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 2, 1998
--------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from _______________to________________
Commission File Number: 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 Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. (X) Yes ( ) No
As of September 16, 1998 there was 4,387,190 shares of Common Stock outstanding.
Total number of pages: 266 pages.
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FORSTMANN & COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
Reorganized Reorganized Predecessor Reorganized Predecessor
Company Company Company Company Company
Thirteen Period From Period From Thirty-Nine Period From
Weeks Ended July 23, 1997 May 5, 1997 Weeks Ended November 4,
August 2, to August 3, to July 22, August 2, 1996 to July 22,
1998 1997 1997 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 38,996,000 $ 8,016,000 $ 45,880,000 $ 117,638,000 $ 141,884,000
Cost of goods sold 37,021,000 5,853,000 41,893,000 104,444,000 123,128,000
------------ ------------ ------------ ------------ ------------
Gross profit 1,975,000 2,163,000 3,987,000 13,194,000 18,756,000
Selling, general
and administrative
expenses 3,167,000 419,000 3,594,000 9,933,000 11,575,000
Provision for
uncollectible accounts 67,000 64,000 (177,000) 638,000 252,000
Restructuring items 1,254,000 -- -- 1,566,000 --
------------ ------------ ------------ ------------ ------------
Operating income (loss) (2,513,000) 1,680,000 570,000 1,057,000 6,929,000
Interest expense 1,764,000 216,000 1,646,000 4,915,000 4,958,000
------------ ------------ ------------ ------------ ------------
Income (loss) before
reorganization items,
income taxes and
extraordinary item (4,277,000) 1,464,000 (1,076,000) (3,858,000) 1,971,000
Reorganization items 25,000 -- 25,076,000 80,000 33,401,000
------------ ------------ ------------ ------------ ------------
Income (loss) before
income taxes and
extraordinary item (4,302,000) 1,464,000 (26,152,000) (3,938,000) (31,430,000)
Income taxes not
payable in cash (benefit) (142,000) 571,000 -- -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before
extraordinary item (4,160,000) 893,000 (26,152,000) (3,938,000) (31,430,000)
Extraordinary item -
gain on debt
discharge -- -- 24,135,000 -- 24,135,000
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (4,160,000) 893,000 $ (2,017,000) $ (3,938,000) $ (7,295,000)
============ ============ ============ ============ ============
(continued on next page)
</TABLE>
<PAGE>
FORSTMANN & COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (continued)
(unaudited)
<TABLE>
Reorganized Reorganized Predecessor Reorganized Predecessor
Company Company Company Company Company
Thirteen Period From Period From Thirty-Nine Period From
Weeks Ended July 23, 1997 May 5, 1997 Weeks Ended November 4,
August 2, to August 3, to July 22, August 2, 1996 to July 22,
1998 1997 1997 1998 1997
---- ---- ---- ---- ----
<S> <C> <C>
Per share and share information:
Loss per common
share - basic and diluted $ (.95) $ (.90)
========= =========
Weighted average common
shares outstanding 4,386,390 4,385,087
========= =========
</TABLE>
See notes to financial statements.
<PAGE>
FORSTMANN & COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
AUGUST 2, 1998 AND NOVEMBER 2 , 1997
(unaudited)
<TABLE>
August 2, November 2,
1998 1997
---- ----
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 118,000 $ 493,000
Cash restricted for settlement of unpaid claims 565,000 558,000
Accounts receivable, net of allowance of
$1,096,000 and $458,000 46,220,000 42,005,000
Inventories 48,272,000 43,210,000
Current deferred tax assets -- --
Other current assets 160,000 926,000
------------- -------------
Total current assets 95,335,000 87,192,000
Property, plant and equipment, net 21,903,000 24,779,000
Other assets 2,851,000 1,670,000
------------- -------------
Total $ 120,089,000 $ 113,641,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 5,892,000 $ 5,756,000
Accounts payable 3,901,000 3,335,000
Accrued liabilities 6,851,000 11,371,000
------------- -------------
Total current liabilities 16,644,000 20,462,000
Long-term debt 56,726,000 42,548,000
Deferred tax liabilities -- --
------------- -------------
Total liabilities 73,370,000 63,010,000
Commitments and contingencies
Shareholders' Equity:
Preferred Stock, 1,000,000 shares authorized
and nil outstanding -- --
Common stock, $.01 par value, 35,000,000
shares authorized, 4,386,390 and 4,384,436
shares issued and outstanding 43,864 43,844
Additional paid-in capital 50,323,136 50,297,156
Retained earnings (deficit) since July 23, 1997 (3,648,000) 290,000
------------- -------------
Total shareholders' equity 46,719,000 50,631,000
------------- -------------
Total $ 120,089,000 $ 113,641,000
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
FORSTMANN & COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
Reorganized Predecessor
Reorganized Company Company
Company Period From Period From
Thirty-Nine July 23, November 4,
Weeks Ended 1997 to 1996 to
August 2, August 3, July 22,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ (3,938,000) $ 893,000 $ (7,295,000)
------------ ------------ ------------
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 4,081,000 150,000 10,600,000
Write-off of deferred financing costs -- -- 211,000
Income taxes not payable in cash -- 571,000 --
Income taxes paid (29,000) -- (108,000)
Provision for uncollectible accounts 638,000 64,000 252,000
Increase (decrease) in market reserves 2,650,000 -- (6,362,000)
Loss from disposal, abandonment
and impairment of machinery
and equipment and other assets 720,000 -- 3,305,000
Gain associated with NY office lease
surrender (987,000) -- --
Adjustment of accounts
to fair value -- -- 22,076,000
Extraordinary gain on discharge of debt -- -- (24,135,000)
Changes in current assets
and current liabilities:
Accounts receivable (4,603,000) (3,321,000) (17,592,000)
Inventories (7,712,000) 1,491,000 9,047,000
Other current assets 516,000 100,000 (996,000)
Accounts payable 566,000 (1,868,000) 2,028,000
Accrued liabilities (2,364,000) 513,000 794,000
Deferred income taxes 13,000 -- --
Operating liabilities subject
to compromise -- -- (513,000)
------------ ------------ ------------
Total adjustments (6,511,000) (2,300,000) (1,393,000)
------------ ------------ ------------
Net cash used by
operating activities (10,449,000) (1,407,000) (8,688,000)
------------ ------------ ------------
</TABLE>
(continued on next page)
<PAGE>
FORSTMANN & COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS(continued)
(unaudited)
<TABLE>
Reorganized Predecessor
Reorganized Company Company
Company Period From Period From
Thirty-Nine July 23, November 4,
Weeks Ended 1997 to 1996 to
August 2, August 3, July 22,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows provided (used) in investing activities:
Capital expenditures (2,421,000) (103,000) (1,036,000)
Investment in other assests, primarily
computer information systems (1,784,000) (3,000) (289,000)
Net proceeds from disposal of
property, plant and equipment 6,000 -- 2,612,000
------------ ------------ ------------
Net cash provided (used) in
investing activities (4,199,000) (106,000) 1,287,000
------------ ------------ ------------
Cash flows from financing activities:
Net repayments under
the DIP Facility -- -- (16,017,000)
Net borrowings under the
Revolving Loan Facility 24,240,000 1,763,000 26,244,000
Borrowings under the Term
Loan Facility -- -- 31,450,000
Repayment of Term Loan Facility (7,736,000) -- --
Repayment of Deferred Interest Rate Notes (1,571,000) -- --
Borrowings under financing
arrangements -- -- 1,691,000
Repayment of CIT Equipment Facility
and other financing arrangements (619,000) (1,000) (6,368,000)
Repayment of Senior Secured Notes -- -- (26,909,000)
Deferred financing costs (34,000) -- (2,006,000)
------------ ------------ ------------
Net cash provided by
financing activities 14,280,000 1,762,000 8,085,000
------------ ------------ ------------
Net increase (decrease) in cash (368,000) 249,000 684,000
Cash and restricted cash at beginning of period 1,051,000 732,000 48,000
------------ ------------ ------------
Cash and restricted cash at end of period $ 683,000 $ 981,000 $ 732,000
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FORSTMANN & COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THIRTY-NINE WEEKS ENDED AUGUST 2, 1998
(unaudited)
<TABLE>
Additional Total
Common Paid-In Retained Shareholders'
Stock Capital Earnings(Deficit) Equity
----- ------- ---------------- ------
<S> <C> <C> <C> <C>
Balance, November 2, 1997 $ 43,844 $ 50,297,156 $ 290,000 $ 50,631,000
Net loss -- -- (3,938,000) (3,938,000)
Director shares awarded 20 25,980 -- 26,000
------------ ------------ ------------ ------------
Balance, August 2, 1998 $ 43,864 $ 50,323,136 $ (3,648,000) $ 46,719,000
============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FORSTMANN & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 2, 1998
(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. The apparel
industry represents the majority of the Company's customers for its
fabrics. Additionally, through the Company's wholly owned subsidiary
Forstmann Apparel, Inc. (see Note 2 to these Financial Statements) the
Company designs and markets women's suits primarily under the "Oleg
Cassini" label. The Company contracts the manufacturing of women's suits
through manufacturers based in the Caribbean and sources complete apparel
packages internationally. See Note 2 to these financial statements for a
discussion of Forstmann Apparel, Inc. and it's purchase of certain assets
of Arenzano Trading Company, Inc. and B&B Corporation, collectively
("Arenzano").
As described in Note 1 to the Financial Statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended November
2, 1997 (the "1997 Form 10-K"), on September 22, 1995, the Company filed
a petition for protection under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") with the U.S. Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Filing"). The
Company emerged from Bankruptcy pursuant to a Plan of Reorganization (the
"Plan of Reorganization") on July 23, 1997 (the "Effective Date").
As described in Note 2 to the Financial Statements contained in the 1997
Form 10-K, 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"), the Company
established its reorganization value and adopted "fresh start" accounting
as of July 22, 1997.
Under the principles of "fresh start" accounting, the Company's total net
assets were recorded at its established reorganization value, which was
then 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 aggregate 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.
In connection with the Plan of Reorganization and the application of
"fresh start" accounting, the Company is 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. Accordingly, the reorganized
Company's consolidated condensed financial statements are not comparable
to the Company's condensed financial statements for prior periods.
<PAGE>
The following table describes the periods presented in the consolidated
condensed financial statements and related notes thereto:
Period Referred to as
- ------------------------------------- -----------------------------------------
Results for the Reorganized Company
Thirteen Weeks Ended August 2, 1998 "1998 Third Quarter"
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 Reorganized Company
Thirty-Nine Weeks Ended
August 2, 1998 "1998 Nine-Month Period"
Results for the Predecessor Company
From November 4, 1996 to
July 22, 1997 "Predecessor Company 1997 261-Day 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 1997 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, the
effects of the consummation of the Plan of Reorganization and application
of "fresh start" accounting, and the purchase of Arenzano during the
Company's 1998 Third Quarter, results for the periods described above are
not necessarily indicative of the results for a full fiscal year.
2. On May 11, 1998, the Company announced that it had agreed to acquire the
business and substantially all of the assets of Arenzano. Arenzano had
instituted voluntary bankruptcy proceedings in April 1998. The Company's
purchase was made pursuant to an order signed by United States Bankruptcy
Judge Burton R. Lifland, dated May 8, 1998, in the cases entitled, In re
Arenzano Trading Company, Inc. and In re B&B Corporation, Case Nos. 98 B
42508 and 98 B 42520 (BRL). The transaction was completed on May 13, 1998
at a purchase price of $2.0 million. However, the Company, as an
unsecured creditor of Arenzano, is expected to receive a distribution
<PAGE>
from the bankruptcy estate in the approximate amount of $275,000 out of
the proceeds to the estate from the purchase. The acquisition allows the
Company to expand its fabrics business into the apparel business. The
Company expects to benefit from Arenzano's expertise in contracting for
the manufacture of apparel in the Caribbean, as well as its ability in
sourcing complete apparel packages internationally. The Company is
operating the new apparel venture as a wholly-owned subsidiary under the
name Forstmann Apparel, Inc. ("FAI"). The new venture is expected to
provide an enhanced outlet for the Company's fabrics while providing
growth opportunities outside of the Company's core business. The working
capital and capital expenditure requirements of FAI for the next twelve
months will be funded from borrowings under the Revolving Loan Facility.
The Company believes that availability under its Revolving Loan Facility
will be adequate to fund the working capital and capital expenditure
requirements of the Company, including FAI, for the next twelve months.
Arenzano had sales of approximately $17 million during its most recent
fiscal year.
The acquisition of Arenzano by the Company was accounted for using the
purchase method of accounting. The purchase price paid for Arenzano was
assigned $0.7 million to tangible assets and $1.3 million to intangible
assets. The Company's results of operations for the 1998 Third Quarter
and 1998 Nine-Month Period include the results of operations for FAI for
the period May 13, 1998 to August 2, 1998.
3. On March 6, 1998, the Company announced that, as part of its long-term
strategy, it will discontinue the production of top dye worsted fabrics
used to manufacture men's suits and government uniforms (the "1998
Restructuring") after completing orders for its fall season. In fiscal
year 1997, top dye worsteds accounted for approximately $18 million in
men's suiting fabric and $10 million in government uniform fabric sales.
This decision has resulted in the Company's previous overall workforce of
approximately 2,500 people being reduced by approximately 730 people.
Implementation of the 1998 Restructuring has resulted in the Company
incurring certain costs, including, among other costs, salaried
severance, special one-time hourly "stay put" bonuses and equipment
relocation costs. Additionally, certain of the Company's inventories and
machinery and equipment have been impaired or rendered obsolete.
Accordingly, during the 1998 Nine-Month Period, the Company recognized
severance expense of approximately $0.8 million, accrued approximately
$0.4 million for stay put bonuses, recognized a loss on impairment of
$0.7 million relating to the impairment of certain machinery and
equipment, and increased inventory market reserves by $2.6 million in
connection with the 1998 Restructuring. Severance expense, expense
associated with the stay put bonuses and the loss on impairment of
certain machinery and equipment were recognized as restructuring items
during the 1998 Nine-Month Period. Inventory market reserves associated
with the 1998 Restructuring were included in cost of goods sold during
the 1998 Nine-Month Period. Any additional impairment of inventories will
be included in cost of goods sold in the periods in which the impairment
can be reasonably estimated. Any additional impairment in property, plant
and equipment will be recognized as a restructuring item in the periods
in which the impairment can be reasonably estimated. The Company incurred
costs of approximately $0.1 million during the 1998 Nine-Month Period
related to the relocation of certain machinery and equipment which was
included in cost of goods sold during the 1998 Nine-Month Period. Any
additional costs incurred to relocate certain machinery and equipment
will be charged to cost of goods sold in the periods incurred. See Note
<PAGE>
11 to these Financial Statements for a description of restructuring items
recognized during the 1998 Nine-Month Period.
The Company and the landlord of its corporate and marketing offices have
entered into a lease surrender agreement whereby the Company will vacate
such premises on or before January 1, 1999. Pursuant to the agreement,
the Company waived any and all existing and future claims against the
landlord arising out of, or in connection with the takeover agreement,
effective August 1, 1995, whereby the landlord had previously agreed to
take over the Company's remaining obligations under the Company's
previous lease. The Company waived the right to collect contributions due
the Company from the landlord for leasehold improvements and related fees
and expenses the Company had incurred. The Company had fully reserved
such claims against the landlord during its fiscal year 1997. In
connection with entering into the lease surrender agreement, the Company
has written-down property, plant and equipment by approximately $1.1
million associated with the future abandonment of leasehold improvements
and furniture and fixtures, wrote-down the estimated deferred rent
liability at January 1, 1999 by approximately $2.1 million, accrued $0.5
million for broker's commission and accrued approximately $0.1 million
for lease cancellation liability. These items resulted in a $0.4 million
gain which was recorded as a restructuring item during the 1998
Nine-Month Period. The Company expects to enter a new ten-year lease
during September 1998 for new corporate and marketing offices at a new
location in New York, New York pursuant to which the Company will reduce
the amount of space it occupies and lower the associated annual rent
expense by approximately $0.5 million. In connection with the new lease,
the Company expects to incur approximately $1.0 million in build-out
cost, furniture and moving related costs. Such costs will be funded
through borrowings under the Company's Revolving Loan Facility.
4. One of the Company's customers accounted for approximately 18% of the
Company's revenues for the 1998 Nine-Month Period and another customer
represented approximately 8% of gross accounts receivable at August 2,
1998. No other customer represented more than 6% of revenues or 7% of
gross accounts receivable.
<PAGE>
5. Inventories are stated at the lower of cost, determined principally by
the LIFO method, or market and consist of (in thousands):
August 2, November 2,
1998 1997
---- ----
Raw materials and supplies $ 11,093 $ 8,303
Work-in-process 26,159 27,459
Finished products 15,304 8,169
Less market reserves (4,284) (721)
-------- --------
Total 48,272 43,210
Difference between LIFO
carrying value and current
replacement cost 613 --
-------- --------
Current replacement cost $ 48,885 $ 43,210
======== ========
The Company increased market reserves by $2.6 million for inventory
related to the top dye worsted fabrics product line which will be
discontinued as part of the 1998 Restructuring (see Note 3 to these
Financial Statements). This expense was charged to cost of goods sold
during the 1998 Nine-Month Period.
6. Other assets consist of (in thousands):
August 2, November 2,
1998 1997
---- ----
Computer information systems,
net of accumulated amortization
of $30 and $0 $ 771 $ 94
Deferred financing costs, net of
accumulated amortization of
$585 and $164 1,102 1,520
Licensing and royalty agreements,
net of accumulated amortization
of $85 and $0 796 --
Other, net 182 56
------ ------
Total $2,851 $1,670
====== ======
<PAGE>
7. Accrued liabilities consist of (in thousands):
August 2, November 2,
1998 1997
---- ----
Salaries, wages and related
payroll taxes $ 1,423 $ 978
Incentive compensation 273 2,082
Vacation and holiday 899 1,729
Interest on long-term debt 78 62
Medical insurance claims 1,304 1,327
Professional fees 140 355
Environmental remediation 340 361
Deferred rental and other
lease obligations 12 2,186
Other 2,382 2,291
------- -------
Total $ 6,851 $11,371
======= =======
The Company reduced its deferred rent liability by $2.1 million in
connection with of entering into the lease surrender agreement as more
fully described in Note 3 to these Financial Statements.
8. Long-term debt consists of (in thousands):
August 2, November 2,
1998 1997
---- ----
Revolving Loan Facility $ 37,629 $ 13,389
Term Loan Facility 22,591 30,327
Deferred Interest Rate Notes -- 1,571
Other note 422 603
Capital lease obligations 1,976 2,414
-------- --------
Total debt 62,618 48,304
Current portion of long-term debt (5,892) (5,756)
-------- --------
Total long-term debt $ 56,726 $ 42,548
======== ========
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 $15.0 million letter of credit facility as amended), 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").
At August 2, 1998, the Company's loan availability (as defined in the
Loan and Security Agreement), in excess of outstanding advances and
letters of credit, was approximately $17.3 million. Giving effect to
certain amendments to the Loan and Security Agreement discussed below,
the Company's loan availability at August 2, 1998 would have been $13.6
million, a reduction of $3.7 million (including the required Term Loan
Facility payment of $1.5 million and fees of $0.1 million associated with
the amendment of the Loan and Security Agreement).
<PAGE>
In accordance with section 4.5(c) of the Loan and Security Agreement, a
Term Loan Facility payment equal to 50% of any Excess Cash Flow for any
fiscal year must be made by April 30 following the end of the fiscal year
in which such Excess Cash Flow arose. Excess Cash Flow for fiscal year
1997 was approximately $2.7 million, and on April 27, 1998, the Company
repaid the Term Loan Facility by approximately $1.4 million through
borrowings under the Revolving Loan Facility.
The Company and its lenders as of March 24, 1998 entered into an
amendment to the Loan and Security Agreement modifying, among other
things, the definition of earnings before interest, income taxes,
depreciation, amortization and reorganization items ("EBITDAR") and
Adjusted Tangible Net Worth, and modifying certain loan covenants so as
to increase permitted capital expenditures and lower the minimum fixed
charge coverage ratio. Such modifications were made in anticipation of
the effects of the Company's 1998 Restructuring as more fully described
in Note 3 to these Financial Statements. In accordance with the
amendment, the Company prepaid $3.0 million of the Term Loan Facility
through borrowings under the Revolving Loan Facility on April 29, 1998.
The Company and its lenders as of September 14, 1998 further amended and
restated the Loan and Security Agreement to incorporate FAI into the
Credit Facility, fund the on-going working capital needs of FAI, provide
the funding to the Company to incur the necessary build out costs and
relocation expenses and establish the required security deposit
associated with the surrender of the Company's existing lease of its
corporate and marketing offices and the relocation of such offices (see
Note 3 to these Financial Statements) and modify certain existing
financial covenants to incorporate FAI and reflect the Company's
financial results to date as well as expected results for all of fiscal
year 1998 and fiscal year 1999.
As described more thoroughly in Note 8 to the Financial Statements
contained in the 1997 Form 10-K, on the Effective Date, in accordance
with the Plan of Reorganization, the Company issued subordinated floating
rate notes (the "Deferred Interest Rate Notes") in respect of certain
accrued but unpaid interest (approximately $1.6 million). On December 22,
1997, the Company repaid the Deferred Interest Rate Notes and accrued
interest due thereon through borrowings under the Revolving Loan
Facility.
9. The Company adopted Financial Accounting Standards ("SFAS") No. 128,
Earnings Per Share as required in the first quarter of fiscal year 1998.
SFAS128 replaces the presentation of "primary" (and when required "fully
diluted") EPS with a presentation of "basic" and "diluted" EPS. Net loss
per share basic is computed based on net loss divided by the weighted
average common shares outstanding. If required, on a diluted basis, net
income per share - diluted is computed by dividing net income by the
weighted average common shares outstanding during the period plus the
incremental shares that would have been outstanding under stock option
plans. Due to the net losses incurred by the Company, the Company did not
have any dilutive options for either the 1998 Third Quarter or the 1998
Nine-Month Period. Computation of per share earnings for the predecessor
company for all periods presented in the Consolidated Condensed
Statements of Operations and the reorganized company period from July 23,
1997 to August 3, 1997 has been omitted as such information is not deemed
to be meaningful.
<PAGE>
10. As discussed in Note 14 to the Financial Statements in the 1997 Form
10-K, the Company has accrued certain estimated costs for environmental
matters.
Dublin, Georgia. On December 29, 1995, the Georgia Environmental
Protection Division ("EPD") issued separate administrative orders (the
"Administrative Orders") to the Company and to J.P. Stevens & Co., Inc.
("Stevens") which relate to three sites on the Georgia Hazardous Site
Inventory - the "TCE site", the "1,1-DCA site" and another site known as
the "Burn Area" - at the Company's Dublin, Georgia facility. The
Administrative Orders required the Company and Stevens to submit a
compliance status report ("CSR") for these sites that would include,
among other things, a description of the release, including its nature
and extent, and suspected or known source, the quantity of the release
and the date of the release. The CSR would also have to include a
determination of cleanup standards (called "risk reduction standards")
for the sites and a certification that the sites were in compliance with
those standards; alternatively, the party submitting the CSR could
acknowledge that the site is not in compliance with risk reduction
standards. Pursuant to the Administrative Orders, if a site is not in
compliance with the risk reduction standards, then a Corrective Action
Plan (a "Corrective Action Plan") for remediating the release would have
to be submitted to EPD.
Since both the Company and Stevens had been required to perform the same
work at all three of these sites, the Company and Stevens agreed to
allocate responsibilities between themselves pursuant to an Agreement
Concerning Performance of Work ("Agreement") dated January 24, 1997. The
Agreement required the Company to prepare and submit to EPD the CSR for
the TCE and 1,1-DCA sites, while requiring Stevens to prepare and submit
to EPD a CSR for the Burn Area site. The Agreement does not commit either
party to perform corrective action at these sites. On January 27, 1998
EPD provided comments to the CSR previously submitted by Stevens and
requested clarification of the Stevens CSR. By letter dated March 5,
1998, Stevens submitted a "draft" response to EPD and by letter of April
6, 1998, a final response. It is the Company's understanding that Stevens
is waiting for a response to this letter from EPD.
The Company submitted a CSR for the TCE and 1,1-DCA sites, which
certified compliance with risk reduction standards for both sites. EPD
indicated that it did not agree to the certification with respect to the
TCE site. After extensive discussions with EPD concerning the issue, the
Company submitted a Corrective Action Plan for the TCE site by letter
dated May 15, 1997. By letter dated September 29, 1997, EPD responded to
the Corrective Action Plan with notice of deficiency. The Company
submitted a revised Corrective Action Plan ("CAP") on October 31, 1997.
The revised CAP calls for continued operation of the Company's existing
groundwater recovery system, as well as one additional groundwater
recovery well and a groundwater collection trench near the former dry
cleaning basement. On July 28, 1998 EPD approved the Company's CAP. The
Company has begun installation of the recovery well and design of the
groundwater collection trench. In addition to the installation of these
two systems, the CAP requires the submission of an Annual Corrective
Action Status Report to EPD.
<PAGE>
Tifton, Georgia. In January 1997, the Company was notified by a potential
buyer of the Company's Tifton facility that soil and groundwater samples
had been obtained from that facility and that certain contaminants had
been identified. Subsequently, through sampling and testing performed by
the Company's environmental consultants, the Company confirmed the
presence of contaminants in groundwater samples taken at the site. On
February 28, 1997, the Company notified EPD of such findings, and the
site was placed on the Georgia Hazardous Site Inventory.
The Company subsequently consummated its sale of the Tifton facility. As
part of that transaction, the Company, the Tift County Development
Authority as purchaser ("TCDA") and Burlen Corporation as operator
("Burlen") entered into an Environmental Cost Sharing and Indemnity
Agreement ("Cost Sharing Agreement"). Under the Cost Sharing Agreement,
the Company retained responsibility for remediating certain
contamination, to the extent required by law, that originated prior to
Burlen's occupancy of the premises. Likewise, the Company assumed the
obligation to indemnify TCDA and Burlen in regard to such contamination
to the extent that a claim is made by an unaffiliated third party or
governmental agency. In exchange, Burlen agreed to pay to the Company the
lesser of (1) $150,000 minus any payments already made to the Company
(certain expenses had already been shared) to respond to the
contamination or (2) one-half of the costs incurred by the Company in
response to such contamination. EPD has not yet requested any additional
response to conditions at this site.
At August 2, 1998, the Company had $0.3 million accrued for costs to be
incurred in connection with the TCE, 1,1-DCA and Tifton facility
environmental matters. The Company, subject to EPD's response to J.P.
Stevens revised CSR and compliance status certification and EPD's
response to the Tifton site, believes the accrual for environmental costs
at August 2, 1998 is adequate.
11. Restructuring items related to the Company's 1998 Restructuring have been
segregated and included in normal operations during the 1998 Third
Quarter and 1998 Nine-Month Period and consist of (in thousands):
1998 1998
Third Nine-Month
Quarter Period
------- ------
Severance and "stay-put" bonus expense
and related employee benefits $ 205 $ 1,172
Loss (gain) associated with N.Y. office
lease surrender 283 (375)
Professional fees 47 50
Loss on impairment of machinery and equipment 719 719
------- -------
Total $ 1,254 $ 1,566
======= =======
During the 1998 Third Quarter, certain of the Company's machinery and
equipment was rendered impaired. The Company currently estimates that the
fair value of such equipment is $0.7 million below its current net book
value. Accordingly, the Company recognized a loss on impairment of $0.7
million as a restructuring item during the 1998 Third Quarter.
During the 1998 Nine-Month Period, the Company recognized as
restructuring items severance expense of approximately $0.8 million and
expense of approximately $0.4 million for stay put bonuses (see Note 3 to
these Financial Statements).
<PAGE>
In connection with entering into the lease surrender agreement (see Note
3 to these Financial Statements), the Company wrote-down property, plant
and equipment by approximately $1.1 million associated with the future
abandonment of leasehold improvements and furniture and fixtures,
wrote-down the estimated deferred rent liability at January 1, 1999 by
approximately $2.1 million, accrued $0.5 million for broker's commission
and accrued approximately $0.1 million for lease cancellation liability.
These items resulted in a $0.4 million gain which was recorded as a
restructuring item during the 1998 Nine-Month Period.
12. In accordance with SOP 90-7, professional fees, asset impairments and
reorganization charges directly related to the Bankruptcy Filing and
related reorganization proceedings have been segregated from normal
operations during the 1998 Third Quarter and the 1997 Third Quarter and
the 1998 Nine-Month Period and the 1997 Nine-Month Period and consist of
(in thousands):
1998 1997
Third Quarter Third Quarter
------------- -------------
Professional fees $19 $ 1,273
Impairment of assets -- 327
Expense incurred due to the rejection and
amendment of executory contracts -- 914
Default interest expense and
professional fees associated with the
Senior Secured Notes -- 185
Adjustment of accounts to fair value -- 22,076
Other 6 301
--- ------
Total $25 $25,076
=== =======
1998 1997
Nine-Month Nine-Month
Period Period
------ ------
Professional fees $45 $ 3,102
Impairment of assets -- 4,602
Expense incurred due to the rejection and
amendment of executory contracts -- 3,314
Default interest expense and
professional fees associated with the
Senior Secured Notes -- (388)
Adjustment of accounts to fair value 22,076
Other 35 695
--- -------
Total $80 $33,401
=== =======
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.
<PAGE>
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 fiscal 1997. 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.
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 second quarter of fiscal 1997.
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. 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.
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. Additionally, 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. These items
resulted in a $22.1 million charge to reorganization items during the
1997 Third Quarter.
<PAGE>
Item 2. 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 1997 Form 10-K for a
discussion of the Company's financial condition as of November 2, 1997,
including a discussion of the Company's anticipated liquidity and working
capital requirements during its 1998 fiscal year.
Forward Looking Statements
Certain matters discussed in this Quarterly Report under Item 2 are forward
looking statements which reflect the Company's current views with respect to
future events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from historical results or those anticipated. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. The following factors could cause
actual results to differ materially from historical results or those
anticipated: demand for the Company's products, competition, the Company's
production needs, wool market conditions, any unexpected financing requirements,
and changes in the general economic climate.
Recent Events
Acquisition
On May 11, 1998, the Company announced that it had agreed to acquire the
business and substantially all of the assets of Arenzano, a manufacturer of
women's suits primarily under the "Oleg Cassini" label. Arenzano had instituted
voluntary bankruptcy proceedings in April 1998. The Company's purchase was made
pursuant to an order signed by United States Bankruptcy Judge Burton R. Lifland,
dated May 8, 1998, in the cases entitled, In re Arenzano Trading Company, Inc.
and In re B&B Corporation, Case Nos. 98 B 42508 and 98 B 42520 (BRL). The
transaction was completed on May 13, 1998 at a purchase price of $2.0 million.
However, the Company, as an unsecured creditor of Arenzano, is expected to
receive a distribution from the bankruptcy estate in the approximate amount of
$275,000 out of the proceeds to the estate from the purchase. The acquisition
allows the Company to expand its fabrics business into the apparel business. The
Company expects to benefit from Arenzano's expertise in contracting for the
manufacture of apparel in the Caribbean, as well as its ability in sourcing
complete apparel packages internationally. The Company is operating the new
apparel venture as a wholly-owned subsidiary under the name Forstmann Apparel,
Inc. ("FAI"). The new venture is expected to provide an enhanced outlet for the
Company's fabrics while providing growth opportunities outside of the Company's
core business. Arenzano had sales of approximately $17 million for its most
recent fiscal year.
The working capital and capital expenditure requirements of FAI for the next
twelve months will be funded from borrowings under the Revolving Loan Facility.
The Company believes that availability under its Revolving Loan Facility will be
adequate to fund the working capital and capital expenditure requirements of the
Company, including FAI, for the next twelve months.
<PAGE>
1998 Restructuring
On March 6, 1998, the Company announced that, as part of its long-term strategy,
it will discontinue the production of top dye worsted fabrics used to
manufacture men's suits and government uniforms (the "1998 Restructuring") after
completing orders for its fall season. In fiscal year 1997, top dye worsteds
accounted for approximately $18 million in men's suiting fabric sales and $10
million in government uniform fabric sales. This decision has resulted in the
Company's previous overall workforce of approximately 2,500 people being reduced
by approximately 730 people. The top dye worsted fabrics business has been a
relatively small part of the Company's overall business. However, the complexity
of manufacturing top dyes makes it extremely labor intensive and unprofitable at
its current level. By discontinuing top dye worsted fabrics, the Company
believes it can focus all of its resources on its strengths in men's and women's
woolen and worsted sportswear, coating and niche specialty markets.
Implementation of the 1998 Restructuring has resulted in the Company incurring
certain costs, including, among other costs, salaried severance, special
one-time hourly "stay put" bonuses and equipment relocation costs. Additionally,
certain of the Company's inventories have been impaired or rendered obsolete.
Accordingly, during the 1998 Nine-Month Period, the Company recognized severance
expense of approximately $0.8 million, accrued approximately $0.4 million for
stay put bonuses, recognized a loss on impairment of $0.7 million relating to
the impairment of certain machinery and equipment, and increased inventory
market reserves by $2.6 million in connection with the 1998 Restructuring.
Severance expense, expense associated with the stay put bonuses and the loss on
impairment of certain machinery and equipment were recognized as restructuring
items during the 1998 Nine-Month Period. Inventory market reserves associated
with the 1998 Restructuring were included in cost of goods sold during the 1998
Nine-Month Period. Any additional impairment of inventories will be included in
cost of goods sold in the periods in which the impairment can be reasonably
estimated. Any additional impairment in property, plant and equipment will be
recognized as a restructuring item in the periods in which the impairment can be
reasonably estimated. The Company incurred costs of approximately $0.1 million
during the 1998 Nine-Month Period related to the relocation of certain machinery
and equipment which was included in cost of goods sold during the 1998
Nine-Month Period. Any additional costs incurred to relocate certain machinery
and equipment will be charged to cost of goods sold in the periods incurred. See
Note 11 to these Financial Statements for a description of restructuring items
recognized during the 1998 Nine-Month Period.
Financial Condition and Liquidity
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 fiscal quarters. This sales pattern places seasonal
constraints on the Company's manufacturing operations which, during the first
fiscal quarter, the Company has traditionally lessened by manufacturing certain
components of inventory in advance of actual sales orders. Further, the industry
practice of providing coating fabric customers with favorable billing terms
(referred to as "dating") which permit payment 60 (sixty) days from July 1 for
invoices billed in January through June encourages such coating fabric customers
to place orders in advance of their actual need. This enables the Company to
manufacture and bill certain coating fabric customers during the Company's first
fiscal quarter. Accounts receivable at August 2, 1998 included $21.4 million of
accounts receivable with dating terms, an increase of $3.3 million compared to
<PAGE>
August 3, 1997. The Company expects FAI's sales to be somewhat counter seasonal,
with the majority of FAI's sales occurring during its fourth and second fiscal
quarter. The majority of FAI's sales are on net sixty day terms or less.
During the 1998 Nine-Month Period, operations used $10.4 million of cash,
whereas $10.1 million was used by operations during the 1997 Nine-Month Period.
Investing activities used $4.2 million in the 1998 Nine-Month Period whereas
investing activities provided $1.2 million in the 1997 Nine-Month Period due to
proceeds received during the Company's 1997 Third Quarter from the sale of the
Company's Tifton facility and certain equipment located at the site. The Company
expects spending for capital expenditures, principally plant and equipment, in
fiscal year 1998 to be greater than fiscal year 1997 due to renewals or
betterments of plant and equipment and compliance with environmental
regulations. As a result of foregoing, during the 1998 Nine-Month Period, $14.3
million was provided by financing activities whereas during the 1997 Nine-Month
Period $9.8 million was provided by financing activities.
The Company believes that cash generated from operations and borrowings under
the Revolving Loan Facility will be sufficient to fund its working capital and
capital expenditure requirements, including the requirements of FAI, for the
next twelve months. However, expected cash flows from operations are dependent
upon achieving sales expectations during the next twelve months which are
influenced by market conditions, including apparel sales at retail, that are
beyond the control of the Company. Due to the seasonal nature of the Company's
core woolen and worsted business, the Company's borrowings under its Revolving
Loan Facility will tend to increase during the first three quarters of the
Company's fiscal year until the fourth quarter, when, at year-end, borrowings
tend to be the lowest. However, as a result of the 1998 Restructuring, the
acquisition of substantially all of the assets of Arenzano and the Company's
operating results, the Company expects borrowings at the end of the fiscal year
1998 to be somewhat higher than borrowings at the end of fiscal year 1997.
The fabrics sales order backlog at August 30, 1998 was $42.0 million, whereas at
the comparable time in fiscal year 1997 it was $47.5 million. The fabrics sales
order backlog at August 30, 1998 reflects a weaker order position in all product
lines, except specialty and womenswear fabrics which increased by $2.7 million
and $0.2 million, respectively, when compared to a year earlier. Of the
approximate $5.6 million decline in the fabrics sales order backlog at August
30, 1998 as compared to a year earlier, approximately $6.0 million related to
menswear fabrics and government fabrics, due to the Company's decision to exit
men's suits and government business (approximately $4.4 million of the decline),
and to an over capacity in global worsted manufacturing as well as fashion
trends. The order position for coating fabrics at August 30, 1998 has declined
by $2.1 million over the comparable time a year earlier. The decrease in coating
fabric sales order backlog is due, in part, to an unseasonably warm last fall
and winter season which resulted in lower than anticipated women's coats selling
at retail.
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. Based on wool
costs incurred during the 1998 Nine-Month Period and the Company's forward
purchase commitments for wool delivery in the Company's fourth quarter of fiscal
year 1998, the Company expects wool costs to be approximately 1% lower in fiscal
year 1998 as compared to fiscal year 1997. After placing orders for the majority
of the Company's wool top needs, the Company decided to exit the men's suiting
<PAGE>
and government worsted top dyed markets in conjunction with the 1998
Restructuring. Further, during fiscal year 1998, the financial crisis in the
Asian markets reduced their demand for Australian supplied wool, which resulted
in a decline in the market price for Australian wool and lowered the Australian
dollar against the United States dollar. These factors may cause the carrying
value of certain of the Company's worsted top inventories or open contracts to
purchase worsted top to be valued higher than current market. This may result in
the Company recognizing a "mark to market" loss during its fourth quarter of
fiscal year 1998.
Results of Operations
The discussion below compares the results of operations for the 1998 Third
Quarter to the 1997 Third Quarter and the 1998 Nine-Month Period to the 1997
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 1998 Third Quarter and the 1997 Third Quarter or the 1998 Nine-Month
Period and the 1997 Nine-Month Period. Further, management believes that the
operating results of the Reorganized Company 1997 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, the effects of the consummation of the Plan of Reorganization, and the
purchase of Arenzano during the Company's 1998 Third Quarter, 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 as a result
of the Company writing off certain intangible assets (primarily deferred
software development costs). 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 Company also wrote off certain other assets and liabilities
associated with the Company's headquarters lease which was charged to
reorganization items during the 1997 Third Quarter ($0.9 million). In addition,
as described in Note 12 contained in this 1998 Third Quarter Form 10-Q, during
the 1997 Third Quarter 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 Thirty-Nine Weeks Ended August 2, 1998 ("1998 Nine-Month Period") compared
to the Thirty-Nine Weeks Ended August 3, 1997 ("1997 Nine-Month Period")
The Company's business is seasonal. Accordingly, results for these interim
periods are not indicative of results for a full fiscal year. Net sales for the
1998 Nine-Month Period were $117.6 million, a decrease of 21.5% from the 1997
Nine-Month Period. Total yards of fabric sold decreased 24.4% from the 1997
Nine-Month Period to the 1998 Nine-Month Period. However, the average per yard
selling price increased to $7.57 per yard from $7.40 per yard due to shifts in
<PAGE>
product mix. Sales declined in all major product lines except for specialty
fabric sales which increased by $2.7 million during the 1998 Nine-Month Period
when compared to the 1997 Nine-Month Period. In addition, the Company added
apparel sales of $1.6 million during the 1998 Nine-Month Period as a result of
the acquisition of the Arenzano business (see Note 2 to these Financial
Statements). Womenswear fabric sales were approximately $18.4 million lower in
the 1998 Nine-Month Period as compared to the 1997 Nine-Month Period. Based on
the current backlog of sales orders for womenswear fabric sales, market trends
and increased competitive pressures, the Company expects overall womenswear
fabric sales to be lower in fiscal year 1998 than in fiscal year 1997. Menswear
fabric sales were $5.8 million lower in the 1998 Nine-Month Period as compared
to the 1997 Nine-Month Period. The decline in menswear fabric sales is due, in
part, to the Company's decision made in March 1998 to exit the men's top dyed
suit business. Overall, the Company expects menswear fabric sales to be lower in
fiscal year 1998 as compared to fiscal year 1997. Product lines discontinued
during fiscal year 1996 (converting, career uniform and Carpini) realized sales
of approximately $3.2 million in the 1997 Nine-Month Period as compared to $0.4
million in the 1998 Nine-Month Period. Coating fabric sales were approximately
$4.1 million lower in the 1998 Nine-Month Period as compared to the 1997
Nine-Month Period. The decrease in coating fabric sales is due, in part, to an
unseasonably warm last fall and winter season which resulted in lower than
anticipated women's coats selling at retail. This has resulted in delayed fabric
shipments and order assortment by the Company's coating fabric customers.
Government uniform fabric sales decreased by $4.3 million during the 1998
Nine-Month Period as compared to the 1997 Nine-Month Period due to the Company's
decision in March 1998 to exit this line of business.
Based on these trends (increased competitive pressures in the woolen and worsted
markets, the decline in backlog of orders, and the effect of discontinued
product lines) the Company expects sales revenue for fabric sales in fiscal year
1998 to be approximately 25% lower than in fiscal year 1997, exclusive of
apparel sales by FAI in the Company's 1998 Third Quarter and the fourth quarter
of fiscal year 1998. Accordingly, on March 6, 1998, the Company announced that,
as part of its long-term strategy, it will discontinue the production of top dye
worsted fabrics used to manufacture men's suits and government uniforms after
completing orders for its fall season. In fiscal year 1997, top dyed worsteds
accounted for approximately $18 million in men's suiting fabric sales and $10
million in government uniform fabric sales.. The top dye worsted fabrics
business has been a relatively small part of the Company's overall business.
However, the complexity of manufacturing top dyes makes it extremely labor
intensive and unprofitable at its current level. By discontinuing top dye
worsted fabrics, the Company believes it can focus all of its resources on its
strengths in men's and women's woolen and worsted sportswear, coating and niche
specialty markets. Further, in addition to exiting the production of top-dyed
worsted fabrics, the Company is consolidating certain manufacturing operations
and implementing other plans designed to align its costs during fiscal year 1998
with the decline in sales anticipated in fiscal year 1998. However, there can be
no assurance as to the level of sales that will actually be attained in fiscal
year 1998, as sales are dependent on market conditions and other factors beyond
the Company's control, nor can there be assurance that the Company's cost
reduction will be implemented successfully.
Cost of goods sold decreased $24.5 million to $104.4 million during the 1998
Nine-Month Period primarily as a result of the decline in sales and change in
product mix and a $5.4 million decline in depreciation and amortization expense
primarily due to the effect of "fresh start" accounting previously discussed
herein. Gross profit decreased $7.7 million or 36.9% to $13.2 million in the
1998 Nine-Month Period, and gross profit margin for the 1998 Nine-Month Period
was 11.2% compared to 14.0% for the 1997 Nine-Month Period. Included in cost of
<PAGE>
goods sold during the 1998 Nine-Month Period is a $2.6 million charge relating
to increased market reserves recorded as a result of the 1998 Restructuring (see
Note 3 to these Financial Statements). During the 1998 Nine-Month Period, FAI's
gross profit was $0.4 million and its gross profit margin was 26.4%.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, decreased 17.2% to $9.9 million in the 1998 Nine-Month
Period compared to $12.0 million in the 1997 Nine-Month Period. The majority of
the decrease in the 1998 Nine-Month Period is due to lower incentive
compensation expense, depreciation and amortization expense and human resource
related expenses. Incentive compensation expense in the 1998 Nine-Month Period
was lower than in the 1997 Nine-Month Period due to the expectation that no
management incentive will be paid for fiscal year 1998, whereas management
incentive was paid for fiscal year 1997. Additionally, a one-time special bonus
plan implemented in fiscal year 1997 for certain key employees, which was
triggered by the Company's emergence from Bankruptcy was not repeated in fiscal
year 1998. The decline in depreciation and amortization expense is primarily due
to the effect of "fresh start" accounting previously discussed herein. Human
resource related expenses decreased as a result of the Company's continuing
efforts to reduce its overhead in response to reduced sales. Somewhat offsetting
these declines was increased professional expenses. Included in selling, general
and administrative expenses is $0.8 million related to FAI.
The provision for uncollectible accounts increased to $0.6 million in the 1998
Nine-Month Period as compared to $0.3 million in the 1997 Nine-Month Period. See
Note 3 to the Financial Statements contained in the 1997 Form 10-K for a
discussion of the Company's accounting policies regarding the establishment of
its allowance for uncollectible accounts.
Restructuring items were $1.6 million in the 1998 Nine-Month Period. Reference
is made to Note 11 to these Financial Statements for a discussion of
restructuring items incurred during the 1998 Nine-Month Period. The Company
expects to incur additional restructuring items associated with the 1998
Restructuring during its fourth quarter of fiscal year 1998. Additionally, in
connection with a settlement with the former owners of Arenzano, FAI expects to
recognize approximately $0.4 million in restructuring items during its fourth
quarter of fiscal year 1998.
Interest expense for the 1998 Nine-Month Period was $4.9 million as compared to
$5.2 million in the 1997 Nine-Month Period. This decrease is attributable to
lower interest rates in effect under the Loan and Security Agreement during the
1998 Nine-Month Period as compared to interest rates in effect in the 1997
Nine-Month Period.
As a result of the foregoing, a loss before reorganization items, income tax and
extraordinary item of $3.9 million was realized in the 1998 Nine-Month Period as
compared to income before reorganization items, income tax and extraordinary
item of $3.4 million in the 1997 Nine-Month Period. During the 1998 Nine-Month
Period, FAI realized a loss before reorganization items, income tax and
extraordinary item of $0.4 million. Income before depreciation and amortization,
reorganization and restructuring items, interest expense, income taxes and
extraordinary item during the 1998 Nine-Month Period was $6.3 million as
compared to $18.6 million during the 1997 Nine-Month Period. However, included
in income before depreciation and amortization, reorganization and restructuring
items, interest expense, income taxes and extraordinary item during the 1998
Nine-Month Period was a $2.6 million charge relating to increased market
reserves recorded as a result of the 1998 Restructuring (see Note 3 to these
Financial Statements). During the 1998 Nine-Month Period, FAI's loss before
depreciation and amortization, reorganization and restructuring items, interest
expense, income taxes and extraordinary item was $0.3 million.
<PAGE>
Reorganization items were $33.4 million in the 1997 Nine-Month Period as
compared to $0.1 million in the 1998 Nine-Month Period. Reference is made to
Note 12 to these Financial Statements for a discussion of reorganization items
incurred during the 1997 Nine-Month Period and 1998 Nine-Month Period.
During fiscal year 1995, the Company fully utilized its net operating loss
carrybacks as permitted by the Internal Revenue code. For the 1998 Nine-Month
Period and the Predecessor Company 1997 261-Day 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 Predecessor Company 1997 261-Day Period can be used
to offset net taxable income generated in future periods.
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, 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 1998 Nine-Month Period was $3.9
million as compared to a net loss of $6.4 million in the 1997 Nine-Month Period.
During the 1998 Nine-Month Period, FAI realized a net loss of $0.4 million.
The Thirteen Weeks ended August 2, 1998 (the "1998 Third Quarter") compared to
the Thirteen Weeks ended August 3, 1997 (the "1997 Third Quarter").
Net sales for the 1998 Third Quarter were $39.0 million, a decrease of 27.6%
from the 1997 Third Quarter. Total yards of fabric sold decreased 29.7% during
the 1998 Third Quarter. The average per yard selling price decreased to $7.62
per yard from $7.73 per yard. Sales declined in all major product lines except
for specialty fabric sales and apparel sales. Such decrease is attributable to
the reasons discussed in the Nine-Month Period comparison above.
Cost of goods sold decreased $10.7 million to $37.0 million during the 1998
Third Quarter primarily as a result of lower sales. Gross profit decreased $4.2
million or 67.9% to $2.0 million in the 1998 Third Quarter, and gross profit
margin for the 1998 Third Quarter was 5.1% compared to 11.4% for the 1997 Third
Quarter. Included in cost of goods sold during the 1998 Third Quarter is a $1.5
million charge relating to increased market reserves recorded as a result of the
1998 Restructuring (see Note 3 to these Financial Statements). During the 1998
Third Quarter, FAI's gross profit was $0.4 million and its gross profit margin
was 26.4%.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, decreased 21.1% to $3.2 million in the 1998 Third
Quarter compared to $4.0 million in the 1997 Third Quarter. The majority of the
decrease in the 1998 Third Quarter is due to lower incentive compensation
expense and lower depreciation and amortization. Such reduction is attributable
to the reasons discussed in the Nine-Month Period comparison above. Included in
selling, general and administrative expenses is $0.8 million related to FAI.
The provision for uncollectible accounts was $0.1 million during the 1998 Third
Quarter compared to a gain of $0.1 million during the 1997 Third Quarter.
<PAGE>
Restructuring items were $1.3 million in the 1998 Third Quarter. Reference is
made to Note 11 to these Financial Statements for a discussion of restructuring
items incurred during the 1998 Third Quarter. The Company expects to incur
additional restructuring items associated with the 1998 Restructuring during its
fourth quarter of fiscal year 1998. Additionally, in connection with a
settlement with the former owners of Arenzano, FAI expects to recognize
approximately $0.4 million as a restructuring item during its fourth quarter of
fiscal year 1998.
Interest expense for the 1998 Third Quarter was $1.8 million or $0.1 million
lower than the 1997 Third Quarter. This decrease is attributable to lower
interest rates in effect under the Loan and Security Agreement during the 1998
Third Quarter as compared to interest rates in effect in the 1997 Third Quarter.
As a result of the foregoing, a loss before reorganization items, income tax and
extraordinary item of $4.3 million was realized in the 1998 Third Quarter as
compared to income before reorganization items, income tax and extraordinary
item of $0.4 million in the 1997 Third Quarter. During the 1998 Third Quarter,
FAI realized a loss before reorganization items, income tax and extraordinary
item of $0.4 million. Income before depreciation and amortization,
reorganization and restructuring items, interest expense, income taxes and
extraordinary item during the 1998 Third Quarter was less than $0.1 million as
compared to $6.6 million during the 1997 Third Quarter. However, included in
income before depreciation and amortization, reorganization and restructuring
items, interest expense, income taxes and extraordinary item during the 1998
Third Quarter is a $1.5 million charge relating to increased market reserves
recorded as a result of the 1998 Restructuring (see Note 3 to these Financial
Statements). During the 1998 Third Quarter, FAI's loss before depreciation and
amortization, reorganization and restructuring items, interest expense, income
taxes and extraordinary item was $0.3 million.
Reorganization items were $25.1 million in the 1997 Third Quarter as compared to
less than $0.1 million during the 1998 Third Quarter. Reference is made to Note
12 to these Financial Statements for a discussion of reorganization items
incurred during the 1997 Third Quarter and 1998 Third Quarter.
During fiscal year 1995, the Company fully utilized its net operating loss
carrybacks as permitted by the Internal Revenue code. For the 1998 Third Quarter
and the Predecessor Company 1997 79-Day Period, 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 generated in future periods.
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, 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 was $4.2 million in the 1998 Third
Quarter compared to $1.1 million in the 1997 Third Quarter. During the 1998
Third Quarter, FAI realized a net loss of $0.4 million.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
4 Amended and Restated Loan and Security Agreement dated as
of September 14, 1998.
10 Lease Surrender Agreement dated August 31, 1998 between the
Company and 1155 Avamer Reality Corp.
15 Independent Accountants' Review Report, dated September 4, 1998
from Deloitte & Touche LLP to Forstmann & Company, Inc.
(b) Current Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORSTMANN & COMPANY, INC.
-------------------------
(Registrant)
/s/Rodney Peckham
-----------------
Rodney Peckham
Executive Vice President
Finance, Administration and
Strategic Planning
September 16, 1998
- --------------------
Date
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- ------- ------------ ----------
4 Amended and Restated Loan and Security Agreement
dated as of September 14, 1998. 33
10 Lease Surrender Agreement dated August 31, 1998 between
the Company and 1155 Avamer Realty Corp. 247
15 Independent Accountants' Review Report, dated
September 4, 1998, from Deloitte & Touche
LLP to Forstmann & Company, Inc. 265
<PAGE>
Exhibit 4
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of September 14, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
and
FORSTMANN & COMPANY, INC.
and
FORSTMANN APPAREL, INC.
as the Borrowers
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions.................................................. 2
-----------
1.2 Accounting Terms.............................................33
----------------
1.3 Interpretive Provisions......................................33
-----------------------
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Total Facility...............................................34
--------------
2.2 Revolving Loans..............................................35
---------------
2.3 Term Loans...................................................42
----------
2.4 Letters of Credit............................................43
-----------------
2.5 Automated Clearing House Transfers and Overdrafts............49
-------------------------------------------------
ARTICLE 3
INTEREST AND FEES
3.1 Interest.....................................................50
--------
3.2 Conversion and Continuation Elections........................51
-------------------------------------
3.3 Maximum Interest Rate........................................52
---------------------
3.4 Facility Fee; Closing Fee....................................53
-------------------------
3.5 Unused Line Fee..............................................53
---------------
3.6 Letter of Credit Fee.........................................53
--------------------
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans..............................................54
---------------
4.2 Termination of Revolving Credit Facility.....................54
----------------------------------------
4.3 Repayment of the Term Loans..................................55
---------------------------
4.4 Voluntary Prepayments of the Term Loans......................55
---------------------------------------
4.5 Mandatory Prepayments of the Term Loans......................55
---------------------------------------
4.6 Payments by the Borrowers....................................56
-------------------------
4.7 Payments as Revolving Loans..................................56
---------------------------
4.8 Apportionment, Application and Reversal of Payments..........57
---------------------------------------------------
4.9 Indemnity for Returned Payments..............................57
-------------------------------
4.10 Agent's and Lenders' Books and Records; Monthly Statements
----------------------------------------------------------
............................................................58
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes........................................................58
-----
5.2 Illegality...................................................60
----------
5.3 Increased Costs and Reduction of Return......................60
---------------------------------------
5.4 Funding Losses...............................................61
--------------
<PAGE>
5.5 Inability to Determine Rates.................................61
----------------------------
5.6 Certificates of Lenders......................................62
-----------------------
5.7 Survival.....................................................62
--------
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest...................................62
--------------------------
6.2 Perfection and Protection of Security Interest...............63
----------------------------------------------
6.3 Location of Collateral.......................................64
----------------------
6.4 Title to, Liens on, and Sale and Use of Collateral...........65
--------------------------------------------------
6.5 Appraisals...................................................66
----------
6.6 Access and Examination; Confidentiality......................66
---------------------------------------
6.7 Collateral Reporting.........................................67
--------------------
6.8 Accounts.....................................................68
--------
6.9 Collection of Accounts; Payments.............................70
--------------------------------
6.10 Inventory; Perpetual Inventory...............................71
------------------------------
6.11 Equipment....................................................71
---------
6.12 Assigned Contracts...........................................72
------------------
6.13 Documents, Instruments, and Chattel Paper....................73
-----------------------------------------
6.14 Right to Cure................................................73
-------------
6.15 Power of Attorney............................................74
-----------------
6.16 The Agent's and Lenders' Rights, Duties and Liabilities......74
-------------------------------------------------------
6.17 Site Visits, Observations and Testing........................75
-------------------------------------
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records............................................76
-----------------
7.2 Financial Information........................................76
---------------------
7.3 Notices to the Lenders.......................................79
----------------------
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
8.1 Authorization, Validity, and Enforceability of this
---------------------------------------------------
Agreement and the Loan Documents............................. 82
--------------------------------
8.2 Validity and Priority of Security Interest................... 82
------------------------------------------
8.3 Organization and Qualification............................... 83
------------------------------
8.4 Corporate Name; Prior Transactions........................... 83
----------------------------------
8.5 Subsidiaries and Affiliates.................................. 83
---------------------------
8.6 Projections; Balance Sheet................................... 83
--------------------------
8.7 Capitalization............................................... 83
--------------
8.8 Solvency..................................................... 84
--------
8.9 Debt......................................................... 84
----
8.10 Distributions................................................ 84
-------------
8.11 Title to Property............................................ 84
-----------------
8.12 Real Estate; Leases.......................................... 84
-------------------
8.13 Proprietary Rights........................................... 84
------------------
8.14 Trade Names and Terms of Sale................................ 85
-----------------------------
8.15 Litigation................................................... 85
----------
8.16 Restrictive Agreements....................................... 85
----------------------
8.17 Labor Disputes............................................... 85
--------------
8.18 Environmental Laws........................................... 85
------------------
<PAGE>
8.19 No Violation of Law.......................................... 87
-------------------
8.20 No Default................................................... 87
----------
8.21 ERISA Compliance............................................. 87
----------------
8.22 Taxes........................................................ 88
-----
8.23 Regulated Entities........................................... 88
------------------
8.24 Use of Proceeds; Margin Regulations.......................... 88
-----------------------------------
8.25 Copyrights, Patents, Trademarks and Licenses, etc............ 88
-------------------------------------------------
8.26 No Material Adverse Change................................... 88
--------------------------
8.27 Full Disclosure.............................................. 89
---------------
8.28 Material Agreements.......................................... 89
-------------------
8.29 Bank Accounts................................................ 89
-------------
8.30 Governmental Authorization................................... 89
--------------------------
8.31 Acquisition.................................................. 89
-----------
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Taxes and Other Obligations.................................. 89
---------------------------
9.2 Corporate Existence and Good Standing........................ 90
-------------------------------------
9.3 Compliance with Law and Agreements; Maintenance of
--------------------------------------------------
Licenses..................................................... 90
--------
9.4 Maintenance of Property...................................... 90
-----------------------
9.5 Insurance.................................................... 90
---------
9.6 Condemnation................................................. 92
------------
9.7 Environmental Laws........................................... 92
------------------
9.8 Compliance with ERISA........................................ 93
---------------------
9.9 Mergers, Consolidations or Sales............................. 93
--------------------------------
9.10 Distributions; Capital Change; Restricted Investments........ 94
-----------------------------------------------------
9.11 Transactions Affecting Collateral or Obligations............. 94
------------------------------------------------
9.12 Guaranties................................................... 94
----------
9.13 Debt......................................................... 94
----
9.14 Prepayment................................................... 94
----------
9.15 Transactions with Affiliates................................. 95
----------------------------
9.16 Investment Banking and Finder's Fees......................... 95
------------------------------------
9.17 Business Conducted........................................... 96
------------------
9.18 Liens........................................................ 96
-----
9.19 Sale and Leaseback Transactions.............................. 96
-------------------------------
9.20 Subsidiaries................................................. 96
------------
9.21 Fiscal Year.................................................. 96
-----------
9.22 Capital Expenditures; MIS Expenditures....................... 96
--------------------------------------
9.23 Operating Lease Obligations.................................. 97
---------------------------
9.24 Adjusted Tangible Net Worth.................................. 97
---------------------------
9.25 Interest Coverage Ratio...................................... 97
-----------------------
9.26 Fixed Charge Coverage Ratio.................................. 98
---------------------------
9.27 Use of Proceeds.............................................. 98
---------------
9.28 Plan of Reorganization....................................... 98
----------------------
9.29 Further Assurances........................................... 98
------------------
9.30 Minimum EBITDA............................................... 98
--------------
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Effectiveness of Agreement........... 99
--------------------------------------------------
10.2 Conditions Precedent to Each Loan............................101
---------------------------------
<PAGE>
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default............................................102
-----------------
11.2 Remedies.....................................................105
--------
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination.........................................107
--------------------
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATION; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers; Cumulative Remedies..............................107
-------------------------------
13.2 Amendments and Waivers.......................................107
----------------------
13.3 Assignments; Participation...................................108
--------------------------
ARTICLE 14
THE AGENT
14.1 Appointment and Authorization................................111
-----------------------------
14.2 Delegation of Duties.........................................112
--------------------
14.3 Liability of Agent...........................................112
------------------
14.4 Reliance by Agent............................................112
-----------------
14.5 Notice of Default............................................113
-----------------
14.6 Credit Decision..............................................113
---------------
14.7 Indemnification..............................................114
---------------
14.8 Agent in Individual Capacity.................................114
----------------------------
14.9 Successor Agent..............................................115
---------------
14.10 Withholding Tax..............................................115
---------------
14.11 Collateral Matters...........................................117
------------------
14.12 Agency for Perfection........................................118
---------------------
14.13 Payments by Agent to Lenders.................................118
----------------------------
14.14 Concerning the Collateral and the Related Loan Documents
............................................................118
ARTICLE 15
MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral.........119
----------------------------------------------------
15.2 Severability.................................................119
------------
15.3 Governing Law; Choice of Forum; Service of Process...........119
--------------------------------------------------
15.4 WAIVER OF JURY TRIAL.........................................120
--------------------
15.5 Survival of Representations and Warranties...................120
------------------------------------------
15.6 Other Security and Guaranties................................121
-----------------------------
15.7 Fees and Expenses............................................121
-----------------
15.8 Notices......................................................122
-------
15.9 Waiver of Notices............................................123
-----------------
15.10 Binding Effect...............................................123
--------------
15.11 Indemnity of the Agent and the Lenders by the Borrower.......123
------------------------------------------------------
15.12 Restrictions on Actions by Lenders; Sharing of Payments......124
-------------------------------------------------------
<PAGE>
15.13 Field Audit and Examination Reports; Disclaimer by Lenders
............................................................125
15.14 Relation Among Lenders.......................................126
----------------------
15.15 Limitation of Liability......................................126
-----------------------
15.16 Final Agreement..............................................126
---------------
15.17 Counterparts.................................................126
------------
15.18 Captions.....................................................126
--------
15.19 Signatures by Telecopy.......................................127
----------------------
15.20 Joint and Several Liability..................................127
---------------------------
15.21 Waiver of Default............................................128
-----------------
<PAGE>
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 - [Intentionally omitted.]
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 Subsidiary Pledge Agreement
(Accounts Receivable Notes)
EXHIBIT I - Form of Company Pledge Agreement
(Accounts Receivable Notes)
EXHIBIT J - Form of Company Pledge Agreement
(Shares of FAI)
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
<PAGE>
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 9.15 - Promissory Notes
SCHEDULE 9.17 - Management Compensation
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Loan and Security Agreement, dated as of July 23, 1997, as amended by
Amendment No. 1 to Loan and Security Agreement, dated as of March 13, 1998, as
amended by Amendment No. 2 to Loan and Security Agreement, dated as of March 24,
1998 (the "Original Loan Agreement"), as amended and restated as of September
14, 1998, 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 ("Forstmann") and Forstmann Apparel,
Inc., a New York corporation, with offices at 500 Seventh Avenue, 17th Floor,
New York, New York 10018 ("FAI") (each of the foregoing, individually a
"Borrower" and, collectively, the "Borrowers").
W I T N E S S E T H
WHEREAS, Forstmann filed in the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court") a
<PAGE>
petition for relief under Chapter 11 of the Bankruptcy Code (as
defined below) and proposed a plan of reorganization; and
WHEREAS, by an order dated July 9, 1997, the Bankruptcy Court confirmed
Forstmann's plan of reorganization; and
WHEREAS, Forstmann, certain financial institutions (the "Original
Lenders") and the Agent are parties to the Original Loan Agreement pursuant to
which, inter alia, the Agent and the Original Lenders made available to
Forstmann a revolving line of credit for loans and letters of credit in an
amount not to exceed $85,000,000 and made term loans to Forstmann in the
aggregate principal amount of $31,450,000; and
WHEREAS, the Borrowers, the Agent and the other parties hereto wish to
amend and restate the Original Loan Agreement to, inter alia, permit Forstmann
to establish a wholly-owned subsidiary (FAI) which will operate in a new line of
business, to include FAI as a Borrower hereunder, and permit FAI to use proceeds
of the loans hereunder to acquire certain assets and to operate its business,
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
Borrowers hereby agree that the Original Loan Agreement is hereby amended and
restated to read in its entirety as follows.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means any and all of the Borrowers' 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 Borrowers 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 accounts of the Borrowers
pursuant to agreement or overdrafts.
"Acquisition Order" means the order of the Bankruptcy
Court, dated May 8, 1998 authorizing the sale of substantially all
<PAGE>
of the assets of Arenzano Trading Co., Inc. ("Arenzano") and B&B
Corporation ("BBC") to FAI.
"Adjusted Tangible Assets" means all of the Borrowers'
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 Borrowers 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
consolidated balance sheet of the Borrowers at such date prepared in accordance
with GAAP; less (b) the amount at which the Borrowers' 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, provided further, however, that any calculation of 'Adjusted
Tangible Net Worth' pursuant to this Agreement shall exclude the 1998-1999
Extraordinary Charges.
"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 Borrowers, 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.
<PAGE>
"Aggregate Revolver Outstandings" means, at any time,
the sum of all Revolver Outstandings for all Borrowers.
"Aggregate Availability" means, at any time, the sum of
the Availability for all Borrowers.
"Agreement" means this Amended and Restated 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 each
Borrower's rights and remedies under, and all moneys and claims for money due or
to become due to such 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 such 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, for any Borrower,
<PAGE>
(a) the lesser of:
(i) if the Borrower is Forstmann, the Maximum Revolver
Amount less the aggregate Revolver Outstandings for all other Borrowers, and if
the Borrower is FAI, the lesser of (a) the Maximum Revolver Amount less the
aggregate Revolver Outstandings for all other Borrowers, or (b) $12,000,000; or
(ii) the sum of:
(A) if the Borrower is Forstmann, eighty-five
percent (85%), and if the Borrower is FAI, eighty
percent (80%) (provided, however, that if the
Borrower is FAI, and the calculation of
Availability is made in the months of January,
February, March, August, September or October,
such percentage shall be eighty-five percent
(85%)), of the Net Amount of Eligible Accounts
(other than Eligible Bill and Hold Accounts) owed
to such Borrower,
(B) if the Borrower is Forstmann, the lesser of
$15 million (less the aggregate amount of Eligible
Bill and Hold Accounts for all other Borrowers) or
eighty-five percent (85%) of the Net Amount of
Eligible Bill and Hold Accounts owed to Forstmann,
(C) (1) if the Borrower is Forstmann, (a) in the
case of Eligible Inventory consisting of
work-in-process or yarn, fifty percent (50%) of
the lower of cost, determined on a
first-in-first-out ("FIFO") basis, or market value
of such Eligible Inventory of such Borrower, and
(b) in the case of all other Eligible Inventory,
sixty-five percent (65%) of the lower of cost,
determined on a first-in-first-out ("FIFO") basis,
or market value of such Eligible Inventory of such
Borrower, and
(2) if the Borrower is FAI, fifty percent
(50%) of the lower of cost, determined on a
first-in-first-out ("FIFO") basis, or market value
of Eligible Inventory consisting of raw materials
of such Borrower, and sixty (60%) of the lower of
cost, determined on a first-in-first-out ("FIFO")
basis, or market value of Eligible Inventory
consisting of finished goods of such Borrower, and
(D) without duplication of (C), above, (1) if the
Borrower is Forstmann, fifty-five percent (55%) of
the lower of cost, determined on a FIFO basis, or
market value of Eligible Letter of Credit
Inventory of such Borrower;
<PAGE>
(2) if the Borrower is FAI, forty-five percent
(45%) of the lower of cost, determined on a FIFO
basis, or market value of Eligible Letter of
Credit Inventory of such Borrower consisting of
piece goods, and fifty-five percent (55%) of the
lower of cost, determined on a FIFO basis, or
market value of Eligible Letter of Credit
Inventory of such Borrower consisting of finished
goods;
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") for all Borrowers in the
aggregate, or $4,000,000 if the Borrower is FAI,
and provided that in the case of any Borrower, at
no time shall the sum of outstanding Revolving
Loans to such Borrower based upon the value of (C)
and (D) above exceed the sum of $30,000,000 less
the amount of such loans outstanding to all other
Borrowers; minus
(b) the sum of:
(i) the Revolver Outstandings for such Borrower,
(ii) reserves for such Borrower for accrued interest on
the Obligations,
(iii) the Environmental Compliance Reserve for such
Borrower,
(iv) the ACH Settlement Risk Reserve for such Borrower,
(v) in the case of FAI, the Promotional Reserve for
such Borrower,
(vi) in the case of Forstmann, the Availability
Reserve, and
(vii) 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 any 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 any Borrower under
Section 9.1) which the Agent deems necessary in the
reasonable exercise of its credit judgment to maintain
with respect to the Borrowers' accounts, 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 any 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
<PAGE>
principal made by the Borrowers pursuant to Section 2.3(c), with respect to Term
Loans on or prior to such time.
"BABC" has the meaning specified in the introductory
paragraph hereof.
"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.Code 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 any 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 such
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 such
Borrower, but such Account Debtor has not yet paid the invoice and has directed
such 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 such Borrower's
<PAGE>
exclusive control and identifiable by piece number on such
Borrower's accounting records.
"Bill of Sale" means the General Bill of Sale dated May
13, 1998 by Arenzano and BBC, transferring substantially all of the assets of
Arenzano and BBC to FAI.
"Borrower" and "Borrowers" have the meanings specified
in the introductory paragraph hereof.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans or Term Loans made pursuant to a single Notice of Borrowing by
the Lenders to any 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, with respect to
any Borrower, a certificate by a Responsible Officer of Forstmann or such
Borrower, substantially in the form of Exhibit B (or another form acceptable to
the Agent) setting forth the calculation of the Availability for such Borrower,
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 for such Borrower 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 of such Borrower
and all components thereof may be calculated as frequently as the Agent may
request. All calculations of Availability with respect to any Borrower in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by such 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.
<PAGE>
"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 any
Borrower which, in accordance with GAAP, is or should be reflected as a capital
lease on the balance sheet of such Borrower.
"Capital Stock" means common stock or other voting
securities.
"Closing Date" means September 14, 1998.
"Closing Fee" has the meaning specified in Section 3.4.
"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 any 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) such Borrower's liabilities and obligations to trade
creditors; (ii) all Obligations; (iii) all obligations and liabilities of any
Person secured by any Lien on such Borrower's property, even though such
Borrower shall not have assumed or become liable for the
<PAGE>
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 balance sheet
of such 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
such 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 balance sheet of the applicable 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
<PAGE>
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 any Borrower to provide for the
intended means of making payment when due by such 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 any period, the sum of:
(i) the net income (or net loss) of the Borrowers
(determined on a consolidated basis in accordance with GAAP) for such
period, without giving effect to any GAAP extraordinary gains or losses
and without deduction for Reorganization Charges or 1998-1999
Extraordinary 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 Borrowers for
such period;
(B) federal, state or local income tax
expense of the Borrowers 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)
<PAGE>
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 any 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 of
Forstmann 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, in the
case of Forstmann, or 90 days in the case of FAI, 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 any 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 any such 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
<PAGE>
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 any 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
any 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.Code 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
<PAGE>
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 in the
aggregate for all Borrowers;
(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 any 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 any Borrower's business;
(xviii) except for Bill and Hold Accounts of
Forstmann, 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 any Borrower, and, if
applicable, accepted by the Account Debtor, or the Account Debtor revokes its
acceptance of such goods or services;
(xix) which is owed by an Account Debtor which is
obligated to any 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 such Borrower
at such time by all of such Borrower's Account Debtors, but only to the extent
of such excess;
(xx) which 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 any 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
<PAGE>
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 of Forstmann consisting of Bill and Hold Accounts.
"Eligible Letter of Credit Inventory" means inventory
which has not yet been received by any Borrower, but which has been or will be
consigned for shipment to the Agent and is or will be in transit directly to
such Borrower and not to any finisher or other bailee of such Borrower, and will
otherwise be Eligible Inventory immediately upon receipt by such 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 such
Borrower (if not already delivered to such 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, piece goods (in the case of FAI), 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 any 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, trim (excluding any interfacing, taffeta and lining
purchased as piece goods), samples, packaging and shipping materials, supplies,
bill-and-hold Inventory, returned or defective Inventory (other than "second"
quality Inventory), or Inventory delivered to any Borrower on consignment or
approval; (e) in the case of FAI, is not more than one (1) Season old; and (f)
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 (w) work-in-process of FAI, (x) work-in-process yarn of
Forstmann whose aggregate value exceeds $12,000,000 at any time, (y)
work-in-process greige goods of Forstmann whose aggregate value exceeds
$15,000,000 at any time, and (z) finished goods of Forstmann whose aggregate
value exceeds $12,000,000 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 any Borrower in order for
such 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
<PAGE>
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 each 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 any Borrower and all of such 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 any 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 any 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 any 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
<PAGE>
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 any
Borrower or any ERISA Affiliate.
"ERISA Plan" means an employee benefit plan (as defined
in Section 3(3) of ERISA) which any Borrower sponsors or maintains or to which
any 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 Borrowers, 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) of the Borrowers and all other fees and
expenses incurred by Forstmann 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 any 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.
"FAI" has the meaning specified in the introductory
paragraph hereof.
"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
<PAGE>
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 Borrowers 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 hereof
or any other financial statements required to be given to the Lenders pursuant
to this Agreement.
"Fiscal Year" means the Borrowers' fiscal year for
financial accounting purposes. The current Fiscal Year of the
Borrowers will end on November 1, 1998.
"Fixed Assets" means Equipment and Real Estate of any
Borrower.
"Fixed Charge Coverage Ratio" means, for the Borrowers,
determined on a consolidated basis, 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.
"Forstmann" has the meaning specified in the
introductory paragraph hereof.
"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 each Borrower's now
owned or hereafter acquired general intangibles, choses in action and causes of
action and all other intangible personal property of such Borrower of every kind
and nature (other than Accounts), including, without limitation, all contract
rights, Proprietary
<PAGE>
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 such 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 such 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 such Borrower is beneficiary, and
any letter of credit, guarantee, claim, security interest or other security held
by or granted to any 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 Forstmann
pursuant to which Forstmann has issued Deferred Interest Notes.
"Intercompany Accounts" means all assets and
liabilities, however arising, which are due to any Borrower from, which are due
from any Borrower to, or which otherwise arise from any transaction by any
Borrower with, any Affiliate.
"Interest Coverage Ratio" means, for the Borrowers,
determined on a consolidated basis, 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
<PAGE>
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 Forstmann in any 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 each 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 such 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 each Borrower's financial condition, results of
operations, and cash flow, for the period commencing on November 3, 1997 and
ending on November 2, 1998 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.
<PAGE>
"Letter of Credit" means a letter of credit issued or
caused to be issued for the account of any 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 $15,000,000.
"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:
FUNC{LIBOR~Rate~=~{LIBOR OVER {1.00~-~Eurodollar~Reserve~Percentage}}}
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.
<PAGE>
"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 any 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, 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 Borrowers, on
a consolidated basis taken as a whole, or the Collateral; (b) a material
impairment of the ability of the Borrowers, on a consolidated basis taken as a
whole, 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 Borrowers, on a consolidated basis taken as a whole,
of any Loan Document.
"Maximum Rate" has the meaning specified in Section
3.3.
<PAGE>
"Maximum Revolver Amount" means, at any time,
$85,000,000.
"MIS Expenditures" means any deferred and capitalized
cash expenditures made by any Borrower in connection with the acquisition and
development of computer hardware and software for such Borrower's management
information systems.
"Mortgages" means all real property fee mortgages,
leasehold mortgages, assignments of leases, mortgage deeds, deeds of trust,
deeds to secure debt, security agreements, and other similar instruments entered
into in connection with the Original Loan Agreement or this Agreement and now
and hereafter entered into by any Borrower which provide the Agent, for the
benefit of the Lenders, a Lien 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 any
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.
"1998-1999 Extraordinary Charges" means any of the
following items, to the extent that such item would be treated as a
restructuring expense or an operating expense in accordance with GAAP:
(i) writedowns or other adjustments to the value of any of
Forstmann's assets (other than current assets), caused by (A) the
discontinuation by such Borrower of its top dye worsted operations, (B)
the relocation by such Borrower of its package dye operations from
Milledgeville, Georgia to Dublin, Georgia, (C) the relocation by such
Borrower of certain of its finishing equipment from Dublin, Georgia to
Louisville, Georgia and (D) the reduction by such Borrower of its
worsted operations;
(ii) writedowns or other adjustments to the value of any
of Forstmann's Inventory relating to its worsted operations, including
such writedowns or other adjustments to Inventory consisting of yarn
caused by the reduction by such Borrower of its worsted operations;
(iii) costs incurred by Forstmann in connection with
moving from Milledgeville, Georgia to Dublin, Georgia certain of its
yarn dyeing and warp preparation equipment and moving from Dublin,
Georgia to Louisville, Georgia certain of its finishing equipment; and
(iv) severance and "stay put" payments made by Forstmann
to its salaried and hourly employees in connection
<PAGE>
with the actions described in clauses (i), (ii) and (iii) above and
payments made and charges taken by such Borrower in connection with the
partial termination of its ERISA Plan related to such salaried and
hourly employees;
provided that: (a) such items arise, in each case above, during the Fiscal Year
ending in 1998 and, in the case of clauses (i)(B), (i)(C) and (iii) above,
during the Fiscal Year ending in 1998 or 1999; (b) such items do not exceed, in
the case of clauses (i)(B), (i)(C) and (iii) above, $1,000,000 in the aggregate;
and (c) such items do not exceed, in the case of clause (ii) above, $3,500,000
in the aggregate.
"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 each
of the Borrowers 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 any 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
any 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 any 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 any 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.
"Original Closing Date" means the "Closing Date," as
that term was defined in the Original Loan Agreement.
"Original Lenders" has the meaning specified in the
recitals hereof.
"Original Loan Agreement" has the meaning specified in
the introductory paragraph hereof.
"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
<PAGE>
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 of the Original Loan Agreement, executed and delivered by Forstmann to the
Agent to evidence and perfect the Agent's security interest, to the extent such
security interest may be granted, in any of Forstmann's present and future
patents, trademarks, and related licenses and rights, for the benefit of the
Agent and the Lenders and other similar instruments entered into in connection
with the Original Loan Agreement or this Agreement and now and hereafter entered
into between any Borrower and the Agent 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 any Borrower
(including, without limitation, proceeds of Accounts and other Collateral) are
deposited or credited, and which is maintained in the name of any 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 any 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,
<PAGE>
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 any 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 any 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 any
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 such 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,
<PAGE>
association, corporation, Governmental Authority, or any other
entity.
"Plan of Reorganization" means Forstmann's First
Amended Plan of Reorganization, dated May 14, 1997, as filed with and confirmed
by order of the Bankruptcy Court.
"Pledge Agreement" means collectively (a) the pledge
agreement, dated as of the date of the Original Loan Agreement, executed and
delivered by Forstmann, 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; (b) the pledge
agreement, dated as of the date hereof, executed and delivered by FAI, as
pledgor, to Agent, as pledgee, substantially in the form of Exhibit H, to
evidence 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; and (c) the pledge agreement, dated as of the date
hereof, executed and delivered by Forstmann, as pledgor, to Agent, as pledgee,
substantially in the Form of Exhibit J, to evidence Agent's security interest in
the shares of FAI owned by Forstmann and its 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
any Borrower has any interests on the Closing Date.
"Promotional Reserve" means any and all reserves which
the Agent from time to time establishes, in its sole discretion, with respect to
liabilities or obligations of any Borrower in connection with advertising,
promotions, mark-downs, sales or discounts.
"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 any Borrower, including, without
limitation, such Borrower's Equipment, Inventory, and Real Estate.
"Proprietary Rights" means any Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits,
patents, patent rights, copyrights, works which are the subject
<PAGE>
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 each 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 Forstmann in connection
with the Plan of Reorganization and the transactions contemplated thereby, and
limited to, (i) for the Borrowers on a consolidated basis, $3,800,000 (of which
no more than $1,200,000 may consist of cash expenses) during the Fiscal Year
ending on November 2, 1998, and $1,000,000 (provided that such amount shall be
limited to the amount of machinery and equipment included in 1998-1999
Extraordinary Charges) during the Fiscal Year Ending on November 2, 1999, and
(ii) in the case of FAI individually, $400,000 in the aggregate.
"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 any 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 any
<PAGE>
Borrower, or any other officer having substantially the same authority and
responsibility.
"Restricted Investment" means any acquisition of
property by any 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 any 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 any 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 any 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 of all Borrowers
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) the creation and establishment by Forstmann of
FAI and the acquisition by FAI of substantially all of the assets and certain
liabilities of Arenzano and BBC; (h) Restricted Investments, in addition to the
Restricted Investments permitted by the other subdivisions of this definition
other than as described in subdivision (e), in an amount not to exceed $3
million in the aggregate; and (i) if no Revolving Loans are then outstanding,
(1) 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; (2)
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 (3) commercial paper given a rating of
"A2" or better by Standard & Poor's Ratings Group or "P2" or better by Moody's
Investors
<PAGE>
Service, Inc. and maturing not more than 90 days from the date of
creation thereof;
"Revolver Outstandings" means, at any time, with
respect to any Borrower (without duplication): the sum of (a) the unpaid balance
of Revolving Loans made to such Borrower, (b) the aggregate amount of Pending
Revolving Loans to such Borrower, excluding, in the case of a request for a
Borrowing, the amount of such Borrowing being requested, (c) one hundred percent
(100%) of the aggregate undrawn face amount of all outstanding Letters of Credit
issued for the account of such Borrower, (d) the aggregate amount of any unpaid
reimbursement obligations in respect of Letters of Credit issued for the account
of such Borrower and (e) the aggregate maximum amount available for drawing
under Letters of Credit requested by such 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.
"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.
"Season" means any period (i) from January 1 through
June 30, or (ii) from July 1 through December 31.
"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.
<PAGE>
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.
"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).
<PAGE>
"Termination Date" means the earliest to occur of (i)
the Stated Termination Date, (ii) the date the Total Facility is terminated
either by the Borrowers 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.
"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. (a) 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."
<PAGE>
(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 Borrowers 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 Borrowers' 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
Forstmann'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 any Borrower on whose behalf a Revolving Loan has been
requested by Forstmann 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
<PAGE>
Agent Advances) the lesser of (i) such Lender's Pro Rata Share of the Aggregate
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 Aggregate Availability (with the
Aggregate Availability for this purpose calculated as if the Aggregate Revolver
Outstandings were zero) or the Revolver Outstandings for such Borrower exceed
the Availability of such Borrower (with the Availability for this purpose
calculated as if the Revolver Outstandings for such Borrower 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. (i) Each Borrowing shall
be made upon an irrevocable written notice delivered to the Agent by Forstmann
on behalf of the applicable Borrower 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 Aggregate Availability and
Availability for the applicable Borrower, (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 applicable Borrower;
(B) the amount of the Borrowing;
(C) the requested Funding Date, which shall be a
Business Day;
(D) whether the Revolving Loans requested are to
be Base Rate Revolving Loans or LIBOR Revolving Loans; and
(E) 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. FAI hereby
authorizes Forstmann to execute and deliver Notices of Borrowing and Notices of
Conversion/Continuation on its behalf and agrees to be bound by the same.
(ii) With respect to any request for Base Rate
Revolving Loans, in lieu of delivering the above-described Notice of Borrowing
Forstmann 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.
<PAGE>
(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), Forstmann shall
deliver to the Agent a writing setting forth (i) the accounts of each 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 Borrowers, and shall
provide the Agent with a specimen signature of each such person. The parties
hereto acknowledge and agree that, until Forstmann delivers any change in the
information described in clauses (i) and (ii) of the preceding sentence, the
delivery of information delivered by Forstmann under Section 2.2(c) of the
Original Loan Agreement will be deemed to satisfy the provisions of such clauses
with respect to such information. The Agent shall be entitled to rely
conclusively on such person's authority to request Revolving Loans on behalf of
such Borrower, the proceeds of which are to be transferred to any of the
accounts specified by Forstmann 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 Forstmann to make such requests on its behalf.
(d) No Liability. The Agent shall not incur any
liability to any 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 Forstmann to request Revolving Loans
on behalf of any Borrower or for otherwise acting in good faith under this
Section 2.2, and the crediting of Revolving Loans to any Borrower's deposit
account, or transmittal to such Person as Forstmann shall direct, shall
conclusively establish the obligation of the Borrowers to repay such Revolving
Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made pursuant to Section 2.2(b) shall be
irrevocable and the applicable Borrower shall be bound to borrow the funds
requested therein in accordance therewith.
(f) 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. (i) 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
<PAGE>
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
applicable 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 such Borrower designated in writing by Forstmann and acceptable to
the Agent; provided, however, that the amount of Revolving Loans so made on any
date shall in no event exceed the Aggregate Availability or Availability of such
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 any 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 such 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 such 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 Borrowers of such failure to fund and, upon demand by the
Agent, the Borrowers 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 any 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
<PAGE>
retained by the Agent. The Agent may hold and, in its discretion, re-lend to any
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 any 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 any Borrower of its duties and obligations hereunder.
(h) Making of BABC Loans. (i) 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 applicable Borrower on the Funding Date applicable thereto by
transferring same day funds to the account of such Borrower, designated in
writing by Forstmann 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 Aggregate Availability or the
Availability of any Borrower 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.
<PAGE>
(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. (i) Subject to the limitations
set forth in the provisos contained in this Section 2.2(i), the Agent is hereby
authorized by the Borrowers 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 any
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 such 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
Borrowers) 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
<PAGE>
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
<PAGE>
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 Original Lender
severally agreed 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 the "Term
Loans") to Forstmann on the "Closing Date" (as defined in the Original Loan
Agreement), upon the satisfaction of the conditions precedent set forth in
Article 10 of the Original Loan Agreement, in an amount equal to such Lender's
Term Loan Commitment. The Term Loans were initially Base Rate Term Loans.
(b) Making of Term Loans. Each Original Lender made
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 designated on the Original 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 of the Original
Loan Agreement, the Agent made the proceeds of such Term Loans available to
Forstmann on the Original Closing Date by transferring same day funds equal to
the proceeds of such Term Loans received by the Agent to an account of Forstmann
designated in writing by Forstmann or as Forstmann otherwise instructed in
writing.
(c) Term Loan Notes. Forstmann executed and delivered
to the Agent on behalf of each Original Lender, on the Original
<PAGE>
Closing Date, a promissory note, substantially in the form of Exhibit A attached
to the Original Loan Agreement (such promissory notes, together with any new
notes in the form of Exhibit A attached hereto 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 were dated the Original Closing Date and stated to mature in
thirty-six (36) monthly installments. Each of the first thirty-five (35)
installments of principal were, or shall be (as applicable), 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 Original Closing Date occurred and ending on the last day of the 35th
month following the month in which the Original Closing Date occurred, 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 Borrowers 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 each of the Borrowers herein set forth, the Agent agrees to take
reasonable steps to cause to be issued Letters of Credit for the account of the
relevant Borrower, and to provide credit support or other enhancement to banks
acceptable to Agent, which issue Letters of Credit for the accounts of the
Borrowers (any such credit support or enhancement being herein referred to as a
"Credit Support"), as applicable, 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
<PAGE>
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 any Borrower in connection with the
opening thereof exceed the Aggregate Availability or the Availability of such
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) Forstmann 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 on behalf of the applicable
Borrower 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. Forstmann shall give
the Agent two (2) Business Days' prior written notice of any request for the
issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the applicable Borrower, 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. Forstmann shall attach to such notice the proposed
form of the
<PAGE>
Letter of Credit. FAI hereby authorizes Forstmann to execute and
deliver such notices on its behalf and agrees to be bound by the
same.
(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 Forstmann pursuant to Section 2.4(d)(i), (i) the amount of the
applicable Unused Letter of Credit Subfacility and (ii) the Aggregate
Availability and the Availability of the applicable 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 such
Borrower in connection with the opening thereof would not exceed the Aggregate
Availability or the Availability of such 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.
Each 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 any 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 Borrowers
<PAGE>
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
applicable 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 any 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 any 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 such
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 each 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 any Borrower may have at any time against
<PAGE>
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 any
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 any 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 any Borrower or reimbursement obligation of any 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 Borrowers jointly
and severally agree 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 Borrowers
jointly and severally agree to 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.
<PAGE>
(i) Assumption of Risk by the Borrowers. As
among the Borrowers, the Lenders, and the Agent, the Borrowers assume 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 any Borrower or
relieve any 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, each 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
<PAGE>
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. Each 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, each 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 Borrowers 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. Each Borrower
may request and the Agent may, in its sole and absolute discretion, arrange for
such Borrower to obtain from Bank of America ACH Transactions. Each 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
<PAGE>
Lenders to Bank of America with respect to all risks of loss associated with the
ACH Transactions.
ARTICLE 3
INTEREST AND FEES
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.
<PAGE>
3.2 Conversion and Continuation Elections. (a) Forstmann
may, on behalf of any or all Borrowers, 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 Forstmann to continue such Loans as, and convert such Loans into, LIBOR Rate
Loans, as the case may be, shall terminate.
(b) Forstmann shall deliver a notice of conversion/
continuation ("Notice of Conversion/Continuation"), in substantially the form of
Exhibit F on behalf of all Borrowers, 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, Forstmann 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, Forstmann 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, Forstmann 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.
<PAGE>
(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, Forstmann 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 Borrowers jointly and
severally agree, to the extent permitted by applicable law, to 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 Borrowers such
excess.
3.4 Facility Fee; Closing Fee. Each of Forstmann, the Agent and the
Lenders acknowledges and agrees that Forstmann paid to the Agent, for the
account of each Original 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 was payable on the date of the Original Loan Agreement and was
earned when due. In addition, the Borrowers jointly and severally agree to pay
the Agent a fee of $100,000 on the Closing Date (the "Closing Fee"), for the
ratable account of each Lender.
<PAGE>
3.5 Unused Line Fee. Until the Obligations have been paid in full and
the Agreement terminated, the Borrowers jointly and severally agree 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 Borrowers' Loan Accounts immediately upon receipt for
purposes of calculating the unused line fee pursuant to this Section 3.5.
3.6 Letter of Credit Fee. The Borrowers jointly and severally agree 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 Borrowers' accounts at Forstmann'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 Borrowers jointly and severally agree to repay
the outstanding principal balance of the Revolving Loans, plus all accrued but
unpaid interest thereon, on the Termination Date. The Borrowers 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 Borrowers prior to the expiration date of the Interest Period
applicable thereto, the Borrowers jointly and severally promise 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
Borrowers jointly and severally promise to pay to the Agent, for account of the
Lenders, the amount, without duplication, by which the Aggregate Revolver
Outstandings exceed the Aggregate Availability (with Aggregate Availability for
this purpose calculated as if the Aggregate Revolver Outstandings were zero) or
the Availability of any Borrower (with Availability of such Borrower for this
purpose
<PAGE>
calculated as if the Revolver Outstandings of such Borrower were
zero).
4.2 Termination of Revolving Credit Facility. The Borrowers may
terminate the Revolving Credit Facility upon at least thirty (30) Business Days'
notice to the Agent and the Lenders, by Forstmann on behalf of the Borrowers
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 Borrowers jointly and severally agree to 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
early termination Termination
occurs Fee
------ ---
On or prior to the One percent (1%) of the
first Anniversary Date Maximum Revolver Amount at
the time of termination.
After the first Three-quarters of one
Anniversary Date, but percent (.75 %) of the
on or prior to the Maximum Revolver Amount at
second Anniversary the time of termination.
Date
After the second One-half of one percent Anniversary Date, but (.50%) of the
Maximum on or prior to April Revolver Amount at the time 23, 2000 of
termination.
After April 23, 2000. No early termination fee.
4.3 Repayment of the Term Loans. The Borrowers agree 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 Borrowers 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 by
Forstmann 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
<PAGE>
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. (a) The Borrowers 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 Borrowers
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 Borrowers. (a) All payments to be made by the
Borrowers shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by any 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 any Borrower
prior to the date on which any payment is due to the Lenders that such Borrower
will not make such payment in full as and when required, the Agent may assume
that the Borrowers have made such
<PAGE>
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 Borrowers have 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
any Borrower pursuant to Section 2.2 or a deemed request as provided in this
Section 4.7. The Borrowers hereby irrevocably authorize 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 agree 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 the Borrowers 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 Borrowers; second, to pay any fees or expense
reimbursements then due to the Lenders from the Borrowers; 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 Borrowers. Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrowers, 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
<PAGE>
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 Borrowers shall be jointly and severally liable to pay to the Agent, and
hereby do 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. Each
of the Borrowers 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 Forstmann a monthly statement of
Loans, payments, and other transactions pursuant to this Agreement. Such
statement shall be deemed correct, accurate, and binding on all Borrowers 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 Forstmann 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 Borrowers, only the items to which exception is
expressly made will be considered to be disputed by the Borrowers.
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
<PAGE>
5.1 Taxes. (a) Any and all payments by the Borrowers 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 Borrowers shall pay all Other Taxes.
(b) The Borrowers jointly and severally agree 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 any 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) such Borrower shall make such deductions and
withholdings;
(iii) the Borrowers jointly and severally agree to
pay the full amount deducted or withheld to the relevant taxing
authority or other authority in accordance with applicable law; and
(iv) the Borrowers shall also agree jointly and
severally to 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
Borrowers 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 Borrowers of Taxes or Other Taxes, Forstmann 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 any 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
<PAGE>
jurisdiction of its lending office so as to eliminate any such additional
payment by the Borrowers 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
Borrowers, each Lender to or for the account of which the Borrowers are required
to pay additional amounts pursuant to subsection (c) of this Section shall
afford the Borrowers the opportunity to contest, and cooperate with the
Borrowers 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 Borrowers have 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 Borrowers, provided that the Borrowers, upon
the request of such Lender, shall repay the amount paid over to the Borrowers
(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 Borrowers, 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 each Borrower through
the Agent, any obligation of that Lender to make LIBOR Rate Loans shall be
suspended until the Lender notifies the Agent and each 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 Borrowers shall, upon their 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 Borrowers are
required to so prepay any LIBOR Rate Loan, then concurrently with such
prepayment, the Borrowers shall borrow from the affected Lender, in the amount
of such repayment, a Base Rate Loan.
5.3 Increased Costs and Reduction of Return. (a) If any
Lender reasonably determines that, due to either (i) the
introduction of or any change in the interpretation of any law or
<PAGE>
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 Borrowers shall be jointly and severally 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
Borrowers through the Agent, the Borrowers, jointly and severally, agree to 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 Borrowers shall, jointly and severally,
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 any Borrower to make on a timely
basis any payment of principal of any LIBOR Rate Loan;
(b) the failure of any Borrower to borrow, continue or
convert a Loan after such 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
<PAGE>
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 each 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 Borrowers may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrowers do not revoke
such Notice, the Lenders shall make, convert or continue the Loans, as proposed
by the Borrowers, in the amount specified in the applicable notice submitted by
the Borrowers, 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 each 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 Borrowers in the absence of manifest error.
5.7 Survival. The agreements and obligations of the Borrowers 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, each of the Borrowers 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 such 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 such 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;
<PAGE>
(vii) all of such 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 such
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 license, patent license or trademark license under
which such Borrower is a licensee or a security interest in any Equipment lease
(or Equipment leased by such Borrower thereunder), Real Property lease or
contract relating to Real Property in effect as of the date hereof or entered
into by such 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 license, 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 owned by Forstmann which is 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 each of the Borrowers 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 Borrowers
have executed and delivered 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. (a) Each of the
Borrowers 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;
<PAGE>
(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
any 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 signature of any Borrower, one or more financing statements disclosing the
Agent's Liens. The Borrowers agree 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 any Borrower's agents or
processors, then such 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 any Borrower which is not
owned by such Borrower, then such 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
Borrowers acknowledge and agree that, if and to the extent that the Borrowers do
not obtain any such waivers, the Agent shall be entitled to (i) reserve from the
Availability for the applicable Borrower 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 Availability of the applicable Borrower, treat
the Inventory located on such Premises as ineligible Inventory, for each such
waiver not obtained by the Borrowers.
(c) From time to time, each of the Borrowers 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 such Borrower, but any 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 such 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
of any Borrower or
<PAGE>
as the basis for any advance, loan, extension of credit, or other
financial accommodation).
6.3 Location of Collateral. Each of the Borrowers represents and
warrants to the Agent and the Lenders that: (a) Schedule 6.3 is a correct and
complete list of such 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) (A) Equipment
and Inventory of Forstmann temporarily held by third parties for processing or
repairs, and (B) work in process of FAI located outside of the United States,
valued at no more than $5,000,000 in the aggregate (based on the lower of cost
or fair market value, determined on a FIFO basis)) 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 a Borrower and sets forth
the names of the owners and lessors or sublessors of and, to the best of such
Borrower's knowledge, the holders of any mortgages on, such facilities and
locations. Each of the Borrowers 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) (A) Equipment and Inventory of Forstmann
temporarily held by third parties for processing or repairs, and (B) work in
process of FAI located outside of the United States, valued at no more than
$5,000,000 in the aggregate (based on the lower of cost or fair market value,
determined on a FIFO basis))at any location other than those locations listed
for such 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 any
Borrower, and the Borrowers hereby authorize the Agent to substitute a new
Schedule 6.3 to reflect such additional location. Without limiting the
foregoing, each of the Borrowers 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 a Borrower, (b) on premises leased by a 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. Each of the
Borrowers 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 such 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
<PAGE>
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) such Borrower will use, store, and
maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only; and (d) such 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 and sales of
Accounts, which are not Eligible Accounts as a result of being past due, to The
CIT Group/Commercial Services, Inc. ("CIT") pursuant to (i) the certain Credit
Approved Receivables Purchasing Agreement dated as of March 13, 1998, between
Forstmann and CIT, as amended by First Amendment to Credit Approved Receivables
Purchasing Agreement and Second Amendment to Credit Approved Receivables
Purchasing Agreement, each dated as of March 13, 1998, as such Agreement is in
effect on March 13, 1998 (the "Forstmann/CIT Agreement"), and (ii) that certain
Credit Approved Receivables Purchasing Agreement dated as of September 11, 1998,
between FAI and CIT] (the "FAI/CIT Agreement", and collectively with the
Forstmann/CIT Agreement, the "CIT Agreements"). 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,
each of the Borrowers 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. (a) Upon reasonable prior
notice to any 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
such Borrower's records, files, and books of account and the Collateral, and
discuss such Borrower's affairs with such Borrower's officers and management.
Each of the Borrowers will deliver to the Agent any instrument necessary for the
Agent to obtain records from any service bureau maintaining records for such
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 such Borrower's
expense, make copies of all of such Borrower's books and records, or require
such Borrower to deliver such copies to the Agent. The Agent may, without
expense to the Agent, use such of such 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 a nominee of the
<PAGE>
Agent, to verify the validity, amount or any other matter relating to the
Accounts, Inventory, or other Collateral, by mail, telephone, or otherwise.
(b) Each of the Borrowers agrees that, subject to such
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 such 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 Borrowers
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 Borrowers, 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
Borrowers, provided that such source is not bound by a confidentiality agreement
with the Borrowers 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 any Borrower is party or is deemed party with the Agent
or such Lender, and (9) to its Affiliates.
6.7 Collateral Reporting. Each of the Borrowers 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
<PAGE>
acquired by such Borrower, purchase orders and invoices; and (ii) such other
reports as to such Borrower or its property as the Agent shall reasonably
request from time to time. In addition, each of the Borrowers 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 certificates of such 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, such Borrower hereby authorizes such service
or agent to deliver same to the Agent, for distribution to the Lenders.
6.8 Accounts. (a) Each of the Borrowers 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 such Borrower, or rendition of services
by such Borrower, in the ordinary course of such 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 or except pursuant to the terms of the CIT
Agreements; (iv) each copy of an invoice delivered to the Agent by such 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 such 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) No Borrower shall re-date any invoice or sale or
make sales on extended dating beyond that customary in such 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 such Borrower becomes aware of any matter
adversely affecting the collectability of any Account or Account Debtor
involving an amount greater than $250,000, in the case of Forstmann, and
$50,000, in the case of FAI, including information regarding the Account
Debtor's creditworthiness, such Borrower will promptly so advise the Agent.
<PAGE>
(c) No Borrower shall 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 such Borrower will promptly deliver such instrument to the Agent,
endorsed by such Borrower to the Agent, if so requested by the Agent, in a
manner satisfactory in form and substance to the Agent.
(d) Each of the Borrowers shall notify the Agent
promptly of all disputes and claims in excess of $250,000, in the case of
Forstmann, and $50,000, in the case of FAI, individually, or $500,000 in the
case of Forstmann, and $100,000 in the case of FAI, 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 such Borrower's business when no Event of Default exists hereunder.
Each of the Borrowers shall send the Agent a copy of each credit memorandum in
excess of $250,000, in the case of Forstmann, and $50,000, in the case of FAI,
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 such 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 any
Borrower when no Event of Default exists, then such Borrower shall promptly
determine the reason for such return and shall issue a credit memorandum to the
Account Debtor in the appropriate amount. Such Borrower shall immediately report
to the Agent any return involving an amount in excess of $250,000, in the case
of Forstmann, and $50,000, in the case of FAI. 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 any Borrower
when an Event of Default exists, such 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 each of the Borrowers to the contrary, the Borrowers shall
<PAGE>
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 accounts of each of the Borrowers at a bank
acceptable to Agent and subject to documentation reasonably acceptable to Agent.
The Borrowers 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, any 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 any 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 Borrowers' Loan
Accounts as a Revolving Loan. So long as an Event of Default has occurred and is
continuing, each of the Borrowers, 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, each of the Borrowers shall immediately deliver to the Agent
or deposit into a Payment Account the cash which the such 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 respective Borrower's Loan Accounts (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 respective Borrower's Loan
Accounts 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 Borrowers).
(d) In the event the Borrowers repay 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 Borrowers' Loan Accounts on the
Business
<PAGE>
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. Each of the Borrowers represents
and warrants to the Agent and the Lenders and agrees with the Agent and the
Lenders that all of the Inventory owned by such 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 such Borrower's business, and is and will be fit for such purposes. Such
Borrower will use its best efforts to keep its Inventory in good and marketable
condition, at its own expense. Such Borrower will not accept any Inventory on
consignment or approval except for such Inventory properly reflected on a
Borrowing Base Certificate. Such 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. Such 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. Such Borrower
will maintain a perpetual inventory reporting system at all times. Such 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, except that FAI may do so without the Agent's
consent, provided that (i) it is for promotional purposes and in the ordinary
course of its business, and (ii) an amount equal to the value of such Inventory
shall have been included in the Promotional Reserve for FAI.
6.11 Equipment. (a) Each of the Borrowers represents and warrants to
the Agent and the Lenders and agrees with the Agent and the Lenders that all of
the Equipment owned by such Borrower is and will be used or held for use in such
Borrower's business, and is and will be fit for such purposes. Each of the
Borrowers 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) Each of the Borrowers shall promptly inform the
Agent of any material additions to or deletions from the Equipment. No Borrower
shall 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. No Borrower
shall, without the Agent's prior written consent, alter or remove any
identifying symbol or number on any of such Borrower's Equipment consisting of
Collateral.
(c) No Borrower shall, without the Agent's prior
written consent, sell, lease as a lessor, or otherwise dispose of any of such
Borrower's Equipment; provided, however, that such Borrower may dispose of
obsolete or unusable Equipment having an
<PAGE>
orderly liquidation value no greater than $500,000 in the aggregate for all
Borrowers in any Fiscal Year, or $2,500,000 in the aggregate for all Borrowers
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 such Borrower in its business, then such 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 such Borrower of other Equipment, then such
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
such Borrower shall be free and clear of all Liens except the Agent's Lien.
6.12 Assigned Contracts. Each of the Borrowers 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 no Borrower shall 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, each of the Borrowers 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. No Borrower shall, 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.
Each of the Borrowers shall notify the Agent and the Lenders in writing,
promptly after such 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 any
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 such 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 Borrowers shall
jointly and severally indemnify and hold the Agent and Lenders harmless from and
against all expense, loss or damage suffered by reason of any defense,
<PAGE>
setoff, counterclaims, recoupment, or reduction of liability whatsoever of the
obligor thereunder arising out of a breach by any Borrower of any obligation
thereunder or arising out of any other agreement, indebtedness or liability at
any time owing from any Borrower to or in favor of such obligor or its
successors; provided that no Borrower shall be under any 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 Borrowers shall be and remain enforceable
only against the Borrowers and shall not be enforceable against the Agent.
Notwithstanding any provision hereof to the contrary, each 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 such
Borrower from any of such duties and obligations. Neither the Agent nor any
Lender shall be obligated to perform or fulfill any of 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. Each of the Borrowers
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 such 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 any
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 such Borrower fails to pay or do, including, without
limitation, payment of any judgment against such 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 such 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. Each of the Borrowers hereby appoints the Agent
and the Agent's designee as the Borrower's attorney, with power: (a) to endorse
such Borrower's name on any checks, notes, acceptances, money orders, or other
forms of payment
<PAGE>
or security that come into the Agent's or any Lender's possession; (b) to sign
such 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 such Borrower's mail to an address designated by the
Agent and to receive, open and dispose of all mail addressed to such 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 such 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 such
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.
Each of the Borrowers 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. Each of
the Borrowers 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 any 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 any 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
Borrowers for the Obligations or under this Agreement or any other agreement now
or hereafter existing between the Agent and/or any Lender and any Borrower.
<PAGE>
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 any Borrower is located for the purposes of
observing the Premises, and to determine such 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
such Borrower is located, the Agent may reinspect the Premises or the place
where the property of such Borrower is located as frequently as Agent deems
necessary. Agent may request any 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 any Borrower fails
to do so within a reasonable time after Agent's written request, the Agent may
require such Borrower to retain an independent environmental consultant
reasonably acceptable to the Agent to evaluate such Borrower's compliance with
Environmental Laws. If any Borrower refuses to do so, the Agent may retain (at
the Borrowers' 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 any 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 any
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 any Borrower or any other party against, or to inform any 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
Borrowers 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. Each
Borrower understands and agrees that the Agent makes no warranty or
representation to such Borrower or any other party regarding the truth, accuracy
or completeness of any such report or findings that may be disclosed. Each
Borrower also understands that depending on the results of any site visit,
observation or testing by the Agent and disclosed to such Borrower, such
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 such Borrower without advice or assistance from the
Agent. In each instance, the Agent will give the applicable 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 any Borrower's use of the Premises or any
other property in exercising any rights provided hereunder.
<PAGE>
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records. Each of the Borrowers 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). Each 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. Each 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. Each of the Borrowers 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 Borrowers 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 consolidated
and unaudited consolidating balance sheets, and consolidated and consolidating
statements of income and expense, cash flow and of stockholders' equity for the
Borrowers 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 Borrowers 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 Borrowers
and reasonably satisfactory to the Agent. The Borrowers, 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 Borrowers hereby
authorize the Agent to communicate directly with their certified public
accountants and, by this provision, authorize those accountants to disclose to
the
<PAGE>
Agent any and all financial statements and other supporting financial documents
and schedules relating to the Borrowers and to discuss directly with the Agent
the finances and affairs of the Borrowers.
(b) As soon as available, but in any event not later
than thirty (30) days after the end of each fiscal month, unaudited consolidated
and consolidating balance sheets of the Borrowers as at the end of such month,
and unaudited consolidated and consolidating statements of income and expense
and cash flow for the Borrowers 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
Borrowers 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). Forstmann 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 Borrowers' 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 consolidated and consolidating
balance sheets of the Borrowers as at the end of such quarter, and unaudited
consolidated and consolidating statements of income and expense and statement of
cash flows for the Borrowers 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
Borrowers 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). Forstmann 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 Forstmann (i) setting forth in reasonable detail the calculations
required to establish that the Borrowers were in compliance with the covenants
set forth in
<PAGE>
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 Borrowers 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 Borrowers are, at the date of
such certificate, in compliance in all material respects with all of their
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 Borrowers have taken or propose 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 of the Borrowers, annual forecasts
(to include consolidated and consolidating forecasted balance sheets, statements
of income and expenses and statements of cash flow) for the Borrowers 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 any Borrower.
(h) Promptly upon the filing thereof, copies of all
reports, if any, to or other documents filed by any Borrower with the Securities
and Exchange Commission under the Exchange Act, and all reports, notices, or
statements sent or received by any Borrower to or from the holders of any equity
interests of any Borrower (other than routine non-material correspondence sent
by shareholders of any Borrower to such Borrower) or of any Debt for Borrowed
Money of any 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 any Borrower's receipt thereof, a copy of all management
reports and management letters prepared for such Borrower by Deloitte & Touche
LLP or any other independent certified public accountants of such Borrower.
(j) Promptly after filing with the IRS, a copy of each
tax return filed by any 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
<PAGE>
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 any Borrower, including, without limitation, projections of
future operations, information relating to the Plan of Reorganization and all
claims and proceedings in connection therewith, and information relating to the
acquisition by FAI of substantially all of the assets of Arenzano and BBC.
7.3 Notices to the Lenders. Each 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 such Borrower or of any Debt that a
default exists with respect thereto or that such 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 such 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 such 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 such Borrower which could reasonably be expected to have a Material
Adverse Effect.
(g) Immediately after receipt of any written notice of
any violation by such Borrower of any Environmental Law which could reasonably
be expected to have a Material Adverse Affect or that any Governmental Authority
has asserted that such Borrower thereof is not in compliance in any material
respect with any Environmental Law or is investigating such Borrower's
compliance therewith other than routine and ordinary inspections.
(h) Immediately after receipt of any written notice
that such Borrower is or may be liable to any Person as a result of
<PAGE>
the Release or threatened Release of any Contaminant or that such 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
such Borrower.
(j) Any change in such Borrower's name, state of
incorporation, or form of organization, trade names under which such 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 such 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 such
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 such 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 such 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) such Borrower has
knowledge or should have knowledge that any changes in the benefits of any
existing ERISA Plan have increased such 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 such Borrower or any ERISA Affiliate
was not previously contributing; or (iii) any failure by such Borrower or any
ERISA
<PAGE>
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 such 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 any Borrower
or any ERISA Affiliate, as applicable, has taken or proposes to take with
respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each 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. Such 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. Such 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 such Borrower, and constitute
the legal, valid and binding obligations of such Borrower, enforceable against
it in accordance with their respective terms. Such 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 such Borrower by reason of the terms of (a) any material
contract, mortgage, Lien, lease, agreement, indenture, or instrument to which
such Borrower is a party or which is binding upon them, (b) any Requirement of
Law applicable to such Borrower, or (c) the certificate or articles of
incorporation or by-laws of such Borrower as each has been amended pursuant to
the Plan of Reorganization or otherwise, 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
<PAGE>
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 such Borrower and all third parties.
8.3 Organization and Qualification. Such 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, such 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 such Borrower of such Borrower's
Subsidiaries and other Affiliates. Each of such Borrower's Subsidiaries is (a)
duly incorporated and organized and validly existing in good standing under the
laws of its state of incorporation set forth on Schedule 8.5, and (b) qualified
to do business as a foreign corporation and in good standing in the
jurisdictions set forth opposite its name on Schedule 8.5, which are the only
states in which such qualification is necessary in order for it to own or lease
its property and conduct its business.
8.6 Projections; Balance Sheet. (a) The Latest Projections when
submitted to the Lenders as required herein represent the Borrowers' best
estimate of the future financial performance of the Borrowers for the periods
set forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrowers believe are fair and
reasonable in light of current and reasonably foreseeable business conditions at
the time submitted to the Lenders.
(b) [Intentionally omitted.]
(c) The unaudited consolidated and consolidating
balance sheet of the Borrowers as of August 2, 1998, attached hereto as Schedule
8.6(c), presents fairly and accurately the Borrowers' financial condition as at
such date assuming the
<PAGE>
transactions contemplated hereby and in the Acquisition Order and Bill of Sale
had occurred on such date and the Closing Date had been on such Date, and has
been prepared in accordance with GAAP.
8.7 Capitalization. On the Closing Date and after giving effect to the
consummation of the transactions contemplated hereby and in the Acquisition
Order and Bill of Sale, (i) Forstmann'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 has been distributed to holders of "allowed
general unsecured claims" pursuant to the Plan of Reorganization; and (ii) FAI's
authorized capital stock consists of 100 shares of common stock, par value $0.01
per share, all of which approximately are owned by Forstmann.
8.8 Solvency. The Borrowers on a consolidated basis taken as a whole
are Solvent prior to and after giving effect to the assumption of their
liability under this Agreement and the making of any Revolving Loans to be made
on the Closing Date and the issuance of any Letter of Credit to be issued on the
Closing Date, and shall remain Solvent on a consolidated basis during the term
of this Agreement.
8.9 Debt. After giving effect to the Term Loans, in the case of
Forstmann, and the Revolving Loans to be made and to the issuance of the Letters
of Credit to be issued on the Closing Date, in the case of both Borrowers, such
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 such Borrower.
8.11 Title to Property. Such Borrower has good and marketable title in
fee simple to its real property listed in Schedule 8.12 hereto, and such
Borrower has good, indefeasible, and 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 such Borrower as of the Closing Date,
all leases and subleases of real or personal property by such Borrower as lessee
or sublessee, and all leases and subleases of real or personal property by such
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.
<PAGE>
8.13 Proprietary Rights. Schedule 8.13 sets forth a correct and
complete list of all of such 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 such 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 such Borrower's business.
8.14 Trade Names and Terms of Sale. All trade names under which such
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 such 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. Such 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 such Borrower can reasonably foresee, could reasonably be expected to
materially and adversely affect, the property, business, operations, or
condition (financial or otherwise) of such 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
such 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 such Borrower or for any similar
purpose, and (d) there is no pending or (to the best of such Borrower's
knowledge) threatened, strike, work stoppage, material unfair labor practice
claim, or other material labor dispute against or affecting such Borrower or its
employees.
8.18 Environmental Laws. Except as otherwise disclosed on
Schedule 8.18:
(a) Such Borrower has complied in all material
respects with all Environmental Laws applicable to its Premises and business,
and neither such Borrower nor any of its present Premises or operations, nor, to
the best of such 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
<PAGE>
or (ii) any potential liabilities and costs or remedial action arising from the
Release or threatened Release of a Contaminant.
(b) Such Borrower has obtained all material permits
necessary for its current operations under Environmental Laws, and all such
permits are in good standing and such Borrower is in compliance in all material
respects with all terms and conditions of such permits.
(c) Neither such Borrower nor, to the best of such
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) Such 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 such
Borrower's knowledge, past operations of such 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 such
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) Such 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) Such 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 such 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 such Borrower contains asbestos containing material.
<PAGE>
(j) No Environmental Lien has attached to any Premises
of such Borrower.
8.19 No Violation of Law. Such 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. Such Borrower is not in default with respect to any
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to
which such 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 such Borrower, nothing has occurred which would cause the loss
of such qualification. Such Borrower and each ERISA Affiliate of such Borrower
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
such 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 such Borrower nor any ERISA Affiliate of such Borrower 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 such Borrower nor any
ERISA Affiliate of such Borrower 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, such 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
<PAGE>
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 such Borrower nor any Person
controlling such Borrower is an "Investment Company" within the meaning of the
Investment Company Act of 1940. Such 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 such Borrower to fund the
Plan of Reorganization, to pay the fees and expenses of such Borrower in
connection with this Agreement and the transactions contemplated hereby, for the
acquisition by FAI of substantially all of the assets of Arenzano and BBC, and
for general working capital and corporate purposes. Such 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. Such 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 such Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by such 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 such 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) of this Agreement. On the basis of a comprehensive review and assessment
undertaken by such Borrower of Borrower's computer applications and inquiry made
of such Borrower's material suppliers, vendors and customers such Borrower
reasonably believes that the "Year 2000 problem" (that is, the risk that
computer applications used by any person may be unable to recognize and perform
properly date sensitive functions involving certain dates prior to and any date
after December 31, 1999) will not result in a Material Adverse Effect.
8.27 Full Disclosure. None of the representations or
warranties made by such Borrower in the Loan Documents as of the
<PAGE>
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 such Borrower in connection with the Loan Documents
(including the offering and disclosure materials delivered by or on behalf of
such 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 such 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 such 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, such
Borrower of this Agreement, any other Loan Document, or the Bill of Sale, except
for filings necessary to perfect the Agent's Lien on the Collateral.
8.31 Acquisition. The Acquisition Order has become a Final Order,
remains in full force and effect, and has not been revoked, vacated or otherwise
modified or amended.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each 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. Such 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, that such Borrower need not pay any tax, fee, assessment, governmental
charge, Debt, claim or other indebtedness that (i) it is contesting in good
faith by
<PAGE>
appropriate proceedings diligently pursued and (ii) that such 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
such Borrower for any and all Liens in an amount greater than $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. Such 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 such Borrower's property, business, operations, prospects, or condition
(financial or otherwise).
9.3 Compliance with Law and Agreements; Maintenance of Licenses. Such
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). Such 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. Such 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. Such 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) Such 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, such 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. Such 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) Such 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
<PAGE>
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 such 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 such 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 such 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) Such 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 such 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) such 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 for all Borrowers in any Fiscal Year or $2,500,000 in
the aggregate for all Borrowers 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 such 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.
<PAGE>
9.6 Condemnation. (a) Such 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 such 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 such 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 such 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) Such 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. Such 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,
such 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 such Borrower and its
communications with any Governmental Authority to determine whether such
Borrower is proceeding reasonably to correct, cure or contest in good faith any
alleged non-compliance or environmental
<PAGE>
liability. Such Borrower shall, at the Agent's or the Majority Lenders' request
and at such Borrower's expense, (a) retain an independent environmental engineer
acceptable to the Agent to evaluate such 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. Such 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, such 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 for (i) sales of Inventory
in the ordinary course of its business, (ii) sales or other dispositions of
Equipment in the ordinary course of business that are obsolete or no longer
useable such Borrower in its business as permitted by Section 6.11 and (iii)
sales of Accounts, which are not Eligible Accounts as a result of being past
due, to CIT pursuant to the CIT Agreements.
9.10 Distributions; Capital Change; Restricted Investments. Such
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. Such Borrower
shall not enter into any transaction which would be reasonably expected to have
a Material Adverse Effect.
9.12 Guaranties. The Borrowers shall not make, issue, or become liable
on any Guaranty, except (i) Guaranties of the Obligations in favor of the Agent,
(ii) Guaranties by FAI in connection with or relating to sales of Inventory on a
guaranteed
<PAGE>
sale, sale and return, sale on approval, consignment, or other repurchase or
return basis, provided that (A) it is for promotional purposes and in the
ordinary course of its business, and (B) the value of such Inventory is included
in the Promotional Reserve for FAI, (iii) Guaranties by FAI made to Solo Credit
International Corp. in that certain Guarantee dated May 28, 1998, and (iv)
Guaranties of the obligations of any other Person aggregating no more than
$1,000,000 in the aggregate for all Borrowers, for all such Persons at any time
outstanding.
9.13 Debt. Such 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 such 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,
(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, and (e) Debt of a Borrower owing to any other Borrower.
9.14 Prepayment. (a) The Borrowers shall prepay $1,500,000 of Term
Loans on the first date following the Closing Date on which any Interest Period
ends, and the Agent is authorized to charge the Borrowers' Loan Accounts the sum
of $1,500,000 as a Revolving Loan on such date and apply such amount as a
prepayment to the Term Loan with such prepayment to be applied as set forth in
Section 4.5(b).
(b) No Borrower shall 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 set forth below, such
Borrower shall not, and shall not permit any of its Subsidiaries to, (a) 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), except (i) actual expenses incurred and
approved in advance in writing by the Agent, and (ii) management fees payable by
FAI to Forstmann, to any Affiliate, or (b) lend or advance money or property to
any Affiliate (except as permitted in Section 9.13(e)), 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 the
ordinary course of business and in accordance with
<PAGE>
past practice so long as not otherwise prohibited hereunder. Notwithstanding the
foregoing or anything to the contrary in any other Loan Document, if no Event of
Default has occurred and is continuing or would result, such Borrower and its
Subsidiaries may engage in transactions of the type referred to in clauses (a)
and (b) of this Section 9.15 in the ordinary course of business, in amounts and
upon terms fully disclosed to the Agent, and no less favorable to such Borrower
or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a third party who is not an Affiliate; provided, that no
intercompany debt so permitted shall be evidenced by a note or other instrument
(other than the promissory notes listed on Schedule 9.15) unless such note or
instrument (in form and substance satisfactory to the Agent) is simultaneously
delivered to the Agent (together with instruments of transfer, opinions and all
other documents which may be requested by the Agent, all in form and substance
satisfactory in all respects to the Agent) upon creation thereof and the Agent
shall at all times be satisfied in its pledge of and first priority perfected
security interest therein; provided further, that no such debt evidenced by such
note or instrument (other than the promissory notes listed on Schedule 9.15) may
be paid without the prior written consent of the Agent; provided further, that
the amount of Debt owing by FAI to Forstmann shall not at any time exceed
$7,000,000.
9.16 Investment Banking and Finder's Fees. Such 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. Such Borrower shall defend
and indemnify the Agent and the Lenders against and hold them harmless from all
claims of any Person that such 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. Such Borrower shall not engage directly or
indirectly, in any line of business other than the businesses in which such
Borrower is engaged on the date hereof; 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. Such 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. Such Borrower shall not, directly
or indirectly, enter into any arrangement with any Person providing for such
Borrower to lease or rent property that such 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).
<PAGE>
9.20 Subsidiaries. With the exception of the creation and establishment
by Forstmann of FAI no Borrower shall, directly or indirectly, organize, create,
acquire or permit to exist any Subsidiary.
9.21 Fiscal Year. Such Borrower shall not change its Fiscal
Year.
9.22 Capital Expenditures; MIS Expenditures.
(a) Such Borrower shall not make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by the Borrowers would in the aggregate exceed (i) $5,000,000
during the Fiscal Year ending on November 2, 1998, (ii) $6,500,000 during the
Fiscal Year ending on November 2, 1999 or (iii) $5,000,000 during any subsequent
Fiscal Year; provided, however, that in the event that all or any part of such
permitted aggregate amount is not utilized by the Borrowers during any Fiscal
Year, such unutilized amount may be added to the limit in respect of any
subsequent year or years; provided further, that in no event shall the aggregate
amount of all Capital Expenditures by the Borrowers exceed $11,000,000 during
the two-year period ending on November 2, 1999.
(b) Such Borrower shall not make or incur any MIS
Expenditure, if after giving effect thereto, the aggregate amount of all MIS
Expenditures by the Borrowers would in the aggregate exceed (i) $1,500,000
during the Fiscal Year ending on November 2, 1998, (ii) $1,500,000 during the
Fiscal Year ending on November 2, 1999 or (iii) $500,000 during any other Fiscal
Year.
9.23 Operating Lease Obligations. The Borrowers 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 Borrowers in
any Fiscal Year in respect of such lease and all other such leases would in the
aggregate exceed $4,000,000 (such amount being referred to herein as "Permitted
Rentals") on a consolidated basis. 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 Borrowers will maintain Adjusted
Tangible Net Worth for all Borrowers, determined as of the last day of each
fiscal quarter, of not less than the following amounts, on a consolidated basis,
during the following periods of time:
<PAGE>
Fiscal Quarter Ending Amount
- --------------------- ------
July 1998 EDATNW minus
$1,300,000
October 1998 EDATNW minus
$3,900,000
January 1999 EDATNW minus
$7,300,000
April 1999 EDATNW minus
$3,000,000
July 1999 EDATNW minus
$2,100,000
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, on a consolidated basis for all Borrowers, 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 1998 1.99
October 1998 1.40
January 1999 1.55
April 1999 1.60
July 1999 2.20
October 1999 (and any fiscal 2.50
quarter thereafter)
9.26 Fixed Charge Coverage Ratio. The Borrowers will maintain a Fixed
Charge Coverage Ratio, on a consolidated basis for all Borrowers, 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 1998 0.60
October 1998 0.20
January 1999 0.15
April 1999 0.25
July 1999 0.50
October 1999 0.65
January 2000 (and any fiscal
quarter thereafter) 1.1
9.27 Use of Proceeds. Such 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 such 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
<PAGE>
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, such 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. Such 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.
9.30 Minimum EBITDA. FAI shall not permit its EBITDA to be less than
(i) $0 for the period from November 2, 1998 through May 2, 1999; (ii) $1,000,000
for the Fiscal Year ending on October 31, 1999; and (iii) $0 for the period from
November 1, 1999 through April 30, 2000.
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Effectiveness of Agreement. The
effectiveness of this Agreement is 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 each 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 such
Borrower before or on the Closing Date.
(b) [Intentionally omitted.]
(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) With the exception of any default described in
Section 15.21, no Default or Event of Default under either the Original Loan
Agreement or this Agreement 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 each 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.
<PAGE>
(f) [Intentionally omitted.]
(g) [Intentionally omitted.]
(h) The Agent shall have received an ALTA title
policy, or at the Agent's discretion, a bringdown of 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 copies of the
Acquisition Order certified by the Bankruptcy Court and the Bill of Sale
certified by an officer of the Borrowers in form and substance satisfactory to
the Agent.
(j) [Intentionally omitted.]
(k) The Agent shall have received 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 Closing Date).
(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) [Intentionally omitted.]
(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) Each 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 each 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.
<PAGE>
(r) All proceedings taken in connection with the
transactions contemplated by this Agreement, all other Loan Documents, the Plan
or Reorganization, the Acquisition Order, the Bill of Sale 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 any Borrower of any Loans made on the Closing Date
shall be deemed to be a representation and warranty made by such 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 any Revolving Loans on the Closing Date, 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 any 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
<PAGE>
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 Aggregate Availability and the Availability for any Borrower shall be
sufficient to make such Revolving Loan without exceeding the Aggregate
Availability and the Availability for such Borrower, respectively, 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).
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 any Borrower in this Agreement or in any of the other Loan Documents, any
Financial Statement, or any certificate furnished by any 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) any 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 such 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 any 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 any 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
<PAGE>
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 any 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) any 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 any 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 such Borrower shall have been entered in such proceeding;
(i) a receiver, assignee, liquidator, sequestrator,
custodian, monitor, trustee or similar officer for any 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 such Borrower and such appointment continues or such warrant,
execution or similar process is not released, vacated or fully bonded for sixty
(60) days;
(j) any 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
<PAGE>
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 any
Borrower shall be nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such property or of any 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 any 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 any Borrower occurs which materially
and adversely affects the property, business, operation, prospects, or condition
of such Borrower;
(o) there occurs a Material Adverse Effect;
(p) there is filed against any 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 any 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) any Borrower or any ERISA
Affiliate shall fail to pay when due, after the expiration of
<PAGE>
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 one or more sales, transfers or
other dispositions of Capital Stock of any Borrower, or securities convertible
into or exchangeable for such Capital Stock, or rights to acquire such Capital
Stock, to one or more purchasers, or 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 such 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 such Borrower; or
(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.
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 any Borrower: (i) reduce the Maximum Revolver
Amount, or the advance rates against Eligible Accounts and/or Eligible Inventory
used in computing the Aggregate Availability and the Availability of such
Borrower, or reduce one or more of the other elements used in computing the
Aggregate Availability and the Availability of such Borrower; (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 any 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 any 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 such Borrower shall, upon the Agent's
<PAGE>
demand, at the Borrowers' 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, each 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 such 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 such 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 any
Borrower. In the event the Agent seeks to take possession of all or any portion
of the Collateral by judicial process, each 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. Each 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, each 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 each
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 applicable Borrower and the Borrowers shall remain liable for any
deficiency.
(c) If an Event of Default occurs, each 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
<PAGE>
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 each
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, each 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).
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
any 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 Borrowers 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
any Borrower therefrom, shall be effective unless the same shall be in writing
and signed by the Agent and each 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 any 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 each 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,
<PAGE>
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. [Intentionally omitted.]; 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 any
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
Forstmann 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
each Borrower and the Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an
<PAGE>
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 Forstmann and the Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to Forstmann
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 any
Borrower or the performance or observance by any 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.
<PAGE>
(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, each 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 any 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 Borrowers 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 Borrowers
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
<PAGE>
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 Code
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 no Borrower shall have any 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
Aggregate Availability and the Availability of any Borrower, (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
<PAGE>
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 any Borrower or any
Affiliate of any 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 any 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 any Borrower or any Borrower's
Affiliates.
14.4 Reliance by Agent. (a) 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 any 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
<PAGE>
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
any 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 any
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 each
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 Borrowers. 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 each 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 any 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
Borrowers and without limiting the obligation of the Borrowers 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
<PAGE>
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 Borrowers. 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 any 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 any
Borrower or its Affiliates (including information that may be subject to
confidentiality obligations in favor of such 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 Borrowers. 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 Borrowers, 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. (a) 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
<PAGE>
the Code, such Lender shall deliver to the Agent and each of the
Borrowers:
(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 Borrowers 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 Borrowers 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 Borrowers 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 Borrowers 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
<PAGE>
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 the Borrowers 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 applicable 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 applicable Borrower owned no interest at the time the Lien was granted
or at any time thereafter; (iv) constituting property leased to the applicable
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 any 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 applicable Borrower, the Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release
<PAGE>
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 applicable Borrower in respect of) all interests
retained by such 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 any
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:
Bank of America NT&SA
1850 Gateway Blvd.
Concord, CA 04520
ABA No. 121000358
For account of: BankAmerica
Business Credit Inc.
Account No. 12353-03848
For credit to: Forstmann & Company, Inc.
<PAGE>
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.
14.14 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 Borrowers 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
<PAGE>
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 BORROWERS, THE
AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, 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 ANY 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) EACH 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 SUCH 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 BORROWERS, 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 BORROWERS, 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,
<PAGE>
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
15.5 Survival of Representations and Warranties. All of each 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. Each Borrower jointly and severally 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 Mortgages, 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 any Borrower under the Loan Documents that such 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 any 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
<PAGE>
for and consultations concerning any such matters). The Borrowers jointly and
severally agree 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 any Borrower. All of the
foregoing costs and expenses shall be charged to the applicable 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 LLP
200 Park Avenue
New York, New York 10166
Attention: Alan M. Christenfeld, Esq.
Telephone: (212) 878-8000
Telecopy: (212) 878-8375
<PAGE>
If to any Borrower:
c/o Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York 10036
Attention: Rod Peckham, Executive Vice President
Telephone: (212) 642-6900
Telecopy: (212) 642-6942
with copies to:
Christy & Viener
Rockefeller Center
620 Fifth Avenue
New York, New York 10020-2457
Attention: Laurence S. Markowitz, Esq.
Telephone: (212) 632-5514
Telecopy: (212) 307-3314
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,
each 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 any Borrower
which the Agent or any Lender may elect to give shall entitle such 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 any 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) Each Borrower jointly and severally 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
<PAGE>
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 no Borrower shall
have any 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) Each Borrower jointly and severally 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 any Borrower's property or
operations or property leased to any 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. (a) 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 any Borrower or any accounts of any 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 any
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.
<PAGE>
(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 any 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 Borrowers and will rely significantly upon the Borrowers' books
and records, as well as on representations of the Borrowers' 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 any Borrower,
<PAGE>
or the indemnifying Lender's participation in, or the indemnifying Lender's
purchase of, a loan or loans of any 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 any 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 each 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 each 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 each 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, any Lender or any 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.
15.19 Signatures by Telecopy. The parties hereto agree that signed
faxed documents delivered in connection with this Agreement and the Loan
Documents (other than the Term Notes and Letters of Credit) shall be deemed to
be of the same force and effect as an original of a manually signed copy.
15.20 Joint and Several Liability. The liability of
Borrowers for all of the Obligations shall be joint and several
<PAGE>
regardless of which Borrower actually receives loans or other extensions of
credit hereunder or the amount of such loans received or the manner in which
Lender accounts for such loans or other extensions of credit or on its books and
records. Each Borrower's Obligations with respect to Term Loans or Revolving
Loans made to it or Letters of Credit issued for its account, and related fees,
costs and expenses, and each Borrower's Obligations arising as a result of the
joint and several liability of any Borrower hereunder, with respect to Term
Loans or Revolving Loans made to any other Borrower hereunder or Letters of
Credit issued for the account of any other Borrower hereunder, together with the
related fees, costs and expenses, shall be separate and distinct obligations,
all of which are primary obligations of each Borrower.
Each Borrower's Obligations arising as a result of the joint and
several liability of any Borrower hereunder with respect to loans or other
extensions of credit made to any other Borrower hereunder shall, to the fullest
extent permitted by law, be unconditional irrespective of (i) the validity of
enforceability, avoidance or subordination of the Obligations of such other
Borrower or of any promissory note or other document evidencing all of any part
of the Obligations of such other Borrower, (ii) the absence of any attempt to
collect the Obligations from any other Borrower, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by the Lenders with respect to any provision of any instrument evidencing the
Obligations of any other Borrower, or any part thereof, or any other agreement
now or hereafter executed by any other Borrower and delivered to the Lenders,
(iv) the failure by the Agent to take any steps to perfect and maintain its
security interest in, or to preserve its rights to, any security or collateral
for the Obligations of any other Borrower, (v) the Lenders' election, in any
proceeding instituted under the Bankruptcy Code, of the application of Section
1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by any other Borrower, as debtor-in-possession under Section 364 of the
Bankruptcy Code, (vii) the disallowance of all or any portion of the Lenders'
claim(s) for repayment of the Obligations of any other Borrower under Section
502 of the Bankruptcy Code, or (viii) any other circumstance which might
constitute a legal or equitable discharge or defense of a guarantor or of any
other Borrower.
Each Borrower hereby irrevocably agrees that it will not bring any
"claims" (as defined in Section 101(5) of the Bankruptcy Code) against any other
Borrower to which such Borrower is or would at any time be otherwise entitled by
virtue of its obligations under this Agreement or under any of the Loan
Documents, including, without limitation, any right of subrogation (whether
contractual, under Section 509 of the Bankruptcy Code or otherwise),
reimbursement, contribution, exoneration or other similar right against such
other Borrower, until such time as all of the Obligations have been satisfied in
full and this Agreement shall have terminated in accordance with its terms.
Upon any Event of Default, the Agent may, at its sole election, proceed
directly and at once, without notice, against any
<PAGE>
Borrower to collect and recover the full amount, or any portion of the
Obligations, without first proceeding against any other Borrower or any other
Person, or against any security or collateral for the Obligations. Each Borrower
consents and agrees that neither the Agent nor any Lender shall be under any
obligation to marshall any assets in favor of such Borrower or against or in
payment of any or all of the Obligations.
15.21 Waiver of Default. Subject to the satisfaction of the conditions
precedent to the effectiveness of this Agreement set forth in Article 10, the
Lenders hereby waive any and all Events of Default under the Original Loan
Agreement arising solely by reason of the establishment by Forstmann of FAI as a
wholly-owned subsidiary and the acquisition by FAI of substantially all of the
assets of Arenzano and BBC.
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
Borrowers
---------
FORSTMANN & COMPANY, INC.
By: /s/Rodney J. Peckham
------------------------
Name: Rodney J. Peckham
Title: EVP & CFO
FORSTMANN APPAREL, INC.
By: /s/ Rodney J. Peckham
----------------------------
Name: Rodney J. Peckham
Title: EVP & CFO
Agent
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/Louis Alexander
-------------------------
Name: Louis Alexander
Title: VP
<PAGE>
Lenders
Revolving Credit BANKAMERICA BUSINESS CREDIT,
Commitment: $33,898,000.00 INC., as a Lender
Term Loan
Commitment: $12,552,000.00 By: /s/Louis Alexander
--------------------------
Name: Louis Alexander
Title: VP
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 Seindenwar
--------------------------
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
Commitment: $18,249,500.00 SERVICES, INC., as a Lender
Term Loan
Commitment: $6,750,500.00 By: /s/Jeffrey Heller
-------------------------
Name: Jeffrey Heller
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 BUSINESS CREDIT
Commitment: $7,301,500.00 CORPORATION, as a Lender
Term Loan
Commitment: $2,698,500.00 By: /s/James M. Steffy
--------------------------
Name: James M. Steffy
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
Commitment: $4,052,000.00 By: /s/Cyril Prince
-------------------------
Name: Cyril Prince
Title: 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
Commitment: $7,301,500.00 ASSOCIATION, as a Lender
Term Loan
Commitment: $2,698,500.00 By: /s/Peter H. Schryver
----------------------------
Name: Peter H. Schryver
Title: Vice President
c/o PNC Business Credit
Two Tower Center
8th Floor
East Brunswick, NJ 08816
Attention: William P. Gennario
Telephone: (908) 220-4314
Telecopy: (908) 220-4399
<PAGE>
EXHIBIT A
FORM OF TERM NOTE
<PAGE>
EXHIBIT A
FORM OF TERM LOAN NOTE
FORSTMANN & COMPANY, INC.
FORSTMANN APPAREL, INC.
TERM LOAN NOTE
--------, -----
New York, New York
FOR VALUE RECEIVED, FORSTMANN & COMPANY, INC., a
Georgia corporation and FORSTMANN APPAREL, INC., a New York corporation
(collectively the "Borrower"), hereby unconditionally promises to pay to the
order of ____________________ (the "Lender") the principal amount of
_______________________________ DOLLARS ($________) or, if less, the outstanding
principal amount owed by the Borrower to the Lender with respect to the Term
Loan made by the Lender to the Borrower under the Loan Agreement (as defined
below). Unless otherwise required to be paid sooner pursuant to the provisions
of either Sections 4.5 or 12.1 of the Loan Agreement, the principal indebtedness
evidenced hereby shall be payable in thirty six (36) consecutive installments as
follows: (i) each of the first thirty five (35) installments shall be in the
amount of $__________ and shall be payable monthly on the last Business Day of
each month commencing on _________, ____ and (ii) the final installment shall be
made on _______, ____ and shall be in the amount necessary to pay in full the
unpaid principal amount hereof and all accrued interest thereon.
The Borrower also promises to pay interest on the
unpaid principal amount borrowed hereunder from the date advanced until paid at
the rate and at the times which shall be determined in accordance with the
provisions of the Amended and Restated Loan and Security Agreement dated as of
September 14, 1998 (as amended, modified or otherwise supplemented, the "Loan
Agreement"), among the Borrower, Forstmann Apparel, Inc., the financial
institutions from time to time parties thereto named as Lenders (the "Lenders")
and BankAmerica Business Credit, Inc., as agent for the Lenders (in such
capacity, the "Agent"). Terms defined in the Loan Agreement not otherwise
defined herein are used herein with the meanings so defined.
This Term Note is one of the Term Notes issued pursuant
to, and entitled to the benefits of, the Loan Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Term Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of
this Term Note shall be made to the Agent at such account and place in New York,
New York as the Agent may from time to time designate in writing to the Borrower
or at such other location as the Agent may from time to time designate in
writing to the Borrower, in lawful money of the United States of America in
same-day funds.
<PAGE>
This Term Note may be prepaid at the option of Borrower
as provided in Section 4.4 of the Loan Agreement and must be prepaid as provided
in Section 4.5 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS TERM NOTE SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK.
Upon the occurrence of any one or more of certain
Events of Default, the unpaid balance of the principal amount of this Term Note
may become, and upon the occurrence and continuation of any one or more of
certain other Events of Default, such unpaid balance may be declared to be, due
and payable in the manner, upon the conditions and with the effect provided in
the Loan Agreement.
No reference herein to the Loan Agreement and no
provision of this Term Note, the Loan Agreement or any of the other Loan
Documents shall alter or impair the obligation of the Borrower, which is
absolute and unconditional, to pay the principal of and interest on this Term
Note at the place, at the respective times, and in the currency herein
prescribed.
The Borrower promises to pay all costs and expenses,
including reasonable attorneys' fees and disbursements, incurred in the
collection and enforcement of this Term Note or any appeal of a judgment
rendered thereon all in accordance with the provisions of the Loan Agreement.
The Borrower hereby waives diligence, presentment, protest, demand and notice of
every kind except as required pursuant to the Loan Agreement and waives to the
full extent permitted by the law the right to plead any statute of limitations
as a defense to any demands hereunder.
IN WITNESS WHEREOF, the Borrower has caused this Term
Note to be executed and delivered by its duly authorized officer, as of the day
and year and at the place first above written.
FORSTMANN & COMPANY, INC.
By:
Name:
Title:
FORSTMANN APPAREL, INC.
By:
Name:
Title:
<PAGE>
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<PAGE>
Schedule B to Note
LIBOR RATE LOANS AND REPAYMENT OF LIBOR RATE LOANS
<PAGE>
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
<PAGE>
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
FORSTMANN & COMPANY, INC.
Borrowing Base Certificate for the week ended ______________. Page 1 of 5.
<PAGE>
ACCOUNTS RECEIVABLE:
Gross Accounts Receivable
a Less: Dated Accounts >245 days from invoice date or 30 days past
due
b All other Accounts > 120 days from invoice date or 60 days past
due
c Bankrupt/Disputed accounts
d Cross Aging 50%
e Foreign Accounts not covered by L/C's
f Affiliate/Subsidiary Accounts
g Contra Accounts
h Government Accounts > $4.0MM
I Accounts in excess of 15% of total Gross A/R balance (Kellwood
30%)
j Credit balances in (a) and (b)
k Chargebacks net of ineligibles in (a) and (b)
l Service Charges net of ineligibles in (a) and (b)
m Other
n Other
o Other
Total Ineligible A/R
Eligible A/R
Available @ 85%
Less: Available bill & hold > $15.0MM (calculated using same method
as above)
Total Available Accounts Receivable
ACCOUNTS RECEIVABLE SUMMARY
Total Dating Accounts Receivable included in above total Total
Bill & Hold Accounts Receivable included in above total
ACCOUNTS RECEIVABLE ROLLFORWARD
Gross Accounts Receivable prior borrowing base certificate
Plus: Gross billings current period
Less: Cash collections current period
Less: Credits current period
Less: Other adjustments current period
Total Gross Accounts Receivable current period (agrees to amount
in (a)
<PAGE>
FORSTMANN & COMPANY, INC.
.
Borrowing Base Certificate for the week ended ______________.
Page 2 of 5.
INVENTORY (FIFO Basis)
Gross Raw Materials
Less: Dyes and Chemicals
Material at Outside Processors
Supplies
Market Reserve
Other
Total Ineligibles
Total Eligible
Available @ 65%
Gross Work in Process (Yarn)
Less: Work in Process (Yarn) >$12.0MM
Material at Outside Processors
Supplies
Market Reserve
Other
Total Ineligibles
Total Eligible
Available @ 50%
Gross Work in Process (Greige Goods)
Less: Work in Process (Greige Goods) > $15.0MM
Material at Outside Processors
Market Reserve
Other
Other
Total Ineligibles
Total Eligible
Available @ 65%
Gross Finished Goods
Less: Finished Goods > $12.0MM
Material at Outside Processors
Samples
Market Reserve
Other
Total Ineligibles
Total Eligible
Available @ 65%
Total Eligible Letter of Credit Inventory
Available @ 55%
Total Available Inventory as calculated above
Inventory Cap: $30.0MM less Forstmann Apparel Available Inventory
Total Available Inventory
Total Available Collateral (accounts plus inventory plus letter
of credit)
Less : Availability Reserve:
Total Net Availability
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE INFORMATION SET FORTH ABOVE IS
TRUE AND COMPLETE. THE UNDERSIGNED GRANTS A SECURITY INTEREST IN THE COLLATERAL
REFLECTED ABOVE TO BANK AMERICA BUSINESS CREDIT, INC. AND REPRESENTS AND
WARRANTS THAT SAID
<PAGE>
COLLATERAL COMPLIES WITH REPRESENTATIONS, WARRANTIES AND COVENANTS CONTAINED IN
THE LOAN AND SECURITY AGREEMENT BETWEEN BANK AMERICA BUSINESS CREDIT, INC AND
THE UNDERSIGNED.
AUTHORIZED SIGNATURE & DATE: _____________________________ ____________
TITLE: _____________________________
<PAGE>
FORSTMANN & COMPANY, INC.
Forstmann Apparel, Inc.
Borrowing Base Certificate for the week ended ______________.
Page 3 of 5.
ACCOUNTS RECEIVABLE:
Gross Accounts Receivable
Less: Accounts > 90 days from invoice date or >60 days past due
Chargebacks/debit memos in current
Credit balances in past due
Bankrupt/Disputed accounts
Cross Aging 50%
Foreign Accounts not covered by L/C's
Affiliate/Subsidiary Accounts
Contra Accounts
Government Accounts
Concentration Cap
Other
Total Ineligible A/R
Eligible A/R
Available @ 80%
ACCOUNTS RECEIVABLE ROLLFORWARD
Gross Accounts Receivable prior borrowing base certificate
Plus: Gross billings current period
Less: Cash collections current period
Less: Credits current period
Less: Other adjustments current period
Total Gross Accounts Receivable current period
<PAGE>
FORSTMANN & COMPANY, INC.
Forstmann Apparel, Inc.
Borrowing Base Certificate for the week ended ______________.
Page 4 of 5.
INVENTORY (FIFO Basis)
Gross Raw Materials
Less: Material at Outside Processors
Trim Inventory
Inventory > one season
Other
Total Ineligibles
Total Eligible
Available @ 50%
Gross Work in Process (all ineligible)
Gross Finished Goods
Less: Material at Outside Processors
Samples
Inventory from previous season
Defective/returned/ rework inventory
Other
Total Ineligibles
Total Eligible
Available @ 65%
Total Eligible Letter of Credit Inventory: Raw materials
Available @ 45%
Total Eligible Letter of Credit Inventory: Finished Goods
Available @ 55%
Total Available Inventory as calculated above
Inventory Cap $4.0MM
Total Available Inventory
Total Available Collateral (accounts plus inventory plus letter
of credit)
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE INFORMATION SET FORTH ABOVE IS
TRUE AND COMPLETE. THE UNDERSIGNED GRANTS A SECURITY INTEREST IN THE COLLATERAL
REFLECTED ABOVE TO BANK AMERICA BUSINESS CREDIT, INC. AND REPRESENTS AND
WARRANTS THAT SAID COLLATERAL COMPLIES WITH REPRESENTATIONS, WARRANTIES AND
COVENANTS CONTAINED IN THE LOAN AND SECURITY AGREEMENT BETWEEN BANK AMERICA
BUSINESS CREDIT, INC AND THE UNDERSIGNED.
AUTHORIZED SIGNATURE & DATE: _____________________________ ____________
TITLE: _____________________________
<PAGE>
FORSTMANN & COMPANY, INC.
Borrowing Base Certificate for the week ended ______________.
Page 5 of 5.
Availability Summary
Total Available Accounts Receivable: Forstmann Inc.
Total Available Accounts Receivable: Forstmann Apparel, Inc.
Total Available Inventory: Forstmann Inc.
Total Available Inventory: Forstmann Apparel, Inc.
Inventory Availability Cap $30.0MM
Total Available Inventory
Total Available Collateral (Accounts receivable plus Inventory)
Loan summary
Forstmann Inc.
Total direct borrowings
Total merchandise letters of credit:
Total standby letter of credit
Total loan
Forstmann Apparel, Inc.
Total direct borrowings
Total merchandise letters of credit:
Total standby letter of credit
Total loan (sublimit: $12.0MM)
Less : Availability Reserve:
Total Net Availability
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE INFORMATION SET FORTH ABOVE IS
TRUE AND COMPLETE. THE UNDERSIGNED GRANTS A SECURITY INTEREST IN THE COLLATERAL
REFLECTED ABOVE TO BANK AMERICA BUSINESS CREDIT, INC. AND REPRESENTS AND
WARRANTS THAT SAID COLLATERAL COMPLIES WITH REPRESENTATIONS, WARRANTIES AND
COVENANTS CONTAINED IN THE LOAN AND SECURITY AGREEMENT BETWEEN BANK AMERICA
BUSINESS CREDIT, INC AND THE UNDERSIGNED.
AUTHORIZED SIGNATURE & DATE: _____________________________ ____________
TITLE: _____________________________
<PAGE>
EXHIBIT C
[Intentionally omitted.]
<PAGE>
EXHIBIT D
LIST OF CLOSING DOCUMENTS
<PAGE>
FORSTMANN & COMPANY, INC.
FORSTMANN APPAREL, INC.
September 14, 1998
LIST OF CLOSING DOCUMENTS
As used below:
Agent = BankAmerica Business Credit, Inc.
BABC
AT&T = AT&T Commercial Finance Corporation
Borrowers = Company and Subsidiary
CIT = The CIT Group/Commercial Services,
Inc.
Company = Forstmann & Company, Inc.
CV = Christy & Viener
GECC = General Electric Capital
Corporation
IBJ = IBJ Schroder Bank and Trust Company
LBC = La Salle Business Credit Inc.
Lenders = AT&T, BABC, CIT, IBJ, LBC and PNC
Lockbox Bank = Citibank, N.A.
PNC = PNC Bank, National Association
R&W = Rogers & Wells
SSN = State Street Bank and Trust Company
Subsidiary = Forstmann Apparel, Inc.
Title Company = Chicago Title Insurance Company
<PAGE>
Responsible Party
A. Basic Documents
1. Amended and Restated Loan and Security R&W
Agreement with Exhibits and Schedules
Exhibits
A - Form of Term Note R&W
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
B - Form of Borrowing Base Certificate Agent/Borrowers
C - [Intentionally Omitted]
D - List of Closing Documents R&W
E - Form of Notice of Borrowing R&W
F - Form of Notice of Conversion/ Continuation R&W
G - Form of Assignment and Acceptance R&W
Agreement
H - Form of Subsidiary Pledge Agreement R&W
(Accounts Receivable Notes)
I - Form of Company Pledge Agreement (Accounts R&W
Receivable Notes)
J - Form of Company Pledge Agreement (Shares R&W
of FAI)
<PAGE>
Responsible Party
Responsible Party
Schedules
1.1(a) - Assigned Contracts Borrowers
1.1(b) - Locations of Eligible Inventory Borrowers
1.1(c) - Permitted Liens Borrowers
1.1(d) - Restricted Investments Borrowers
6.3 - Facilities and Locations Borrowers
6.7 - Collateral Reports Agent
8.3 - Jurisdictions of Qualification to do Borrowers
Business
8.4 - Corporate Names Borrowers
8.5 - Affiliates Borrowers
8.6(c) - Balance Sheet Borrowers
8.9 - Debt Borrowers
8.12 - Real Estate Owned or Leased Borrowers
8.13 - Proprietary Rights Borrowers
8.14 - Trade Names Borrowers
8.15 - Litigation Borrowers
8.17 - Labor Matters Borrowers
8.18 - Environmental Law Matters Borrowers
8.21 - ERISA Matters Borrowers
8.22 - Taxes Borrowers
8.28 - Material Agreements Borrowers
8.29 - Bank Accounts Borrowers
9.17 - Management Compensation Borrowers
2. Trademark Security Agreement (Subsidiary) R&W
EXHIBIT R&W
A- Assignment of Trademark and Service
Mark Registrations and Applications
3. Subsidiary Pledge Agreement (Accounts R&W
Receivable)
4. Company Pledge Agreement (Accounts R&W
Receivable)
5. Company Pledge Agreement (Shares in R&W
Subsidiary)
B. Supporting Documents
6. Certificate Regarding Accuracy of Company
Representations and Warranties (Company)
7. Certificate Regarding Absence of any Company
Default or Event of Default (Company)
8. Secretary's Certificate (Company) Company
attaching Resolutions
<PAGE>
Responsible Party
Responsible Party
9. Certificate Regarding Accuracy of Subsidiary
Representations and Warranties
(Subsidiary)
10. Certificate Regarding Absence of any Subsidiary
Default or Event of Default (Subsidiary)
11. Good Standing Certificates for the Subsidiary
Subsidiary
a. [to be provided]
12. Certificates of Incorporation and of Subsidiary
Qualification to Do Business (Subsidiary)
a. [to be provided]
13. Secretary's Certificate (Subsidiary) to Subsidiary
which is attached:
a. By-Laws
b. Resolutions
c. Certificate of Incumbency
C. Legal Opinions
14. Opinion of C&V C&V
D. Security Matters
15. Results of lien searches R&W
Subsidiary:
a. UCC1-financing statements filed in
the following jurisdictions:
Department of State, Florida Baldwin County, Georgia
Chatham County, Georgia Clay County, Georgia Clerks
Cooperative Authority, Georgia Jefferson County,
Georgia Laurens County, Georgia Secretary of State,
New Jersey Department of State, New York New York
County, New York
<PAGE>
Responsible Party
Responsible Party
16. Financing statements (Subsidiary) R&W
a. UCC1-financing statements filed in
the following jurisdictions:
Department of State, Florida
Laurens County, Georgia
Secretary of State, New Jersey
Department of State, New York
New York City Register, New York
17. Financing Statements (Company) R&W
a. UCC-3 Amendments to financing
statements have been filed in the
following jurisdictions:
Laurens County, Georgia Secretary of State, New
Jersey Bergen County, New Jersey Department of State,
New York New York City Register, New York Secretary
of State, North Carolina Burke County, North Carolina
Chowan County, North Carolina Davison County, North
Carolina Edgecombe County, North Carolina
18. Warehouse receipts covering any portion of Borrowers
the Collateral located in warehouses and
for which warehouse receipts are issued
19. Certificates of title covering any portion Borrowers
of the Collateral for which certificates
of title have been issued
20. Landlord Waivers (Subsidiary) Subsidiary
F. Miscellaneous
21. Evidence of insurance with standard R&W/
insurance endorsement lender's loss Borrowers
payable clause (Agent form)
22. Certified copy of the Order of the Borrowers
Bankruptcy Court Authorizing Sale and
Acquisition
23. Certified copy of the Bill of Sale for the Borrowers
Acquisition
24. Governmental approvals and consents Borrowers/C&V
25. Lockbox Agreement (Subsidiary) [or Lockbox Bank
amendment]
<PAGE>
EXHIBIT E
NOTICE OF BORROWING
Date: ____________, ____
To: BankAmerica Business Credit, Inc. as Agent for the Lenders who are
parties to the Amended and Restated Loan and Security Agreement dated
as of September 14, 1998 (as extended, renewed, amended or restated
from time to time, the "Loan and Security Agreement") among Forstmann &
Company, Inc., Forstmann Apparel, Inc., certain Lenders which are
signatories thereto and BankAmerica Business Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned, ___________________________ ("Forstmann"), on behalf
of the borrower identified in item 1 below (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 Borrower for the proposed Borrowing is
--------------------.
2. The Business Day of the proposed Borrowing is _________, ____.
3. The aggregate amount of the proposed Borrowing is ___________.
4. The Borrowing is to be comprised of $____________ of Base Rate
Loans and $____________ of LIBOR Rate Loans.
5. 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 each 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
for the Borrower or the Aggregate Availability for all Borrowers (with the
Availability for this purpose calculated as if the Aggregate Revolver
Outstandings were zero) or the combined Commitments of the Lenders.
<PAGE>
FORSTMANN & COMPANY, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE>
EXHIBIT F
NOTICE OF CONVERSION/CONTINUATION
Date: ____________, ____
To: BankAmerica Business Credit, Inc. as Agent for the Lenders to the
Amended and Restated Loan and Security Agreement dated as of September
14, 1998 (as extended, renewed, amended or restated from time to time,
the "Loan and Security Agreement") among Forstmann & Company, Inc.,
Forstmann Apparel, Inc., certain Lenders which are signatories thereto
and BankAmerica Business Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned, ___________________________ ("Forstmann"), on behalf
of all of the Borrowers under the Loan and Security Agreement, 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 Borrower of the Loans referenced herein is ________.
2. The Conversion/Continuation Date is ____________, ____.
3. The aggregate amount of the Loans to be [converted] [continued] is
$------------ .
4. The Loans are to be [converted into] [continued as] [LIBOR Rate] [Base
Rate] Loans.
5. 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 each 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
Aggregate Availability or the Availability of the Borrower or the combined
Commitments of the Lenders.
FORSTMANN & COMPANY, INC.
<PAGE>
By: __________________________
Name: ________________________
Title: _______________________
<PAGE>
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 Amended and Restated
Loan and Security Agreement dated as of September 14, 1998 (as amended, amended
and restated, modified, supplemented or renewed, the "Credit Agreement") among
Forstmann & Company, Inc., a Georgia corporation ("Forstmann"), Forstmann
Apparel, Inc., a New York corporation ("FAI") (each of the foregoing,
individually a "Borrower" and, collectively, the "Borrowers"), 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 maintaining Term Loans to (the
"Committed Loans"), and purchasing participations in Letters of Credit and
Credit Support issued for the account of, the Borrowers in an aggregate amount
not to exceed $__________ (the "Commitment");
WHEREAS, the Assignor has made Committed Loans in the aggregate
principal amount of $__________ to the Borrowers;
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
<PAGE>
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 Borrowers, and such other documents and
<PAGE>
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 Borrowers
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 Borrowers 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 Borrowers 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 Borrowers prior to the time that the Agent or Borrowers 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
<PAGE>
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 Borrowers, or the performance or observance by the Borrowers, of any of
their 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
<PAGE>
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 Borrowers 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]
<PAGE>
By:
Name:
Title:
By:
Name:
Title:
Address:
[ASSIGNEE]
By:
Name:
Title:
By:
Name:
Title:
Address:
<PAGE>
PLEDGE AGREEMENT
between
FORSTMANN APPAREL, INC.
a New York Corporation
and
BANKAMERICA BUSINESS CREDIT, INC.,
a Delaware corporation, as Agent
This Pledge Agreement ("Agreement") is made and entered into
as of September 14, 1998, by Forstmann Apparel, Inc., a New York corporation
("Pledgor"), in favor of BankAmerica Business Credit, Inc., a Delaware
corporation, as Agent ("Pledgee").
Preliminary Statement.
A. Pledgor, Forstmann & Company, Inc. ("Forstmann"), Pledgee,
in its capacity as agent, and the lenders from time to time parties thereto (the
"Lenders") will enter into that certain Amended and Restated Loan and Security
Agreement dated as of September 14, 1998 (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 and Forstmann.
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:
a. 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
<PAGE>
hereof, it shall promptly, but in no event later than five Business 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 Account Debtors to the name of Pledgee or to the name of Pledgee's
nominee.
b. 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.
c. 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).
<PAGE>
d. 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.
e. 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.
f. 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 Account Debtor
(including, without limitation, the issuance of additional shares of preferred
or common stock of any Account Debtor 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
<PAGE>
terms of this Agreement in the same manner as the Collateral originally pledged
under this Agreement.
g. 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.
h. 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 Pledgee 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.
i. 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
<PAGE>
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.
j. 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.
k. 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.
l. 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.
m. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
<PAGE>
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.
n. 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.
o. 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.
p. 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.
q. 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.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Pledgee have executed this
Agreement as of this 14th day of September, 1998.
FORSTMANN APPAREL, INC., as Pledgor
By: /s/Rodney J. Peckham
---------------------------
Name: Rodney J. Peckham
Title: EVP & CFO
BANKAMERICA BUSINESS
CREDIT, INC., as Agent, as Pledgee
By: /s/Louis Alexander
-----------------------------
Name: Louis Alexander
Title: VP
<PAGE>
Schedule 1
to
Agreement
Form of Endorsement Separate from Note
ENDORSEMENT
FOR VALUE RECEIVED, Forstmann Apparel, Inc. ("Forstmann")
hereby assigns and transfers unto BankAmerica Business Credit, Inc., as Agent
("Agent") under that certain Amended and Restated Loan and Security Agreement
dated as of _________, 1998 entered into among Forstmann, Forstmann & Company,
Inc., 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 APPAREL, INC.
By:_______________________
Name:
Title:
In presence of:
- -------------------------
<PAGE>
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:
r. 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 Business Days after
receipt thereof, deliver the same, accompanied by appropriate Powers or
Endorsements, as applicable, affixed thereto or thereon, to the Pledgee or its
<PAGE>
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.
s. 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.
t. 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).
u. 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
<PAGE>
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.
v. 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.
w. 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.
<PAGE>
x. 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.
y. 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 Pledgee 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.
z. 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
<PAGE>
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.
aa. 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.
bb. 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.
cc. 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.
dd. 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
<PAGE>
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.
ee. 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.
ff. 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.
gg. 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
hh. 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.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Pledgee have executed this
Agreement as of this 23th day of July, 1997.
FORSTMANN & COMPANY, INC., as Pledgor
By: /s/Rodney J. Peckham
----------------------------
Name: Rodney J. Peckham
Title: EVP & CFO
BANKAMERICA BUSINESS
CREDIT, INC., as Agent, as Pledgee
By: /s/Louis Alexander
------------------------------
Name: Louis Alexander
Title: Vice President
<PAGE>
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:
- -------------------------
<PAGE>
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 September 14, 1998, 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, Forstmann Apparel, Inc. ("FAI"), Pledgee, in its
capacity as agent, and the lenders from time to time parties thereto (the
"Lenders") will enter into that certain Amended and Restated Loan and Security
Agreement dated as of September 14, 1998 (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 and FAI. Capitalized
terms used and not defined herein shall have the meanings assigned to such terms
in the Loan Agreement.
B. FAI is a wholly-owned subsidiary of Pledgor.
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:
ii. Pledge. Pledgor hereby pledges and grants security
interests to Pledgee in all of its right, title and interest in and to
securities consisting of capital stock (collectively, the "Stock") of FAI,
accompanied by stock powers duly executed in blank (the "Powers") (said Stock,
Powers 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 Stock after the date hereof,
it shall promptly, but in no event later than five Business Days after receipt
thereof, deliver the same, accompanied by appropriate Powers, 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 Pledgor to the name of Pledgee or to the name
of Pledgee's nominee.
<PAGE>
jj. 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.
kk. 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).
ll. Representations and Covenants. Pledgor warrants and
represents that Pledgor is (or, in the case of any and all Stock delivered after
the date hereof, will be) the sole owner, free and clear of all liens, claims
security interests and encumbrances of the 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
<PAGE>
encumbrances (except those held by Pledgee) of 100% of the 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,
and (d) the Powers are (or, in the case of Stock delivered after the date
hereof, the Powers will be) duly executed and give, or will give, as the case
may be, Pledgee the authority such Powers purport to confer.
mm. 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.
nn. 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 FAI (including, without
limitation, the issuance of additional shares of preferred or common stock of
FAI 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.
oo. 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.
pp. 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
<PAGE>
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 Pledgee 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.
qq. 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, 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
<PAGE>
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.
rr. 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.
ss. 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.
tt. 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.
uu. 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.
vv. 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.
ww. 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.
xx. 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.
<PAGE>
yy. 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.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Pledgee have executed this
Agreement as of this 14th day of September, 1998.
FORSTMANN & COMPANY, INC., as Pledgor
By: /s/Rodney J. Peckham
----------------------------
Name: Rodney J. Peckham
Title: EVP & CFO
BANKAMERICA BUSINESS
CREDIT, INC., as Agent, as Pledgee
By: /s/Louis Alexander
------------------------------
Name: Louis Alexander
Title: VP
<PAGE>
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.; Forstmann Apparel, Inc.
Ladies and Gentlemen:
We refer to the Amended and Restated Loan and Security Agreement dated
as of September 14, 1998 (as amended, amended and restated, modified,
supplemented or renewed from time to time the "Credit Agreement") among
Forstmann & Company, Inc. ("Forstmann"), Forstmann Apparel, Inc. ("FAI") (each
of the foregoing, individually a "Borrower" and, collectively, the "Borrowers"),
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 or maintained 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: (___) ______________________
<PAGE>
(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:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
ACKNOWLEDGED AND ACCEPTED:
BankAmerica Business Credit, Inc,
as Agent
By:
Name:
Title:
<PAGE>
FORSTMANN APPAREL, INC.
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") made as of the
14th day of September, 1998, by and between FORSTMANN APPAREL, INC., a New York
corporation, with an office at [_______________] ("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, Forstmann & Company, Inc., the lenders
from time to time party thereto (the "Lenders"), and the Agent are parties to
that certain Amended and Restated 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
<PAGE>
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
corresponding 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
<PAGE>
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 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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 14th day of September, 1998.
FORSTMANN APPAREL, INC.,
a New York corporation
By: /s/Rodney J. Peckham
-----------------------
Name: Rodney J. Peckham
Title: EVP & CFO
ATTEST:
By: /s/Linda A. Harvey
-------------------
Accepted and agreed to as
of the 14th day of
September, 1998, by:
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/Louis Alexander
-----------------------
Name:Louis Alexander
Title:VP
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
The foregoing Trademark Security Agreement was executed and
acknowledged before me this 14th day of September, 1998, by Rodney J. Peckham,
personally known to me to be the EVP & CFO of Forstmann Apparel, Inc., a New
York corporation, on behalf of such corporation.
(SEAL)
/s/Katherine E. Tew
--------------------
Notary Public
NY County, NY
My commission expires:March 30, 2000
<PAGE>
EXHIBIT A
ASSIGNMENT OF TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS
WHEREAS, Forstmann Apparel, Inc. ("Assignor"), a New York
corporation with an address at [_________________] 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
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: __________ __,
ATTEST:
- --------------------
Name: FORSTMANN APPAREL, INC.
By:
Name:
Title:
<PAGE>
LEASE SURRENDER AGREEMENT
AGREEMENT, dated as of August 31, 1998, between 1155 AVAMER
REALTY CORP., a New York corporation having an office at 1155 Avenue of the
Americas, New York, New York 10036 ("Landlord") and FORSTMANN & COMPANY, INC., a
Georgia corporation having an office at 1155 Avenue of the Americas, New York,
New York 10036 ("Tenant").
W I T N E S S E T H:
WHEREAS, by that certain Lease dated as of January 31, 1995 (the
"Original Lease"), as amended by a First Amendment to Lease, dated as of
December 27, 1995 (the Original Lease, as so amended, the "Lease"), Landlord
leased to Tenant the entire fourth (4th) floor and a portion of the third (3rd)
floor in the building known as 1155 Avenue of the Americas, New York, New York
(the "Premises") on the terms and conditions set forth therein; and
WHEREAS, Landlord and Tenant simultaneously with the execution
of the Lease entered into a Lease Takeover Agreement (the "Lease Takeover
Agreement") with respect to Tenant's leased premises at 1185 Avenue of the
Americas, New York, New York; and
WHEREAS, by that certain Sublease dated as of August 8, 1997
(the "Sublease") Tenant subleased to D.E. Shaw & Co., L.P., as sublessee
("Sublessee"), a portion of the Premises located on the third (3rd) floor (the
"Sublet Space");
WHEREAS, the Sublease has been cancelled and terminated, such
cancellation having been effected by a certain agreement by and between Tenant
and Sublessee (the "Sublease
<PAGE>
Surrender Agreement"), dated as of even date herewith under which the Sublessee
has surrendered all right title and interest in and to the Sublease and the
Sublet Space, and has executed such documents as are necessary to allow Tenant
to prosecute a holdover proceeding against Sublessee, and to stay the delivery
to Tenant of possession of the Sublet Space until March 31, 1999 (such Sublease
Surrender Agreement, including the exhibits thereto, being hereafter referred to
collectively as the "Sublease Surrender Documents");
WHEREAS, Landlord and Tenant mutually desire to cancel and
terminate the Lease as of December 31, 1998 or (if Tenant gives written notice
thereof to Landlord no later than December 1, 1998) January 31, 1999 (the
"Cancellation Date"), subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto hereby covenant and agree as follows:
1. Capitalized terms used, but not defined, herein shall have
the meanings ascribed to them in the Lease.
2. (a) Effective as of the Cancellation Date,
Landlord shall assume all of Tenant's obligations under the
<PAGE>
Sublease and Tenant hereby assigns to Landlord, effective as of such Date, all
of Tenant's right, title and interest in and to the Sublease, the Sublease
Surrender Agreement referenced above, along with all of Tenant's right, title
and interest in and to the Sublet Surrender Documents and any rights of the
Tenant thereunder, including, without limitation, the right to prosecute a
holdover proceeding in accordance with the terms of the Sublease Surrender
Documents. The parties acknowledge that no further documentation is necessary or
required to effectuate the assignment and assumption described in the preceding
sentence.
(b) In part consideration of
Landlord's assumption of Tenant's obligations under the Sublease and the
Sublease Surrender Documents pursuant to Section 2(a), Tenant shall,
simultaneously with the execution of this Agreement, deliver the sum of $112,500
to Landlord's attorneys to be held in escrow until Landlord receives the consent
of its mortgagee to this Agreement as contemplated by Section 11(h) below. In
the event that Landlord receives such consent and has given written notice
thereof to Tenant (together with a copy of mortgagee's consent), Landlord's
attorneys shall release the sum of $112,500 to Landlord on the later of (i)
September 30, 1998 or (ii) that date which is five (5) business days after
Tenant receives such written notice from Landlord or Landlord's designee. In the
event, however, that Landlord shall not receive its mortgagee's consent to this
Agreement within the Mortgagee
<PAGE>
Consent Period (as hereafter defined) and this Agreement is cancelled by either
Landlord or Tenant pursuant to Section 11(h) below, Landlord's attorneys shall
return the $112,500 to Tenant. Landlord shall hold harmless and indemnify Tenant
from and against any and all cost, expense (including reasonable attorneys'
fees) or liability with respect to any and all claims of Sublessee arising out
of, or in connection with, (i) the Sublease which relate to any time on or after
the Cancellation Date, and (ii) the Sublease Surrender Documents whether such
claims arise prior to, on or after the Cancellation Date. Unless Landlord and
Sublessee otherwise agree, Landlord shall pay to Sublessee, on behalf of Tenant,
$100,000 in part consideration for Sublessee's surrender of the Sublet Space on
or before March 31, 1999, provided Sublessee vacates the Sublet Space on or
before that date and has paid all rent and additional rent due and owing to
Landlord through that date in accordance with the Sublease Surrender Documents.
3. Effective as of the Cancellation Date, Tenant does hereby
surrender to Landlord all of its right, title and interest in and to the Lease
and the Premises, together with all non-moveable fixtures, improvements,
installations and appurtenances therein which are required to be surrendered to
Landlord in accordance with the Lease, except as hereinafter provided. As of the
Cancellation Date the Lease shall be canceled and terminated and neither party
shall have any further rights or obligations thereunder or with respect to the
Premises, except as provided herein.
4. On or before the Cancellation Date, Tenant shall vacate the
Premises and surrender the same to Landlord in vacant, broom clean condition,
free of all tenancies and occupancies (except for the Sublease or the occupancy
of the Sublessee thereunder), in accordance with the provisions of the Lease
applicable upon the expiration of the term thereof, together with all keys to
the Premises; provided, however, that Tenant need not remove any alterations
currently installed in the Premises, except as expressly provided in paragraph 6
below.
5. If Tenant fails to so vacate the Premises and deliver
possession thereof (subject to the Sublease and the Sublease Surrender
Documents) to Landlord on or before the Cancellation Date as provided above,
then the Lease shall nevertheless automatically terminate on the Cancellation
Date and Landlord may take all steps necessary under the Lease or by law to
obtain possession of the Premises. Tenant hereby waives service of any notice
required under the Lease or by law and the service of a notice of petition and
petition, and Tenant hereby consents to the entry of an immediate and final
judgment of possession in favor of Landlord against Tenant in the appropriate
Court or other forum with the issuance and execution of the warrant forthwith
and agrees not to seek a stay of, nor appeal, any such judgment, issuance or
execution.
6. Should Tenant fail or refuse to vacate and deliver to
Landlord the Premises (subject to the Sublease and the Sublease Surrender
Documents) on the Cancellation Date, because Landlord's damages shall be
difficult to ascertain under such circumstances and because immediate delivery
of possession of the Premises (subject to the Sublease and the Sublease
Surrender Documents) on such date is of the essence of this Agreement to
Landlord, Landlord, in addition to having the right to institute and maintain
summary proceedings or any other action or proceeding available under the Lease
or this Agreement, or at law or in equity, shall have the right to collect from
Tenant, as and for liquidated damages, one and one-half (1.5) times for the
first 30 days after the Cancellation Date, and two (2) times after such first
thirty (30) days, the amounts which Tenant would have otherwise paid as annual
rent and additional rent (computed on a daily basis based on a 365 day year) for
each and every day, or part thereof, that Tenant remains in possession of the
Premises after the Cancellation Date. The foregoing shall not in any way permit,
or be deemed to authorize, Tenant to remain in possession of the Premises after
the Cancellation Date.
7. Tenant shall on or before the Cancellation Date (i) remove
all of its moveable furniture, furnishings, trade fixtures and equipment
("Tenant's Property") from the Premises, and (ii) remove all internal staircases
from the Premises, and in connection therewith, restore the floor slabs to their
condition immediately prior to the installation of such staircases (including
the reinstallation of any previously removed portions of the floor slab), and
shall repair any damage to the Premises and the Building caused by the
foregoing; provided, however, that Tenant may leave the internal staircases in
the Premises and not restore the floor slabs, in which event, Tenant shall pay
$7,500 to Landlord on December 1, 1998. In the event that Tenant shall not have
fully performed its obligations set forth above on or before the Cancellation
Date, Landlord may without notice after the Cancellation Date perform such
obligations and dispose of Tenant's Property as Landlord sees fit, all without
the incurrence of any liability to Tenant. If Landlord makes any expenditures or
incurs any obligations for the payment of money in connection with the
foregoing, including, but not limited to, attorney's fees in instituting,
prosecuting or defending any action or proceeding, such reasonable sums paid or
reasonable obligations incurred shall be paid by Tenant to Landlord within five
(5) days of rendition of any bill or statement reasonably satisfactory to Tenant
and evidencing the expenditure or obligation made or incurred by Landlord.
8. All rent and additional rent payable under the Lease shall
be apportioned as of the Cancellation Date. If the amount of any such additional
rent, due or prepaid, under the Lease cannot be determined as of the
Cancellation Date, Tenant shall remain liable for the payment of any such
additional rent attributable to the period prior to the Cancellation Date and
through and including the Cancellation Date and Landlord shall refund to Tenant
any such additional rent prepaid by Tenant which is attributable to a period
after the Cancellation Date.
9. Simultaneously with the execution and delivery of this
Agreement, Landlord and Tenant shall execute a Stipu lation of Dismissal in the
form annexed hereto as Exhibit A dis missing with prejudice and without costs to
either party the ad versary proceeding Forstmann & Company, Inc. v. 1155 Avamer
Realty Corp., Adv. Pro. No. 97-9206A, pending in the United States Bankruptcy
Court for the Southern District of New York. The stipulation will be placed in
escrow with Landlord's attorneys. If Landlord receives the consent of its
mortgagee to this Agreement as contemplated by Section 11(h) below, and Landlord
gives written notice thereof to Tenant (together with a copy of mortgagee's
consent), the Stipulation of Dismissal shall be released to Landlord. In the
event, however, that Landlord shall not receive its mortgagee's consent to this
Agreement within the Mortgagee Consent Period and this Agreement is cancel led
by either Landlord or Tenant pursuant to Section 11(h) below,
<PAGE>
Landlord's attorneys shall return the Stipulation of Dismissal to Tenant.
10. As a material inducement to Landlord to enter into this
Agreement, Tenant hereby waives any and all existing and future claims against
Landlord arising out of, or in connection with, the Lease Takeover Agreement, as
well as any and all existing and future claims under the Lease with respect to
the Work Allowance payable by Landlord to Tenant under the Lease. In addition,
Tenant shall hold harmless and indemnify Landlord from and against any and all
cost, expense (including attorneys' fees) or liability with respect to any and
all claims of any current or prior owner of the building known as 1185 Avenue of
the Americas arising out of, or in connection with, the Lease Takeover
Agreement, except for any such claim arising out of or in connection with
negotiations or other discussions or communications between Landlord and the
1185 Landlord on or after September 22, 1995 to which Tenant was not a party.
Landlord agrees that it will not disclose the provisions of this Section 10 to
the 1185 Landlord or have any further negotiations or other communications with
the 1185 Landlord regarding the Lease Takeover Agreement without the prior
consent of Tenant.
11. Tenant hereby represents, warrants and covenants that on
the date of execution and delivery hereof:
(a) Tenant owns the Lease and has the full
corporate right and power to enter into this Agreement;
(b) Tenant has not taken any action which shall, in
any manner, impair the rights, title and interest of Landlord
in and to the Premises except for the Sublease and the
Sublease Surrender Documents;
(c) Except for the Sublease and the Sublease
Surrender Documents, Tenant has not encumbered the Lease, the
Premises or any of the fixtures, improvements, installations
and appurtenances in and to the Premises by any prior
transfer, assignment, mortgage, pledge or lien and it has not
taken any action which could limit its right to cancel and
terminate the Lease and surrender the Premises as provided
herein;
(d) no one, other than Tenant and Sublessee, has
acquired, through or under Tenant, any right, title or
interest in or to the Lease or the term or estate thereby
granted or in or to the Premises.
(e) Tenant is duly incorporated in the State of
Georgia and authorized to do business in the State of New
York; and the person executing this Agreement on behalf of
Tenant is an officer of Tenant, and such officer was duly
authorized to sign and execute this Agreement.
(f) Tenant does not require the approval of the
United States Bankruptcy Court for the Southern District of
New York with respect to its bankruptcy, Case No. 95 B 44190
(JLG), to enter into this Agreement or to pay any
consideration under this Agreement. The foregoing
representations and warranties shall be true and complete as
of the Cancellation Date as a condition precedent to the
performance of Landlord's obligations hereunder.
Landlord hereby represents, warrants and covenants that on the
date of execution and delivery thereof:
(g) Landlord owns the Premises and has the full
corporate right and power to enter into this Agreement
(h) Landlord will seek the consent of its mortgagee
to enter into the Agreement, and if Landlord is unable to
obtain such consent within thirty (30) days from the date
hereof (such thirty (30) day period being the "Mortgagee
Consent Period"), either Landlord or Tenant may cancel this
Agreement.
(i) Landlord is duly incorporated and authorized to
do business in the State of New York; and the person executing
this Agreement on behalf of Landlord is an officer of
Landlord, and such officer was duly authorized to sign and
execute this Agreement. The foregoing representations and
warranties shall be true and complete as of the Cancellation
Date as a condition precedent to the performance of Tenant's
obligations hereunder.
12. Landlord hereby accepts said surrender, and in
consideration of said surrender by Tenant and of the acceptance thereof by
Landlord, and provided Tenant so vacates and delivers possession of the Premises
(subject to the Sublease and the Sublease Surrender Documents) to Landlord as
provided herein, and otherwise complies with all the terms of this Agreement,
Tenant and Landlord do hereby mutually release each other, and their respective
successors and assigns, of and from all claims, demands, actions and causes of
action of every kind and nature whatsoever arising out of the Lease, except that
nothing herein contained shall be deemed to constitute a release or discharge of
Tenant with respect to (i) third party claims with respect to the Lease or the
Premises (including without limitation any claims by Sublessee relating to any
time prior to the Cancellation Date), (ii) any obligation or liability incurred
under the Lease which remains outstanding and unsatisfied on the Cancellation
Date, including, but not limited to, any rents, additional rents, escalation and
other charges then due or thereafter becoming due under the Lease for any period
up to and including the Cancellation Date and (iii) any obligation or liability
under this Agreement.
13. Tenant represents, covenants and warrants that it has had
no dealings or communications with any broker or agent in connection with this
Agreement other than Cushman & Wakefield, Inc. (the "Broker"), and Tenant
further covenants and agrees to pay all commissions and other compensation, if
any, payable to the Broker in connection herewith. Tenant shall indemnify
Landlord and hold Landlord harmless from and against any and all cost, expense
(including attorneys' fees) or liability for any compensation, commissions or
charges claimed by any broker or agent engaged by Tenant (including without
limitation the Broker) with respect to this Agreement or the negotiation
thereof.
14. Landlord represents, covenants and warrants that it has
had no dealings or communications with any broker or agent in connection with
this Agreement other than the Broker, and Landlord further covenants and agrees
to pay all commissions and other compensation, if any, payable to any broker
whom Landlord engaged in connection herewith other than the Broker. Landlord
shall indemnify Tenant and hold Tenant harmless and against any and all cost,
expense (including attorneys' fees) or liability for any compensation,
commissions or charges claimed by any broker or agent engaged by Landlord (other
than the Broker) with respect to this Agreement or the negotiation thereof.
15. Provided that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this Agreement,
the Security Deposit currently held by Landlord shall be returned to Tenant on
the Cancellation Date and surrender of entire possession of the Premises to
Landlord in accordance with the terms of this Agreement.
16. The representations, warranties and covenants contained in
this Agreement shall survive and inure to the benefit of and be binding upon
Landlord and Tenant and their respective successors and assigns.
17. Any notices, demands or instructions which Landlord or
Tenant may be required or permitted to give under this Agreement shall be in
writing addressed as follows:
If to Landlord:
1155 AVAMER Realty Corp.
1133 Avenue of the Americas
New York, New York 10036
Attn: Mr. Douglas D. Durst
With a copy sent by facsimile to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022
Attn: Robert M. Safron, Esq.
Fax No. (212) 750-9022
If to Tenant:
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, New York 10036
Attn:
With a copy sent by facsimile to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: George E.B. Maguire, Esq.
Fax no. (212) 909-6836
Such notice, demand or instructions, shall be deemed sufficiently or properly
given if: (a) addressed to Landlord or Tenant as specified above and delivered
to Landlord or Tenant at their above respective offices; and (b) sent by fax on
that same day to the receiving party's attorneys at the facsimile number set
forth above. The time of the giving of such a notice, demand or instructions
shall be deemed to be the time when the same is so delivered to Landlord or
Tenant, whichever the case may be.
18. Tenant shall pay any and all real estate transfer taxes of
any kind or nature whatsoever arising in connection with the execution and
delivery of this Agreement and/or the acceptance hereof by Landlord. Landlord
agrees to cooperate with Tenant in connection with the filing of any returns
with respect to such taxes and to notify Tenant promptly upon receipt of any
notice of demand with respect to such taxes.
19. All prior agreements and understandings between the
parties hereto are merged herein and this Agreement shall not be modified or
terminated orally.
20. This Agreement shall be deemed made in and governed by the
laws of the State of New York.
21. Notwithstanding anything herein to the contrary, this
Agreement is submitted to Tenant on the understanding that it shall not be
considered an offer and shall not bind Landlord in any way until (i) Tenant has
duly executed and delivered duplicate originals to Landlord and (ii) Landlord
has executed and unconditionally delivered one of said originals to Tenant and
the mortgagee (if required) and lessor of the Over Lease (if required) shall
consent thereto in writing.
22. This Agreement may not be modified orally but only by a
writing signed by the party against whom enforcement thereof is sought. Waivers
of any terms or conditions of this Agreement must be in writing, signed by the
party against whom such waiver is sought to be enforced. No waiver by either
party of any breach hereunder shall be deemed a waiver of any other or
subsequent breach.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Agreement as of the day and year first above written.
1155 AVAMER REALTY CORP.
By:/s/Douglas Durst
---------------------
Name: Douglas Durst
Title: President
FORSTMANN & COMPANY, INC.
By: /s/ Rodney J. Peckham
------------------------
Name: Rodney J. Peckham
Title: EVP & CFO
AGREED AND ACCEPTED (as to the provisions of Articles 2 and 9):
RICHARDS & O'NEIL, LLP
By:/s/ Robert M. Safron
---------------------
Partner:
<PAGE>
EXHIBIT A
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
In re: :
FORSTMANN & COMPANY, INC., :
:
Debtor. : Chapter 11
: Case No. 95 B 44190 (JLG)
- -----------------------------------X
FORSTMANN & COMPANY, INC., :
:
Plaintiff, : Adv. Pro. No. 97-9206A
: STIPULATION OF DISMISSAL
- - against - :
:
1155 AVAMER REALTY CORP., :
:
Defendant. :
- -----------------------------------X
It is hereby stipulated and agreed that the within
adversary proceeding be, and it hereby is, dismissed with
prejudice and without costs to either party.
Dated: New York, New York
July __, 1998
DEBEVOISE & PLIMPTON RICHARDS & O'NEIL, LLP
By:___________________________ By:________________________
George E. B. Maguire (GM3218) Edward M. Fox (EF1619)
Attorneys for Plaintiff Attorneys for Defendant
Forstmann & Company, Inc. 1155 Avamer Realty
875 Third Avenue 885 Third Avenue
New York, New York 10022 New York, New York 10022-4873
(212) 909-6000 (212) 207-1200
SO ORDERED:
- -------------------------------
U.S.B.J.
Exhibit 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
Forstmann & Company, Inc.:
We have reviewed the accompanying consolidated condensed financial statements of
Forstmann & Company, Inc. (the "Company") for the following periods:
Period(s) Covered
Financial Statements Reorganized Company Predecessor Company
- -------------------- ------------------- -------------------
Consolidated Condensed August 2, 1998
Balance Sheet
Consolidated Condensed Thirteen and Thirty-Nine Period from
Statement of Operations Weeks Ended August 2, 1998 November 4, 1996 to
and period from July 23, 1997 July 22, 1997 and
to August 3, 1997 period from July 22,
1997 and May 4, 1997
to July 22, 1997
Consolidated Condensed Thirty-Nine Weeks Ended Period from
Statement of Cash Flows August 2, 1998 and period November 4, 1996 to
from July 23, 1997 July 22, 1997
to August 3, 1997
Consolidated Condensed Thirty-Nine Weeks Ended
Statement of Changes in August 2, 1998
Shareholders' Equity
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 consolidated condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of the Company as of November 2, 1997 and the
related statements of operations, shareholders' equity, and cash flows for the
period from November 4, 1996 to July 22, 1997 of the Predecessor Company and the
period from July 23, 1997 to November 2, 1997 of the Reorganized Company (not
presented herein); and in our report dated December 19, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of November
2, 1997 is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
Deloitte & Touche LLP
Atlanta, Georgia
September 4, 1998 (September 14, 1998 as to Note 8)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule containes financial information extracted from Forstmann &
Company, Inc.'s condensed financial statements for the thirty-nine weeks ended
August 2, 1998 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-01-1998
<PERIOD-START> May-03-1998
<PERIOD-END> Aug-02-1998
<CASH> 118
<SECURITIES> 0
<RECEIVABLES> 47,316
<ALLOWANCES> 1,096
<INVENTORY> 48,272
<CURRENT-ASSETS> 95,335
<PP&E> 28,501
<DEPRECIATION> 6,598
<TOTAL-ASSETS> 120,089
<CURRENT-LIABILITIES> 16,644
<BONDS> 56,726
0
0
<COMMON> 44
<OTHER-SE> 46,675
<TOTAL-LIABILITY-AND-EQUITY> 120,089
<SALES> 117,638
<TOTAL-REVENUES> 117,638
<CGS> 104,444
<TOTAL-COSTS> 104,444
<OTHER-EXPENSES> 9,933
<LOSS-PROVISION> 638
<INTEREST-EXPENSE> 4,915
<INCOME-PRETAX> (3,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,018)
<DISCONTINUED> 80
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,938)
<EPS-PRIMARY> 0
<EPS-DILUTED> (.90)
</TABLE>
