fair Market Value" shall mean (A) in the case of cash,
the amount of all cash received or held at the date of determination; (B) in the
case of a marketable security which is listed or regularly traded on any
domestic securities exchange or quoted on NASDAQ, the weighted average of the
closing prices of such security's sales on all domestic securities exchanges on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and the lowest
asked prices on all such exchanges on such day, or, if on any day such security
is not listed, the average of the representative bid and ask prices quoted in
the NASDAQ as of 4:00 p.m., New York City time, on such day, in each such case,
averaged over a period of 11 (11) days consisting of the date of determination
and the ten (10) consecutive Business Days (or such lesser period as such
security shall have been listed) prior to such day; provided, however, the term
"Business Days" as used in this sentence shall mean Business Days on which the
domestic exchange on which the security is listed or the NASDAQ, as the case may
be, is open for trading. NASDAQ, as used in this definition, shall mean the
National Market System of NASDAQ Inter-Dealer Quotation System or such other
similar inter-dealer quotation system as may in the future be used generally by
members of the National Association of Securities Dealers for the over-the-
counter transactions in securities; and (C) in the case of any consideration of
property other than set forth in the foregoing, the value thereof shall be the
fair market value of such consideration or property as of the date of
determination as determined in good faith by the Company's Board of Directors.
If distributions to stockholders are sufficient, in the aggregate,
to result in adjusting the Purchase Price to zero or less than zero, then all
then outstanding Warrants shall automatically be deemed exercised as of the
record date for such distribution or repurchase without any action on the part
of any holder of a Warrant Certificate, and the holders of the Warrant
Certificates shall then be entitled, in addition to exercising all rights and
privileges of a holder of Shares, to participate proportionately in such
distribution to the extent the Purchase Price would have been reduced to less
than zero. Upon any such automatic exercise of the Warrants, the Company shall
promptly issue and deliver to the holders of the Warrant Certificates, without
charge, share certificates evidencing the Shares for which the Warrants were
exercised and any such required distribution, and thereafter all such Warrant
Certificates shall be deemed canceled.
(c) Merger, Consolidation, etc. If after the
--------------------------
Effective Date the Company shall undertake (i) any capital reorganization,
reclassification or recapitalization of the capital stock of the Company (other
than in the cases referred to in Section 10(a)), (ii) any consolidation or
merger of the Company with or into another corporation, or (iii) any sale or
transfer of the property of the Company as an entirety or substantially as an
entirety, the Company shall use its best efforts to make adequate provisions so
that each holder of a Warrant Certificate shall thereafter be entitled to
purchase upon exercise of any Warrant held by such holder (in lieu of or in
addition to the number of Shares deliverable, as appropriate) such number of
shares of stock, other securities or property, if any, to which a holder of the
number of Shares which would otherwise have been deliverable upon the exercise
of a Warrant at the time would have been entitled upon such capital
reorganization, reclassification, recapitalization, consolidation, merger, sale
or transfer, and at the same aggregate Purchase Price.
(d) No Adjustment for Small Amounts. No ad
-------------------------------
justment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least ten (10) cents in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
10(d) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 10 shall be made to the nearest cent or to the
nearest one-hundredth of a Share, as the case may be.
(e) No Adjustment for Stock Options. No
-------------------------------
adjustment to the Purchase Price or the number of Shares issuable upon the
exercise of the Warrants shall be made as a result of the exercise of options
issued pursuant to the Company's Management Stock Option Plan
(f) Effect of Alternate Securities. If at any
------------------------------
time, as a result of an adjustment made pursuant to this Section 10, the holder
of a Warrant shall thereafter become entitled to receive any securities of the
Company other than Shares, then the number of such other securities receivable
upon exercise of a Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to Shares contained in this Section 10.
SECTION 11. Certificate of Adjusted Purchase
--------------------------------
Price or Number of Shares. Whenever an adjustment is made
- -------------------------
as provided in Section 10 hereof, the Company shall (a) prepare a certificate
setting forth such adjustment and a brief statement of the facts accounting for
such adjustment, (b) file with the Warrant Agent a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Warrant Certificate in
accordance with Section 21 hereof.
SECTION 12. Warrants to Purchase Fractional
-------------------------------
Shares. The Company shall not be required to issue Warrants
- ------
for purchase of fractional Shares or to distribute Warrant Certificates which
evidence such Warrants. Each Person otherwise entitled to a Warrant that
includes fractional amounts of New Common Stock shall receive a Warrant that has
been rounded down to the next whole number of Shares (if such fraction is less
than one-half) or rounded up to the next whole number of Shares (if such
fraction is equal to or greater than one-half).
SECTION 13. Right of Action; Entitlement to Vote
------------------------------------
or Receive Dividends. (a) All rights of action in respect of
- --------------------
this Agreement are vested in the respective registered holders of the Warrant
Certificates; and any registered holder of any Warrant Certificate, without the
consent of the Warrant Agent or of the holder of any other Warrant Certificate,
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Warrants evidenced by
such Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Prior to the exercise of the Warrants evidenced thereby, the
holder of a Warrant Certificate, as such, shall not be entitled to any rights of
a stockholder of the Company with respect to, or be deemed for any purpose the
holder of, Shares for which the Warrants shall be exercisable, including,
without limitation, the right to vote or to receive dividends, or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
SECTION 14. Agreement of Warrant Certificate
--------------------------------
Holders. Every holder of a Warrant Certificate, by
- -------
accepting the same, consents and agrees with the Company and the Warrant Agent
and with every other holder of a Warrant Certificate that (a) the Warrant
Certificates are transferable only on the registry books of the Warrant Agent if
surrendered at the principal office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer and (b) the Company and the
Warrant Agent may deem and treat the person in whose name the Warrant Cer-
tificate is registered as the absolute owner thereof and of the Warrants
evidenced thereby (notwithstanding any notations of ownership or writing on the
Warrant Certificates) for all purposes whatsoever, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary.
SECTION 15. Concerning the Warrant Agent. The
----------------------------
Company agrees to pay to the Warrant Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Warrant Agent, its reasonable expenses and counsel fees and other disbursements
ncurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Warrant Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Warrant Agent, for anything done or omitted by the Warrant Agent in
connection with the acceptance and administration of this Agreement.
The Warrant Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered, or omitted by it in connection
with its administration of this Agreement in reliance upon any Warrant
Certificate or certificate for New Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it in
good faith to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons.
SECTION 16. Merger or Consolidation or Change of
------------------------------------
Name of Warrant Agent. Any corporation into which the
- ---------------------
Warrant Agent or any successor Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent or any successor Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant Agent
or any successor Warrant Agent, shall be the successor to the Warrant Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that such corporation
would be eligible for appointment as a successor Warrant Agent under the
provisions of Section 18 hereof. In case at the time such successor Warrant
Agent shall succeed to the agency created by this Agreement, any of the Warrant
Certificates shall have been countersigned but not delivered, any such successor
Warrant Agent may adopt the countersignature of the predecessor Warrant Agent
and deliver such Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, any successor
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor Warrant Agent; and
in all such cases such Warrant Certificates shall have the full force provided
in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent may adopt the countersignature under its
prior name and deliver Warrant Certificates so countersigned; and in case at
that time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Warrant Certificates shall
have the full force provided in the Warrant Certificates and in this Agreement.
SECTION 17. Duties of Warrant Agent. The Warrant
-----------------------
Agent undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Warrant Certificates, by their acceptance thereof, shall be bound:
(a) The Warrant Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Warrant Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be proved conclusively and
established by a certificate signed on behalf of the Company by its Chief
Executive Officer, its President, its Chief Financial Officer or any of its
Vice-Presidents and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary and delivered to the Warrant Agent; and such cer-
tificate shall be full authorization to the Warrant Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Warrant Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Warrant Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Warrant Agent) or in
respect of the validity or execution and delivery of any Warrant Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Warrant Certificate; nor shall it be responsible for the adjustment of
the Purchase Price or the making of any change in the number of shares of New
Common Stock required under the provisions of Section 10 hereof or responsible
for the manner, method or amount of any such change or the ascertaining of the
existence of facts that would require any such adjustment or change (except with
respect to the exercise of Warrants evidenced by Warrant Certificates after
actual notice of any adjustment of the Purchase Price); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Shares to be issued pursuant to this
Agreement or any Warrant Certificate or as to whether any Shares will, when
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer, the President, the Chief Financial Officer or any of
the Vice-Presidents, the Secretary, any Assistant Secretary, the Treasurer or
any Assistant Treasurer of the Company and to apply to such officers for advice
or instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance with
the instructions of any such officer.
(h) The Warrant Agent and any shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
SECTION 18. Change of Warrant Agent. The Warrant
-----------------------
Agent may resign and be discharged from its duties under this Agreement upon 30
days' notice in writing mailed to the Company by registered or certified mail,
and to the holders of the Warrant Certificates by first-class mail. The Company
may remove the Warrant Agent or any successor Warrant Agent upon 30 days' notice
in writing, mailed to the Warrant Agent or successor Warrant Agent, as the case
may be, and to each transfer agent of the New Common Stock by registered or
certified mail. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of 30 days after such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Warrant Agent
or by the holder of a Warrant Certificate (who shall, with such notice, submit
his Warrant Certificate for inspection by the Company), then the registered
holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any successor Warrant
Agent, whether appointed by the Company or by such a court, shall be a corpora-
tion organized and doing business under the laws of the United States or the
laws of any state, in good standing, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
a federal or state authority and which has at the time of its appointment as
Warrant Agent a combined capital and surplus of at least $150,000,000. After
appointment, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the predecessor Warrant Agent
shall deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Warrant Agent and each transfer agent of the New Common
Stock. Failure to give any notice provided for in this Section 18, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Warrant Agent or the appointment of the successor Warrant
Agent, as the case may be.
SECTION 19. Issuance of New Warrant Certificates.
------------------------------------
Notwithstanding any of the provisions of this Agreement or of the Warrant
Certificates to the contrary, the Company may, at its option, issue new Warrant
Certificates evidencing Warrants in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price per share
and the number or kind or class of shares of stock or other securities or
property purchasable under the Warrant Certificates made in accordance with the
provisions of this Agreement.
SECTION 20. Notices. Notices or demands author
-------
ized by this Agreement to be given or made by the Warrant Agent or by the holder
of any Warrant Certificate to or on the Company shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Warrant Agent) as follows:
FORSTMANN & COMPANY, INC.
1155 Avenue of the Americas
New York, New York 10036
Attention: Chief Financial Officer
Subject to the provisions of Section 17 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Warrant Certificate to or on the Warrant Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
Norwest Bank Minnesota, N.A.
P.O. Box 64854
St. Paul, Minnesota 55164
Attention: Shareowner Services Department
Notices and demands authorized by this Agreement to be given or made by the
Company or the Warrant Agent to the holder of any Warrant Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 21. Supplements and Amendments. The
--------------------------
Company and the Warrant Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Warrant Certificates in order
to cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising hereunder which
the Company and the Warrant Agent may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant Certificates.
SECTION 22. Successors. All the covenants and
----------
provisions of this Agreement by or for the benefit of the Company or the Warrant
Agent shall bind and inure to the benefit of their respective successors and
assigns.
SECTION 23. Benefits of This Agreement. Nothing
--------------------------
in this Agreement shall be construed to give to any person or corporation other
than the Company, the Warrant Agent and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Warrant Agent and the registered holders of the Warrant Certificates.
SECTION 24. Governing Law. This Agreement and
-------------
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to con-
tracts to be made and performed entirely within such state.
SECTION 25. Counterparts. This Agreement may be
------------
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
SECTION 26. Descriptive Headings. Descriptive
--------------------
headings of the Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
FORSTMANN & COMPANY, INC.
By: /s/ Rodney Peckham
--------------------
Attest:
/s/ Linda A. Filippone
- -----------------------
NORWEST BANK, MINNESOTA, N.A.
By: /s/ Kenneth P. Swanson
-----------------------
Attest:
/s/ Suzanne Swifs
- -----------------------
Exhibit A to
Warrant Agreement
[Form of Warrant Certificate]
No. Warrants
NOT EXERCISABLE AFTER JULY 23 1999
Warrant Certificate
FORSTMANN & COMPANY, INC.
THIS CERTIFIES THAT --------------------------- or registered
assigns, is the registered owner of the number of Warrants set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Warrant Agreement, dated as of July, 23, 1997 (the "Warrant
Agreement"), between FORSTMANN & COMPANY, INC., a Georgia corporation (the
"Company"), and Norwest Bank Minnesota, N.A.(the "Warrant Agent"), to purchase
from the Company at any time after July 23, 1997 and prior to 5:00 P.M., New
York time, on July 23, 1999 at the principal office of the Warrant Agent, or at
the office to its successor as Warrant Agent, one fully paid and nonassessable
share of the common stock, par value $.01, of the Company (the "Common Stock"),
at a purchase price of $23 per share (the "Purchase Price"), upon presentation
and surrender of this Warrant Certificate with the Form of Election to Purchase
duly executed and payment in full (in cash or by certified or official bank or
bank cashier's check payable to the order of the Company) of the Purchase Price
as to which the Warrant(s) represented by this Warrant Certificate are
exercised, all subject to the terms and conditions hereof and the Warrant
Agreement. The number of Warrants evidenced by this Warrant Certificate (and
the number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price per share set forth above, are as of July 23,
1997.
As provided in the Warrant Agreement, the number of Warrants
evidenced by this Warrant Certificate, the Purchase Price and the number of
shares of Common Stock which may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate is subject to all of the terms, provisions
and conditions of the Warrant Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Warrant Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Warrant Agent, the Company and the holders of the Warrant Certificates.
Capitalized terms used herein without definition shall have the meaning ascribed
to them in the Warrant Agreement. Copies of the Warrant Agreement are on file
at the principal executive offices of the Company and the principal office of
the Warrant Agent.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the principal office of the Warrant Agent, may
be exchanged for another Warrant Certificate or Warrant Certificates of like
tenor and date evidencing Warrants entitling the holder to purchase a like
aggregate number of shares of Common Stock as the Warrants evidenced by the
Warrant Certificate or Warrant Certificates surrendered shall have entitled such
holder to purchase. If this Warrant Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole Warrants not
exercised.
No fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby, but in lieu thereof
adjustments to the number of the whole shares issued will be made, as provided
in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled, as such, to
vote or receive dividends or be deemed for any purpose the holder of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise or conversion hereof, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon the holder hereof,
as such, any of the rights of a stockholder of the Company or any right to vote
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue of stock, reclassification of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or, except as provided in the Warrant
Agreement, to receive notice of meetings, or to receive dividends or
subscription rights or otherwise, until the Warrant or Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated: -------------, 19---.
FORSTMANN & COMPANY, INC.
By---------------------------
ATTEST:
- -----------------------------
Secretary
Countersigned:
NORWEST BANK MINNESOTA, N.A., WARRANT AGENT
By---------------------------
Authorized Signature
Form of Reverse Side of Warrant Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ---------------------- hereby sells, assigns and
transfers unto ------------------------
- ----------------------------------------------------------
(Please print name and address of transferee)
- ----------------------------------------------------------
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint -------------- Attorney, to
transfer the within Warrant Certificate on the books of the Company, with full
power of substitution.
Date:-----------------, 19--.
---------------------------
Signature
Signature Guaranteed:
- -----------------------------
All guarantees must be made by a financial institution (such as a
bank or broker) which is a participant in the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange, Inc. Medallion
Signature Program ("MSP") or the Stock Exchanges Medallion Program ("SEMP") and
must not be dated. Guarantees by a notary public are not acceptable.
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise the
Warrants evidenced by the Warrant Certificate.)
To: FORSTMANN & COMPANY, INC.
The undersigned hereby irrevocably elects to exercise --------------
Warrants represented by this Warrant Certificate to purchase the shares of
Common Stock issuable upon the exercise of such Warrants and requests that cer-
tificates for such shares of Common Stock be issued in the name of:
Please insert social security
or other identifying number
- ------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- ------------------------------------------------------------
(Please print name and address)
- -----------------------------------------------------------
Date:----------------, 19--.
------------------------- Signature
Signature Guaranteed:<PAGE>
- -----------------------------
All guarantees must be made by a financial institution (such as a
bank or broker) which is a participant in the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange, Inc. Medallion
Signature Program ("MSP") or the Stock Exchanges Medallion Program ("SEMP") and
must not be dated. Guarantees by a
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Exhibit 4.2
INDENTURE, dated as of July 23, 1997, between Forstmann & Company,
Inc., a Georgia Corporation (the "Company"), and State Street Bank and Trust
Company, a Massachusetts Trust Company, as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's Subordinated
Floating Rate Notes due July 23, 2001 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
-----------
"Affiliate" means any person directly or indi
---------
rectly controlling or controlled by or under direct or indirect common control
with the Company.
"Agent" means any Registrar, Paying Agent or co-
-----
registrar.
"Board of Directors" means the Board of Directors
------------------
of the Company or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal
------------
Holiday.
"Capital Stock" or "capital stock" means any and
------------- -------------
all shares, interests, participations or other equivalents (however designated)
of corporate stock or partnership interests.
"Cash Equivalent" means (a) direct obligations
---------------
issued or unconditionally guaranteed by the United States government or issued
by an agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one (1) year after the date of acquisition
thereof, (b) direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Rating Group, a
division of McGraw Hill, or Moody's Investors Service, Inc. (or, if at any time
neither Standard & Poor's Rating Group, a division of McGraw Hill, nor Moody's
Investors Service, Inc. shall be rating such obligations, then from such other
nationally recognized rating services acceptable to the Trustee), (c) commercial
paper, other than commercial paper issued by the Company or any of its Affili-
ates, maturing no more than one year after the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 or P-1 from either
Standard & Poor's Rating Group, a division of McGraw Hill, or Moody's Investors
Service, Inc. (or, if at any time neither Standard & Poor's Rating Group, a
division of McGraw Hill, nor Moody's Investor Service, Inc. shall be rating such
obligations, then the highest rating from such other nationally recognized
rating services acceptable to the Trustee), and (d) domestic and Eurodollar
certificates of deposit or time deposits or bankers' acceptances maturing within
ninety (90) days after the date of acquisition thereof issued by any commercial
bank organized under the Laws of the United States of America or any state
thereof or the District of Columbia or Canada having combined capital and
surplus of not less than $100,000,000.
"Change of Control" means (a) the sale, in one or
-----------------
a series of related transactions, of all or substantially all of the Company's
assets as an entirety to any Person; (b) the merger or consolidation of the
Company with or into another entity where the Company is not the surviving
entity; or (c) any sale or disposition of Capital Stock of the Company which
results in any Person or "group" (within the meaning of Section 13(d) or
14(d)(2) of the Exchange Act) owning more than 50% of the total voting power of
the Company's Capital Stock entitled to vote in the election of directors of the
Company.
"Company" means Forstmann & Company, Inc., a
-------
Georgia corporation, or any other obligor hereunder and under the Notes, until a
successor replaces it and thereafter means the successor.
"Corporate Trust Office of the Trustee" shall be
-------------------------------------
at the address of the Trustee specified in Section 9.1 or such other address as
the Trustee may give notice to the Company.
"Credit Agent" means BankAmerica Business Credit,
------------
Inc., as agent under the Loan Agreement, or any successor thereto.
"Default" means any event that, with the giving of
-------
notice or passage of time, or both, would be an Event of Default.
"Disqualified Stock" means any capital stock
------------------
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part on, or prior to, the maturity date of the Notes.
"Effective Date" means July 23, 1997.
--------------
"Equity Interests" means capital stock or war
----------------
rants, options or other rights to acquire capital stock (but excluding any debt
security which is convertible into, or exchangeable for, capital stock).
"Exchange Act" means the Securities Exchange Act
------------
of 1934, as amended.
"Exempted Payment" shall mean any payment made in
----------------
connection with the purchase, redemption or acquisition or retirement of any
Equity Interests issued to any of the Company's or its Subsidiaries' employees
pursuant to any bonus or employee stock option plan or incentive; provided, that
the foregoing exempted payments shall not exceed $2,000,000 in any fiscal year
and shall not exceed $4,000,000 in the aggregate.
"GAAP" means generally accepted accounting
----
principles in the United States consistently applied, as amended from time to
time.
"Holder" or "Noteholder" means a person in whose
------ ----------
name a Note is registered.
"Indebtedness" with respect to any person, means
------------
any indebtedness, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof), or with respect to
sale-leaseback transactions or representing the balance deferred and unpaid of
the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
if and to the extent any of the foregoing indebtedness would appear or does
appear as a liability upon a balance sheet of such person prepared on a
consolidated basis in accordance with GAAP, and shall also include (to the
extent not otherwise included) the guaranty of items which would be included
within this definition.
"Indenture" means this Indenture as amended or
---------
supplemented from time to time.
"Interest Payment Date" means the last day of each
---------------------
calendar month or the next Business Day in the event that the last day of such
month is a Legal Holiday.
"Interest Period" means a period of one calendar
---------------
month beginning on the first day of each month and ending on the last day of
such month, provided, that if the last day of any such month is not a Business
Day, the Interest Period shall include the next succeeding Business Day after
the last day of such month, and the next proceeding Interest Period thereafter
shall commence on the day following the last day of the preceeding Interest
Period.
"LIBOR Business Day" means a Business Day on which
------------------
banks may accept deposits of United States dollars in the London Interbank
Market.
"LIBOR Determination Date" for any Interest Period
------------------------
means the second LIBOR Business Day next preceding the first day of such
Interest Period.
"LIBOR Rate" means, for any Interest Period, the rate, as determined
by the Company, equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the offered rates for deposits in U.S. dollars for a
period of one month, as set forth on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the LIBOR Determination Date for such Interest Period;
provided that the LIBOR Rate for the Interest Period commencing on the date
hereof and ending on July 31, 1997 shall be 5.6875%; provided further, that if
only one such offered rate appears on the Reuters Screen LIBO Page, the LIBOR
Rate for such Interest Period shall mean such offered rate. If such rate is not
available at 11:00 a.m., London time on the LIBOR Determination Date for such
Interest Period, then the LIBOR Rate for such Interest Period shall equal the
arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the interest rates per annum at which deposits in amounts equal to $1,000,000 in
U.S. dollars are offered by the Reference Banks to leading banks in the London
Interbank Market for a period of one month as of 11:00 a.m., London time, on the
LIBOR Determination Date for such Interest Period. If on any LIBOR
Determination Date only one of the Reference Banks provides such offered
quotation, then the LIBOR Rate for such Interest Period shall mean such offered
quotation; provided further, that if none of the Reference Banks provides such
quotations, then the LIBOR Rate for such Interest Period shall be determined by
reference to the LIBOR Rate as quoted in the most recent Wall Street Journal in
which such quotes are available. If none of the rates or quotations referred to
above is available in respect to any Interest Period, then the LIBOR Rate shall
be mutually agreed upon by the Company and the holders of at least a majority in
principal amount of the then outstanding notes.
"Lien" means any mortgage, deed of trust, deed to
----
secure debt, pledge, hypothecation, assignment for security, security interest,
encumbrance, lien or charge of any kind, whether voluntarily incurred or arising
by operation of law, by statute, by contract, or otherwise, affecting any prop-
erty, including any agreement to grant any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature of a security
interest, and/or the filing of or agreement to give any financing statement
(other than a precautionary financing statement with respect to a lease that is
not in the nature of a security interest) under the Uniform Commercial Code or
comparable law of any jurisdiction with respect to any property.
"Loan Agreement" means that certain Loan Agreement
--------------
dated as of the Effective Date, among the Company, the Lenders named therein and
the Credit Agent, including any related notes, collateral documents, instruments
or agreements executed in connection therewith, and in each case as amended,
supplemented, modified, extended or renewed or as any or all of the foregoing
may be refunded or refinanced from time to time, or a refunding or refinancing
of such refunding or refinancing from time to time.
"Obligations" means any principal, interest,
-----------
penalties, fees, indemnifications, reimbursement, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Officer" means the Chief Executive Officer, the
-------
President, any Vice President, the Chief Financial Officer, the Secretary, the
Controller or the Treasurer of the Company.
"Officers' Certificate" means a certificate signed
---------------------
by two Officers of the Company.
"Opinion of Counsel" means a written opinion from
------------------
legal counsel who is reasonably acceptable to the Trustee, which may be an
employee of, or counsel to, the Company or the Trustee.
"Person" means any individual, corporation, part
------
nership, joint venture, association, joint stock company, trust, limited
liability company, unincorporated organization or government or any agency or
political subdivision thereof.
"Principal" of a debt security means the principal
---------
of the security plus the premium, if any, on the security.
"Property" means any interest in any kind of prop
--------
erty or asset, whether real, personal or mixed, tangible or intangible.
"Reference Banks" means each of Bank of Tokyo,
---------------
Ltd. (London office), Barclays Bank, PLC (London office), Bankers Trust Company
(London office) and National Westminster Bank, PLC (London office), and any such
replacement bank thereof as listed on the Reuters Screen LIBO Page and their
respective successors (or if such Banks are not listed thereon or such page
shall not be available, as determined from a Replacement Service), and if any of
such banks are not at the applicable time providing interest rates as
contemplated within the definition of "LIBOR Rate," Reference Banks shall mean
the remaining bank or banks so providing such rates. In the event that less
than two of such banks are providing such rates, the Company shall use rea-
sonable efforts to appoint additional Reference Banks so that there are at least
two such banks providing such rates; provided, that such banks appointed by the
Company shall be London offices of leading banks engaged in the London Interbank
Market.
"Replacement Service" means Telerate News Service
-------------------
or such other financial reporting service or information as the Company
determines and as shall not be reasonably objected to by the holders of a
majority of the outstanding amount of the Notes within 30 days after receipt of
notice of such determination by the Company.
"Reuters Screen LIBO Page" means the display
------------------------
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks).
"SEC" means the Securities and Exchange Commis
---
sion.
"Secured Indebtedness" means any Indebtedness that
--------------------
is secured by any Lien in respect of Property owned by the Company.
"Securities Act" means the Securities Act of 1933,
--------------
as amended.
"Significant Subsidiary" means any subsidiary
----------------------
which would be a "significant subsidiary" as defined in Rule 1-02 of Regulation
S-X under the Securities Act and the Exchange Act.
"Subordination Agreement" means that certain
-----------------------
Subordination Agreement dated July 23, 1997 by and between BankAmerica Business
Credit, Inc., in its capacity as agent for the lenders parties to the Loan
Agreement, and the Trustee, a copy of which is attached hereto as Exhibit B.
"Subsidiary" means any Person of which at least a
----------
majority of the capital stock having ordinary voting power for the election of
directors or other governing body of such person is owned by the Company
directly and/or through one or more Subsidiaries.
"Trustee" means the party named as such above
-------
until a successor replaces it in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.
"Trust Officer" means any officer or assistant
-------------
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
Section 1.2. Other Definitions.
-----------------
Defined in
Term Section
---- -------
5.1 "Bankruptcy Law" . . . . . . . . . . . . . . . . . .
5.1 "Custodian" . . . . . . . . . . . . . . . . . . . . .
5.1 "Event of Default" . . . . . . . . . . . . . . . . .
9.5 "Legal Holiday" . . . . . . . . . . . . . . . . . . .
2.3 "Paying Agent" . . . . . . . . . . . . . . . . . . .
2.3 "Registrar" . . . . . . . . . . . . . . . . . . . . .
4.7 "Restricted Payments" . . . . . . . . . . . . . . .
7.1 "U.S. Government Obligations" . . . . . . . . . . . .
Section 1.3. Rules of Construction. Unless the
---------------------
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined herein has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
Section 2.1. Form and Dating. The Notes and the
---------------
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, the terms of which are incorporated in and made a part of this
Indenture. The Notes may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which the Company is subject or usage.
Each Note shall be dated the date of its authentication. The Notes shall be
initially issued in denominations of $1.00 and integral multiples of $1.00 in
excess thereof.
Section 2.2. Execution and Authentication. An
----------------------------
Officer shall sign the Notes for the Company by manual or facsimile signature.
The Company's seal shall be reproduced on the Notes.
If an Officer whose signature is on a Note no longer holds that
office at the time the Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Note has been authenticated under this Indenture. The form of
Trustee's certificate of authentication to be borne by the Notes shall be
substantially as set forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to an aggregate principal
amount stated in paragraph 5 of the Notes. The aggregate principal amount of
the Notes outstanding at any time may not exceed the amount set forth herein
except as provided in Section 2.7.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate.
Section 2.3. Registrar and Paying Agent. The
--------------------------
Company shall maintain an office or agency where Notes may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Notes may be presented for payment ("Paying Agent"). The Registrar shall
keep a register of the Notes and of their transfer and exchange. The Company
may appoint one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent, Registrar or co-registrar without notice to any
Noteholder. The Company shall notify the Trustee of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company or any of its subsidiaries may act as Paying Agent, Registrar
or co-registrar.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes,
and the Trustee agrees to act in such capacities.
Section 2.4. Paying Agent to Hold Money in Trust.
----------------------------------
The Company shall require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of Noteholders
or the Trustee all money held by the Paying Agent for the payment of principal
or interest on the Notes, and will notify the Trustee of any default by the
Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company) shall have no further liability for the money delivered to the
Trustee. If the Company acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Noteholders all money held by it as
Paying Agent.
Section 2.5. Noteholder Lists. The Trustee shall
----------------
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of Noteholders. If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least five
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Noteholders.
Section 2.6. Transfer and Exchange. When Notes
---------------------
are presented to the Registrar or a co-registrar with a request to register,
transfer or exchange them for an equal principal amount of Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; provided, however, that any Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar and the Trustee duly executed by the Holder
thereof or by his attorney duly authorized in writing. To permit registrations
of transfer and exchanges, the Company shall issue and the Trustee shall
authenticate Notes at the Registrar's request, subject to such rules as the
Trustee may reasonably require.
The Company shall not be required (i) to issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business on a Business Day 15 days before the day of any selection of Notes for
redemption under Section 3.2 and ending at the close of business on the day of
selection, (ii) to register the transfer of or exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part or (iii) to register the transfer or exchange of a Note between
the record date and the next succeeding Interest Payment Date.
No service charge shall be made to any Noteholder for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Section 2.10, 3.6 or 8.4 hereof, which shall be paid by
the Company).
Prior to due presentment for registration of transfer of any Note,
the Trustee, any Paying Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Note and for
all other purposes whatsoever, whether or not such Note is overdue, and neither
the Trustee, any Paying Agent nor the Company shall be affected by notice to the
contrary.
Section 2.7. Replacement Notes. If any mutilated
-----------------
Note is surrendered to the Trustee, or the Company and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any Note,
the Company shall issue and the Trustee, upon the written order of the Company
signed by two Officers, shall authenticate a replacement Note if the Trustee's
requirements for replacements of Notes are met. The Company shall issue and the
Trustee shall authenticate a replacement Note in the case of the mutilation,
destruction, loss or theft of any Note. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Paying Agent and any authenticating agent from any loss which any of them
may suffer if a Note is replaced. The Company and the Trustee may charge for
their expenses in replacing a Note.
The provisions of this Section 2.7 are exclusive, shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Every replacement Note is an additional Obligation of the Company.
Section 2.8. Outstanding Notes. The Notes out
-----------------
standing at any time are all the Notes authenticated by the Trustee except for
those cancelled by it, those delivered to it for cancellation and those
described in this Section as not outstanding.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate holds the Note.
Section 2.9. Treasury Notes. In determining
--------------
whether the Holders of the required principal amount of Notes have concurred in
any direction, waiver or consent, Notes owned by the Company or an Affiliate
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee knows to be so owned
shall be so disregarded.
Section 2.10. Temporary Notes. Until definitive
---------------
Notes are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of definitive Notes but may have variations that the Company considers
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee, upon receipt of the written order of the Company signed
by two Officers, shall authenticate definitive Notes in exchange for temporary
Notes. Until such exchange, temporary Notes shall be entitled to the same
rights, benefits and privileges as definitive Notes.
Section 2.11. Cancellation. The Company at any
------------
time may deliver Notes to the Trustee for cancellation. The Registrar and
Paying Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall destroy cancelled Notes (subject to the record
retention requirement of the Exchange Act), and certification of their
destruction will be delivered by the Trustee to the Company, unless the Company
directs such cancelled Notes to be returned to it. The Company may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest. If the Company
------------------
defaults in a payment of interest on the Notes, it shall pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on
the defaulted interest, to the Persons who are Noteholders on a subsequent
special record date, which date shall be at the earliest practicable date but in
all events at least five Business Days prior to the payment date, in each case
at the rate provided in the Notes and in Section 4.1 hereof. The Company shall,
with the consent of the Trustee, fix or cause to be fixed each such special
record date and payment date. At least 15 days before the special record date,
the Company (or the Trustee, in the name of and at the expense of the Company)
shall mail to Noteholders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
Section 2.13. Payment Subject to Subordination
--------------------------------
Agreement. Each Noteholder by accepting a Note ratifies the
- ---------
execution and delivery by the Trustee of the Subordination Agreement on its
behalf and agrees, so long as such Noteholder holds Notes, to be bound thereby
as to each and every provision thereof applicable to each Noteholder as fully as
if such person were a party thereto and further represents and warrants that the
Trustee has all requisite authority to bind such Noteholder by the Trustee's
execution and delivery of the Subordination Agreement.
ARTICLE 3
OPTIONAL REDEMPTION
Section 3.1. Optional Redemption. The Company
-------------------
may redeem at any time, and from time to time, all or any portion of the Notes,
upon the terms set forth in paragraph 6 of the Notes. Any redemption pursuant
to this Section 3.1 shall be made pursuant to the provisions of Sections 3.2
through 3.7 hereof.
Section 3.2. Notices to Trustee. If the Company
------------------
elects to redeem Notes pursuant to the optional redemption provision of
paragraph 6 of the Notes, it shall furnish to the Trustee, at least 45 days but
not more than 60 days before a redemption date, an Officers' Certificate setting
forth the Section of this Indenture pursuant to which the redemption shall
occur, the redemption date, the principal amount of Notes to be redeemed and the
redemption price.
If the Registrar is not the Trustee, the Company shall, concurrently
with each notice of redemption, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the principal amount
of Notes held by any Holder.
Section 3.3. Selection of Notes to Be Redeemed.
---------------------------------
(a) With respect to an optional redemption pursuant to Section 3.1,
if less than all the Notes are to be redeemed, the Trustee shall select the
Notes to be redeemed pro rata or by lot or by a method that complies with the
requirements of any exchange on which the Notes are listed and that the Trustee
considers fair and appropriate.
(b) The Trustee shall make the selection not more than 60 days and
not less than 30 days before the redemption date from Notes outstanding and not
previously called for redemption and shall thereafter notify the Company in
writing of the Notes, or portions thereof, to be redeemed. The Trustee may
select for redemption portions of the principal of the Notes, and such portions
shall be in amounts of $1.00 or integral multiples of $1.00. Provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption. The Trustee shall notify the Company promptly in
writing of the Notes or portions of Notes to be called for redemption.
Section 3.4. Notice of Redemption. At least
--------------------
30 days but not more than 60 days before a redemption date, the Company shall
mail a notice of redemption to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date, upon surrender of such Note, a new Note in principal amount equal to the
unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest on the Notes (or portion thereof) called for redemption ceases
to accrue on and after the redemption date; and
(7) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall deliver to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.5. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, the Notes called for redemption become due
and payable on the redemption date at the applicable redemption price, including
any accrued interest thereon.
Section 3.6. Deposit of Redemption Price. One
---------------------------
Business Day prior to the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of, including any accrued interest on, all Notes to be redeemed on that date.
The Trustee or the Paying Agent shall return to the Company any money deposited
with the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all Notes to
be redeemed.
If the Company complies with the preceding paragraph, interest on
the Notes to be redeemed will cease to accrue on the applicable redemption date,
whether or not such Notes are presented for payment. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.1
hereof.
Section 3.7. Notes Redeemed in Part. Upon sur
----------------------
render of a Note that is redeemed in part, the Company shall issue and the
Trustee shall authenticate for the Holder at the expense of the Company a new
Note equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE 4
COVENANTS
Section 4.1. Payment of Notes. The Company shall
----------------
pay the principal of and interest on the Notes on the dates and in the manner
provided in the Notes. Principal and interest shall be considered paid on the
date due if the Paying Agent, other than the Company or a Subsidiary, at least
one Business Day before that date holds money deposited by the Company in
available funds and designated for and sufficient to pay all principal and
interest then due. Such Paying Agent shall return to the Company, no later than
five days following the date of payment, any money (including accrued interest)
that exceeds such amount of principal and interest paid on the Notes.
The Company shall pay interest (including, to the extent permitted
by law, post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal at the rate equal to 2% per annum in excess of the interest
rate then applicable to the Notes to the extent lawful; it shall pay interest
(including, to the extent permitted by law, post-petition interest in any
proceeding under Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace period) at the same rate to the extent lawful.<PAGE>
Section 4.2. Maintenance of Office or Agency.
------------------------------- The Company shall
maintain in the Borough of Manhattan, the City of New York, an office or agency
(which may be an office of the Trustee, Registrar or co-registrar) where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Notes and Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company from time to time also may designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3.
Section 4.3. SEC Reports; Financial Statements;
---------------------------------
Other Reports.
- -------------
(a) The Company shall file with the Trustee, within 15 days after it files them
with the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portion of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is
not subject to the requirements of such Section 13 or 15(d) of the Exchange Act,
the Company shall file with the Trustee, within 15 days after it would have been
required to file with the SEC, financial statements, including any notes
thereto, and a "Management's Discussion and Analysis of Financial Condition and
Results of Operations," both comparable to that which the Company would have
been required to include in such annual report, information, documents or other
reports if the Company were subject to the requirements of Section 13 or 15(d)
of the Exchange Act. The Company shall timely comply with its reporting and
filing obligations under the applicable federal securities laws.
(b) If the Company is required to furnish annual or quarterly
reports to its shareholders pursuant to the Exchange Act, the Company shall
promptly cause any annual report furnished to its shareholders generally and any
quarterly or other financial reports furnished by it to its shareholders
generally to be filed with the Trustee and mailed by the Trustee to the holders
of Notes at their addresses appearing in the register of Notes maintained by the
Registrar. If the Company is not required to furnish annual or quarterly
reports to its shareholders pursuant to the Exchange Act, the Company shall
cause its financial statements referred to in clause (a) above, including any
notes thereto (and with respect to annual reports, an auditors' report by a firm
of established national reputation), and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations," to be so mailed to the
holders of Notes within 120 days after the end of each fiscal year of the
Company and within 60 days after the end of each of the Company's first three
fiscal quarters.
(c) The Company shall deliver to the Trustee, promptly after the
same are generally made available to the public, copies of all press releases
issued by the Company concerning material developments in the Company's business
or financial condition.<PAGE>
Section 4.4. Compliance Certificate. (a) So long
----------------------
as any Note is outstanding, the Company shall deliver to the Trustee, within
120 days after the end of each fiscal year of the Company, an Officers'
Certificate stating that a review of the activities of the Company during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed, per-
formed and fulfilled its obligations under the Indenture, and further stating,
as to each Officer signing such certificate, that to the best of his knowledge
the Company has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he may have knowledge and what action the Company is
taking or proposes to take with respect thereto).
(b) The Company, so long as any Note is outstanding, shall deliver
to the Trustee, forthwith upon any Officer's becoming aware of (i) any Default
or Event of Default or (ii) any event of default under the Loan Agreement, an
Officers' Certificate specifying such Default, Event of Default or other event
of default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.5. Taxes. The Company shall, and shall
-----
cause each of its Subsidiaries to, pay prior to delinquency all taxes,
assessments, and governmental levies, other than those taxes, assessments or
governmental levies the inadvertent non-payment of which would not have a
material adverse effect on the Company, and except as contested in good faith
and by appropriate proceedings.
Section 4.6. Stay, Extension and Usury Laws. The
------------------------------
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
Section 4.7. Limitation on Restricted Payments.
--------------------------------- Subject to the
other provisions of this Section 4.7 the Company shall not, and will not permit
any of its Subsidiaries to:
(a) declare or pay any dividend or make any distribution on account
of the Company's or any Subsidiary's capital stock or other Equity Interests
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or such Subsidiary or dividends or
distributions payable to the Company or a Subsidiary); or
(b) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company, any Subsidiary or other Affiliate of the
Company (other than any such Equity Interests owned by the Company or any
Subsidiary).
(all of the foregoing dividends, distributions, purchases, redemptions or other
acquisitions or retirements set forth in clauses (a) and (b) above being
collectively referred to as "Restricted Payments").
The provisions of this Section 4.7 shall not prohibit:
(x) any Exempted Payments; or
(y) the retirement of any shares of the Company's or a
Subsidiary's capital stock in exchange for, or out of the net proceeds of
the substantially, concurrent sale (other than to a Subsidiary of the
Company) of, other shares of the Company's or Subsidiary's capital stock,
other than any Disqualified Stock.
Section 4.8. Limitation on Secured Indebtedness.
----------------------------------
Subject to the provisions of this Section, the Company will not, and will not
permit any of its Subsidiaries to, create, incur, issue, assume, guarantee or
otherwise become liable with respect to any Secured Indebtedness; provided,
however, that the limitations of this Section 4.8 shall not apply to any Secured
Indebtedness of the Company existing as of the Effective Date or the incurrence
by the Company of: (a) Secured Indebtedness incurred pursuant to the Loan
Agreement or (b) other Secured Indebtedness of up to $15 million outstanding at
any time.
Section 4.9 Corporate Existence. The Company
-------------------
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of each Significant Subsidiary in accordance with the respective
organizational documents of each Significant Subsidiary and the rights (charter
and statutory), licenses and franchises of the Company and its Significant
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the busi-
ness of the Company and its Subsidiaries taken as a whole and that the loss
thereof is not adverse in any material respect to the Holders.
Section 4.10. Maintenance of Properties. The
-------------------------
Company will cause all properties used or useful in the conduct of its business
or the businesses of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section 4.10 shall prevent the Company or any Subsidiary from discontinuing the
operation or maintenance of any such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.1. Events of Default. An "Event of
-----------------
Default" occurs if:
(1) the Company defaults in the payment of (a) the principal of any
of the Notes when the same becomes due and payable at maturity, upon redemption
or otherwise or (b) interest on any of the Notes when the same becomes due and
payable and such default is not cured within five days;
(2) the Company is in violation of a covenant contained in Sections
4.7 or 4.8;<PAGE>
(3) the Company fails to observe or perform any covenant (other than
those covenants contained in paragraphs (1) or (2) hereof), condition or
agreement on the part of the Company to be observed or performed pursuant to
provisions of the Notes or this Indenture; or any representation or warranty
contained in the Notes or this Indenture is untrue in any material respect and,
in either case, such Default continues for a period and after the notice of the
Default is provided as specified below;
(4) the Credit Agent or the Lenders under the Loan Agreement have
accelerated the maturity of the Indebtedness thereunder;
(5) there shall occur a Change of Control;
(6) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(a) commences a voluntary case;
(b) consents to the entry of an order for relief against it
in an involuntary case;
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(d) makes a general assignment for the benefit of its
creditors;
(e) admits in an official public document or statement its
current inability to pay its debts as the same become due; or
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any Significant
Subsidiary in an involuntary case; or
(b) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of its property; or
(c) orders the liquidation of the Company or any Significant
Subsidiary;
and the order or decree remains unstayed and in effect for 60 days.
A Default under Clause (3) hereof is not an Event of Default until
the Trustee notifies the Company, or the Holders of at least 33 % in principal
amount of the then outstanding Notes notify the Company and the Trustee of the
Default and the Company does not cure the Default within 30 days after its
receipt of such notice. The notice must specify the Default and state that the
notice is a "Notice of Default."
The term "Bankruptcy Law" means title 11 of the U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
Section 5.2. Acceleration. If an Event of De
------------
fault (other than an Event of Default specified in clauses (6) and (7) of
Section 5.1) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least a majority in principal amount of the then outstanding
Notes by written notice to the Company and the Trustee, may declare the unpaid
principal of and any accrued interest on all the Notes to be due and payable.
Upon such declaration the principal and interest shall be due and payable
immediately. If an Event of Default specified in clause (6) or (7) of Section
5.1 occurs, such an amount shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Holders of at least a majority in principal amount of the then out-
standing Notes by written notice to the Trustee may rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived. No such rescission shall affect any subsequent Default or Event of
Default or impair any right consequent thereto.
Section 5.3. Other Remedies. If an Event of
--------------
Default occurs and is continuing, the Trustee may pursue any available remedy to
collect the payment of principal or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 5.4. Waiver of Past Defaults. Subject to
-----------------------
Section 8.2 hereof, Holders of a majority in principal amount of the then
outstanding Notes by notice to the Trustee may waive an existing Default or
Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal of or interest on any Note. Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Inden-
ture; but no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
Section 5.5. Control by Majority. The Holders of
-------------------
a majority in principal amount of the then outstanding Notes may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on it. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of other Noteholders, or that may involve the Trustee in personal liability.
Section 5.6. Limitation on Suits. A Noteholder
-------------------
may pursue a remedy with respect to this Indenture or the Notes only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 33 % in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
Section 5.7. Rights of Holders to Receive Pay
--------------------------------
ment. Notwithstanding any other provision of this Inden
- ----
ture, the right of any Holder of a Note to receive payment of principal and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
Section 5.8. Collection Suit by Trustee. If an
--------------------------
Event of Default specified in Section 5.1(1) occurs and is continuing, the
Trustee is authorized to recover judgment in its own name and as trustee of an
express trust against the Company for the whole amount of principal and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 5.9. Trustee May File Proofs of Claim.
--------------------------------
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Noteholder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 6.6 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.6 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties which the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Noteholder in any such proceeding.
Section 5.10. Priorities. If the Trustee col
----------
lects any money pursuant to this Article, it shall pay out the money in the
following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 6.6, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Noteholders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and<PAGE>
Third: to the Company.
The Trustee may fix a record date and payment date for any payment
to Noteholders.
Section 5.11. Undertaking for Costs. In any suit
---------------------
for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court
in its discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 5.6, or a suit by
Holders of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 6
TRUSTEE
Section 6.1. Duties of Trustee. (1)If an Event of
-----------------
Default has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of its own affairs.
(2) Except during the continuance of an Event of Default:
(a) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee;
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2) of
this Section.
(b) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proven that the Trustee was
negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.5.
(4) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(5) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 6.2. Rights of Trustee. (1) The Trustee
-----------------
may conclusively rely and shall be protected from acting or refraining from
acting based upon any document believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
Section 6.3. Individual Rights of Trustee. The
----------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Company or an Affiliate thereof with
the same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to Section 6.9.
Section 6.4. Trustee's Disclaimer. The Trustee
--------------------
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the Notes or any money paid to the Company or
upon the Company or upon the Company's direction under any provision hereof, it
shall not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
Section 6.5 Notice of Defaults. If a Default
------------------
occurs and is continuing and if it is known to a Trust Officer of the Trustee,
the Trustee shall mail to Noteholders a notice of the Default within 90 days
after such Default becomes known to such Trust Officer. Except in the case of a
Default in payment on any Note, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
The Trustee shall not be deemed to owe any fiduciary
duty to the Credit Agent.
Section 6.6. Compensation and Indemnity. The
--------------------------
Company shall pay to the Trustee from time to time reasonable compensation for
its acceptance of this Indenture and services hereunder. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request
for all reasonable disbursements, advances and expenses incurred or made by it
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee, its directors, officers,
employees, agents and stockholders against any and all losses, liabilities or
expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next paragraph. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld. The
obligation of the Company under this Section 6.6 shall survive the satisfaction
and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.
To secure the Company's payment obligations under this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of the Indenture. The Trustee shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.1(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 6.7. Replacement of Trustee. A
----------------------
resignation or removal of the Trustee and appointment of a successor Trustee
shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(1) The Trustee fails to comply with Section 6.9;
(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Noteholder who has been
a Noteholder for at least six months falls to comply with Section 6.9, such
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 6.6. Notwithstanding replacement of the Trustee pursuant to this
Section 6.7, the Company's obligations under Section 6.6 hereof shall continue
for the benefit of the retiring Trustee.
Section 6.8. Successor Trustee by Merger, etc.
---------------------------------
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 6.9. Eligibility; Disqualification.
-----------------------------
There shall at all times be a Trustee hereunder which shall be a corporation
organized and doing business under the laws of the United States of America or
of any state thereof authorized under such laws to exercise corporate trustee
power, shall be subject to supervision or examination by Federal or state
authority and shall have a combined capital and surplus of at least $25,000,000
as set forth in its most recent published annual report of condition.
ARTICLE 7
DISCHARGE OF INDENTURE
Section 7.1. Termination of Company's Obliga
-------------------------------
tions. This Indenture shall cease to be of further effect
- -----
(except that the Company's obligations under Section 6.6 and the Company's,
Trustee's and Paying Agent's obligations under Section 7.3 shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Notes which have been replaced or paid) to
the Trustee for cancellation and the Company has paid all sums payable
hereunder. In addition, the Company may terminate all of its obligations under
this Indenture if:
(1) the Company irrevocably deposits in trust with the Trustee or
at the option of the Trustee, with a trustee reasonably satisfactory to the
Trustee and the Company under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, money or U.S. Government
Obligations sufficient to pay principal and interest on the Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it
hereunder; provided that, (i) the trustee of the irrevocable trust shall have
been irrevocably instructed to pay such money or the proceeds of such U.S.
Government Obligations to the Trustee and (ii) the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and interest with
respect to the Notes;
7
(2) the Company delivers to the Trustee an Officers' Certificate
stating that all conditions precedent to satisfaction and discharge of this
Indenture have been complied with, and an Opinion of Counsel to the same effect;
and
(3) no Event of Default or event (including such deposit) which,
with notice or lapse of time, or both, would become an Event of Default with
respect to the Notes shall have occurred and be continuing on the date of such
deposit.
Then, this Indenture shall cease to be of further effect (except as provided in
this paragraph), and the Trustee, on demand of the Company, shall execute proper
instruments acknowledging confirmation of and discharge under this Indenture.
However, the Company's obligations under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1,
4.6, 6.6, 6.7, 7.3 and 7.4 hereof, and the Trustee's and Paying Agent's
obligations under Section 7.3 shall survive until the Notes are no longer
outstanding. Thereafter, only the Company's obligations under Section 6.6 and
the Company's, Trustee's and Paying Agent's obligations under Section 7.3 shall
survive.
After such irrevocable deposit made pursuant to this Section 7.1 and
satisfaction of the other conditions set forth herein, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture (except for those surviving obligations specified above) and
shall provide a certificate to that effect to the Company.
In order to have money available on a payment date to pay principal
or interest on the Notes, the U.S. Government Obligations shall be payable as to
principal or interest at least one Business Day before such payment date in such
amounts as will provide the necessary money. U.S. Government Obligations shall
not be callable at the issuer's option.
"U.S. Government Obligations" means direct obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.
Section 7.2. Application of Trust Money. The
--------------------------
Trustee or a trustee satisfactory to the Trustee and the Company shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to Section
7.1. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal and interest on the Notes.
Section 7.3. Repayment to Company. The Trustee
--------------------
and the Paying Agent shall promptly pay to the Company upon written request any
excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such payment
shall have become due; provided, however, that the Company shall have either
caused notice of such payment to be mailed to each Noteholder entitled thereto
no less than 30 days prior to such repayment or within such period shall have
published such notice in a financial newspaper of widespread circulation
published in the City of New York. After payment to the Company, Noteholders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
Section 7.4. Reinstatement. If the Trustee or
-------------
Paying Agent is unable to apply any money or U.S. Government Obligations in
accordance with Section 7.2 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 7.1 until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government Obligations
in accordance with Section 7.2; provided, however, that if the Company has made
any payment of interest on or principal of any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 8
AMENDMENTS
Section 8.1. Without Consent of Holders. The
--------------------------
Company and the Trustee may amend this Indenture or the Notes, and the Trustee
may amend the Subordination Agreement, without the consent of any Noteholder:
(1) to cure any ambiguity, defect or inconsistency:
(2) to provide for uncertificated Notes in addition to certificated
Notes; or
(3) to make any change that does not adversely affect the legal
rights hereunder of any Noteholder.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such supplemental indenture,
and upon receipt by the Trustee of the documents described in Section 8.5
hereof, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 8.2. With Consent of Holders. The Company and
-----------------------
the Trustee may amend this Indenture or the Notes, and the Trustee may amend the
Subordination Agreement, with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Notes.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence satisfactory to the Trustee of
the necessary consents of the Noteholders as aforesaid, and upon receipt by the
Trustee of the documents described in Section 8.5 hereof, the Trustee shall join
with the Company in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section 8.2 becomes
effective, the Company shall mail to the Holders of each Note affected thereby a
notice briefly describing the amendment or waiver. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver. The
Holders of a majority in principal amount of the Notes then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Notes. However, without the consent of each Noteholder
affected, an amendment or waiver under this Section may not:
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment or waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(3) reduce the principal of or change the fixed maturity of any
Note;
(4) make any Note payable in money other than that stated in the
Note;
(5) make any change in Section 5.4 or 5.7 hereof or in this
sentence of this Section 8.2; or
(6) waive a Default in the payment of principal of or interest on,
or redemption payment with respect to, any Note.
Section 8.3. Revocation and Effect of Consents. Until
--------------------------------
an amendment or waiver becomes effective, a consent to it by a Holder of a Note
is a continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to its Note or portion of
a Note if the Trustee receives the notice of revocation before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented to the amendment or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment
or waiver. If a record date is fixed, then notwithstanding the provisions of
the immediately preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to consent to such amendment or waiver or to revoke any consent previ-
ously given, whether or not such Persons continue to be Holders after such
record date. No consent shall be valid or effective for more than 90 days after
such record date unless consents from Holders of the principal amount of Notes
required hereunder for such amendment or waiver to be effective shall have also
been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Noteholder, unless it is of the type described in any of clauses (1) through (6)
of Section 8.2. In such case, the amendment or waiver shall bind only each
Holder of a Note who has consented to it.
Section 8.4. Notation on or Exchange of Notes. The
--------------------------------
Trustee may place an appropriate notation about an amendment or waiver on any
Note thereafter authenticated. The Company in exchange for all Notes may issue,
and the Trustee shall authenticate new Notes that reflect the amendment or
waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment or waiver.
Section 8.5. Trustee to Sign Amendments, etc. The
--------------------------------
Trustee shall sign any amendment or supplemental indenture authorized pursuant
to this Article 8 if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such amendment or supplemental indenture. In signing or refusing to
sign such amendment or supplemental indenture, the Trustee shall be entitled to
receive, if requested, an indemnity reasonably satisfactory to it and to receive
and, subject to Section 6.1, shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE 9
MISCELLANEOUS
Section 9.1. Notices. Any notice or communication by
-------
the Company and the Trustee to the other is duly given if in writing and
delivered in person or mailed by first-class mail (registered or certified,
return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the other's address:
If to the Company:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York 10036
Attention: Chief Financial Officer
Telecopier No.: (212) 642-6992
If to the Trustee:
State Street Bank and Trust Company
777 Main Street
Hartford, CT 06115
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to
Noteholders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Noteholder shall be mailed by
first-class mail, certified or registered, return receipt requested, to his
address shown on the register kept by the Registrar. Failure to mail a notice
or communication to a Noteholder or any defect in it shall not affect its
sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 9.2. Officers' Certificate and Opinion of
------------------------------------
Counsel as to Conditions Precedent. Upon any request or
- ----------------------------------
application by the Company to the Trustee to take any action under this
Indenture, the Company shall furnish to the Trustee, upon the request of the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel, all
conditions precedent and covenants have been complied with.
Section 9.3. Statements Required in Officers'
--------------------------------
Certificate or Opinion of Counsel. Each Officers' Certificate or
- ---------------------------------
Opinion of Counsel with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 9.4. Rules by Trustee and Agents. The Trustee
---------------------------
may make reasonable rules for action by or at a meeting of Noteholders. The
Registrar or Paying Agent may make reasonable rules and set reasonable
requirements for its functions.
Section 9.5. Legal Holidays. A "Legal Holiday" is a
--------------
Saturday, a Sunday or a day on which banking institutions in the City of New
York, Boston, Massachusetts or at a place of payment are authorized or obligated
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and interest shall accrue for
the intervening period.
Section 9.6. No Recourse Against Others. A director,
--------------------------
officer, employee or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Note waives and releases all such
liability.
Section 9.7. Duplicate Originals. The parties may
-------------------
sign any number of copies of this Indenture. One signed copy is enough to prove
this Indenture.
Section 9.8. Counterpart Originals. The parties may
---------------------
sign any number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
Section 9.9. Governing Law. The laws of the State of
-------------
New York shall govern and be used to construe this Indenture and the Notes.
Section 9.10. No Adverse Interpretation of Other
----------------------------------
Agreements. This Indenture may not be used to interpret another
- ----------
indenture, loan or debt agreement of the Company or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 9.11. Successors. All agreements of the
----------
Company in this Indenture and the Notes shall bind its successor. All
agreements of the Trustee in this Indenture shall bind its successor.
Section 9.12. Severability. In case any provision in
------------
this Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 9.13. Variable Provisions. The Company
-------------------
initially appoints the Trustee as Paying Agent, Registrar and authenticating
agent.
Section 9.14. Table of Contents, Headings, etc. The
--------------------------------
Table of Contents and Headings of the Articles and Sections of this Indenture
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
[Remainder of page intentionally left blank]
SIGNATURES
Dated as of July 23, 1997 FORSTMANN & COMPANY, INC.
By:/s/ Rodney Peckham
--------------------------
Title: Chief Financial Officer
Dated as of July 23, 1997 STATE STREET BANK AND TRUST COMPANY, as
Trustee
By:/s/ Elizabeth Hammer
--------------------
Title: Vice President
EXHIBIT A
---------
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE AND JUNIOR IN RIGHT OF
PAYMENT TO ALL SENIOR INDEBTEDNESS (AS DEFINED IN THAT CERTAIN SUBORDINATION
AGREEMENT DATED JULY 23, 1997 BETWEEN STATE STREET BANK AND TRUST COMPANY, AS
INDENTURE TRUSTEE, AND BANKAMERICA BUSINESS CREDIT, INC., AS AGENT, AS THE SAME
MAY BE AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME),
AND EACH HOLDER OF THE NOTES BY HIS ACCEPTANCE THEREOF AUTHORIZES AND EXPRESSLY
DIRECTS THE TRUSTEE ON HIS BEHALF TO TAKE SUCH ACTION AS MAY BE NECESSARY OR
APPROPRIATE TO EFFECT THE SUBORDINATION PROVISIONS CONTAINED IN THE
SUBORDINATION AGREEMENT, AND APPOINTS THE TRUSTEE HIS ATTORNEY-IN-FACT FOR SUCH
PURPOSE.<PAGE>
SUBORDINATED FLOATING RATE NOTE
DUE JULY 23, 2001
No. $------
FORSTMANN & COMPANY, INC.
promises to pay to ---------------------------- or registered assigns,
the principal sum of ------------------------ Dollars on July 23, 2001.
Interest Payment Dates: The last day of each calendar month or the next Business
Day in the event that the last day of such month is a
Legal Holiday, as defined in the Indenture.
Record Dates: The fifteenth day of each calendar month.
(whether or not a Business Day).
This is one of the Notes
referred to in the within-
mentioned Indenture. Dated:
STATE STREET BANK AND FORSTMANN & COMPANY, INC.
TRUST COMPANY, as Trustee
By----------------------- By-----------------------
(Back of Note)
------------
SUBORDINATED FLOATING
RATE NOTES DUE JULY 23, 2001
1. Interest. (a) Forstmann & Company, Inc., a
--------
Georgia corporation (the "Company"), promises to pay interest on the principal
amount of this Note at a rate per annum equal to the LIBOR Rate plus 4.5% (the
"Applicable LIBOR Rate") from date of issuance of this Note to maturity. All
interest will be calculated on the basis of a 360-day year and the actual number
of days elapsed. Interest payments on the Notes will be made monthly in arrears
to but not including the date of payment commencing on August 31, 1997, and on
the last day of each calendar month thereafter, except for the final interest
payment which will be made on July 23, 2001; provided, that if any such payment
date is not a Business Day, payment may be made on the next succeeding Business
Day and such extension of time shall be included in the computation of the
amount of interest to be paid on such Business Day. Interest on the Notes shall
accrue (i) from the most recent date to which Interest has been paid or, if no
interest has been paid, from the date of issuance of this Note and (ii) with
respect to the principal on the Notes, to, but not including, the date of
repayment of such principal; provided, however, that if such principal repayment
occurs after 12:00 noon, New York City time, interest shall be deemed to accrue
thereon until the following Business Day. To the extent lawful, the Company
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at a rate equal to 2% per annum in excess
of the interest rate then applicable to the Notes; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the same rate to the extent lawful.
(b) As used in this Note, the following terms shall have the
following meanings:
"Interest Payment Date" means the last day of each
---------------------
calendar month or the next Business Day in the event that the last day of such
month is a Legal Holiday.
"Interest Period" means a period of one calendar month
---------------
beginning on the first day of each month and ending on the last day of such
month, provided, that if the last day of any such month is not a Business Day,
the Interest Period shall include the next succeeding Business Day after the
last day of such month, and the next proceeding Interest Period thereafter shall
commence on the day following the last day of the preceeding Interest Period;
provided further, that the final Interest Period hereunder shall be the 23 days
beginning on July 1, 2001 and ending on July 23, 2001.
"LIBOR Business Day" means a Business Day on which banks may accept
deposits of United States dollars in the London Interbank Market.
"LIBOR Determination Date" for any Interest Period means the second
LIBOR Business Day next preceding the first day of such Interest Period.
"LIBOR Rate" means, for any Interest Period, the rate, as determined
by the Company, equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the offered rates for deposits in U.S. dollars for a
period of one month, as set forth on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the LIBOR Determination Date for such Interest Period;
provided that the LIBOR Rate for the Interest Period commencing on the date
hereof and ending on July 31, 1997 shall be 5.6875%; provided further, that if
only one such offered rate appears on the Reuters Screen LIBO Page, the LIBOR
Rate for such Interest Period shall mean such offered rate. If such rate is not
available at 11:00 a.m., London time on the LIBOR Determination Date for such
Interest Period, then the LIBOR Rate for such Interest Period shall equal the
arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the interest rates per annum at which deposits in amounts equal to $1,000,000 in
U.S. dollars are offered by the Reference Banks to leading banks in the London
Interbank Market for a period of one month as of 11:00 a.m., London time, on the
LIBOR Determination Date for such Interest Period. If on any LIBOR
Determination Date only one of the Reference Banks provides such offered
quotation, then the LIBOR Rate for such Interest Period shall mean such offered
quotation; provided further, that if none of the Reference Banks provide such
quotations, then the LIBOR Rate for such Interest Period shall be determined by
reference to the LIBOR Rate as quoted in the most recent Wall Street Journal in
which such quotes are available. If none of the rates or quotations referred to
above is available in respect of any Interest Period, then the LIBOR Rate shall
be mutually agreed upon by the Company and the holders of at least a majority in
principal amount of the then outstanding Notes.
"Reference Banks" means each of Bank of Tokyo, Ltd. (London office),
Barclays Bank, PLC (London office), Bankers Trust Company (London office) and
National Westminster Bank, PLC (London office), and any such replacement bank
thereof as listed on the Reuters Screen LIBO Page and their respective
successors (or if such Banks are not listed thereon or such page shall not be
available, as determined from a Replacement Service), and if any of such banks
are not at the applicable time providing interest rates as contemplated within
the definition of "LIBOR Rate," Reference Banks shall mean the remaining bank or
banks so providing such rates. In the event that less than two of such banks
are providing such rates, the Company shall use reasonable efforts to appoint
additional Reference Banks so that there are at least two such banks providing
such rates; provided that such banks appointed by the Company shall be London
offices of leading banks engaged in the London Interbank Market.
"Replacement Service" means Telerate News Service or such other
financial reporting service or information as the Company determines and as
shall not be reasonably objected to by the holders of a majority of the
outstanding amount of the Notes within 30 days after receipt of notice of such
determination by the Company.
"Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).<PAGE>
2. Method of Payment. The Company will pay interest
-----------------
on the Notes (except defaulted interest) to the Persons who are registered
Holders of Notes at the close of business on the record date next preceding the
Interest Payment Date, even if such Notes are cancelled after such record date
and on or before such Interest Payment Date. The Holder must surrender this
Note to a Paying Agent to collect principal payments. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
The Company, however, may pay principal and interest by check payable in such
money. It may mail an interest check to a Holder's registered address.
3. Payment Subject to Subordination Agreement. Each
------------------------------------------
Noteholder by accepting a Note ratifies the execution and delivery by the
Trustee of the Subordination Agreement on its behalf and agrees, so long as such
Noteholder holds Notes, to be bound thereby as to each and every provision
thereof applicable to each Noteholder as fully as if such person were a party
thereto and further represents and warrants that the Trustee has all requisite
authority to bind such Noteholder by the Trustee's execution and delivery of the
Subordination Agreement.
4. Paying Agent and Registrar. Initially, the Trustee
--------------------------
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-registrar without notice to any Noteholder. The Company
may act in any such capacity.
5. Indenture. The Company issued $1,570,758 in
---------
original aggregate principal amount of its Subordinated Floating Rate Notes on
July 23, 1997 (the "Notes") under an Indenture dated as of July 23, 1997
("Indenture") between the Company and the Trustee. THIS IS A NOTE. The Notes
are subject to all terms of the Indenture and the Subordination Agreement, and
Noteholders are referred to the Indenture and the Subordination Agreement for a
statement of such terms. The Notes are limited to $1,570,758 in aggregate
principal amount except as provided in Section 2.7 of the Indenture.
6. Optional Redemption. Upon 45 days' notice to the
-------------------
Trustee, the Company may redeem, at any time and from time to time, all or any
portion of the Notes, plus accrued and unpaid interest to the redemption date.
Any such optional redemption shall be made pursuant to Section 3.1 of the
Indenture.
7. Notice of Redemption. Notice of redemption will
--------------------
be mailed at least 30 days but not more than 60 days before the redemption date
to each Holder of Notes to be redeemed at his registered address. Notes may be
redeemed in part but only in whole multiples of $1.00, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date interest
ceases to accrue on Notes or portions of them called for redemption.
8. Denominations, Transfer, Exchange. The Notes are
---------------------------------
in registered form without coupons and were initially issued in denominations of
$1.00. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
The Registrar need not exchange or register the transfer of any Note or portion
of a Note selected for redemption. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed or during the period between a record date and the corresponding
interest payment date. All transfers of the Notes are also subject to the
restrictions contained in, and terms of, Section 2.6 of the Indenture
9. Persons Deemed Owners. Prior to due presentment
---------------------
to the Trustee for registration of the transfer of this Note, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this Note is
registered as its absolute owner, for the purpose of receiving payment of
principal of and interest on this Note and for all other purposes whatsoever,
whether or not this Note is overdue, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary. The registered Holder of a
Note shall be treated as its owner for all purposes.
10. Amendments and Waivers. Subject to certain
----------------------
exceptions, the Indenture, the Subordination Agreement or the Notes may be
amended with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes. Without the consent of the Noteholders,
the Indenture, the Subordination Agreement or the Notes may be amended to cure
any ambiguity, defect or inconsistency, to provide for assumption of Company
obligations to Noteholders or to make any change that does not adversely affect
the rights of any Noteholder.
11. Defaults and Remedies. An Event of Default
---------------------
includes, among other things: default in payment of interest (if not cured
within five days) or principal on the Notes; failure by the Company to comply
(subject to applicable grace periods) with certain covenants contained in the
Indenture or the Notes, or a material breach of representation and the
continuance of breach for 30 days after notice; an acceleration of maturity
under the Loan Agreement; the occurrence of a Change of Control; and certain
events of bankruptcy or insolvency. If an Event of Default occurs and is
continuing, the Trustee or the holders of a majority in principal amount of the
then outstanding Notes may declare all the Notes to be due and payable imme-
diately (except in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, in which event all outstanding Notes become due and
payable immediately without further action or notice). Noteholders may not
enforce the Indenture, or the Notes except as provided in the Indenture. The
Trustee may request indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Noteholders
notice of any continuing default (except a default in payment of principal or
interest) if it determines that withholding notice is in their interest. The
Company must furnish an annual compliance certificate to the Trustee.
12. Trustee Dealings with Company. State Street Bank
-----------------------------
and Trust Company, the Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer,
--------------------------
employee or stockholder, as such, of the Company or the Trustee, as the case may
be, shall not have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Noteholder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
14. Authentication. This Note shall not be valid
--------------
until authenticated by the manual signature of the Trustee or an authenticating
agent.<PAGE>
15. Abbreviations. Customary abbreviations may be
-------------
used in the name of Noteholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common). CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
16. Indenture and Subordination Agreement. Each
-------------------------------------
Noteholder, by accepting a Note, agrees to be bound to all of the terms and
provisions of the Indenture and the Subordination Agreement, as the same may be
amended from time to time. Certain capitalized terms used and not defined
herein have the meaning set forth in the Indenture.
The Company will furnish to any Noteholder upon written request and
without charge a copy of the Indenture. Request may be made to:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York 10036
Attention: Chief Financial Officer
ASSIGNMENT FORM
To assign this Note, fill in the form below: [I or We] assign and
transfer this Note to:
- -----------------------------------------------------------------
(Insert assignee's soc. sec. no. or Tax I.D. no.)
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint -----------------------------------------
- ----------------------------- agent to transfer this Note on the books of the
Company. The agent may substitute another to act for him.
- -----------------------------------------------------------------
Date: --------
Your Signature:-------------------------
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
FORSTMANN & COMPANY, INC.
$1,570,758
Subordinated Floating Rate Notes
due July 23, 2001
INDENTURE
Dated as of July 23, 1997
State Street Bank and Trust Company,
as Trustee
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Definitions. . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.3. Rules of Construction . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . 8
Section 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . 8
Section 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . 9
Section 2.5. Noteholder Lists . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . 9
Section 2.7. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . .10
Section 2.8. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.9. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE 3
OPTIONAL REDEMPTION
Section 3.1. Optional Redemption . . . . . . . . . . . . . . . . . . . . . .12
Section 3.2. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . .12
Section 3.3. Selection of Notes to Be Redeemed . . . . . . . . . . . . . . .12
Section 3.4. Notice of Redemption . . . . . . . . . . . . . . . . . . . . .13
Section 3.5. Effect of Notice of Redemption . . . . . . . . . . . . . . . .14
Section 3.6. Deposit of Redemption Price . . . . . . . . . . . . . . . . . .14
Section 3.7. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . 14
ARTICLE 4
COVENANTS
Section 4.1. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . .14
Section 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . .15
Section 4.3. SEC Reports; Financial Statements; Other Reports . . . . . . 15
Section 4.4. Compliance Certificate . . . . . . . . . . . . . . . . . . . .16
Section 4.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 4.6. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . .17
Section 4.7. Limitation on Restricted Payments . . . . . . . . . . . . . . .17
Section 4.8. Limitation on Secured Indebtedness . . . . . . . . . . . . . .18
Section 4.9. Corporate Existence . . . . . . . . . . . . . . . . . . . . . .18
Section 4.10. Maintenance of Properties . . . . . . . . . . . . . . . . . . .18
ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . .19
Section 5.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 5.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . .21
Section 5.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . .21
Section 5.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . .22
Section 5.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . .22
Section 5.7. Rights of Holders to Receive Payment . . . . . . . . . . . . .22
Section 5.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . .23
Section 5.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . .23
Section 5.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 5.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . .24
ARTICLE 6
TRUSTEE
Section 6.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . .24
Section 6.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . .26
Section 6.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . .26
Section 6.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . .26
Section 6.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . .27
Section 6.6. Compensation and Indemnity . . . . . . . . . . . . . . . . . .27
Section 6.7. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . .28
Section 6.8. Successor Trustee by Merger, etc. . . . . . . . . . . . . . . .29
Section 6.9. Eligibility; Disqualification . . . . . . . . . . . . . . . . .29
ARTICLE 7
DISCHARGE OF INDENTURE
Section 7.1. Termination of Company's Obligations . . . . . . . . . . . . .29
Section 7.2. Application of Trust Money . . . . . . . . . . . . . . . . . 31
Section 7.3. Repayment to Company . . . . . . . . . . . . . . . . . . . . .31
Section 7.4. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE 8
AMENDMENTS
Section 8.1. Without Consent of Holders . . . . . . . . . . . . . . . . . .32
Section 8.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . .32
Section 8.3. Revocation and Effect of Consents . . . . . . . . . . . . . . .33
Section 8.4. Notation on or Exchange of Notes . . . . . . . . . . . . . . .34
Section 8.5. Trustee to Sign Amendments, etc . . . . . . . . . . . . . . . .34
ARTICLE 9
MISCELLANEOUS
Section 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.2. Officers' Certificate and Opinion of Counsel as to Conditions
Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.3. Statements Required in Officers' Certificate or Opinion of
Counsel 36
Section 9.4. Rules by Trustee and Agents. . . . . . . . . . . . . . . . . .36
Section 9.5. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . .36
Section 9.6. No Recourse Against Others . . . . . . . . . . . . . . . . . .37
Section 9.7. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . .37
Section 9.8. Counterpart Originals . . . . . . . . . . . . . . . . . . . . .37
Section 9.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 9.10. No Adverse Interpretation of Other Agreements . . . . . . . . .37
Section 9.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 9.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 9.13. Variable Provisions . . . . . . . . . . . . . . . . . . . . . .37
Section 9.14. Table of Contents, Headings, etc. . . . . . . . . . . . . . . .37
Exhibit 10.1(a)
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement, dated as of July 23, 1997, among the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), BankAmerica Business Credit, Inc., a Delaware corporation
("BABC")with an office at 40 East 52nd Street, New York, New York 10022, as
agent for the Lenders (in its capacity as agent, the "Agent"), and Forstmann &
Company, Inc., a Georgia corporation, with offices at 1155 Avenue of the
Americas, New York, New York 10036 (the "Borrower").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Borrower has filed in the United States Bankruptcy Court for
the Southern District of New York (the "Bankruptcy Court") a petition for relief
under Chapter 11 of the Bankruptcy Code (as defined below) and has proposed a
plan of reorganization; and
WHEREAS, by an order dated July 9, 1997, the Bankruptcy Court confirmed
the Borrower's plan of reorganization; and
WHEREAS, the Borrower has requested the Agent and the Lenders to make
available to the Borrower a revolving line of credit for loans and letters of
credit in an amount not to exceed $85,000,000 and to make term loans to the
Borrower in the aggregate principal amount of $31,450,000, which extensions of
credit the Borrower will use: (i) in part to fund its plan of reorganization and
(ii) for its working capital needs and general business purposes;
WHEREAS, the Lenders have agreed to make available to the Borrower a
revolving credit facility and term loans upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Lenders, the Agent, and the
Borrower hereby agree as follows.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
-------------------------------
1.1 Definitions. As used herein:
"Accounts" means all of the Borrower's now owned or hereafter
acquired or arising accounts, and any other rights to payment for the sale or
lease of goods or rendition of services, whether or not they have been earned by
performance.
"Account Debtor" means each Person obligated in any way on or in
connection with an Account.
"ACH Settlement Risk Reserve" means any and all reserves which the
Agent from time to time establishes, in its sole discretion, with respect to ACH
Transactions.
"ACH Transactions" means all debts, liabilities, and obligations
now or hereafter owing from the Borrower to Bank of America arising from or
related to cash management services including the automatic clearing house
transfer of funds by the Bank of America for the account of the Borrower
pursuant to agreement or overdrafts.
"Adjusted Tangible Assets" means all of the Borrower's assets
except: (a) deferred assets, other than prepaid insurance and prepaid taxes;
(b) patents, copyrights, trademarks, trade names, franchises, goodwill, and
other similar intangibles; (c) unamortized debt discount and expense; (d) assets
of the Borrower constituting Intercompany Accounts; and (e) fixed assets to the
extent of any write-up in the book value thereof resulting from a revaluation
effective after the Closing Date.
"Adjusted Tangible Net Worth" means, at any date: (a) the book
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with GAAP) at
which the Adjusted Tangible Assets would be shown on a balance sheet of the
Borrower at such date prepared in accordance with GAAP; less (b) the amount at
which the Borrower's liabilities (excluding deferred tax liabilities and
Unfunded Pension Liability) would be shown on such balance sheet, including as
liabilities all reserves for contingencies and other potential liabilities which
would be required to be shown on such balance sheet; provided, however, that any
calculation of "Adjusted Tangible Net Worth" pursuant to this Agreement shall
exclude any extraordinary gains and losses and any last-in-first-out ("LIFO")
adjustments on a cumulative basis from and after the Effective Date.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, ten percent
(10%) or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise. Notwithstanding the foregoing,
the term "Affiliate," as it pertains to the Borrower, shall not be deemed to
include any Lender or any Affiliate of any Lender.
"Agent" means BankAmerica Business Credit, Inc., solely in its
capacity as agent for the Lenders, and any successor agent.
"Agent Advances" has the meaning specified in Section 2.2(i).
"Agent's Liens" means the Liens in the Collateral granted to the
Agent, for the ratable benefit of the Lenders, BABC, and Agent pursuant to this
Agreement and the other Loan Documents.
"Agent-Related Persons" means the Agent and any successor agent,
together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Revolver Outstandings" means, at any time: the sum of
(a) the unpaid balance of Revolving Loans, (b) the aggregate amount of Pending
Revolving Loans, (c) one hundred percent (100%) of the aggregate undrawn face
amount of all outstanding Letters of Credit, (d) the aggregate amount of any
unpaid reimbursement obligations in respect of Letters of Credit and (e) the
aggregate maximum amount available for drawing under Letters of Credit requested
by the Borrower, the issuance of which has been authorized by the Agent pursuant
to Section 2.4(d) but which have not yet been issued, in each case as determined
by the Agent.
"Agreement" means this Loan and Security Agreement.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Margin" means
(i) with respect to Base Rate Revolving Loans and all other
Obligations (other than Base Rate Term Loans and LIBOR Rate Loans), one-quarter
of one percent (.25%);
(ii) with respect to Base Rate Term Loans, three-quarters of one
percent (.75%);
(iii) with respect to LIBOR Revolving Loans, two and one-
half percent (2.50%); and
(iv) with respect to LIBOR Term Loans, three percent (3.00%).
"Assigned Contracts" means collectively, all of the Borrower's
rights and remedies under, and all moneys and claims for money due or to become
due to the Borrower under those contracts set forth on Schedule (1.1)(a), and
any other material contracts, and any and all amendments, supplements,
extensions, and renewals thereof including, without limitation, all rights and
claims of the Borrower now or hereafter existing: (i) under any insurance,
indemnities, warranties, and guarantees provided for or arising out of or in
connection with any of the foregoing agreements; (ii) for any damages arising
out of or for breach or default under or in connection with any of the foregoing
contracts; (iii) to all other amounts from time to time paid or payable under or
in connection with any of the foregoing agreements; or (iv) to exercise or
enforce any and all covenants, remedies, powers and privileges thereunder.
"Assignee" has the meaning specified in Section 13.3(a).
"Assignment and Acceptance" has the meaning specified in Section
13.3(a).
"Attorney Costs" means and includes all reasonable
fees, expenses and disbursements of any law firm or other external counsel
engaged by the Agent (including, without limitation, special local counsel), all
paralegals' fees and disbursements, the allocated cost of internal legal
services of the Agent and all expenses and disbursements of internal counsel of
the Agent.
"Availability" means, at any time, (a) the lesser of
(I) the Maximum Revolver Amount and (ii) the sum of (A) eighty-five percent
(85%) of the Net Amount of Eligible Accounts (other than Eligible Bill and Hold
Accounts); plus (B) the lesser of $15 million or eighty-five percent (85%) of
the Net Amount of Eligible Bill and Hold Accounts; plus (C) sixty-five percent
(65%) of the lower of cost, determined on a first-in-first-out ("FIFO") basis,
or market value of Eligible Inventory; plus (D) without duplication of (C),
above, fifty-five percent (55%) of the lower of cost, determined on a FIFO
basis, or market value of Eligible Letter of Credit Inventory; provided, that at
no time shall the sum of outstanding Revolving Loans based upon the value of (C)
and (D) above exceed $30,000,000 ("Maximum Inventory Loan"); minus (b) the sum
of (i) the Aggregate Revolver Outstandings, (ii) reserves for accrued interest
on the Obligations, (iii) the Environmental Compliance Reserve, (iv) the ACH
Settlement Risk Reserve, (v) the Availability Reserve, (vi) all other reserves
(including, without limitation, any and all reserves established by the Agent in
respect of waivers referenced in Section 6.2(b) which the Borrower has failed to
obtain, Liens referenced in Section 9.1, judgments referenced in Section 11.1(m)
or taxes, assessments or other similar charges of the Borrower under Section
9.1) which the Agent deems necessary in the reasonable exercise of its credit
judgment to maintain with respect to the Borrower's account, including, without
limitation, reserves for any amounts which the Agent or any Lender may be
obligated to pay in the future for the account of the Borrower.
"Availability Reserve" means, at any time, the
difference of (i) $6,500,000 minus (ii) the product of (x) $47,500 times (y) the
number of all regularly scheduled payments of principal made by the Borrower
pursuant to Section 2.3(c), with respect to Term Loans on or prior to such time.
"BABC" means BankAmerica Business Credit, Inc.
"BABC Loan" and "BABC Loans" have the meanings specified in
Section 2.2(h).
"Bank of America" means Bank of America National Trust and Savings
Association, a national banking association, or any successor entity thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. section 101 et seq.).
"Bankruptcy Court" has the meaning specified in the introductory
paragraph hereof.
"Base Rate" means, for any day, the rate of interest in effect for
such day as publicly announced from time to time by Bank of America in San
Francisco, California, as its "reference rate" (the "reference rate" being a
rate set by Bank of America based upon various factors including Bank of
America's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate). Any change in the reference
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change. Each Interest
Rate based upon the Base Rate shall be adjusted simultaneously with any change
in the Base Rate.
"Base Rate Loans" means, collectively, the Base Rate Revolving
Loans and the Base Rate Term Loans.
"Base Rate Revolving Loan" means a Revolving Loan during any
period in which it bears interest based on the Base Rate.
"Base Rate Term Loan" means any portion of a Term Loan during any
period in which such portion bears interest based on the Base Rate.
"Bill and Hold Accounts" means Accounts of the Borrower for
Inventory that has been sold and invoiced to an Account Debtor in the ordinary
course of business consistent with past practices, as to which the Borrower has
no further work to do on such Inventory, the Account Debtor has accepted the
subject Inventory and title to such Inventory has passed to such Account Debtor
under a written agreement or confirmation of order issued by Borrower, but such
Account Debtor has not yet paid the invoice and has directed the Borrower to
hold shipment of such Inventory pending delivery instructions from such Account
Debtor; provided such Account Debtor is unconditionally obligated to pay such
invoice at the maturity date stated therein regardless of when shipment is made
and such Inventory is under Borrower's exclusive control and identifiable by
piece number on Borrower's accounting record.
"Borrowing" means a borrowing hereunder consisting of Revolving
Loans or Term Loans made pursuant to a single Notice of Borrowing by the Lenders
to the Borrower (or by BABC in the case of a Borrowing funded by BABC Loans) or
by the Agent in the case of a Borrowing consisting of an Agent Advance.
"Borrowing Base Certificate" means a certificate by a Responsible
Officer of the Borrower, substantially in the form of Exhibit B (or another form
acceptable to the Agent) setting forth the calculation of the Availability,
including a calculation of each component thereof, as of the close of business
no more than five (5) Business Days prior to the date of such certificate, all
in such detail as shall be satisfactory to the Agent; provided, however, that
Eligible Inventory and all components thereof may be calculated as of the close
of business on the last day of the immediately preceding fiscal month, unless a
Default or an Event of Default shall have occurred and be continuing, in which
case Eligible Inventory and all components thereof may be calculated as
frequently as the Agent may request. All calculations of Availability in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by the Borrower and certified to the Agent; provided,
however, that the Agent shall have the right to review and adjust, in the
reasonable exercise of its credit judgment, any such calculation (1) to reflect
its reasonable estimate of declines in value of any of the Collateral described
therein, and (2) to the extent that such calculation is not in accordance with
this Agreement.
"Business Day" means (a) any day that is not a Saturday, Sunday,
or a day on which banks in New York, New York or San Francisco, California, are
required or permitted to be closed, and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBOR Rate or LIBOR
Rate Loans, any day that is a Business Day pursuant to clause (a) above and that
is also a day on which trading in Dollars is carried on by and between banks in
the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not
paid) in respect of the cost of any fixed asset or improvement, or replacement,
substitution, or addition thereto, which has a useful life of more than one
year, including, without limitation, those costs arising in connection with the
direct or indirect acquisition of such asset by way of increased product or
service charges or offset items or in connection with a Capital Lease.
"Capital Lease" means any lease of property by the Borrower which,
in accordance with GAAP, is or should be reflected as a capital lease on the
balance sheet of Borrower.
"Capital Stock" means common stock or other voting securities.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute, and regulations promulgated thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Commitment" means, at any time with respect to a Lender, such
Lender's Term Loan Commitment and Revolving Credit Commitment, and "Commitments"
means, collectively, the Term Loan Commitments and Revolving Credit Commitments
of all of the Lenders.
"Confirmation Order" has the meaning specified in the Disclosure
Statement.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
"Conversion/Continuation Date" means each date on which a Loan is
to be converted into or continued as a LIBOR Rate Loan pursuant to Section 3.2.
"Credit Support" has the meaning specified in Section
2.4(a).
"Debt" means all liabilities, obligations and indebtedness of the
Borrower to any Person, of any kind or nature, now or hereafter owing, arising,
due or payable, howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise, and
including, without in any way limiting the generality of the foregoing: (i) the
Borrower's liabilities and obligations to trade creditors; (ii) all Obligations;
(iii) all obligations and liabilities of any Person secured by any Lien on the
Borrower's property, even though the Borrower shall not have assumed or become
liable for the payment thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such property as would be shown on
a balance sheet of the Borrower prepared in accordance with GAAP; (iv) all
obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement with respect to property
used or acquired by the Borrower, even if the rights and remedies of the lessor,
seller or lender thereunder are limited to repossession of such property;
provided, however, that all such obligations and liabilities which are limited
in recourse to such property shall be included in Debt only to the extent of the
book value of such property as would be shown on a balance sheet of the Borrower
prepared in accordance with GAAP; (v) all accrued ERISA Plan and other pension
fund and other employee benefit plan obligations and liabilities; (vi) all
obligations and liabilities under Guaranties; (vii) all obligations and
liabilities under any swap, cap or other financial arrangement; and (viii)
deferred taxes.
"Debt For Borrowed Money" means Debt for borrowed money or as
evidenced by notes, bonds, debentures or similar evidences of any such Debt of
such Person, the deferred and unpaid purchase price of any property or business
(other than trade accounts payable incurred in the ordinary course of business
and constituting current liabilities) and all obligations under Capital Leases.
"Default" means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Defaulting Lender" has the meaning specified in Section
2.2(g)(ii).
"Default Rate" means a fluctuating per annum interest rate at all
times equal to the sum of (a) the otherwise applicable Interest Rate plus (b)
two percent (2%). Each Default Rate shall be adjusted simultaneously with any
change in the applicable Interest Rate.
"Deferred Interest Notes" has the meaning specified in the
Disclosure Statement.
"Disclosure Statement" means the First Amended Disclosure
Statement Pursuant to Section 1125 of the Bankruptcy Code for Forstmann's Plan
of Reorganization, dated May 14, 1997, as approved by the Bankruptcy Court.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in capital stock (or any options or
warrants for such stock) of the same class; or (b) the redemption, purchase,
retirement or other acquisition of, or any defeasance, sinking fund payment or
other setting aside of funds in respect of, any capital stock (or any options,
warrants or other rights with respect to such stock) of such corporation.
"Documentary Letter of Credit" means a documentary Letter of
Credit issued for the account of the Borrower to provide for the intended means
of making payment when due by the Borrower for the purchase of Inventory or
Equipment (subject, in the case of Equipment, to the limit specified in Section
9.22) and available for drawing against presentation of, inter alia, negotiable
documents of title covering such Inventory.
"DOL" means the United States Department of Labor or any successor
department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States of America and, in relation to any amount to be advanced or paid
hereunder, funds having same day or immediate value.
"EDATNW" means the Adjusted Tangible Net Worth as of the Effective
Date after all adjustments required in connection with application of the
principles of "fresh start" accounting as set forth in Statement of Position 90-
7 issued by the American Institute of Certified Public Accountants.
"EBITDA" means, for the Borrower for any period, the sum of:
(i) the net income (or net loss) of the Borrower (determined in
accordance with GAAP) for such period, without giving effect to any GAAP
extraordinary gains or losses and without deduction for Reorganization
Charges; plus (or minus)
(ii) to the extent that any of the items referred to in any of
clauses (A) through (E) below were deducted or added in calculating such
net income:
(A) interest expense of the Borrower for such
period;
(B) federal, state or local income tax expense of
the Borrower with respect to operations for such period;
(C) the amount of all depreciation and amortization
and other non-cash charges for such period
(D) LIFO adjustments for such period; and
(E) non-cash gains or losses from the sale or disposal
of property (other than Inventory); plus (or minus)
(iii) the amount of cash received or expended in such period in
respect of any amount which, under clause (C) above, was taken into
account in determining EBITDA for such or any prior period.
"Effective Date" has the meaning given to that term in the Plan of
Reorganization. The Effective Date shall occur not later than the Closing Date.
"Eligible Accounts" means all Accounts of the Borrower which the
Agent in the reasonable exercise of its credit judgment determines to be
Eligible Accounts. Without limiting the discretion of the Agent to establish
other criteria of ineligibility, Eligible Accounts shall not, unless the Agent
in its sole discretion elects, include any Account:
(i) (A) in the case of "dated" Accounts arising in the
ordinary course of business consistent with past practices, with respect to
which more than 245 days have elapsed since the date of the original invoice
therefor or it is more than 30 days past due and (B) in the case of all other
Accounts, with respect to which more than 120 days have elapsed since the date
of the original invoice therefor or it is more than 60 days past due;
(ii) with respect to which any of the representations,
warranties, covenants, and agreements contained in Section 6.8 are not or have
ceased to be complete and correct or have been breached;
(iii) with respect to which, in whole or in part, a check,
promissory note, draft, trade acceptance or other instrument for the payment of
money has been received, presented for payment and returned uncollected for any
reason;
(iv) which represents a progress billing (as hereinafter
defined) or as to which the Borrower has extended the time for payment without
the consent of the Agent; for the purposes hereof, "progress billing" means any
invoice for goods sold or leased or services rendered under a contract or
agreement pursuant to which the Account Debtor's obligation to pay such invoice
is conditioned upon the Borrower's completion of any further performance under
the contract or agreement;
(v) as to which any one or more of the following events
has occurred with respect to the Account Debtor on such Account: death or
judicial declaration of incompetency of an Account Debtor who is an individual;
the filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States of America, any state or territory thereof, or
any foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the
Account Debtor, including, without limitation, the appointment of or taking
possession by a "custodian," as defined in the Bankruptcy Code; the institution
by or against the Account Debtor of any other type of insolvency proceeding
(under the bankruptcy laws of the United States of America or otherwise) or of
any formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, the Account Debtor;
the sale, assignment, or transfer of all or any material part of the assets of
the Account Debtor; the nonpayment generally by the Account Debtor of its debts
as they become due; or the cessation of the business of the Account Debtor as a
going concern;
(vi) if fifty percent (50%) or more of the aggregate Dollar
amount of outstanding Accounts owed at such time by the Account Debtor thereon
which constituted Eligible Accounts at the time they arose are, at any time of
determination, classified as ineligible under the other criteria set forth
herein or otherwise established by the Agent;
(vii) owed by an Account Debtor which: (i) does not maintain its
chief executive office in the United States; or (ii) is not organized under the
laws of the United States or any state thereof; or (iii) is the government of
any foreign country or sovereign state, or of any state, province, municipality,
or other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof; except to the extent that such
Account is secured or payable by a letter of credit reasonably satisfactory to
the Agent;
(viii) owed by an Account Debtor which is an Affiliate or
employee of the Borrower;
(ix) except as provided in (xi) below, as to which either
the perfection of the Agent's Lien in such Account, or the Agent's right or
ability to obtain direct payment to the Agent of the proceeds of such Account,
is governed by any federal, state, or local statutory requirements other than
those of the UCC;
(x) which is owed by an Account Debtor to which the
Borrower is indebted in any way, or which is subject to any right of setoff or
recoupment by the Account Debtor, unless the Account Debtor has entered into an
agreement acceptable to the Agent to waive setoff rights; or if the Account
Debtor thereon has disputed liability or made any claim with respect to any
other Account due from such Account Debtor; but in each such case only to the
extent of such indebtedness, setoff, recoupment, dispute, or claim;
(xi) which is owed by the government of the United States
of America, or any department, agency, public corporation, or other
instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as
amended (31 U.S.C. section 3727 et seq.), and any other steps necessary to
perfect the Agent's Lien therein, have been complied with to the Agent's
reasonable satisfaction with respect to such Account;
(xii) which is owed by any state, municipality, or other political
subdivision of the United States of America, or any department, agency, public
corporation, or other instrumentality thereof and (A) as to which the Agent
determines that its Lien therein is not or cannot be perfected or (B) to the
extent that the amount thereof exceeds $4,000,000;
(xiii) which represents a sale on a guaranteed sale, sale and
return, sale on approval, consignment, or other repurchase or return basis;
(xiv) which is evidenced by a promissory note or other instrument
or by chattel paper;
(xv) if the Agent believes, in the reasonable exercise of
its judgment, that the prospect of collection of such Account is impaired or
that the Account may not be paid by reason of the Account Debtor's financial
inability to pay;
(xvi) with respect to which the Account Debtor is located in any
state requiring the filing of a Notice of Business Activities Report or similar
report in order to permit the Borrower to seek judicial enforcement in such
State of payment of such Account, unless such Borrower has qualified to do
business in such state or has filed a Notice of Business Activities Report or
equivalent report for the then current year; or
(xvii) which arises out of a sale not made in the ordinary
course of the Borrower's business;
(xviii) except for Bill and Hold Accounts, as to which the
goods giving rise to such Account have not been shipped and delivered to and
accepted by the Account Debtor or the services giving rise to such Account have
not been performed by the Borrower, and, if applicable, accepted by the Account
Debtor, or the Account Debtor revokes its acceptance of such goods or services;
(xix) is owed by an Account Debtor which is obligated to the
Borrower respecting Accounts the aggregate unpaid balance of which exceeds
fifteen percent (15%) (thirty percent (30%) in the case of Kellwood) of the
aggregate unpaid balance of all Accounts owed to the Borrower at such time by
all of the Borrower's Account Debtors, but only to the extent of such excess;
(xx) arises out of an enforceable contract or order which,
by its terms, forbids, restricts or makes void or unenforceable the granting of
a Lien by the Borrower to the Agent with respect to such Account to the extent
that any such provision is enforceable; or
(xxi) which is not subject to a first priority and perfected
security interest in favor of the Agent for the benefit of the Lenders.
If any Account at any time ceases to be an Eligible Account by reason of
any of the foregoing exclusions or any failure to meet any other eligibility
criteria established by the Agent in the reasonable exercise of its credit
judgment then such Account shall promptly be excluded from the calculation of
Eligible Accounts.
"Eligible Bill and Hold Accounts" means Eligible Accounts
consisting of Bill and Hold Accounts.
"Eligible Letter of Credit Inventory" means inventory which has
not yet been received by the Borrower, but which has been or will be consigned
for shipment to the Agent and is or will be in transit directly to the Borrower
and not to any finisher or other bailee of the Borrower, and will otherwise be
Eligible Inventory immediately upon receipt by the Borrower, and with respect to
the purchase of which a Documentary Letter of Credit (which may only be drawn
against by the presentation of customary certificates of insurance, shipping
documents showing that such inventory is in transit to the Borrower (if not
already delivered to the Borrower) and documents of title with respect to such
inventory) has been issued or caused to be issued by the Agent.
"Eligible Inventory" means Inventory that constitutes raw
materials, work-in-process (to the extent permitted below) and finished goods
and that, unless the Agent in its sole discretion elects: (a) is not, in the
Agent's reasonable opinion, obsolete, slow moving, or unmerchantable; (b) is
located at premises owned by the Borrower or on premises listed in Schedule
1.1(b) otherwise reasonably acceptable to the Agent or in transit from one such
location to another; (c) upon which the Agent for the benefit of the Lenders has
a first priority perfected security interest; (d) is not spare parts, packaging
and shipping materials, supplies, bill-and-hold Inventory, returned or defective
Inventory (other than "second" quality Inventory), or Inventory delivered to the
Borrower on consignment or approval; and (e) the Agent, in the reasonable
exercise of its credit judgment, deems eligible as the basis for Revolving Loans
and Letters of Credit based on such collateral and credit criteria as the Agent
may from time to time establish; provided, however, that any and all (x)
work-in-process yarn whose aggregate value exceeds $21,000,000 at any time and
(y) work-in-process greige goods whose aggregate value exceeds $19,000,000 at
any time shall be excluded from the calculation of Eligible Inventory. If any
Inventory at any time ceases to be Eligible Inventory, such Inventory shall
promptly be excluded from the calculation of Eligible Inventory.
"Environmental Compliance Reserve" means any reserves which the
Agent, after the Closing Date, establishes from time to time for amounts that
are reasonably likely to be expended by the Borrower in order for the Borrower
and its operations and property (a) to comply with any notice from a
Governmental Authority asserting material non-compliance with Environmental
Laws, or (b) to correct any such material non-compliance identified in a report
delivered to the Agent and the Lenders pursuant to Section 9.7, in each case if
and to the extent that such non-compliance could have an adverse impact on any
of the Collateral or could have a Material Adverse Effect.
"Environmental Laws" means all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with all
administrative orders, licenses, authorizations and permits of, and agreements
with, any Governmental Authority, in each case relating to environmental,
health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (1) any liability under any Environmental Laws, or (2) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Equipment" means all of the Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (except Inventory), including motor vehicles with
respect to which a certificate of title has been issued, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of property leased by
the Borrower and all of the Borrower's rights and interests with respect thereto
under such leases (including, without limitation, options to purchase); together
with all present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to be used in
connection therewith, and all substitutes for any of the foregoing, and all
manuals, drawings, instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any
ERISA Affiliate under Section 4203 or 4205 of ERISA from a Multi-employer Plan
or notification that a Multi-employer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of an ERISA Plan amendment as
a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multi-employer Plan; (e)
an event or condition which might reasonably be expected to constitute grounds,
or the taking of any steps by the PBGC concerning the institution of
proceedings, for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multi-employer Plan, in each case under Section
4042 (other than 4042(a)(4)) of ERISA; or (f) the imposition of any liability
under Title IV of ERISA that would reasonably be expected to have a Material
Adverse Effect, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Borrower or any ERISA Affiliate.
"ERISA Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Borrower sponsors or maintains or to which the Borrower
makes, is making, or is obligated to make contributions and includes any Pension
Plan.
"Event of Default" has the meaning specified in Section
11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and regulations promulgated thereunder.
"Excess Cash Flow" means with respect to any Fiscal Year of the
Borrower, EBITDA (exclusive of any gain or loss on the disposition of assets)
minus the sum of (without duplication) (i)interest expense (excluding in the
determination of interest expense the amortization of the Facility Fee, and the
Underwriting Fee) and all other fees and expenses incurred by the Borrower in
connection with the closing of this transaction as contemplated by this
Agreement, in each case during such Fiscal Year, (ii) regularly scheduled
payments and voluntary prepayments on the Term Loans or other Debt for Borrowed
Money (other than any repayment of any of the Senior Secured Notes (as defined
in the Disclosure Statement) or Deferred Interest Notes from the proceeds of a
sale of the Tifton Facility (as defined in the Disclosure Statement)) during
such Fiscal Year to the extent made, (iii) Capital Expenditures and MIS
Expenditures made during such Fiscal Year, (iv) the aggregate amount of income
taxes paid by the Borrower in cash for such Fiscal Year and (v) Distributions,
if any, to the extent specifically permitted hereunder for such Fiscal Year.
"Facility Fee" has the meaning specified in Section 3.4.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fee Agreement" means the letter agreement dated as of the date
hereof between the Agent and the Borrower with respect to the payment of certain
fees described therein.
"Final Order" means an order or judgment, the operation or effect
of which has not been stayed, and as to which order or judgment (or any
revision, modification or amendment thereof), the time to appeal or seek review
or rehearing has expired and as to which no appeal or petition for review or
rehearing has been taken or is pending.
"Financial Statements" means, according to the context in which it
is used, the financial statements referred to in Section 8.6 or any other
financial statements required to be given to the Lenders pursuant to this
Agreement.
"Fiscal Year" means the Borrower's fiscal year for financial
accounting purposes. The current Fiscal Year of the Borrower will end on
November 2, 1997.
"Fixed Assets" means Equipment and Real Estate of the Borrower.
"Fixed Charge Coverage Ratio" means, for the Borrower for any
period, the ratio of (i) the difference of (v) EBITDA for such period minus (w)
Capital Expenditures not financed by third parties during such period to (ii)
the sum of (x) total cash interest expense during such period plus (y) total
debt service during such period plus (2) cash tax expense during such period.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date.
"General Intangibles" means all of the Borrower's now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrower of every kind and
nature (other than Accounts), including, without limitation, all contract
rights, Proprietary Rights, corporate or other business records, inventions,
designs, blueprints, plans, specifications, patents, patent applications,
trademarks, service marks, trade names, trade secrets, goodwill, copyrights,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, any funds which may become due to the Borrower in connection with
the termination of any ERISA Plan or other employee benefit plan or any rights
thereto and any other amounts payable to the Borrower from any ERISA Plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which the Borrower
is beneficiary, and any letter of credit, guarantee, claim, security interest or
other security held by or granted to the Borrower.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty" means, with respect to any Person, all obligations of
such Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any indebtedness,
dividend or other obligations of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity securities
or other property or services.
"Indenture Trustee" means State Street Bank and Trust Company, in
its capacity as trustee under an Indenture of Trust dated as of the Effective
Date between State Street Bank and Trust Company and the Borrower pursuant to
which the Borrower has issued Deferred Interest Notes.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Borrower from, which are due from the Borrower to,
or which otherwise arise from any transaction by the Borrower with, any
Affiliate.
"Interest Coverage Ratio" means, for the Borrower for any period,
the ratio of (i) EBITDA for such period to (ii) total cash interest expense
during such period.
"Interest Period" means, as to any LIBOR Rate Loan, the period
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and
ending on the date one, two, or three months thereafter as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Rate Loan
that begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Stated
Termination Date.
"Interest Rate" means each or any of the interest rates, including
the Default Rate, set forth in Section 3.1.
"Inventory" means all of the Borrower's now owned and hereafter
acquired inventory, goods and merchandise, wherever located, to be furnished
under any contract of service or held for sale or lease, all returned goods, raw
materials, other materials and supplies of any kind, nature or description which
are or might be consumed in the Borrower's business or used in connection with
the packing, shipping, advertising, selling or finishing of such goods,
merchandise and such other personal property, and all documents of title or
other documents representing them.
"IRS" means the Internal Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Latest Projections" means: (a) on the Closing Date and
thereafter until the Agent receives new projections pursuant to Section 7.2(f),
the projections of the Borrower's financial condition, results of operations,
and cash flow, for the period commencing on November 4, 1996 and ending on
November 2, 1997 and delivered to the Agent prior to the Closing Date; and
(b) thereafter, the projections most recently received by the Agent pursuant to
Section 7.2(f).
"Lender" and "Lenders" have the meanings specified in the
introductory paragraph hereof and shall include the Agent to the extent of any
Agent Advance outstanding and BABC to the extent of any BABC Loan outstanding;
provided that no such Agent Advance or BABC Loan shall be taken into account
in determining any Lender's Pro Rata Share.
"Letter of Credit" means a letter of credit issued or caused to be
issued for the account of the Borrower pursuant to Section 2.4.
"Letter of Credit Fee" has the meaning specified in Section 3.6.
"Letter of Credit Subfacility" means that portion of the Maximum
Revolver Amount available for the issuance of Letters of Credit in an aggregate
amount outstanding at any time not to exceed $10,000,000.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR
Rate Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/1000th of 1.0%) determined by the Agent as
follows:
LIBOR
LIBOR = --------------------------------------
1.00 - Eurodollar Reserve Precentage
Where,
"Eurodollar Reserve Percentage" means for any
day for any Interest Period the maximum reserve
percentage (expressed as a decimal, rounded upward
to the next 1/100th of 1%) in effect on such day
(whether or not applicable to any Lender) under
regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental
or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum
(rounded upward to the next 1/16th of 1%) notified
to the Agent by Bank of America as the rate of
interest at which dollar deposits in the
approximate amount of the Loan to be made or
continued as, or converted into, a LIBOR Rate Loan
and having a maturity comparable to such Interest
Period would be offered by Bank of America's
applicable lending office to major banks in the
London eurodollar market at approximately 11:00
a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
"LIBOR Rate Loans" means, collectively, the LIBOR Revolving Loans
and the LIBOR Term Loans.
"LIBOR Revolving Loan" means a Revolving Loan during any period in
which it bears interest based on the LIBOR Rate.
"LIBOR Term Loan" means any portion of a Term Loan during any
period in which such portion bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting property.
"Loan Account" means any loan account of the Borrower established
and maintained by the Agent on its books in connection with the transactions
contemplated by this Agreement and the other Loan Documents.
"Loan Documents" means this Agreement, the Term Loan Notes, the
Patent and Trademark Agreements, the Pledge Agreement, the Mortgages, the Fee
Agreement, the Subordination Agreement, all documents pertaining to any Credit
Support, and any other agreements, instruments, and documents heretofore, now or
hereafter evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, or any other aspect of the transactions
contemplated by this Agreement.
"Loans" means, collectively, all loans, advances and participation
in Letters of Credit and Credit Support provided for in Article 2.
"Majority Lenders" means at any time Lenders whose Pro Rata shares
aggregate more than 66 2/3% of the Commitments or, if no Commitments shall then
be in effect, Lenders who hold more than 66 2/3% of the aggregate principal
amount of the Loans then outstanding.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Borrower or the
Collateral; (b) a material impairment of the ability of the Borrower to perform
under any Loan Document and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Borrower of any Loan Document.
"Maximum Rate" has the meaning specified in Section 3.3.
"Maximum Revolver Amount" means, at any time, $85,000,000.
"MIS Expenditures" means any deferred and capitalized cash
expenditures made by the Borrower in connection with the acquisition and
development of computer hardware and software for the Borrower's management
information systems.
"Mortgages" means: (a) each Mortgage, Security Agreement, and
Assignments of Leases and Rents dated the date hereof between the Borrower and
the Agent and delivered to the Agent; and (b) all other real property mortgages,
leasehold mortgages, assignments of leases, mortgage deeds, deeds of trust,
deeds to secure debt, security agreements, and other similar instruments
hereafter entered into between the Borrower and the Agent which provide the
Agent a lien, for the benefit of the Agent and Lenders, on or other interest in
any portion of the Premises or the Real Estate or which relate to any such Lien
or interest.
"Multi-employer Plan" means a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by the Borrower or any
ERISA Affiliate.
"Net Amount of Eligible Accounts" means, at any time, the gross
amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding or available.
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
"Notice of Conversion/Continuation" has the meaning specified in
Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by the Borrower to
the Agent and/or any Lender, arising under or pursuant to this Agreement or any
of the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment from others, and any participation by the Agent and/or any Lender in
the Borrower's debts owing to others), absolute or contingent, due or to become
due, primary or secondary, as principal or guarantor, and including, without
limitation, all principal, interest, charges, expenses, fees, attorneys' fees,
filing fees and any other sums chargeable to the Borrower hereunder or under any
of the other Loan Documents. "Obligations" includes, without limitation, (a)
all debts, liabilities, and obligations now or hereafter owing from the Borrower
to the Agent and/or any Lender under or in connection with the Letters of Credit
or Credit Support, (b) all debts, liabilities and obligations now or hereafter
owing from the Borrower to the Agent and Lenders arising from or related to ACH
Transactions and (c) all interest and all other amounts referred to above, on
the terms provided, accruing after the filing of any proceeding under any
bankruptcy, insolvency, reorganization or similar law.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other Loan
Documents.
"Participant" means any Person who shall have been granted the
right by any Lender to participate in the financing provided by such Lender
under this Agreement, and who shall have entered into a participation agreement
in form and substance satisfactory to such Lender.
"Patent and Trademark Agreements" means the Patent Security
Agreement and the Trademark Security Agreement, each dated as of the date
hereof, executed and delivered by the Borrower to the Agent to evidence and
perfect the Agent's security interest in the Borrower's present and future
patents, trademarks, and related licenses and rights, for the benefit of the
Agent and the Lenders.
"Payment Account" means each blocked bank account established
pursuant to Section 6.9, to which the funds of the Borrower (including, without
limitation, proceeds of Accounts and other Collateral) are deposited or
credited, and which is maintained in the name of the Borrower on terms
reasonably acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, the aggregate
principal amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent which have not yet been advanced.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower or any ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multi-employer Plan has made contributions at
any time during the immediately preceding five (5) plan years.
"Permitted Liens" means:
(i) Liens existing on the Closing Date and described on
Schedule 1.1(c);
(ii) Liens for taxes, assessments or other charges, the
non-payment of which is permitted under Section 9.1.
(iii) the Agent's Liens;
(iv) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than Liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(v) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons created in
the ordinary course of business and arising in respect of claims, the non-
payment of which is permitted under Section 9.1.
(vi) reservations, exceptions, encroachments, easements,
rights of way, covenants running with the land, and other similar title
exceptions or encumbrances affecting any Real Estate; provided that they do not
in the aggregate materially detract from the value of the Real Estate or
materially interfere with its use in the ordinary conduct of the Borrower's
business;
(vii) judgment and other similar Liens arising in connection with
court proceedings to the extent the attachment or enforcement of such Liens
would not result in an Event of Default hereunder;
(viii) any interest or title of a lessor, or secured by a
lessor's interest, under any lease permitted by this Agreement;
(ix) Liens (including the interest of a lessor under a Capital
Lease) to which any Property is subject at the time of the Borrower's
acquisition thereof or within 12 months thereafter, securing Debt for Borrowed
Money permitted under Section 9.13 arising in respect of, or incurred to
finance, the purchase or lease of such Property; provided that in each case, (w)
such Lien does not extend or cover or include any other Property of the
Borrower, (x) the fair market value of the Property subject to such Lien is no
less than the principal amount of the Debt for Borrowed Money to be secured by
such Lien, (y) such Lien secures only such permitted Debt for Borrowed Money and
no other Debt for Borrowed Money of the Borrower and (z) such Lien is promptly
released upon the payment in full of such Debt for Borrowed Money;
(x) to the extent Debt for Borrowed Money secured thereby is
permitted to be extended, renewed, replaced or refinanced pursuant to Section
9.13, a future Lien upon any Property which is subject to a Lien described in
clause (ix) above, if such future Lien attaches only to the same Property,
secures only such permitted extensions, renewals, replacements or refinancings
and is of like quality, character and extent.
"Permitted Rentals" has the meaning specified in Section 9.24.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
Governmental Authority, or any other entity.
"Plan of Reorganization" means the Borrower's First Amended Plan
of Reorganization, dated May 14, 1997, as filed with and confirmed by order of
the Bankruptcy Court.
"Pledge Agreement" means the pledge agreement, dated as of the
date hereof, executed and delivered by the Borrower, as pledgor, to the Agent,
as pledgee, substantially in the form of Exhibit I, to evidence the Agent's
security interest in the Restricted Investments constituting promissory notes or
securities and rights related thereto, for the benefit of the Agent and the
Lenders.
"Premises" means the land identified by addresses on Schedule
8.12, together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which the Borrower
has any interests on the Closing Date.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments, or if no Commitments are outstanding, a
fraction (expressed as a percentage), the numerator of which is the amount of
Obligations owed to such Lender and the denominator of which is the aggregate
amount of the Obligations owed to the Lenders.
"Property" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by the Borrower, including, without limitation, the
Borrower's Equipment, Inventory, and Real Estate.
"Proprietary Rights" means all of the Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, service marks, trade names, trade styles, patent, trademark and
service mark applications, and all licenses and rights related to any of the
foregoing, including, without limitation, those patents, trademarks, service
marks, trade names and copyrights set forth on Schedule 8.13 hereto, and all
other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, and
all rights to sue for past, present and future infringement of any of the
foregoing.
"Real Estate" means all of the present and future interests of the
Borrower, as owner, lessee, or otherwise, in the Premises, including, without
limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Rentals" has the meaning specified in Section 9.24.
"Reorganization Charges" means all expenses properly classified as
reorganization items in accordance with GAAP, including, without limitation, all
fees, costs and expenses, including, without limitation, legal and other
professional fees and expenses, incurred by the Borrower in connection with the
Plan of Reorganization and the transactions contemplated thereby.
"Reportable Event" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, president
or chief financial officer of the Borrower, or any other officer having
substantially the same authority and responsibility; or, with respect to
compliance with financial covenants and the preparation of the Borrowing Base
Certificate, the chief financial officer, treasurer or controller of the
Borrower, or any other officer having substantially the same authority and
responsibility.
"Restricted Investment" means any acquisition of property by the
Borrower in exchange for cash or other property, whether in the form of an
acquisition of stock, debt, or other indebtedness or obligation, or the purchase
or acquisition of any other property, or a loan, advance, capital contribution,
or subscription, except acquisitions of the following: (a) Property to be used
in the business of the Borrower so long as the acquisition costs thereof
constitute Capital Expenditures or MIS Expenditures permitted hereunder; (b)
Inventory in the ordinary course of business; (c) current assets arising from
the sale or lease of goods or the rendition of services in the ordinary course
of business of the Borrower; (d) acquisitions of Property in the ordinary course
of business consistent with past practices, other than acquisitions of stock,
debt or all or any material amount of the assets of another Person; (e)
Restricted Investments consisting of advances to employees of the Borrower for
travel expenses, relocation and similar purposes in the ordinary course of
business in amounts not to exceed $150,000 to any individual employee at any
time outstanding or $750,000 to all employees in the aggregate at any time
outstanding; (f) Restricted Investments arising from the conversion of Accounts
which are over ninety (90) days past due and in any event are not Eligible
Accounts into (i) securities consisting of promissory notes if the aggregate
face value of such Accounts with respect to any Account Debtor at any time held
as such securities does not exceed $1 million and the aggregate face value of
all such Accounts held as such securities does not exceed $3 million outstanding
at any one time and (ii) securities consisting of a combination of promissory
notes and capital stock of the Account Debtors if the aggregate face value of
such Accounts with respect to any one Account Debtor at any time held as such
securities does not exceed $500,000 and the aggregate face value of all such
Accounts at any time held as such securities does not exceed $2 million;
provided that in each case the securities into which such Accounts are converted
shall be pledged and, upon the Agent's request, delivered to the Agent, for the
benefit of the Lenders, in a manner reasonable satisfactory to the Agent; (g)
Restricted Investments, in addition to the Restricted Investments permitted by
the other subdivisions of this definition other than as described in subdivision
(f), in an amount not to exceed $3 million in the aggregate and (h) if no
Revolving Loans are then outstanding, (i) direct obligations of the United
States of America, or any agency thereof, or obligations guaranteed by the
United States of America, provided that such obligations mature within one year
from the date of acquisition thereof; (ii) certificates of deposit maturing
within one year from the date of acquisition, bankers' acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States or
any state thereof having capital and surplus aggregating at least $100,000,000;
and (iii) commercial paper given a rating of "A2" or better by Standard & Poor's
Ratings Group or "P2" or better by Moody's Investors Service, Inc. and maturing
not more than 90 days from the date of creation thereof;
"Revolving Credit Facility" has the meaning specified in Section
2.1.
"Revolving Credit Commitment" means, with respect to each Lender,
the amount set forth beside such Lender's name under the heading "Revolving
Credit Commitment" on the signature pages of this Agreement or in the Assignment
and Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 13.3, as such Revolving Credit
Commitment may be adjusted from time to time in accordance with the provisions
of Section 13.3.
"Revolving Loans" has the meaning specified in Section 2.2 and
includes each Agent Advance and BABC Loan.
"Settlement" and "Settlement Date" have the meanings specified
in Section 2.2(j)(i).
"Solvent" means when used with respect to any Person that at the
time of determination:
(i) the assets of such Person, at a fair valuation, are in
excess of the total amount of its debts (including, without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is
greater than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and
(iv) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit other than a
Documentary Letter of Credit.
"Stated Termination Date" means July 23, 2000.
"Subordination Agreement" means the subordination agreement dated
as of the date hereof between the Agent and the Indenture Trustee, and consented
to by the Borrower, substantially in the form of Exhibit H, with respect to the
subordination of the Debt evidenced by the Deferred Interest Notes to the
Obligations.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof.
"Supporting Letter of Credit" has the meaning specified in Section
2.4(j).
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Lender's net income, or the net income of a lending office of such Lender
or the Agent, and all taxes on doing business or taxes measured by or imposed on
the overall capital or net worth of any Lender or the Agent, or a lending office
of either, in each case imposed by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Agent, as the
case may be, is organized or maintains a lending office or by reason of any
connection between the jurisdiction imposing such tax and such Lender or its
lending office other than a connection arising solely from such Lender having
executed, delivered or performed its obligations under, or received payment
under or enforced this Agreement or any Loan Document.
"Term Loan" and "Term Loans" have the meanings specified in
Section 2.3(a).
"Term Loan Commitment" means, with respect to each Lender, the
amount set forth beside such Lender's name under the heading "Term Loan
"Commitment" on the signature pages of this Agreement or in the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of Section 13.3, as such Term Loan Commitment may be
adjusted from time to time in accordance with the provisions of Section 13.3.
"Term Loan Note" and "Term Loan Notes" have the meanings specified
in Section 2.3(c).
"Termination Date" means the earliest to occur of (i) the Stated
Termination Date, (ii) the date the Total Facility is terminated either by the
Borrower pursuant to Article IV or by the Majority Lenders pursuant to Section
11.2, and (iii) the date this Agreement is otherwise terminated in accordance
with its terms for any reason whatsoever.
"Total Facility" has the meaning specified in Section 2.1.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of New York or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Underwriting Fee" has the meaning specified in Section 3.4.
"Unfunded Pension Liability" means the excess of an ERISA Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that ERISA Plan's assets, determined in accordance with the assumptions used
for funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"Unused Letter of Credit Subfacility" means an amount equal to the
Letter of Credit Subfacility minus the sum of (a) the aggregate undrawn amount
of all outstanding Letters of Credit plus (b) the aggregate unpaid reimbursement
obligations with respect to all Letters of Credit.
"Unused Line Fee" has the meaning specified in Section 3.5.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Interpretive Provisions. The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and Subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including," the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative
and shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lenders' involvement in their preparation.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
---------------------------
2.1 Total Facility. Subject to all of the terms and conditions of
this Agreement, the Lenders severally agree to make available a total credit
facility of up to $116,450,000 (the "Total Facility") for the Borrower's use
from time to time during the term of this Agreement. The Total Facility shall
be comprised of: (a) a revolving line of credit consisting of revolving loans
and letters of credit (the "Revolving Credit Facility") up to the Maximum
Revolver Amount, as described in Sections 2.2 and 2.4; and (b) the Term Loans
described in Section 2.3.
2.2 Revolving Loans. (a) Amounts. Subject to the
satisfaction of the conditions precedent set forth in Article 10,
each Lender severally agrees, upon the Borrower's request from time to time on
any Business Day during the period from the Closing Date to the Termination
Date, to make revolving loans (the "Revolving Loans") to the Borrower and
participate (as provided for in Section 2.4(f)) in the reimbursement obligations
under the Credit Support and Letters of Credit, in amounts not to exceed at any
time (except for BABC with respect to BABC Loans and the Agent with respect to
Agent Advances) the lesser of (i) such Lender's Pro Rata Share of the
Availability and (ii) such Lender's Revolving Credit Commitment minus such
Lender's Pro Rata Share of the Aggregate Revolver Outstandings at such time. If
the Aggregate Revolver Outstandings exceed the Availability (with the
Availability for this purpose calculated as if the Aggregate Revolver
Outstandings were zero), the Lenders may refuse to make or otherwise restrict
the making of Revolving Loans as the Lenders determine until such excess has
been eliminated, subject to the Agent's authority, in its sole discretion, to
make Agent Advances pursuant to the terms of Section 2.2(i).
(b) Procedure for Borrowing. Each Borrowing shall be
made upon the Borrower's irrevocable written notice delivered to the Agent in
the form of a notice of borrowing (Notice of Borrowing"), in substantially the
form of Exhibit E, together with a Borrowing Base Certificate reflecting
sufficient Availability, (which must be received by the Agent prior to 11:00
a.m. (New York City time) (x) three Business Days prior to the requested Funding
Date, in the case of LIBOR Rate Loans and (y) no later than 12:00 noon (New York
time) on the requested Funding Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing;
(B) the requested Funding Date, which shall be a Business
Day;
(C) whether the Revolving Loans requested are to be Base
Rate Revolving Loans or LIBOR Revolving Loans; and
(D) the duration of the Interest Period if the requested
Revolving Loans are to be LIBOR Revolving Loans. If the Notice of
Borrowing fails to specify the duration of the Interest Period for any
Borrowing comprised of LIBOR Rate Loans, such Interest Period shall be one
month;
provided, however, that with respect to any Borrowing to be made on the Closing
Date, such Borrowing will consist of Base Rate Revolving Loans only.
(ii) With respect to any request for Base Rate Revolving
Loans, in lieu of delivering the above-described Notice of Borrowing the
Borrower may give the Agent telephonic notice of such request by the required
time, with such telephonic notice to be confirmed in writing within 24 hours of
the giving of such notice but the Agent shall be entitled to rely on the
telephonic notice in making such Revolving Loans.
(c) Reliance upon Authority. On or prior to the
Closing Date and thereafter prior to any change with respect to any of the
information contained in the following clauses (i) and (ii), the Borrower shall
deliver to the Agent a writing setting forth (i) the account of the Borrower to
which the Agent is authorized to transfer the proceeds of the Revolving Loans
requested pursuant to this Section 2.2, and (ii) the names of the persons
authorized to request Revolving Loans on behalf of the Borrower, and shall
provide the Agent with a specimen signature of each such person. The Agent
shall be entitled to rely conclusively on such person's authority to request
Revolving Loans on behalf of the Borrower, the proceeds of which are to be
transferred to any of the accounts specified by the Borrower pursuant to the
immediately preceding sentence, until the Agent receives written notice to the
contrary. The Agent shall have no duty to verify the identity of any individual
representing him or herself as one of the employees authorized by the Borrower
to make such requests on its behalf.
(d) No Liability. The Agent shall not incur any
liability to the Borrower as a result of acting upon any notice referred to in
Sections 2.2(b) and (c), which notice the Agent believes in good faith to have
been given by an officer duly authorized by the Borrower to request Revolving
Loans on its behalf or for otherwise acting in good faith under this Section
2.2, and the crediting of Revolving Loans to the Borrower's deposit account, or
transmittal to such Person as the Borrower shall direct, shall conclusively
establish the obligation of the Borrower to repay such Revolving Loans as
provided herein.
(c) Notice Irrevocable. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made pursuant to Section 2.2(b)
shall be irrevocable and the Borrower shall be bound to borrow the funds
requested therein in accordance therewith.
(d) Agent's Election. Promptly after receipt of a
Notice of Borrowing (or telephonic notice in lieu thereof) pursuant to Section
2.2(b), the Agent shall elect, in its discretion, (i) to have the terms of
Section 2.2(g) apply to such requested Borrowing, or (ii) to request BABC to
make a BABC Loan pursuant to the terms of Section 2.2(h) in the amount of the
requested Borrowing; provided, however, that if BABC declines in its sole
discretion to make a BABC Loan pursuant to Section 2.2(h), the Agent shall elect
to have the terms of Section 2.2(g) apply to such requested Borrowing.
(g) Making of Revolving Loans. In the event that the
Agent shall elect to have the terms of this Section 2.2(g) apply to
a requested Borrowing as described in Section 2.2(f), then promptly
after receipt of a Notice of Borrowing or telephonic notice pursuant to Section
2.2(b), the Agent shall notify the Lenders by telecopy, telephone or other
similar form of transmission, of the requested Borrowing. Each Lender shall
make the amount of such Lender's Pro Rata Share of the requested Borrowing
available to the Agent in same day funds, to such account of the Agent as the
Agent may designate, not later than 1:00 p.m. (New York time) on the Funding
Date applicable thereto. After the Agent's receipt of the proceeds of such
Revolving Loans, upon satisfaction of the applicable conditions precedent set
forth in Article 10, the Agent shall make the proceeds of such Revolving Loans
available to the Borrower on the applicable Funding Date by transferring same
day funds equal to the proceeds of such Revolving Loans received by the Agent to
the account of the Borrower, designated in writing by the Borrower and
acceptable to the Agent; provided, however, that the amount of Revolving Loans
so made on any date shall in no event exceed the Availability of the Borrower on
such date.
(ii) Unless the Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to the Agent for
the account of the Borrower the amount of that Lender's Pro Rata Share of the
Borrowing, the Agent may assume that each Lender has made such amount available
to the Agent in immediately available funds on the Funding Date and the Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is
so made available, such payment to the Agent shall constitute such Lender's Loan
on the date of Borrowing for all purposes of this Agreement. If such amount is
not made available to the Agent on the Business Day following the Funding Date,
the Agent will notify the Borrower of such failure to fund and, upon demand by
the Agent, the Borrower shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the Interest Rate applicable at the
time to the Loans comprising such Borrowing. The failure of any Lender to make
any Loan on any Funding Date (any such Lender, prior to the cure of such
failure, being hereinafter referred to as a "Defaulting Lender") shall not
relieve any other Lender of any obligation hereunder to make a Loan on such
Funding Date, but no Lender shall be responsible for the failure of any other
Lender to make the Loan to be made by such other Lender on any Funding Date.
(iii) The Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrower to the Agent for the Defaulting Lender's
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by the Agent. The Agent may hold and, in its discretion,
re-lend to Borrower the amount of all such payments received or retained by it
for the account of such Defaulting Lender. Any amounts so re-lent to the
Borrower shall bear interest at the rate applicable to Base Rate Revolving Loans
and for all other purposes of this Agreement shall be treated as if they were
Revolving Loans, provided, however, that for purposes of voting or consenting to
matters with respect to the Loan Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Commitment shall be deemed to be zero (-0-). Until a Defaulting Lender cures
its failure to fund its Pro Rata Share of any Borrowing (1) such Defaulting
Lender shall not be entitled to any portion of the Unused Line Fee and (2) the
Unused Line Fee shall accrue in favor of the Lenders which have funded their
respective Pro Rata Shares of such requested Borrowing, shall be allocated among
such performing Lenders ratably based upon their relative Commitments, and shall
be calculated based upon the average amount by which the aggregate Commitments
of such performing Lenders exceeds the sum of outstanding Revolving Loans and
the undrawn face amount of all outstanding Letters of Credit. This section
shall remain effective with respect to such Lender until such time as the
Defaulting Lender shall no longer be in default of any of its obligations under
this Agreement. The terms of this Section shall not be construed to increase or
otherwise affect the Commitment of any Lender, or relieve or excuse the
performance by Borrower of its duties and obligations hereunder.
(h) Making of BABC Loans. In the event the Agent shall elect,
with the consent of BABC, to have the terms of this Section 2.2(h) apply to a
requested Borrowing as described in Section 2.2(f), BABC shall make a Revolving
Loan in the amount of such Borrowing (any such Revolving Loan made solely by
BABC pursuant to this Section 2.2(h) being referred to as a "BABC Loan" and such
Revolving Loans being referred to collectively as "BABC Loans") available to the
Borrower on the Funding Date applicable thereto by transferring same day funds
to an account of the Borrower, designated in writing by the Borrower and
acceptable to the Agent. Each BABC Loan is a Revolving Loan hereunder and shall
be subject to all the terms and conditions applicable to other Revolving Loans
except that all payments thereon shall be payable to BABC solely for its own
account (and for the account of the holder of any participation interest with
respect to such Revolving Loan). The Agent shall not request BABC to make any
BABC Loan if (i) the Agent shall have received written notice from any Lender,
or otherwise has actual knowledge, that one or more of the applicable conditions
precedent set forth in Article 10 will not be satisfied on the requested Funding
Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed
the Availability on such Funding Date. BABC shall not otherwise be required to
determine whether the applicable conditions precedent set forth in Article 10
have been satisfied or the requested Borrowing would exceed the Availability on
the Funding Date applicable thereto prior to making, in its sole discretion, any
BABC Loan.
(ii) The BABC Loans shall be repayable on demand and
secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving Loans
from time to time.
(i) Agent Advances. Subject to the limitations set
forth in the provisos contained in this Section 2.2(i), the Agent
is hereby authorized by the Borrower and the Lenders, from time to time in the
Agent's sole discretion, (1) after the occurrence of a Default or an Event of
Default, or (2) at any time that any of the other applicable conditions
precedent set forth in Article 10 have not been satisfied, to make Revolving
Loans to the Borrower on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (A) to preserve or
protect the Collateral, or any portion thereof, (B) to enhance the likelihood
of, or maximize the amount of, repayment of the Loans and other Obligations, or
(C) to pay any other amount chargeable to the Borrower pursuant to the terms of
this Agreement, including, without limitation, costs, fees and expenses as
described in Section 15.7 (any of the advances described in this Section 2.2(i)
being hereinafter referred to as "Agent Advances"); provided, that
the Majority Lenders may at any time revoke the Agent's authorization contained
in this Section 2.2(i) to make Agent Advances, any such revocation to be in
writing and to become effective prospectively upon the Agent's receipt thereof;
(ii) The Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving Loans
from time to time. The Agent shall notify each Lender in writing of each such
Agent Advance.
(j) Settlement. It is agreed that each Lender's funded portion
of the Revolving Loan is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Revolving Loans.
Notwithstanding such agreement, the Agent, BABC, and the other Lenders agree
(which agreement shall not be for the benefit of or enforceable by the Borrower)
that in order to facilitate the administration of this Agreement and the other
Loan Documents, settlement among them as to the Revolving Loans, the BABC Loans
and the Agent Advances shall take place on a periodic basis in accordance with
the following provisions:
(i) The Agent shall request settlement ("Settlement") with
the Lenders on a weekly basis, or on a more frequent basis if so determined by
the Agent, (1) on behalf of BABC, with respect to each outstanding BABC Loan,
(2) for itself, with respect to each Agent Advance, and (3) with respect to
collections received, in each case, by notifying the Lenders by telecopy,
telephone or other similar form of transmission, of such requested Settlement,
no later than 11:00 a.m. (New York time) on the date of such requested
Settlement (the "Settlement Date"). Each Lender (other than BABC, in the case of
BABC Loans) shall make the amount of such Lender's Pro Rata Share of the
outstanding principal amount of the BABC Loans and Agent Advances with respect
to which Settlement is requested available to the Agent, for itself or for the
account of BABC, in same day funds, to such account of the Agent as the Agent
may designate, not later than 1:00 p.m. (New York time), on the Settlement Date
applicable thereto, regardless of whether the applicable conditions precedent
set forth in Article 10 have then been satisfied. Such amounts made available
to the Agent shall be applied against the amounts of the applicable BABC Loan or
Agent Advance and, together with the portion of such BABC Loan or Agent Advance
representing BABC's Pro Rata Share thereof, shall constitute Revolving Loans of
such Lenders. If any such amount is not made available to the Agent by any
Lender on the Settlement Date applicable thereto, the Agent shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
the Federal Funds Rate for the first three (3) days from and after the
Settlement Date and thereafter at the Interest Rate then applicable to the
Revolving Loans.
(ii) Notwithstanding the foregoing, not more than one (1)
Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a BABC Loan or Agent Advance),
each other Lender shall irrevocably and unconditionally purchase and receive
from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by any
Lender, the Agent shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Federal Funds Rate for the first
three (3) days from and after such demand and thereafter at the Interest Rate
then applicable to the Revolving Loans.
(iii) From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any BABC Loan or Agent
Advance pursuant to subsection (ii) above, the Agent shall promptly distribute
to such Lender at such address as such Lender may request in writing, such
Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such BABC Loan or
Agent Advance.
(iv) Between Settlement Dates, the Agent, to the extent no
Agent Advances or BABC Loans are outstanding, may pay over to BABC any payments
received by the Agent, which in accordance with the terms of this Agreement
would be applied to the reduction of the Revolving Loans, for application to
BABC's other outstanding Revolving Loans. If, as of any Settlement Date,
collections received since the then immediately preceding Settlement Date have
been applied to BABC's other outstanding Revolving Loans other than to BABC
Loans or Agent Advances, as provided for in the previous sentence, BABC shall
pay to the Agent for the accounts of the Lenders, to be applied to the
outstanding Revolving Loans of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its Pro
Rata Share of the Revolving Loans. During the period between Settlement Dates,
BABC with respect to BABC Loans, the Agent with respect to Agent Advances, and
each Lender with respect to the Revolving Loans other than BABC Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the actual average daily amount of funds employed by
BABC, the Agent and the other Lenders.
(k) Notation. The Agent shall record on its
books the principal amount of the Revolving Loans owing to each Lender,
including the BABC Loans owing to BABC, and the Agent Advances owing to the
Agent, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Revolving Loans in its books and records, including
computer records, such books and records constituting rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(l) Lenders' Failure to Perform. All Loans (other
than BABC Loans and Agent Advances) shall be made by the Lenders simultaneously
and in accordance with their Pro Rata Shares. It is understood that (a) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Loans hereunder, nor shall any Commitment of any Lender
be increased or decreased as a result of any failure by any other Lender to
perform its obligation to make any Loans hereunder, (b) no failure by any Lender
to perform its obligation to make any Loans hereunder shall excuse any other
Lender from its obligation to make any Loans hereunder, and (c) the obligations
of each Lender hereunder shall be several, not joint and several.
2.3 Term Loans.
(a) Amounts of Term Loans. Each Lender severally
agrees to make a term loan (any such term loan being referred to as a "Term
Loan" and such term loans being referred to collectively as satisfaction of the
conditions precedent set forth in Article 10, in an amount equal to such
Lender's Term Loan Commitment. The Term Loans shall initially be Base Rate Term
Loans.
(b) Making of Term Loans. Each Lender shall make the
amount of such Lender's Term Loan available to the Agent in same day funds, to
such account of the Agent as the Agent may designate, not later than 11:00 a.m.
(New York time) on the Closing Date. After the Agent's receipt of the proceeds
of such Term Loans, upon satisfaction of the conditions precedent set forth in
Article 10, the Agent shall make the proceeds of such Term Loans available to
the Borrower on the Closing Date by transferring same day funds equal to the
proceeds of such Term Loans received by the Agent to an account of the Borrower
designated in writing by the Borrower or as the Borrower shall otherwise
instruct in writing.
(c) Term Loan Notes. The Borrower shall execute and
deliver to the Agent on behalf of each Lender, on the Closing Date, a promissory
note, substantially in the form of Exhibit A attached hereto and made a part
hereof (such promissory notes, together with any new notes issued pursuant to
Section 13.3(d) upon the assignment of any portion of any Lender's Term Loan,
being hereinafter referred to collectively as the "Term Loan Notes" and
each of such promissory notes being hereinafter referred to individually as a
"Term Loan Note"), to evidence such Lender's Term Loan, in an original principal
amount equal to the amount of such Lender's Term Loan Commitment and with other
appropriate insertions. The Term Loan Notes delivered to the Agent on behalf of
each Lender shall be dated the Closing Date and stated to mature in thirty-six
(36) monthly installments. Each of the first thirty-five (35) installments of
principal shall be in an amount equal to such Lender's Pro Rata Share of
$374,405 and shall be payable on the last day of each month, commencing on the
last day of the month following the month in which the Closing Date occurs and
ending on the last day of the 35th month following the month in which the
Closing Date occurs, and the final installment of principal shall be in an
amount equal to the then remaining principal balance of such Lender's Term
Loans, and shall be payable on the Termination Date. Each such installment
shall be payable to the Agent for the account of the applicable Lender.
(d) Notation and Endorsement. The Agent shall record on its
books the principal amount of the Term Loans owing to each Lender from time to
time. In addition, each Lender is authorized, at such Lender's option, to note
the date and amount of each payment or prepayment of principal of such Lender's
Term Loans in its books and records, such books and records constituting
rebuttably presumptive evidence, absent manifest error, of the accuracy of the
information contained therein. Prior to the transfer of a Term Loan Note, the
applicable Lender shall endorse on the reverse side thereof the outstanding
principal balance of the Term Loan evidenced thereby. Failure by such Lender to
make such notation or endorsement shall not affect the obligations of the
Borrower under such Term Loan Note or any of the other Loan Documents.
2.4 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms
and conditions of this Agreement, and in reliance upon the representations and
warranties of the Borrower herein set forth, the Agent agrees to take reasonable
steps to cause to be issued Letters of Credit for the account of the Borrower
and to provide credit support or other enhancement to banks acceptable to Agent,
which issue Letters of Credit for the account of the Borrower (any such credit
support or enhancement being herein referred to as a "Credit Support") in
accordance with this Section 2.4 from time to time during the term of this
Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall
not have any obligation to take steps to cause to be issued any Letter of Credit
or to provide Credit Support for any Letter of Credit at any time if: (1) the
maximum undrawn amount of the requested Letter of Credit is greater than the
Unused Letter of Credit Subfacility at such time; (2) the maximum undrawn amount
of the requested Letter of Credit and all commissions, fees, and charges due
from the Borrower in connection with the opening thereof exceed the Availability
of the Borrower at such time; (3) such Letter of Credit has an expiration date
later than the earlier to occur of (i) the Stated Termination Date and (ii) (x)
the date which is one year from the date of issuance thereof, in the case of
Standby Letters of Credit (y) the date which is 180 days from the date of
issuance thereof, in the case of Documentary Letters of Credit.
(c) Other Conditions. In addition to being subject to
the satisfaction of the applicable conditions precedent contained in Article 10,
the obligation of the Agent to take reasonable steps to cause to be issued any
Letter of Credit or to provide Credit Support for any Letter of Credit is
subject to the following conditions precedent having been satisfied in a manner
satisfactory to the Agent:
(i) The Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such manner as such
proposed issuer may prescribe, an application in form and substance satisfactory
to such proposed issuer and the Agent for the issuance of the Letter of Credit
and such other documents as may be required pursuant to the terms thereof, and
the form and terms of the proposed Letter of Credit shall be satisfactory to the
Agent and such proposed issuer; and
(ii) As of the date of issuance, no order of any court,
arbitrator or Governmental Authority shall purport by its terms to enjoin or
restrain money center banks generally from issuing letters of credit of the type
and in the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed issuer of such Letter of Credit refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit.
(d) Issuance of Letters of Credit.
(i) Request for Issuance. The Borrower shall
give the Agent two (2) Business Days' prior written notice of the Borrower's
request for the issuance of a Letter of Credit. Such notice shall be
irrevocable and shall specify the original face amount of the Letter of Credit
requested, the effective date (which date shall be a Business Day) of issuance
of such requested Letter of Credit, whether such Letter of Credit may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit is to expire (which date shall be a Business Day), the purpose for which
such Letter of Credit is to be issued, and the beneficiary of the requested
Letter of Credit. The Borrower shall attach to such notice the proposed form of
the Letter of Credit.
(ii) Responsibilities of the Agent; Issuance. The
Agent shall determine, as of the Business Day immediately preceding the
requested effective date of issuance of the Letter of Credit set forth in the
notice from the Borrower pursuant to Section 2.4(d)(i), (i) the amount of the
applicable Unused Letter of Credit Subfacility and (ii) the Availability of the
Borrower as of such date. If (i) the undrawn amount of the requested Letter of
Credit is not greater than the applicable Unused Letter of Credit Subfacility
and (ii) the issuance of such requested Letter of Credit and all commissions,
fees, and charges due from the Borrower in connection with the opening thereof
would not exceed the Availability of the Borrower, the Agent shall take
reasonable steps to cause such issuer to issue the requested Letter of Credit on
such requested effective date of issuance.
(iii) Notice of Issuance. On each Settlement
Date the Agent shall give notice to each Lender of the issuance of all Letters
of Credit issued since the last Settlement Date.
(iv) No Extensions or Amendment. The Agent shall
not be obligated to cause any Letter of Credit to be extended or amended unless
the requirements of this Section 2.4(d) are met as though a new Letter of Credit
were being requested and issued. With respect to any Letter of Credit which
contains any "evergreen" or automatic renewal provision, each Lender shall be
deemed to have consented to any such extension or renewal unless any such Lender
shall have provided to the Agent, not less than 30 days prior to the last date
on which the applicable issuer can in accordance with the terms of the
applicable Letter of Credit decline to extend or renew such Letter of Credit,
written notice that it declines to consent to any such extension or renewal,
provided, that if all of the requirements of this Section 2.4 are met and no
Default or Event of Default exists, no Lender shall decline to consent to any
such extension or renewal.
(e) Payments Pursuant to Letters of Credit.
(i) Payment of Letter of Credit Obligations. The
Borrower agrees to reimburse the issuer for any draw under any Letter of Credit
and the Agent for the account of the Lenders upon any payment pursuant to any
Credit Support immediately upon demand, and to pay the issuer of the Letter of
Credit the amount of all other obligations and other amounts payable to such
issuer under or in connection with any Letter of Credit immediately when due,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against such issuer or any other Person.
(ii) Revolving Loans to Satisfy Reimbursement
Obligations. In the event that the issuer of any Letter of Credit
honors a draw under such Letter of Credit or the Agent shall have made any
payment pursuant to any Credit Support and the Borrower shall not have repaid
such amount to the issuer of such Letter of Credit or the Agent, as applicable,
pursuant to Section 2.4(e)(i), the Agent shall, upon receiving notice of such
failure, notify each Lender of such failure, and each Lender shall
unconditionally pay to the Agent, for the account of such issuer or the Agent,
as applicable, as and when provided hereinbelow, an amount equal to such
Lender's Pro Rata Share of the amount of such payment in Dollars and in same day
funds. If the Agent so notifies the Lenders prior to 2:00 p.m. (New York time)
on any Business Day, each Lender shall make available to the Agent the amount of
such payment, as provided in the immediately preceding sentence, on such
Business Day. Such amounts paid by the Lenders to the Agent shall constitute
Revolving Loans which shall be deemed to have been requested by the Borrower
pursuant to Section 2.2 as set forth in Section 4.7.
(f) Participation.
(i) Purchase of Participation. Immediately upon
issuance of any Letter of Credit in accordance with Section 2.4(d),
each Lender shall be deemed to have irrevocably and unconditionally purchased
and received without recourse or warranty, an undivided interest and
participation in the Letter of Credit or the Credit Support provided through the
Agent to such issuer in connection with the issuance of such Letter of Credit,
equal to such Lender's Pro Rata Share of the face amount of such Letter of
Credit or the amount of such Credit Support (including, without limitation, all
obligations of the Borrower with respect thereto, and any security therefor or
guaranty pertaining thereto).
(ii) Sharing of Reimbursement Obligation Payments.
Whenever the Agent receives a payment from the Borrower on account of
reimbursement obligations in respect of a Letter of Credit or Credit Support as
to which the Agent has previously received for the account of the issuer thereof
payment from a Lender pursuant to Section 2.4(e)(ii) the Agent shall promptly
pay to such Lender such Lender's Pro Rata Share of such payment from the
Borrower in Dollars. Each such payment shall be made by the Agent on the
Business Day on which the Agent receives immediately available funds paid to
such Person pursuant to the immediately preceding sentence, if received prior to
1:00 p.m. (New York time) on such Business Day and otherwise on the next
succeeding Business Day.
(iii) Obligations Irrevocable. The obligations of
each Lender to make payments to the Agent with respect to any Letter of Credit
or with respect to any Credit Support provided through the Agent with respect to
a Letter of Credit, and the obligations of the Borrower to make payments to the
Agent, for the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever , including, without limitation, any of
the following circumstances:
(A) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other
right which the Borrower may have at any time against a beneficiary named
in a Letter of Credit or any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), any Lender, the Agent,
the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between the Borrower or any other Person and the
beneficiary named in any Letter of Credit);
(C) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(E) the occurrence of any Default or Event of Default.
(g) Recovery or Avoidance of Payments. In the event
any payment by or on behalf of the Borrower received by the Agent with respect
to any Letter of Credit or Credit Support provided for any Letter of Credit (or
any guaranty by the Borrower or reimbursement obligation of the Borrower
relating thereto) and distributed by the Agent to the Lenders on account of
their respective participation therein is thereafter set aside, avoided or
recovered from the Agent in connection with any receivership, liquidation or
bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay to the
Agent their respective Pro Rata Shares of such amount set aside, avoided or
recovered, together with interest at the rate required to be paid by the Agent
upon the amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(i) Letter of Credit Fee. The Borrower agrees to
pay to the Agent with respect to each Letter of Credit, for the account of the
Lenders, the Letter of Credit Fee specified in, and in accordance with the terms
of, Section 3.6.
(ii) Issuer Fees and Charges. The Borrower shall
pay to the issuer of any Letter of Credit, or to the Agent, for the account of
the issuer of any such Letter of Credit, solely for such issuer's account, such
fees and other charges as are charged by such issuer for letters of credit
issued by it, including, without limitation, its standard fees for issuing,
administering, amending, renewing, paying and canceling letters of credit and
all other fees associated with issuing or servicing letters of credit, as and
when assessed, and all out-of-pocket expenses related to any such Letter of
Credit.
(i) Assumption of Risk; Exoneration; Power of
Attorney.
(i) Assumption of Risk by the Borrower. As among the
Borrower, the Lenders, and the Agent, the Borrower assumes all risks of the acts
and omissions of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the foregoing, the Lenders and the Agent shall not be responsible for: (A)
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any Person in connection with the application for and
issuance of and presentation of drafts with respect to any of the Letters of
Credit, even if it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any Letter of Credit to comply
duly with conditions required in order to draw upon such Letter of Credit; (D)
errors, omissions, interruptions, or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (E) errors in interpretation of technical terms; (F) any loss or
delay in the transmission or otherwise of any document required in order make a
drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or (H) any consequences arising from causes
beyond the control of the Lenders or the Agent, including, without limitation,
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto Governmental Authority. None of the foregoing shall affect,
impair or prevent the vesting of any rights or powers of the Agent or any Lender
under this Section 2.4(i).
(ii) Exoneration. In furtherance and extension,
and not in limitation, of the specific provisions set forth above, any action
taken or omitted by the Agent or any Lender under or in connection with any of
the Letters of Credit or any related certificates, if taken or omitted in good
faith and in the absence of gross negligence or willful misconduct, shall not
put the Agent or any Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to any such Person.
(iii) Power of Attorney. In connection with all
Inventory financed by Letters of Credit, the Borrower hereby appoints the Agent,
or the Agent's designee, as its attorney, with full power and authority: (a) to
sign and/or endorse the Borrower's name upon any warehouse or other receipts;
(b) to sign the Borrower's name on bills of lading and other negotiable and non-
negotiable documents; (c) to clear Inventory through customs in the Agent's or
the Borrower's name, and to sign and deliver to customs officials powers of
attorney in the Borrower's name for such purpose; (d) to complete in the
Borrower's or the Agent's name, any order, sale, or transaction, obtain the
necessary documents in connection therewith, and collect the proceeds thereof;
and (e) to do such other acts and things as are necessary in order to enable the
Agent to obtain possession of the Inventory and to obtain payment of the
Obligations. Neither the Agent nor its designee, as the Borrower's attorney,
will be liable for any acts or omissions, nor for any error of judgement or
mistakes of fact or law. This power, being coupled with an interest, is
irrevocable until all Obligations have been paid and satisfied.
(iv) Account Party. The Borrower hereby
authorizes and directs any issuer of a Letter of Credit to name the Borrower as
the "Account Party" therein and to deliver to the Agent all instruments,
documents and other writings and property received by the issuer pursuant to the
Letter of Credit, and to accept and rely upon the Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit or the application therefor.
(v) Control of Inventory. In connection with all
Inventory financed by Letters of Credit, the Borrower will, at the Agent's
request, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
the Agent holds a security interest to deliver them to the Agent and/or subject
to the Agent's order, and if they shall come into the Borrower's possession, to
deliver them, upon request, to the Agent in their original form. The Borrower
shall also, at the Agent's request, designate the Agent as the consignee on all
bills of lading and other negotiable and non-negotiable documents.
(j) Supporting Letter of Credit. If, notwithstanding
the provisions of Section 2.4(b) and Section 12.1 any Letter of
Credit is outstanding upon the termination of this Agreement, then upon such
termination the Borrower shall deposit with the Agent, for the ratable benefit
of the Agent and the Lenders, with respect to each Letter of Credit then
outstanding, a standby letter of credit (a "Supporting Letter of Credit") in
form and substance satisfactory to the Agent, issued by an issuer satisfactory
to the Agent in an amount equal to the greatest amount for which such Letter of
Credit may be drawn plus any fees and expenses associated with such Letter of
Credit, under which Supporting Letter of Credit the Agent is entitled to draw
amounts necessary to reimburse the Agent and the Lenders for payments made by
the Agent and the Lenders under such Letter of Credit or under any credit
support or enhancement provided through the Agent with respect thereto and any
fees and expenses associated with such Letter of Credit. Such Supporting Letter
of Credit shall be held by the Agent, for the ratable benefit of the Agent and
the Lenders, as security for, and to provide for the payment of, the aggregate
undrawn amount of such Letters of Credit remaining outstanding.
2.5 Automated Clearing House Transfers and Overdrafts. The
Borrower may request and the Agent may, in its sole and absolute discretion,
arrange for the Borrower to obtain from Bank of America ACH Transactions. The
Borrower acknowledges and agrees that the obtaining of ACH Transactions from
Bank of America (a) is in the sole and absolute discretion of Bank of America,
(b) is subject to all rules and regulations of the Bank, and (c) is due to Bank
of America relying on the indemnity of the Agent and the Lenders to Bank of
America with respect to all risks of loss associated with the ACH Transactions.
ARTICLE 3
INTEREST AND FEES
-----------------<PAGE>
3.1 Interest.
(a) Interest Rates. All outstanding Obligations shall
bear interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate or
the LIBOR Rate and Sections 3.1(a)(i), 3.1(a)(ii), 3.1(a)(iii), and 3.1(a)(iv)
as applicable, but not to exceed the Maximum Rate described in Section 3.3.
Subject to the provisions of Section 3.2, any of the Loans may be
converted into, or continued as, Base Rate Loans or LIBOR Rate Loans in the
manner provided in Section 3.2. If at any time Loans are outstanding with
respect to which notice has not been delivered to the Agent in accordance with
the terms of this Agreement specifying the basis for determining the interest
rate applicable thereto, then those Loans shall be Base Rate Loans and shall
bear interest at a rate determined by reference to the Base Rate until notice to
the contrary has been given to the Agent in accordance with this Agreement and
such notice has become effective. Except as otherwise provided herein, the
outstanding Obligations shall bear interest as follows:
(i) For all Base Rate Term Loans at a fluctuating per
annum rate equal to the Base Rate plus the Applicable Margin;
(ii) For all Base Rate Revolving Loans and other
Obligations (other than Base Rate Term Loans and LIBOR Rate Loans) at a
fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;
(iii) For all LIBOR Term Loans at a per annum rate equal to the
LIBOR Rate plus the Applicable Margin; and
(iv) For all LIBOR Revolving Loans at a per annum rate
equal to the LIBOR Rate plus the Applicable Margin.
Each change in the Base Rate shall be reflected in the interest rate described
in clauses (i) and (ii) above as of the effective date of such change. All
interest charges shall be computed on the basis of a year of 360 days and actual
days elapsed. Interest accrued on all Loans will be payable in arrears on the
first day of each month hereafter.
(b) Default Rate. If any Default or Event of
Default occurs and is continuing, then, while any such Default or Event of
Default is outstanding, all of the Obligations shall bear interest at the
Default Rate applicable thereto.
3.2 Conversion and Continuation Elections. (a) The Borrower
may, upon irrevocable written notice to the Agent in accordance with Subsection
3.2(b):
(i) elect, as of any Business Day, in the case of Base
Rate Loans to convert any such Loans (or any part thereof in an amount not less
than $5,000,000 in an integral multiple of $1,000,000 in excess thereof) into
LIBOR Rate Loans; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any LIBOR Rate Loans having Interest Periods expiring on
such day (or any part thereof in an amount not less than $5,000,000, or that is
in an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $5,000,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrower to continue such Loans as, and convert such Loans into, LIBOR
Rate Loans, as the case may be, shall terminate.
(b) The Borrower shall deliver a notice of conversion/
continuation ("Notice of Conversion/Continuation"), in substantially the form of
Exhibit F, to be received by the Agent not later than 11:00 a.m. (New York time)
at least three Business Days in advance of the Conversion/Continuation Date, if
the Loans are to be converted into or continued as LIBOR Rate Loans and
specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted or
renewed;
(iii) the type of Loans resulting from the proposed conversion or
continuation; and
(iv) the duration of the requested Interest Period,
provided, however, the Borrower may not select an Interest Period with respect
to any portion of the Term Loans which extends beyond an installment payment
date for the Term Loans unless, after giving effect to such election, the
portion of the Term Loans not subject to Interest Periods ending after such
installment payment date is equal to or greater than the principal due on such
installment payment date.
(c) If upon the expiration of any Interest Period applicable to
LIBOR Rate Loans, the Borrower has failed to select timely a new Interest Period
to be applicable to LIBOR Rate Loans or if any Default or Event of Default then
exists, the Borrower shall be deemed to have elected to convert such LIBOR Rate
Loans into Base Rate Loans effective as of the expiration date of such Interest
Period.
(d) The Agent will promptly notify each Lender of its receipt of
a Notice of Conversion/Continuation. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.
(e) During the existence of a Default or Event of Default, the
Borrower may not elect to have a Loan converted into or continued as a LIBOR
Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, there may not be more than 5 different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate
provided for hereunder exceed the maximum rate legally chargeable by any Lender
under applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations, the
total amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this Section 3.3,
have been paid or accrued if the interest rates otherwise set forth in this
Agreement had at all times been in effect, then the Borrower shall, to the
extent permitted by applicable law, pay the Agent, for the account of the
Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of
interest which would have been charged if the Maximum Rate had, at all times,
been in effect over (ii) the amount of interest which would have accrued had the
interest rates otherwise set forth in this Agreement, at all times, been in
effect over (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that the Agent and/or any
Lender has received interest and other charges hereunder in excess of the
Maximum Rate, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations other than interest, in the
inverse order of maturity, and if there are no Obligations outstanding, the
Agent and/or such Lender shall refund to the Borrower such excess.
3.4 Facility Fee; Underwriting Fee. The Borrower agrees to
-----------------------------
pay to the Agent, for the account of each Lender, a non-refundable facility fee
(the "Facility Fee") equal to one-half of one percent (.50%) of such Lender's
Commitment. Such Facility Fee shall be payable on the date hereof and shall be
earned when due. In addition, the Borrower agrees to pay the Agent, for its own
account a non-refundable underwriting fee (the "Underwriting Fee") on the
----------------
dates and in the amounts set forth in the Fee Agreement.
3.5 Unused Line Fee. Until the Obligations have been paid
---------------
in full and the Agreement terminated, the Borrower agrees to pay, on the first
day of each month and on the Termination Date, to the Agent, for the ratable
account of the Lenders, an unused line fee equal to one-half of one percent
(.50%) per annum on the average daily amount by which the Maximum Revolver
Amount exceeded the sum of the average daily outstanding amount of Revolving
Loans and the undrawn face amount of all outstanding Letters of Credit, during
the immediately preceding month or shorter period if calculated on the
Termination Date. The unused line fee shall be computed on the basis of a 360-
day year for the actual number of days elapsed. All payments received by the
Agent on account of Accounts or as proceeds of other Collateral shall be deemed
to be credited to the Borrower's Loan Account immediately upon receipt for
purposes of calculating the unused line fee pursuant to this Section 3.5.
-----------
3.6 Letter of Credit Fee. The Borrower agrees to pay to
--------------------
the Agent, for the ratable account of the Lenders, for each Letter of Credit, a
fee (the "Letter of Credit Fee") equal to two and one-
--------------------
quarter percent (2.25%) per annum of the undrawn face amount of each Letter of
Credit issued for the Borrower's account at the Borrower's request, plus all
out-of-pocket costs, fees and expenses incurred by the Agent in connection with
the application for, issuance of, or amendment to any Letter of Credit, which
costs, fees and expenses could include a "fronting fee" required to be paid by
the Agent to such issuer for the assumption of the settlement risk in connection
with the issuance of such Letter of Credit; The Letter of Credit Fee shall be
payable monthly in arrears on the first day of each month following any month in
which a Letter of Credit was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a 360-
day year for the actual number of days elapsed.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
------------------------
4.1 Revolving Loans. The Borrower shall repay the
---------------
outstanding principal balance of the Revolving Loans, plus all accrued but
unpaid interest thereon, on the Termination Date. The Borrower may prepay
Revolving Loans at any time, and reborrow subject to the terms of this
Agreement; provided, however, that
-------- -------
with respect to any LIBOR Revolving Loans prepaid by the Borrower prior to the
expiration date of the Interest Period applicable thereto, the Borrower promises
to pay to the Agent for account of the Lenders the amounts described in Section
5.4. In addition, and
-----------
without limiting the generality of the foregoing, upon demand the Borrower
promises to pay to the Agent, for account of the Lenders, the amount, without
duplication, by which the Aggregate Revolver Outstandings exceed the
Availability (with Availability for this purpose calculated as if the Aggregate
Revolver Outstandings were zero).
4.2 Termination of Revolving Credit Facility. The Borrower
---------------------------------------
may terminate the Revolving Credit Facility upon at least thirty (30) Business
Days' notice to the Agent and the Lenders, upon (a) the payment in full of all
outstanding Revolving Loans, together with accrued interest thereon, and the
cancellation of all outstanding Letters of Credit, (b) the payment of the early
termination fee set forth in the next sentence, (c) the payment in full in cash
of all other Obligations (other than any outstanding Term Loans and accrued
interest thereon) together with accrued interest thereon, and (d) with respect
to any LIBOR Revolving Loans prepaid in connection with such termination prior
to the expiration date of the Interest Period applicable thereto, the payment of
the amounts described in Section 5.4. If the Revolving Credit Facility
----------
is terminated at any time prior to the Stated Termination Date, whether pursuant
to this Section or pursuant to Section 11.2, the
------------
Borrower shall pay to the Agent, for the account of the Lenders, an early
termination fee determined in accordance with the following table:
Period during which
early termination
occurs Early
Termination
Fee
On or prior to the One percent (1%) of the Maximum
first Anniversary Date Revolver Amount at the time of
termination.
After the first Three-quarters of one percent
Anniversary Date, but (.75%) of the Maximum Revolver
on or prior to the Amount at the time of termination.
second Anniversary Date
After the second One-half of one perent (.50%) of
Anniversary Date, but the Maximum Revolver Amount at the
on or prior to April time of termination.
23, 2000
After April 23, 2000. No early termination fee.
4.3 Repayment of the Term Loans. The Borrower agrees to
---------------------------
repay the principal of the Term Loans to the Agent, for the account of the
Lenders, in accordance with the terms of this Agreement and the Term Loan Notes.
4.4 Voluntary Prepayments of the Term Loans. The Borrower
---------------------------------------
may prepay the principal of the Term Loans in whole or in part, at any time and
from time to time upon (a) at least five (5) Business Days' prior written notice
to the Agent and the Lenders, and (b) payment of, with respect to any LIBOR Term
Loans to be prepaid prior to the expiration date of the Interest Period
applicable thereto, the amounts described in Section 5.4. All voluntary
-----------
prepayments of the principal of the Term Loans shall be accompanied by the
payment of all accrued but unpaid interest on the Term Loans to the date of
prepayment. Any voluntary prepayment under this Section 4.4 of less than all of
the outstanding principal of the
- -----------
Term Loans shall be applied to the installments of principal of the Term Loans
in the inverse order of maturity. Amounts prepaid in respect of the Term Loans
pursuant to this Section 4.4 may not be
-----------
reborrowed.
4.5 Mandatory Prepayments of the Term Loans. The Borrower
--------------------------------------
shall prepay the entire unpaid principal balance of the Term Loans, and all
accrued but unpaid interest thereon, upon the termination of this Agreement for
any reason.
(b) Any prepayment under this Section 4.5 of less than
-----------
all of the outstanding principal amount of the Term Loans shall be applied,
based upon the Pro Rata Shares of the Lenders, to the installments of principal
of the Term Loans in the inverse order of maturity. Amounts prepaid in respect
of the Term Loans pursuant to this Section 4.5 may not be reborrowed. In
connection with any
-----------
such prepayment, if any LIBOR Term Loans are prepaid prior to the expiration
date of the Interest Period applicable thereto, the Borrower shall pay to the
Lenders the amounts described in Section
-------
5.4.
- ---
(c) In the event that at the end of any Fiscal Year there shall
exist Excess Cash Flow (based on information contained in Financial Statements
required under Section 7.2(a)) with respect
-------------
to such Fiscal Year, then on or before April 30 of the following Fiscal Year, a
prepayment equal to fifty percent (50%) of such Excess Cash Flow shall be made
on the Term Loans; provided,
--------
however, if the unpaid principal balance of the Term Loans is equal
- -------
to or less than $23,300,212, no prepayment pursuant to this Section
-------
4.5(c) in respect of any subsequent Fiscal Year will be required.
- -----
4.6 Payments by the Borrower. All payments to be made by
------------------------
the Borrower shall be made without set-off, recoupment or counterclaim. Except
as otherwise expressly provided herein, all payments by the Borrower shall be
made to the Agent for the account of the Lenders at the Agent's address set
forth in Section 15.8,
------------
and shall be made in Dollars and in immediately available funds, no later than
12:00 noon (New York time) on the date specified herein. Any payment received
by the Agent later than 12:00 noon (New York time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Borrower prior to
the date on which any payment is due to the Lenders that the Borrower will not
make such payment in full as and when required, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Lender on such due date an amount equal
to the amount then due such Lender. If and to the extent the Borrower has not
made such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
4.7 Payments as Revolving Loans. All payments of
---------------------------
principal, interest, reimbursement obligations in connection with Letters of
Credit, fees, premiums and other sums payable hereunder, including all
reimbursement for expenses pursuant to Section 15.7,
------------
may, at the option of the Agent, in its sole discretion, subject only to the
terms of this Section 4.7, be paid from the proceeds of
-----------
Revolving Loans made hereunder, whether made following a request by the Borrower
pursuant to Section 2.2 or a deemed request as
-----------
provided in this Section 4.7. The Borrower hereby irrevocably
-----------
authorizes the Agent to charge any applicable Loan Account for the purpose of
paying principal, interest, reimbursement obligations in connection with Letters
of Credit, fees, premiums and other sums payable hereunder, including
reimbursing expenses pursuant to Section 15.7, and agrees that all such amounts
charged shall
- ------------
constitute Revolving Loans (including BABC Loans and Agent Advances) and that
all such Revolving Loans so made shall be deemed to have been requested by
Borrower pursuant to Section 2.2.
-----------
4.8 Apportionment, Application and Reversal of Payments.
---------------------------------------------------
Aggregate principal and interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Loans to which such
payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to principal or
interest of specific Loans, or not constituting payment of specific fees, and
all proceeds of Accounts or other Collateral received by the Agent, shall be
applied, ratably, subject to the provisions of this Agreement, first, to pay any
fees, indemnities or expense reimbursements including any amounts relating to
ACH Transactions then due to the Agent from the Borrower; second, to pay any
fees or expense reimbursements then due to the Lenders from the Borrower; third,
to pay interest due in respect of all Revolving Loans, including BABC Loans and
Agent Advances; fourth, to pay or prepay principal of the BABC Loans and Agent
Advances; fifth, to pay or prepay principal of the Revolving Loans (other than
BABC Loans and Agent Advances) and unpaid reimbursement obligations in respect
of Letters of Credit; sixth, to pay or prepay principal of the Term Loans; and
seventh, to the payment of any other Obligation due to the Agent or any Lender
by the Borrower. Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrower, or unless an Event of Default is
outstanding, neither the Agent nor any Lender shall apply any payments which it
receives to any LIBOR Revolving Loan or LIBOR Term Loan, except on the
expiration date of the Interest Period applicable to any such LIBOR Rate Loan.
The Agent shall promptly distribute to each Lender, pursuant to the applicable
wire transfer instructions received from each Lender in writing, such funds as
it may be entitled to receive, subject to a Settlement delay as provided for in
Section 2.2(j). The Agent and
-------------
the Lenders shall have the continuing and exclusive right to apply and reverse
and reapply any and all such proceeds and payments to any portion of the
Obligations.
4.9 Indemnity for Returned Payments. If, after receipt of
-------------------------------
any payment of, or proceeds applied to the payment of, all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment or proceeds to any Person, because such payment or application of
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, then the Obligations or part thereof intended to
be satisfied shall be revived and continue and this Agreement shall continue in
full force as if such payment or proceeds had not been received by the Agent or
such Lender, and the Borrower shall be liable to pay to the Agent, and hereby
does indemnify the Agent and the Lenders and hold the Agent and the Lenders
harmless for, the amount of such payment or proceeds surrendered. The
provisions of this Section 4.9 shall be and
-----------
remain effective notwithstanding any contrary action which may have been taken
by the Agent or any Lender in reliance upon such payment or application of
proceeds, and any such contrary action so taken shall be without prejudice to
the Agent's and the Lenders' rights under this Agreement and shall be deemed to
have been conditioned upon such payment or application of proceeds having become
final and irrevocable. The provisions of this Section 4.9 shall survive
-----------
the termination of this Agreement.
4.10 Agent's and Lenders' Books and Records; Monthly
-----------------------------------------------
Statements. The Borrower agrees that the Agent's and each Lender's
- ----------
books and records showing the Obligations and the transactions pursuant to this
Agreement and the other Loan Documents shall be admissible in any action or
proceeding arising therefrom, and shall constitute rebuttably presumptive proof
thereof, irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Agent will provide to the Borrower a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate, and binding on the
Borrower and an account stated (except for reversals and reapplications of
payments made as provided in Section 4.8 and corrections of errors discovered by
the Agent),
- -----------
unless the Borrower notifies the Agent in writing to the contrary within thirty
(30) days after such statement is rendered. In the event a timely written
notice of objections is given by the Borrower, only the items to which exception
is expressly made will be considered to be disputed by the Borrower.
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
---------------------------------------
5.1 Taxes. Any and all payments by the Borrower to each
-----
Lender or the Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for any Taxes. In
addition, the Borrower shall pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Lender or the Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days after
the date the Lender or the Agent makes written demand therefor.
(c) If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so
that after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section) such
Lender or the Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions or withholdings been made;
(ii) the Borrower shall make such deductions and
withholdings;
(iii) the Borrower shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Borrower shall also pay to each Lender or the
Agent for the account of such Lender, at the time interest is paid, all
additional amounts which the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such Taxes or
Other Taxes had not been imposed, provided that the Borrower shall not be
required to make any payment pursuant to this clause (iv) to or for the account
of any Lender that is a foreign corporation, partnership or trust within the
meaning of Section 7701(a) of the Code if such Lender fails to comply with
Section 14.10(a).
----------------
(d) Within 30 days after the date of any payment by the Borrower
of Taxes or Other Taxes, the Borrower shall furnish the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(e) If the Borrower is required to pay additional amounts to any
Lender or the Agent pursuant to subsection (c) of this Section, then such Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its lending office so as to eliminate any such
additional payment by the Borrower which may thereafter accrue, if such change
in the judgment of such Lender is not otherwise disadvantageous to such Lender.
(f) Upon the request, and at the expense of the Borrower, each
Lender to or for the account of which the Borrower is required to pay additional
amounts pursuant to subsection (c) of this Section shall afford the Borrower the
opportunity to contest, and cooperate with the Borrower in contesting, the
imposition of Taxes or Other Taxes giving rise to such additional amount.
(g) If any Lender receives a refund in respect of Taxes or Other
Taxes for which the Borrower has paid additional amounts pursuant to subsection
(c) of this Section, such Lender shall promptly pay such refund (together with
any interest with respect thereto received from the relevant taxing authority)
to the Borrower, provided that the Borrower, upon the request of such Lender,
shall repay the amount paid over to the Borrower (plus interest with respect
thereto due to the relevant taxing authority) in the event such Lender is
required to repay such refund or pay any tax arising therefrom to the applicable
taxing authority.
(h) The obligations of the Borrower, the Lenders and the Agent
under this Section 5.1 shall survive the payment of all
-----------
Obligations and the resignation or replacement of the Agent.
5.2 Illegality. (a) If any Lender determines that the
----------
introduction of any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of Law, has made
it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable lending office to
make LIBOR Rate Loans, then, on notice thereof by the Lender to the Borrower
through the Agent, any obligation of that Lender to make LIBOR Rate Loans shall
be suspended until the Lender notifies the Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
LIBOR Rate Loan, the Borrower shall, upon its receipt of notice of such fact and
demand from such Lender (with a copy to the Agent), prepay in full such LIBOR
Rate Loans of that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 5.4, either on the last day of the
-----------
Interest Period thereof, if the Lender may lawfully continue to maintain such
LIBOR Rate Loans to such day, or immediately, if the Lender may not lawfully
continue to maintain such LIBOR Rate Loan. If the Borrower is required to so
prepay any LIBOR Rate Loan, then concurrently with such prepayment, the Borrower
shall borrow from the affected Lender, in the amount of such repayment, a Base
Rate Loan.
5.3 Increased Costs and Reduction of Return. If any
---------------------------------------
Lender reasonably determines that, due to either (i) the introduction of or any
change in the interpretation of any law or regulation or (ii) the compliance by
that Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) made or issued
after the date hereof, there shall be any increase in the cost to such Lender of
agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then
the Borrower shall be liable for, and shall from time to time, upon demand (with
a copy of such demand to be sent to the Agent), pay to the Agent for the account
of such Lender, additional amounts as are sufficient to compensate such Lender
for such increased costs.
(b) If any Lender shall have reasonably determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation or other entity controlling the
Lender with any Capital Adequacy Regulation made or issued after the date
hereof, affects or would affect the amount of capital required or expected to be
maintained by the Lender or any corporation or other entity controlling the
Lender and (taking into consideration such Lender's or such corporation's or
other entity's policies with respect to capital adequacy and such Lender's
desired return on capital) reasonably determines that the amount of such capital
is increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Lender to the Borrower through
the Agent, the Borrower shall pay to the Lender, from time to time as specified
by the Lender, additional amounts sufficient to compensate the Lender for such
increase.
5.4 Funding Losses. The Borrower shall reimburse each
--------------
Lender and hold each Lender harmless from any loss or expense which the Lender
may sustain or incur as a consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(b) the failure of the Borrower to borrow, continue or convert a
Loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
(c) the prepayment or other payment (including after
acceleration thereof) of a LIBOR Rate Loan on a day that is not the last day of
the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained.
5.5 Inability to Determine Rates. If the Agent reasonably
----------------------------
determines that for any reason adequate and reasonable means do not exist for
determining the LIBOR Rate for any requested Interest Period with respect to a
proposed LIBOR Rate Loan, or that the LIBOR Rate for any requested Interest
Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly
reflect the cost to the Lenders of funding such Loan, the Agent will promptly so
notify the Borrower and each Lender. Thereafter, the obligation of the Lenders
to make or maintain LIBOR Rate Loans hereunder shall be suspended until the
Agent revokes such notice in writing. Upon receipt of such notice, the Borrower
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Borrower does not revoke such Notice, the Lenders shall
make, convert or continue the Loans, as proposed by the Borrower, in the amount
specified in the applicable notice submitted by the Borrower, but such Loans
shall be made, converted or continued as Base Rate Loans instead of LIBOR Rate
Loans.
5.6 Certificates of Lenders. Any Lender claiming
-----------------------
reimbursement or compensation under this Article 5 shall deliver to
---------
the Borrower (with a copy to the Agent) a certificate setting forth in
reasonable detail the amount payable to the Lender hereunder and such
certificate shall be conclusive and binding on the Borrower in the absence of
manifest error.
5.7 Survival. The agreements and obligations of the
--------
Borrower in this Article 5 shall survive the payment of all other
---------
Obligations.
ARTICLE 6
COLLATERAL
---------
6.1 Grant of Security Interest. (a) As security for all
--------------------------
present and future Obligations, the Borrower hereby grants to the Agent, for the
ratable benefit of the Agent and the Lenders, a continuing security interest in,
and a perfected and enforceable first priority lien on, assignment of, and right
of set-off against, all of the following property of Borrower, whether now owned
or existing or hereafter acquired or arising, regardless of where located,
including, without limitation:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights, letters of credit, Assigned
Contracts, chattel paper, instruments, notes, documents, and documents of title;
(iv) all General Intangibles;
(v) all Equipment;
(vi) all money, investment property, securities and
other property of any kind of the Borrower in the possession or under the
control of the Agent or any Lender, any assignee of or participant in the
Obligations, or a bailee of any such party or such party's affiliates;
(vii) all of the Borrower's deposit accounts, credits and
balances with and other claims against the Agent or any Lender or any of its
affiliates or any other financial institution with which the Borrower maintains
deposits;
(viii) all books, records and other property related to
or referring to any of the foregoing, including, without limitation, books,
records, account ledgers, data processing records, computer software and other
property and General Intangibles at any time evidencing or relating to any of
the foregoing; and
(ix) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing;
provided, that the foregoing grant of a security interest shall not include (a)
a security interest in any patent license or trademark license under which the
Borrower is a licensee or a security interest in any Equipment lease (or
Equipment leased by the Borrower thereunder), Real Property lease or contract
relating to Real Property in effect as of the date hereof or entered into by the
Borrower subsequent to the date hereof, in each case which by its terms
prohibits the grant of the security interest contemplated by this Agreement,
unless and until either such prohibition is terminated or an appropriate consent
is obtained, in which event such patent license, trademark license, Equipment
lease (and the Equipment leased thereunder), Real Property lease or contract
relating to Real Property, as applicable, shall be subject to the security
interest granted herein for all purposes; or (b) the Equipment subject to the
security interest on the date hereof in favor of Schlafhorst Inc. until such
time as the Debt related thereto is paid in full.
All of the foregoing, together with the Real Estate covered by the Mortgage(s),
and all other property of the Borrower in which the Agent or any Lender may at
any time be granted a Lien, is herein collectively referred to as the
"Collateral."
(b) As security for all Obligations, the Borrower shall
simultaneously herewith execute and deliver to the Agent the Mortgage(s) to
grant to the Agent, for the ratable benefit of the Agent and the Lenders, a
continuing mortgage lien on the Real Estate and Premises.
(c) All of the Obligations shall be secured by all of the
Collateral.
6.2 Perfection and Protection of Security Interest. The
----------------------------------------------
Borrower shall, at its expense, perform all steps requested by the Agent at any
time to perfect, maintain, protect, and enforce the Agent's Liens, including,
without limitation: (i) executing, delivering and/or filing and recording of
the Mortgage(s) and the Patent and Trademark Agreements and executing and filing
financing or continuation statements, and amendments thereof, in form and
substance satisfactory to the Agent; (ii) delivering to the Agent the originals
of all instruments, documents, and chattel paper, and all other Collateral of
which the Agent determines it should have physical possession in order to
perfect and protect the Agent's security interest therein, duly pledged,
endorsed or assigned to the Agent without restriction; (iii) delivering to the
Agent warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued and certificate of titles
covering any portion of the Collateral for which certificates of title have been
issued; (iv) when an Event of Default exists, transferring Inventory to
warehouses designated by the Agent; (v) placing notations on the Borrower's
books of account to disclose the Agent's security interest; (vii) delivering to
the Agent all letters of credit on which the Borrower is named beneficiary; and
(viii) taking such other steps as are deemed necessary or desirable by the Agent
to maintain and protect the Agent's Liens. To the extent permitted by
applicable law, the Agent may file, without the Borrower's signature, one or
more financing statements disclosing the Agent's Liens. The Borrower agrees
that a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the Borrower's agents or
processors, then the Borrower shall notify the Agent thereof and, upon the
Agent's request, shall notify such Person of the Agent's security interest in
such Collateral and instruct such Person to hold all such Collateral for the
Agent's account subject to the Agent's instructions. The Agent hereby agrees
that it will not issue any such instructions pursuant to the previous sentence
unless an Event of Default has occurred and is continuing. If at any time any
Collateral is located on any operating facility of the Borrower which is not
owned by the Borrower, then the Borrower shall, at the request of the Agent, use
its best efforts to obtain written waivers, in form and substance satisfactory
to the Agent, of all present and future Liens to which the owner or lessor of
such premises may be entitled to assert against the Collateral. The Borrower
acknowledges and agrees that, if and to the extent that the Borrower does not
obtain any such waivers, the Agent shall be entitled to (i) reserve from
Availability an amount equal to up to 3 months' rent with respect to the
Inventory located on such Premises or (ii) if it would result in a smaller
reduction in Availablity, treat the Inventory located on such Premises as
ineligible Inventory, for each such waiver not obtained by the Borrower.
(c) From time to time, the Borrower shall, upon the Agent's
request, execute and deliver confirmatory written instruments pledging to the
Agent, for the ratable benefit of the Agent and the Lenders, the Collateral with
respect to the Borrower, but the Borrower's failure to do so shall not affect or
limit any security interest or any other rights of the Agent or any Lender in
and to the Collateral with respect to the Borrower. So long as this Agreement
is in effect and until all Obligations have been fully satisfied, the Agent's
Liens shall continue in full force and effect in all Collateral (whether or not
deemed eligible for the purpose of calculating the Availability or as the basis
for any advance, loan, extension of credit, or other financial accommodation).
6.3 Location of Collateral. The Borrower represents and
----------------------
warrants to the Agent and the Lenders that: (a) Schedule 6.3 is a
------------
correct and complete list of the Borrower's chief executive office, the location
of its books and records, the locations of the Collateral (except for (i)
Equipment and Inventory temporarily in transit between such locations or (ii)
Equipment and Inventory valued at no more than $1,000,000 in the aggregate
(based on the lower of cost or fair market value, determined on a FIFO basis)
temporarily held by third parties for processing or repairs) and the locations
of all of its other places of business; and (b) Schedule 6.3 correctly
identifies any of such facilities and
- ------------
locations that are not owned by the Borrower and sets forth the names of the
owners and lessors or sublessors of and, to the best of the Borrower's
knowledge, the holders of any mortgages on, such facilities and locations. The
Borrower covenants and agrees that it will not (i) maintain any Collateral
(except for (i) Equipment and Inventory temporarily in transit between such
locations or (ii) Equipment and Inventory valued at no more than $1,000,000 in
the aggregate (based on the lower of cost or fair market value, determined on a
FIFO basis) temporarily held by third parties for processing or repairs)at any
location other than those locations listed for the Borrower on Schedule 6.3,
(ii) otherwise change or
------------
add to any of such locations, or (iii) change the location of its chief
executive office from the location identified in Schedule
--------
6.3, unless it gives the Agent at least thirty (30) days' prior
- ---
written notice thereof and executes any and all financing statements and other
documents that the Agent requests in connection therewith. Upon the
establishment of any such location, Schedule 6.3 shall be deemed amended to add
such location thereto
- ------------
without further action by the Agent or the Borrower, and the Borrower hereby
authorizes the Agent to substitute a new Schedule
--------
6.3 to reflect such additional location. Without limiting the
- ---
foregoing, the Borrower represents that all of its Inventory (other than
Inventory in transit or held by third parties for processing) is, and covenants
that all of its Inventory will be, located either (a) on premises owned by the
Borrower, (b) on premises leased by the Borrower, provided that the Agent has
received an executed landlord waiver from the landlord of such premises in form
and substance satisfactory to the Agent, or (c) in a public warehouse, provided
that the Agent has received an executed bailee letter from the applicable public
warehouseman in form and substance satisfactory to the Agent.
6.4 Title to, Liens on, and Sale and Use of Collateral.
--------------------------------------------------
The Borrower represents and warrants to the Agent and the Lenders and agrees
with the Agent and the Lenders that: (a) all of the Collateral is and will
continue to be owned by the Borrower free and clear of all Liens whatsoever,
except for Permitted Liens; (b) the Agent's Liens in the Collateral will not be
subject to any prior Lien, except Permitted Liens, described in clause (i) of
the definition of "Permitted Liens" and Permitted Liens if and to the extent
that such Permitted Liens constitute prior Liens under any Requirement of Law
or, in the case of Real Estate, Permitted Liens described in clause (vi) of the
definition of "Permitted Liens"; (c) the Borrower will use, store, and maintain
the Collateral with all reasonable care and will use such Collateral for lawful
purposes only; and (d) the Borrower will not, without the Agent's prior written
approval, sell, or dispose of or permit the sale or disposition of any of the
Collateral except for sales of Inventory in the ordinary course of business and
sales of Equipment as permitted by Section 6.11. The inclusion of proceeds in
the Collateral shall not be deemed to constitute the Agent's or any Lender's
consent to any sale or other disposition of the Collateral except as expressly
permitted herein.
6.5 Appraisals. Whenever a Default or Event of Default
----------
exists, and at such other times not more frequently than once a year as the
Agent requests, the Borrower shall, at its expense and upon the Agent's request,
provide the Agent with appraisals or updates thereof of any or all of the
Collateral from an appraiser, and prepared on a basis, satisfactory to the
Agent, such appraisals and updates to include, without limitation, information
required by applicable law and regulation and by the internal policies of the
Lenders.
6.6 Access and Examination; Confidentiality. Upon
---------------------------------------
reasonable prior notice to the Borrower (unless an Event of Default has occurred
and is continuing, in which case no notice is necessary), the Agent, accompanied
by any Lender which so elects, may at all reasonable times during regular
business hours (and at any time when a Default or Event of Default exists) have
access to, examine, audit, make extracts from or copies of and inspect any or
all of the Borrower's records, files, and books of account and the Collateral,
and discuss the Borrower's affairs with the Borrower's officers and management.
The Borrower will deliver to the Agent any instrument necessary for the Agent to
obtain records from any service bureau maintaining records for the Borrower.
The Agent may, and at the direction of the Majority Lenders shall, at any time
when a Default or Event of Default exists, and at the Borrower's expense, make
copies of all of the Borrower's books and records, or require the Borrower to
deliver such copies to the Agent. The Agent may, without expense to the Agent,
use such of the Borrower's respective personnel, supplies, and premises as may
be reasonably necessary for maintaining or enforcing the Agent's Liens. The
Agent shall have the right, at any time, in the Agent's name or in the name of
nominee of the Agent, to verify the validity, amount or any other matter
relating to the Accounts, Inventory, or other Collateral, by mail, telephone, or
otherwise.
(b) The Borrower agrees that, subject to the Borrower's prior
consent for uses other than in a traditional tombstone, which consent shall not
be unreasonably withheld or delayed, the Agent and each Lender may use the
Borrower's name in advertising and promotional material and in conjunction
therewith disclose the general terms of this Agreement. The Agent and each
Lender acknowledge that certain information concerning the Borrower which is
obtained by or furnished to the Agent and such Lenders pursuant to this
Agreement, including, without limitation, pursuant to this Section 6.6(b), may
be non-public, proprietary or
--------------
confidential in nature. The Agent and each Lender agree to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all such information provided to the Agent or such Lender by or on behalf of the
Borrower, under this Agreement or any other Loan Document, and neither the
Agent, nor such Lender nor any of their respective Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents, except to the extent that such information (i) was
or becomes generally available to the public other than as a result of
disclosure by the Agent or such Lender, or (ii) was or becomes available on a
nonconfidential basis from a source other than the Borrower, provided that such
source is not bound by a confidentiality agreement with the Borrower known to
the Agent or such Lender; provided, however, that the Agent and any Lender may
disclose such information (1) at the request or pursuant to any requirement of
any Governmental Authority to which the Agent or such Lender is subject or in
connection with an examination of the Agent or such Lender by any such
Governmental Authority; (2) pursuant to subpoena or other court process; (3)
when required to do so in accordance with the provisions of any applicable
requirement of law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Agent, any Lender or their respective Affiliates may be
party; (5) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (6) to the Agent's or
such Lender's independent auditors, accountants, attorneys and other
professional advisors; (7) to any prospective Participant or assignee under any
Assignment and Acceptance, actual or potential, provided that such prospective
Participant or assignee agrees to keep such information confidential to the same
extent required of the Agent and the Lenders hereunder; (8) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Borrower is party or is deemed party with the Agent
or such Lender, and (9) to its Affiliates.
6.7 Collateral Reporting. The Borrower shall provide to
--------------------
the Agent the following reports, documents and materials: (i) upon request,
copies of invoices in connection with Accounts, customer statements, credit
memos, remittance advices and reports, deposit slips, shipping and delivery
documents in connection with the Accounts and for Inventory and Equipment
acquired by the Borrower, purchase orders and invoices; and (ii) such other
reports as to the Borrower or its property as the Agent shall reasonably request
from time to time. In addition, the Borrower shall provide the Agent with the
reports, documents and other materials described in Schedule 6.7 at the times
set forth therein. All reports,
- ------------
documents and materials provided pursuant to this Section 6.7 shall
----------
be in form and substance satisfactory to the Agent and shall be accompanied by a
certificate of the Borrower executed by an officer thereof certifying as to the
accuracy and completeness of the included matter. If any such reports,
documents or other materials are prepared by an accounting service or other
agent, the Borrower hereby authorizes such service or agent to deliver same to
the Agent, for distribution to the Lenders.
6.8 Accounts.(a)The Borrower hereby represents and warrants
--------
to the Agent and the Lenders, with respect to the Accounts, that: (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by the Borrower, or rendition of services by
the Borrower, in the ordinary course of the Borrower's business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset,
deduction, defense, or counterclaim except those properly reflected on a
Borrowing Base Certificate; (iii) no payment will be received with respect to
any Account, and no credit, discount, or extension, or agreement therefor will
be granted on any Account, except as reported to the Agent and the Lenders in
accordance with this Agreement; (iv) each copy of an invoice delivered to the
Agent by the Borrower will be a genuine copy of the original invoice sent to the
Account Debtor named therein; (v) except in the case of invoices relating to
Bill and Hold Accounts, all goods described in any invoice representing a sale
of goods will have been delivered to the Account Debtor and all services of the
Borrower described in each invoice will have been performed; and (vi) in the
case of invoices relating to Eligible Bill and Hold Accounts, all goods
described in any such invoice will be shipped and delivered within (A) the later
of (I) the season in which the invoice is rendered or (II) six months after the
date on which the invoice is rendered or (B) the time specified in the invoice.
(b) Borrower shall not re-date any invoice or sale or make sales
on extended dating beyond that customary in the Borrower's business or extend or
modify any Account, other than in the ordinary course of business consistent
with past practices and other than as properly reflected on a Borrowing Base
Certificate. If the Borrower becomes aware of any matter adversely affecting the
collectability of any Account or Account Debtor involving an amount greater than
$250,000, including information regarding the Account Debtor's creditworthiness,
the Borrower will promptly so advise the Agent.
(c) Borrower shall not accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Account, except for such notes and other instruments described in
clause (f) of the definition of "Restricted Investment," without the Agent's
written consent. If the Agent consents to the acceptance of any such
instrument, it shall be considered as evidence of the Account and not payment
thereof and the Borrower will promptly deliver such instrument to the Agent,
endorsed by the Borrower to the Agent, if so requested by the Agent, in a manner
satisfactory in form and substance to the Agent.
(d) The Borrower shall notify the Agent promptly of all disputes
and claims in excess of $250,000, individually, or $500,000 in the aggregate
with any Account Debtor, and agrees to settle, contest, or adjust such dispute
or claim at no expense to the Agent or any Lender. No discount, credit or
allowance shall be granted to any such Account Debtor without the Agent's prior
written consent, except for discounts, credits and allowances made or given in
the ordinary course of the Borrower's business when no Event of Default exists
hereunder. The Borrower shall send the Agent a copy of each credit memorandum
in excess of $250,000 as soon as issued. The Agent may, and at the direction of
the Majority Lenders shall, at all times when an Event of Default exists
hereunder, settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which the Agent or the Majority Lenders, as
applicable, shall consider advisable and, in all cases, the Agent will credit
the Borrower's Loan Account with only the net amounts received by the Agent in
payment of any Accounts.
(e) If an Account Debtor returns any Inventory to the Borrower
when no Event of Default exists, then the Borrower shall promptly determine the
reason for such return and shall issue a credit memorandum to the Account Debtor
in the appropriate amount. The Borrower shall immediately report to the Agent
any return involving an amount in excess of $250,000. Each such report shall
indicate the reasons for the returns and the locations and condition of the
returned Inventory. In the event any Account Debtor returns Inventory to the
Borrower when an Event of Default exists, the Borrower, upon request of the
Agent, shall: (i) hold the returned Inventory in trust for the Agent; (ii)
segregate all returned Inventory from all of its other property; (iii) dispose
of the returned Inventory solely according to the Agent's written instructions;
and (iv) not issue any credits or allowances with respect thereto without the
Agent's prior written consent. All returned Inventory shall be subject to the
Agent's Liens thereon. Whenever any Inventory is returned, the related Account
shall be deemed ineligible to the extent of the amount owing by the Account
Debtor with respect to such returned Inventory
6.9 Collection of Accounts; Payments. (a) Until the Agent
--------------------------------
notifies the Borrower to the contrary, the Borrower shall make collection of all
Accounts and other Collateral for the Agent, shall receive all payments as the
Agent's trustee, and shall immediately, and in no event later than the Business
Day on which such payments are received, deliver all payments in their original
form duly endorsed in blank into a Payment Account established for the account
of the Borrower at a bank acceptable to Agent and subject to documentation
reasonably acceptable to Agent. The Borrower shall maintain a lock-box service
for collections of Accounts at a bank acceptable to the Agent and pursuant to
documentation reasonably satisfactory to the Agent. All Account Debtors have
been or will be instructed to make all payments directly to the address
established for such service. If, notwithstanding such instructions, the
Borrower receives any proceeds of Accounts, it shall receive such payments as
the Agent's trustee, and shall immediately deliver such payments to the Agent in
their original form duly endorsed in blank or deposit them into a Payment
Account, as the Agent may direct. All collections received in any such lock-box
or Payment Account or directly by the Borrower or the Agent, and all funds in
any Payment Account or other account to which such collections are deposited
shall be subject to the Agent's sole control. The Agent or the Agent's designee
may, at any time after the occurrence of an Event of Default and for so long as
such Event of Default is continuing, notify Account Debtors that the Accounts
have been assigned to the Agent and of the Agent's security interest therein,
and may collect them directly and charge the collection costs and expenses to
the Borrower's Loan Account as a Revolving Loan. So long as an Event of Default
has occurred and is continuing, the Borrower, at the Agent's request, shall
execute and deliver to the Agent such documents as the Agent shall require to
grant the Agent access to any post office box in which collections of Accounts
are received.
(b) If sales of Inventory are made or services are rendered for
cash, the Borrower shall immediately deliver to the Agent or deposit into a
Payment Account the cash which the Borrower receives.
(c) All payments, including immediately available funds received
by the Agent at a bank designated by it, received by the Agent on account of
Accounts or as proceeds of other Collateral will be the Agent's sole property
for its benefit and the benefit of the Lenders and will be credited to the
Borrower's Loan Account (conditional upon final collection) after allowing one
(1) Business Day for collection; provided, however, that such payments shall be
deemed to be credited to the Borrower's Loan Account immediately upon receipt
for purposes of (i) determining Availability, (ii) calculating the unused line
fee pursuant to Section 3.5, and
-----------
(iii) calculating the amount of interest to be distributed by the Agent to the
Lenders (but not the amount of interest payable by the Borrower).
(d) In the event the Borrower repays all of the Obligations upon
the termination of this Agreement or upon acceleration of the Obligations, other
than through the Agent's receipt of payments on account of the Accounts or
proceeds of the other Collateral, such payment will be credited (conditional
upon final collection) to the Borrower's Loan Account on the Business Day on
which the Agent receives such funds, if the Agent receives such funds by 2:00
p.m. (New York time), or, if the Agent receives such funds after 2:00 p.m. (New
York time), on the Business Day after the Agent's receipt of such funds.
6.10 Inventory; Perpetual Inventory. The Borrower
------------------------------
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that all of the Inventory owned by the Borrower (except for
Inventory constituting raw materials) is and will be held for sale or lease, or
to be furnished in connection with the rendition of services, in the ordinary
course of the Borrower's business, and is and will be fit for such purposes.
The Borrower will use its best efforts to keep its Inventory in good and
marketable condition, at its own expense. The Borrower will not accept any
Inventory on consignment or approval except for such Inventory properly
reflected on a Borrowing Base Certificate. The Borrower agrees that all
Inventory produced in the United States will be produced in accordance with the
Federal Fair Labor Standards Act of 1938, as amended from time to time, and all
rules, regulations, and orders thereunder. The Borrower will conduct a physical
count of the Inventory at least once per Fiscal Year, and after and during the
continuation of an Event of Default, at such other times as the Agent requests.
The Borrower will maintain a perpetual inventory reporting system at all times.
The Borrower will not, without the Agent's written consent, sell any Inventory
on a guaranteed sale, sale and return, sale on approval, consignment, or other
repurchase or return basis.
6.11 Equipment. (a) The Borrower represents and warrants to
---------
the Agent and the Lenders and agrees with the Agent and the Lenders that all of
the Equipment owned by the Borrower is and will be used or held for use in the
Borrower's business, and is and will be fit for such purposes. The Borrower
shall, in the ordinary course of its business, keep and maintain its Equipment
in good operating condition and repair (ordinary wear and tear excepted) and
shall, in the ordinary course of its business, make all necessary replacements
thereof.
(b) The Borrower shall promptly inform the Agent of any material
additions to or deletions from the Equipment. The Borrower shall not permit any
Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Agent does not have a Lien. The Borrower will not,
without the Agent's prior written consent, alter or remove any identifying
symbol or number on any of the Borrower's Equipment consisting of Collateral.
(c) The Borrower shall not, without the Agent's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Borrower's
Equipment; provided, however, that the Borrower may dispose of obsolete or
unusable Equipment having an orderly liquidation value no greater than $500,000
in the aggregate in any Fiscal Year, or $2,500,000 in the aggregate during the
term of this Agreement, without the Lender's consent, subject to the conditions
set forth in the next sentence. In the event any of such Equipment is sold,
transferred or otherwise disposed of pursuant to the proviso contained in the
immediately preceding sentence, (1) if such sale, transfer or disposition is
effected without the reinvestment of the proceeds thereof in other Equipment to
be used by the Borrower in its business, then the Borrower shall deliver all of
the cash proceeds of any such sale, transfer or disposition to the Agent, which
proceeds shall be applied to the reduction of the Term Loan (in the inverse
order of maturity), or (2) if such sale, transfer or disposition is made in
connection with the purchase by the Borrower of other Equipment, then the
Borrower shall use the proceeds of such sale, transfer or disposition to
purchase such other Equipment and shall deliver to the Agent written evidence of
the use of the proceeds for such purchase. All such other Equipment purchased
by the Borrower shall be free and clear of all Liens except the Agent's Lien.
6.12 Assigned Contracts. The Borrower shall fully perform
------------------
all of its obligations under each of the Assigned Contracts, and shall enforce
all of its rights and remedies thereunder, in each case, as it deems appropriate
in its business judgment; provided, however, that the Borrower shall not take
any action or fail to take any action with respect to its Assigned Contracts
which would cause the termination of a material Assigned Contract. Without
limiting the generality of the foregoing, the Borrower shall take all action
necessary or appropriate to permit, and shall not take any action which would
have any materially adverse effect upon, the full enforcement of all
indemnification rights under its Assigned Contracts. The Borrower shall not,
without the Agent's and the Majority Lenders' prior written consent, modify,
amend, supplement, compromise, satisfy, release, or discharge any of its
material Assigned Contracts, any collateral securing the same, any Person liable
directly or indirectly with respect thereto, or any agreement relating to any of
its material Assigned Contracts or the collateral therefor in any material
respect. The Borrower shall notify the Agent and the Lenders in writing,
promptly after the Borrower becomes aware thereof, of any event or fact which
could give rise to a claim by it for indemnification under any of its Assigned
Contracts in excess of $100,000, and shall diligently pursue such right and
report to the Agent on all further developments with respect thereto. If the
Borrower shall fail after the Agent's demand to pursue diligently any right
under its Assigned Contracts, or if an Event of Default then exists, the Agent
may, and at the direction of the Majority Lenders shall, directly enforce such
right in its own or the Borrower's name and may enter into such settlements or
other agreements with respect thereto as the Agent or the Majority Lenders, as
applicable, shall determine. In any suit, proceeding or action brought by the
Agent for the benefit of the Lenders under any Assigned Contract for any sum
owing thereunder or to enforce any provision thereof, the Borrower shall
indemnify and hold the Agent and Lenders harmless from and against all expense,
loss or damage suffered by reason of any defense, setoff, counterclaims,
recoupment, or reduction of liability whatsoever of the obligor thereunder
arising out of a breach by the Borrower of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing from the
Borrower to or in favor of such obligor or its successors; provided that the
Borrower shall be under no obligation to indemnify the Agent or the Lenders with
respect to any expense, loss or damage caused by or resulting from the willful
misconduct or gross negligence of the Agent or any Lender. All such obligations
of the Borrower shall be and remain enforceable only against the Borrower and
shall not be enforceable against the Agent. Notwithstanding any provision
hereof to the contrary, the Borrower shall at all times remain liable to observe
and perform all of its duties and obligations under its Assigned Contracts, and
the Agent's or any Lender's exercise of any of their respective rights with
respect to the Collateral shall not release the Borrower from any of such duties
and obligations. Neither the Agent nor any Lender shall be obligated to perform
or fulfill any of the Borrower's duties or obligations under its Assigned
Contracts or to make any payment thereunder, or to make any inquiry as to the
nature or sufficiency of any payment or property received by it thereunder or
the sufficiency of performance by any party thereunder, or to present or file
any claim, or to take any action to collect or enforce any performance, any
payment of any amounts, or any delivery of any property.
6.13 Documents, Instruments, and Chattel Paper. The
-----------------------------------------
Borrower represents and warrants to the Agent and the Lenders that (a) all
documents, instruments, and chattel paper describing, evidencing, or
constituting Collateral, and all signatures and endorsements thereon, are and
will be complete, valid, and genuine, and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned by the Borrower,
free and clear of all Liens other than Permitted Liens.
6.14 Right to Cure. The Agent may, in its discretion, and
-------------
shall, at the direction of the Majority Lenders, pay any amount or do any act
required of the Borrower hereunder or under any other Loan Document in order to
preserve, protect, maintain or enforce the Obligations, the Collateral or the
Agent's Liens therein, and which the Borrower fails to pay or do, including,
without limitation, payment of any judgment against the Borrower, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's claim, and any other Lien upon or with respect to the Collateral.
All payments that the Agent makes under this Section 6.14 and all out-of-pocket
costs and expenses
------------
that the Agent pays or incurs in connection with any action taken by it
hereunder shall be charged to the Borrower's Loan Account as a Revolving Loan.
Any payment made or other action taken by the Agent under this Section 6.14
shall be without prejudice to any
------------
right to assert an Event of Default hereunder and to proceed thereafter as
herein provided.
6.15 Power of Attorney. The Borrower hereby appoints the
-----------------
Agent and the Agent's designee as the Borrower's attorney, with power: (a) to
endorse the Borrower's name on any checks, notes, acceptances, money orders, or
other forms of payment or security that come into the Agent's or any Lender's
possession; (b) to sign the Borrower's name on any invoice, bill of lading,
warehouse receipt or other document of title relating to any Collateral, on
drafts against customers, on assignments of Accounts, on notices of assignment,
financing statements and other public records and to file any such financing
statements by electronic means with or without a signature as authorized or
required by applicable law or filing procedure; (c) to notify the post office
authorities to change the address for delivery of the Borrower's mail to an
address designated by the Agent and to receive, open and dispose of all mail
addressed to the Borrower; (d) to send requests for verification of Accounts to
customers or Account Debtors; (e) to clear Inventory, the purchase of which was
financed with Letters of Credit, through customs in the Borrower's name, the
Agent's name or the name of the Agent's designee, and to sign and deliver to
customs officials powers of attorney in the Borrower's name for such purpose;
and (f) to do all things necessary to carry out this Agreement. The Agent
agrees that, except upon the occurrence and during the continuation of an Event
of Default, it will not exercise the power of attorney or any rights granted to
the Agent pursuant to this Section 6.15, except for the right granted in
------------
clause (b) to sign the Borrower's name on any financing statements and the right
granted in clause (d) to send requests for verification of Accounts to customers
or Account Debtors. The Borrower ratifies and approves all acts of such
attorney. None of the Lenders or the Agent nor their attorneys will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law, except for gross negligence or willful misconduct. This power, being
coupled with an interest, is irrevocable until this Agreement has been
terminated and the Obligations have been fully satisfied.
6.16 The Agent's and Lenders' Rights, Duties and
-------------------------------------------
Liabilities. The Borrower assumes all responsibility and liability
- -----------
arising from or relating to the use, sale or other disposition of the
Collateral. The Obligations shall not be affected by any failure of the Agent
or any Lender to take any steps to perfect the Agent's Liens or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release the Borrower from any of the Obligations. Following the occurrence and
continuation of an Event of Default, the Agent may (but shall not be required
to), and at the direction of the Majority Lenders shall, without notice to or
consent from the Borrower, sue upon or otherwise collect, extend the time for
payment of, modify or amend the terms of, compromise or settle for cash, credit,
or otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of the Borrower for the Obligations or under
this Agreement or any other agreement now or hereafter existing between the
Agent and/or any Lender and the Borrower.
6.17 Site Visits, Observations and Testing. The Agent and
-------------------------------------
its representatives will have the right at any reasonable time, but no more than
twice during any twelve month period, to enter and visit the Premises and any
other place where any property of the Borrower is located for the purposes of
observing the Premises, and to determine Borrower's compliance with Section
9.7(a); provided,
--------------
however, (i) upon the occurrence of an Event of Default or (ii) if the Agent
reasonably believes that a material change has occurred to the Premises or to
the soil or groundwater at any other place where any property of the Borrower is
located, the Agent may reinspect the Premises or the place where the property of
the Borrower is located as frequently as Agent deems necessary. Agent may
request the Borrower to confirm (to Agent's reasonable satisfaction) that its
generation, handling, use, storage or disposal of a Contaminant is in compliance
with all Environmental Laws. If Borrower fails to do so within a reasonable
time after Agent's written request, the Agent may require the Borrower to retain
an independent environmental consultant reasonably acceptable to the Agent to
evaluate Borrower's compliance with Environmental Laws. If Borrower refuses to
do so, the Agent may retain (at Borrower's expense) its own environmental
consultant to make such evaluation. The Agent is under no duty, however, to
visit or observe the Premises or to conduct tests, and any such acts by the
Agent will be solely for the purposes of protecting the Agent's Liens and
preserving the Agent and the Lenders' rights under this Agreement. No site
visit, observation or testing by the Agent and the Lenders will result in a
waiver of any default of the Borrower or impose any liability on the Agent or
the Lenders. In no event will any site visit, observation or testing by the
Agent be a representation that hazardous substances are or are not present in,
on or under the Premises, or that there has been or will be compliance with any
law, regulation or ordinance pertaining to hazardous substances or any other
applicable governmental law. Neither the Borrower nor any other party is
entitled to rely on any site visit, observation or testing by the Agent. The
Agent and the Lenders owe no duty of care to protect the Borrower or any other
party against, or to inform the Borrower or any other party of, any hazardous
substances or any other adverse condition affecting the Premises. The Agent may
in its discretion disclose to the Borrower or any other party any report or
findings made as a result of, or in connection with, any site visit, observation
or testing by the Agent. The Borrower understands and agrees that the Agent
makes no warranty or representation to the Borrower or any other party regarding
the truth, accuracy or completeness of any such report or findings that may be
disclosed. The Borrower also understands that depending on the results of any
site visit, observation or testing by the Agent and disclosed to the Borrower,
the Borrower may have a legal obligation to notify one or more environmental
agencies of the results, that such reporting requirements are site-specific, and
are to be evaluated by the Borrower without advice or assistance from the Agent.
In each instance, the Agent will give the Borrower reasonable advance notice
before entering the Premises or any other place the Agent is permitted to enter
under this Section 6.17. The Agent will make reasonable efforts to avoid
- ------------
interfering with the Borrower's use of the Premises or any other property in
exercising any rights provided hereunder.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
-------------------------------------------------
7.1 Books and Records. The Borrower shall maintain, at all
----------------
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with GAAP
applied consistently with the audited Financial Statements required to be
delivered pursuant to Section
-------
7.2(a). The Borrower shall, by means of appropriate entries,
- -----
reflect in such accounts and in all Financial Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
property and bad debts, all in accordance with GAAP. The Borrower shall
maintain at all times books and records pertaining to the Collateral in such
detail, form and scope as the Agent or any Lender shall reasonably require,
including, but not limited to, records of (a) all payments received and all
credits and extensions granted with respect to the Accounts; (b) the return,
rejections, repossession, stoppage in transit, loss, damage, or destruction of
any Inventory; and (c) all other dealings affecting the Collateral.
7.2 Financial Information. The Borrower shall promptly
----------------------
furnish to each Lender, all such financial information as the Agent or any
Lender shall reasonably request, and notify its auditors and accountants that
the Agent, on behalf of the Lenders, is authorized to obtain such information
directly from them. Without limiting the foregoing, the Borrower will furnish
to the Agent, in sufficient copies for distribution by the Agent to each Lender,
in such detail as the Agent or the Lenders shall reasonably request, the
following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, audited balance sheets, and
statements of income and expense, cash flow and of stockholders' equity for the
Borrower for such Fiscal Year, and the accompanying notes thereto, setting forth
in each case in comparative form figures for the previous Fiscal Year, all in
reasonable detail, fairly presenting the financial position and the results of
operations of the Borrower as at the date thereof and for the Fiscal Year then
ended, and prepared in accordance with GAAP. Such statements shall be examined
in accordance with generally accepted auditing standards by, and accompanied by
a report thereon unqualified as to scope of, Deloitte & Touche LLP or other
independent certified public accountants selected by the Borrower and reasonably
satisfactory to the Agent. The Borrower, simultaneously with retaining such
independent public accountants to conduct such annual audit, shall send a letter
to such accountants, with a copy to the Agent and the Lenders, notifying such
accountants that one of the primary purposes for retaining such accountants'
services and having audited financial statements prepared by them is for use by
the Agent and the Lenders. The Borrower hereby authorizes the Agent to
communicate directly with its certified public accountants and, by this
provision, authorizes those accountants to disclose to the Agent any and all
financial statements and other supporting financial documents and schedules
relating to the Borrower and to discuss directly with the Agent the finances and
affairs of the Borrower.
(b) As soon as available, but in any event not later than thirty
(30) days after the end of each fiscal month, unaudited balance sheets of the
Borrower as at the end of such month, and unaudited statements of income and
expense and cash flow for the Borrower for such month and for the period from
the beginning of the Fiscal Year to the end of such month, all in reasonable
detail, fairly presenting the financial position and results of operations of
the Borrower as at the date thereof and for such periods, and prepared in
accordance with GAAP applied consistently with the audited Financial Statements
required to be delivered pursuant to Section 7.2(a). The Borrower shall certify
by a certificate signed
- -------------
by its chief financial officer that all such statements have been prepared in
accordance with GAAP and present fairly, subject to normal year-end adjustments,
the Borrower's financial position as at the dates thereof and its results of
operations for the periods then ended.
(c) As soon as available, but in any event not later than forty-
five (45) days after the close of each fiscal quarter other than the fourth
quarter of a Fiscal Year, unaudited balance sheets of the Borrower as at the end
of such quarter, and unaudited statements of income and expense and statement of
cash flows for the Borrower for such quarter and for the period from the
beginning of the Fiscal Year to the end of such quarter, all in reasonable
detail, fairly presenting the financial position and results of operation of the
Borrower as at the date thereof and for such periods, prepared in accordance
with GAAP consistent with the audited Financial Statements required to be
delivered pursuant to Section 7.2(a). The Borrower shall certify by a
certificate signed
- --------------
by its chief financial officer that all such statements have been prepared in
accordance with GAAP and present fairly, subject to normal year-end adjustments,
the Borrower's financial position as at the dates thereof and its results of
operations for the periods then ended.
(d) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the
--------------
independent certified public accountants that examined such statement to the
effect that they have reviewed and are familiar with this Agreement and that, in
examining such Financial Statements, they did not become aware of any fact or
condition which then constituted a Default or Event of Default, except for
those, if any, described in reasonable detail in such certificate.
(e) With each of the annual audited Financial Statements
delivered pursuant to Section 7.2(a), and within forty-
--------------
five (45) days after the end of each fiscal quarter, a certificate of the chief
financial officer of the Borrower (i) setting forth in reasonable detail the
calculations required to establish that the Borrower was in compliance with the
covenants set forth in Sections
--------
9.22 through 9.26 during the period covered in such Financial
- ---- ----
Statements and as at the end thereof, and (ii) stating that, except as explained
in reasonable detail in such certificate, (A) all of the representations and
warranties of the Borrower contained in this Agreement and the other Loan
Documents are correct and complete in all material respects as at the date of
such certificate as if made at such time, (B) the Borrower is, at the date of
such certificate, in compliance in all material respects with all of its
respective covenants and agreements in this Agreement and the other Loan
Documents, (C) no Default or Event of Default then exists or existed during the
period covered by such Financial Statements, (D) describing and analyzing in
reasonable detail all material trends, changes, and developments in each and all
Financial Statements; and (E) explaining the variances of the figures in the
corresponding budgets and prior Fiscal Year financial statements. If such
certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what action
the Borrower has taken or proposes to take with respect thereto.
(f) No sooner than 60 days and not less than 30 days prior to
the beginning of each Fiscal Year, annual forecasts (to include forecasted
balance sheets, statements of income and expenses and statements of cash flow)
for the Borrower as at the end of and for each fiscal month of such Fiscal Year.
(g) Promptly after filing with the PBGC and the IRS, a copy of
each annual report or other filing filed with respect to each ERISA Plan of the
Borrower.
(h) Promptly upon the filing thereof, copies of all reports, if
any, to or other documents filed by the Borrower with the Securities and
Exchange Commission under the Exchange Act, and all reports, notices, or
statements sent or received by the Borrower to or from the holders of any equity
interests of the Borrower (other than routine non-material correspondence sent
by shareholders of the Borrower to the Borrower) or of any Debt for Borrowed
Money of the Borrower registered under the Securities Act of 1933 or to or from
the trustee under any indenture under which the same is issued.
(i) As soon as available, but in any event not later than 15
days after the Borrower's receipt thereof, a copy of all management reports and
management letters prepared for the Borrower by Deloitte & Touche LLP or any
other independent certified public accountants of the Borrower.
(j) Promptly after filing with the IRS, a copy of each tax
return filed by the Borrower.
(k) As promptly as practicable with respect to the period
commencing on and at all times after the Closing Date, all filings with the
Bankruptcy Court by any Person, all notices of hearings, all reports with
respect to Claims (as defined in the Plan of Reorganization), all reports from
the disbursing agent under the Plan of Reorganization and copies of all other
materials relating to any matter over which the Bankruptcy Court has retained
jurisdiction.
(l) Such additional information as the Agent and/or any Lender
may from time to time reasonably request regarding the financial and business
affairs of the Borrower, including, without limitation, projections of future
operations and information relating to the Plan of Reorganization and all claims
and proceedings in connection therewith.
7.3 Notices to the Lenders. The Borrower shall notify the
----------------------
Agent, in writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or Event of
Default.
(b) Immediately after becoming aware of the assertion by the
holder of any capital stock of the Borrower or of any Debt that a default exists
with respect thereto or that the Borrower is not in compliance with the terms
thereof, or the threat or commencement by such holder of any enforcement action
because of such asserted default or non-compliance.
(c) Immediately after becoming aware of any material adverse
change in the Borrower's property, business, operations, or condition (financial
or otherwise).
(d) Immediately after receipt of any written notice of (i) any
pending or threatened action, suit, proceeding, or counterclaim by any Person
which may have a Material Adverse Effect, or (ii) any pending or threatened
investigation by a Governmental Authority (other than routine and ordinary
inspections).
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or other labor
dispute affecting the Borrower in a manner which could reasonably be expected to
have a Material Adverse Effect.
(f) Immediately after becoming aware of any violation of any
law, statute, regulation, or ordinance of a Governmental Authority affecting the
Borrower which could reasonably be expected to have a Material Adverse Effect.
(g) Immediately after receipt of any written notice of any
violation by the Borrower of any Environmental Law which could reasonably be
expected to have a Material Adverse Affect or that any Governmental Authority
has asserted that the Borrower thereof is not in compliance in any material
respect with any Environmental Law or is investigating the Borrower's compliance
therewith other than routine and ordinary inspections.
(h) Immediately after receipt of any written notice that the
Borrower is or may be liable to any Person as a result of the Release or
threatened Release of any Contaminant or that the Borrower is subject to
investigation by any Governmental Authority evaluating whether any remedial
action is needed to respond to the Release or threatened Release of any
Contaminant which, in either case, is reasonably likely to give rise to
liability in excess of $5,000,000.
(i) Immediately after receipt of any written notice of the
imposition of any Environmental Lien against any property of the Borrower.
(j) Any change in the Borrower's name, state of incorporation,
or form of organization, trade names under which the Borrower will sell
Inventory or create Accounts, or to which instruments in payment of Accounts may
be made payable, in each case at least thirty (30) days prior thereto.
(k) Within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or receives notice, that an ERISA Event or a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto.
(l) Upon request, or, in the event that such filing reflects a
significant change (as reasonably determined by the Borrower) with respect to
the matters covered thereby, within ten (10) days after the filing thereof with
the PBGC, the DOL or the IRS, as applicable, copies of the following: (i) each
annual report (form 5500 series), including Schedule B thereto, filed with the
PBGC, the DOL or the IRS with respect to each ERISA Plan, (ii) a copy of each
funding waiver request filed with the PBGC, the DOL or the IRS with respect to
any ERISA Plan and all communications received by the Borrower or any ERISA
Affiliate from the PBGC, the DOL or the IRS with respect to such request, and
(iii) a copy of each other filing or notice filed with the PBGC, the DOL or the
IRS, with respect to each ERISA Plan of either Borrower or any ERISA Affiliate.
(m) Upon request, copies of each actuarial report for any ERISA
Plan or Multi-employer Plan and annual report for any Multi-employer Plan; and
within ten (10) days after receipt thereof by the Borrower or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC's intention to
terminate an ERISA Plan or to have a trustee appointed to administer such ERISA
Plan; (ii) any favorable or unfavorable determination letter from the IRS
regarding the qualification of an ERISA Plan under Section 401(a) of the Code;
or (iii) any notice from a Multi-employer Plan regarding the imposition of
withdrawal liability.
(n) Within ten (10) days after (i) the Borrower has knowledge or
should have knowledge that any changes in the benefits of any existing ERISA
Plan have increased the Borrower's annual costs with respect thereto, (ii) the
establishment of any new ERISA Plan or the commencement of contributions to any
ERISA Plan to which the Borrower or any ERISA Affiliate was not previously
contributing; or (iii) any failure by the Borrower or any ERISA Affiliate to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment.
(o) Within ten (10) days after the Borrower or any ERISA
Affiliate knows or receives notice that any of the following events has or will
occur: (i) a Multi-employer Plan has been or will be terminated; (ii) the
administrator or plan sponsor of a Multi-employer Plan intends to terminate a
Multi-employer Plan; or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the Borrower
or any ERISA Affiliate, as applicable, has taken or proposes to take with
respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
-------------------------------------
The Borrower warrants and represents to the Agent and the Lenders that
except as hereafter disclosed to and accepted by the Agent and the Majority
Lenders in writing:
8.1 Authorization, Validity, and Enforceability of this
---------------------------------------------------
Agreement and the Loan Documents. The Borrower has the corporate
- --------------------------------
power and authority to execute, deliver and perform this Agreement and the other
Loan Documents, to incur the Obligations, and to grant to the Agent Liens upon
and security interests in the Collateral. The Borrower has taken all necessary
corporate action (including without limitation, obtaining approval of its
stockholders if necessary) to authorize its execution, delivery, and performance
of this Agreement and the other Loan Documents. This Agreement and the other
Loan Documents have been duly executed and delivered by the Borrower, and
constitute the legal, valid and binding obligations of the Borrower, enforceable
against it in accordance with their respective terms. The Borrower's execution,
delivery, and performance of this Agreement and the other Loan Documents do not
and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any Lien
upon the property of the Borrower by reason of the terms of (a) any material
contract, mortgage, Lien, lease, agreement, indenture, or instrument to which
the Borrower is a party or which is binding upon it, (b) any Requirement of Law
applicable to the Borrower, or (c) the certificate or articles of incorporation
or by-laws of the Borrower as each has been amended pursuant to the Plan of
Reorganization, copies of which amendments have been delivered to the Agent and
the Lenders.
8.2 Validity and Priority of Security Interest. The
------------------------------------------
provisions of this Agreement, the Mortgage(s), and the other Loan Documents
create legal and valid Liens on all the Collateral in favor of the Agent, for
the ratable benefit of the Agent and the Lenders, and, when financing statements
have been filed and the Mortgages recorded in the appropriate offices in the
appropriate locations, such Liens will constitute perfected and continuing Liens
on all the Collateral, having priority over all other Liens on the Collateral,
except Permitted Liens described in clause (i) of the definition of "Permitted
Liens" and Permitted Liens if and to the extent that such Permitted Liens
constitute prior Liens under any Requirement of Law and, in the case of Real
Estate, Permitted Liens described in clause (vi) of the definition of "Permitted
Liens", securing all the Obligations, and enforceable against the Borrower and
all third parties.
8.3 Organization and Qualification. The Borrower (a) is
------------------------------
duly incorporated and organized and validly existing in good standing under the
laws of the state of its incorporation, (b) is qualified to do business as a
foreign corporation and is in good standing in the jurisdictions set forth on
Schedule 8.3 which are
------------
the only jurisdictions in which qualification is necessary in order for it to
own or lease its property and conduct its business, except where the failure so
to qualify and to be in good standing would not constitute a Material Adverse
Effect and (c) has all requisite power and authority to conduct its business and
to own its property.
8.4 Corporate Name; Prior Transactions. Except as
----------------------------------
disclosed on Schedule 8.4, the Borrower has not, during the past
------------
five (5) years, been known by or used any other corporate or fictitious name, or
been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property outside of the
ordinary course of business.
8.5 Subsidiaries and Affiliates. Schedule 8.5 is a correct
--------------------------- ------------
and complete list of the name and relationship to the Borrower of each and all
of the Borrower's Affiliates of which the Borrower is aware. The Borrower has
no Subsidiaries.
8.6 Financial Statements and Projections. The Borrower
-------------------------------------
has delivered to the Agent and the Lenders the audited balance sheet and related
statements of income, retained earnings, cash flows, and changes in stockholders
equity for the Borrower as of November 3, 1996, and for the Fiscal Year then
ended, accompanied by the report thereon of the Borrower's independent certified
public accountants, Deloitte & Touche LLP. The Borrower has also delivered to
the Agent and the Lenders the unaudited balance sheet and related statements of
income and cash flows for the Borrower as of May 4, 1997. Such financial
statements are attached hereto as Exhibit C. All such financial statements have
been prepared in
- ---------
accordance with GAAP and present accurately and fairly the financial position of
the Borrower as at the dates thereof and their results of operations for the
periods then ended.
(b) The Latest Projections when submitted to the Lenders as
required herein represent the Borrower's best estimate of the future financial
performance of the Borrower for the periods set forth therein. The Latest
Projections have been prepared on the basis of the assumptions set forth
therein, which the Borrower believes are fair and reasonable in light of current
and reasonably foreseeable business conditions at the time submitted to the
Lender.
(c) The pro forma balance sheet of the Borrower as at June 29,
1997, attached hereto as Schedule 8.6(c), presents fairly
---------------
and accurately the Borrower's financial condition as at such date assuming the
transactions contemplated hereby and by the Plan of Reorganization had occurred
on such date and the Closing Date had been such date, and has been prepared in
accordance with GAAP.
8.7 Capitalization. On the Effective Date and after giving
--------------
effect to the consummation of the transactions contemplated by the Plan of
Reorganization, the Borrower's authorized capital stock consists of 10,000,000
shares of common stock, par value $0.01 per share, of which approximately
4,300,000 shares will be distributed to holders of "allowed general unsecured
claims" pursuant to the Plan of Reorganization.
8.8 Solvency. The Borrower is Solvent prior to and after
--------
giving effect to the making of the Term Loans and the Revolving Loans to be made
on the Closing Date and the issuance of the Letters of Credit to be issued on
the Closing Date, and shall remain Solvent during the term of this Agreement.
8.9 Debt. After giving effect to the making of the Term
----
Loans and the Revolving Loans to be made and to the issuance of the Letters of
Credit to be issued on the Closing Date, the Borrower has no Debt, except (a)
the Obligations, (b) Debt to be paid in accordance with the Plan of
Reorganization which is described on Schedule 8.9, and (c) trade payables,
administrative expenses and
- ------------
contractual obligations arising in the ordinary course of business after the
date of the Confirmation Order.
8.10 Distributions. Since January 1, 1993, no Distribution
-------------
has been declared, paid, or made upon or in respect of any capital stock or
other securities of the Borrower.
8.11 Title to Property. The Borrower has good and
-----------------
marketable title in fee simple to its real property listed in Schedule 8.12
hereto, and the Borrower has good, indefeasible, and<PAGE>
- -------------
merchantable title to all of its other property (including, without limitation,
the assets reflected on the most recent Financial Statements delivered to the
Agent and the Lenders, except as disposed of in the ordinary course of business
since the date thereof), free of all Liens except Permitted Liens.
8.12 Real Estate; Leases. Schedule 8.12 sets forth a
------------------- -------------
correct and complete list of all Real Estate owned by the Borrower as of the
Closing Date, all leases and subleases of real or personal property by the
Borrower as lessee or sublessee, and all leases and subleases of real or
personal property by the Borrower as lessor or sublessor. Except as disclosed
on Schedule 8.12, each
------------
of such leases and subleases is valid and enforceable in accordance with its
terms and is in full force and effect, and no default by any party to any such
lease or sublease exists.
8.13 Proprietary Rights. Schedule 8.13 sets forth a correct
------------------ -------------
and complete list of all of the Borrower's Proprietary Rights. None of the
Proprietary Rights is subject to any licensing agreement or similar arrangement
except as set forth on Schedule
---------
8.13. To the best of the Borrower's knowledge, none of the
- ----
Proprietary Rights infringes on or conflicts with any other Person's property,
and no other Person's property infringes on or conflicts with the Proprietary
Rights. The Proprietary Rights described on Schedule 8.13 constitute all of the
property of such
-------------
type necessary to the current and anticipated future conduct of the Borrower's
business.
8.14 Trade Names and Terms of Sale. All trade names under
-----------------------------
which the Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
8.14.
-------------
8.15 Litigation. Except as set forth on Schedule 8.15,
---------- -------------
there is no pending or (to the best of the Borrower's knowledge) threatened,
action, suit, proceeding, or counterclaim by any Person, or investigation by any
Governmental Authority, or any basis for any of the foregoing, which could
reasonably be expected to cause a Material Adverse Effect.
8.16 Restrictive Agreements. The Borrower is not a party to
----------------------
any contract or agreement, or subject to any charter or other corporate
restriction, which affects its ability to execute, deliver, and perform the Loan
Documents and repay the Obligations or which materially and adversely affects
or, insofar as the Borrower can reasonably foresee, could reasonably be expected
to materially and adversely affect, the property, business, operations, or
condition (financial or otherwise) of the Borrower, or would in any respect
cause a Material Adverse Effect.
8.17 Labor Disputes. Except as set forth on Schedule 8.17,
-------------- -------------
(a) there is no collective bargaining agreement or other labor contract covering
employees of the Borrower, (b) no such collective bargaining agreement or other
labor contract is scheduled to expire during the term of this Agreement, (c) no
union or other labor organization is seeking to organize, or to be recognized
as, a collective bargaining unit of employees of the Borrower or for any similar
purpose, and (d) there is no pending or (to the best of the Borrower's
knowledge) threatened, strike, work stoppage, material unfair labor practice
claim, or other material labor dispute against or affecting the Borrower or its
employees.
8.18 Environmental Laws. Except as otherwise disclosed on
------------------
Schedule 8.18:
- -------------
(a) The Borrower has complied in all material respects with all
Environmental Laws applicable to its Premises and business, and neither the
Borrower nor any of its present Premises or operations, nor, to the best of
Borrower's knowledge, its past property or operations, is subject to any
enforcement order from or liability agreement with any Governmental Authority or
private Person respecting (i) compliance with any Environmental Law or (ii) any
potential liabilities and costs or remedial action arising from the Release or
threatened Release of a Contaminant.
(b) The Borrower has obtained all material permits necessary for
its current operations under Environmental Laws, and all such permits are in
good standing and the Borrower is in compliance in all material respects with
all terms and conditions of such permits.
(c) Neither the Borrower nor, to the best of the Borrower's
knowledge, any of its predecessors in interest, has, in violation of applicable
law, stored, treated or disposed of any hazardous waste on any Premises, as
defined pursuant to 40 CFR Part 261 or any equivalent Environmental Law.
(d) The Borrower has not received any summons, complaint, order
or similar written notice that it is not currently in compliance with, or that
any Governmental Authority is investigating (other than periodic and ordinary
inspections) its compliance with, any Environmental Laws or that it is or may be
liable to any other Person as a result of a Release or threatened Release of a
Contaminant.
(e) None of the present or, to the best of Borrower's knowledge,
past operations of the Borrower is the subject of any investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to a Release or threatened Release of a Contaminant.
(f) There is not now, nor to the best of the Borrower's
knowledge has there ever been on or in the Premises:
(i) any underground storage tanks or surface impoundments,
(ii) any asbestos-containing material, or
(iii) any polychlorinated biphenyls (PCB's) used in hydraulic
oils, electrical transformers or other equipment.
(g) The Borrower has not filed any notice under any requirement
of Environmental Law reporting a material spill or material accidental and
unpermitted release or discharge of a Contaminant into the environment.
(h) The Borrower has not entered into any negotiations or
settlement agreements with any Person (including, without limitation, the prior
owner of its property) imposing material obligations or liabilities on the
Borrower with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim.
(i) None of the products manufactured, distributed or sold by
the Borrower contains asbestos containing material.
(j) No Environmental Lien has attached to any Premises of the
Borrower.<PAGE>
8.19 No Violation of Law. The Borrower is not in violation
-------------------
of any law, statute, regulation, ordinance, judgment, order, or decree
applicable to it which violation could reasonably be expected to have a Material
Adverse Effect.
8.20 No Default. The Borrower is not in default with
----------
respect to any note, indenture, loan agreement, mortgage, lease, deed, or other
agreement to which the Borrower is a party or by which it is bound, which
default could reasonably be expected to have a Material Adverse Effect.
8.21 ERISA Compliance. Except as specifically disclosed in
----------------
Schedule 8.21:
- -------------
(a) Each ERISA Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each ERISA Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the IRS and to the best
knowledge of the Borrower, nothing has occurred which would cause the loss of
such qualification. The Borrower and each ERISA Affiliate has made all required
contributions to any ERISA Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any ERISA
Plan.
(b) There are no pending or, to the best knowledge of Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any ERISA Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any ERISA Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any material liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer
Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.22 Taxes. Except as disclosed in Schedule 8.22, the
----- -------------
Borrower has filed all Federal and other tax returns and reports required to be
filed, and has paid all taxes shown to be due and payable on such returns and
reports and has paid all Federal and other taxes, assessments, fees and other
governmental charges levied or imposed upon it or its properties, income or
assets otherwise due and payable other than any such taxes, assessments, fees
and other charges, the non-payment of which is permitted by Section 9.1.
- -----------
8.23 Regulated Entities. None of the Borrower or any Person
------------------
controlling the Borrower is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Borrower is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur indebtedness.
8.24 Use of Proceeds; Margin Regulations. The proceeds of
-----------------------------------
the Loans and other extensions of credit hereunder will be used by the Borrower
to fund the Plan of Reorganization, to pay the fees and expenses of the Borrower
in connection with this Agreement and the transactions contemplated hereby and
for general working capital and corporate purposes. The Borrower is not engaged
in the business of purchasing or selling Margin Stock or extending credit for
the purpose of purchasing or carrying Margin Stock.
8.25 Copyrights, Patents, Trademarks and Licenses, etc. The
------------------------------------------------
Borrower owns or is licensed or otherwise has the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of its businesses, without conflict with the rights of any other
Person. To the best knowledge of the Borrower, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Borrower infringes upon any
rights held by any other Person. No claim or litigation regarding any of the
foregoing is pending or threatened, and, to the knowledge of the Borrower, no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
8.26 No Material Adverse Change. No Material Adverse Effect
-------------------------
has occurred since the date of the Financial Statements referred to in Section
8.6(c).
--------------
8.27 Full Disclosure. None of the representations or
---------------
warranties made by the Borrower in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Borrower in connection with the Loan Documents (including
the offering and disclosure materials delivered by or on behalf of the Borrower
to the Lenders prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
8.28 Material Agreements. Schedule 8.28 hereto sets forth
------------------- -------------
all material agreements and contracts to which the Borrower is a party or is
bound as of the date hereof.
8.29 Bank Accounts. Schedule 8.29 contains a complete and
------------- -------------
accurate list of all bank accounts maintained by the Borrower with any bank or
other financial institution.
8.30 Governmental Authorization. No approval, consent,
--------------------------
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower of this Agreement or any other Loan Document, except for filings
necessary to perfect the Agent's Lien on the Collateral.
8.31 Reorganization Matters. Attached hereto as Schedule
---------------------- --------
8.31 is a certified copy of the order of the Bankruptcy Court
- ----
confirming the Plan of Reorganization and such Plan of Reorganization and the
order of confirmation entered pursuant thereto have not been amended or modified
in any material respect and no conditions contained therein to their
effectiveness have been waived by the Borrower and such order has become a Final
Order. Simultaneously with the making of the initial Loans and the issuance of
Letters of Credit on the Closing Date, the Effective Date will occur. Cash
payments to holders of general unsecured claims, secured claims (other than for
payments of principal and interest) and priority claims (other than
administrative claims) and to officers and employees in respect of confirmation
bonuses or success fees in connection with the Plan of Reorganization shall not
exceed $4,300,000.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
-----------------------------------
The Borrower covenants to the Agent and each Lender that, so long as any
of the Obligations remain outstanding or this Agreement is in effect:
9.1 Taxes and Other Obligations. The Borrower shall
---------------------------
(a) file when due all tax returns and other reports which it is required to
file; (b) pay, or provide for the payment, when due, of all taxes, fees,
assessments and other governmental charges against it or upon its property,
income and franchises, make all required withholding and other tax deposits,
other than any inadvertent nonpayment of an immaterial amount, and establish
adequate reserves for the payment of all such items, and provide to the Agent
and the Lenders, upon request, satisfactory evidence of its timely compliance
with the foregoing; and (c) pay when due all Debt owed by it and all claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons, and all other indebtedness (including without limitation all trade
payables) owed by it and perform and discharge in a timely manner all other
obligations undertaken by it, other than any inadvertent nonpayment of an
immaterial amount; provided, however, the Borrower need not pay any tax, fee,
assessment, governmental charge, Debt, claim or other indebtedness that (i) it
is contesting in good faith by appropriate proceedings diligently pursued and
(ii) the Borrower has established proper reserves for as provided in GAAP;
provided further, however, that the Agent shall be entitled to establish
reserves from Availability for any and all Liens in an amount greater then
$100,000 (individually or in the aggregate) for taxes, fees, assessments,
governmental charges, Debts, claims or other indebtedness resulting from such
non-payment.
9.2 Corporate Existence and Good Standing. The Borrower
-------------------------------------
shall maintain its corporate existence and its qualification and good standing
in all jurisdictions in which the failure to maintain such existence and
qualification or good standing could reasonably be expected to have a material
adverse effect on the Borrower's property, business, operations, prospects, or
condition (financial or otherwise).
9.3 Compliance with Law and Agreements; Maintenance of
---------------------------------------------------
Licenses. The Borrower shall comply in all material respects with
- ---------
all Requirements of Law of any Governmental Authority having jurisdiction over
it or its business (including the Federal Fair Labor Standards Act). The
Borrower shall obtain and maintain all licenses, permits, franchises, and
governmental authorizations necessary to own its property and to conduct its
business as conducted on the Closing Date, except to the extent that failure to
do any of the foregoing would not constitute a Material Adverse Effect. The
Borrower shall not modify, amend or alter its certificate or article of
incorporation other than in a manner which does not adversely affect the rights
of the Lenders or the Agent.
9.4 Maintenance of Property. The Borrower shall maintain
-----------------------
all of its property necessary and useful in the conduct of its business, in good
operating condition and repair, ordinary wear and tear excepted, and in the
ordinary course of its business.
9.5 Insurance. (a) The Borrower shall maintain, with
---------
financially sound and reputable insurers having a rating of at least A-VII or
better by Best Rating Guide, insurance against such hazards or of such types as
is customary for Persons engaged in the same or similar business, in amounts,
and under policies reasonably acceptable to the Agent and the Majority Lenders.
Without limiting the foregoing, the Borrower shall also maintain flood
insurance, in the event of a designation of the area in which any Real Estate
covered by the Mortgages and any of the Equipment and Inventory located on such
Real Estate is located as "flood prone" or a "flood risk area," (hereinafter
"SFHA") as defined by the Flood Disaster
----
Protection Act of 1973, in an amount to be reasonably determined by the Agent,
and shall comply with the additional requirements of the National Flood
Insurance Program as set forth in said Act. The Borrower shall also maintain
flood insurance for any material amount of its Inventory and Equipment which is,
at any time, located in a SFHA.
(b) The Borrower shall cause the Agent, for the ratable benefit
of the Agent and the Lenders, to be named in each such policy as secured party
or mortgagee and loss payee or additional insured, in a manner reasonably
acceptable to the Agent. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days' prior
written notice to the Agent in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of the
Agent shall not be impaired or invalidated by any act or neglect of the Borrower
or the owner of any premises for purposes more hazardous than are permitted by
such policy. All premiums for such insurance shall be paid by the Borrower when
due, and certificates of insurance and, if requested by the Agent or any Lender,
photocopies of the policies, shall be delivered to the Agent, in each case in
sufficient quantity for distribution by the Agent to each of the Lenders. If
the Borrower fails to procure such insurance or to pay the premiums therefor
when due, the Agent may, and at the direction of the Majority Lenders shall, do
so from the proceeds of Revolving Loans.
(c) The Borrower shall promptly notify the Agent and the Lenders
of any loss, damage, or destruction to the Collateral arising from its use,
whether or not covered by insurance. The Agent is hereby authorized to collect
all insurance proceeds directly, and to apply or remit them as follows:
(i) With respect to insurance proceeds relating to
property other than Collateral, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall promptly remit to the Borrower such proceeds.
(ii) With respect to insurance proceeds relating to
Collateral other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 4.8.
-----------
(iii) With respect to insurance proceeds relating to Collateral
consisting of Fixed Assets, after deducting from such proceeds the reasonable
expenses, if any, incurred by the Agent in the collection or handling thereof,
(i) the Borrower may, so long as no Event of Default has occurred and is
continuing, use such proceeds, or any part thereof, to replace, repair, restore
or rebuild any relevant Equipment having an orderly liquidation value
immediately prior to the loss, damage or destruction thereof of no greater than
$500,000 in the aggregate in any Fiscal Year or $2,500,000 in the aggregate
during the term of this Agreement and (ii) in all other cases, the Agent (A)
shall apply such proceeds, ratably, to the reduction of the Term Loans (applying
such proceeds ratably to the installments of the Term Loans in the inverse order
of maturity) or (B) at the option of the Majority Lenders, may permit or require
the Borrower to use such money, or any part thereof, to replace, repair, restore
or rebuild the relevant Fixed Assets in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or destruction.
9.6 Condemnation. (a) The Borrower shall, promptly after
------------
receipt of written notice of the institution of any proceeding for the
condemnation or other taking of any of its property, notify the Agent of the
pendency of such proceeding, and agrees that the Agent may participate in any
such proceeding, and the Borrower from time to time will deliver to the Agent
all instruments reasonably requested by the Agent to permit such participation.
(b) The Agent is hereby authorized to collect the proceeds of
any condemnation claim or award directly, and to apply or remit them as follows:
(i) With respect to condemnation proceeds relating to
property other than Collateral, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall remit to the Borrower such proceeds.
(ii) With respect to condemnation proceeds relating to
Collateral other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 4.8.
-----------
(iii) With respect to condemnation proceeds relating to Collateral
consisting of Fixed Assets, after deducting from such proceeds the reasonable
expenses, if any, incurred by the Agent in the collection or handling thereof,
the Agent shall apply such proceeds, ratably, to the reduction of the Term Loans
(applying such proceeds ratably to the installments of the Term Loans in the
inverse order of maturity), or at the option of the Majority Lenders, may permit
or require the Borrower to use such money, or any part thereof, to replace,
repair, restore or rebuild the relevant Fixed Assets in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the condemnation.
9.7 Environmental Laws. (a) The Borrower shall conduct its
------------------
business in compliance in all material respects with all Environmental Laws
applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of any Contaminant. The
Borrower shall take prompt and appropriate action to respond to any material
non-compliance with Environmental Laws and shall regularly report to the Agent
on such response.
(b) Without limiting the generality of the foregoing, the
Borrower shall submit to the Agent and the Lenders annually, commencing on the
first Anniversary Date, and on each Anniversary Date thereafter, an update of
the status of each environmental compliance or liability issue that must be
reported pursuant to the last sentence of Section 9.7(a). The Agent or any
Lender may
-------------
request copies of technical reports prepared by the Borrower and its
communications with any Governmental Authority to determine whether the Borrower
is proceeding reasonably to correct, cure or contest in good faith any alleged
non-compliance or environmental liability. The Borrower shall, at the Agent's
or the Majority Lenders' request and at the Borrower's expense, (a) retain an
independent environmental engineer acceptable to the Agent to evaluate the
Borrower's compliance or non-compliance in all material respects with all
Environmental Laws, including tests if appropriate, where the non-compliance or
alleged non-compliance with Environmental Laws has occurred and prepare and
deliver to the Agent, in sufficient quantity for distribution by the Agent to
the Lenders, a report setting forth the results of such evaluation, a proposed
plan for responding to any environmental problems described therein, and an
estimate of the costs thereof, and (b) provide to the Agent and the Lenders a
supplemental report of such engineer whenever the scope of the environmental
problems, or the response thereto or the estimated costs thereof, shall change
in any material respect.
9.8 Compliance with ERISA. The Borrower shall, and shall
----------------------
cause each of its ERISA Affiliates to: (a) maintain each ERISA Plan in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state law; (b) cause each ERISA Plan which is intended
to satisfy Section 401(a) (or, if applicable, Section 401(k)) of the Code to
satisfy and to continue to satisfy such requirements; (c) make all required
contributions to any ERISA Plan subject to Section 412 of the Code; (d) not
engage in a prohibited transaction or violation of the fiduciary responsibility
rules with respect to any ERISA Plan that could reasonably be expected to have a
Material Adverse Effect; and (e) not engage in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
9.9 Mergers, Consolidations or Sales. Except in accordance
--------------------------------
with the Plan of Reorganization, the Borrower shall not enter into any
transaction of merger, reorganization, or consolidation, or transfer, sell,
assign, lease, or otherwise dispose of all or any part of its property, or wind
up, liquidate or dissolve, or agree to do any of the foregoing, except (i) for
sales of Inventory in the ordinary course of its business and (ii) for sales or
other dispositions of Equipment in the ordinary course of business that are
obsolete or no longer useable by Borrower in its business as permitted by
Section 6.11.
------------
9.10 Distributions; Capital Change; Restricted Investments.
-----------------------------------------------------
The Borrower shall not (i) directly or indirectly declare or make, or incur any
liability to make, any Distribution, (ii) make any change in its capital
structure which could have a Material Adverse Effect or (iii) make any
Restricted Investment.
9.11 Transactions Affecting Collateral or Obligations. The
------------------------------------------------
Borrower shall not enter into any transaction which would be reasonably expected
to have a Material Adverse Effect.
9.12 Guaranties. The Borrower shall not make, issue, or
----------
become liable on any Guaranty, except (i) Guaranties of the Obligations in
favor of the Agent and (ii) Guaranties of the obligations of any other Person
aggregating no more than $1,000,000 for all such Persons at any time
outstanding.
9.13 Debt. The Borrower shall not incur or maintain any
----
Debt for Borrowed Money, other than: (a) the Obligations; (b) other Debt for
Borrowed Money existing on the Closing Date and reflected on Schedule 8.9; (c)
purchase money Debt for Borrowed
------------
Money incurred by the Borrower to finance Capital Expenditures, MIS Expenditures
and the acquisition of Property under Capital Leases subsequent to the date of
this Agreement, to the extent that (i) immediately after giving effect to the
incurrence of any such purchase money Debt for Borrowed Money or liability under
a Capital Lease, the aggregate amount allocable to principal under all Capital
Leases for which liability is incurred during any Fiscal Year, together with the
aggregate principal amount of purchase money Debt for Borrowed Money incurred
during such Fiscal Year, will not exceed $1,000,000 and (ii) at the time that
any such liability in respect of purchase money Debt for Borrowed Money or
Capital Leases is to be incurred, no Default or Event of Default shall have
occurred and be continuing or will result therefrom and (d) extensions,
renewals, replacements or refinancings of the Debt for Borrowed Money described
in the preceding clause (c) on terms and conditions satisfactory to the Majority
Lenders.
9.14 Prepayment. The Borrower shall not voluntarily prepay
----------
any Debt for Borrowed Money, except the Obligations in accordance with the terms
of this Agreement.
9.15 Transactions with Affiliates. Except as may be
----------------------------
required by the Plan of Reorganization, the Borrower shall not sell, transfer,
distribute, or pay any money or property, including, but not limited to, any
fees or expenses of any nature (including, but not limited to, any fees or
expenses for management services), to any Affiliate, or lend or advance money
or property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any property,
of any Affiliate, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate, except in each case on terms
that are no less favorable to the Borrower than those that might be obtained in
an arm's-length transaction at the time from Persons who are not an Affiliate.
Nothing in this Section 9.15 shall prohibit payment of customary
------------
directors' fees and indemnities or reimbursement of reasonable expenses incurred
in the ordinary course of business by any officer or director of the Borrower
who is an Affiliate.
9.16 Investment Banking and Finder's Fees. The Borrower
------------------------------------
shall not pay or agree to pay, or reimburse any other party with respect to,
any investment banking or similar or related fee, underwriter's fee, finder's
fee, or broker's fee to any Person in connection with this Agreement. The
Borrower shall defend and indemnify the Agent and the Lenders against and hold
them harmless from all claims of any Person that the Borrower is obligated to
pay for any such fees, and all costs and expenses (including without limitation,
attorneys' fees) incurred by the Agent and/or any Lender in connection
therewith.
9.17 Business Conducted. The Borrower shall not engage
------------------
directly or indirectly, in any line of business other than the businesses in
which the Borrower is engaged on the Closing Date; provided that the
introduction of additional products or services within or related to such lines
of business or the expansion of marketing areas shall not be construed to be a
new line of business.
9.18 Liens. The Borrower shall not create, incur, assume,
-----
or permit to exist any Lien on any property now owned or hereafter acquired by
it, except Permitted Liens.
9.19 Sale and Leaseback Transactions. The Borrower shall
-------------------------------
not, directly or indirectly, enter into any arrangement with any Person
providing for the Borrower to lease or rent property that the Borrower has sold
or will sell or otherwise transfer to such Person; provided, however, that such
prohibition shall not apply to new Equipment sold and leased back within one
year of acquisition in connection with a Capital Lease, subject to the
limitations with respect thereto contained in Section 9.13(c).
---------------
9.20 Subsidiaries. The Borrower shall not, directly or
------------
indirectly, organize, create, acquire or permit to exist any Subsidiary.
9.21 Fiscal Year. The Borrower shall not change its Fiscal
-----------
Year.
9.22 Capital Expenditures; MIS Expenditures.
--------------------
(a) The Borrower shall not make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by the Borrower would exceed $5,000,000 during any Fiscal Year;
provided, however, that in the event that all or any part of such permitted
aggregate amount is not utilized by the Borrower during any Fiscal Year, such
unutilized amount may be added to the limit in respect of any subsequent year or
years.
(b) The Borrower shall not make or incur any MIS Expenditure, if
after giving effect thereto, the aggregate amount of all MIS Expenditures by the
Borrower would exceed $1,500,000 during any Fiscal Year; provided, however, that
in the event that all or any part of such permitted aggregate amount is not
utilized by the Borrower during any Fiscal Year, such unutilized amount may be
added to the limit in respect of any subsequent year or years.
9.23 Operating Lease Obligations. The Borrower shall not
---------------------------
enter into, or suffer to exist, any lease of real or personal property as lessee
or sublessee (other than a Capital Lease), if, after giving effect thereto, the
aggregate amount of Rentals (as hereinafter defined) payable by the Borrower in
any Fiscal Year in respect of such lease and all other such leases would exceed
$4,000,000 (such amount being referred to herein as "Permitted
---------
Rentals"). The term "Rentals" means all payments due from the
- -------
lessee or sublessee under a lease, including, without limitation, basic rent,
percentage rent, property taxes, utility or maintenance costs, and insurance
premiums.
9.24 Adjusted Tangible Net Worth. The Borrower will
---------------------------
maintain Adjusted Tangible Net Worth, determined as of the last day of each
fiscal quarter, of not less than the following amounts during the following
periods of time:
Fiscal Quarter Ending Amount
--------------------- ------
October 1997 EDATNW minus
$4,000,000
January 1998 EDATNW minus
$8,300,000
April 1998 EDATNW minus
$3,800,000
July 1998 EDATNW minus
$1,300,000
October 1998 EDATNW minus
$3,000,000
January 1999 EDATNW minus
$7,300,000
April 1999 EDATNW minus
$3,000,000
July 1999 EDATNW minus
$550,000
October 1999 EDATNW minus
$2,000,000
January 2000 EDATNW minus
$6,400,000
April 2000 EDATNW minus
$2,275,000
9.25 Interest Coverage Ratio. The Borrower will maintain an
-----------------------
Interest Coverage Ratio, determined as of the last day of each fiscal quarter on
a rolling 12-month basis, of not less than the following ratios during the
following periods of time:
Fiscal Quarter Ending Ratio
--------------------- -----
July 1997 1.7
October 1997 2.1
January 1998 1.7
April 1998 2.2
July 1998 2.5
October 1998 2.5
January 1999 2.5
April 1999 2.5
July 1999 2.5
October 1999 (and any
fiscal quarter thereafter) 2.5
9.26 Fixed Charge Coverage Ratio. The Borrower will
---------------------------
maintain a Fixed Charge Coverage Ratio, determined as of the last day of each
fiscal quarter on a rolling 12-month basis, of not less than the following
ratios during the following periods of time:
Fiscal Quarter Ending Ratio
--------------------- -----
July 1997 1.0
October 1997 1.0
January 1998 0.7
April 1998 0.9
July 1998 0.8
October 1998 1.1
January 1999 0.9
April 1999 0.9
July 1999 0.9
October 1999 (and any
fiscal quarter thereafter) 1.1
9.27 Use of Proceeds. The Borrower shall not use any
---------------
portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry
Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Borrower
or others incurred to purchase or carry Margin Stock, (iii) to extend credit for
the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
9.28 Plan of Reorganization. Without the prior written
----------------------
consent of the Agent and the Majority Lenders, the Borrower shall not cause or
permit the Plan of Reorganization to be amended or modified or waive any of the
conditions contained therein in any material respect.
9.29 Further Assurances. The Borrower shall execute and
------------------
deliver, or cause to be executed and delivered, to the Agent and/or the Lenders
such documents and agreements, and shall take or cause to be taken such actions,
as the Agent or any Lender may, from time to time, reasonably request to carry
out the terms and conditions of this Agreement and the other Loan Documents.
ARTICLE 10
CONDITIONS OF LENDING
---------------------
10.1 Conditions Precedent to Making of Loans on the Closing
-----------------------------------------------------
Date. The obligation of the Lenders to make the initial Revolving
- ----
Loans on the Closing Date and to make the Term Loans, and the obligation of the
Agent to cause to be issued or provide Credit Support for any Letter of Credit
on the Closing Date and the obligation of the Lenders to participate in Letters
of Credit issued on the Closing Date or in Credit Support for any Letters of
Credit, are subject to the following conditions precedent having been satisfied
in a manner reasonably satisfactory to the Agent and each Lender:
(a) This Agreement and the other Loan Documents have been
executed by each party thereto and the Borrower shall have performed and
complied with all covenants, agreements and conditions contained herein and the
other Loan Documents which are required to be performed or complied with by the
Borrower before or on such Closing Date.
(b) After giving effect to (i) the Revolving Loans to be made
and the Letters of Credit to be issued on the Closing Date (including such
Revolving Loans made to finance the Facility Fee or Underwriting Fee or
otherwise pursuant to Section 4.7 as
--------------
reimbursement for fees, costs and expenses then payable under this Agreement)
and (ii) all payments (including all payments to be made pursuant to the Plan of
Reorganization) on the Closing Date, and after deducting (x) the aggregate
amount of payments that would have been payable on the Effective Date to holders
of Disputed Claims (as defined in the Plan of Reorganization) based on the
Borrower's good faith estimates (and confirmed by Agent and its counsel) of the
aggregate amount of such payments to holders of Disputed Claims and (y) any
deferred or unpaid administrative expenses of, or cure payments by, the
Borrower, the Borrower shall have excess Availability of no less than
$7,000,000.
(c) All representations and warranties made hereunder and in the
other Loan Documents shall be true and correct as of the Closing Date as if made
on such date.
(d) No Default or Event of Default shall exist on the Closing
Date, or would exist after giving effect to the Loans to be made on such date.
(e) The Agent and the Lenders shall have received such opinions
of counsel for the Borrower as the Agent or any Lender shall request, each such
opinion to be in a form, scope, and substance reasonably satisfactory to the
Agent, the Lenders, and their respective counsel.
(f) The Agent shall have received evidence that EBITDA shall
have not been less than $14,100,000 for the thirty-week period ended June 1,
1997.
(g) (i) The Agent and the Lenders shall have approved the
Confirmation Order, (ii) the Agent and the Lenders shall have received a
certified copy of the Confirmation Order and such Confirmation Order has become
a Final Order, (iii) simultaneously with the making of the initial Loans and the
issuance of any Letters of Credit on the Closing Date, the Effective Date will
occur, (iv) the Agent and the Lenders shall have received evidence that cash
payments to holders of general unsecured claims, secured claims (other than for
payments of principal and interest) and priority claims (other than
administrative claims) and to officers and employees in respect of confirmation
bonuses or success fees in connection with the Plan of Reorganization shall not
exceed $4,300,000 and (v) the Borrower's Plan of Reorganization and order of
confirmation entered pursuant thereto shall have not been amended or modified in
any material respect or any conditions contained therein been waived by
Borrower.
(h) The Agent shall have received an ALTA title policy by a
title insurance company satisfactory to Agent in an amount and in form and
substance acceptable to Agent, insuring that the Mortgages constitute valid,
first priority record Liens in favor of the Agent in the Premises covered
thereby, with no exceptions other than Permitted Liens and such exceptions as
may be acceptable to the Agent in its sole discretion.
(i) The Agent shall have received an order of the Bankruptcy
Court in form and substance satisfactory to Agent authorizing and approving
Borrower's execution, deliver and performance of this Agreement and the payment
of fees and expenses in connection herewith.
(j) The Agent and the Lenders shall be satisfied with the
results of a meeting with new management (if a change occurs in connection with
the Plan of Reorganization).
(k) The Agent shall have received:
(i) financing statements prepared for filing under the UCC
of all jurisdictions that the Agent may deem necessary or desirable in order to
perfect the Agent's Lien (which financing statements shall have been delivered
to a filing service acceptable to the Agent so that filing thereof with the
appropriate Governmental Authorities can occur concurrently with the initial
Borrowing hereunder); and
(ii) UCC-3 Termination Statements, duly executed by the
Senior Secured Note Trustee, The CIT Group/Equipment Financing, Inc. and General
Electric Capital Corporation, and such other instruments, in form and substance
satisfactory to the Agent, as shall be necessary to terminate and satisfy all
Liens on the Property of the Borrower except Permitted Liens.
(l) The Agent and the Lenders shall have received certified
copies of all consents or approvals of any Governmental Authority or other
Person which the Agent and the Lenders determine are required in connection with
the transactions contemplated by this Agreement.
(m) There shall have occurred no material adverse change in the
Borrower's business or financial condition or in the Collateral since December
31, 1996. The Agent and the Lenders shall have received a certificate of
Borrower's chief financial officer to the effect of the foregoing sentence.
(n) The Agent shall have received all documents, instruments,
opinions and other materials described on Exhibit D,
---------
to the extent such items are not otherwise specifically referenced in this
Section 10.1.
------------
(o) The Borrower shall have paid all fees and expenses of the
Agent and the Attorney Costs incurred in connection with any of the Loan
Documents and the transactions contemplated thereby.
(p) The Agent shall have received evidence, in form, scope, and
substance, reasonably satisfactory to the Agent, of all insurance coverage as
required by this Agreement.
(q) The Agent and the Lenders shall have examined the books of
account and other records and files of the Borrower and to make copies thereof,
and conducted a pre-closing audit which shall include, without limitation,
verification of Inventory, Accounts, and Availability, and the results of such
examination and audit shall have been reasonably satisfactory to the Agent and
the Lenders in all respects.
(r) All proceedings taken in connection with the transactions
contemplated by this Agreement, all other Loan Documents and the Plan or
Reorganization and all documents, instruments and other matters incident hereto
or thereto shall be satisfactory in form, scope, and substance to the Agent, the
Lenders and their respective counsel.
The acceptance by the Borrower of any Loans made on the Closing Date shall
be deemed to be a representation and warranty made by the Borrower to the effect
that all of the conditions precedent to the making of such Loans have been
satisfied, with the same effect as delivery to the Agent and the Lenders of a
certificate signed by a Responsible Officer of the Borrower, dated the Closing
Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (i) all conditions
precedent in this Section 10.1 have
------------
been fulfilled to the satisfaction of such Lender and (ii) the decision of such
Lender to execute and deliver to the Agent an executed counterpart of this
Agreement was made by such Lender independently and without reliance on the
Agent or any other Lender as to the satisfaction of any condition precedent set
forth in this Section 10.1.
- ------------
10.2 Conditions Precedent to Each Loan. The obligation of
---------------------------------
the Lenders to make each Loan, including the initial Revolving Loans on the
Closing Date and the Term Loans, and the obligation of the Agent to take
reasonable steps to cause to be issued or to provide Credit Support for any
Letter of Credit and the obligation of the Lenders to participate in Letters of
Credit or Credit Support for Letters of Credit, shall be subject to the further
conditions precedent that on and as of the date of any such extension of credit:
(a) The following statements shall be true, and the acceptance
by the Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i) and (ii), with the same effect as the
delivery to the Agent and the Lenders of a certificate signed by a Responsible
Officer, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material respects on
and as of the date of such extension of credit as though made on and as of such
date, other than any such representation or warranty which expressly relates to
an earlier date; and
(ii) No event has occurred and is continuing, or would
result from such extension of credit, which constitutes a Default or an Event of
Default; and
(b) no order, judgment or decree of any Governmental Authority
and no law, rule or regulation applicable to the Agent or any Lender shall
purport by its terms to enjoin, restrain or otherwise prohibit the making of
such Loan or issuance of such Letter of Credit or Credit Support; and
(c) without limiting Section 10.1(b), the amount of
--------------
the Availability shall be sufficient to make such Revolving Loan without
exceeding the Availability, provided, however, that the foregoing conditions
precedent are not conditions to each Lender participating in or reimbursing BABC
or the Agent for such Lender's Pro Rata Share of any BABC Loan or Agent Advance
as provided in Sections 2.2(h), 2.2(i), and 2.2(j).
- -------------- ------ ------<PAGE>
ARTICLE 11
DEFAULT; REMEDIES
-----------------
11.1 Events of Default. It shall constitute an event of
-----------------
default ("Event of Default") if any one or more of the following
-----------------
shall occur for any reason:
(a) any failure to pay the principal of or interest or premium
on any of the Obligations when due, whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement or in any of the other Loan Documents, any Financial
Statement, or any certificate furnished by the Borrower at any time to the Agent
or any Lender shall prove to be untrue in any material respect as of the date on
which made, deemed made, or furnished;
(c) the Borrower shall (i) fail to comply with any of the
covenants set forth in Article 9 (other than Sections 9.1, 9.2, 9.3, 9.4, 9.6,
9.7, 9.8 or 9.29) or Article 6 or Section 7.1 or (ii) fail to comply with any of
the covenants set forth in (A) Sections 9.1, 9.2, 9.3, 9.4, 9.6, 9.7 or 9.8, if
such failure shall have existed for more than 20 days, (B) Sections 7.2 or 7.3,
if such failure shall have existed for more than 3 days or (C) Section 9.29, if
such failure shall have existed for more than 10 days, in each case after the
date that the Borrower discovers such failure (or the date of Agent's request in
the case of Section 9.29);
(d) except as provided in Sections 11.1(a) and 11.1(c), any
default shall occur in the observance or performance of any of the covenants and
agreements of the Borrower contained in this Agreement or any other Loan
Documents, and the continuance of such default remains unremedied for a period
of 20 days;
(e) any default shall occur in the observance or performance of
any of the covenants and agreements contained in this Agreement, any other Loan
Documents, or any other agreement entered into at any time to which the Borrower
and the Agent or any Lender are party, or if any such agreement or document
shall terminate (other than in accordance with its terms or the terms hereof or
with the written consent of the Agent and the Majority Lenders) or become void
or unenforceable, without the written consent of the Agent and the Majority
Lenders;
(f) default shall occur with respect to any Debt For Borrowed
Money (other than the Obligations) in an outstanding principal amount which
exceeds $1,000,000 or under any agreement or instrument under or pursuant to
which any such Debt For Borrowed Money may have been issued, created, assumed,
or guaranteed by the Borrower, and such default shall continue for more than the
period of grace, if any, therein specified, if the effect thereof (with or
without the giving of notice or further lapse of time or both) is to accelerate,
or to permit the holders of any such Debt For Borrowed Money to accelerate, the
maturity of any such Debt For Borrowed Money; or any such Debt For Borrowed
Money shall be declared due and payable or be required to be prepaid (other than
by a regularly scheduled required prepayment) prior to the stated maturity
thereof;
(g) the Borrower shall (i) file a voluntary petition in
bankruptcy or file a voluntary petition or an answer or otherwise commence any
action or proceeding seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the federal Bankruptcy Code, as amended, or
under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, or consent to, approve of, or acquiesce in, any such
petition, action or proceeding; (ii) apply for or acquiesce in the appointment
of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee
or similar officer for it or for all or any part of its property; (iii) make an
assignment for the benefit of creditors; or (iv) be unable generally to pay its
debts as they become due;
(h) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement,
consolidation or readjustment of the debts of the Borrower or for any other
relief under the Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing and either
(i) such petition, proposal, action or proceeding shall not have been dismissed
within a period of sixty (60) days after its commencement or (ii) an order for
relief against the Borrower shall have been entered in such proceeding;
(i) a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for the Borrower or for all or any part of
its property shall be appointed or a warrant of attachment, execution or similar
process shall be issued against any material part of the property of the
Borrower and such appointment continues or such warrant, execution or similar
process is not released, vacated or fully bonded for sixty (60) days;
(j) the Borrower shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence or have commenced against it any action or proceeding for dissolution,
winding-up or liquidation and, in the case where such action or proceeding is
commenced against it, such action or proceeding shall not have been dismissed
within sixty (60) days after its commencement, or shall take any corporate
action in furtherance thereof;
(k) all or any material part of the property of the Borrower
shall be nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such property or of the Borrower shall be
assumed by any Governmental Authority or any court of competent jurisdiction at
the instance of any Governmental Authority, except where contested in good faith
by proper proceedings diligently pursued where a stay of enforcement is in
effect;
(l) any guaranty of the Obligations shall be terminated, revoked
or declared void or invalid;
(m) one or more judgments or orders for the payment of money
aggregating in excess of $1,000,000 which amount shall not be fully covered by
insurance, shall be rendered against the Borrower and remains undischarged,
unvacated, unbounded or unstayed for a period of thirty (30) days; provided,
however, that, notwithstanding the foregoing, an Event of Default shall be
deemed to have occurred immediately upon the enforcement of any such judgment or
order;
(n) any loss, theft, damage or destruction of any item or items
of Collateral or other property of the Borrower occurs which materially and
adversely affects the property, business, operation, prospects, or condition of
the Borrower;
(o) there occurs a Material Adverse Effect;
(p) there is filed against the Borrower any criminal action,
suit or proceeding under any federal or state racketeering statute (including,
without limitation, the Racketeer Influenced and Corrupt Organization Act of
1970), which action, suit or proceeding (1) is not dismissed within one hundred
twenty (120) days, and (2) could reasonably be expected to result in the
confiscation or forfeiture of any material portion of the Collateral;
(q) for any reason other than the failure of the Agent to take
any action available to it to maintain perfection of the Agent's Liens, pursuant
to the Loan Documents, any Loan Document ceases to be in full force and effect
or any Lien with respect to any material portion of the Collateral intended to
be secured thereby ceases to be, or is not, valid, perfected and prior to all
other Liens (other than Permitted Liens) or is terminated, revoked or declared
void;
(r) (i) an ERISA Event shall occur with respect to a Pension
Plan or Multi-employer Plan which has resulted or would reasonably be expected
to result in liability of the Borrower under Title IV of ERISA to the Pension
Plan, Multi-employer Plan or the PBGC in an aggregate amount in excess of
$1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $5,000,000; or (iii) the Borrower or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multi-employer Plan in an aggregate amount
in excess of $1,000,000;
(s) there shall occur (i) one of more sales, transfers or other
dispositions of Capital Stock of the Borrower, or securities convertible into or
exchangeable for such Capital Stock, or rights to acquire such Capital Stock, to
one or more purchasers or (ii) any other event, such that after, or as a direct
result of, such sale, transfer, disposition, or event (A) any "person" or
related "group" of persons (within the meaning of Sections 13(d)(3) and 14(d)(2)
of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the total voting power of the then
outstanding Capital Stock of the Borrower (calculated on a fully diluted basis
in accordance with GAAP) or (B) any "person" or related "group" of persons
(within the meaning of Sections 13(d)(3) and 14(2) of the Exchange Act) acquires
directly or indirectly the power to elect a majority of the directors onto the
board of directors of the Borrower;
(t) one or more defaults shall occur under the Plan of
Reorganization, and such default(s) shall continue for more than the grace
period, if any, therein specified; or
(u) the Subordination Agreement shall be terminated or otherwise
fail to be in full force and effect for any reason.
11.2 Remedies. (a) If a Default or an Event of Default
--------
exists, the Agent may, in its discretion, and shall, at the direction of the
Majority Lenders, do one or more of the following at any time or times and in
any order, without notice to or demand on the Borrower: (i) reduce the Maximum
Revolver Amount, or the advance rates against Eligible Accounts and/or Eligible
Inventory used in computing the Availability, or reduce one or more of the
other elements used in computing the Availability; (ii) restrict the amount of
or refuse to make Revolving Loans; and (iii) restrict or refuse to arrange for
or provide Letters of Credit or Credit Support. If an Event of Default exists,
the Agent shall, at the direction of the Majority Lenders, do one or more of
the following, in addition to the actions described in the preceding sentence,
at any time or times and in any order, without notice to or demand on the
Borrower: (a) terminate the Commitments and this Agreement; (b) declare any or
all Obligations to be immediately due and payable; provided, however, that upon
the occurrence of any Event of Default described in Sections 11.1(e), 11.1(f),
11.1(g), or
---------------- ------- -------
11.1(h), the Commitments shall automatically and immediately
- ------
expire and all Obligations shall automatically become immediately due and
payable without notice or demand of any kind; and (c) pursue its other rights
and remedies under the Loan Documents and applicable law.
(b) If an Event of Default has occurred and is continuing:
(i) the Agent shall have for the benefit of the Lenders, in addition to all
other rights of the Agent and the Lenders, the rights and remedies of a secured
party under the UCC; (ii) the Agent may, at any time, take possession of the
Collateral and keep it on the Borrower's premises, at no cost to the Agent or
any Lender, or remove any part of it to such other place or places as the Agent
may desire, or the Borrower shall, upon the Agent's demand, at the Borrower's
cost, assemble the Collateral and make it available to the Agent at a place
reasonably convenient to the Agent; and (iii) the Agent may sell and deliver any
Collateral at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as the Agent deems advisable, in its sole
discretion, and may, if the Agent deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale. Without
in any way requiring notice to be given in the following manner, the Borrower
agrees that any notice by the Agent of sale, disposition or other intended
action hereunder or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to the Borrower if such notice is
mailed by registered or certified mail, return receipt requested, postage
prepaid, or is delivered personally against receipt, at least five (5) Business
Days prior to such action to the Borrower's address specified in or pursuant to
Section 15.8. If any Collateral is sold on terms other
------------
than payment in full at the time of sale, no credit shall be given against the
Obligations until the Agent or the Lenders receive payment, and if the buyer
defaults in payment, the Agent may resell the Collateral without further notice
to the Borrower. In the event the Agent seeks to take possession of all or any
portion of the Collateral by judicial process, the Borrower irrevocably waives:
(a) the posting of any bond, surety or security with respect thereto which might
otherwise be required; (b) any demand for possession prior to the commencement
of any suit or action to recover the Collateral; and (c) any requirement that
the Agent retain possession and not dispose of any Collateral until after trial
or final judgment. The Borrower agrees that the Agent has no obligation to
preserve rights to the Collateral or marshal any Collateral for the benefit of
any Person. The Agent is hereby granted a license or other right to use,
without charge, the Borrower's labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and the
Borrower's rights under all licenses and all franchise agreements shall inure to
the Agent's benefit for such purpose. The proceeds of sale shall be applied
first to all expenses of sale, including attorneys' fees, and then to the
Obligations in whatever order the Agent elects. The Agent will return any
excess to the Borrower and the Borrower shall remain liable for any deficiency.
(c) If an Event of Default occurs, the Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
ARTICLE 12
TERM AND TERMINATION
---------------------
12.1 Term and Termination. The term of this Agreement shall
--------------------
end on the Stated Termination Date. The Agent upon direction from the Majority
Lenders may terminate this Agreement without notice upon the occurrence of an
Event of Default. Upon the effective date of termination of this Agreement for
any reason whatsoever, all Obligations (including, without limitation, all
unpaid principal, accrued interest and any early termination or prepayment fees
or penalties) shall become immediately due and payable and Borrower shall
immediately arrange for the cancellation of Letters of Credit then outstanding.
Notwithstanding the termination of this Agreement, until all Obligations are
indefeasibly paid and performed in full in cash, the Borrower shall remain bound
by the terms of this Agreement and shall not be relieved of any of its
Obligations hereunder, and the Agent and the Lenders shall retain all their
rights and remedies hereunder (including, without limitation, the Agent's Liens
in and all rights and remedies with respect to all then existing and after-
arising Collateral).<PAGE>
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATION; ASSIGNMENTS; SUCCESSORS
-----------------------------------------------------------
13.1 No Waivers; Cumulative Remedies. No failure by the
--------------------------------
Agent or any Lender to exercise any right, remedy, or option under this
Agreement or any present or future supplement thereto, or in any other agreement
between or among the Borrower and the Agent and/or any Lender, or delay by the
Agent or any Lender in exercising the same, will not operate as a waiver
thereof. No waiver by the Agent or any Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by the
Agent or the Lenders on any occasion shall affect or diminish the Agent's and
each Lender's rights thereafter to require strict performance by the Borrower of
any provision of this Agreement. The Agent's and each Lender's rights under
this Agreement will be cumulative and not exclusive of any other right or remedy
which the Agent or any Lender may have.
13.2 Amendments and Waivers. (a)(i) No amendment or waiver
----------------------
of any provision of the Fee Agreement, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Agent and the Borrower and (ii) no amendment or
waiver of any provision of this Agreement or any other Loan Document (other than
the Fee Agreement), and no consent with respect to any departure by the Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Lenders (or by the Agent at the written request of the Majority
Lenders) and the Borrower, and (b) any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all the Lenders and acknowledged by the Agent, do any of
the following:
i. increase or extend the Commitment of any Lender;
ii. postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
iii. reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
iv. change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder;
v. increase any of the percentages set forth in the definition
of Availability;
vi. amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
vii. release Collateral other than as permitted by Section 14.11;
- -------------
viii. change the definition of "Majority Lenders";
ix. amend, terminate (except in accordance with the provisions
thereof) or waive any provision of, the Subordination Agreement, if such
amendment, termination or waiver could have an adverse effect on any Lender; or
x. increase the Maximum Revolver Amount, the Maximum Inventory
Loan, and Unused Letter of Credit Subfacility.
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent, affect the rights or duties of the Agent under
this Agreement or any other Loan Document. Notwithstanding any of the
foregoing, Schedules 8.5 (if
----------------
such amendment adds or otherwise relates to any Affiliate of the
- -----------------------------------------------------------------
Borrower), 8.3, 8.4, 8.17, 8.18 and 8.28 may be amended by five (5)
- ------------------------------- ----
Business Days' prior written notice, and Schedules 8.5 (if such
-----------------------
amendment adds or otherwise relates to any Subsidiary of the
- ------------------------------------------------------------
Borrower), 8.13, 8.14 and 8.29 may be amended by thirty (30)
- --------------------- ----
Business Days' prior written notice, to the Agent by the Borrower of any change
thereto without any further action on the part of the Agent or any Lender.
13.3 Assignments; Participation.
--------------------------
(a) Any Lender may, upon prior written notice to the Borrower
and receipt of the prior written consent of the Agent (which consent shall not
be withheld unreasonably), assign and delegate to one or more commercial lenders
(provided that no written consent of the Agent shall be required in connection
with any assignment and delegation by a Lender to an Affiliate of such Lender)
(each an "Assignee") all, or any ratable part of all, of
--------
the Loans, the Commitments and the other rights and obligations of such Lender
hereunder, in a minimum amount of $10,000,000 or if less the entire amount of
such Lender's Commitment; provided, however, that after giving effect to any
assignment of less than all of its Commitment hereunder, the assigning Lender
shall have a Commitment of at least $10,000,000; provided, further, that the
Borrower and the Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Borrower and the Agent by such Lender and the Assignee; (ii) such Lender and its
Assignee shall have delivered to the Borrower and the Agent an Assignment and
Acceptance in the form of Exhibit G ("Assignment and
--------- --------------
Acceptance") together with any Note or Notes subject to such
- ----------
assignment and (iii) the assignor Lender or Assignee has paid to the Agent a
processing fee in the amount of $3,000.
(b) From and after the date that the Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations, including, but not
limited to, the obligation to participate in Letters of Credit and Credit
Support have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (6) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, the Borrower shall execute and deliver to the Agent, new
Notes evidencing such Assignee's assigned Loans and, if the assignor Lender has
retained a portion of its Loans and its Commitment, replacement Notes in the
principal amount of the Loans retained by the assignor Lender (such Notes to be
in exchange for, but not in payment of, the Notes held by such Lender).
Immediately upon payment of the processing fee under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Lender
pro tanto.
(e) Any Lender may at any time sell to one or more commercial
banks, financial institutions, or other commercial lenders not Affiliates of the
Borrower (a "Participant")
-----------
participating interests in any Loans, the Commitment of that Lender and the
other interests of that Lender (the "Originating Lender")
------------------
hereunder and under the other Loan Documents; provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Borrower and the Agent shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, and all amounts payable by the Borrower hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
and subject to the same limitation as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement.
Notwithstanding anything to the contrary in the foregoing sentence, any
participant may be given the right to require the Lender granting such
participant's participation to vote against (1) the release of all or
substantially all of the Collateral, and (2) any amendment, modification or
waiver of any provision of Article 2 or 3 relating to the principal amount of
the
---------- -
Loans or Letter of Credit or Credit Support Obligations, the maturity dates of
the Loans, interest and fees payable hereunder (but not a waiver of a Default or
Event of Default that would result in the reduction of the interest rate payable
with respect to any Borrowing from the Default Rate to the LIBOR Rate or Base
Rate), the interest rates borne by the Loans and the amounts of any fees payable
under Sections 3.4, 3.5 and 3.6.
------------ --- ---
(f) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
ARTICLE 14
THE AGENT
---------
14.1 Appointment and Authorization. Each Lender hereby
-----------------------------
designates and appoints BankAmerica Business Credit, Inc. as its Agent under
this Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this Article 14. The
----------
provisions of this Article 14 are solely for the benefit of the
----------
Agent and the Lenders and the Borrower shall have no rights as a third party
beneficiary of any of the provisions contained herein. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Except as expressly
otherwise provided in this Agreement, the Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the other
Loan Documents, including, without limitation, (a) the determination of the
applicability of ineligibility criteria with respect to the calculation of the
Availability, (b) the making of Agent Advances pursuant to Section
-------
2.2(i), and (c) the exercise of remedies pursuant to Section 11.2,
- ------ ------------
and any action so taken or not taken shall be deemed consented to by the
Lenders.
14.2 Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made without gross negligence or
willful misconduct.
14.3 Liability of Agent. None of the Agent-Related Persons
-------------------
shall (i) be liable for any action taken or omitted to be taken by any of them
in good faith under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by
the Borrower or any Affiliate of the Borrower, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
of the Borrower's Affiliates.
14.4 Reliance by Agent. The Agent shall be entitled to
-----------------
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 10.1, each Lender that has executed
-----------
this Agreement shall be deemed to have consented to, approved or accepted or to
be satisfied with, each document or other matter either sent by the Agent to
such Lender for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lender.
14.5 Notice of Default. The Agent shall not be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Lenders, unless the
Agent shall have received written notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." The Agent will notify the Lenders of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Lenders in
accordance with Article 11; provided, however, that unless and until the Agent
has
- ----------
received any such request, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable.
14.6 Credit Decision. Each Lender acknowledges that none of
---------------
the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Agent hereinafter taken, including any review of the affairs
of the Borrower and its Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Affiliates, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrower.
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower and its Affiliates.
Except for notices, reports and other documents expressly herein required to be
furnished to the Lenders by the Agent, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower and its Affiliates which may come
into the possession of any of the Agent-Related Persons.
14.7 Indemnification. Whether or not the transactions
----------------
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), based on
their Pro Rata Shares, from and against any and all Indemnified Liabilities as
such term is defined in Section 15.11; provided, however, that no Lender shall
be liable
-------------
for the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
the Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrower. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
14.8 Agent in Individual Capacity. BABC and its Affiliates
----------------------------
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Borrower and
its Affiliates as though BABC were not the Agent hereunder and without notice to
or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BABC or its Affiliates may receive information regarding the
Borrower or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Borrower) and acknowledge that the
Agent shall be under no obligation to provide such information to them. With
respect to its Loans, BABC shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent, and the terms "Lender" and "Lenders" include BABC in its individual
capacity.
14.9 Successor Agent. The Agent may resign as Agent upon 30
---------------
days' notice to the Lenders and the Borrower. If the Agent resigns under this
Agreement, the Majority Lenders shall appoint from among the Lenders a successor
agent for the Lenders. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and the Borrower, a successor agent from among the
Lenders. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article 14 shall inure to its benefit as to any actions taken or
- ----------
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Majority Lenders appoint a successor agent as provided for above.
14.10 Withholding Tax. If any Lender is a foreign
----------------
corporation, partnership or trust within the meaning of Section 7701(a) of the
Code and such Lender claims exemption from, or a reduction of, U.S. withholding
tax under Sections 1441 or 1442 of the Code, such Lender shall deliver to the
Agent and the Borrower:
(x) (i) two properly completed IRS Forms 1001 and W-8 (or
applicable successor forms) before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement; or
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 (or applicable successor form)
before the payment of any interest is due in the first taxable year of such
Lender and in each succeeding taxable year of such Lender during which interest
may be paid under this Agreement, and IRS Form W-9; and
(y) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Lender becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form, and such Lender so advises the Borrower and the Agent.
Such Lender agrees to promptly notify the Agent and the Borrower of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Borrower to such Lender, such Lender
agrees to notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrower to such Lender. To the extent
of such percentage amount, the Agent will treat such Lender's IRS Form 1001 as
no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify the Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Agent fully for all amounts paid,
directly or indirectly, by the Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
14.11 Collateral Matters.
-------------------
(a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release any Agent's Lien upon any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Loans and reimbursement obligations in
respect of Letters of Credit and Credit Support, and the termination of all
outstanding Letters of Credit (whether or not any of such obligations are due)
and all other Obligations; (ii) constituting property being sold or disposed of
if the Borrower certifies to the Agent that the sale or disposition is made in
compliance with Section 9.9 (and the Agent
-----------
may rely conclusively on any such certificate, without further inquiry);
(iii) constituting property in which the Borrower owned no interest at the time
the Lien was granted or at any time thereafter; (iv) constituting property
leased to the Borrower under a lease which has expired or been terminated in a
transaction permitted under this Agreement or (v) constituting property financed
by Debt for Borrower Money of the type described in Section 9.13(c) or (d) or
acquired in a sale and leaseback
- --------------- ---
transaction permitted by Section 9.19. Except as provided above,
------------
the Agent will not release any of the Agent's Liens without the prior written
authorization of the Majority Lenders; provided that the Agent may, in its
discretion, release the Agent's Liens on Collateral valued in the aggregate not
in excess of $5,000,000 in any one year period without the prior written
authorization of the Lenders. Upon request by the Agent or the Borrower at any
time, the Lenders will confirm in writing the Agent's authority to release any
Agent's Liens upon particular types or items of Collateral pursuant to this
Section 14.11.
--------------
(b) Upon receipt by the Agent of any authorization required
pursuant to Section 14.11(a) from the Majority Lenders of
---------------
the Agent's authority to release any Agent's Liens upon particular types or
items of Collateral, and upon at least five (5) Business Days' prior written
request by the Borrower, the Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release of the Agent's Liens upon such Collateral; provided, however, that (i)
the Agent shall not be required to execute any such document on terms which, in
the Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Borrower in respect of)
all interests retained by the Borrower, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(c) The Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by the Borrower or is
cared for, protected or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Agent pursuant to any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion given the Agent's own interest in the
Collateral in its capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.
14.12 Agency for Perfection. Each Lender hereby appoints
----------------------
each other Lender as agent for the purpose of perfecting the Lenders' security
interest in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender (other than the Agent) obtain
possession of any such Collateral, such Lender shall notify the Agent thereof,
and, promptly upon the Agent's request therefor shall deliver such Collateral to
the Agent or in accordance with the Agent's instructions.
14.13 Payments by Agent to Lenders. All payments to be made
----------------------------
by the Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds to:
if to BABC:
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
ABA No. 021-000021
For account of: BankAmerica
Business Credit Inc.
Account No. 910-2-640704
For credit to: Forstmann & Company, Inc.
if to a Lender, as provided on the signature pages hereof or in the Assignment
and Acceptance pursuant to which such Lender became a party hereto;
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to the Agent. Concurrently with each such payment,
the Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on the Revolving Loans, Term Loans or
otherwise.
14.4 Concerning the Collateral and the Related Loan
----------------------------------------------
Documents. Each Lender authorizes and directs the Agent to enter
- ----------
into this Agreement and the other Loan Documents relating to the Collateral, for
the ratable benefit of the Agent and the Lenders. Each Lender agrees that any
action taken by the Agent or the Majority Lenders, as applicable, in accordance
with the terms of this Agreement or the other Loan Documents relating to the
Collateral, and the exercise by the Agent or the Majority Lenders as applicable,
of their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
ARTICLE 15
MISCELLANEOUS
-------------
15.1 Cumulative Remedies; No Prior Recourse to Collateral.
-----------------------------------------------------
The enumeration herein of the Agent's and each Lender's rights and remedies is
not intended to be exclusive, and such rights and remedies are in addition to
and not by way of limitation of any other rights or remedies that the Agent and
the Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. The Agent and the Lenders may, without limitation, proceed
directly against the Borrower to collect the Obligations without any prior
recourse to the Collateral. No failure to exercise and no delay in exercising,
on the part of the Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
15.2 Severability. The illegality or unenforceability
------------
of any provision of this Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.
15.3 Governing Law; Choice of Forum; Service of Process.
---------------------------------------------------
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE SECURITY INTERESTS GRANTED
HEREIN, OR THE REMEDIES HEREUNDER IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK;
PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND
THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-
EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND THE
LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING
THE FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2)
EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS
DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) THE BORROWER 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 THE BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 15.8
------------
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME
SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS. NOTHING CONTAINED HEREIN SHALL
AFFECT THE RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER
MANNER PERMITTED BY LAW.
15.4 WAIVER OF JURY TRIAL. THE BORROWER, THE LENDERS AND
--------------------
THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
15.5 Survival of Representations and Warranties. All of the
------------------------------------------
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
15.6 Other Security and Guaranties. The Agent, may, without
-----------------------------
notice or demand and without affecting the Borrower's obligations hereunder,
from time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
15.7 Fees and Expenses. The Borrower agrees to pay to the
------------------
Agent, for its benefit, on demand, all costs and expenses that Agent pays or
incurs in connection with the negotiation, preparation, syndication,
consummation, administration, enforcement, and termination of this Agreement or
any of the other Loan Documents, including, without limitation: (a) Attorney
Costs; (b) costs and expenses (including Attorney Costs) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien and title searches and title insurance; (d) taxes, fees and other charges
for recording the Mortgage, filing financing statements and continuations, and
other actions to perfect, protect, and continue the Agent's Liens (including
costs and expenses paid or incurred by the Agent in connection with the
consummation of Agreement); (e) sums paid or incurred to pay any amount or take
any action required of the Borrower under the Loan Documents that the Borrower
fails to pay or take; (f) costs of appraisals, inspections, and verifications of
the Collateral, including, without limitation, travel, lodging, and meals for
inspections of the Collateral and the Borrower's operations by the Agent plus
the Agent's then customary charge for field examinations and audits and the
preparation of reports thereof (such charge is currently $750 per day (or
portion thereof) for each agent or employee of the Agent with respect to each
field examination or audit); (g) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes; (h) costs and expenses of preserving and
protecting the Collateral; and (i) costs and expenses (including Attorney Costs)
paid or incurred to obtain payment of the Obligations, enforce the Agent's
Liens, sell or otherwise realize upon the Collateral, and otherwise enforce the
provisions of the Loan Documents, or to defend any claims made or threatened
against the Agent or any Lender arising out of the transactions contemplated
hereby (including, without limitation, preparations for and consultations
concerning any such matters). Borrower agrees to pay on demand reasonable costs
and expenses of each of the Lenders (including reasonable attorneys and
paralegals' fees and disbursements) paid or incurred to obtain payment of the
Obligations, enforce the Agent's Liens, sell or realize upon the Collateral, and
otherwise enforce the provisions of the Loan Documents or to defend any claims
made or threatened against such Lender arising out of the transactions
contemplated hereby (including, without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and
expenses shall be charged to the Borrower's Loan Account as Revolving Loans as
described in Section 4.7.
-----------
15.8 Notices. Except as otherwise provided herein, all
--------
notices, demands and requests that any party is required or elects to give to
any other shall be in writing, or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, but not limited to, delivery by overnight
mail and courier service, (b) four (4) days after it shall have been mailed by
United States mail, first class, certified or registered, with postage prepaid,
or (c) in the case of notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
40 East 52nd Street
New York, New York 10022
Attention: Division Manager
Telephone: (212) 836-5100
Telecopy: (212) 836-5167
with copies to:
BankAmerica Business Credit, Inc.
335 Madison Avenue
New York, New York 10017
Attention: Girolamo M. Saccone, Esq.
Telephone: (212) 503-7230
Telecopy: (212) 503-7350
and to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Alan M. Christenfeld, Esq.
Telephone: (212) 878-8000
Telecopy: (212) 878-8375
If to the Borrower:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York 10036
Attention: Chief Financial Officer
Telephone: (212) 642-6900
Telecopy: (212) 642-6992
with copies to:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York 10036
Attention: Chief Executive Officer
Telephone: (212) 642-6900
Telecopy: (212) 642-6992
and to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Richard F. Hahn, Esq.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
15.9 Waiver of Notices. Unless otherwise expressly provided
-----------------
herein, the Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, notice of intent to accelerate the
Obligations and notice of acceleration of the Obligations, as well as any and
all other notices to which it might otherwise be entitled. No notice to or
demand on the Borrower which the Agent or any Lender may elect to give shall
entitle the Borrower to any or further notice or demand in the same, similar or
other circumstances.
15.10 Binding Effect. The provisions of this Agreement shall
--------------
be binding upon and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; provided, however, that no
interest herein may be assigned by the Borrower without prior written consent of
the Agent and each Lender. The rights and benefits of the Agent and the Lenders
hereunder shall, if such Persons so agree, inure to any party acquiring any
interest in the Obligations or any part thereof.
15.11 Indemnity of the Agent and the Lenders by the Borrower.
----------------------------------------------------
(a) The Borrower agrees to defend, indemnify and hold the Agent-
Related Persons, and each Lender and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and
------------------
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the termination,
resignation or replacement of the Agent or replacement of any Lender) be
imposed on, incurred by or asserted against any such Person in any way relating
to or arising out of this Agreement or any document contemplated by or referred
to herein, the issuance of any Letter of Credit or the provision of any credit
support or enhancement in connection therewith, any ACH Transaction, or any
other transactions contemplated hereby, or any action taken, or omitted by any
such Person under or in connection with any of the foregoing, including with
respect to any investigation, litigation or proceeding (including any bankruptcy
proceeding or appellate proceeding) related to or arising out of this Agreement,
any other Loan Document, or the Loans or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided,
----------------------
that the Borrower shall have no obligation hereunder to any Indemnified Person
with respect to Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
(b) The Borrower agrees to indemnify, defend and hold harmless
the Agent and the Lenders from any loss or liability directly or indirectly
arising out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of a hazardous substance.
This indemnity will apply whether the hazardous substance is on, under or about
the Borrower's property or operations or property leased to the Borrower. The
indemnity includes but is not limited to attorneys' fees. The indemnity extends
to the Agent and the Lenders, their parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns.
"Hazardous substances" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant"
or a similar designation or regulation under any federal, state or local law
(whether under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including without limitation petroleum or
natural gas. This indemnity will survive repayment of all other Obligations.
15.12 Restrictions on Actions by Lenders; Sharing of
-----------------------------------------------
Payments. Each of the Lenders agrees that it shall not, without
- ---------
the express consent of all Lenders, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of all Lenders, set off against the
Obligations, any amounts owing by such Lender to the Borrower or any accounts of
the Borrower now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by the
Agent, take or cause to be taken any action to enforce its rights under this
Agreement or against the Borrower, including, without limitation, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.
(b) If at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations of the Borrower to such Lender arising
under, or relating to, this Agreement or the other Loan Documents, except for
any such proceeds or payments received by such Lender from the Agent pursuant to
the terms of this Agreement, or (ii) payments from the Agent in excess of such
Lender's ratable portion of all such distributions by the Agent, such Lender
shall promptly (1) turn the same over to the Agent, in kind, and with such
endorsements as may be required to negotiate the same to the Agent, or in same
day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of
this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participation shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
15.13 Field Audit and Examination Reports; Disclaimer by
---------------------------------------------------
Lenders. By signing this Agreement, each Lender:
- -------
(a) is deemed to have requested that the Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and
------
collectively, "Reports") prepared by the Agent;
-------
(b) expressly agrees and acknowledges that neither BABC nor the
Agent (i) makes any representation or warranty as to the accuracy of any Report,
or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or other party performing
any audit or examination will inspect only specific information regarding the
Borrower and will rely significantly upon the Borrower's books and records, as
well as on representations of the Borrower's personnel;
(d) agrees to keep all Reports confidential and strictly for its
internal use, and not to distribute except to its participants, or use any
Report in any other manner; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold the Agent and any
such other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from any
Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to the Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of the Borrower; and (ii) to pay and protect, and indemnify, defend and
hold the Agent and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses and other
amounts (including, without limitation, attorney costs) incurred by the Agent
and any such other Lender preparing a Report as the direct or indirect result of
any third parties who might obtain all or part of any Report through the
indemnifying Lender.
15.14 Relation Among Lenders. The Lenders are not partners
-----------------------
or co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.
15.15 Limitation of Liability. No claim may be made by the
-----------------------
Borrower, any Lender or other Person against the Agent, any Lender, or the
affiliates, directors, officers, employees, or agents of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any other Loan Document, or
any act, omission or event occurring in connection therewith, and the Borrower
and each Lender hereby waive, release and agree not to sue upon any claim for
such damages, whether or not accrued and whether or not know or suspected to
exist in its favor.
15.16 Final Agreement. This Agreement and the other Loan
---------------
Documents are intended by the Borrower, the Agent and the Lenders to be the
final, complete, and exclusive expression of the agreement between them. This
Agreement supersedes any and all prior oral or written agreements relating to
the subject matter hereof. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement or any other Loan Document shall be
made, except by a written agreement signed by the Borrower and a duly authorized
officer of each of the Agent and the requisite Lenders.
15.17 Counterparts. This Agreement may be executed in any
-------------
number of counterparts, and by the Agent, each Lender and the Borrower in
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
15.18 Captions. The captions contained in this Agreement are
---------
for convenience of reference only, are without substantive meaning and should
not be construed to modify, enlarge, or restrict any provision.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
Borrower
--------
FORSTMANN & COMPANY, INC.
By:/s/ Rodney Peckham
-------------------
Name:Rodney Peckham
Title: Chief Financial Officer
Agent
-----
BANKAMERICA BUSINESS CREDIT, INC.
By:/s/ Ernest Pelli
----------------
Name: Ernest Pelli
Title: Vice President
Lenders
-------
Revolving Credit BANKAMERICA BUSINESS CREDIT,
Commitment: $33,898,000.00 INC., as a Lender
Term Loan
Commitment: $12,552,000.00 By:/s/ Ernest Pelli
-------------------------
Name: Ernest Pelli
Title: Vice President
40 East 52nd Street
New York, New York 10022
Attention: Division Manager
Telephone: (212) 836-5100
Telecopy: (212) 836-5167
Revolving Credit AT&T COMMERCIAL FINANCE
Commitment: $7,301,500.00 CORPORATION, as a Lender
Term Loan
Commitment: $2,698,500.00 By:/s/ Paul Seidenwar
----------------------------
Name: Paul Seidenwar
Title: Assistant Vice President
2 Gatehall Drive
Parsipanny, NJ 07054
Attention: Managing Director Asset
Based Lending
Telephone: (201) 606-4874
Telecopy: (201) 606-4776
Revolving Credit THE CIT GROUP/COMMERCIAL SERVICES,
Commitment: $18,249,500.00 INC., as a Lender
Term Loan
Commitment: $6,750,500.00 By:/s/ Terry Schwartz
-----------------------------
Name: Terry Schwartz
Title: Vice President
1211 Avenue of the Americas, 12th
Floor
New York, New York 10036
Attention: Lori Kudish
Telephone: (212) 382-7192
Telecopy: (212) 382-6814
Revolving Credit IBJ SCHRODER CREDIT CORPORATION,
Commitment: $7,301,500.00 as a Lender
Term Loan
Commitment: $2,698,500.00 By:/s/ Thomas Bayer
-----------------------------
Name: Thomas Bayer
Title: Vice President
One State Street, 6th Floor
New York, New York 10004
Attention: James M. Steffy, Vice
President
Telephone: (212) 858-2094
Telecopy: (212) 858-2151
Revolving Credit LA SALLE BUSINESS CREDIT,
Commitment: $10,948,000.00 INC., as a Lender
Term Loan<PAGE>
Commitment: $4,052,000.00 By:/S/ Lawrence P. Garni
------------------------------
Name: Lawrence Garni
Title: Credit Manager, Vice
President
477 Madison Avenue, 20th Floor
New York, New York 10022
Attention: Credit Manager, Vice
President
Telephone:(212) 858-2188
Telecopy: (212) 858-2151
Revolving Credit PNC BANK, NATIONAL ASSOCIATION,
Commitment: $7,301,500.00 as a lender
Term Loan
Commitment: $2,698,500.00 By:/s/ William P. Gennario
-----------------------
Name: William P. Gennario
Title: Vice President
c/o PNC Business Credit
Two Tower Center
8th Floor
East Brunswick, NJ 08816
Attention: William P. Gennario
Telephone: (908) 220-4314
Telecopy: (908) 220-4399
EXHIBIT A
FORM OF TERM NOTE
-----------------
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
------------------------------------------------
Schedule B to Note
LIBOR RATE LOANS AND REPAYMENT OF LIBOR RATE LOANS
---------------------------------------------------
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
----------------------------------
EXHIBIT C
FINANCIAL STATEMENTS
-------------------
EXHIBIT D
LIST OF CLOSING DOCUMENTS
-------------------------
EXHIBIT E
NOTICE OF BORROWING
-------------------
Date:
----------, ------
To: BankAmerica Business Credit, Inc. as Agent for the Lenders who are parties
to the Loan and Security Agreement dated as of July 23, 1997 (as extended,
renewed, amended or restated
-----------
from time to time, the "Loan and Security Agreement") among Forstmann &
Company, Inc., certain Lenders which are signatories thereto and
BankAmerica Business Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned , (the "Borrower"), refers
------------------ --------
to the Loan and Security Agreement, the terms defined therein being used herein
as therein defined, and hereby gives you notice irrevocably of the Borrowing
specified below:
1. The Business Day of the proposed Borrowing is
--------------, -------.
2. The aggregate amount of the proposed Borrowing is
---------------.
3. The Borrowing is to be comprised of $ of Base
--------
Rate Loans and $ of LIBOR Rate Loans.
---------
4. The duration of the Interest Period for the LIBOR Rate Loans, if
any, included in the Borrowing shall be
----
months.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) The representations and warranties of the Borrower contained in
the Loan and Security Agreement are true and correct in all material respects as
though made on and as of such date other than such representation or warranty
which expressly relates to an earlier date;
(b) No Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing; and
(c) The proposed Borrowing will not cause the aggregate principal
amount of all outstanding Revolving Loans plus the aggregate amount available
for drawing under all outstanding Letters of Credit, to exceed the Availability
(with the Availability for this purpose calculated as if the Aggregate Revolver
Outstandings were zero) or the combined Commitments of the Lenders.
FORSTMANN & COMPANY, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
EXHIBIT F
NOTICE OF CONVERSION/CONTINUATION
---------------------------------
Date:
-------------,---------
To: BankAmerica Business Credit, Inc. as Agent for the Lenders to the Loan and
Security Agreement dated as of , 1997 (as
------
extended, renewed, amended or restated from time to time, the "Loan and
Security Agreement") among Forstmann & Company,
---------------------------
Inc., certain Lenders which are signatories thereto and BankAmerica
Business Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned, (the "Borrower"), refers to the
-------------- --------
Loan and Security Agreement, the terms defined therein being used herein as
therein defined, and hereby gives you notice irrevocably of the [conversion]
[continuation] of the Loans specified herein, that:
1. The Conversion/Continuation Date is
----------,------.
2. The aggregate amount of the Loans to be [converted] [continued] is $
.
---------
3. The Loans are to be [converted into] [continued as] [LIBOR Rate] [Base
Rate] Loans.
4. The duration of the Interest Period for the LIBOR Rate Loans included in
the [conversion] [continuation] shall be
-------
months.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed Conversion/Continuation Date,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) The representations and warranties of the Borrower contained in
the Loan and Security Agreement are true and correct in all material respects as
though made on and as of such date other than such representation or warranty
which expressly relates to an earlier date;
(b) No Default or Event of Default has occurred and is continuing, or
would result from such proposed [conversion] [continuation]; and
(c) The proposed conversion-continuation will not cause the aggregate
principal amount of all outstanding Revolving Loans [plus the aggregate amount
available for drawing under all outstanding Letters of Credit] to exceed the
Availability or the combined Commitments of the Lenders.
FORSTMANN & COMPANY, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
EXHIBIT G
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
-------------------------------------------
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
--------------
Acceptance") dated as of is made between
- ---------- -----------,------
(the "Assignor") and (the
- -------------------- -------- ------------
"Assignee").
- ----------
RECITALS
---------
WHEREAS, the Assignor is party to that certain Loan and Security Agreement
dated as of , 1997 (as amended, amended
-------
and restated, modified, supplemented or renewed, the "Credit
------
Agreement") among Forstmann & Company, Inc., a Georgia corporation
- ---------
(the "Borrower"), the several financial institutions from time to
--------
time party thereto (including the Assignor, the "Lenders"), and
-------
BankAmerica Business Credit, Inc., as agent for the Lenders (the "Agent"). Any
terms defined in the Credit Agreement and not
- ------
defined in this Assignment and Acceptance are used herein as defined in the
Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Revolving Loans and Term Loans to (the "Committed Loans"),
and purchasing participations in Letters of
- -----------------
Credit and Credit Support issued for the account of, the Borrower in an
aggregate amount not to exceed $ (the
-----------
"Commitment");
- ------------
WHEREAS, the Assignor has made Committed Loans in the aggregate principal
amount of $ to the Borrower;
----------
WHEREAS, [the Assignor has acquired a participation in its pro rata share
of the Lenders' liabilities under Letters of Credit and Credit Support in an
aggregate principal amount of $ (the
---------
"Credit Obligations")] [no Letters of Credit or Credit Support is
- --------------------
outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all]
rights and obligations of the Assignor under the Credit Agreement in respect of
its Commitment, together with a corresponding portion of each of its outstanding
Committed Loans and Credit Obligations, in an amount equal to $ (the
---------
"Assigned Amount") on the terms and subject to the conditions set
- -----------------
forth herein and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such
conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
--------------------------
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) % (the "Assignee's Percentage
---- ----------------------
Share") of (A) the Commitment, the Committed Loans and the Credit
- -----
Obligations of the Assignor and (B) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in connection with the
Credit Agreement and the Loan Documents.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Lender under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender. It is the
intent of the parties hereto that the Commitment of the Assignor shall, as of
the Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Sections 15.7 and 15.11 of the Credit
------------- -----
Agreement to the extent such rights relate to the time prior to the Effective
Date.
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $ .
---------
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $ .
---------
2. Payments.
--------
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $ ,
representing the Assignee's Pro Rata
---------
Share of the principal amount of all Committed Loans.
(b) The Assignee further agrees to pay to the Agent a processing fee
in the amount specified in Section 13.3 of the
------------
Credit Agreement.
3. Reallocation of Payments.
------------------------
Any interest, fees and other payments accrued to the Effective Date with
respect to the Commitment, and Committed Loans and Credit Obligations shall be
for the account of the Assignor. Any interest, fees and other payments accrued
on and after the Effective Date with respect to the Assigned Amount shall be for
the account of the Assignee. Each of the Assignor and the Assignee agrees that
it will hold in trust for the other party any interest, fees and other amounts
which it may receive to which the other party is entitled pursuant to the
preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.
4. Independent Credit Decision.
---------------------------
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent Financial Statements of the Borrower, and such other documents and
information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into this Assignment and Acceptance; and
(b) agrees that it will, independently and without reliance upon the Assignor,
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit and legal
decisions in taking or not taking action under the Credit Agreement.
5. Effective Date; Notices.
-----------------------
(a) As between the Assignor and the Assignee, the effective date for
this Assignment and Acceptance shall be (the
-------,----
"Effective Date"); provided that the following conditions precedent
- ---------------
have been satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the Assignee shall pay to the Assignor all amounts due
to the Assignor under this Assignment and Acceptance;
(iii) the Assignee shall have complied with [Section 14.10
of the Credit Agreement (if applicable) and] Section
------------- -------
7 hereof;
- -
(iv) the consents of the Agent and the Borrower required
for an effective assignment of the Assigned Amount by the Assignor to the
Assignee shall have been duly obtained and shall be in full force and effect as
of the Effective Date;
(v) the processing fee referred to in Section
--------
2(b) hereof and in Section 13.3(a) of the Credit Agreement shall
- -- ---------------
have been paid to the Agent; and
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Borrower and the Agent for
acknowledgment by the Agent, a Notice of Assignment in the form attached hereto
as Schedule 1.
-----------
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
-----
(a) The Assignee hereby appoints and authorizes the Assignor to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the Lenders pursuant to the terms of
the Credit Agreement.
(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement.]
7. Withholding Tax.
----------------
The Assignee (a) represents and warrants to the Lender, the Agent and the
Borrower that under applicable law and treaties no tax will be required to be
withheld by the Lender or the Agent with respect to any payments to be made to
the Assignee hereunder, (b) agrees to furnish (if it is organized under the laws
of any jurisdiction other than the United States or any State thereof) to the
Agent and the Borrower prior to the time that the Agent or Borrower is required
to make any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein the Assignee claims entitlement to the
benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new Forms 4224 or 1001 upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by the Assignee, and (c) agrees
to comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption, provided, for avoidance of doubt, that the
performance by the Assignee of its obligations under this Section 7 shall not
excuse the Assignee from the performance of any
- ---------
obligations of the Assignee, as a Lender, under Section 14.10 of the Credit
Agreement.
8. Representations and Warranties.
-------------------------------
(a) The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any Lien or other adverse claim; (ii) it is duly
organized and existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and
(iv) this Assignment and Acceptance has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the Assignor,
enforceable against the Assignor in accordance with the terms hereof, subject,
as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and
other laws of general application relating to or affecting creditors' rights and
to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Borrower, or the performance or observance by the Borrower, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder; (ii) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance; and apart
from any agreements or undertakings or filings required by the Credit Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
9. Further Assurances.
-------------------
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Borrower or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
-------------
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and the
Assignee each irrevocably submits to the non-exclusive jurisdiction of any State
or Federal court sitting in New York over any suit, action or proceeding arising
out of or relating to this Assignment and Acceptance and irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court. Each party to this Assignment and
Acceptance hereby irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND
AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER
ORAL OR WRITTEN).
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
--------------------------
Name:
------------------------
Title:
-----------------------
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Address:
---------------------
[ASSIGNEE]
By:
---------------------------
Name:
-------------------------
Title:
------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address:
--------------------------
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
----------------,--------
BankAmerica Business Credit, Inc.
40 East 52nd Street
New York, New York 10022
Attn:
-------------------------
Re: Forstmann & Company, Inc.
Ladies and Gentlemen:
We refer to the Loan and Security Agreement dated as of
-----
, 1997 (as amended, amended and restated, modified, supplemented or renewed from
time to time the "Credit Agreement") among Forstmann
----------------
& Company, Inc. (the "Borrower"), the Lenders referred to therein
--------
and BankAmerica Business Credit, Inc., as agent for the Lenders (the "Agent").
Terms defined in the Credit Agreement are used
-----
herein as therein defined.
1. We hereby give you notice of, and request your acknowledgement of,
the assignment by (the
---------------
"Assignor") to (the "Assignee") of % of the
-------- ----------- -------- ------
right, title and interest of the Assignor in and to the Credit Agreement
(including, without limitation, the right, title and interest of the Assignor in
and to the Commitments of the Assignor, all outstanding Loans made by the
Assignor and the Assignor's participation in the Letters of Credit pursuant to
the Assignment and Acceptance Agreement attached hereto (the "Assignment and
--------------
Acceptance"). We understand and agree that the Assignor's
- -----------
Commitment, as of , , is $ , the aggregate
--------- --------- -------
amount of its outstanding Loans is $ , and its
---------
participation in Credit Obligations is $ .
----------
2. The Assignee agrees that, from and after the Effective Date (as
defined in the Assignment and Acceptance), the Assignee will be bound by the
terms of the Credit Agreement as fully and to the same extent as if the Assignee
were the Lender originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
------------------------------
Assignee name:
-------------------------------
Address:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
-----------------------------------
Telephone:
-----------------------------------
Telecopier:
----------------------------------
(B) Payment Instructions:
Account No.:
---------------------------------
At:
-------------------------------------
-------------------------------------
Reference:
-----------------------------------
Attention:
-----------------------------------
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
[NAME OF ASSIGNEE]
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
ACKNOWLEDGED AND ACCEPTED:
BankAmerica Business Credit, Inc,
as Agent
- --------------------------------
By:
-----------------------------
Title:
--------------------------
EXHIBIT H
FORM OF SUBORDINATION AGREEMENT
-------------------------------
R&W Draft
7/17/97
LOAN AND SECURITY AGREEMENT
Dated as of July 23, 1997
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
--------------
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
-----------
and
FORSTMANN & COMPANY, INC.
as the Borrower
---------------
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
-------------------------------
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . .29
1.3 Interpretive Provisions . . . . . . . . . . . . . . . .29
ARTICLE 2
LOANS AND LETTERS OF CREDIT
---------------------------
2.1 Total Facility . . . . . . . . . . . . . . . . . . . .30
2.2 Revolving Loans . . . . . . . . . . . . . . . . . . . .30
2.3 Term Loans . . . . . . . . . . . . . . . . . . . . . .37
2.4 Letters of Credit . . . . . . . . . . . . . . . . . . .38
2.5 Automated Clearing House Transfers and Overdrafts . . .45
ARTICLE 3
INTEREST AND FEES
-----------------
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . .45
3.2 Conversion and Continuation Elections . . . . . . . . .46
3.3 Maximum Interest Rate . . . . . . . . . . . . . . . . .47
3.4 Facility Fee; Underwriting Fee . . . . . . . . . . . .48
3.5 Unused Line Fee . . . . . . . . . . . . . . . . . . . .48
3.6 Letter of Credit Fee . . . . . . . . . . . . . . . . .48
ARTICLE 4
PAYMENTS AND PREPAYMENTS
------------------------
4.1 Revolving Loans . . . . . . . . . . . . . . . . . . . 49
4.2 Termination of Revolving Credit Facility . . . . . . 49
4.3 Repayment of the Term Loans . . . . . . . . . . . . . 50
4.4 Voluntary Prepayments of the Term Loans . . . . . . . 50
4.5 Mandatory Prepayments of the Term Loans . . . . . . . 50
4.6 Payments by the Borrower . . . . . . . . . . . . . . 51
4.7 Payments as Revolving Loans . . . . . . . . . . . . . 51
4.8 Apportionment, Application and Reversal of Payments . 52
4.9 Indemnity for Returned Payments . . . . . . . . . . . 52
4.10 Agent's and Lenders' Books and Records; Monthly
Statements 53
Section Page
- ------- ----
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
-------------------------------------
5.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 53
5.2 Illegality . . . . . . . . . . . . . . . . . . . . . 55
5.3 Increased Costs and Reduction of Return . . . . . . . 55
5.4 Funding Losses . . . . . . . . . . . . . . . . . . . 56
5.5 Inability to Determine Rates . . . . . . . . . . . . 56
5.6 Certificates of Lenders . . . . . . . . . . . . . . . 57
5.7 Survival . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 6
COLLATERAL
---------
6.1 Grant of Security Interest . . . . . . . . . . . . . 57
6.2 Perfection and Protection of Security Interest . . . 58
6.3 Location of Collateral . . . . . . . . . . . . . . . 60
6.4 Title to, Liens on, and Sale and Use of Collateral . 60
6.5 Appraisals . . . . . . . . . . . . . . . . . . . . . 61
6.6 Access and Examination; Confidentiality . . . . . . . 61
6.7 Collateral Reporting . . . . . . . . . . . . . . . . 62
6.8 Accounts . . . . . . . . . . . . . . . . . . . . . . 63
6.9 Collection of Accounts; Payments . . . . . . . . . . 64
6.10 Inventory; Perpetual Inventory . . . . . . . . . . . 66
6.11 Equipment . . . . . . . . . . . . . . . . . . . . . . 66
6.12 Assigned Contracts . . . . . . . . . . . . . . . . . 67
6.13 Documents, Instruments, and Chattel Paper . . . . . . 68
6.14 Right to Cure . . . . . . . . . . . . . . . . . . . . 68
6.15 Power of Attorney . . . . . . . . . . . . . . . . . . 68
6.16 The Agent's and Lenders' Rights, Duties and Liabilities 69
6.17 Site Visits, Observations and Testing . . . . . . . . 69
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
-------------------------------------------------
7.1 Books and Records . . . . . . . . . . . . . . . . . . 71
7.2 Financial Information . . . . . . . . . . . . . . . . 71
7.3 Notices to the Lenders . . . . . . . . . . . . . . . 74
Section Page
- ------- ----
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
--------------------------------------
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents . . . . . . . . . . 76
8.2 Validity and Priority of Security Interest . . . . . 77
8.3 Organization and Qualification . . . . . . . . . . . 77
8.4 Corporate Name; Prior Transactions . . . . . . . . . 77
8.5 Subsidiaries and Affiliates . . . . . . . . . . . . . 77
8.6 Financial Statements and Projections . . . . . . . . 77
8.7 Capitalization . . . . . . . . . . . . . . . . . . . 78
8.8 Solvency . . . . . . . . . . . . . . . . . . . . . . 78
8.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . 78
8.10 Distributions . . . . . . . . . . . . . . . . . . . . 78
8.11 Title to Property . . . . . . . . . . . . . . . . . . 79
8.12 Real Estate; Leases . . . . . . . . . . . . . . . . . 79
8.13 Proprietary Rights . . . . . . . . . . . . . . . . . 79
8.14 Trade Names and Terms of Sale . . . . . . . . . . . . 79
8.15 Litigation . . . . . . . . . . . . . . . . . . . . . 79
8.16 Restrictive Agreements . . . . . . . . . . . . . . . 79
8.17 Labor Disputes . . . . . . . . . . . . . . . . . . . 80
8.18 Environmental Laws . . . . . . . . . . . . . . . . . 80
8.19 No Violation of Law . . . . . . . . . . . . . . . . . 81
8.20 No Default . . . . . . . . . . . . . . . . . . . . . 81
8.21 ERISA Compliance . . . . . . . . . . . . . . . . . . 81
8.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 82
8.23 Regulated Entities . . . . . . . . . . . . . . . . . 82
8.24 Use of Proceeds; Margin Regulations . . . . . . . . . 82
8.25 Copyrights, Patents, Trademarks and Licenses, etc . . 82
8.26 No Material Adverse Change . . . . . . . . . . . . . 83
8.27 Full Disclosure . . . . . . . . . . . . . . . . . . . 83
8.28 Material Agreements . . . . . . . . . . . . . . . . . 83
8.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . 83
8.30 Governmental Authorization . . . . . . . . . . . . . 83
8.31 Reorganization Matters . . . . . . . . . . . . . . . 83
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
-----------------------------------
9.1 Taxes and Other Obligations . . . . . . . . . . . . . 84
9.2 Corporate Existence and Good Standing . . . . . . . . 84
9.3 Compliance with Law and Agreements; Maintenance of
Licenses . . . 84
9.4 Maintenance of Property . . . . . . . . . . . . . . . 85
9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . 85
9.6 Condemnation . . . . . . . . . . . . . . . . . . . . 86
9.7 Environmental Laws . . . . . . . . . . . . . . . . . 87
9.8 Compliance with ERISA . . . . . . . . . . . . . . . . 88
9.9 Mergers, Consolidations or Sales . . . . . . . . . . 88
Section Page
- ------- ----
9.10 Distributions; Capital Change; Restricted Investments .88
9.11 Transactions Affecting Collateral or Obligations . . .88
9.12 Guaranties . . . . . . . . . . . . . . . . . . . . . .88
9.13 Debt . . . . . . . . . . . . . . . . . . . . . . . . .88
9.14 Prepayment . . . . . . . . . . . . . . . . . . . . . .89
9.15 Transactions with Affiliates . . . . . . . . . . . . .89
9.16 Investment Banking and Finder's Fees . . . . . . . . .89
9.17 Business Conducted . . . . . . . . . . . . . . . . . .89
9.18 Liens . . . . . . . . . . . . . . . . . . . . . . . . .90
9.19 Sale and Leaseback Transactions . . . . . . . . . . . .90
9.20 Subsidiaries . . . . . . . . . . . . . . . . . . . . .90
9.21 Fiscal Year . . . . . . . . . . . . . . . . . . . . . .90
9.22 Capital Expenditures; MIS Expenditures . . . . . . . .90
9.23 Operating Lease Obligations . . . . . . . . . . . . . 90
9.24 Adjusted Tangible Net Worth . . . . . . . . . . . . . .90
9.25 Interest Coverage Ratio . . . . . . . . . . . . . . . 91
9.26 Fixed Charge Coverage Ratio . . . . . . . . . . . . . .91
9.27 Use of Proceeds . . . . . . . . . . . . . . . . . . . .92
9.28 Plan of Reorganization . . . . . . . . . . . . . . . .92
9.29 Further Assurances . . . . . . . . . . . . . . . . . .92
ARTICLE 10
CONDITIONS OF LENDING
---------------------
10.1 Conditions Precedent to Making of Loans on the
Closing Date . . . 92
10.2 Conditions Precedent to Each Loan . . . . . . . . . . .95
ARTICLE 11
DEFAULT; REMEDIES
-----------------
11.1 Events of Default . . . . . . . . . . . . . . . . . . .96
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 100
ARTICLE 12
TERM AND TERMINATION
---------------------
12.1 Term and Termination . . . . . . . . . . . . . . . 101
Section Page
- ------- ----
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATION; ASSIGNMENTS; SUCCESSORS
-----------------------------------------------------------
13.1 No Waivers; Cumulative Remedies . . . . . . . . . . . 102
13.2 Amendments and Waivers . . . . . . . . . . . . . . . 102
13.3 Assignments; Participation . . . . . . . . . . . . . 103
ARTICLE 14
THE AGENT
--------
14.1 Appointment and Authorization . . . . . . . . . . . . 106
14.2 Delegation of Duties . . . . . . . . . . . . . . . . 106
14.3 Liability of Agent . . . . . . . . . . . . . . . . . 107
14.4 Reliance by Agent . . . . . . . . . . . . . . . . . . 107
14.5 Notice of Default . . . . . . . . . . . . . . . . . . 108
14.6 Credit Decision . . . . . . . . . . . . . . . . . . . 108
14.7 Indemnification . . . . . . . . . . . . . . . . . . . 108
14.8 Agent in Individual Capacity . . . . . . . . . . . . 109
14.9 Successor Agent . . . . . . . . . . . . . . . . . . . 109
14.10 Withholding Tax . . . . . . . . . . . . . . . . . . . 110
14.11 Collateral Matters . . . . . . . . . . . . . . . . . 111
14.12 Agency for Perfection . . . . . . . . . . . . . . . . 112
14.13 Payments by Agent to Lenders. . . . . . . . . . . . . 113
14.14 Concerning the Collateral and the Related Loan
Documents . . . . 113
ARTICLE 15
MISCELLANEOUS
-------------
15.1 Cumulative Remedies; No Prior Recourse to Collateral 113
15.2 Severability . . . . . . . . . . . . . . . . . . . . 114
15.3 Governing Law; Choice of Forum; Service of Process . 114
15.4 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 115
15.5 Survival of Representations and Warranties . . . . . 115
15.6 Other Security and Guaranties . . . . . . . . . . . . 115
15.7 Fees and Expenses . . . . . . . . . . . . . . . . . . 115
15.8 Notices . . . . . . . . . . . . . . . . . . 116
15.9 Waiver of Notices . . . . . . . . . . . . . . . . . . 118
15.10 Binding Effect . . . . . . . . . . . . . . . . . . . 118
15.11 Indemnity of the Agent and the Lenders by the Borrower118
15.12 Restrictions on Actions by Lenders; Sharing of Payment119
15.13 Field Audit and Examination Reports; Disclaimer by
Lenders . . . 120
15.14 Relation Among Lenders . . . . . . . . . . . . . . . 120
Section Page
- ------- ----
15.15 Limitation of Liability . . . . . . . . . . . . . . . 121
15.16 Final Agreement . . . . . . . . . . . . . . . . . . . 121
15.17 Counterparts . . . . . . . . . . . . . . . . . . . . 121
15.18 Captions . . . . . . . . . . . . . . . . . . . . . . 121
EXHIBITS AND SCHEDULES
EXHIBIT A - Form of Term Note
SCHEDULE A TO NOTE - Base Rate Loans and Repayment of Base Rate
Loans
SCHEDULE B TO NOTE - LIBOR Rate Loans and Repayment of LIBOR Rate
Loans
EXHIBIT B - Form of Borrowing Base Certificate
EXHIBIT C - Financial Statements
EXHIBIT D - List of Closing Documents
EXHIBIT E - Form of Notice of Borrowing
EXHIBIT F - Form of Notice of
Conversion/Continuation
EXHIBIT G - Form of Assignment and Acceptance
Agreement
EXHIBIT H - Form of Subordination Agreement
EXHIBIT I - Form of Pledge Agreement
SCHEDULE 1.1(a) - Assigned Contracts
SCHEDULE 1.1(b) - Locations of Eligible Inventory
SCHEDULE 1.1(c) - Permitted Liens
SCHEDULE 1.1(d) - Restricted Investments
SCHEDULE 6.3 - Facilities and Locations
SCHEDULE 6.7 - Collateral Reports
SCHEDULE 8.3 - Jurisdictions of Qualification to do
Business
SCHEDULE 8.4 - Corporate Names
SCHEDULE 8.5 - Affiliates
SCHEDULE 8.6(c) - Pro Forma Balance Sheet
SCHEDULE 8.9 - Debt
SCHEDULE 8.12 - Real Estate Owned or Leased
SCHEDULE 8.13 - Proprietary Rights
SCHEDULE 8.14 - Trade Names
SCHEDULE 8.15 - Litigation
SCHEDULE 8.17 - Labor Matters
SCHEDULE 8.18 - Environmental Law Matters
SCHEDULE 8.21 - ERISA Matters
SCHEDULE 8.22 - Taxes
SCHEDULE 8.28 - Material Agreements
SCHEDULE 8.29 - Bank Accounts
SCHEDULE 8.31 - Reorganization Matters
SCHEDULE 9.17 - Management Compensation
Exhibit 10.1(b)
FORSTMANN & COMPANY, INC.
TRADEMARK SECURITY AGREEMENT
-----------------------------
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") made as
---------
of the 23rd day of July, 1997, by and between FORSTMANN & COMPANY, INC., a
Georgia corporation, with an office at 1155 Avenue of the Americas, New York,
New York 10036-2711 ("Borrower"), and BANKAMERICA BUSINESS CREDIT, INC., in its
capacity as agent (the "Agent") for the Lenders (as hereinafter defined), with
an office at 40 East 52nd Street, New York, New York, 10022.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower, the lenders from time to time party thereto
(the "Lenders"), and the Agent are parties to that certain Loan and Security
Agreement of even date herewith (as the same may be further amended, restated,
modified or supplemented, the "Loan Agreement"); and
--------------
WHEREAS, Agent has required Borrower to execute and deliver this
Agreement (i) in order to secure the prompt and complete payment, observance and
performance of all of the "Obligations" (as defined in the Loan Agreement) and
(ii) as a condition precedent to the Lenders' execution and delivery of the Loan
Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower agrees as follows:
1. Defined Terms.
-------------
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Loan Agreement shall have the meaning specified
for such term in the Loan Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and paragraph references are
to this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. Incorporation of Premises. The premises set forth
-------------------------
above are incorporated into this Agreement by this reference hereto and are made
a part hereof.
3. Incorporation of the Loan Agreement. The Loan
-----------------------------------
Agreement and the terms and provisions thereof are hereby incorporated herein in
their entirety by this reference thereto.
4. Security Interest in Trademarks. To secure the
-------------------------------
complete and timely payment, performance and satisfaction of all of the
Obligations, Borrower hereby grants to Agent, subject to the terms of existing
licenses granted by Borrower in the ordinary course of business set forth on
Schedule 8.13 of the Loan Agreement
-------------
(the "Existing Licenses"), for the ratable benefit of Agent, BABC and the
Lenders, a security interest in all of Borrower's:
(a) now owned or existing and hereafter acquired or arising
trademarks, registered trademarks, trademark applications (except for any
intent to use applications, and except for any trademark which is the
subject of an intent to use application, in each case, filed pursuant to
Section 1(b) of the Lanham Act, 15 U.S.C. Section 15017, until Borrower
files an Amendment to Allege Use or a Statement of Use under Sections 1(c)
and 1(d) of the Lanham Act is filed with respect to such trademark),
service marks, registered service marks and service mark applications
listed on Schedule A attached
----------
hereto and made a part hereof, together with any goodwill connected with
and symbolized by any such trademarks, trademark applications, service
marks, registered service marks, service mark applications, and (i) all
renewals thereof, (ii) all income, royalties, damages and payments now and
hereafter due and/or payable under and with respect thereto, including,
without limitation, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or
dilutions thereof, (iii) the right to sue for past, present and future
infringements and dilutions thereof, and (iv) all of Borrower's rights
c o rresponding thereto throughout the world (all of the foregoing
trademarks, registered trademarks and trademark applications, and service
marks, registered service marks and service mark applications, together
with the items described in clauses (i)-(iv) in this paragraph 4(a), are
---------------- --------------
sometimes hereinafter individually and/or collectively referred to as the
"Trademarks");
----------
(b) rights under or interests in any trademark license agreements
or service mark license agreements with any other party, whether Borrower
is a licensee or licensor under any such license agreement, together with
any goodwill connected with and symbolized by any such trademark license
agreements or service marks license agreements, and the right to prepare
for sale and sell any and all Inventory now or hereafter owned by Borrower
and now or hereafter covered by such licenses (all of the foregoing are
hereinafter referred to collectively as the "Licenses"); provided, that
the foregoing grant of a
-------- --------
security interest with respect to Licenses shall not include a security
interest in any License under which Borrower is a Trademark licensee to
the extent that the grant by Borrower of such security interest is (i)
prohibited by the terms and the provisions of the written agreement,
document or instrument creating or evidencing such License, or (ii) gives
the licensor thereto the right to terminate such License in the event of
the grant of a security interest with respect thereto.
5. Restrictions on Future Agreements. In addition to
---------------------------------
the restrictions provided in paragraph 8, Borrower will not,
-----------
without the prior written consent of the Majority Lenders, (i) enter into any
agreement, including, without limitation, any license agreement, which is
inconsistent with this Agreement, provided, however, that Borrower shall have
the right to license
- -------- -------
the use of the Trademarks in the ordinary course of its business, and Borrower
further agrees that it will not take any action, and will use its commercially
reasonable efforts not to permit any action to be taken by others, including,
without limitation, licensees, or fail to take any action, which would in any
material adverse respect affect the validity or enforcement of the rights
transferred to Agent under this Agreement or the rights associated with those
Trademarks or Licenses or (ii) except for transactions or Liens permitted under
the Loan Agreement, mortgage, pledge, assign, encumber, grant a security
interest in, transfer, license or alienate any of the Trademarks.
6. New Trademarks and Licenses. Borrower represents
---------------------------
and warrants that (a) the Trademarks listed on Schedule A include
----------
all of the trademarks, registered trademarks, trademark applications, service
marks, registered service marks and service mark applications now owned by
Borrower, and (b) no other liens, claims or security interests have been granted
by Borrower to any other Person in such Trademarks and Licenses other than the
Existing Licenses and Permitted Liens. If, prior to the termination of this
Agreement, Borrower shall (i) obtain rights to any new Trademarks or (ii) become
entitled to the benefit of any Licenses or License renewals, the provisions of
paragraph 4 above shall automatically apply thereto. Borrower shall give to
Agent written notice of events described in clauses (i) or (ii) of the
----------- ----
preceding sentence within 30 days after such occurrence. Borrower hereby
authorizes Agent to modify this Agreement by amending Schedule A to include any
future Trademarks or Licenses under
- ----------
paragraph 4 above or under this paragraph 6.
- ----------- -----------
7. Royalties. Borrower hereby agrees that the use by
---------
Agent of the Trademarks and the Licenses as authorized hereunder in connection
with the exercise of its remedies under paragraph 16 or
------------
pursuant to Section 13 of the Loan Agreement shall be coextensive
----------
with Borrower's rights thereunder and with respect thereto and without any
liability for royalties or other related charges from Agent to Borrower.
8. Right to Inspect; Further Assignments and Security
--------------------------------------------------
Interests. At all reasonable times (and at any time when an Event
- ---------
of Default exists) upon reasonable advance notice to Borrower and at reasonable
intervals, Agent may have access to, examine, audit, make copies (at Borrower's
expense) and extracts from and inspect Borrower's premises and examine
Borrower's books, records and operations relating to the Trademarks and the
Licenses, including, without limitation, Borrower's quality control processes;
provided,
--------
that in conducting such inspections and examinations, Agent shall use reasonable
efforts not to unnecessarily disturb the conduct of Borrower's ordinary business
operations. From and after the occurrence and during the continuation of an
Event of Default, Borrower agrees that Agent, or a conservator appointed by
Agent, shall have the right to establish such reasonable additional product
quality controls as Agent or such conservator, in its sole and absolute
judgment, may deem necessary to assure maintenance of the quality of products
sold by Borrower under the Trademarks and the Licenses or in connection with
which such Trademarks and Licenses are used. Borrower agrees (i) not to sell or
assign its interest in, or grant any license under, the Trademarks or the
Licenses without the prior and express written consent of the Majority Lenders,
provided, however, that Borrower shall have the
-------- -------
right to license the use of the Trademarks in the ordinary course of its
business, and (ii) to the extent required to maintain the validity of the
Trademarks, not to change the quality of such products without the Majority
Lenders' prior and express written consent.
9. Nature and Continuation of Agent's Security
-------------------------------------------
Interest; Termination of Agent's Security Interest. This Agreement
- -------------------------------------------------
is made for collateral security purposes only. This Agreement shall create a
continuing security interest in the Trademarks and Licenses and shall remain in
full force and effect until the payment in full of all of the Obligations
and termination of the Loan Agreement. Upon payment in full of all of
Obligations and termination of the Loan Agreement, this Agreement shall
terminate and upon Borrower's request, Agent shall promptly execute and deliver
to the Borrower, at Borrower's expense, all termination statements and other
instruments as may be necessary or desirable to evidence the termination of the
Agent's security interest in the Trademarks and the Licenses.
10. Termination of Liens on Disposed Trademarks or
----------------------------------------------
Licenses. If any of the Trademarks or Licenses shall be sold,
- --------
transferred or otherwise disposed of by the Borrower in a transaction permitted
by the Loan Agreement or this Agreement, then the Agent shall execute and
deliver to the Borrower all releases or other documents described in Section
14.11(b) of the Loan Agreement affecting such Trademark or License.
11. Duties of Borrower. Borrower shall have the duty,
------------------
to the extent desirable in the normal conduct of Borrower's business, to: (i)
prosecute diligently any trademark application or service mark application that
is part of the Trademarks pending as of the date hereof or thereafter until the
termination of this Agreement, and (ii) make application for trademarks or
service marks. Borrower further agrees (i) not to abandon any Trademarks or
Licenses, except those Trademarks and Licenses that Borrower has reasonably
determined are not economically material to the operation of Borrower's business
without the prior written consent of the Majority Lenders and (ii) to use its
best efforts to maintain in full force and effect the Trademarks and Licenses,
that are or shall be necessary or economically material to the operation of
Borrower's business. Any expenses incurred in connection with the foregoing
shall be borne by Borrower.
12. Agent's Right to Sue. From and after the occurrence
-------------------
and during the continuation of an Event of Default, Agent shall have the right,
but shall in no way be obligated, to bring suit in its own name to enforce the
Trademarks and Licenses and, if Agent shall commence any such suit, Borrower
shall, at the request of Agent or the Majority Lenders, do any and all lawful
acts and execute any and all proper documents required by Agent or the Majority
Lenders in aid of such enforcement. Borrower shall, upon demand, promptly
reimburse Agent for all costs and expenses incurred by Agent in the exercise of
its rights under this paragraph 12 (including, without limitation, reasonable
fees and
- ------------
expenses of in-house and outside attorneys and paralegals for Agent).
13. Waivers. Agent's failure, at any time or times
-------
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Agent thereafter to
demand strict compliance and performance therewith nor shall any course of
dealing between Borrower and Agent or any Lender have such effect. No single or
partial exercise of any right hereunder shall preclude any other or further
exercise thereof or the exercise of any other right. None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained in
this Agreement shall be deemed to have been suspended or waived by Agent unless
such suspension or waiver is in writing signed by the Majority Lenders and
directed to Borrower specifying such suspension or waiver.
14. Severability. Whenever possible, each provision of
------------
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but the provisions of this Agreement are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part hereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction,
or any other clause or provision of this Agreement in any jurisdiction.
15. Modification. This Agreement cannot be altered,
------------
amended or modified in any way, except as specifically provided in paragraphs 4
and 6 hereof or by a writing signed by the parties
- ------------ -
hereto.
16. Cumulative Remedies; Power of Attorney. From and
--------------------------------------
after the occurrence and during the continuation of an Event of Default under
the Loan Agreement, Borrower hereby irrevocably designates, constitutes and
appoints Agent (and all Persons designated by Agent in its sole and absolute
discretion) as Borrower's true and lawful attorney-in-fact, and authorizes Agent
and any of Agent's designees, in Borrower's or Agent's name, from and after the
occurrence of an Event of Default, to (i) endorse Borrower's name on all
applications, documents, papers and instruments necessary or desirable for Agent
in the use of the Trademarks or the Licenses, (ii) subject to the Existing
Licenses, assign, pledge, convey or otherwise transfer title in or dispose of
the Trademarks or the Licenses to anyone on commercially reasonable terms, (iii)
subject to the Existing Licenses, grant or issue any exclusive or nonexclusive
license under the Trademarks or, to the extent permitted, under the Licenses, to
anyone on commercially reasonable terms, (iv) revise, update, amend, complete,
file or record the Assignment of Trademark Registrations and Applications
attached as Exhibit A hereto, as Agent may determine to be
---------
necessary or desirable to assign or otherwise transfer the trademarks covered by
this Agreement to any Person, including, without limitation, Agent and (v)
subject to the Existing Licenses, take any other actions with respect to the
Trademarks or the Licenses as Agent deems reasonably necessary to protect,
preserve or realize upon the Trademarks or Licenses and the Liens thereon.
Agent shall take no action pursuant to subparagraphs (i), (ii),
----------------- ----
(iii), (iv), or (v) of this paragraph 16 without taking like action
- ----- ---- --- ------------
with respect to the entire goodwill of Borrower's business connected with the
use of, and symbolized by, such Trademarks or Licenses. Borrower hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall be
irrevocable until all of the Obligations shall have been paid in full and the
Loan Agreement shall have been terminated. Borrower acknowledges and agrees
that this Agreement is not intended to limit or restrict in any way the rights
and remedies of Agent or the Lenders under the Loan Agreement, but rather is
intended to facilitate the exercise of such rights and remedies.
Agent shall have, in addition to all other rights and remedies given
it by the terms of this Agreement, all rights and remedies allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Trademarks or the Licenses may be
located or deemed located. Upon the occurrence and during the continuation of
an Event of Default and the election by Agent to exercise any of its remedies
under Section 9-504 or Section 9-505 of the Uniform Commercial Code with respect
to the Trademarks and Licenses, Borrower agrees to assign, convey and otherwise
transfer title in and to the Trademarks and the Licenses to Agent or any
transferee of Agent and to execute and deliver to Agent or any such transferee
all such agreements, documents and instruments (in addition to the Assignment of
Trademark Registration and Applications attached as Exhibit A hereto executed in
connection herewith) as may be
- ---------
necessary, in Agent's determination, to effect such assignment, conveyance and
transfer. All of Agent's rights and remedies with respect to the Trademarks and
the Licenses, whether established hereby, by the Loan Agreement, by any other
agreements or by law, shall be cumulative and may be exercised singularly or
concurrently. Notwithstanding anything set forth herein to the contrary, it is
hereby expressly agreed that upon the occurrence and during the continuation of
an Event of Default, Agent may exercise any of the rights and remedies provided
in this Agreement, the Loan Agreement and any other Loan Document.
17. Successors and Assigns. This Agreement shall be
----------------------
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Agent and the Lenders and their respective successors and assigns.
Borrower's successors and assigns shall include, without limitation, a receiver,
trustee or debtor-in-possession to the extent that any of the foregoing are
considered to be a successor or assign of all for the Borrower; provided,
however, that Borrower shall not voluntarily assign or
- -------- -------
transfer its rights or obligations hereunder without the prior written consent
of all Lenders.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
-------------
AND ENFORCED AND THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE GOVERNED BY IN
ALL RESPECTS IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
NEW YORK.
19. Notices. All notices or other communications
-------
hereunder shall be given in the manner and to the addresses set forth in the
Loan Agreement.
20. Agent's Duty. Agent shall not have any duty with
------------
respect to the Trademarks or the Licenses. Without limiting the generality of
the foregoing, Agent shall not be under any obligation to take any steps
necessary to preserve rights in the Trademarks or the Licenses against any other
parties, but may do so at its option, and all expenses incurred in connection
therewith shall be for the sole account of Borrower and added to the Obligations
secured hereby.
21. Paragraph Titles. The paragraph titles herein are
----------------
for convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
22. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
23. Further Assurances. Borrower hereby covenants and
------------------
agrees that it shall execute and deliver such documents and instruments, and
hereby authorizes Agent, in its own name or on behalf of Borrower, to execute
and deliver such documents and instruments, at Borrower's expense, as Agent
deems necessary or proper to give effect to the provisions of this Agreement.
[Balance of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 23rd day of July, 1997.
FORSTMANN & COMPANY, INC.,
a Georgia corporation
By: /s/ Rodney Peckham
--------------------
Name: Rodney Peckham
Title:Chief Financial Officer
ATTEST:
By: /s/ Attest
-------------
Accepted and agreed to as of
the 23rd day of July, 1997, by:
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Ernest Pelli
-----------------
Name:Ernest Pelli
Title:Vice President
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
T h e foregoing Trademark Security Agreement was executed and
acknowledged before me this 23rd day of July, 1997, by Rodney Peckham,
personally known to me to be the Chief Financial Officer of Forstmann & Company,
Inc., a Georgia corporation, on behalf of such corporation.
(SEAL)
/s/ Lena Mandel
---------------
Notary Public
New York County,
My commission expires: May 1, 1999
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
T h e foregoing Trademark Security Agreement was executed and
acknowledged before me this 23rd day of July, 1997, by Ernest Pelli, personally
known to me to be a Vice President of BankAmerica Business Credit, Inc., a
Delaware corporation, on behalf of such corporation.
(SEAL)
/s/ Lena Mandel
------------------------------
Notary Public
New York County,
My commission expires:May 1, 1999<PAGE>
EXHIBIT A
---------
ASSIGNMENT OF TRADEMARK AND SERVICE MARK REGISTRATIONS AND
-----------------------------------------------------------
APPLICATIONS
WHEREAS, Forstmann & Company, Inc. ("Assignor"), a
--------
Georgia corporation with an address at 1155 Avenue of the Americas, New York,
New York 10036-2711 has adopted, used and is using certain trademarks and
service marks listed on Schedule I annexed hereto and has made applications to
use certain trademarks and service marks listed on such Schedule, such Schedule
being made a part hereof (the "Marks"), all of which are registered or filed in
-----
the United States Patent and Trademark Office.
NOW THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, Assignor hereby assigns to
BankAmerica Business Credit, Inc. all of its right, title and interest in and to
each of the Marks (except for any intent to use applications, and except for any
trademark which is the subject of an intent to use application, in each case,
filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section 15017, until
Borrower (i) files Amendment to Allege Use or (ii) a Statement of Use under
Sections 1(c) and 1(d) of the Lanham Act with respect to such trademark)
together with the goodwill of the business symbolized by the Marks, and their
respective federal registrations.
DATED: July 23, 1997
ATTEST:
- --------------------
Name: /s/ Attest
------------ FORSTMANN & COMPANY, INC.
By:/s/ Rodney Peckham
-------------------
Name:Rodney Peckham
Title:Chief Financial Officer
Exhibit 10.1(c)
FORSTMANN & COMPANY, INC.
PATENT SECURITY AGREEMENT
-------------------------
THIS PATENT SECURITY AGREEMENT ("Agreement") made as of
---------
the 23rd day of July, 1997, by and between FORSTMANN & COMPANY, INC., a Georgia
corporation, with an office at 1155 Avenue of the Americas, New York, New York
10036-2711 ("Borrower"), and
--------
BANKAMERICA BUSINESS CREDIT, INC., in its capacity as agent (the "Agent") for
the Lenders (as hereinafter defined), with an office
-----
at 40 East 52nd Street, New York, New York, 10022.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower, the lenders from time to time party thereto
(the "Lenders"), and the Agent are parties to that certain Loan and Security
Agreement of even date herewith (as the same may be further amended, restated,
modified or supplemented, the "Loan Agreement"); and
--------------
WHEREAS, Agent has required Borrower to execute and deliver this
Agreement (i) in order to secure the prompt and complete payment, observance and
performance of all of the "Obligations" (as defined in the Loan Agreement) and
(ii) as a condition precedent to the Lenders' execution and delivery of the Loan
Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower agrees as follows:
1. Defined Terms.
-------------
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Loan Agreement shall have the meaning specified
for such term in the Loan Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and paragraph references are
to this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. Incorporation of Premises. The premises set forth
-------------------------
above are incorporated into this Agreement by this reference hereto and are made
a part hereof.
3. Incorporation of the Loan Agreement. The Loan
-----------------------------------
Agreement and the terms and provisions thereof are hereby incorporated herein in
their entirety by this reference thereto.
4. Security Interest in Patents. To secure the
----------------------------
complete and timely payment, performance and satisfaction of all of the
Obligations, Borrower hereby grants to Agent, subject to the terms of existing
licenses granted by Borrower in the ordinary course of business set forth on
Schedule 8.13 of the Loan Agreement
-------------
(the "Existing Licenses"), for the ratable benefit of Agent, BABC and the
Lenders a security interest in, as and by way of a first mortgage and security
interest having priority over all other security interests, with power of sale
to the extent permitted by applicable law, all of Borrower's:
(a) now owned or existing and hereafter acquired or arising
patents, registered patents and patent applications, including, without
limitation, the patents, registered patents and patent applications,
listed on Schedule A attached hereto
----------
and made a part hereof, and (i) all income, royalties, damages and
payments now and hereafter due and/or payable under and with respect
thereto, including, without limitation, payments under all licenses
entered into in connection therewith and damages and payments for past or
future infringements thereof, (ii) the right to sue for past, present and
future infringements thereof, and (iii) all of Borrower's rights
corresponding thereto throughout the world (all of the foregoing patents,
registered patents and patent applications, together with the items
described in clauses (i)-(iii) in this
----------------
paragraph 4(a), are sometimes hereinafter individually and/or
----
collectively referred to as the "Patents");
-------
(b) rights under or interests in any patent license agreements with
any other party, whether Borrower is a licensee or licensor under any such
l i cense agreement, together with any goodwill connected with and
symbolized by any such patent license agreements and the right to prepare
for sale and sell any and all Inventory now or hereafter owned by Borrower
and now or hereafter covered by such licenses (all of the foregoing are
hereinafter referred to collectively as the "Licenses"); provided, that
the foregoing grant of a
-------- --------
security interest with respect to Licenses shall not include a security
interest in any License under which Borrower is a Patent licensee to the
extent that the grant by Borrower of such security interest is (i)
prohibited by the terms and the provisions of the written agreement,
document or instrument creating or evidencing such License, or (ii) gives
the licensor thereto the right to terminate such License in the event of
the grant of a security interest with respect thereto; and
(c) all other patent rights and all additions, improvements, and
accessions to, all substitutions for and replacements of, and all products
and proceeds (including insurance proceeds) of any and all of the
foregoing, and all books and records and technical information and data
describing or used in connection with any and all such rights, interests,
assets or property (any or all of the foregoing hereinafter referred to as
"Other Patent Rights").
-------------------
5. Restrictions on Future Agreements. In addition to
---------------------------------
the restrictions provided in paragraph 8, Borrower will not,
-----------
without the prior written consent of the Majority Lenders, (i) enter into any
agreement, including, without limitation, any license agreement, which is
inconsistent with this Agreement, provided, however, that Borrower shall have
the right to license
- -------- -------
the use of the Patents in the ordinary course of its business, and Borrower
further agrees that it will not take any action, and will use its commercially
reasonable efforts not to permit any action to be taken by others, including,
without limitation, licensees, or fail to take any action, which would in any
material adverse respect affect the validity or enforcement of the rights
transferred to Agent under this Agreement or the rights associated with those
Patents, Licenses or Other Patent Rights or (ii) except for transactions or
Liens permitted under the Loan Agreement, mortgage, pledge, assign, encumber,
grant a security interest in, transfer, license or alienate any of the Patents,
Licenses or Other Patent Rights.
6. New Patents, Licenses and Other Patent Rights.
---------------------------------------------
Borrower represents and warrants that: (a) the Patents listed on Schedule A
include all of the patents, registered patents, patent
- ----------
applications and Licenses now owned by Borrower; (b) the issued Patents are
subsisting and have not been adjudged invalid or unenforceable, in whole or in
part, and there is no litigation or proceeding pending concerning the validity
or enforceability of the issued Patents; (c) each of the issued Patents is valid
and enforceable; (d) there is no infringement by others of the issued Patents
and (e) no lien, claim or security interest has been granted by Borrower to any
Person in such Patents, Licenses and Other Patent Rights other than the Existing
Licenses and Permitted Liens. If, prior to the termination of this Agreement,
Borrower shall (i) obtain rights to any new Patents, (ii) become entitled to the
benefit of any Patents, Licenses, License renewals, whether as licensee or
licensor, or Other Patent Rights or (iii) enter into any new License, the
provisions of paragraph 4 above shall
-----------
automatically apply thereto. Borrower shall give to Agent written notice of
events described in clauses (i) or (ii) of the preceding
---------- ---
sentence within 30 days after such occurrence. Borrower hereby authorizes Agent
to modify this Agreement by amending Schedule A to
----------
include any future patents, registered patents and patent applications which are
Patents, Licenses or Other Patent Rights under paragraph 4 above or under this
paragraph 6.
----------- -----------
7. Royalties. Borrower hereby agrees that the use by
---------
Agent of the Patents, Licenses and Other Patent Rights as authorized hereunder
in connection with the exercise of its remedies under paragraph 15 or pursuant
to Section 13 of the Loan
------------
Agreement shall be coextensive with Borrower's rights thereunder and with
respect thereto and without any liability for royalties or other related charges
from Agent to Borrower.
8. Right to Inspect: Further Assignments and Security
--------------------------------------------------
Interests. At all reasonable times (and at any time when a Default
- ---------
or Event of Default exists) upon reasonable advance notice to Borrower and at
reasonable intervals, Agent may have access to, examine, audit, make copies (at
Borrower's expense) and extracts from and inspect Borrower's premises and
examine Borrower's books, records and operations relating to the Patents,
Licenses and Other Patent Rights; provided, that in conducting such inspections
and
--------
examinations, Agent shall use reasonable efforts not to unnecessarily disturb
the conduct of Borrower's ordinary business operations. Borrower agrees not to
pledge, sell or assign its interest in, or grant any license under, the Patents,
Licenses or Other Patent Rights without the prior and express written consent of
the Majority Lenders, provided, however, that Borrower shall
-------- -------
have the right to license the use of the Patents in the ordinary course of its
business.
9. Nature and Continuation of Agent's Security
-------------------------------------------
Interest; Termination of Agent's Security Interest. This Agreement
- -------------------------------------------------
is made for collateral security purposes only. This Agreement shall create a
continuing security interest in the Patents, Licenses and Other Patent Rights
and shall remain in full force and effect until the payment in full of all of
the Obligations and termination of the Loan Agreement. Upon payment in full of
all of the Obligations and termination of the Loan Agreement, this Agreement
shall terminate and upon Borrower's request, Agent shall promptly execute and
deliver to the Borrower, at Borrower's expense, all termination statements and
other instruments as may be necessary or desirable to evidence the termination
of the Agent's security interest in the Patents, Licenses and Other Patent
Rights, subject to any disposition thereof which may have been made by Agent
pursuant to this Agreement or the Loan Agreement.
10. Termination of Liens on Disposed Patents, Licenses
--------------------------------------------------
or Other Patent Rights. If any of the Patents, Licenses or Other
- ----------------------
Patent Rights shall be sold, transferred or otherwise disposed of by the
Borrower in a transaction permitted by the Loan Agreement or this Agreement,
then the Agent shall execute and deliver to the Borrower all releases or other
documents described in Section 14.11(b) of the Loan Agreement affecting such
Patents, Licenses or Other Patent Rights.
11. Duties of Borrower. Borrower shall have the duty,
------------------
to the extent desirable in the normal conduct of Borrower's business, to: (i)
prosecute diligently any patent application that is part of the Patents pending
as of the date hereof or thereafter until the termination of this Agreement, and
(ii) make application for patents. Borrower further agrees: (i) not to abandon
any Patent, License or Other Patent Rights except those Patents, Licenses or
O t her Patent Licenses that Borrower has reasonably determined are not
economically material to the operation of Borrower's business without the prior
written consent of the Majority Lenders and (ii) to use its best efforts to
maintain in full force and effect the Patents, Licenses and Other Patent Rights,
that are or shall be necessary or economically material in the operation of
Borrower's business. Any expenses incurred in connection with the foregoing
shall be borne by Borrower.
12. Agent's Right to Sue. From and after the occurrence
--------------------
of and during the continuation of an Event of Default, Agent shall have the
right, but shall in no way be obligated, to bring suit in its own name to
enforce the Patents, Licenses and Other Patent Rights and, if Agent shall
commence any such suit, Borrower shall, at the request of Agent or the Majority
Lenders, do any and all lawful acts and execute any and all proper documents
required by Agent or the Majority Lenders in aid of such enforcement. Borrower
shall, upon demand, promptly reimburse Agent for all costs and expenses incurred
by Agent in the exercise of its rights under this paragraph 12 (including,
without limitation, fees and expenses of
- ------------
in-house and outside attorneys and paralegals for Agent).
13. Waivers. Agent's failure, at any time or times
-------
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Agent thereafter to
demand strict compliance and performance therewith nor shall any course of
dealing between Borrower and Agent or any Lender have such effect. No single or
partial exercise of any right hereunder shall preclude any other or further
exercise thereof or the exercise of any other right. None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained in
this Agreement shall be deemed to have been suspended or waived by Agent unless
such suspension or waiver is in writing signed by the Majority Lenders and
directed to Borrower specifying such suspension or waiver.
14. Severability. Whenever possible, each provision of
------------
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but the provisions of this Agreement are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part hereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
15. Modification. This Agreement cannot be altered,
------------
amended or modified in any way, except as specifically provided in paragraphs 4
and 6 hereof or by a writing signed by the parties
- ------------ -<PAGE>
hereto.
16. Cumulative Remedies; Power of Attorney. From and
--------------------------------------
after the occurrence and during the continuation of an Event of Default under
the Loan Agreement, the Borrower shall immediately cease and desist from the
practice, manufacture, use and sale of the inventions claimed, disclosed or
covered by the Patents, and Borrower hereby irrevocably designates, constitutes
and appoints Agent (and all Persons designated by Agent in its sole and absolute
discretion) as Borrower's true and lawful attorney-in-fact, and authorizes Agent
and any of Agent's designees, in Borrower's or Agent's name, from and after the
occurrence of an Event of Default, to (i) endorse Borrower's name on all
applications, documents, papers and instruments necessary or desirable for Agent
in the use of the Patents, Licenses or Other Patent Rights, (ii) subject to the
Existing Licenses, assign, pledge, convey or otherwise transfer title in or
dispose of the Patents, Licenses or Other Patent Rights to anyone on
commercially reasonable terms, (iii) subject to the Existing Licenses, grant or
issue any exclusive or nonexclusive license under the Patents, Licenses (to the
extent permitted) or Other Patent Rights, to anyone on commercially reasonable
terms, (iv) revise, update, amend, complete, file or record the Assignment of
Patent and Patent Licenses Registrations and Applications attached as Exhibit A
hereto, as Agent may determine to be
---------
necessary or desirable to assign or otherwise transfer the Patents and Licenses
covered by this Agreement to any Person including, without limitation, Agent,
and (v) subject to the Existing Licenses, take any other actions with respect to
the Patents, Licenses or Other Patent Rights as Agent deems reasonably necessary
to protect, preserve or realize upon the Patents, Licenses or Other Patent
Rights and the Liens thereon. Borrower hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney
is coupled with an interest and shall be irrevocable until all of the
Obligations shall have been paid in full and the Loan Agreement shall have been
terminated. Borrower acknowledges and agrees that this Agreement is not
intended to limit or restrict in any way the rights and remedies of Agent or the
Lenders under the Loan Agreement, but rather is intended to facilitate the
exercise of such rights and remedies.
Agent shall have, in addition to all other rights and remedies given
it by the terms of this Agreement, all rights and remedies allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Patents, Licenses or Other Patent
Rights may be located or deemed located. Upon the occurrence and during the
continuation of an Event of Default and the election by Agent to exercise any of
its remedies under Section 9-504 or Section 9-505 of the Uniform Commercial Code
with respect to the Patents, Licenses and Other Patent Rights, Borrower agrees
to assign, convey and otherwise transfer title in and to the Patents, Licenses
and Other Patent Rights to Agent or any transferee of Agent and to execute and
deliver to Agent or any such transferee all such agreements, documents and
instruments (in addition to the Assignment of Patent and Patent Licenses
Registrations and Applications attached as Exhibit A hereto) as may be
necessary, in
---------
Agent's determination, to effect such assignment, conveyance and transfer. All
of Agent's rights and remedies with respect to the Patents, Licenses and Other
Patent Rights, whether established hereby, by the Loan Agreement, by any other
agreements or by law, shall be cumulative and may be exercised singularly or
concurrently. Notwithstanding anything set forth herein to the contrary, it is
hereby expressly agreed that upon the occurrence of and during the continuation
of an Event of Default, Agent may exercise any of the rights and remedies
provided in this Agreement, the Loan Agreement and any other Loan Document.
17. Successors and Assigns. This Agreement shall be
----------------------
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Agent and the Lenders and their respective successors and assigns.
Borrower's successors and assigns shall include, without limitation, a receiver,
trustee or debtor-in-possession to the extent that any of the foregoing are
considered to be a successor or assign of all for the Borrower; provided,
however, that Borrower shall not voluntarily assign or
- -------- -------
transfer its rights or obligations hereunder without the prior written consent
of all Lenders.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
-------------
AND ENFORCED AND THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE
GOVERNED BY IN ALL RESPECTS IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF NEW YORK.
19. Notices. All notices or other communications
-------
hereunder shall be given in the manner and to the addresses set forth in the
Loan Agreement.
20. Agent's Duty. Agent shall not have any duty with
------------
respect to the Patents, Licenses or Other Patent Rights. Without limiting the
generality of the foregoing, Agent shall not be under any obligation to take any
steps necessary to preserve rights in the Patents, Licenses or Other Patent
Rights against any other parties, but may do so at its option, and all expenses
incurred in connection therewith shall be for the sole account of Borrower and
added to the Obligations secured hereby.
21. Paragraph Titles. The paragraph titles herein are
----------------
for convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
22. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
23. Further Assurances. Borrower hereby covenants and
------------------
agrees that it shall execute and deliver such documents and instruments, and
hereby authorizes Agent, in its own name or on behalf of Borrower, to execute
and deliver such documents and instruments, at Borrower's expense, as Agent
deems necessary or proper to give effect to the provisions of this Agreement.
[Balance of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 23rd day of July, 1997.
FORSTMANN & COMPANY, INC.,
a Georgia corporation
By: /s/ Rodney Peckham
--------------------
Name:Rodney Peckham
Title:Chief Financial Officer
ATTEST:<PAGE>
By: /s/ Attest
-----------------
Accepted and agreed to as of
the 23rd day of July, 1997, by:
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Ernest Pelli
-----------------
Name:Ernest Pelli
Title:Vice President
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
T h e f oregoing Patent Security Agreement was executed and
acknowledged before me this 23rd day of July, 1997, by Rodney Peckham,
personally known to me to be the Chief Financial Officer of Forstmann & Company,
Inc., a Georgia corporation, on behalf of such corporation.
(SEAL)
/s/ Lena Mandel
---------------
Notary Public
New York County,
My commission expires: May 1, 1999
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
T h e f oregoing Patent Security Agreement was executed and
acknowledged before me this 23rd day of July, 1997, by Ernest Pelli, personally
known to me to be a Vice President of BankAmerica Business Credit, Inc., a
Delaware corporation, on behalf of such corporation.
(SEAL)
/s/ Lena Mandel
----------------
Notary Public
New York County,
My commission expires: May 1, 1999
EXHIBIT A
---------
ASSIGNMENT OF PATENT AND PATENT LICENSES
REGISTRATIONS AND APPLICATIONS
-------------------------------
WHEREAS, FORSTMANN & COMPANY, INC. ("Assignor"), a
--------
Georgia corporation with an address at 1155 Avenue of the Americas, New York,
New York 10036-2711, has adopted, used and is using certain Patents and Patent
Licenses listed on Schedule I annexed hereto and has made applications to use
certain Patents and Patent Licenses listed on such Schedule, such Schedule being
made a part hereof (the Patents and Patent Licenses, collectively, the
"Licenses"), all of which are registered or filed in the United
--------
States Patent and Trademark Office.
NOW THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, Assignor hereby assigns to
BankAmerica Business, Inc. all of its right, title and interest in and to each
of the Licenses together with the goodwill of the business symbolized by the
Licenses, and their respective federal registrations.
DATED: --------- ---, ----
ATTEST:
- -------------------- FORSTMANN & COMPANY, INC.
Name:
By:--------------------------
Name:
Title:
Exhibit 10.1(d)
EXHIBIT I
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT
between
FORSTMANN & COMPANY, INC.
a Georgia Corporation
and
BANKAMERICA BUSINESS CREDIT, INC.,
a Delaware corporation, as Agent
This Pledge Agreement ("Agreement") is made and entered into as of
July 23, 1997, by Forstmann & Company, Inc., a Georgia corporation ("Pledgor"),
in favor of BankAmerica Business Credit, Inc., a Delaware corporation, as Agent
("Pledgee").
Preliminary Statement.
- ---------------------
A. Pledgor, Pledgee, in its capacity as agent, and the lenders
from time to time parties thereto (the "Lenders") will enter into that certain
Loan and Security Agreement dated as of July 23, 1997 (as the same may be
amended, restated, modified or supplemented from time to time, the "Loan
Agreement"), pursuant to which the Lenders will, subject to the terms and
conditions thereof, advance monies and make other extensions of credit to the
Pledgor. Capitalized terms used and not defined herein shall have the meanings
assigned to such terms in the Loan Agreement.
B. The Loan Agreement permits the Pledgor to convert accounts
receivable into, among other things, promissory notes and securities consisting
of capital stock, subject to the terms and conditions with respect thereto
contained in the Loan Agreement.
C. The Lenders have required as a condition to the Lenders'
advancement of funds under the Loan Agreement that Pledgor execute and deliver
to Pledgee this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
any loan or advance by renewal, refinancing or extension of the Loan Agreement
or otherwise) heretofore, now or hereafter made to or for the benefit of Pledgor
by Pledgee or any Lender, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Pledge. Pledgor hereby pledges and grants security
------
interests to Pledgee in all of its right, title and interest in and to
Restricted Investments arising from the conversion of Accounts which are over
ninety (90) days past due and in any event are not Eligible Accounts into (i)
securities consisting of capital stock (collectively, the "Stock") of the
Account Debtors, accompanied by stock powers duly executed in blank (the
"Powers"); or (ii) securities consisting of promissory notes (collectively, the
"Notes"), of the Account Debtors and all payments delivered in connection with
any Notes, accompanied by separate instruments of endorsement for each
respective Note, duly executed in blank in the form attached hereto as Schedule
1 and made a part hereof (the "Endorsements") (said Stock, Notes, Powers
Endorsements and proceeds thereof, together with the property and interests in
property described in Paragraphs 3, 6 and 7, being hereinafter
--------------- -
collectively referred to as the "Collateral"), as security for the payment and
performance of the Obligations. In the event Pledgor receives any Notes or
Stock after the date hereof, it shall promptly, but in no event later than five
B u siness Days after receipt thereof, deliver the same, accompanied by
appropriate Powers or Endorsements, as applicable, affixed thereto or thereon,
to the Pledgee or its nominee. Pledgor hereby appoints Pledgee as Pledgor's
attorney-in-fact to arrange, at Pledgee's option, for the transfer, upon or at
any time after the existence or occurrence of an Event of Default of the
Collateral on the books of the Company to the name of Pledgee or to the name of
Pledgee's nominee.
2. Voting Rights. During the term of this Agreement,
-------------
and so long as there shall not occur or exist an Event of Default and Pledgee
has not delivered the written notice referred to in clause (b) below, Pledgor
shall have the right to vote the Stock on all corporate questions for all
purposes not inconsistent with the terms of this Agreement and the Loan
Agreement. Pledgee shall be entitled to exercise all voting powers pertaining
to the Collateral from and after (a) the occurrence and during the continuation
of an Event of Default and (b) Pledgee's delivery of written notice to Pledgor
of Pledgee's intention to exercise such voting powers.
3. Dividends and Distributions. (a) During the term of
---------------------------
this Agreement, and so long as there shall not exist an Event of Default,
Pledgor shall be entitled to receive and retain any and all dividends, principal
and interest paid in respect of the Collateral, provided, however, that from and
after (a) the
-------- -------
occurrence and during the continuation of an Event of Default and (b) Pledgee's
delivery of written notice to Pledgor to do so any and all:
(i) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Collateral;
(ii) dividends and other distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(iii) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Collateral;
shall be, and shall be forthwith delivered to the Pledgee to hold as, Collateral
and shall, if received by the Pledgor, be received in trust for the benefit of
the Pledgee, be segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).
(b) Pledgee shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to Paragraph 2
above and
-----------
to receive the dividends or interest payments which it is authorized to receive
and retain pursuant to subparagraph (a) of this Paragraph 3.
-----------
(c) Upon the occurrence and during the continuance of an Event of
Default all dividends and interest paid which are received by the Pledgor
contrary to the provisions of subparagraph (a) of this Paragraph 3 shall be
received in trust for the benefit of the
-----------
Pledgee, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
4. Representations and Covenants. Pledgor warrants and
-----------------------------
represents that Pledgor is (or, in the case of any and all Notes and Stock
delivered after the date hereof, will be) the sole owner, free and clear of all
liens, claims security interests and encumbrances of the Notes and Stock and any
and all voting rights associated therewith and that Pledgor has full power and
authority to enter into this Agreement. Pledgor covenants that Pledgor will
continue to be the sole owner, free and clear of all liens, claims, security
interests and encumbrances (except those held by Pledgee) of 100% of the Notes
and Stock and any and all voting rights associated therewith.
Pledgor warrants and represents that (a) there are (or in the case
of any and all Collateral delivered after the date hereof, it will use its best
efforts to ensure that such Collateral will have) no restrictions upon the
voting rights or upon the transfer of any of the Collateral other than those
which may appear on the face of the certificates evidencing the Collateral, (b)
there are (or in the case of any and all Collateral delivered after the date
hereof, it will use its best efforts to ensure that such Collateral will have)
no warrants or other rights or options issued or outstanding in connection with
any of the Collateral, (c) Pledgor has (or in the case of any and all Collateral
delivered after the date hereof, will use its best efforts to ensure that it
will have) the right to vote, pledge and grant a security interest in or
otherwise transfer such Collateral free of any liens, claims or encumbrances,
(d) to the best of Pledgor's knowledge, each Note has been (or, in the case of
Notes delivered after the date hereof, will use its best efforts to ensure that
such Notes will be) duly authorized, issued and delivered, and is the legal,
valid, and binding obligation of the issuer thereof, (e) each payor party to
any of the Notes has (or in the case of any and all Notes delivered after the
date hereof, Pledgor will use its best efforts to ensure that each such payor
party will have) no right of set off or defense or counterclaim which would
inhibit the collection of all amounts outstanding under such Note, and (f) the
Powers or Endorsements, as the case may be, are (or, in the case of Stock or
Notes delivered after the date hereof, the Powers or Endorsements, as the case
may be, will be) duly executed and give, or will give, as the case may be,
Pledgee the authority such Powers or Endorsements, as the case may be, purport
to confer.
5. Subsequent Changes Affecting Collateral. Pledgor
---------------------------------------
represents to Pledgee that Pledgor has made Pledgor's own arrangements for
keeping informed of changes or potential changes affecting the Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and Pledgor agrees that Pledgee shall have no responsibility or
liability for informing Pledgor of any such changes or potential changes or for
taking any action or omitting to take any action with respect thereto. Pledgee
may, upon or at any time after the occurrence of an Event of Default, and after
written notice and at Pledgee's option, transfer or register the Collateral or
any part of the Collateral into Pledgee's or Pledgee's nominee's name with or
without any indication that such Collateral is subject to the security interest
under this Agreement.
6. Stock Adjustments. In the event that during the
-----------------
term of this Agreement any stock dividend, reclassification, readjustment or
other change is declared or made in the capital structure of any Company
(including, without limitation, the issuance of additional shares of preferred
or common stock of any Company of whatever class to the Pledgor), or any option
included within the Stock is exercised, or both, then all new, substituted and
additional shares, or other securities, issued to the Pledgor by reason of any
such change or exercise shall be delivered to and held by Pledgee under the
terms of this Agreement in the same manner as the Collateral originally pledged
under this Agreement.
7. Warrants, Options and Other Rights. In the event
----------------------------------
that during the term of this Agreement subscription warrants or any other rights
or options shall be issued in connection with any of the Collateral, then such
warrants, rights and options shall be immediately assigned to Pledgee and all
new stock or other securities so acquired by Pledgor shall be immediately
assigned to Pledgee to be held under the terms of this Agreement in the same
manner as the Collateral originally pledged hereunder.
8. Registration. (a) Upon or at any time after the
------------
occurrence of an Event of Default, if for any reason Pledgee desires to sell any
of the Stock at a public sale, Pledgor will, at any time and from time to time,
upon the written request of the Pledgee, use its best efforts to take or cause
the issuer of such Stock to take such action and prepare, distribute and/or file
such documents, as are required or advisable in the reasonable opinion of
counsel for the Pledgee to permit the public sale of such Stock. Pledgor
agrees to use all reasonable efforts to qualify, file or register, or cause the
issuer of such Stock to qualify, file or register, any of the Stock under the
Blue Sky or other securities laws of such states as may be requested by the
P l edgee and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Pledgor will bear all costs and
expenses of carrying out obligations under this Section. Pledgor acknowledges
that there is no adequate remedy at law for failure by it to comply with the
provisions of this Section and that such failure would not be adequately
compensable in damages, and therefore agrees that its agreements contained in
this Section may be specifically enforced.
(b) Upon or at any time after the occurrence of an Event of
Default, should Pledgee determine that, prior to any public offering of any
securities contained in any of the Collateral, such securities should be
registered under the Securities Act and/or registered or qualified under any
other federal or state law, and that such registration and/or qualification is
not practical, then Pledgor agrees that it will be commercially reasonable if a
private sale, upon at least 10 days' prior notice to Pledgor, is arranged so as
to avoid a public offering even though the sales price established and/or
obtained may be substantially less than prices quoted for such security on any
market or exchange.
9. Default. (a) Upon the existence of an Event of
-------
Default, Pledgee shall have, in addition to any other rights given by law or the
rights given under this Agreement or the Loan Agreement, all of the rights and
remedies with respect to the Collateral of a secured party under the Uniform
Commercial Code.
(b) In addition, with respect to the Collateral, or any part of
the Collateral, which shall then be or shall thereafter come into the possession
or custody of Pledgee:
(i) Pledgee may sell or cause the same to be sold at any broker's
board or at public or private sale, in one or more sales or lots, at such
price as Pledgee may deem best, and for cash or on credit or for future
delivery, without assumption of any credit risk, and the purchaser of any
or all of the Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind
whatsoever. Unless any of the Collateral threatens to decline speedily in
value or is or becomes of a type sold on a recognized market, Pledgee will
give Pledgor reasonable notice of the time and place of any public sale of
the Collateral, or of the time after which any private sale or other
intended disposition is to be made. Any sale of any of the Collateral
conducted in conformity with reasonable commercial practices of banks,
commercial finance companies, insurance companies or other financial
institutions disposing of property similar to such Collateral, including
any sale made pursuant to Paragraph
---------
8 hereof, shall be deemed to be commercially reasonable.
-
Notwithstanding any provision to the contrary contained in this Agreement,
any requirements of reasonable notice shall be met if such notice is
deposited in the United States mails, addressed to Pledgor as provided in
Paragraph 16, at least 10
------------
days before the time of the sale or disposition. Any other requirement of
notice, demand or advertisement for sale is, to the extent permitted by
law, waived. Pledgee may, in Pledgee's own name, or in the name of a
designee or nominee, buy at any public sale of any of the Collateral and,
if permitted by applicable law, buy at any private sale of any of the
Collateral. Pledgor will pay to Pledgee all expenses (including court
costs and reasonable in-house and outside attorneys' and paralegals' fees
and expenses) of, or incident to, the enforcement of any of the provisions
of this Agreement. Since federal and state securities laws may impose
certain restrictions on the method by which a sale of any or all of the
Collateral may be effected after the occurrence of an Event of Default,
Pledgor agrees that upon the occurrence or existence of an Event of
Default, Pledgee may, from time to time, attempt to sell all or any part
of the Collateral by means of a private placement, restricting the bidder
and prospective purchasers to those who will represent and agree that they
are purchasing for investment only and not for distribution. In so doing,
Pledgee may solicit offers to buy the Collateral, or any part of it, for
cash, from a limited number of investors deemed by Pledgee, in Pledgee's
reasonable judgment, to be financially responsible parties who might be
interested in purchasing such Collateral, and if Pledgee solicits such
offers from not less than three such investors, then the acceptance by
Pledgee of the highest offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposition of such Collateral; and
(ii) Pledgee, or its nominee, may without notice to the Pledgor,
notify any payor of the Notes of this Agreement, direct that all sums then
and thereafter payable pursuant to the Notes be paid solely to the
Pledgee, and collect and retain all sums payable pursuant to the Notes as
they become due and payable and apply the same to the Obligations in
accordance with the terms of the Loan Agreement.
10. Term. This Agreement shall remain in full force and
----
effect until all of the Obligations have been fully paid and satisfied, and the
Loan Agreement has been terminated. Upon termination of this Agreement as
provided in this Paragraph 10,
------------
Pledgee agrees to return any Collateral in its possession to Pledgor at the
address set forth in Paragraph 16.
------------
11. Definitions. Any capitalized terms used herein and
-----------
not otherwise defined are used herein as defined in the Loan Agreement. The
singular shall include the plural and vice versa.
12. Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of Pledgor, Pledgee and their respective
successors and assigns. Pledgor's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for Pledgor.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY
--------------
AND CONSTRUED UNDER THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK. WHENEVER possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
14. Further Assurances. Pledgor agrees that Pledgor
------------------
will cooperate with Pledgee and will execute and deliver, or cause to be
executed and delivered, all such other stock powers, proxies, instruments,
documents, endorsements and resignations of officers and directors, and will
take all such other action, including, without limitation, the filing of UCC
financing statements, as Pledgee may reasonably request from time to time in
order to carry out the provisions and purposes of this Agreement.
15. Pledgee's Duty of Care. Pledgee shall have no duty
----------------------
with respect to any Collateral other than as set forth in the Loan Agreement.
Without limiting the generality of the foregoing, Pledgee shall be under no
obligation to take any steps necessary to preserve rights in any of the
Collateral against any other parties but may do so at Pledgee's option, but all
expenses incurred in connection therewith shall be for the sole account of
Pledgor.
16. Notices. Any notice, request or other communication
-------
required or desired to be served, given or delivered under this Agreement shall
be in writing and shall be given in the manner and to the addresses set forth in
the Loan Agreement
17. Section Headings. The section headings in this
----------------
Agreement are for convenience of reference only, and shall not affect in any way
the interpretation of any of the provisions of this Agreement.
IN WITNESS WHEREOF, Pledgor and Pledgee have executed this Agreement
as of this 23rd day of July, 1997.
FORSTMANN & COMPANY, INC., as Pledgor
By: /s/ Rodney Peckham
-------------------
Name: Rodney Peckham
Title: Chief Financial Officer
BANKAMERICA BUSINESS
CREDIT, INC., as Agent, as Pledgee
By: /s/ Ernest Pelli
------------------
Name: Ernest Pelli
Title: Vice President
Schedule 1
to
Agreement
Form of Endorsement Separate from Note
---------------------------------------
ENDORSEMENT
-----------
FOR VALUE RECEIVED, Forstmann & Company, Inc. ("Forstmann") hereby
assigns and transfers unto BankAmerica Business Credit, Inc., as Agent ("Agent")
under that certain Loan and Security Agreement dated as of July 23, 1997 entered
into among Forstmann, the Lenders from time to time party thereto and the Agent
one note of [payor] for [principal amount] herewith, standing in Fostmann's name
and does hereby irrevocably constitute and appoint the Agent as Fostmann's
attorney to transfer said Note with full power of substitution in the premises.
Dated ---------, ----
FORSTMANN & COMPANY, INC.
By:--------------------------
Name:
Title:
In presence of:
- ---------------------------
Exhibit 10.1(e)
Dublin/Nathaniel Plant After recording, return to:
Laurens County, Georgia Alan M. Christenfeld, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
DEED TO SECURE DEBT, SECURITY AGREEMENT
AND ASSIGNMENT OF RENTS
This Deed to Secure Debt, Security Agreement and Assignment of
Rents (The "Deed") is made and entered into as of the 23rd day of July, 1997 by
FORSTMANN & COMPANY, INC., a Georgia corporation (hereinafter referred to as
"Grantor"), having an address at 1155 Avenue of the Americas, New York, New York
10036, to BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, in its
capacity as agent for the "Lenders" (as defined in the Loan Agreement, as
hereinafter defined) (hereinafter referred to as "Grantee"), having an address
at 40 East 52nd Street, 2nd floor, New York, New York 10022.
R E C I T A L S:
WHEREAS, Grantor and Grantee are parties to that certain Loan and
Security Agreement (the "Loan and Security Agreement"), dated as of July 23,
1997, among Grantor and the financial institutions named therein, as Lenders
(the Loan and Security Agreement and any and all renewals, extensions for any
p e r i od, modifications, supplements, restatements, increases and/or
rearrangements thereof are hereinafter collectively referred to as the "Loan
Agreement") pursuant to which Grantee and the Lenders have agreed to make loans
and advances or extend other financial accommodations in the aggregate principal
amount of up to $31,450,000.00; and
WHEREAS, the Grantee has required that Grantor execute and deliver
this Deed to Grantee in order to secure the payment and performance of (i) all
of Grantor's obligations and liabilities hereunder and (ii) the "Obligations"
(as defined in the Loan Agreement) except the "Revolving Loan" (as defined in
the Loan Agreement) but including, without limitation, the obligation to repay
the Term Loan (all such obligations and liabilities being hereinafter referred
to collectively as the "Obligations") each of the Terms Notes being described in
Schedule A attached hereto and made a part hereof, and having a final maturity
date of July 22, 2000; and
WHEREAS, the Obligations secured hereby shall not exceed an
aggregate principal amount, at any one time outstanding, of ($31,450,000.00).
Provided that the foregoing limitation shall apply only to the lien and interest
upon the real property created by this Deed, and it shall not in any manner
limit, affect or impair any grant of a security interest or other right in favor
of the Grantee under the provisions of the Loan Agreement or under any other
security agreement at any time executed in connection with the Loan Agreement,
and further provided that such limitation shall not limit the lien and interest
of this Deed with respect to interest due on such Obligations at the rates set
forth in the Loan Agreement and sums to pay real estate taxes and insurance
premiums with respect to the Deed Property (as defined herein) or to otherwise
protect the security of this Deed;
NOW, THEREFORE, to secure payment of the Obligations and in
consideration of One Dollar ($1.00) in hand paid, receipt whereof is hereby
acknowledged, Grantor does hereby grant, bargain, sell, remise, release, alien,
convey, and warrant to Grantee, its successors and assigns, and grant a security
interest to Grantee, its successors and assigns, in and to the following
described real estate in Laurens County, Georgia (the "State"):
See Exhibit A attached hereto and by this reference made
a part hereof
which real estate (the "Land"), together with all right, title and interest, if
any, which Grantor may now have or hereafter acquire in and to all improvements,
buildings and structures thereon of every nature whatsoever, is herein called
the "Premises."
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to (a) all
easements, rights of way, gores of land or any lands occupied by streets, ways,
alleys, passages, sewer rights, air rights, development rights, water courses,
water rights and powers, and public places adjoining said Land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto and (b) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to, or of any rights and interests described in
subparagraph (a) above and this subparagraph (b) (hereinafter the "Property
Rights").
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, which Grantor may now or hereafter
acquire in and to fixtures and appurtenances of every nature whatsoever now or
hereafter located in, on or attached to, and used or intended to be used in
connection with, or with the operation of, the Premises, including, but not
limited to, (a) all apparatus, machinery, and equipment of Grantor; and (b) all
extensions, additions, improvements, betterments, renewals, substitutions, and
replacements to or of any of the foregoing (the items described in the foregoing
(a) and (b) being the "Fixtures"); as well as all personal property and
equipment of every nature whatsoever now or hereafter located in or on the
Premises, including, but not limited to, (c) all screens, window shades, blinds,
wainscoting, storm doors and windows, floor coverings, and awnings of Grantor;
(d) all apparatus, machinery, equipment and appliances of Grantor not included
as Fixtures; (e) all items of furniture, furnishings, and personal property of
Grantor; and (f) all extensions, additions, improvements, betterments, renewals,
substitutions, and replacements to or of any of the foregoing (c)-(e) (the items
described in the foregoing (c)-(f) and any other personal property referred to
in this paragraph being the "Personal Property") and in and to the proceeds of
the Personal Property. The foregoing grant shall not include any apparatus,
machinery, and equipment subject to capital leases which by their terms prohibit
the grant of the security interest contemplated by this Deed. It is mutually
agreed, intended and declared that the Premises and all of the Property Rights
and Fixtures owned by Grantor (referred to collectively herein as the "Real
Property") shall, so far as permitted by law, be deemed to form a part and
parcel of the Land and for the purpose of this Deed to be real estate and
covered by this Deed. It is also agreed that if any of the property herein
described is of a nature so that a security interest therein can be perfected
under the Uniform Commercial Code, this instrument shall constitute a security
agreement, and Grantor agrees to execute, deliver and file or refile any
financing statement, continuation statement, or other instruments Grantee may
reasonably require from time to time to perfect or renew such security interest
under the Uniform Commercial Code. Subject to the terms and conditions of the
Loan Agreement the remedies for any violation of the covenants, terms and
conditions of the agreements herein contained shall be as prescribed herein or
by general law, or, as to that part of the security in which a security interest
may be perfected under the Uniform Commercial Code, by the specific statutory
consequences now or hereafter enacted and specified in the Uniform Commercial
Code, all at the Grantee's sole election.
TOGETHER WITH (i) all the estate, right, title and interest of the
Grantor, in and to all judgments, insurance proceeds, awards of damages and
settlements resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for any
damage (whether caused by such taking or otherwise) to the Real Property, the
Personal Property or any part thereof, or to any rights appurtenant thereto, and
all proceeds of any sales or other dispositions of the Real Property, the
Personal Property or any part thereof; and (except as otherwise provided herein
or in the Loan Agreement) the Grantee is hereby authorized to collect and
receive said awards and proceeds and to give proper receipts and acquittances
therefor, and to apply the same as provided in the Loan Agreement; and (ii) all
contract rights, general intangibles, actions and rights in action, relating to
the Real Property or the Personal Property, including, without limitation, all
rights to insurance proceeds and unearned premiums arising from or relating to
damage to the Real Property or the Personal Property; and (iii) all proceeds,
products, replacements, additions, substitutions, renewals and accessions of and
to the Real Property or the Personal Property. (The rights and interests
described in this paragraph shall hereinafter be called the "Intangibles.")
As additional security for the Obligations secured hereby, Grantor
does (i) hereby pledge and assign to Grantee from and after the date hereof
(including any period of redemption), primarily and on a parity with said real
estate, and not secondarily, all the rents, issues and profits of the Real
Property and all rents, issues, profits, revenues, royalties, bonuses, rights
and benefits due, payable or accruing (including all deposits of money as
advance rent, for security or as earnest money or as downpayment for the
purchase of all or any part of the Real Property or the Personal Property) (the
"Rents") under any and all present and future leases, contracts or other
agreements relating to the ownership of the Real Property or the Personal
Property or to the occupancy of all or any portion of the Real Property and,
(ii) except to the extent such a transfer or assignment is not permitted by the
terms thereof (and a consent to the transfer or assignment has not been
obtained), does hereby transfer and assign to Grantee all such leases and
agreements (including all Grantor's rights under any contracts for the sale of
any portion of the Deed Property (as hereinafter defined) and to all revenues
and royalties under any oil, gas and mineral leases relating to the Real
Property) (the "Leases"). Grantee hereby grants to Grantor the right to collect
and use the Rents as they become due and payable under the Leases, but not more
than one (1) month in advance thereof, until an "Event of Default" (as defined
in the Loan Agreement) has occurred, provided that the existence of such right
shall not operate to subordinate this assignment to any subsequent assignment,
in whole or in part, by Grantor, and any such subsequent assignment shall be
subject to the rights of the Grantee under this Deed. Grantor further agrees to
execute and deliver such assignments of leases or assignments of land sale
contracts as Grantee may from time to time request. In the event of an Event of
Default under the Loan Agreement, (i) the Grantor agrees, upon demand, to
deliver to the Grantee all of the Leases with such additional assignments
thereof as the Grantee may request and agrees that the Grantee may assume the
management of the Real Property and collect the Rents, applying the same upon
the Obligations in the manner provided in the Loan Agreement, and (ii) the
Grantor hereby authorizes and directs all tenants, purchasers or other persons
occupying or otherwise acquiring any interest in any part of the Real Property
to pay the Rents due under the Leases to the Grantee upon request of the
Grantee. Grantor hereby appoints Grantee as its true and lawful attorney-in-
fact to manage said property and collect the Rents, with full power to bring
suit for collection of the Rents and possession of the Real Property, giving and
granting unto said Grantee and unto its agent or attorney full power coupled
with an interest and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done in the protection of the security
hereby conveyed; provided, however, that (i) this power of attorney and
assignment of Rents shall not be construed as an obligation upon said Grantee to
make or cause to be made any repairs that may be needful or necessary and (ii)
Grantee agrees that until such Event of Default as aforesaid, Grantee shall
permit Grantor to perform the aforementioned management responsibilities. Upon
Grantee's receipt of the Rents, at Grantee's option, it may: (i) pay reasonable
charges for collection hereunder, costs of necessary repairs and other costs
requisite and necessary during the continuance of this power of attorney and
assignment of Rents, (ii) pay general and special taxes, insurance premiums,
and, thereafter, (iii) distribute the balance of the Rents pursuant to the
provisions of the Loan Agreement. This power of attorney and assignment of
Rents shall be irrevocable until this Deed shall have been satisfied and
released of record and the releasing of this Deed shall act as a revocation of
this power of attorney and assignment of Rents. Grantee shall have and hereby
expressly reserves the right and privilege (but assumes no obligation) to
demand, collect, sue for, receive and recover the Rents, or any part thereof,
now existing or hereafter made, and apply the same in accordance with the
provisions of the Loan Agreement.
All of the property described above, and each item of property
therein described, not limited to, but including, the Land, the Premises, the
Property Rights, the Fixtures, the Real Property, the Personal Property, the
Intangibles, the Rents and the Leases, is herein referred to as the "Deed
Property."
Nothing herein contained shall be construed as constituting the
Grantee a mortgagee-in-possession in the absence of the taking of actual
possession of the Deed Property by the Grantee. Nothing contained in this Deed
shall be construed as imposing on Grantee any of the obligations of the lessor
under any lease of all or any portion of the Deed Property in the absence of an
explicit assumption thereof by Grantee. In the exercise of the powers herein
granted the Grantee, no liability shall be asserted or enforced against the
Grantee, all such liability being expressly waived and released by Grantor.
TO HAVE AND TO HOLD the Deed Property, properties, rights and
privileges hereby conveyed or assigned, or intended so to be, unto Grantee, its
beneficiaries, successors and assigns, forever for the uses and purposes herein
set forth. Grantor hereby releases and waives all rights under and by virtue of
the homestead exemption laws of the State and Grantor hereby covenants,
represents and warrants that, at the time of the ensealing and delivery of these
presents, Grantor is well seized of the Deed Property (except Personal Property
which it leases) in fee simple and with full legal and equitable title to the
Deed Property, and with good right, full power and lawful authority to sell,
assign, convey and mortgage the same, and that title to the Deed Property is
free and clear of encumbrances, except as described on Exhibit B attached hereto
and made a part hereof, and that Grantor will forever defend the same against
all lawful claims.
This Deed is a deed passing title pursuant to the laws of the State
of Georgia governing loan or security deeds and is not a mortgage.
The following provisions shall also constitute an integral part of
this Deed:
1. Payment of Taxes on the Deed. Without limiting any of the
provisions of
-------------------------------------------
the Loan Agreement, Grantor agrees that, if the United States or any department,
agency or bureau thereof or the State or any of its subdivisions having
jurisdiction shall at any time require documentary stamps to be affixed to the
Deed or additional intangible recording tax to be paid in order to secure the
lien, interest and priority of this Deed or shall levy, assess, or charge any
tax, assessment or imposition upon this Deed or the credit or indebtedness
secured hereby or the interest of Grantee in the Deed Property or upon Grantee
by reason of or as holder of any of the foregoing, or in the event that any law
is enacted changing in any way the laws now in force with respect to the
taxation of mortgages, deeds to secure debt, deeds of trust or other liens or
debts secured thereby for any purpose, or deducting from the value of the Deed
Property for the purpose of taxation any lien or security interest thereon, then
Grantor shall pay for such documentary stamps and/or intangible recording tax in
the required amount and deliver them to Grantee or pay (or reimburse Grantee
for) such taxes, assessments or impositions and, unless all such documentary
stamps, intangible recording tax, taxes, assessments and impositions are paid or
reimbursed by Grantor when and as they become due and payable, all sums hereby
secured shall become immediately due and payable, at the option of Grantee,
notwithstanding anything contained herein or in any law heretofore or hereafter
enacted provided that if any such payment or reimbursement shall be unlawful or
would constitute usury or render the Obligations wholly or partially usurious
under applicable law, then Grantee may, at its option, declare the Obligations
immediately due and payable or require Grantor to pay or reimburse Grantee for
payment of the lawful and nonusurious portion thereof. Grantor agrees to
exhibit to Grantee, at any time upon request, official receipts showing payment
of all taxes, assessments and charges which Grantor is required or elects to pay
under this paragraph. Grantor agrees to indemnify Grantee against liability on
account of such documentary stamps, intangible recording tax, taxes, assessments
or impositions, whether such liability arises before or after payment of the
Obligations and regardless of whether this Deed shall have been released.
2. Leases Affecting the Real Property. Grantor agrees faithfully
to perform
------------------------------------------------
all of its obligations under all present and future leases or other agreements
relative to the occupancy of the Real Property at any time assigned to Grantee
herein or by separate instrument as additional security, and to refrain from any
action or inaction which would result in termination of any such leases or
agreements or in the diminution of the value thereof or of the rents or revenues
due thereunder. All future lessees under any lease of the Real Property, or any
part thereof, made after the date of recording of this Deed shall, at Grantee's
option and without any further documentation, attorn to Grantee as lessor if for
any reason Grantee becomes lessor thereunder, and, upon demand, pay rent to
Grantee, and Grantee shall not be responsible under such lease for matters
arising prior to Grantee becoming lessor thereunder.
3. Use of the Real Property. Grantor agrees that it shall not
permit the public
---------------------------------
to use the Real Property or any other property covered by this Deed in any
manner that might tend, in Grantee's reasonable judgment, to impair Grantor's
title to such property or any portion thereof, or to make possible any claim or
claims of easement by prescription or of implied dedication to public use.
4. Indemnification. Grantor shall not use or permit the use of
any part of the
---------------------
Real Property or any other property covered by this Deed for an illegal purpose,
including, without limitation, the violation of any environmental laws,
statutes, codes, regulations or practices. Without limiting any indemnification
Grantor has granted in the Loan Agreement, Grantor agrees to indemnify and hold
harmless Grantee and the Lenders from and against any and all losses, suits,
obligations, fines, damages, judgments, penalties, claims, charges, costs and
expenses (including reasonable in-house and outside attorneys' and paralegals'
fees, court costs and disbursements actually incurred) (collectively "Claims")
which may be imposed on, incurred or paid by or asserted against the Real
Property by reason or on account of, or in connection with (i) the construction,
reconstruction or alteration of the Real Property, (ii) any negligence or
misconduct of Grantor, any lessee of the Real Property, or any of their
respective agents, contractors, subcontractors, servants, employees, licensees
or invitees, (iii) any accident, injury, death or damage to any person or
property occurring in, on or about the Real Property or any street, drive,
sidewalk, curb or passageway adjacent thereto, or (iv) any other transaction
arising out of or in any way connected with the Deed Property. This property
has been listed on the state's hazardous site inventory and has been designated
as needing corrective action due to the presence of hazardous wastes, hazardous
constituents, or hazardous substances regulated under state law. Contact the
property owner or the Georgia Environmental Protection Division for further
information concerning this property. This notice is provided in compliance
with the Georgia Hazardous Site Response Act.
5. Insurance. Grantor shall, at its sole expense, obtain for,
deliver to, assign
-------------
and maintain for the benefit of Grantee, until the Obligations are paid in full,
insurance policies as specified in the Loan Agreement. In the event of a
casualty loss, the insurance proceeds from such insurance policies shall be paid
and applied as specified in the Loan Agreement.
6. Condemnation Awards. Grantor hereby assigns to Grantee, as
additional
--------------------------------
security, all awards of damage resulting from condemnation proceedings or the
taking of or injury to the Real Property for public use, and Grantor agrees that
the proceeds of all such awards shall be paid and applied as specified in the
Loan Agreement.
7. Performance of Grantor's Obligations. Grantor agrees that if
an Event of
--------------------------------------------------
- --
Default (as defined in the Loan Agreement) has occurred and is continuing,
Grantee may, but need not, make any payment or perform any act hereinbefore
required of Grantor, in any form and manner deemed expedient. By way of
illustration and not in limitation of the foregoing, Grantee may, but need not,
(i) make full or partial payments of insurance premiums which are unpaid by
Grantor, coordinate liens or encumbrances, if any, (ii) purchase, discharge,
compromise or settle any tax lien or any other lien, encumbrance, suit,
proceeding, title or claim thereof, or (iii) redeem all or any part of the
Premises from any tax or assessment. All money paid for any of the purposes
herein authorized and all other moneys advanced by Grantee to protect the Deed
Property and the lien hereof shall be additional Obligations secured hereby and
shall become immediately due and payable without notice and shall bear interest
thereon at the post-default rate of interest under the Loan Agreement applicable
to Reference Rate Loans, as defined in the Loan Agreement ("Default Rate") until
paid to Grantee in full. In making any payment hereby authorized relating to
taxes, assessments or prior or coordinate liens or encumbrances, Grantee shall
be the sole judge of the legality, validity and priority thereof and of the
amount necessary to be paid in satisfaction thereof.
8. Remedies of Grantee. Subject to the provisions of the Loan
Agreement,
-----------------------------
upon the occurrence and during the continuation of an Event of Default under the
terms of the Loan Agreement, in addition to any rights and remedies provided for
in the Loan Agreement, and to the extent permitted by applicable law, the
following provisions shall apply:
(a) Grantee's Power of Enforcement. It shall be lawful for
Grantee to sell and
---------------------------------------------
dispose of the Deed of Property (i) at public auction, at the usual place for
conducting sales at the courthouse in the county where the Deed Property or any
part thereof may be located, to the highest bidder for cash, first advertising
the time, terms and place of such sale by publishing a notice thereof once a
week for four consecutive weeks immediately preceding the date of sale (without
regard to the actual number of days) in a newspaper in which sheriff's
advertisements are published in said county, all other notice being hereby
waived by the Grantor, or (ii) as otherwise may be permitted by applicable law;
and the Grantee may thereupon execute and deliver to the purchaser at said sale
a sufficient conveyance of the Deed Property in fee simple, which conveyance may
contain recitals as to the happening of the default upon which the execution of
the power of sale, herein granted, depends, and said recitals shall be
presumptive evidence that all preliminary acts prerequisite to said sale and
deed were in all things duly complied with; and the Grantor hereby constitutes
and appoints the Grantee or its assigns agent and attorney-in-fact to make such
recitals, sale and conveyance, and all of the acts of such attorney-in-fact are
hereby ratified, and the Grantor agrees that such recitals shall be binding and
conclusive upon the Grantor and that the conveyance to be made by the Grantee,
or its assigns (and in the event of a deed in lieu of foreclosure, then as to
such conveyance) shall be effectual to bar all right, title and interest, equity
of redemption, including all statutory redemption, homestead, dower, curtesy and
all other exemptions of the Grantor, or its successors in interest, in and to
said Deed Property; and the Grantor agrees that in case of a sale, as herein
provided, the Grantor or any person in possession under the Grantor shall then
become and be tenants holding over, and shall forthwith deliver possession to
the purchaser at such sale, or be summarily dispossessed in accordance with the
provisions of law applicable to tenants holding over; the power and agency
hereby granted are coupled with an interest and are irrevocable by death or
otherwise, and are in addition to any and all other remedies which the Grantee
may have at law or in equity.
Any portion of the Deed Property sold pursuant to this Deed may, to
the extent permitted by applicable law, be sold in one parcel as an entirety, or
in such parcels and in such manner or order as Grantee in its sole discretion,
may elect, to the maximum extent permitted by the laws of the State of Georgia.
One or more exercises of the powers herein granted shall not extinguish or
exhaust the power unless the entire indebtedness secured by this Deed is paid in
full or the entire Deed Property is sold. At any such sale, the Grantee, its
agents, representatives, successors, or assigns may bid for and acquire, as
purchaser, the Deed Property or any part thereof. It shall also be lawful for
Grantee to immediately foreclose this Deed by judicial action. The court in
which any proceeding is pending for the purpose of foreclosure of this Deed may,
at once or at any time thereafter, either before or after sale, without notice
and without requiring bond, and without regard to the solvency or insolvency of
any person liable for payment of the Obligations secured hereby, and without
regard to the then value of the Deed Property or the occupancy thereof as a
homestead, appoint a receiver (the provisions for the appointment of a receiver
and assignment of rents being an express condition upon which the Loan hereby
secured is made) for the benefit of Grantee, with power to collect the Rents,
due and to become due, during such foreclosure suit and the full statutory
period of redemption, notwithstanding any redemption. The receiver, out of the
Rents, when collected, may pay costs incurred in the management and operation of
the Real Property, prior and subordinate liens, if any, and taxes, assessments,
water and other utilities and insurance, then due or thereafter accruing, and
may make and pay for any necessary repairs to the Real Property or the Personal
Property, and may pay all or any part of the Obligations or other sums secured
hereby or any deficiency decree entered in such foreclosure proceedings. Upon
or at any time after the filing of a suit to foreclose this Deed, the court in
which such suit is filed shall have full power to enter an order placing Grantee
in possession of the Real Property with the same power granted to a receiver
pursuant to this subparagraph and with all other rights and privileges of a
mortgagee-in-possession under applicable law.
(b) Grantee's Right to Enter and Take Possession, Operate and
Apply Income.
--------------------------------------------------
- -------------------------------------------------
Grantee shall, at its option, have the right, acting through its agents or
attorneys, either with or without process of law, forcibly or otherwise, to
enter upon and take possession of the Real Property, expel and remove any
persons, good, or chattels occupying or upon the same, to collect or receive all
the Rents, and to manage and control the same, and to lease the same or any part
thereof, from time to time, and, after deducting all reasonable attorneys' fees
and expenses, and all reasonable expenses incurred in the protection, care,
maintenance, management and operation of the Real Property, distribute and apply
the remaining net income in accordance with the terms of the Loan Agreement or
upon any deficiency decree entered in any foreclosure proceedings.
(c) Subject to the terms of the Loan Agreement, Grantee shall
apply the proceeds of any foreclosure sale: first, to the expense of
advertising, selling, and conveying, including a reasonable attorney's fee;
second, to the payment of any amounts that may have been expended or that may
then be necessary to expend in paying insurance, taxes, and other encumbrances,
with interest thereon; third, to the payment in full of the indebtedness hereby
secured and interest thereon, whether the same shall or shall not have fully
matured at the date of said sale, but no interest shall be collected beyond the
date of sale; and fourth, the balance, if any, to be paid over to Grantor or to
whomsoever then appears of record to be the owner of Grantor's interest in said
property.
(d) Grantee may bid and become the purchaser of the Deed Property
at any foreclosure sale hereunder. Grantor hereby waives any requirement that
the Deed Property be sold in separate tracts and agrees that Grantee may, at
Grantee's option, sell said property en masse regardless of the number of
parcels hereby conveyed.
9. Application of the Rents or Proceeds from Foreclosure or Sale.
In any
--------------------------------------------------
- ------------------------------------
foreclosure of this Deed by judicial action, or any sale of the Deed Property
under the power of sale herein granted, in addition to any of the terms and
provisions of the Loan Agreement, there shall be allowed (and included in the
decree for sale in the event of a foreclosure by judicial action) to be paid out
of the Rents or the proceeds of such foreclosure proceeding and/or sale:
(a) Obligations. All of the Obligations and other sums
secured hereby which
----------------
then remain unpaid; and
(b) Other Advances. All other items advanced or paid by Grantee
pursuant
-----------------------
to this Deed, with interest thereon at the Default Rate from the date of
advancement; and
(c) Costs, Fees and Other Expenses. Subject to the terms of the
Loan
----------------------------------------------
Agreement, all court costs, reasonable in-house and outside attorneys' and
paralegals' fees and expenses actually incurred, costs of environmental surveys
and guard or other security services, appraiser's fees, advertising costs,
notice expenses, expenditures for documentary and expert evidence,
stenographer's charges, publication costs, and costs (which may be estimated as
to items to be expended after entry of the decree) of procuring all abstracts of
title, title searches and examinations, title guarantees, title insurance
policies, surveys, and similar data with respect to title which Grantee may deem
necessary. All such expenses shall become additional Obligations secured hereby
and immediately due and payable, with interest thereon at the Default Rate, when
paid or incurred by Grantee in connection with any proceedings, including, but
not limited to, probate and bankruptcy proceedings, to which Grantee shall be a
party, either as plaintiff, claimant or defendant, by reason of this Deed or any
indebtedness hereby secured or in connection with the preparations for the
commencement of any suit for the foreclosure, whether or not actually commenced,
or sale under the power of sale herein granted. It is intended that the
proceeds of any sale (whether through a foreclosure proceeding or Grantee's
exercise of the power of sale) shall be distributed and applied in accordance
with the terms of the Loan Agreement.
10. Cumulative Remedies; Delay or Omission Not a Waiver. Each
remedy or
--------------------------------------------------
- --------------------------
right of Grantee shall not be exclusive of, but shall be in addition to, every
other remedy or right now or hereafter existing at law or in equity. No delay
in the exercise or omission to exercise any remedy or right accruing on the
occurrence or existence of any Event of Default (as defined in the Loan
Agreement) shall impair any such remedy or right or be construed to be a waiver
of any such Event of Default or acquiescence therein, nor shall it affect any
subsequent Event of Default of the same or different nature. Every such remedy
or right may be exercised concurrently or independently and when and as often as
may be deemed expedient by Grantee.
11. Grantee's Remedies against Multiple Parcels. If more than one
property,
--------------------------------------------------
- -----------
lot or parcel is covered by this Deed, and if this Deed is foreclosed upon, or
judgment is entered upon any Obligations secured hereby, or if Grantee exercises
its power of sale, execution may be made upon or Grantee may exercise its power
of sale against any one or more of the properties, lots or parcels and not upon
the others, or upon all of such properties or parcels, either together or
separately, and at different times or at the same time, and execution sales or
sales under the power of sale herein granted may likewise be conducted
separately or concurrently, in each case at Grantee's election.
12. No Merger. In the event of a foreclosure of this Deed or any
other
--------------
mortgage, deed to secure debt or deed of trust securing the Obligations, the
Obligations then due the Grantee shall not be merged into any decree of
foreclosure entered by the court, and Grantee may concurrently or subsequently
seek to foreclose one or more mortgages, deeds to secure debt or deeds of trust
which also secure said Obligations, to the full extent permitted by applicable
law.
13. Notices. Except as otherwise provided herein, any notices,
demands,
----------
consents, requests, approvals, undertakings or other instruments required or
permitted to be given in connection with this Deed (and all copies of such
notices or other instruments as set forth below) shall be in writing, and may be
personally served, telecopied, telexed or sent by courier service or United
States mail and shall be deemed to have been given (a) when delivered in person
or by courier service, (b) upon receipt of a telecopy or telex properly
transmitted or, (c) if mailed, five (5) days after deposit in the United States
mail, first class, registered or certified, with postage prepaid, addressed to
the party so notified and sent to the address or number so indicated as follows:
if to Grantor:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York
Attn: Chief Financial Officer
Telecopier No.: (212) 642-6992
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Richard Hahn, Esq.
Telecopier No.: (212) 909-6836
if to Grantee:
BankAmerica Business Credit, Inc.
40 East 52nd Street
2nd Floor
New York, New York 10022
Attn: Division Manager
Telecopier No.: (212) 836-5167
with a copy to:
BankAmerica National Trust
and Savings Association
10124 Old Grove Road
San Diego, California 92131
Attn: Legal Department
Telecopier No.: (619) 549-7518
and with a copy to:
Rogers & Wells
200 Park Avenue<PAGE>
New York, New York 10166
Attn: Alan M. Christenfeld, Esq.
Telecopier No.: (212) 878-8375
Grantor or Grantee shall, from time to time, have the right to specify as the
proper addressee and/or address for the purposes of this Deed any other party or
address in the United States upon giving five (5) days' written notice in the
manner herein prescribed.
14. Extension of Payments. Grantor agrees that, without affecting
the liability
-------------------------------
of any person for payment of the Obligations secured hereby or affecting the
lien of this Deed upon the Deed Property or any part thereof (other than persons
or property explicitly released as a result of the exercise by Grantee of its
rights and privileges hereunder), Grantee may, at any time and from time to
time, on request of the Grantor, without notice to any person liable for payment
of any Obligations secured hereby, but otherwise subject to the provisions of
the Loan Agreement, extend the time, or agree to alter or amend the terms of
payment of such Obligations. Grantor further agrees that any part of the
security herein described may be released with or without consideration without
affecting the remainder of the Obligations or the remainder of the security.
15. Governing Law. Grantor agrees that this Deed is to be
construed,
---------------------
governed and enforced in accordance with the laws of the State. Wherever
possible, each provision of this Deed shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Deed
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Deed.
16. R e conveyance of Deed. Upon full payment of all the
Obligations, at the
--------------------------------
time and in the manner provided in the Loan Agreement, or upon satisfaction of
the conditions set forth in the Loan Agreement for release of the Deed Property
from this Deed, upon demand therefor following such payment or satisfaction, a
satisfaction or reconveyance of the Deed Property and any other documents
required to release this Deed shall promptly be provided by Grantee to Grantor.
17. Successors and Assigns Included in Parties. This Deed shall
be binding
-------------------------------------------------
- ----------
upon the Grantor and upon the successors, assigns and vendees of the Grantor and
shall inure to the benefit of the Grantee's successors and assigns and any
principals it represents as agent; all references herein to the Grantor and to
the Grantee shall be deemed to include their successors and assigns and, as to
Grantee, any principals it represents as agent. Grantor's successors and
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of or for the Grantor. Wherever used, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall be applicable to all genders.
18. Estoppel Certificates. Grantor, within ten (10) days after
request in
-----------------------------
person or within fifteen (15) days after request by mail, will furnish a duly
acknowledged written statement setting forth the amount of the debt secured by
this Deed, the date to which interest, if any, has been paid and stating either
that no offsets or defenses exist against the mortgage debt, or, if such offsets
or defenses are alleged to exist, the nature thereof.
19. W a iver of Appraisement, Valuation, Stay, Extension and
Redemption
--------------------------------------------------
- -----------------------------------------------
Laws. Grantor agrees, to the full extent permitted by law, that in case of an
Event of Default
- -------
(as defined in the Loan Agreement), neither Grantor nor anyone claiming through
or under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, or extension laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Deed or the
absolute sale of the Deed Property or the final and absolute putting into
possession thereof, immediately after such sale, of the purchaser thereat, and
Grantor, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets comprising the Deed Property
marshalled upon any foreclosure of this Deed and agrees that Grantee or any
court having jurisdiction to foreclose this Deed may sell the Deed Property in
part or as an entirety. Grantor represents that it has been authorized to, and
Grantor does hereby waive to the full extent permitted by law any and all
statutory or other rights of redemption from sale under power of sale or from
sale under any order or decree of foreclosure of this Deed, on its own behalf
and on behalf of each and every person acquiring any interest in or title to the
Deed Property subsequent to the date hereof.
20. Interpretation with Other Documents. Notwithstanding anything
in this
--------------------------------------------------
- ---
Deed to the contrary, in the event of a conflict or inconsistency between this
Deed and the provisions of the Loan Agreement, the provisions of the Loan
Agreement shall govern.
21. Invalid Provisions to Affect No Others. In the event that any
of the
--------------------------------------------------
- ---
covenants, agreements, terms or provisions contained in this Deed shall be
invalid, illegal or unenforceable in any respect, the validity of the remaining
covenants, agreements, terms or provisions contained herein or in the Loan
Agreement shall not be in any way affected, prejudiced or disturbed thereby. In
the event that the application of any of the covenants, agreements, terms or
provisions of this Deed is held to be invalid, illegal or unenforceable, those
covenants, agreements, terms and provisions shall not be in any way affected,
prejudiced or disturbed when otherwise applied.
22. Changes. Neither this Deed nor any term hereof may be
changed, waived,
------------
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. To the extent permitted by
law, any agreement hereafter made by Grantor and Grantee relating to this Deed
shall be superior to the rights of the holder of any intervening lien or
encumbrance.
23. Marshalling of Assets. Notice is hereby given that no holder
of any deed
------------------------------
of trust, deed to secure debt mortgage, lien or other encumbrance affecting all
or a part of the Deed Property which is inferior to this Deed shall have any
right to require the Grantee to marshal assets.
24. Grantee's Rights Regarding the Deed Property. At any time or
from time<PAGE>
-------------------------------------------------
- -------------
to time, without liability therefor and without notice and without affecting the
liability of any person for the payment of the Obligations, the Grantee may (a)
consent to the making of any map or plat of the Land, (b) join in granting any
easement or creating any restriction thereon, (c) join in any subordination or
other agreement, affecting this Deed or the lien or charge thereof, or (d)
reconvey or release from this Deed, without warranty, all or any part of the
Deed Property.
25. Time of Essence. Time is of the essence with respect to the
provisions
----------------------
of this Deed.
[This space is intentionally left blank.]
IN WITNESS WHEREOF, this instrument is executed and sealed as of the
day and year first above written by the person or persons identified below on
behalf of Grantor (and said person or persons hereby represent that they possess
full power and authority to execute this instrument).
THE Grantor HEREBY DECLARES AND ACKNOWLEDGES THAT THE Grantor HAS
RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS Deed.
Signed, sealed and delivered in the Grantor:
presence of:
FORSTMANN & COMAPNY, INC.
a Georgia corporation
/s/ Mark Marmen By: /s/ Rodney Peckham
- --------------- --------------------
Unofficial Witness Name: Rodney Peckham
Title: Chief Financial Officer
/s/ Lena Mandel
- ---------------
Notary Public Attest:
Commission Expiration Date: /s/ Linda A. Filippone
May 1, 1999 -----------------------
- ------------------------------
[AFFIX NOTARIAL SEAL] By: Linda A. Filippone
Its: Assistant Secretary
AFFIX CORPORATE SEAL
EXHIBIT A
--------------
Legal Description of the Premises
--------------------------------------
- --------
EXHIBIT B
---------------<PAGE>
Permitted Title Exceptions
---------------------------------
- ----
Those title exceptions listed on the marked-up title commitment
issued by Chicago Title Insurance Company for the property described on Exhibit
A hereof and dated as of the date hereof.
SCHEDULE A
------------------
Term Notes
---------------
Term Note dated the date hereof by Forstmann & Company, Inc. to AT&T Commercial
Finance Corporation in the original principal amount of Two Million Six Hundred
Ninety Eight Thousand Five Hundred Dollars ($2,698,500.00) having a maturity
date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to PNC Bank,
National Association in the original principal amount of Two Million Six Hundred
Ninety Eight Thousand Five Hundred Dollars ($2,698,500.00) having a maturity
date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to IBJ Schroder
Business Credit Corporation in the original principal amount of Two Million Six
Hundred Ninety Eight Thousand Five Hundred Dollars ($2,698,500.00) having a
maturity date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to La Salle
Business Credit, Inc. in the original principal amount of Four Million Fifty Two
Thousand Dollars ($4,052,000.00) having a maturity date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to The CIT
Group/Commercial Services, Inc. in the original principal amount of Six Million
Seven Hundred Fifty Thousand Five Hundred Dollars ($6,750,500.00) having a
maturity date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to Bankamerica
Business Credit, Inc. in the original principal amount of Twelve Million Five
Hundred Fifty Two Thousand Dollars ($12,552,000.00) having a maturity date of
July 22, 2000
Exhibit 10.1(f)
Milledgeville Plant After recording, return to:
Baldwin County, Georgia Alan M. Christenfeld, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
DEED TO SECURE DEBT, SECURITY AGREEMENT
AND ASSIGNMENT OF RENTS
This Deed to Secure Debt, Security Agreement and Assignment of
Rents (The "Deed") is made and entered into as of the 23rd day of July, 1997 by
FORSTMANN & COMPANY, INC., a Georgia corporation (hereinafter referred to as
"Grantor"), having an address at 1155 Avenue of the Americas, New York, New York
10036, to BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, in its
capacity as agent for the "Lenders" (as defined in the Loan Agreement, as
hereinafter defined) (hereinafter referred to as "Grantee"), having an address
at 40 East 52nd Street, 2nd floor, New York, New York 10022.
R E C I T A L S:
WHEREAS, Grantor and Grantee are parties to that certain Loan and
Security Agreement (the "Loan and Security Agreement"), dated as of July 23,
1997, among Grantor and the financial institutions named therein, as Lenders
(the Loan and Security Agreement and any and all renewals, extensions for any
p e r i od, modifications, supplements, restatements, increases and/or
rearrangements thereof are hereinafter collectively referred to as the "Loan
Agreement") pursuant to which Grantee and the Lenders have agreed to make loans
and advances or extend other financial accommodations in the aggregate principal
amount of up to $31,450,000.00; and
WHEREAS, the Grantee has required that Grantor execute and deliver
this Deed to Grantee in order to secure the payment and performance of (i) all
of Grantor's obligations and liabilities hereunder and (ii) the "Obligations"
(as defined in the Loan Agreement) except the "Revolving Loan" (as defined in
the Loan Agreement) but including, without limitation, the obligation to repay
the Term Loan (all such obligations and liabilities being hereinafter referred
to collectively as the "Obligations") each of the Terms Notes being described in
Schedule A attached hereto and made a part hereof, and having a final maturity
date of July 22, 2000; and
WHEREAS, the Obligations secured hereby shall not exceed an
aggregate principal amount, at any one time outstanding, of ($31,450,000.00).
Provided that the foregoing limitation shall apply only to the lien and interest
upon the real property created by this Deed, and it shall not in any manner
limit, affect or impair any grant of a security interest or other right in favor
of the Grantee under the provisions of the Loan Agreement or under any other
security agreement at any time executed in connection with the Loan Agreement,
and further provided that such limitation shall not limit the lien and interest
of this Deed with respect to interest due on such Obligations at the rates set
forth in the Loan Agreement and sums to pay real estate taxes and insurance
premiums with respect to the Deed Property (as defined herein) or to otherwise
protect the security of this Deed;
NOW, THEREFORE, to secure payment of the Obligations and in
consideration of One Dollar ($1.00) in hand paid, receipt whereof is hereby
acknowledged, Grantor does hereby grant, bargain, sell, remise, release, alien,
convey, and warrant to Grantee, its successors and assigns, and grant a security
interest to Grantee, its successors and assigns, in and to the following
described real estate in Baldwin County, Georgia (the "State"):
See Exhibit A attached hereto and by this reference made
a part hereof
which real estate (the "Land"), together with all right, title and interest, if
any, which Grantor may now have or hereafter acquire in and to all improvements,
buildings and structures thereon of every nature whatsoever, is herein called
the "Premises."
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to (a) all
easements, rights of way, gores of land or any lands occupied by streets, ways,
alleys, passages, sewer rights, air rights, development rights, water courses,
water rights and powers, and public places adjoining said Land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto and (b) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to, or of any rights and interests described in
subparagraph (a) above and this subparagraph (b) (hereinafter the "Property
Rights").
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, which Grantor may now or hereafter
acquire in and to fixtures and appurtenances of every nature whatsoever now or
hereafter located in, on or attached to, and used or intended to be used in
connection with, or with the operation of, the Premises, including, but not
limited to, (a) all apparatus, machinery, and equipment of Grantor; and (b) all
extensions, additions, improvements, betterments, renewals, substitutions, and
replacements to or of any of the foregoing (the items described in the foregoing
(a) and (b) being the "Fixtures"); as well as all personal property and
equipment of every nature whatsoever now or hereafter located in or on the
Premises, including, but not limited to, (c) all screens, window shades, blinds,
wainscoting, storm doors and windows, floor coverings, and awnings of Grantor;
(d) all apparatus, machinery, equipment and appliances of Grantor not included
as Fixtures; (e) all items of furniture, furnishings, and personal property of
Grantor; and (f) all extensions, additions, improvements, betterments, renewals,
substitutions, and replacements to or of any of the foregoing (c)-(e) (the items
described in the foregoing (c)-(f) and any other personal property referred to
in this paragraph being the "Personal Property") and in and to the proceeds of
the Personal Property. The foregoing grant shall not include any apparatus,
machinery, and equipment subject to capital leases which by their terms prohibit
the grant of the security interest contemplated by this Deed. It is mutually
agreed, intended and declared that the Premises and all of the Property Rights
and Fixtures owned by Grantor (referred to collectively herein as the "Real
Property") shall, so far as permitted by law, be deemed to form a part and
parcel of the Land and for the purpose of this Deed to be real estate and
covered by this Deed. It is also agreed that if any of the property herein
described is of a nature so that a security interest therein can be perfected
under the Uniform Commercial Code, this instrument shall constitute a security
agreement, and Grantor agrees to execute, deliver and file or refile any
financing statement, continuation statement, or other instruments Grantee may
reasonably require from time to time to perfect or renew such security interest
under the Uniform Commercial Code. Subject to the terms and conditions of the
Loan Agreement the remedies for any violation of the covenants, terms and
conditions of the agreements herein contained shall be as prescribed herein or
by general law, or, as to that part of the security in which a security interest
may be perfected under the Uniform Commercial Code, by the specific statutory
consequences now or hereafter enacted and specified in the Uniform Commercial
Code, all at the Grantee's sole election.
TOGETHER WITH (i) all the estate, right, title and interest of the
Grantor, in and to all judgments, insurance proceeds, awards of damages and
settlements resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for any
damage (whether caused by such taking or otherwise) to the Real Property, the
Personal Property or any part thereof, or to any rights appurtenant thereto, and
all proceeds of any sales or other dispositions of the Real Property, the
Personal Property or any part thereof; and (except as otherwise provided herein
or in the Loan Agreement) the Grantee is hereby authorized to collect and
receive said awards and proceeds and to give proper receipts and acquittances
therefor, and to apply the same as provided in the Loan Agreement; and (ii) all
contract rights, general intangibles, actions and rights in action, relating to
the Real Property or the Personal Property, including, without limitation, all
rights to insurance proceeds and unearned premiums arising from or relating to
damage to the Real Property or the Personal Property; and (iii) all proceeds,
products, replacements, additions, substitutions, renewals and accessions of and
to the Real Property or the Personal Property. (The rights and interests
described in this paragraph shall hereinafter be called the "Intangibles.")
As additional security for the Obligations secured hereby, Grantor
does (i) hereby pledge and assign to Grantee from and after the date hereof
(including any period of redemption), primarily and on a parity with said real
estate, and not secondarily, all the rents, issues and profits of the Real
Property and all rents, issues, profits, revenues, royalties, bonuses, rights
and benefits due, payable or accruing (including all deposits of money as
advance rent, for security or as earnest money or as downpayment for the
purchase of all or any part of the Real Property or the Personal Property) (the
"Rents") under any and all present and future leases, contracts or other
agreements relating to the ownership of the Real Property or the Personal
Property or to the occupancy of all or any portion of the Real Property and,
(ii) except to the extent such a transfer or assignment is not permitted by the
terms thereof (and a consent to the transfer or assignment has not been
obtained), does hereby transfer and assign to Grantee all such leases and
agreements (including all Grantor's rights under any contracts for the sale of
any portion of the Deed Property (as hereinafter defined) and to all revenues
and royalties under any oil, gas and mineral leases relating to the Real
Property) (the "Leases"). Grantee hereby grants to Grantor the right to collect
and use the Rents as they become due and payable under the Leases, but not more
than one (1) month in advance thereof, until an "Event of Default" (as defined
in the Loan Agreement) has occurred, provided that the existence of such right
shall not operate to subordinate this assignment to any subsequent assignment,
in whole or in part, by Grantor, and any such subsequent assignment shall be
subject to the rights of the Grantee under this Deed. Grantor further agrees to
execute and deliver such assignments of leases or assignments of land sale
contracts as Grantee may from time to time request. In the event of an Event of
Default under the Loan Agreement, (i) the Grantor agrees, upon demand, to
deliver to the Grantee all of the Leases with such additional assignments
thereof as the Grantee may request and agrees that the Grantee may assume the
management of the Real Property and collect the Rents, applying the same upon
the Obligations in the manner provided in the Loan Agreement, and (ii) the
Grantor hereby authorizes and directs all tenants, purchasers or other persons
occupying or otherwise acquiring any interest in any part of the Real Property
to pay the Rents due under the Leases to the Grantee upon request of the
Grantee. Grantor hereby appoints Grantee as its true and lawful attorney-in-
fact to manage said property and collect the Rents, with full power to bring
suit for collection of the Rents and possession of the Real Property, giving and
granting unto said Grantee and unto its agent or attorney full power coupled
with an interest and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done in the protection of the security
hereby conveyed; provided, however, that (i) this power of attorney and
assignment of Rents shall not be construed as an obligation upon said Grantee to
make or cause to be made any repairs that may be needful or necessary and (ii)
Grantee agrees that until such Event of Default as aforesaid, Grantee shall
permit Grantor to perform the aforementioned management responsibilities. Upon
Grantee's receipt of the Rents, at Grantee's option, it may: (i) pay reasonable
charges for collection hereunder, costs of necessary repairs and other costs
requisite and necessary during the continuance of this power of attorney and
assignment of Rents, (ii) pay general and special taxes, insurance premiums,
and, thereafter, (iii) distribute the balance of the Rents pursuant to the
provisions of the Loan Agreement. This power of attorney and assignment of
Rents shall be irrevocable until this Deed shall have been satisfied and
released of record and the releasing of this Deed shall act as a revocation of
this power of attorney and assignment of Rents. Grantee shall have and hereby
expressly reserves the right and privilege (but assumes no obligation) to
demand, collect, sue for, receive and recover the Rents, or any part thereof,
now existing or hereafter made, and apply the same in accordance with the
provisions of the Loan Agreement.
All of the property described above, and each item of property
therein described, not limited to, but including, the Land, the Premises, the
Property Rights, the Fixtures, the Real Property, the Personal Property, the
Intangibles, the Rents and the Leases, is herein referred to as the "Deed
Property."
Nothing herein contained shall be construed as constituting the
Grantee a mortgagee-in-possession in the absence of the taking of actual
possession of the Deed Property by the Grantee. Nothing contained in this Deed
shall be construed as imposing on Grantee any of the obligations of the lessor
under any lease of all or any portion of the Deed Property in the absence of an
explicit assumption thereof by Grantee. In the exercise of the powers herein
granted the Grantee, no liability shall be asserted or enforced against the
Grantee, all such liability being expressly waived and released by Grantor.
TO HAVE AND TO HOLD the Deed Property, properties, rights and
privileges hereby conveyed or assigned, or intended so to be, unto Grantee, its
beneficiaries, successors and assigns, forever for the uses and purposes herein
set forth. Grantor hereby releases and waives all rights under and by virtue of
the homestead exemption laws of the State and Grantor hereby covenants,
represents and warrants that, at the time of the ensealing and delivery of these
presents, Grantor is well seized of the Deed Property (except Personal Property
which it leases) in fee simple and with full legal and equitable title to the
Deed Property, and with good right, full power and lawful authority to sell,
assign, convey and mortgage the same, and that title to the Deed Property is
free and clear of encumbrances, except as described on Exhibit B attached hereto
and made a part hereof, and that Grantor will forever defend the same against
all lawful claims.
This Deed is a deed passing title pursuant to the laws of the State
of Georgia governing loan or security deeds and is not a mortgage.
The following provisions shall also constitute an integral part of
this Deed:
1. Payment of Taxes on the Deed. Without limiting any
----------------------------
of the provisions of the Loan Agreement, Grantor agrees that, if the United
States or any department, agency or bureau thereof or the State or any of its
subdivisions having jurisdiction shall at any time require documentary stamps to
be affixed to the Deed or additional intangible recording tax to be paid in
order to secure the lien, interest and priority of this Deed or shall levy,
assess, or charge any tax, assessment or imposition upon this Deed or the credit
or indebtedness secured hereby or the interest of Grantee in the Deed Property
or upon Grantee by reason of or as holder of any of the foregoing, or in the
event that any law is enacted changing in any way the laws now in force with
respect to the taxation of mortgages, deeds to secure debt, deeds of trust or
other liens or debts secured thereby for any purpose, or deducting from the
value of the Deed Property for the purpose of taxation any lien or security
interest thereon, then Grantor shall pay for such documentary stamps and/or
intangible recording tax in the required amount and deliver them to Grantee or
pay (or reimburse Grantee for) such taxes, assessments or impositions and,
unless all such documentary stamps, intangible recording tax, taxes, assessments
and impositions are paid or reimbursed by Grantor when and as they become due
and payable, all sums hereby secured shall become immediately due and payable,
at the option of Grantee, notwithstanding anything contained herein or in any
law heretofore or hereafter enacted provided that if any such payment or
reimbursement shall be unlawful or would constitute usury or render the
Obligations wholly or partially usurious under applicable law, then Grantee may,
at its option, declare the Obligations immediately due and payable or require
Grantor to pay or reimburse Grantee for payment of the lawful and nonusurious
portion thereof. Grantor agrees to exhibit to Grantee, at any time upon
request, official receipts showing payment of all taxes, assessments and charges
which Grantor is required or elects to pay under this paragraph. Grantor agrees
to indemnify Grantee against liability on account of such documentary stamps,
intangible recording tax, taxes, assessments or impositions, whether such
liability arises before or after payment of the Obligations and regardless of
whether this Deed shall have been released.
2. Leases Affecting the Real Property. Grantor agrees
----------------------------------
faithfully to perform all of its obligations under all present and future leases
or other agreements relative to the occupancy of the Real Property at any time
assigned to Grantee herein or by separate instrument as additional security, and
to refrain from any action or inaction which would result in termination of any
such leases or agreements or in the diminution of the value thereof or of the
rents or revenues due thereunder. All future lessees under any lease of the Real
Property, or any part thereof, made after the date of recording of this Deed
shall, at Grantee's option and without any further documentation, attorn to
Grantee as lessor if for any reason Grantee becomes lessor thereunder, and, upon
demand, pay rent to Grantee, and Grantee shall not be responsible under such
lease for matters arising prior to Grantee becoming lessor thereunder.
3. Use of the Real Property. Grantor agrees that it
------------------------
shall not permit the public to use the Real Property or any other property
covered by this Deed in any manner that might tend, in Grantee's reasonable
judgment, to impair Grantor's title to such property or any portion thereof, or
to make possible any claim or claims of easement by prescription or of implied
dedication to public use.
4. Indemnification. Grantor shall not use or permit
---------------
the use of any part of the Real Property or any other property covered by this
Deed for an illegal purpose, including, without limitation, the violation of any
environmental laws, statutes, codes, regulations or practices. Without limiting
any indemnification Grantor has granted in the Loan Agreement, Grantor agrees to
indemnify and hold harmless Grantee and the Lenders from and against any and all
losses, suits, obligations, fines, damages, judgments, penalties, claims,
c h arges, costs and expenses (including reasonable in-house and outside
attorneys' and paralegals' fees, court costs and disbursements actually
incurred) (collectively "Claims") which may be imposed on, incurred or paid by
or asserted against the Real Property by reason or on account of, or in
connection with (i) the construction, reconstruction or alteration of the Real
Property, (ii) any negligence or misconduct of Grantor, any lessee of the Real
Property, or any of their respective agents, contractors, subcontractors,
servants, employees, licensees or invitees, (iii) any accident, injury, death or
damage to any person or property occurring in, on or about the Real Property or
any street, drive, sidewalk, curb or passageway adjacent thereto, or (iv) any
other transaction arising out of or in any way connected with the Deed Property.
5. Insurance. Grantor shall, at its sole expense,
---------
obtain for, deliver to, assign and maintain for the benefit of Grantee, until
the Obligations are paid in full, insurance policies as specified in the Loan
Agreement. In the event of a casualty loss, the insurance proceeds from such
insurance policies shall be paid and applied as specified in the Loan Agreement.
6. Condemnation Awards. Grantor hereby assigns to
-------------------
G r a ntee, as additional security, all awards of damage resulting from
condemnation proceedings or the taking of or injury to the Real Property for
public use, and Grantor agrees that the proceeds of all such awards shall be
paid and applied as specified in the Loan Agreement.
7. Performance of Grantor's Obligations. Grantor
------------------------------------
agrees that if an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, Grantee may, but need not, make any payment or
perform any act hereinbefore required of Grantor, in any form and manner deemed
expedient. By way of illustration and not in limitation of the foregoing,
Grantee may, but need not, (i) make full or partial payments of insurance
premiums which are unpaid by Grantor, coordinate liens or encumbrances, if any,
(ii) purchase, discharge, compromise or settle any tax lien or any other lien,
encumbrance, suit, proceeding, title or claim thereof, or (iii) redeem all or
any part of the Premises from any tax or assessment. All money paid for any of
the purposes herein authorized and all other moneys advanced by Grantee to
protect the Deed Property and the lien hereof shall be additional Obligations
secured hereby and shall become immediately due and payable without notice and
shall bear interest thereon at the post-default rate of interest under the Loan
Agreement applicable to Reference Rate Loans, as defined in the Loan Agreement
("Default Rate") until paid to Grantee in full. In making any payment hereby
authorized relating to taxes, assessments or prior or coordinate liens or
encumbrances, Grantee shall be the sole judge of the legality, validity and
priority thereof and of the amount necessary to be paid in satisfaction thereof.
8. Remedies of Grantee. Subject to the provisions of
-------------------
the Loan Agreement, upon the occurrence and during the continuation of an Event
of Default under the terms of the Loan Agreement, in addition to any rights and
remedies provided for in the Loan Agreement, and to the extent permitted by
applicable law, the following provisions shall apply:
(a) Grantee's Power of Enforcement. It shall be lawful
------------------------------
for Grantee to sell and dispose of the Deed of Property (i) at public auction,
at the usual place for conducting sales at the courthouse in the county where
the Deed Property or any part thereof may be located, to the highest bidder for
cash, first advertising the time, terms and place of such sale by publishing a
notice thereof once a week for four consecutive weeks immediately preceding the
date of sale (without regard to the actual number of days) in a newspaper in
which sheriff's advertisements are published in said county, all other notice
being hereby waived by the Grantor, or (ii) as otherwise may be permitted by
applicable law; and the Grantee may thereupon execute and deliver to the
purchaser at said sale a sufficient conveyance of the Deed Property in fee
simple, which conveyance may contain recitals as to the happening of the default
upon which the execution of the power of sale, herein granted, depends, and said
recitals shall be presumptive evidence that all preliminary acts prerequisite to
said sale and deed were in all things duly complied with; and the Grantor hereby
constitutes and appoints the Grantee or its assigns agent and attorney-in-fact
to make such recitals, sale and conveyance, and all of the acts of such
attorney-in-fact are hereby ratified, and the Grantor agrees that such recitals
shall be binding and conclusive upon the Grantor and that the conveyance to be
made by the Grantee, or its assigns (and in the event of a deed in lieu of
foreclosure, then as to such conveyance) shall be effectual to bar all right,
title and interest, equity of redemption, including all statutory redemption,
homestead, dower, curtesy and all other exemptions of the Grantor, or its
successors in interest, in and to said Deed Property; and the Grantor agrees
that in case of a sale, as herein provided, the Grantor or any person in
possession under the Grantor shall then become and be tenants holding over, and
shall forthwith deliver possession to the purchaser at such sale, or be
summarily dispossessed in accordance with the provisions of law applicable to
tenants holding over; the power and agency hereby granted are coupled with an
interest and are irrevocable by death or otherwise, and are in addition to any
and all other remedies which the Grantee may have at law or in equity.
Any portion of the Deed Property sold pursuant to this Deed may, to
the extent permitted by applicable law, be sold in one parcel as an entirety, or
in such parcels and in such manner or order as Grantee in its sole discretion,
may elect, to the maximum extent permitted by the laws of the State of Georgia.
One or more exercises of the powers herein granted shall not extinguish or
exhaust the power unless the entire indebtedness secured by this Deed is paid in
full or the entire Deed Property is sold. At any such sale, the Grantee, its
agents, representatives, successors, or assigns may bid for and acquire, as
purchaser, the Deed Property or any part thereof. It shall also be lawful for
Grantee to immediately foreclose this Deed by judicial action. The court in
which any proceeding is pending for the purpose of foreclosure of this Deed may,
at once or at any time thereafter, either before or after sale, without notice
and without requiring bond, and without regard to the solvency or insolvency of
any person liable for payment of the Obligations secured hereby, and without
regard to the then value of the Deed Property or the occupancy thereof as a
homestead, appoint a receiver (the provisions for the appointment of a receiver
and assignment of rents being an express condition upon which the Loan hereby
secured is made) for the benefit of Grantee, with power to collect the Rents,
due and to become due, during such foreclosure suit and the full statutory
period of redemption, notwithstanding any redemption. The receiver, out of the
Rents, when collected, may pay costs incurred in the management and operation of
the Real Property, prior and subordinate liens, if any, and taxes, assessments,
water and other utilities and insurance, then due or thereafter accruing, and
may make and pay for any necessary repairs to the Real Property or the Personal
Property, and may pay all or any part of the Obligations or other sums secured
hereby or any deficiency decree entered in such foreclosure proceedings. Upon
or at any time after the filing of a suit to foreclose this Deed, the court in
which such suit is filed shall have full power to enter an order placing Grantee
in possession of the Real Property with the same power granted to a receiver
pursuant to this subparagraph and with all other rights and privileges of a
mortgagee-in-possession under applicable law.
(b) Grantee's Right to Enter and Take Possession,
--------------------------------------------
Operate and Apply Income. Grantee shall, at its option, have the
- ------------------------
right, acting through its agents or attorneys, either with or without process of
law, forcibly or otherwise, to enter upon and take possession of the Real
Property, expel and remove any persons, good, or chattels occupying or upon the
same, to collect or receive all the Rents, and to manage and control the same,
and to lease the same or any part thereof, from time to time, and, after
deducting all reasonable attorneys' fees and expenses, and all reasonable
expenses incurred in the protection, care, maintenance, management and operation
of the Real Property, distribute and apply the remaining net income in
accordance with the terms of the Loan Agreement or upon any deficiency decree
entered in any foreclosure proceedings.
(c) Subject to the terms of the Loan Agreement, Grantee shall
apply the proceeds of any foreclosure sale: first, to the expense of
advertising, selling, and conveying, including a reasonable attorney's fee;
second, to the payment of any amounts that may have been expended or that may
then be necessary to expend in paying insurance, taxes, and other encumbrances,
with interest thereon; third, to the payment in full of the indebtedness hereby
secured and interest thereon, whether the same shall or shall not have fully
matured at the date of said sale, but no interest shall be collected beyond the
date of sale; and fourth, the balance, if any, to be paid over to Grantor or to
whomsoever then appears of record to be the owner of Grantor's interest in said
property.
(d) Grantee may bid and become the purchaser of the Deed Property
at any foreclosure sale hereunder. Grantor hereby waives any requirement that
the Deed Property be sold in separate tracts and agrees that Grantee may, at
Grantee's option, sell said property en masse regardless of the number of
parcels hereby conveyed.
9. Application of the Rents or Proceeds from
-----------------------------------------
Foreclosure or Sale. In any foreclosure of this Deed by judicial
- -------------------
action, or any sale of the Deed Property under the power of sale herein granted,
in addition to any of the terms and provisions of the Loan Agreement, there
shall be allowed (and included in the decree for sale in the event of a
foreclosure by judicial action) to be paid out of the Rents or the proceeds of
such foreclosure proceeding and/or sale:
(a) Obligations. All of the Obligations and other sums
-----------
secured hereby which then remain unpaid; and
(b) Other Advances. All other items advanced or paid by
--------------
Grantee pursuant to this Deed, with interest thereon at the Default Rate from
the date of advancement; and
(c) Costs, Fees and Other Expenses. Subject to the
------------------------------
terms of the Loan Agreement, all court costs, reasonable in-house and outside
attorneys' and paralegals' fees and expenses actually incurred, costs of
environmental surveys and guard or other security services, appraiser's fees,
advertising costs, notice expenses, expenditures for documentary and expert
evidence, stenographer's charges, publication costs, and costs (which may be
estimated as to items to be expended after entry of the decree) of procuring all
abstracts of title, title searches and examinations, title guarantees, title
insurance policies, surveys, and similar data with respect to title which
Grantee may deem necessary. All such expenses shall become additional
Obligations secured hereby and immediately due and payable, with interest
thereon at the Default Rate, when paid or incurred by Grantee in connection with
any proceedings, including, but not limited to, probate and bankruptcy
proceedings, to which Grantee shall be a party, either as plaintiff, claimant or
defendant, by reason of this Deed or any indebtedness hereby secured or in
connection with the preparations for the commencement of any suit for the
foreclosure, whether or not actually commenced, or sale under the power of sale
herein granted. It is intended that the proceeds of any sale (whether through a
foreclosure proceeding or Grantee's exercise of the power of sale) shall be
distributed and applied in accordance with the terms of the Loan Agreement.
10. Cumulative Remedies; Delay or Omission Not a Waiver.
-------------------------------------------------
Each remedy or right of Grantee shall not be exclusive of, but shall be in
addition to, every other remedy or right now or hereafter existing at law or in
equity. No delay in the exercise or omission to exercise any remedy or right
accruing on the occurrence or existence of any Event of Default (as defined in
the Loan Agreement) shall impair any such remedy or right or be construed to be
a waiver of any such Event of Default or acquiescence therein, nor shall it
affect any subsequent Event of Default of the same or different nature. Every
such remedy or right may be exercised concurrently or independently and when and
as often as may be deemed expedient by Grantee.
11. Grantee's Remedies against Multiple Parcels. If
-------------------------------------------
more than one property, lot or parcel is covered by this Deed, and if this Deed
is foreclosed upon, or judgment is entered upon any Obligations secured hereby,
or if Grantee exercises its power of sale, execution may be made upon or Grantee
may exercise its power of sale against any one or more of the properties, lots
or parcels and not upon the others, or upon all of such properties or parcels,
either together or separately, and at different times or at the same time, and
execution sales or sales under the power of sale herein granted may likewise be
conducted separately or concurrently, in each case at Grantee's election.
12. No Merger. In the event of a foreclosure of this
---------
Deed or any other mortgage, deed to secure debt or deed of trust securing the
Obligations, the Obligations then due the Grantee shall not be merged into any
decree of foreclosure entered by the court, and Grantee may concurrently or
subsequently seek to foreclose one or more mortgages, deeds to secure debt or
deeds of trust which also secure said Obligations, to the full extent permitted
by applicable law.
13. Notices. Except as otherwise provided herein, any
-------
n o t ices, demands, consents, requests, approvals, undertakings or other
instruments required or permitted to be given in connection with this Deed (and
all copies of such notices or other instruments as set forth below) shall be in
writing, and may be personally served, telecopied, telexed or sent by courier
service or United States mail and shall be deemed to have been given (a) when
delivered in person or by courier service, (b) upon receipt of a telecopy or
telex properly transmitted or, (c) if mailed, five (5) days after deposit in the
United States mail, first class, registered or certified, with postage prepaid,
addressed to the party so notified and sent to the address or number so
indicated as follows:<PAGE>
if to Grantor:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York
Attn: Chief Financial Officer
Telecopier No.: (212) 642-6992
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Richard Hahn, Esq.
Telecopier No.: (212) 909-6836
if to Grantee:
BankAmerica Business Credit, Inc.
40 East 52nd Street
2nd Floor
New York, New York 10022
Attn: Division Manager
Telecopier No.: (212) 836-5167
with a copy to:
BankAmerica National Trust
and Savings Association
10124 Old Grove Road
San Diego, California 92131
Attn: Legal Department
Telecopier No.: (619) 549-7518
and with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attn: Alan M. Christenfeld, Esq.
Telecopier No.: (212) 878-8375
Grantor or Grantee shall, from time to time, have the right to specify as the
proper addressee and/or address for the purposes of this Deed any other party or
address in the United States upon giving five (5) days' written notice in the
manner herein prescribed.
14. Extension of Payments. Grantor agrees that, without
---------------------
affecting the liability of any person for payment of the Obligations secured
hereby or affecting the lien of this Deed upon the Deed Property or any part
thereof (other than persons or property explicitly released as a result of the
exercise by Grantee of its rights and privileges hereunder), Grantee may, at any
time and from time to time, on request of the Grantor, without notice to any
person liable for payment of any Obligations secured hereby, but otherwise
subject to the provisions of the Loan Agreement, extend the time, or agree to
alter or amend the terms of payment of such Obligations. Grantor further agrees
that any part of the security herein described may be released with or without
consideration without affecting the remainder of the Obligations or the
remainder of the security.
15. Governing Law. Grantor agrees that this Deed is to
-------------
be construed, governed and enforced in accordance with the laws of the State.
Wherever possible, each provision of this Deed shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Deed shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Deed.
16. Reconveyance of Deed. Upon full payment of all the
--------------------
Obligations, at the time and in the manner provided in the Loan Agreement, or
upon satisfaction of the conditions set forth in the Loan Agreement for release
of the Deed Property from this Deed, upon demand therefor following such payment
or satisfaction, a satisfaction or reconveyance of the Deed Property and any
other documents required to release this Deed shall promptly be provided by
Grantee to Grantor.
17. Successors and Assigns Included in Parties. This
------------------------------------------
Deed shall be binding upon the Grantor and upon the successors, assigns and
vendees of the Grantor and shall inure to the benefit of the Grantee's
successors and assigns and any principals it represents as agent; all references
herein to the Grantor and to the Grantee shall be deemed to include their
successors and assigns and, as to Grantee, any principals it represents as
agent. Grantor's successors and assigns shall include, without limitation, a
receiver, trustee or debtor in possession of or for the Grantor. Wherever used,
the singular number shall include the plural, the plural shall include the
singular, and the use of any gender shall be applicable to all genders.
18. Estoppel Certificates. Grantor, within ten (10)
---------------------
days after request in person or within fifteen (15) days after request by mail,
will furnish a duly acknowledged written statement setting forth the amount of
the debt secured by this Deed, the date to which interest, if any, has been paid
and stating either that no offsets or defenses exist against the mortgage debt,
or, if such offsets or defenses are alleged to exist, the nature thereof.
19. Waiver of Appraisement, Valuation, Stay, Extension
--------------------------------------------------
and Redemption Laws. Grantor agrees, to the full extent permitted
- -------------------
by law, that in case of an Event of Default (as defined in the Loan Agreement),
neither Grantor nor anyone claiming through or under it shall or will set up,
claim or seek to take advantage of any appraisement, valuation, stay, or
extension laws now or hereafter in force, in order to prevent or hinder the
enforcement or foreclosure of this Deed or the absolute sale of the Deed
Property or the final and absolute putting into possession thereof, immediately
after such sale, of the purchaser thereat, and Grantor, for itself and all who
may at any time claim through or under it, hereby waives, to the full extent
that it may lawfully so do, the benefit of all such laws, and any and all right
to have the assets comprising the Deed Property marshalled upon any foreclosure
of this Deed and agrees that Grantee or any court having jurisdiction to
foreclose this Deed may sell the Deed Property in part or as an entirety.
Grantor represents that it has been authorized to, and Grantor does hereby waive
to the full extent permitted by law any and all statutory or other rights of
redemption from sale under power of sale or from sale under any order or decree
of foreclosure of this Deed, on its own behalf and on behalf of each and every
person acquiring any interest in or title to the Deed Property subsequent to the
date hereof.
20. Interpretation with Other Documents.
-----------------------------------
Notwithstanding anything in this Deed to the contrary, in the event of a
conflict or inconsistency between this Deed and the provisions of the Loan
Agreement, the provisions of the Loan Agreement shall govern.
21. Invalid Provisions to Affect No Others. In the
--------------------------------------
event that any of the covenants, agreements, terms or provisions contained in
this Deed shall be invalid, illegal or unenforceable in any respect, the
validity of the remaining covenants, agreements, terms or provisions contained
herein or in the Loan Agreement shall not be in any way affected, prejudiced or
disturbed thereby. In the event that the application of any of the covenants,
agreements, terms or provisions of this Deed is held to be invalid, illegal or
unenforceable, those covenants, agreements, terms and provisions shall not be in
any way affected, prejudiced or disturbed when otherwise applied.
22. Changes. Neither this Deed nor any term hereof may
-------
be changed, waived, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. To the
extent permitted by law, any agreement hereafter made by Grantor and Grantee
relating to this Deed shall be superior to the rights of the holder of any
intervening lien or encumbrance.
23. Marshalling of Assets. Notice is hereby given that
---------------------
no holder of any deed of trust, deed to secure debt mortgage, lien or other
encumbrance affecting all or a part of the Deed Property which is inferior to
this Deed shall have any right to require the Grantee to marshal assets.
24. Grantee's Rights Regarding the Deed Property. At
--------------------------------------------
any time or from time to time, without liability therefor and without notice and
without affecting the liability of any person for the payment of the
Obligations, the Grantee may (a) consent to the making of any map or plat of the
Land, (b) join in granting any easement or creating any restriction thereon, (c)
join in any subordination or other agreement, affecting this Deed or the lien or
charge thereof, or (d) reconvey or release from this Deed, without warranty, all
or any part of the Deed Property.
25. Time of Essence. Time is of the essence with
---------------
respect to the provisions of this Deed.
[This space is intentionally left blank.]
IN WITNESS WHEREOF, this instrument is executed and sealed as of the
day and year first above written by the person or persons identified below on
behalf of Grantor (and said person or persons hereby represent that they possess
full power and authority to execute this instrument).
THE Grantor HEREBY DECLARES AND ACKNOWLEDGES THAT THE Grantor HAS
RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS Deed.
Signed, sealed and delivered in Grantor:
the presence of:
FORSTMANN & COMPANY, INC.
/s/ Mark Marmen a Georgia corporation
- -----------------------------
Unofficial Witness
By:/s/ Rodney Peckham
-------------------
/s/ Lena Mandel Name: Rodney Peckham
- ----------------------------- Title: Chief Financial Officer
Notary Public
Attest:
Commission Expiration
Date:May 1, 1999
[AFFIX NOTARIAL SEAL] /s/ Linda A. Filippone
----------------------
By: Linda A. Filippone
Its:Assitant Secretary
AFFIX CORPORATE SEAL
EXHIBIT A
---------
Legal Description of the Premises
---------------------------
- ------
Exhibit 10.1(g)
Louisville Plant After recording, return to:
Jefferson County, Georgia Alan M. Christenfeld, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
DEED TO SECURE DEBT, SECURITY AGREEMENT
AND ASSIGNMENT OF RENTS
This Deed to Secure Debt, Security Agreement and Assignment of
Rents (The "Deed") is made and entered into as of the 23rd day of July, 1997 by
FORSTMANN & COMPANY, INC., a Georgia corporation (hereinafter referred to as
"Grantor"), having an address at 1155 Avenue of the Americas, New York, New York
10036, to BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, in its
capacity as agent for the "Lenders" (as defined in the Loan Agreement, as
hereinafter defined) (hereinafter referred to as "Grantee"), having an address
at 40 East 52nd Street, 2nd floor, New York, New York 10022.
R E C I T A L S:
WHEREAS, Grantor and Grantee are parties to that certain Loan and
Security Agreement (the "Loan and Security Agreement"), dated as of July 23,
1997, among Grantor and the financial institutions named therein, as Lenders
(the Loan and Security Agreement and any and all renewals, extensions for any
p e r i od, modifications, supplements, restatements, increases and/or
rearrangements thereof are hereinafter collectively referred to as the "Loan
Agreement") pursuant to which Grantee and the Lenders have agreed to make loans
and advances or extend other financial accommodations in the aggregate principal
amount of up to $31,450,000.00; and
WHEREAS, the Grantee has required that Grantor execute and deliver
this Deed to Grantee in order to secure the payment and performance of (i) all
of Grantor's obligations and liabilities hereunder and (ii) the "Obligations"
(as defined in the Loan Agreement) except the "Revolving Loan" (as defined in
the Loan Agreement) but including, without limitation, the obligation to repay
the Term Loan (all such obligations and liabilities being hereinafter referred
to collectively as the "Obligations") each of the Terms Notes being described in
Schedule A attached hereto and made a part hereof, and having a final maturity
date of July 22, 2000; and
WHEREAS, the Obligations secured hereby shall not exceed an
aggregate principal amount, at any one time outstanding, of ($31,450,000.00).
Provided that the foregoing limitation shall apply only to the lien and interest
upon the real property created by this Deed, and it shall not in any manner
limit, affect or impair any grant of a security interest or other right in favor
of the Grantee under the provisions of the Loan Agreement or under any other
security agreement at any time executed in connection with the Loan Agreement,
and further provided that such limitation shall not limit the lien and interest
of this Deed with respect to interest due on such Obligations at the rates set
forth in the Loan Agreement and sums to pay real estate taxes and insurance
premiums with respect to the Deed Property (as defined herein) or to otherwise
protect the security of this Deed;
NOW, THEREFORE, to secure payment of the Obligations and in
consideration of One Dollar ($1.00) in hand paid, receipt whereof is hereby
acknowledged, Grantor does hereby grant, bargain, sell, remise, release, alien,
convey, and warrant to Grantee, its successors and assigns, and grant a security
interest to Grantee, its successors and assigns, in and to the following
described real estate in Jefferson County, Georgia (the "State"):
See Exhibit A attached hereto and by this reference made
a part hereof
which real estate (the "Land"), together with all right, title and interest, if
any, which Grantor may now have or hereafter acquire in and to all improvements,
buildings and structures thereon of every nature whatsoever, is herein called
the "Premises."
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to (a) all
easements, rights of way, gores of land or any lands occupied by streets, ways,
alleys, passages, sewer rights, air rights, development rights, water courses,
water rights and powers, and public places adjoining said Land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto and (b) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to, or of any rights and interests described in
subparagraph (a) above and this subparagraph (b) (hereinafter the "Property
Rights").
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, which Grantor may now or hereafter
acquire in and to fixtures and appurtenances of every nature whatsoever now or
hereafter located in, on or attached to, and used or intended to be used in
connection with, or with the operation of, the Premises, including, but not
limited to, (a) all apparatus, machinery, and equipment of Grantor; and (b) all
extensions, additions, improvements, betterments, renewals, substitutions, and
replacements to or of any of the foregoing (the items described in the foregoing
(a) and (b) being the "Fixtures"); as well as all personal property and
equipment of every nature whatsoever now or hereafter located in or on the
Premises, including, but not limited to, (c) all screens, window shades, blinds,
wainscoting, storm doors and windows, floor coverings, and awnings of Grantor;
(d) all apparatus, machinery, equipment and appliances of Grantor not included
as Fixtures; (e) all items of furniture, furnishings, and personal property of
Grantor; and (f) all extensions, additions, improvements, betterments, renewals,
substitutions, and replacements to or of any of the foregoing (c)-(e) (the items
described in the foregoing (c)-(f) and any other personal property referred to
in this paragraph being the "Personal Property") and in and to the proceeds of
the Personal Property. The foregoing grant shall not include any apparatus,
machinery, and equipment subject to capital leases which by their terms prohibit
the grant of the security interest contemplated by this Deed. It is mutually
agreed, intended and declared that the Premises and all of the Property Rights
and Fixtures owned by Grantor (referred to collectively herein as the "Real
Property") shall, so far as permitted by law, be deemed to form a part and
parcel of the Land and for the purpose of this Deed to be real estate and
covered by this Deed. It is also agreed that if any of the property herein
described is of a nature so that a security interest therein can be perfected
under the Uniform Commercial Code, this instrument shall constitute a security
agreement, and Grantor agrees to execute, deliver and file or refile any
financing statement, continuation statement, or other instruments Grantee may
reasonably require from time to time to perfect or renew such security interest
under the Uniform Commercial Code. Subject to the terms and conditions of the
Loan Agreement the remedies for any violation of the covenants, terms and
conditions of the agreements herein contained shall be as prescribed herein or
by general law, or, as to that part of the security in which a security interest
may be perfected under the Uniform Commercial Code, by the specific statutory
consequences now or hereafter enacted and specified in the Uniform Commercial
Code, all at the Grantee's sole election.
TOGETHER WITH (i) all the estate, right, title and interest of the
Grantor, in and to all judgments, insurance proceeds, awards of damages and
settlements resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for any
damage (whether caused by such taking or otherwise) to the Real Property, the
Personal Property or any part thereof, or to any rights appurtenant thereto, and
all proceeds of any sales or other dispositions of the Real Property, the
Personal Property or any part thereof; and (except as otherwise provided herein
or in the Loan Agreement) the Grantee is hereby authorized to collect and
receive said awards and proceeds and to give proper receipts and acquittances
therefor, and to apply the same as provided in the Loan Agreement; and (ii) all
contract rights, general intangibles, actions and rights in action, relating to
the Real Property or the Personal Property, including, without limitation, all
rights to insurance proceeds and unearned premiums arising from or relating to
damage to the Real Property or the Personal Property; and (iii) all proceeds,
products, replacements, additions, substitutions, renewals and accessions of and
to the Real Property or the Personal Property. (The rights and interests
described in this paragraph shall hereinafter be called the "Intangibles.")
As additional security for the Obligations secured hereby, Grantor
does (i) hereby pledge and assign to Grantee from and after the date hereof
(including any period of redemption), primarily and on a parity with said real
estate, and not secondarily, all the rents, issues and profits of the Real
Property and all rents, issues, profits, revenues, royalties, bonuses, rights
and benefits due, payable or accruing (including all deposits of money as
advance rent, for security or as earnest money or as downpayment for the
purchase of all or any part of the Real Property or the Personal Property) (the
"Rents") under any and all present and future leases, contracts or other
agreements relating to the ownership of the Real Property or the Personal
Property or to the occupancy of all or any portion of the Real Property and,
(ii) except to the extent such a transfer or assignment is not permitted by the
terms thereof (and a consent to the transfer or assignment has not been
obtained), does hereby transfer and assign to Grantee all such leases and
agreements (including all Grantor's rights under any contracts for the sale of
any portion of the Deed Property (as hereinafter defined) and to all revenues
and royalties under any oil, gas and mineral leases relating to the Real
Property) (the "Leases"). Grantee hereby grants to Grantor the right to collect
and use the Rents as they become due and payable under the Leases, but not more
than one (1) month in advance thereof, until an "Event of Default" (as defined
in the Loan Agreement) has occurred, provided that the existence of such right
shall not operate to subordinate this assignment to any subsequent assignment,
in whole or in part, by Grantor, and any such subsequent assignment shall be
subject to the rights of the Grantee under this Deed. Grantor further agrees to
execute and deliver such assignments of leases or assignments of land sale
contracts as Grantee may from time to time request. In the event of an Event of
Default under the Loan Agreement, (i) the Grantor agrees, upon demand, to
deliver to the Grantee all of the Leases with such additional assignments
thereof as the Grantee may request and agrees that the Grantee may assume the
management of the Real Property and collect the Rents, applying the same upon
the Obligations in the manner provided in the Loan Agreement, and (ii) the
Grantor hereby authorizes and directs all tenants, purchasers or other persons
occupying or otherwise acquiring any interest in any part of the Real Property
to pay the Rents due under the Leases to the Grantee upon request of the
Grantee. Grantor hereby appoints Grantee as its true and lawful attorney-in-
fact to manage said property and collect the Rents, with full power to bring
suit for collection of the Rents and possession of the Real Property, giving and
granting unto said Grantee and unto its agent or attorney full power coupled
with an interest and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done in the protection of the security
hereby conveyed; provided, however, that (i) this power of attorney and
assignment of Rents shall not be construed as an obligation upon said Grantee to
make or cause to be made any repairs that may be needful or necessary and (ii)
Grantee agrees that until such Event of Default as aforesaid, Grantee shall
permit Grantor to perform the aforementioned management responsibilities. Upon
Grantee's receipt of the Rents, at Grantee's option, it may: (i) pay reasonable
charges for collection hereunder, costs of necessary repairs and other costs
requisite and necessary during the continuance of this power of attorney and
assignment of Rents, (ii) pay general and special taxes, insurance premiums,
and, thereafter, (iii) distribute the balance of the Rents pursuant to the
provisions of the Loan Agreement. This power of attorney and assignment of
Rents shall be irrevocable until this Deed shall have been satisfied and
released of record and the releasing of this Deed shall act as a revocation of
this power of attorney and assignment of Rents. Grantee shall have and hereby
expressly reserves the right and privilege (but assumes no obligation) to
demand, collect, sue for, receive and recover the Rents, or any part thereof,
now existing or hereafter made, and apply the same in accordance with the
provisions of the Loan Agreement.
All of the property described above, and each item of property
therein described, not limited to, but including, the Land, the Premises, the
Property Rights, the Fixtures, the Real Property, the Personal Property, the
Intangibles, the Rents and the Leases, is herein referred to as the "Deed
Property."
Nothing herein contained shall be construed as constituting the
Grantee a mortgagee-in-possession in the absence of the taking of actual
possession of the Deed Property by the Grantee. Nothing contained in this Deed
shall be construed as imposing on Grantee any of the obligations of the lessor
under any lease of all or any portion of the Deed Property in the absence of an
explicit assumption thereof by Grantee. In the exercise of the powers herein
granted the Grantee, no liability shall be asserted or enforced against the
Grantee, all such liability being expressly waived and released by Grantor.
TO HAVE AND TO HOLD the Deed Property, properties, rights and
privileges hereby conveyed or assigned, or intended so to be, unto Grantee, its
beneficiaries, successors and assigns, forever for the uses and purposes herein
set forth. Grantor hereby releases and waives all rights under and by virtue of
the homestead exemption laws of the State and Grantor hereby covenants,
represents and warrants that, at the time of the ensealing and delivery of these
presents, Grantor is well seized of the Deed Property (except Personal Property
which it leases) in fee simple and with full legal and equitable title to the
Deed Property, and with good right, full power and lawful authority to sell,
assign, convey and mortgage the same, and that title to the Deed Property is
free and clear of encumbrances, except as described on Exhibit B attached hereto
and made a part hereof, and that Grantor will forever defend the same against
all lawful claims.
This Deed is a deed passing title pursuant to the laws of the State
of Georgia governing loan or security deeds and is not a mortgage.
The following provisions shall also constitute an integral part of
this Deed:
1. Payment of Taxes on the Deed. Without limiting any of the
provisions of
------------------------------------------
the Loan Agreement, Grantor agrees that, if the United States or any department,
agency or bureau thereof or the State or any of its subdivisions having
jurisdiction shall at any time require documentary stamps to be affixed to the
Deed or additional intangible recording tax to be paid in order to secure the
lien, interest and priority of this Deed or shall levy, assess, or charge any
tax, assessment or imposition upon this Deed or the credit or indebtedness
secured hereby or the interest of Grantee in the Deed Property or upon Grantee
by reason of or as holder of any of the foregoing, or in the event that any law
is enacted changing in any way the laws now in force with respect to the
taxation of mortgages, deeds to secure debt, deeds of trust or other liens or
debts secured thereby for any purpose, or deducting from the value of the Deed
Property for the purpose of taxation any lien or security interest thereon, then
Grantor shall pay for such documentary stamps and/or intangible recording tax in
the required amount and deliver them to Grantee or pay (or reimburse Grantee
for) such taxes, assessments or impositions and, unless all such documentary
stamps, intangible recording tax, taxes, assessments and impositions are paid or
reimbursed by Grantor when and as they become due and payable, all sums hereby
secured shall become immediately due and payable, at the option of Grantee,
notwithstanding anything contained herein or in any law heretofore or hereafter
enacted provided that if any such payment or reimbursement shall be unlawful or
would constitute usury or render the Obligations wholly or partially usurious
under applicable law, then Grantee may, at its option, declare the Obligations
immediately due and payable or require Grantor to pay or reimburse Grantee for
payment of the lawful and nonusurious portion thereof. Grantor agrees to
exhibit to Grantee, at any time upon request, official receipts showing payment
of all taxes, assessments and charges which Grantor is required or elects to pay
under this paragraph. Grantor agrees to indemnify Grantee against liability on
account of such documentary stamps, intangible recording tax, taxes, assessments
or impositions, whether such liability arises before or after payment of the
Obligations and regardless of whether this Deed shall have been released.
2. Leases Affecting the Real Property. Grantor agrees faithfully
to perform
------------------------------------------------
all of its obligations under all present and future leases or other agreements
relative to the occupancy of the Real Property at any time assigned to Grantee
herein or by separate instrument as additional security, and to refrain from any
action or inaction which would result in termination of any such leases or
agreements or in the diminution of the value thereof or of the rents or revenues
due thereunder. All future lessees under any lease of the Real Property, or any
part thereof, made after the date of recording of this Deed shall, at Grantee's
option and without any further documentation, attorn to Grantee as lessor if for
any reason Grantee becomes lessor thereunder, and, upon demand, pay rent to
Grantee, and Grantee shall not be responsible under such lease for matters
arising prior to Grantee becoming lessor thereunder.
3. Use of the Real Property. Grantor agrees that it shall not
permit the public
---------------------------------
to use the Real Property or any other property covered by this Deed in any
manner that might tend, in Grantee's reasonable judgment, to impair Grantor's
title to such property or any portion thereof, or to make possible any claim or
claims of easement by prescription or of implied dedication to public use.
4. Indemnification. Grantor shall not use or permit the use of
any part of the
----------------------
Real Property or any other property covered by this Deed for an illegal purpose,
including, without limitation, the violation of any environmental laws,
statutes, codes, regulations or practices. Without limiting any indemnification
Grantor has granted in the Loan Agreement, Grantor agrees to indemnify and hold
harmless Grantee and the Lenders from and against any and all losses, suits,
obligations, fines, damages, judgments, penalties, claims, charges, costs and
expenses (including reasonable in-house and outside attorneys' and paralegals'
fees, court costs and disbursements actually incurred) (collectively "Claims")
which may be imposed on, incurred or paid by or asserted against the Real
Property by reason or on account of, or in connection with (i) the construction,
reconstruction or alteration of the Real Property, (ii) any negligence or
misconduct of Grantor, any lessee of the Real Property, or any of their
respective agents, contractors, subcontractors, servants, employees, licensees
or invitees, (iii) any accident, injury, death or damage to any person or
property occurring in, on or about the Real Property or any street, drive,
sidewalk, curb or passageway adjacent thereto, or (iv) any other transaction
arising out of or in any way connected with the Deed Property.
5. Insurance. Grantor shall, at its sole expense, obtain for,
deliver to, assign
--------------
and maintain for the benefit of Grantee, until the Obligations are paid in full,
insurance policies as specified in the Loan Agreement. In the event of a
casualty loss, the insurance proceeds from such insurance policies shall be paid
and applied as specified in the Loan Agreement.
6. Condemnation Awards. Grantor hereby assigns to Grantee, as
additional
--------------------------------
security, all awards of damage resulting from condemnation proceedings or the
taking of or injury to the Real Property for public use, and Grantor agrees that
the proceeds of all such awards shall be paid and applied as specified in the
Loan Agreement.
7. Performance of Grantor's Obligations. Grantor agrees that if
an Event of
--------------------------------------------------
- --
Default (as defined in the Loan Agreement) has occurred and is continuing,
Grantee may, but need not, make any payment or perform any act hereinbefore
required of Grantor, in any form and manner deemed expedient. By way of
illustration and not in limitation of the foregoing, Grantee may, but need not,
(i) make full or partial payments of insurance premiums which are unpaid by
Grantor, coordinate liens or encumbrances, if any, (ii) purchase, discharge,
compromise or settle any tax lien or any other lien, encumbrance, suit,
proceeding, title or claim thereof, or (iii) redeem all or any part of the
Premises from any tax or assessment. All money paid for any of the purposes
herein authorized and all other moneys advanced by Grantee to protect the Deed
Property and the lien hereof shall be additional Obligations secured hereby and
shall become immediately due and payable without notice and shall bear interest
thereon at the post-default rate of interest under the Loan Agreement applicable
to Reference Rate Loans, as defined in the Loan Agreement ("Default Rate") until
paid to Grantee in full. In making any payment hereby authorized relating to
taxes, assessments or prior or coordinate liens or encumbrances, Grantee shall
be the sole judge of the legality, validity and priority thereof and of the
amount necessary to be paid in satisfaction thereof.
8. Remedies of Grantee. Subject to the provisions of the Loan
Agreement,
-----------------------------
upon the occurrence and during the continuation of an Event of Default under the
terms of the Loan Agreement, in addition to any rights and remedies provided for
in the Loan Agreement, and to the extent permitted by applicable law, the
following provisions shall apply:
(a) Grantee's Power of Enforcement. It shall be lawful for
Grantee to sell and
----------------------------------------------
dispose of the Deed of Property (i) at public auction, at the usual place for
conducting sales at the courthouse in the county where the Deed Property or any
part thereof may be located, to the highest bidder for cash, first advertising
the time, terms and place of such sale by publishing a notice thereof once a
week for four consecutive weeks immediately preceding the date of sale (without
regard to the actual number of days) in a newspaper in which sheriff's
advertisements are published in said county, all other notice being hereby
waived by the Grantor, or (ii) as otherwise may be permitted by applicable law;
and the Grantee may thereupon execute and deliver to the purchaser at said sale
a sufficient conveyance of the Deed Property in fee simple, which conveyance may
contain recitals as to the happening of the default upon which the execution of
the power of sale, herein granted, depends, and said recitals shall be
presumptive evidence that all preliminary acts prerequisite to said sale and
deed were in all things duly complied with; and the Grantor hereby constitutes
and appoints the Grantee or its assigns agent and attorney-in-fact to make such
recitals, sale and conveyance, and all of the acts of such attorney-in-fact are
hereby ratified, and the Grantor agrees that such recitals shall be binding and
conclusive upon the Grantor and that the conveyance to be made by the Grantee,
or its assigns (and in the event of a deed in lieu of foreclosure, then as to
such conveyance) shall be effectual to bar all right, title and interest, equity
of redemption, including all statutory redemption, homestead, dower, curtesy and
all other exemptions of the Grantor, or its successors in interest, in and to
said Deed Property; and the Grantor agrees that in case of a sale, as herein
provided, the Grantor or any person in possession under the Grantor shall then
become and be tenants holding over, and shall forthwith deliver possession to
the purchaser at such sale, or be summarily dispossessed in accordance with the
provisions of law applicable to tenants holding over; the power and agency
hereby granted are coupled with an interest and are irrevocable by death or
otherwise, and are in addition to any and all other remedies which the Grantee
may have at law or in equity.
Any portion of the Deed Property sold pursuant to this Deed may, to
the extent permitted by applicable law, be sold in one parcel as an entirety, or
in such parcels and in such manner or order as Grantee in its sole discretion,
may elect, to the maximum extent permitted by the laws of the State of Georgia.
One or more exercises of the powers herein granted shall not extinguish or
exhaust the power unless the entire indebtedness secured by this Deed is paid in
full or the entire Deed Property is sold. At any such sale, the Grantee, its
agents, representatives, successors, or assigns may bid for and acquire, as
purchaser, the Deed Property or any part thereof. It shall also be lawful for
Grantee to immediately foreclose this Deed by judicial action. The court in
which any proceeding is pending for the purpose of foreclosure of this Deed may,
at once or at any time thereafter, either before or after sale, without notice
and without requiring bond, and without regard to the solvency or insolvency of
any person liable for payment of the Obligations secured hereby, and without
regard to the then value of the Deed Property or the occupancy thereof as a
homestead, appoint a receiver (the provisions for the appointment of a receiver
and assignment of rents being an express condition upon which the Loan hereby
secured is made) for the benefit of Grantee, with power to collect the Rents,
due and to become due, during such foreclosure suit and the full statutory
period of redemption, notwithstanding any redemption. The receiver, out of the
Rents, when collected, may pay costs incurred in the management and operation of
the Real Property, prior and subordinate liens, if any, and taxes, assessments,
water and other utilities and insurance, then due or thereafter accruing, and
may make and pay for any necessary repairs to the Real Property or the Personal
Property, and may pay all or any part of the Obligations or other sums secured
hereby or any deficiency decree entered in such foreclosure proceedings. Upon
or at any time after the filing of a suit to foreclose this Deed, the court in
which such suit is filed shall have full power to enter an order placing Grantee
in possession of the Real Property with the same power granted to a receiver
pursuant to this subparagraph and with all other rights and privileges of a
mortgagee-in-possession under applicable law.
(b) Grantee's Right to Enter and Take Possession, Operate and
Apply Income.
--------------------------------------------------
- -------------------------------------------------
Grantee shall, at its option, have the right, acting through its agents or
attorneys, either with or without process of law, forcibly or otherwise, to
enter upon and take possession of the Real Property, expel and remove any
persons, good, or chattels occupying or upon the same, to collect or receive all
the Rents, and to manage and control the same, and to lease the same or any part
thereof, from time to time, and, after deducting all reasonable attorneys' fees
and expenses, and all reasonable expenses incurred in the protection, care,
maintenance, management and operation of the Real Property, distribute and apply
the remaining net income in accordance with the terms of the Loan Agreement or
upon any deficiency decree entered in any foreclosure proceedings.
(c) Subject to the terms of the Loan Agreement, Grantee shall
apply the proceeds of any foreclosure sale: first, to the expense of
advertising, selling, and conveying, including a reasonable attorney's fee;
second, to the payment of any amounts that may have been expended or that may
then be necessary to expend in paying insurance, taxes, and other encumbrances,
with interest thereon; third, to the payment in full of the indebtedness hereby
secured and interest thereon, whether the same shall or shall not have fully
matured at the date of said sale, but no interest shall be collected beyond the
date of sale; and fourth, the balance, if any, to be paid over to Grantor or to
whomsoever then appears of record to be the owner of Grantor's interest in said
property.
(d) Grantee may bid and become the purchaser of the Deed Property
at any foreclosure sale hereunder. Grantor hereby waives any requirement that
the Deed Property be sold in separate tracts and agrees that Grantee may, at
Grantee's option, sell said property en masse regardless of the number of
parcels hereby conveyed.
9. Application of the Rents or Proceeds from Foreclosure or Sale.
In any
--------------------------------------------------
- -------------------------------------
foreclosure of this Deed by judicial action, or any sale of the Deed Property
under the power of sale herein granted, in addition to any of the terms and
provisions of the Loan Agreement, there shall be allowed (and included in the
decree for sale in the event of a foreclosure by judicial action) to be paid out
of the Rents or the proceeds of such foreclosure proceeding and/or sale:
(a) Obligations. All of the Obligations and other sums secured
hereby which
----------------
then remain unpaid; and
(b) Other Advances. All other items advanced or paid by Grantee
pursuant
----------------------
to this Deed, with interest thereon at the Default Rate from the date of
advancement; and
(c) Costs, Fees and Other Expenses. Subject to the terms of the
Loan
----------------------------------------------
Agreement, all court costs, reasonable in-house and outside attorneys' and
paralegals' fees and expenses actually incurred, costs of environmental surveys
and guard or other security services, appraiser's fees, advertising costs,
notice expenses, expenditures for documentary and expert evidence,
stenographer's charges, publication costs, and costs (which may be estimated as
to items to be expended after entry of the decree) of procuring all abstracts of
title, title searches and examinations, title guarantees, title insurance
policies, surveys, and similar data with respect to title which Grantee may deem
necessary. All such expenses shall become additional Obligations secured hereby
and immediately due and payable, with interest thereon at the Default Rate, when
paid or incurred by Grantee in connection with any proceedings, including, but
not limited to, probate and bankruptcy proceedings, to which Grantee shall be a
party, either as plaintiff, claimant or defendant, by reason of this Deed or any
indebtedness hereby secured or in connection with the preparations for the
commencement of any suit for the foreclosure, whether or not actually commenced,
or sale under the power of sale herein granted. It is intended that the
proceeds of any sale (whether through a foreclosure proceeding or Grantee's
exercise of the power of sale) shall be distributed and applied in accordance
with the terms of the Loan Agreement.
10. Cumulative Remedies; Delay or Omission Not a Waiver. Each
remedy or
--------------------------------------------------
- --------------------------
right of Grantee shall not be exclusive of, but shall be in addition to, every
other remedy or right now or hereafter existing at law or in equity. No delay
in the exercise or omission to exercise any remedy or right accruing on the
occurrence or existence of any Event of Default (as defined in the Loan
Agreement) shall impair any such remedy or right or be construed to be a waiver
of any such Event of Default or acquiescence therein, nor shall it affect any
subsequent Event of Default of the same or different nature. Every such remedy
or right may be exercised concurrently or independently and when and as often as
may be deemed expedient by Grantee.
11. Grantee's Remedies against Multiple Parcels. If more than one
property,
--------------------------------------------------
- ------------
lot or parcel is covered by this Deed, and if this Deed is foreclosed upon, or
judgment is entered upon any Obligations secured hereby, or if Grantee exercises
its power of sale, execution may be made upon or Grantee may exercise its power
of sale against any one or more of the properties, lots or parcels and not upon
the others, or upon all of such properties or parcels, either together or
separately, and at different times or at the same time, and execution sales or
sales under the power of sale herein granted may likewise be conducted
separately or concurrently, in each case at Grantee's election.
12. No Merger. In the event of a foreclosure of this Deed or any
other
---------------
mortgage, deed to secure debt or deed of trust securing the Obligations, the
Obligations then due the Grantee shall not be merged into any decree of
foreclosure entered by the court, and Grantee may concurrently or subsequently
seek to foreclose one or more mortgages, deeds to secure debt or deeds of trust
which also secure said Obligations, to the full extent permitted by applicable
law.
13. Notices. Except as otherwise provided herein, any notices,
demands,
-----------
consents, requests, approvals, undertakings or other instruments required or
permitted to be given in connection with this Deed (and all copies of such
notices or other instruments as set forth below) shall be in writing, and may be
personally served, telecopied, telexed or sent by courier service or United
States mail and shall be deemed to have been given (a) when delivered in person
or by courier service, (b) upon receipt of a telecopy or telex properly
transmitted or, (c) if mailed, five (5) days after deposit in the United States
mail, first class, registered or certified, with postage prepaid, addressed to
the party so notified and sent to the address or number so indicated as follows:
if to Grantor:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York
Attn: Chief Financial Officer
Telecopier No.: (212) 642-6992
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Richard Hahn, Esq.
Telecopier No.: (212) 909-6836
if to Grantee:
BankAmerica Business Credit, Inc.
40 East 52nd Street
2nd Floor
New York, New York 10022
Attn: Division Manager
Telecopier No.: (212) 836-5167
with a copy to:
BankAmerica National Trust
and Savings Association
10124 Old Grove Road
San Diego, California 92131
Attn: Legal Department
Telecopier No.: (619) 549-7518
and with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attn: Alan M. Christenfeld, Esq.
Telecopier No.: (212) 878-8375
Grantor or Grantee shall, from time to time, have the right to specify as the
proper addressee and/or address for the purposes of this Deed any other party or
address in the United States upon giving five (5) days' written notice in the
manner herein prescribed.
14. Extension of Payments. Grantor agrees that, without affecting
the liability
-------------------------------
of any person for payment of the Obligations secured hereby or affecting the
lien of this Deed upon the Deed Property or any part thereof (other than persons
or property explicitly released as a result of the exercise by Grantee of its
rights and privileges hereunder), Grantee may, at any time and from time to
time, on request of the Grantor, without notice to any person liable for payment
of any Obligations secured hereby, but otherwise subject to the provisions of
the Loan Agreement, extend the time, or agree to alter or amend the terms of
payment of such Obligations. Grantor further agrees that any part of the
security herein described may be released with or without consideration without
affecting the remainder of the Obligations or the remainder of the security.
15. Governing Law. Grantor agrees that this Deed is to be
construed,
----------------------
governed and enforced in accordance with the laws of the State. Wherever
possible, each provision of this Deed shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Deed
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Deed.
16. R e conveyance of Deed. Upon full payment of all the
Obligations, at the
--------------------------------
time and in the manner provided in the Loan Agreement, or upon satisfaction of
the conditions set forth in the Loan Agreement for release of the Deed Property
from this Deed, upon demand therefor following such payment or satisfaction, a
satisfaction or reconveyance of the Deed Property and any other documents
required to release this Deed shall promptly be provided by Grantee to Grantor.
17. Successors and Assigns Included in Parties. This Deed shall
be binding
--------------------------------------------------
- -----------
upon the Grantor and upon the successors, assigns and vendees of the Grantor and
shall inure to the benefit of the Grantee's successors and assigns and any
principals it represents as agent; all references herein to the Grantor and to
the Grantee shall be deemed to include their successors and assigns and, as to
Grantee, any principals it represents as agent. Grantor's successors and
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of or for the Grantor. Wherever used, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall be applicable to all genders.
18. Estoppel Certificates. Grantor, within ten (10) days after
request in
-----------------------------
person or within fifteen (15) days after request by mail, will furnish a duly
acknowledged written statement setting forth the amount of the debt secured by
this Deed, the date to which interest, if any, has been paid and stating either
that no offsets or defenses exist against the mortgage debt, or, if such offsets
or defenses are alleged to exist, the nature thereof.
19. W a iver of Appraisement, Valuation, Stay, Extension and
Redemption
--------------------------------------------------
- -----------------------------------------------
Laws. Grantor agrees, to the full extent permitted by law, that in case of an
Event of Default
- --------
(as defined in the Loan Agreement), neither Grantor nor anyone claiming through
or under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, or extension laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Deed or the
absolute sale of the Deed Property or the final and absolute putting into
possession thereof, immediately after such sale, of the purchaser thereat, and
Grantor, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets comprising the Deed Property
marshalled upon any foreclosure of this Deed and agrees that Grantee or any
court having jurisdiction to foreclose this Deed may sell the Deed Property in
part or as an entirety. Grantor represents that it has been authorized to, and
Grantor does hereby waive to the full extent permitted by law any and all
statutory or other rights of redemption from sale under power of sale or from
sale under any order or decree of foreclosure of this Deed, on its own behalf
and on behalf of each and every person acquiring any interest in or title to the
Deed Property subsequent to the date hereof.
20. Interpretation with Other Documents. Notwithstanding anything
in this
--------------------------------------------------
- --
Deed to the contrary, in the event of a conflict or inconsistency between this
Deed and the provisions of the Loan Agreement, the provisions of the Loan
Agreement shall govern.
21. Invalid Provisions to Affect No Others. In the event that any
of the
--------------------------------------------------
- ----
covenants, agreements, terms or provisions contained in this Deed shall be
invalid, illegal or unenforceable in any respect, the validity of the remaining
covenants, agreements, terms or provisions contained herein or in the Loan
Agreement shall not be in any way affected, prejudiced or disturbed thereby. In
the event that the application of any of the covenants, agreements, terms or
provisions of this Deed is held to be invalid, illegal or unenforceable, those
covenants, agreements, terms and provisions shall not be in any way affected,
prejudiced or disturbed when otherwise applied.
22. Changes. Neither this Deed nor any term hereof may be
changed, waived,
-----------
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. To the extent permitted by
law, any agreement hereafter made by Grantor and Grantee relating to this Deed
shall be superior to the rights of the holder of any intervening lien or
encumbrance.
23. Marshalling of Assets. Notice is hereby given that no holder
of any deed
------------------------------
of trust, deed to secure debt mortgage, lien or other encumbrance affecting all
or a part of the Deed Property which is inferior to this Deed shall have any
right to require the Grantee to marshal assets.
24. Grantee's Rights Regarding the Deed Property. At any time or
from time
--------------------------------------------------
- -------------
to time, without liability therefor and without notice and without affecting the
liability of any person for the payment of the Obligations, the Grantee may (a)
consent to the making of any map or plat of the Land, (b) join in granting any
easement or creating any restriction thereon, (c) join in any subordination or
other agreement, affecting this Deed or the lien or charge thereof, or (d)
reconvey or release from this Deed, without warranty, all or any part of the
Deed Property.
25. Time of Essence. Time is of the essence with respect to the
provisions
----------------------
of this Deed.
[This space is intentionally left blank.]
IN WITNESS WHEREOF, this instrument is executed and sealed as of the
day and year first above written by the person or persons identified below on
behalf of Grantor (and said person or persons hereby represent that they possess
full power and authority to execute this instrument).
THE Grantor HEREBY DECLARES AND ACKNOWLEDGES THAT THE Grantor HAS
RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS Deed.
Signed, sealed and delivered in the Grantor:
presence of:
FORSTMANN & COMPANY, INC.
a Georgia corporation
/s/ Mark Marmen
- ---------------
Unofficial Witness By: /s/ Rodney Peckham
------------------
Name: Rodney Peckham
Title: Chief Financial Officer
/s/ Lena Mandel
- ----------------
Notary Public Attest:
Commission Expiration Date: May 1, 1999 /s/ Linda A. Filippone
[AFFIX NOTARIAL SEAL] -----------------------
By:Linda A. Filippone
Its:Assistant Secretary
AFFIX CORPORATE SEAL
EXHIBIT A
-------------
Legal Description of the Premises
----------------------------------------------
EXHIBIT B
---------------
Permitted Title Exceptions
---------------------------------
- ---
Those title exceptions listed on the marked-up title commitment
issued by Chicago Title Insurance Company for the property described on Exhibit
A hereof and dated as of the date hereof.
SCHEDULE A
-------------------
Term Notes
-----------------
Term Note dated the date hereof by Forstmann & Company, Inc. to AT&T Commercial
Finance Corporation in the original principal amount of Two Million Six Hundred
Ninety Eight Thousand Five Hundred Dollars ($2,698,500.00) having a maturity
date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to PNC Bank,
National Association in the original principal amount of Two Million Six Hundred
Ninety Eight Thousand Five Hundred Dollars ($2,698,500.00) having a maturity
date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to IBJ Schroder
Business Credit Corporation in the original principal amount of Two Million Six
Hundred Ninety Eight Thousand Five Hundred Dollars ($2,698,500.00) having a
maturity date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to La Salle
Business Credit, Inc. in the original principal amount of Four Million Fifty Two
Thousand Dollars ($4,052,000.00) having a maturity date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to The CIT
Group/Commercial Services, Inc. in the original principal amount of Six Million
Seven Hundred Fifty Thousand Five Hundred Dollars ($6,750,500.00) having a
maturity date of July 22, 2000
Term Note dated the date hereof by Forstmann & Company, Inc. to Bankamerica
Business Credit, Inc. in the original principal amount of Twelve Million Five
Hundred Fifty Two Thousand Dollars ($12,552,000.00) having a maturity date of
July 22, 2000
Exhibit 10.2
Forstmann & Company, Inc.
-------------------------
Incentive Plan for Senior MANAGERS
----------------------------------
ARTICLE I
Introduction
------------
The purpose of the Forstmann & Company, Inc. Incentive Plan for
Senior Managers (the "Plan") is to provide incentives to senior officers of the
Company to enhance the value of the Company and to permit the Company to attract
and retain the services of an outstanding management team upon whose judgment,
interest and special effort the successful conduct of the operations of the
Company is largely dependent. Awards will generally be based upon the financial
and operating performance of the Company and the individual performance of each
Participant.
ARTICLE II
Definitions
-----------
"Actual Operating Percentage" means, for any Participant during any
Plan Year, the sum of the EBITDAR Percentage, the Discretionary Percentage and
the Inventory Percentage actually achieved by such Participant for such Plan
Year, as determined by the Board, in its sole discretion.
"Annual Notice" means the annual notice provided to each Employee
who is selected as a Participant for any Plan Year as soon as practicable after
the beginning of such Plan Year and which sets forth the Operating Targets and
the minimum EBITDAR that must be achieved in order to receive an Award hereunder
for such Plan Year.
"Applicable Rate" means the Base Rate, as defined in the Loan and
Security Agreement among the Company, BankAmerica Business Credit, Inc. and the
financial institutions named therein, or any comparable rate provided for in a
successor to such Loan and Security Agreement, as in effect during the period
for which interest is credited pursuant to Section 6.2.
"Award" means the dollar amount of any incentive bonus determined by
the Board, in its sole discretion, to be payable to a Participant in any Plan
Year pursuant to the Plan.
"Board" means the Board of Directors of the Company.
"Company" means Forstmann & Company, Inc. and its successors.
"Compensation" means, for any Participant during any Plan Year, the
Participant's base salary for such Plan Year.
"Compensation Percentage" means 40%.
"Deferred Awards" means the portion of each Award deferred pursuant
to Article VI hereof.
"Disability" means the inability of a Participant to perform the
duties of his position by reason of a bodily injury, disease or illness for an
aggregate of 180 days in any twelve-month period.
"Discretionary Goals" means, for any Participant during any Plan
Year, the individual performance goals established by the Participant and the
Chief Executive Officer for such Participant during such Plan Year, subject to
approval by the Board. In each Plan Year, a Participant's Discretionary Goals
will be set forth in his Annual Notice.
"Discretionary Percentage" means, for any Participant during any
Plan Year, up to 30% depending on the portion of the Discretionary Goals for
such Participant which are satisfied during such Plan Year, as determined by the
Board in its sole discretion.
"EBITDAR" means, for any Plan Year, the
the sum of:
(i) the net income (or net loss) of the Company (determined in
accordance with generally accepted accounting principles) for such Plan
Year, without giving effect to any extraordinary gains or losses and
without deduction for expenses properly classified as reorganization items
in accordance with generally accepted accounting principles; plus (or
minus)
(ii) to the extent that any of the items referred to in any of
clauses (A) through (E) were deducted or added in calculating such net
income:
(A) interest expense of the Company for such Plan Year;
(B) federal, state or local income tax expense of the Company
with respect to operations for such Plan Year;
(C) the amount of all depreciation and amortization and
other noncash charges for such Plan Year;
(D) LIFO adjustments for such Plan Year; and
(E) non-cash gains or losses from the sale or disposal of
property (other than inventory); plus (or minus)
(iii) the amount of cash received or expended
in such Plan Year in respect of any amount which, under clause (C) above, was
taken into account in determining EBITDAR for such Plan Year or any prior Plan
Year; minus
(iv) the aggregate amount of any Awards payable under the Plan in
respect of such Plan Year.
"EBITDAR Goals" means, for any Participant during any Plan Year, the
EBITDAR goals established by the Chief Executive Officer for such Participant
during such Plan Year, subject to approval by the Board. In each Plan Year, a
Participant's EBITDAR Goals will be set forth in his Annual Notice.
"EBITDAR Percentage" means, for any Plan Year, depending on the
EBITDAR for such Plan Year, a percentage ranging from a minimum of 20%, to a
target of 60%, to a maximum of 90%.
"Effective Date" means November 4, 1996.
"Employee" means a senior manager of the Company.
"Inventory Goals" means, for any Participant during any Plan Year,
the inventory goals specifically established for the end of each fiscal month
and for the end of the fiscal year. Specific numbers will be established for
each major component category of inventory for each Plan Year. The Inventory
Goals for Participants in the Sales, Product Development and Finance Departments
will be dependent on greige and finished fabric inventory and will be
established by the Vice Presidents of Marketing and Sales. The Inventory Goals
for Participants in the Planning, Manufacturing and Operations Departments will
be based on raw stock and work in process. The raw stock inventory will be
established by the Vice President of Operations and the work in process
inventory will be established by the Vice President of Planning. In each Plan
Year, a Participant's Inventory Goals will be set forth in his Annual Notice and
shall be subject to approval by the Board.
"Inventory Percentage" means, for any Participant during any Plan
Year, up to 10% depending on the portion of the Inventory Goals which are
satisfied for such Participant during such Plan Year, as determined by the Board
in its sole discretion.
"Operating Targets" means, for any Participant during any Plan Year,
the EBITDAR Goals, the Inventory Goals and the Discretionary Goals for such
Participant during such Plan Year.
"Participant" means, in any Plan Year, an Employee who participates
in the Plan during such Plan Year pursuant to Article IV.
"Payment Date" means, for any Plan Year, a date after the close of
such Plan Year selected by the Board for the payment of Awards, provided that
such Payment Date shall not be later than 45 days following the receipt by the
Company of its audited financial statements for such Plan Year.
"Plan" means the Forstmann & Company, Inc. Incentive Plan for Senior
Managers.
"Plan Year" means the fiscal year of the Company. For 1996, the
Plan Year commences November 4, 1996 and ends November 2, 1997.
ARTICLE III
Administration
--------------
3.1. Powers and Duties of the Board. The Board
------------------------------
shall interpret and construe any and all provisions of the Plan and shall have
discretionary authority to determine the basis upon which any Award is to be
made and whether or not the criteria have been satisfied. The Board shall
administer the Plan and establish rules for such administration. The powers
delegated to the Board under the terms of the Plan may be exercised by the Board
or any committee thereof to which the Board delegates authority to act under the
Plan. Any determination made by the Board (or any committee thereof) which is
taken under the Plan in good faith and which is neither arbitrary nor capricious
shall be final and conclusive.
3.2. Indemnification. Each member of the Board
---------------
(or any committee thereof) and the employees of the Company and its affiliates
who assist in the administration and operation of the Plan shall be entitled to
indemnification and reimbursement by the Company to the maximum extent permitted
by law and the Company's Articles of Incorporation and By-Laws in respect of any
claim, loss, damage or expense (including counsel's fees) arising from their
acts, omissions and conduct in their official capacity with respect to the Plan
except such liability as may arise from their gross negligence or willful
misconduct. To the extent any member of the Board (or any committee thereof) or
any employee of the Company or its affiliates is found liable or otherwise
consents to such liability with respect to any claim arising under the Plan, the
amount of any indemnification or reimbursement paid hereunder shall not be taken
into account in calculating EBITDAR for purposes of this Plan.
3.3. Expenses of Administration. The Company
--------------------------
shall pay all expenses of administering the Plan, including, without limitation,
all expenses incurred by the Board (or any committee thereof) and all accounting
and legal fees and expenses related to the administration of the Plan.
ARTICLE IV
Eligibility and Participation
------------------------------
An Employee shall become a Participant in the Plan for any Plan Year
upon the recommendation of the Chief Executive Officer, subject to approval by
the Board. Each Participant shall receive an Annual Notice as soon as prac-
ticable after the beginning of each Plan Year. If an Employee is hired prior to
August 1 of a Plan Year and thereafter becomes a Participant, or a Participant
is placed on a paid or unpaid leave of absence, the Board shall determine
whether, and on what terms and conditions, such Employee shall become a
Participant and shall be entitled to an Award for such Plan Year. Employees
hired after August 1 will not be eligible to participate in the Plan in the year
of hire. Selection for participation in the Plan in any Plan Year shall not
entitle any Employee to continue as a Participant in any subsequent Plan Year or
to receive an Award with respect to any Plan Year.
ARTICLE V
Awards
------
5.1. Amount of Award. (a) Each Participant's
-----------------
Award for a Plan Year shall be equal to the product of (i) his Compensation for
such Plan Year, times (ii) the Compensation Percentage, times (iii) his Actual
Operating Percentage for such Plan Year, provided however, that no Awards shall
be payable for such Plan Year if EBITDAR for such Plan Year is less than the
minimum EBITDAR that the Board has selected for such Plan Year, unless the
Board, in its sole discretion, determines that extraordinary circumstances exist
and Awards should be payable. Notwithstanding any other Plan provision, the
Board's calculation of any Awards to be made in any Plan Year shall be final and
binding on the Participant.
Example A. Participant's 1997 Compensation is $50,000. The
Actual Operating Percentage is 80% (EBITDAR Percentage of 40%, plus
Inventory Percentage of 10%, plus Discretionary Percentage of 30%).
Participant's 1997 Award is $50,000 x 40% x 80% = $16,000.
Example B. PARTICIPANT'S 1997 Compensation is $50,000. The
Actual Operating Percentage is 130% (EBITDAR Percentage of 90%, plus
Inventory Percentage of 10%, plus Discretionary Percentage of 30%).
Participant's 1997 Award is $50,000 x 130% x 40% = $26,000.
Example B assumes the full achievement of all goals and
represents the maximum award payable to this Participant.
(b) The target Award for each Participant is 40% of the
Participant's Compensation. The target Award will be achieved if the Actual
Operating Percentage is 100%. If the Actual Operating Percentage exceeds 100%,
the amount of Participant's Award for any Plan Year shall be increased
proportionately, subject to a maximum Award of 52% of his Compensation. See
Example B. If the Actual Operating Percentage is less than 100%, the amount of
a Participant's Award shall be decreased proportionately.
5.2. Payment of Awards. A Participant for any
-----------------
Plan Year who is an Employee on the Payment Date for such Plan Year shall
receive a lump sum payment equal to 70% of his Award for such Plan Year.
Payment of the Award shall be made in the form of cash. Except as provided in
Section 5.3, a Participant whose employment terminates for any reason prior to
the end of the Plan Year shall not be eligible to receive an Award. If a
Participant's employment terminates for reasons other than cause (as determined
by the Board) after the end of the Plan Year but before the Payment Date, the
Participant will receive 70% of his award for such Plan Year.
5.3. Death, Disability and Retirement. If a
--------------------------------
Participant's employment terminates before the Payment Date due to the
Participant's death, Disability or retirement after age 65, the Board may, in
its discretion, pay to the Participant or his designated beneficiary (or estate)
on the Payment Date for such Plan Year, an amount equal to the Award that would
have been payable to such Participant for such Plan Year had such Participant
remained employed through the Payment Date (assuming all Discretionary Goals and
Inventory Goals for the applicable Plan Year were achieved), multiplied by a
fraction the numerator of which is the number of months such Participant was
actively employed by the Company during such Plan Year and the denominator of
which is 12.
ARTICLE VI
Deferral of Payment
-------------------
6.1. Deferred Award. In each Plan Year for which
--------------
a Participant is entitled to an Award under Article V, 30% of such Award shall
be deferred. Such Deferred Award, plus interest as determined under Section
6.2, shall become payable on the Payment Date for the Plan Year next following
the Plan Year in which such Deferred Award was earned, provided the Participant
is employed by the Company on such Payment Date.
Example C. ASSUME facts in Example A occur in the 1997 Plan
Year. The 1997 Plan Year payout equals $11,200 ($16,000 Award x
70%). The 1997 Plan Year Deferred Award equals $4,800 ($16,000
Award x 30%). The Participant is still employed on the Payment Date
for the 1998 Plan Year. On such date, the Participant will receive
his 1997 Deferred Award equal to $4,800 plus interest.
6.2. Interest on Deferred Awards. The
---------------------------
amount of an Award that is deferred and which thereafter becomes payable
pursuant to Section 6.1 shall be credited with interest at the Applicable Rate
from the Payment Date for the Plan Year in which the Deferred Award was
initially earned to the Payment Date on which the Deferred Award is actually
paid.
6.3. Acceleration of Distributions Due to Hard
-----------------------------------------
ship. A Participant who experiences a financial hardship
- ----
may apply to the Board for payment of the Deferred Award to alleviate such
hardship. Upon receipt of the Participant's application, the Board may direct,
in its discretion, distribution to the Participant of such portion of his
Deferred Award as the Board may determine is required to alleviate such hard-
ship. "Hardship" shall mean a need for financial assistance in meeting emergen-
cies which would cause great hardship to such Participant or members of his
immediate family, as determined by the Board.
ARTICLE VII
Term and Amendment of the Plan
------------------------------
The Plan shall be effective as of the Effective Date and shall
continue until terminated by action of the Board. The Board may amend or modify
the Plan in any respect at any time, except that in no event may any amendment
or modification pursuant to this Article VII adversely affect the rights of any
Participant with regard to any earned Award for any Plan Year completed prior to
the date of such amendment or modification.
ARTICLE VIII
Miscellaneous
--------------
8.1. No Right of Continued Employment. Nothing
--------------------------------
in this Plan shall be construed as conferring upon any Participant any right to
continue in the employment of the Company or its affiliates.
8.2. No Claim to Particular Assets. The obliga
-----------------------------
tions of the Company under this Plan shall not be construed as giving any
Participant or any other person any equity or other interest of any kind in the
assets of the Company or any of its affiliates or creating a trust or fiduciary
relationship between the Company or any of its affiliates and any such person.
As to any claim for payment under the Plan, a Participant or any other person
having a claim for payment hereunder shall be an unsecured general creditor of
the Company.
8.3. No Limitation on Corporate Actions. Nothing
---------------------------------
contained in the Plan shall be construed to prevent the Company or any of its
affiliates from taking any corporate action which is deemed by it to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Awards under the Plan. No Participant or
other person shall have any claim against the Company or any of its affiliates
as a result of any such action.
8.4. Nonalienation of Benefits. No Participant
-------------------------
shall have the power or right to transfer, anticipate or otherwise encumber such
Participant's interest in the Plan in advance of the time such interest is
payable hereunder. The Company's obligations under this Plan are not assignable
or transferable except that, if any entity acquires all or substantially all of
the Company's assets or the Company merges or is consolidated with any other
corporation, such entity or other corporation shall assume, honor, pay and
perform all of the Company's obligations under the Plan existing as of the most
recent Payment Date. The provisions of the Plan shall inure to the benefit of
each Participant and his heirs, executors, administrators or successors in
interest.
8.5. Withholding. Any amount paid to a Partici
-----------
pant or his estate under this Plan shall be made after deduction for any
applicable Federal, state and local income and employment taxes and any other
amounts that the Company is required at law to deduct and withhold from such
payment.
8.6. Requirements of Law. The issuance of shares
-------------------
of common stock shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. No shares of common stock shall be issued under
the Plan, if such grant would result in a violation of applicable law, including
the federal securities laws and any applicable state or foreign securities laws.
8.7. Governing Law. The Plan shall be construed
-------------
in accordance with and governed by the laws of the State of New York, without
references to the principles of conflict of laws.
8.8. Headings. Headings are inserted in this
--------
Plan for convenience of reference only and are to be ignored in a construction
of the provisions of the Plan.
FORSTMANN & COMPANY, INC.
By:/s/ Robert N. Dangremond
-------------------------
Name: Robert N. Dangremond
Title: Chief Executive Officer
Forstmann & Company, Inc.
Incentive Plan for Senior Managers
Annual Notice - 1997 Fiscal Year
--------------------------------
1. Minimum EBITDAR - $21 million. For the 1997 Plan Year, the EBITDAR
Percentage can range from a minimum of 20% if EBITDAR is $21 million, to a
target of 60% if EBITDAR is $24 million, to a maximum of 90% if EBITDAR is
$27 million or greater. For the 1997 Plan Year, the EBITDAR Percentage
will be adjusted proportionately where EBITDAR falls within the range of
$21 million to $27 million.
2. Discretionary Goals - See Appendix A1.
3. Inventory Goals - See Appendix B1.
- -----------------
1. Each Participant will receive an Appendix A and Appendix B setting forth
his or her individual Discretionary Goals and the Inventory Goals
applicable to his or her group.<PAGE>
Exhibit 10.3
Forstmann & Company, Inc.
-------------------------
Incentive Plan for Key EMPLOYEES
--------------------------------
ARTICLE I
Introduction
- ------------
The purpose of the Forstmann & Company, Inc. Incentive Plan for Key
Employees (the "Plan") is to provide incentives to key employees of the Company
to enhance the value of the Company and to permit the Company to attract and
retain the services of outstanding key employees upon whose judgment, interest
and special effort the successful conduct of the operations of the Company is
largely dependent. Awards will generally be based upon the financial and
operating performance of the Company and the individual performance of each
Participant.
ARTICLE II
Definitions
-----------
"Actual Operating Percentage" means, for any Participant during any
Plan Year, the sum of the EBITDAR Percentage, the Discretionary Percentage and
the Inventory Percentage actually achieved by such Participant for such Plan
Year, as determined by the Board, in its sole discretion.
"Annual Notice" means the annual notice provided to each Employee
who is selected as a Participant for any Plan Year as soon as practicable after
the beginning of such Plan Year and which sets forth the Operating Targets and
the minimum EBITDAR that must be achieved in order to receive an Award hereunder
for such Plan Year.
"Applicable Rate" means the Base Rate, as defined in the Loan and
Security Agreement among the Company, BankAmerica Business Credit, Inc. and the
financial institutions named therein, or any comparable rate provided for in a
successor to such Loan and Security Agreement, as in effect during the period
for which interest is credited pursuant to Section 6.2.
"Award" means the dollar amount of any incentive bonus determined by
the Board, in its sole discretion, to be payable to a Participant in any Plan
Year pursuant to the Plan.
"Board" means the Board of Directors of the Company.
"Company" means Forstmann & Company, Inc. and its successors.
"Compensation" means, for any Participant during any Plan Year, the
Participant's base salary for such Plan Year.
"Compensation Percentage" means 20%.
"Deferred Awards" means the portion of each Award deferred pursuant
to Article VI hereof.
"Disability" means the inability of a Participant to perform the
duties of his position by reason of a bodily injury, disease or illness for an
aggregate of 180 days in any twelve-month period.
"Discretionary Goals" means, for any Participant during any Plan
Year, the individual performance goals established by the Participant and the
Participant's supervisor for such Participant during such Plan Year, subject to
approval by the Chief Executive Officer. In each Plan Year, a Participant's
Discretionary Goals will be set forth in his Annual Notice.
"Discretionary Percentage" means, for any Participant during any
Plan Year, up to 30% depending on the portion of the Discretionary Goals which
are satisfied for such Participant during such Plan Year, as determined by the
Board in its sole discretion.
"EBITDAR" means, for any Plan Year,
the sum of:
(i) the net income (or net loss) of the Company (determined in
accordance with generally accepted accounting principles) for such Plan
Year, without giving effect to any extraordinary gains or losses and
without deduction for expenses properly classified as reorganization items
in accordance with generally accepted accounting principles; plus (or
minus)
(ii) to the extent that any of the items referred to in any of
clauses (A) through (E) were deducted or added in calculating such net
income:
(A) interest expense of the Company for such Plan Year;
(B) federal, state or local income tax expense of the Company
with respect to operations for such Plan Year;
(C) the amount of all depreciation and amortization and
other noncash charges for such Plan Year;
(D) LIFO adjustments for such Plan Year; and
(E) non-cash gains or losses from the sale or disposal of
property (other than inventory); plus (or minus)
(iii) the amount of cash received or expended
in such Plan Year in respect of any amount which, under clause (C) above,
was taken into account in determining EBITDAR for such Plan Year or any
prior Plan Year; minus
(iv) the aggregate amount of any Awards payable under the Plan in
respect of such Plan Year.
"EBITDAR Goals" means, for any Participant during any Plan Year, the
EBITDAR goals established by the Chief Executive Officer for such Participant
during such Plan Year, subject to approval by the Board. In each Plan Year, a
Participant's EBITDAR Goals will be set forth in his Annual Notice.
"EBITDAR Percentage" means, for any Plan Year, depending on the
EBITDAR for such Plan Year, a percentage ranging from a minimum of 20%, to a
target of 60%, to a maximum of 90%.
"Effective Date" means November 4, 1996.
"Employee" means a middle manager, superintendent, department
manager, stylist or other key employee of the Company.
"Inventory Goals" means, for any Participant during any Plan Year,
the inventory goals established for the end of each fiscal month and for the end
of the fiscal year. Specific numbers will be established for each major
component category of inventory for each Plan Year. The Inventory Goals for
Participants in the Sales, Product Development and Finance Departments will be
dependent on greige and finished fabric inventory and will be established by the
Vice Presidents of Marketing and Sales. The Inventory Goals for Participants in
the Planning, Manufacturing and Operations Departments will be based on raw
stock and work in process. The raw stock inventory will be established by the
Vice President of Operations and the work in process inventory will be
established by the Vice President of Planning. In each Plan Year, a
Participant's Inventory Goals will be set forth in his Annual Notice and shall
be subject to approval by the Board.
"Inventory Percentage" means, for any Participant during any Plan
year, up to 10% depending on the portion of the Inventory Goals for such
Participant which are satisfied during such Plan Year, as determined by the
Board in its sole discretion.
"Operating Targets" means, for any Participant during any Plan Year,
the EBITDAR Goals, the Inventory Goals and the Discretionary Goals for such
Participant during such Plan Year.
"Participant" means, in any Plan Year, an Employee who participates
in the Plan during such Plan Year pursuant to Article IV.
"Payment Date" means, for any Plan Year, a date after the close of
such Plan Year selected by the Board for the payment of Awards, provided that
such Payment Date shall not be later than 45 days following the receipt by the
Company of its audited financial statements for such Plan Year.
"Plan" means the Forstmann & Company, Inc. Incentive Plan for Key
Employees.
"Plan Year" means the fiscal year of the Company. For 1996, the
Plan Year commences November 4, 1996 and ends November 2, 1997.
ARTICLE III
Administration
--------------
3.1. Powers and Duties of the Board. The Board
------------------------------
shall interpret and construe any and all provisions of the Plan and shall have
discretionary authority to determine the basis upon which any Award is to be
made and whether or not the criteria have been satisfied. The Board shall
administer the Plan and establish rules for such administration. The powers
delegated to the Board under the terms of the Plan may be exercised by the Board
or any committee thereof to which the Board delegates authority to act under the
Plan. Any determination made by the Board (or any committee thereof) which is
taken under the Plan in good faith and which is neither arbitrary nor capricious
shall be final and conclusive.
3.2. Indemnification. Each member of the Board
---------------
(or any committee thereof) and the employees of the Company and its affiliates
who assist in the administration and operation of the Plan shall be entitled to
indemnification and reimbursement by the Company to the maximum extent permitted
by law and the Company's Articles of Incorporation and By-Laws in respect of any
claim, loss, damage or expense (including counsel's fees) arising from their
acts, omissions and conduct in their official capacity with respect to the Plan
except such liability as may arise from their gross negligence or willful
misconduct. To the extent any member of the Board (or any committee thereof) or
any employee of the Company or its affiliates is found liable or otherwise
consents to such liability with respect to any claim arising under the Plan, the
amount of any indemnification or reimbursement paid hereunder shall not be taken
into account in calculating EBITDAR for purposes of this Plan.
3.3. Expenses of Administration. The Company
--------------------------
shall pay all expenses of administering the Plan, including, without limitation,
all expenses incurred by the Board (or any committee thereof) and all accounting
and legal fees and expenses related to the administration of the Plan.
ARTICLE IV
Eligibility and Participation
------------------------------
An Employee shall become a Participant in the Plan for any Plan Year
upon the recommendation of the Chief Executive Officer, subject to approval by
the Board. Each Participant shall receive an Annual Notice as soon as
practicable after the beginning of each Plan Year. If an Employee is hired
prior to August 1 of a Plan Year and thereafter becomes a Participant, or a
Participant is placed on a paid or unpaid leave of absence, the Board shall
determine whether, and on what terms and conditions, such Employee shall become
a Participant and shall be entitled to an Award for such Plan Year. Employees
hired after August 1 will not be eligible to participate in the Plan in the year
of hire. Selection for participation in the Plan in any Plan Year shall not
entitle any Employee to continue as a Participant in any subsequent Plan Year or
to receive an Award with respect to any Plan Year.
ARTICLE V
Awards
------
5.1. Amount of Award. (a) Each Participant's
---------------
Award for a Plan Year shall be equal to the product of (i) his Compensation for
such Plan Year, times (ii) the Compensation Percentage, times (iii) his Actual
Operating Percentage for such Plan Year, provided however, that no Awards shall
be payable for such Plan Year if EBITDAR for such Plan Year is less than the
minimum EBITDAR that the Board has selected for such Plan Year, unless the
Board, in its sole discretion, determines that extraordinary circumstances exist
and Awards should be payable. Notwithstanding any other Plan provision, the
Board's calculation of any Awards to be made in any Plan Year shall be final and
binding on the Participant.
Example A. Participant's 1997 Compensation is $50,000. The
Actual Operating Percentage is 80% (EBITDAR Percentage of 40%, plus
Inventory Percentage of 10%, plus Discretionary Percentage of 30%).
Participant's 1997 Award is $50,000 x 20% x 80% = $8,000.
Example B. PARTICIPANT'S 1997 Compensation is $50,000. The
Actual Operating Percentage is 130% (EBITDAR Percentage of 90%, plus
Inventory Percentage of 10%, plus Discretionary Percentage of 30%).
Participant's 1997 Award is $50,000 x 130% x 20% = $13,000.
Example B assumes the full achievement of all goals and
represents the maximum award payable to this Participant.
(b) The target Award for each Participant is 20% of the
Participant's Compensation. The target Award will be achieved if the Actual
Operating Percentage is 100%. If the Actual Operating Percentage exceeds 100%,
the amount of Participant's Award for any Plan Year shall be increased
proportionately, subject to a maximum Award of 26% of his Compensation. See
Example B. If the Actual Operating Percentage is less than 100%, the amount of
a Participant's Award shall be decreased proportionately.
5.2. Payment of Awards. A Participant for any
-----------------
Plan Year who is an Employee on the Payment Date for such Plan Year shall
receive a lump sum payment equal to 70% of his Award for such Plan Year.
Payment of the Award shall be made in the form of cash. Except as provided in
Section 5.3, a Participant whose employment terminates for any reason prior to
the end of the Plan Year shall not be eligible to receive an Award. If a
Participant's employment terminates for reasons other than cause (as determined
by the Board) after the end of the Plan Year but before the Payment Date, the
Participant will receive 70% of his award for such Plan Year.
5.3. Death, Disability and Retirement. If a
--------------------------------
Participant's employment terminates before the Payment Date due to the
Participant's death, Disability or retirement after age 65, the Board may, in
its discretion, pay to the Participant or his designated beneficiary (or estate)
on the Payment Date for such Plan Year, an amount equal to the Award that would
have been payable to such Participant for such Plan Year had such Participant
remained employed through the Payment Date (assuming all Discretionary Goals and
Inventory Goals for the applicable Plan Year were achieved), multiplied by a
fraction the numerator of which is the number of months such Participant was
actively employed by the Company during such Plan Year and the denominator of
which is 12.
ARTICLE VI
Deferral of Payment
--------------------
6.1. Deferred Award. In each Plan Year for which
--------------
a Participant is entitled to an Award under Article V, 30% of such Award shall
be deferred. Such Deferred Award, plus interest as determined under Section
6.2, shall become payable on the Payment Date for the Plan Year next following
the Plan Year in which such Deferred Award was earned, provided the Participant
is employed by the Company on such Payment Date.
Example C. ASSUME facts in Example A occur in the 1997 Plan
Year. The 1997 Plan Year payout equals $5,600 ($8,000 Award x 70%).
The 1997 Plan Year Deferred Award equals $2,400 ($8,000 Award x
30%). The Participant is still employed on the Payment Date for the
1998 Plan Year. On such date, the 1997 Deferred Award is $2,400
plus interest.
6.2. Interest on Deferred Awards. The amount of
---------------------------
an Award that is deferred and which thereafter becomes payable pursuant to
Section 6.1 shall be credited with interest at the Applicable Rate from the
Payment Date for the Plan Year in which the Deferred Award was initially earned
to the Payment Date on which the Deferred Award is actually paid.
6.3. Acceleration of Distributions Due to Hard
-----------------------------------------
ship. A Participant who experiences a financial hardship
- ----
may apply to the Board for payment of the Deferred Award to alleviate such
hardship. Upon receipt of the Participant's application, the Board may direct,
in its discretion, distribution to the Participant of such portion of his
Deferred Award as the Board may determine is required to alleviate such hard-
ship. "Hardship" shall mean a need for financial assistance in meeting emergen-
cies which would cause great hardship to such Participant or members of his
immediate family, as determined by the Board.
ARTICLE VII
Term and Amendment of the Plan
------------------------------
The Plan shall be effective as of the Effective Date and shall
continue until terminated by action of the Board. The Board may amend or modify
the Plan in any respect at any time, except that in no event may any amendment
or modification pursuant to this Article VII adversely affect the rights of any
Participant with regard to any earned Award for any Plan Year completed prior to
the date of such amendment or modification.
ARTICLE VIII
Miscellaneous
--------------
8.1. No Right of Continued Employment. Nothing
--------------------------------
in this Plan shall be construed as conferring upon any Participant any right to
continue in the employment of the Company or its affiliates.
8.2. No Claim to Particular Assets. The obliga
-----------------------------
tions of the Company under this Plan shall not be construed as giving any
Participant or any other person any equity or other interest of any kind in the
assets of the Company or any of its affiliates or creating a trust or fiduciary
relationship between the Company or any of its affiliates and any such person.
As to any claim for payment under the Plan, a Participant or any other person
having a claim for payment hereunder shall be an unsecured general creditor of
the Company.
8.3. No Limitation on Corporate Actions. Nothing
---------------------------------
contained in the Plan shall be construed to prevent the Company or any of its
affiliates from taking any corporate action which is deemed by it to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Awards under the Plan. No Participant or
other person shall have any claim against the Company or any of its affiliates
as a result of any such action.
8.4. Nonalienation of Benefits. No Participant
-------------------------
shall have the power or right to transfer, anticipate or otherwise encumber such
Participant's interest in the Plan in advance of the time such interest is
payable hereunder. The Company's obligations under this Plan are not assignable
or transferable except that, if any entity acquires all or substantially all of
the Company's assets or the Company merges or is consolidated with any other
corporation, such entity or other corporation shall assume, honor, pay and
perform all of the Company's obligations under the Plan existing as of the most
recent Payment Date. The provisions of the Plan shall inure to the benefit of
each Participant and his heirs, executors, administrators or successors in
interest.
8.5. Withholding. Any amount paid to a Partici
-----------
pant or his estate under this Plan shall be made after deduction for any
applicable Federal, state and local income and employment taxes and any other
amounts that the Company is required at law to deduct and withhold from such
payment.
8.6. Requirements of Law. The issuance of shares
-------------------
of common stock shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. No shares of common stock shall be issued under
the Plan, if such grant would result in a violation of applicable law, including
the federal securities laws and any applicable state or foreign securities laws.
8.7. Governing Law. The Plan shall be construed
-------------
in accordance with and governed by the laws of the State of New York, without
references to the principles of conflict of laws.
8.8. Headings. Headings are inserted in this
--------
Plan for convenience of reference only and are to be ignored in a construction
of the provisions of the Plan.
FORSTMANN & COMPANY, INC.
By: /s/ Robert N. Dangremond
--------------------
Name: Robert N. Dangremond
Title: Chief Executive Officer
Forstmann & Company, Inc.
Incentive Plan for Key Employees
Annual Notice - 1997 Fiscal Year
--------------------------------
1. Minimum EBITDAR - $21 million. For the 1997 Plan Year, the EBITDAR
Percentage can range from a minimum of 20% if EBITDAR is $21 million, to a
target of 60% if EBITDAR is $24 million, to a maximum of 90% if EBITDAR is
$27 million or greater. For the 1997 Plan Year, the EBITDAR Percentage
will be adjusted proportionately where EBITDAR falls within the range of
$21 million to $27 million.
2. Discretionary Goals - See Appendix A1.
3. Inventory Goals - See Appendix B1.
- -----------------
1. Each Participant will receive an Appendix A and Appendix B setting forth
his or her individual Discretionary Goals and the Inventory Goals
applicable to his or her group.
Exhibit 10.4
FORSTMANN & COMPANY, INC.
EXECUTIVE STOCK OPTION PLAN
---------------------------
ARTICLE I
DEFINITIONS
-----------
1.1 Additional Option means any Option granted
-----------------
after the Effective Date.
1.2 Affiliate means any "subsidiary corporation"
---------
or "parent corporation" as such terms are defined in Section 424 of the Code.
1.3 Agreement means a written agreement (includ
---------
ing any amendment or supplement thereto) between the Company and a Participant
specifying the terms and conditions of an Option granted to such Participant.
1.4 Board means the Board of Directors of the
-----
Company.
1.5 Change in Control means the occurrence of any
-----------------
of the following events after the Effective Date:
(a) the members of the Board at the beginning of any consecutive
twenty-four calendar month period (the "Incumbent Directors") cease for any
reason other than due to death to constitute at least a majority of the members
of the Board, provided that any director whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the members of the Board then still in office who were members of
the Board at the beginning of such twenty-four calendar month period, shall be
treated as an Incumbent Director; or
(b) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Act, but excluding the Company, any of its
Affiliates, any employee benefit plan of the Company or any of its Affiliates),
becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding securities; or
(c) the stockholders of the Company shall approve a definitive
agreement (1) for the merger or other business combination of the Company with
or into another corporation, a majority of the directors of which were not
directors of the Company immediately prior to the merger and in which the stock-
holders of the Company immediately prior to the effective date of such merger
own less than 50% of the voting power in such corporation or (2) for the sale or
other disposition of all or substantially all of the assets of the Company; or
(d) the purchase of Common Stock pursuant to any tender or
exchange offer made by any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Act), other than the Company, any of its
Affiliates, or an employee benefit plan of the Company or any of its Affiliates,
for 35% or more of the Common Stock of the Company.
1.6 Change in Control Price means the highest
-----------------------
price per share of Common Stock offered in conjunction with any transaction
resulting in a Change in Control (as determined in good faith by the Board if
any part of the offered price is payable other than in cash) or, in the case of
a Change in Control occurring solely by reason of a change in the composition of
the Board, the highest Fair Market Value of the Common Stock on any of the 30
trading days immediately preceding the date on which a Change in Control occurs.
1.7 Code means the Internal Revenue Code of 1986,
----
as amended.
1.8 Common Stock means the common stock, $.01 par
------------
value, of the Company.
1.9 Company means Forstmann & Company, Inc.
-------
1.10 Date of Exercise means, with respect to an
----------------
Option, the date that the Option price is received by the Company from a
Participant exercising such Option.
1.11 Disability means the inability of the
----------
Participant to perform his duties for a period of at least six months due to a
medical or physical infirmity.
1.12 Effective Date means the Effective Date of
--------------
the Company's First Amended Plan of Reorganization, dated May 14, 1997.
1.13 Employee means any executive, senior officer
--------
or other key employee of the Company or any Affiliate.
1.14 Fair Market Value means, on any given date,
-----------------
the closing price of the Common Stock on the principal securities exchange on
which the Common Stock is traded on the day immediately preceding the date as of
which Fair Market Value is being determined, or on the next preceding date on
which the Common Stock is traded if no Common Stock was traded on such
immediately preceding day. If the Common Stock is not traded on a securities
exchange, but is reported by the National Association of Securities Dealers,
Inc. Automated Quotation System and market information is published on a regular
basis in The New York Times or The
------------------ ---
Wall Street Journal, then Fair Market Value shall be deemed
- -------------------
to be the average of the published high and low sales price or the published
daily bid and asked prices of the Common Stock, as so published, on the day
immediately preceding the date as of which Fair Market Value is being determined
or on the next preceding date on which such prices were published. If market
information is not so published on a regular basis, then Fair Market Value shall
be deemed to be the average of the high bid and low asked prices of the Common
Stock in the over-the-counter market on the day immediately preceding the date
as of which Fair Market Value is being determined or on the next preceding date
on which such high bid and low asked prices were recorded as reported by the
National Association of Securities Dealers Automated Quotation System, or, if
not so reported, by a generally accepted reporting service. If the Common Stock
is not publicly traded, Fair Market Value shall be determined in good faith by
the Board. In no case shall Fair Market Value be less than the par value of a
share of Common Stock.
1.15 Grant Date means, with respect to any
----------
Option, the date on which such Option is granted pursuant to the Plan.
1.16 Initial Option means any Option granted on
--------------
the Effective Date.
1.17 Option means a stock option that entitles
------
the holder to purchase from the Company a stated number of shares of Common
Stock at the price set forth in an Agreement. Options shall not be incentive
stock options within the meaning of Section 422 of the Code.
1.18 Participant means an Employee of the Company
-----------
or of an Affiliate, including an Employee who is a member of the Board, who is
selected by the Board to receive an Option.
1.19 Plan means the Forstmann & Company, Inc.
----
Executive Stock Option Plan.
ARTICLE II
PURPOSES
--------
The Plan is intended primarily to assist the Company and its
Affiliates in recruiting and retaining employees with ability and initiative by
enabling them to participate in the future success of the Company and its
Affiliates and to associate the interests of such employees with those of the
Company or its Affiliates and their shareholders. The proceeds received by the
Company from the sale of Common Stock pursuant to the Plan shall be used for
general corporate purposes.
ARTICLE III
ADMINISTRATION
--------------
Except as provided in this Article III, the Plan shall be
administered by the Board. The Board shall have authority to grant Options upon
such terms (not inconsistent with the provisions of the Plan) as the Board may
consider appropriate. Such terms may include conditions (in addition to those
contained in the Plan) on the exercisability of all or any part of an Option.
The Board shall have complete authority to interpret all provisions of the Plan;
to prescribe the form of any Agreement; to adopt, amend, and rescind rules and
regulations pertaining to the administration of the Plan with or without notice;
and to make all other determinations necessary or advisable for the adminis-
tration of the Plan. The express grant in the Plan of any specific power to the
Board shall not be construed as limiting any power or authority of the Board.
Any decision made, or action taken, by the Board or in connection with the
administration of the Plan shall be final and conclusive. No member of the
Board shall be liable for any act done in good faith with respect to the Plan or
any Agreement or Option. All expenses of administering the Plan shall be borne
by the Company. All of the powers, duties and responsibilities of the Board
specified in the Plan may, to the full extent permitted by applicable law, be
exercised and performed by any duly constituted committee of the Board, in any
such case, to the extent authorized by the Board to exercise and perform such
powers, duties and responsibilities.
ARTICLE IV
ELIGIBILITY
-----------
Subject to Section 6.2 hereof, any Employee selected by the Board,
in its sole discretion, may be granted one or more Options. A director of the
Company who is an Employee may be granted Options under the Plan.
ARTICLE V
STOCK SUBJECT TO THE PLAN
-------------------------
5.1 Source of Shares. Upon the exercise of any
----------------
Option, the Company may deliver to the Participant treasury shares of Common
Stock or authorized but unissued shares of Common Stock not reserved for any
other purpose.
5.2 Maximum Number of Shares. Subject to Section
------------------------
5.3 and Article IX, the maximum aggregate number of shares of Common Stock that
may be issued pursuant to the exercise of Options may not exceed 487,528 shares
of Common Stock.
5.3 Forfeitures, Etc.. If an Option is can
-----------------
celled, terminated, or otherwise forfeited, in whole or in part, the number of
shares of Common Stock allocated to the Option or portion thereof may be
reallocated to other Options to be granted under the Plan.
ARTICLE VI
TERMS OF OPTIONS
----------------
6.1 Grants. The terms of any Initial Option
------
shall be as set forth in the Plan. The Board may provide that different terms
apply to Additional Options granted to the same or different Participants on the
same or different Grant Date. All Options granted under the Plan shall be
evidenced by Agreements which specify the exercise price for each share of
Common Stock which may be purchased pursuant to such Option, the vesting
schedule for, and the duration of, such Option and such other terms consistent
with the Plan as the Board shall determine.
6.2 Initial Options.
---------------
(a) Number of shares. Initial Options to
----------------
purchase 146,258 shares of Common Stock issuable under the Plan shall be
granted to the Participants listed on the attached Appendices in the
applicable amounts set forth in such Appendices as of the Effective Date
and subject to the applicable terms hereof.
(b) Exercise Price. The exercise price per share
--------------
of Common Stock purchased upon the exercise of each Initial Option shall be
$12.88 per share.
(c) Exercise of Initial Options. Subject to the
---------------------------
provisions of Section 7.1, 25% of each Initial Option awarded to a Participant
shall vest and become exercisable on the Effective Date and on each of the first
three anniversaries of the Effective Date.
6.3 Additional Options.
------------------
(a) Number of Shares. (i) Additional Options to
----------------
purchase 341,270 shares of Common Stock issuable under the Plan shall be granted
to Participants selected by the Board after the Effective Date.
(b) Exercise Price. Unless the Board determines
--------------
otherwise, the exercise price per share of Common Stock purchased upon the
exercise of an Additional Option shall be equal to the Fair Market Value of a
share of Common Stock on the Grant Date.
(c) Exercise of Additional Options. Subject to
------------------------------
the provisions of Section 7.1, additional Options awarded under the Plan shall
be exercisable at such times and shall be subject to such restrictions and
conditions as the Board may impose.
6.4 Maximum Exercise Period. Notwithstanding any
-----------------------
other Plan provision, no Option awarded under the Plan shall be exercisable
after the expiration of ten years from the Grant Date.
6.5 Nontransferability. An Option granted under
------------------
the Plan shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer, the entire Option must be
transferred to the same person or entity. During the lifetime of the
Participant to whom the Option is granted, the Option may be exercised only by
the Participant. No right or interest of a Participant in any Option shall be
liable for, or subject to, any lien, obligation or liability of such
Participant.
ARTICLE VII
TERMINATION OF EMPLOYMENT
-------------------------
7.1 Termination of Employment Due to Death or
-----------------------------------------
Disability. In the event a Participant's employment termi
- ----------
nates by reason of death or Disability, any Options granted to such Participant
shall become 100% vested and may be exercised by the Participant or his
designated beneficiary at any time prior to the expiration of the term of the
Options or within one year following the Participant's termination of
employment, whichever period is shorter.
7.2 Termination of Employment for Any Other
---------------------------------------
Reason. In the event a Participant's employment terminates
- ------
for any reason other than death or Disability, any Options granted to such
Participant which are then exercisable may be exercised at any time prior to the
expiration of the term of the Options or the 90th day following the
Participant's termination of employment, whichever period is shorter. All
Options which are not vested as of the date the Participant's employment termi-
nates shall be forfeited upon such termination.
ARTICLE VIII
METHOD OF EXERCISE
------------------
8.1 Exercise. An Option granted under the Plan
--------
may be exercised with respect to any number of whole shares which is less than
the total number of whole shares for which the Option could be exercised. A
partial exercise of an Option shall not affect the right to exercise the Option
from time to time in accordance with the Plan and the applicable Agreement with
respect to the remaining shares subject to the Option.
8.2 Payment. Unless otherwise determined by the
-------
Board, payment of the Option price shall be made in cash, a cash equivalent,
Common Stock or any other consideration acceptable to the Board. If so
determined by the Board at or after the Grant Date, payment of all or part of
the Option price may be made by surrendering shares of Common Stock already
owned by the Participant, based on the Fair Market Value of such Common Stock on
the Date of Exercise or at such time as shall be set forth in the Agreement. As
soon as practicable after receipt of a written exercise notice and payment in
full of the exercise price of any exercisable Options, the Company shall deliver
to the Participant a certificate or certificates representing the shares of
Common Stock acquired upon the exercise thereof.
8.3 Loans. The Company, in accordance with the
-----
requirements of Regulation G of the Federal Reserve Board regulations
("Regulation G"), may lend the Participant all or part of the Option price as
determined in accordance with Article VI hereof, provided that the maximum loan
amount shall not exceed the current market value at the time of purchase by the
Participant of the shares of Common Stock acquired with the loan proceeds. The
principal amount of the loan shall be repayable in not more than five annual
installments. The Participant shall pay interest on the unpaid principal
balance at such rate as the Board shall determine, which shall be no less than
the minimum rate necessary to avoid imputed interest or original issue discount
under the Code. All shares of Common Stock acquired with cash borrowed from the
Company shall be pledged to the Company as security for the repayment thereof.
In the discretion of the Board, shares of Common Stock may be released from such
pledge proportionately as payments of the note (together with interest) are
made; provided, however,
-------- -------
that the Company, in accordance with the requirements of Regulation G, shall not
release any shares of Common Stock which would cause the amount outstanding
under a loan to exceed the "maximum loan value" of the remaining shares pledged
by the Participant, determined at the time of such release. While such shares
are so pledged, and so long as there has been no default in the installment
payments, such shares shall remain registered in the name of the Participant,
and he or she shall have the right to vote such shares and to receive all
dividends thereon.
8.4 Shareholder Rights. No Participant shall
------------------
have any rights as a stockholder with respect to shares subject to his Option
until the Date of Exercise of such Option.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The maximum number and kind of shares as to which Options may be
granted under the Plan shall be proportionately adjusted, and the terms of
outstanding Options shall be adjusted by way of increase or decrease, as the
Board in the exercise of its reasonable judgment shall determine to be equitably
required, in the event that (a) the Company (i) effects one or more stock
dividends, stock splits, reverse stock splits, subdivisions, consolidations or
other similar events or (ii) engages in a transaction to which Section 424 of
the Code applies or (b) there occurs any other event which in the judgment of
the Board necessitates such action. Any determination made under this Article
IX by the Board shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services rendered, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reasons thereof shall be made with
respect to, outstanding Options.
ARTICLE X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
-----------------------------------------------------
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made, under the Plan except in compliance with all federal and state laws and
regulations (including, without limitation, withholding tax requirements),
federal and state securities laws and regulations and the rules of all national
securities exchanges or self-regulatory organizations on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any certificate issued to evidence shares of
Common Stock for which an Option is exercised may bear such legends and
statements as the Board upon advice of counsel may deem advisable to assure
compliance with federal and state laws and regulations. No Option shall be
exercisable, no Common Stock shall be issued, no certificate for shares shall be
delivered and no payment shall be made, under the Plan until the Company has
obtained such consent or approval as the Board may deem advisable from any
regulatory bodies having jurisdiction over such matters.
SECTION XI
CHANGE IN CONTROL
-----------------
11.1 Accelerated Vesting and Payment. Subject to
------------------------------
the provisions of Section 11.2 below, in the event of a Change in Control, each
Option shall be cancelled in exchange for a payment in cash of an amount equal
to the excess of the Change in Control Price over the exercise price for such
Option.
11.2 Alternative Awards. Notwithstanding Section
------------------
11.1, no cancellation or cash settlement shall occur with respect to any Option
if the Board reasonably determines in good faith prior to the occurrence of a
Change in Control that such Option shall be honored or assumed, or new rights
substituted therefor (such honored, assumed or substituted award hereinafter
called an "Alternative Award"), by a Participant's employer (or the parent or a
subsidiary of such employer) immediately following the Change in Control,
provided that any such Alternative Award must:
(a) be based on stock which is traded on an established securities
market, or which will be so traded within 60 days of the Change in Control;
(b) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or better
than the rights, terms and conditions applicable under such Option, including,
but not limited to, an identical or better exercise or vesting schedule and
identical or better timing and methods of payment;
(c) have substantially equivalent economic value to such Option
(determined at the time of the Change in Control);
(d) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or constructively ter-
minated, any conditions on a Participant's rights under, or any restrictions on
transfer or exercisability applicable to, each such Alternative Award shall be
waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation, a
material reduction in the Participant's responsibilities or the relocation of
the Participant's principal place of employment to another location, in each
case without the Participant's written consent.
ARTICLE XII
AMENDMENT
---------
The Board may amend or terminate the Plan from time to time;
provided, however, that no amendment or
--------
termination shall in any manner adversely affect any Option theretofore granted
under the Plan, without the consent of the Participant holding such Option.
ARTICLE 1.
GENERAL PROVISIONS
------------------
13.1 Effect on Employment. Neither the adoption
--------------------
of the Plan or its operation, nor any documents describing or referring to the
Plan (or any part thereof) shall confer upon any Employee any right to continue
in the employ of the Company or an Affiliate or in any way affect any right and
power of the Company or an Affiliate to terminate the employment of any Employee
at any time with or without assigning a reason therefor.
13.2 Unfunded Plan. The Plan, insofar as it
-------------
provides for grants, shall be unfunded, and the Company shall not be required to
segregate any assets that may at any time be represented by grants under the
Plan. Any liability of the Company to any person with respect to any grant
under the Plan shall be based solely upon any contractual obligations that may
be created pursuant to the Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.
13.3 Rules of Construction. Headings are given
---------------------
to the articles and sections of the Plan solely as a convenience to facilitate
reference. The reference to any statute, regulation or other provision of law
shall be construed to refer to any amendment to or successor of such provision
of law.
13.4 Beneficiary Designation. Each Participant
-----------------------
under the Plan may from time to time name any Beneficiary or Beneficiaries (who
may be named contingently or successively) by whom any right under the Plan is
to be exercised in case of his death. Each designation will revoke all prior
designations by the same Participant, shall be in a form reasonably prescribed
by the Board, and will be effective only when received by the Board and only if
received during the Participant's lifetime.
13.5 Tax Withholding. The Company or Affiliate
---------------
employing a Participant shall have the power to withhold, or to require such
Participant to remit to the Company or such Affiliate, subject to such other
arrangements as the Board may set forth in the Agreement to which such
Participant is a party, an amount sufficient to satisfy all federal, state,
local and foreign withholding tax requirements in respect of any Option granted
under the Plan or any share of Common Stock purchased upon the exercise of any
such Option.
13.6 Term of Plan. The Plan shall be effective
------------
as of the Effective Date. The Plan shall thereafter continue in effect, unless
sooner terminated pursuant to Article XII, until the tenth anniversary of the
Effective Date. The provisions of the Plan, however, shall continue thereafter
to govern all outstanding Options theretofore granted.
13.7 Governing Law. The Plan, and all Agreements
-------------
hereunder, shall be construed in accordance with and governed by the laws of the
State of New York.
FORSTMANN & COMPANY, INC.
/s/ Robert N. Dangremond
-------------------------
By: Robert N. Dangremond
Title: Chief Executive Officer
Exhibit 10.5
ENVIRONMENTAL COST SHARING AND INDEMNITY AGREEMENT
This Environmental Cost Sharing and Indemnity Agreement (the
"Agreement") is made as of July 18, 1997 among Forstmann & Company, Inc.
("Forstmann"), Burlen Corporation ("Burlen") and Tift County Development
Authority ("TCDA").
W I T N E S S E T H
WHEREAS, Forstmann is the owner of all right, title and interest in
and to the Property (as defined below);
WHEREAS, simultaneously with the entry of the parties into this
Agreement, Forstmann is transferring all of its right, title and interest in and
to the Property to TCDA pursuant to the Contract of Sale (as defined below);
WHEREAS, the parties hereto wish to set forth certain understandings
with respect to environmental investigation and remediation which may occur at
the Property after the Closing Date (as defined in the Contract of Sale);
NOW, THEREFORE, in consideration of ten dollars and other good and
valuable consideration, the receipt of which is hereby acknowledged, Forstmann,
Burlen and TCDA agree as follows:
1. Definitions. The following terms shall have
-----------
the meanings set forth below:
"Claim" shall mean any civil, criminal or administrative action or
suit, or any demand, claim, hearing, violation, notice of violation,
investigation, proceeding, notice, order, demand letter or abatement asserted by
or on behalf of any governmental authority, person or entity.
"Contaminant" shall mean any chemical substance, material or waste,
in any form, whether solid, liquid, gaseous, semisolid or any combination
thereof, comprised of or containing any hazardous substance, pollutant, contami-
nant, hazardous waste or hazardous material as those terms are defined under and
regulated by any Environmental Law.
"Contract of Sale" shall mean the Contract of Sale between Forstmann
and TCDA, as amended, modified and supplemented prior to the date of this
Agreement.
"Covered Environmental Liabilities" shall mean any Environmental
Liabilities (i) that arise as a result of a Release that originated on the
Property and occurred prior to Burlen's occupancy of the Property and (ii) that
have been revealed in certain environmental testing conducted by Forstmann prior
to the Closing Date and that are evidenced in the Law Engineering and
Environmental Services Report of Source Investigation and Ground-Water Sampling
and Analysis dated April 8, 1997.
"Environmental Claim" shall mean any Claim with respect to the
Property arising from any Environmental Law.
"Environmental Law" shall mean any applicable federal, state or
local law relating to the environment or the regulation of Contaminants, and any
rules and regulations promulgated pursuant to any of such federal, state or
local law.
"Environmental Liabilities" shall mean any Liabilities arising from
the Release of any Contaminant, either in, on, under or from the Property.
"Lease" shall mean the Lease and Reimbursement Agreement, dated as
of February 1, 1997, between Forstmann and Burlen and consented to by TCDA, as
amended, modified or supplemented prior to the date of this Agreement.
"Liabilities" shall mean any liabilities, obligations, claims or
expenses of any nature.
"Property" shall have the meaning ascribed to that term in the
Contract of Sale.
"Release" shall mean any release, spill, emission, leaking or
discharge of Contaminants into the environment.
"Remedial Action" shall mean all actions required of any party
hereto pursuant to any Environmental Law to: (a) clean up, remove, treat,
dispose of or in any other way address Contaminants in the environment
(including, but not limited to, the removal and disposal of the existing
settling tank and the contents thereof); (b) minimize the further Release of
Contaminants so that they do not migrate or endanger public health or welfare or
the environment; (c) respond to or otherwise mitigate Releases; or (d) perform
pre-remedial studies or investigations, including, but not limited to, soil and
groundwater sampling through the installation of borings and/or groundwater
monitoring wells and post-remedial monitoring and care in respect of actions
contemplated in the preceding clauses (a) through (c).
2. Continuing Investigation and Remediation. On
----------------------------------------
and after the Closing Date, Forstmann will retain responsibility for, and
control over, all Remedial Action at the Property that relates to Covered
Environmental Liabilities. Forstmann agrees to provide Burlen with all written
information derived as a result of the Remedial Action relating to Covered
Environmental Liabilities at the Property. Forstmann shall make such
information available to Burlen substantially contemporaneous with Forstmann's
receipt thereof. Forstmann shall also provide draft copies of all work plans
for conducting Remedial Action at the Property, including estimated costs for
such work. Burlen shall be afforded the right and opportunity to review and
comment on such work and all costs associated therewith in advance of any such
work, but Forstmann shall be under no obligation to accept any such comments.
Forstmann shall certify to Burlen that it has paid any invoices for which
Forstmann seeks reimbursement pursuant to Section 4 hereof and shall provide
Burlen a copy of all paid invoices for which reimbursement is requested pursuant
to Section 4.
3. Access to Property.
------------------
(a) Burlen and TCDA hereby grant Forstmann reasonable access to the
Property in order to conduct any and all Remedial Action. This grant of access
includes the presence of Forstmann's employees, agents, contractors, assignees,
attorneys or other personnel on the Property and includes the right of Forstmann
to leave any necessary equipment or materials at the Property, so long as such
equipment or materials are left in a neat and orderly fashion and in a manner
that does not unreasonably interfere with Burlen and TCDA's operations at the
Property. To the extent practicable, Burlen and TCDA shall provide Forstmann
with reasonable access to water and utilities in order to complete the Remedial
Action. Burlen and its consultants may but shall not be required to accompany
any Forstmann representative during Forstmann's presence on the Property.
(b) Forstmann and its agents, contractors and subcontractors shall
conduct all Remedial Action on the Property in a safe and workmanlike manner,
shall exercise reasonable care to avoid injury to persons or damage to property,
and shall use good faith efforts to perform the Remedial Action in accordance
with the work plan provided to Burlen for review and comment. Forstmann shall
immediately notify Burlen of any injury or damage that Forstmann knows to have
occurred in connection with the performance of the Remedial Action on the
Property. In consideration of the limited rights of access herein granted,
entry upon the Property will be at the risk of Forstmann and its agents,
contractors and subcontractors, and Burlen shall not be responsible to such
persons or to any persons claiming through Forstmann or under Forstmann for
injury, loss, or damage, whether to person, including death therefrom, or
property, suffered by any person upon the Property as a result of the Remedial
Action provided for herein, except to the extent of Burlen's or its agents',
employees', contractors' or subcontractors' negligence or willful misconduct.
Except as otherwise provided in Sections 4 or 5 hereof, Forstmann agrees to
indemnify and hold Burlen, its officers, directors, employees, attorneys, and
agents harmless from any damages, penalties, fines, liens, suits, liabilities,
costs (including clean-up costs or costs of remediation under applicable laws,
judgments, and expenses (including attorneys', consultants' or expert fees and
expenses)) of every kind and nature suffered by or served against Burlen as the
result of any negligence or willful misconduct of Forstmann or its agents or
employees in the course of their performance of the Remedial Action at the
Property required pursuant to Section 2 hereof. Burlen agrees to provide
Forstmann reasonable notice of any and all such claims. Forstmann agrees that
its agents, contractors and subcontractors conducting such Remedial Action shall
perform such Remedial Action in compliance with all applicable laws. At the
conclusion of such Remedial Action, Forstmann agrees to restore the surface of
the Property to its condition prior to such Remedial Action to the extent
required for its intended use, to remove all equipment and improvements placed
upon the Property, and to cap and properly close all wells in conformance with
all applicable laws and regulations, to the extent authorized by the Georgia
Environmental Protection Division. The parties hereto acknowledge that all
Remedial Action at the Property required pursuant to Section 2 hereof is under
the management and control of Forstmann, so that, except to the extent of
Burlen's' or its agents', employees', contractors' or subcontractors' negligence
or willful misconduct, Burlen has no responsibility for the action or
consequences of acts undertaken by persons investigating or conducting Remedial
Action on behalf of Forstmann, and Burlen has no liability whatsoever for
payment for services to such persons, agents, contractors and subcontractors as
a result of their contract or contracts with Forstmann, except as provided in
Section 4 hereof.
4. Sharing of Costs. Burlen agrees to pay
----------------
Forstmann the lesser of (i) $150,000 minus any payments made to Forstmann
pursuant to Paragraph 8 of the Lease and
(ii) one-half of the costs incurred by Forstmann in respect of the Remedial
Action described in Section 2 hereof (such costs to include, without limitation,
those of drilling, disposing of investigation-derived waste and analyzing
results). To this end, Forstmann may provide Burlen with invoices no more
frequently than once per month reflecting expenses incurred subsequent to any
previous invoices provided by Forstmann. Burlen shall have thirty (30) days
from receipt of such an invoice to pay Forstmann its share of the invoice.
5. Indemnification.
---------------
(a) Forstmann agrees to indemnify and hold harmless Burlen and
TCDA from and against any and all Covered Environmental Liabilities for which
there is an Environmental Claim commenced or threatened in writing against
Burlen or TCDA by an unaffiliated third party, including, without limitation,
any reasonable legal or other expenses incurred by Burlen and TCDA in connection
with investigating, defending or preparing to defend any such Environmental
Claim; provided, however, that Forstmann shall
-------- -------
not be required to indemnify Burlen or TCDA (a) with respect to any amounts
Burlen or TCDA is required to pay Forstmann pursuant to Section 4 hereof or (b)
for any portion of any Environmental Liabilities or Environmental Claim which is
determined by a court of competent jurisdiction to be attributable to Burlen or
TCDA's actions, operations, negligence or willful misconduct.
(b) Burlen and TCDA agree to indemnify and hold harmless Forstmann
from and against any and all Environmental Liabilities resulting from any
Release at the Property that occurred or occurs on or after Burlen's occupancy
of the Property and for which there is an Environmental Claim commenced or
threatened in writing against Forstmann by an unaffiliated third party,
including, without limitation, any reasonable legal or other expenses incurred
by Forstmann in connection with investigating, defending or preparing to defend
any such Environmental Claim; provided, however, that Burlen and TCDA shall not
be responsible to indemnify Forstmann for any portion of any Environmental
Liabilities or Environmental Claim which is determined by a court of competent
jurisdiction to be directly attributable to Forstmann's actions, operations,
negligence or willful misconduct.
(c) Burlen and TCDA acknowledge and agree that the indemnification
set forth in subsection (a) is intended to be in lieu of any right they may have
to pursue Forstmann for contribution, cost recovery, breach of contract or other
claims with respect to any Covered Environmental Liabilities and all such rights
are expressly waived.
(d) Forstmann acknowledges and agrees that the indemnification set
forth in subsection (b) is intended to be in lieu of any right it may have to
pursue Burlen and TCDA for contribution, cost recovery, breach of contract or
other claims with respect to the Environmental Liabilities covered thereby, and
all such rights are expressly waived.
6. Completion of Investigation and Remediation.
-------------------------------------------
Forstmann agrees that it will conduct the Remedial Action described in Section 2
hereof with all deliberate speed to the extent not inconsistent in its sole
judgment with the minimization of the costs, expenses and other liabilities
associated with such Remedial Action.
7. Reservation of Rights. Nothing contained in
---------------------
this Agreement shall affect any right, claim, interest or cause of action of any
party hereto with respect to persons or entities who are not parties, including,
without limitation, claims for contribution and indemnity against persons who
are not parties. This Agreement governs only the rights of the parties hereto,
and no other person shall have any rights of any nature hereunder or by reason
hereof. By entering into this Agreement or conducting the Remedial Action
described in Section 2 hereof, no party hereto admits any liability for Contami-
nants or Releases at the Property, nor is any party bound to perform any work at
the Property beyond the work described in Section 2 hereof. This Agreement
shall not constitute or be used as evidence of any admission of law or fact by
any party hereto as among themselves or by any other person. No party hereto
admits liability or responsibility under federal, state or local law, or that
any party is in violation or has ever violated any laws, rules or regulations.
8. Successors and Assigns. This Agreement shall
----------------------
be binding upon the successors and assigns of the parties hereto.
9. Choice of Law. This Agreement shall be
-------------
governed by, and construed and interpreted in accordance with, the law of the
State of Georgia without regard to the principles of conflict of laws thereof.
10. Integration. This Agreement comprises the
-----------
complete and integrated agreement of the parties on the subject matter hereof
and shall supersede all prior agreements, written or oral, on the subject matter
hereof. This Agreement was drafted with the joint participation of the parties
hereto and shall be construed neither against nor in favor of any party.
11. Amendments. Neither this Agreement nor any
----------
of the provisions hereof may be changed, waived, discharged or terminated except
by an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
12. Counterparts. This Agreement may be executed
------------
in counterparts, each of which when executed and delivered will be deemed to be
an original and all of which taken together shall constitute one and the same
document.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first set forth above.<PAGE>
FORSTMANN & COMPANY, INC. BURLEN CORPORATION
By:/s/ S. F. Mair By:/s/ Paul Earhman
-------------- ----------------
Name: S. F. Mair Name: Paul Earhman
Title:Vice President Title: Vice Chairman
TIFT COUNTY DEVELOPMENT
AUTHORITY
By: /s/ James R. Mtee
-------------------
Name: James R. Mtee
Title: Chairman
Exhibit 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
BOARD of Directors and Shareholders
Forstmann & Company, Inc.:
We have reviewed the accompanying condensed financial statements of Forstmann &
Company, Inc. (the "Company") for the following periods:
Period(s) Covered
------------------------------------------
Financial Statements Reorganized Company Predecessor Company
Balance Sheet August 3, 1997
Statement of Operations Thirteen and thirty-nine
weeks ended July 28, 1996
Period from November 4,
1996 to July 22, 1997
Period from July 23, Period from May 5, 1997 to
to August 3, 1997 July 22, 1997
Statement of Cash Flows Thirty-nine weeks ended
July 28, 1996
Period from July 23, Period from November 4,
1997 to August 3, 1997 1996 to July 22, 1997
Statement of Changes in Period from July 23, Period from November 4,
Shareholders' Equity 1997 to August 3, 1997 1996 to July 22, 1997
(deficit)
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Bankruptcy Court
confirmed the Company's Plan of Reorganization on July 9, 1997 and the Company
emerged from bankruptcy on July 23, 1997. On July 23, 1997, the Company
accounted for the reorganization and adopted "fresh start accounting." As a
result, the Company's August 3, 1997 balance sheet is not comparable to the
November 3, 1996 balance sheet since it presents the financial position of the
reorganized entity.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of the Company as of November 3, 1996 and the
related statements of operations, shareholders' deficit, and cash flows for the
fifty-three weeks then ended (not presented herein); and in our report dated
December 20, 1996, we expressed an unqualified opinion on those financial
statements and included explanatory paragraphs concerning bankruptcy matters and
other matters that raise substantial doubt about the Company's ability to
continue as a going concern. In our opinion, the information set forth in the
accompanying condensed balance sheet as of November 3, 1996 is fairly stated, in
all material respects, in relation to the balance sheet from which it has been
derived.
/s/ Deloitte & Touche
- ---------------------
Atlanta, Georgia
September 5, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Forstmann & Company, Inc.'s condensed financial statements for the thirty-
nine weeks ended August 3, 1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-02-1997
<PERIOD-END> AUG-03-1997
<CASH> 981
<SECURITIES> 0
<RECEIVABLES> 56,020
<ALLOWANCES> 64
<INVENTORY> 46,980
<CURRENT-ASSETS> 104,742
<PP&E> 25,248
<DEPRECIATION> 148
<TOTAL-ASSETS> 131,871
<CURRENT-LIABILITIES> 21,935
<BONDS> 58,529
0
0
<COMMON> 44
<OTHER-SE> 50,193
<TOTAL-LIABILITY-AND-EQUITY> 131,871
<SALES> 149,900
<TOTAL-REVENUES> 149,900
<CGS> 128,981
<TOTAL-COSTS> 140,975
<OTHER-EXPENSES> 33,401
<LOSS-PROVISION> 316
<INTEREST-EXPENSE> 5,174
<INCOME-PRETAX> (29,966)
<INCOME-TAX> 571
<INCOME-CONTINUING> (30,537)
<DISCONTINUED> 0
<EXTRAORDINARY> 24,135
<CHANGES> 0
<NET-INCOME> (6,402)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
