UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 27, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 1-9734
ONEITA INDUSTRIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 57-0351045
- ------------------------------- --------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) (Identification No.)
4130 FABER PLACE DRIVE, SUITE 200, CHARLESTON, SC 29405
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(803) 529 - 5225
--------------------------------------------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing for
the past 90 days.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 9,149,339 shares of Common
Stock as of January 30, 1998.
<PAGE>
FORM 10-Q
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION (Unaudited)
---------------------
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets at
December 27, 1997 and September 27, 1997 .............. 1
Condensed Consolidated Statements of Operations for
the Three Months Ended December 27, 1997 and
December 28, 1996 ...................................... 2
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended December 27, 1997
and December 28, 1996 ................................ 3
Notes to Condensed Consolidated Financial Statements .. 4
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations ............ 6
PART II - OTHER INFORMATION
-----------------
Item 1: Legal Proceedings ............................. 12
Item 2: Changes in Securities ......................... 12
Item 3: Defaults upon Senior Securities ............... 12
Item 4: Submission of Matters to a Vote of Security
Holders ....................................... 12
Item 5: Other Information ............................. 12
Item 6: Exhibits and Reports on Form 8-K .............. 12
Signature ............................................... 13
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
------------ -------------
(Unaudited)
(Note 1)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 1,585 $ 1,654
Accounts receivable, less
allowance for doubtful accounts 9,506 17,200
Inventories (Note 2) 28,436 31,214
Prepaid expenses and other
current assets 1,649 1,024
-------- --------
Total current assets 41,176 51,092
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization 31,848 32,733
OTHER ASSETS 2,856 3,152
-------- --------
$ 75,880 $ 86,977
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Long-term debt in technical default,
classified as current $ 70,654 $ 70,654
Current portion of long-term debt
and capital leases 1,405 1,405
Accounts payable 3,832 4,117
Accrued liabilities 17,170 17,511
-------- --------
Total current liabilities 93,061 93,687
CAPITAL LEASE OBLIGATIONS 1,615 2,032
SHAREHOLDERS' EQUITY:
Preferred Stock, Series I, par
value $1.00 per share, 2,000,000
shares authorized, none issued -- --
Common Stock, $.25 par value,
15,000,000 shares authorized,
9,149,339 shares issued and
outstanding at December 27, 1997
and September 27, 1997 2,287 2,287
Other shareholders' equity (21,083) (11,029)
-------- --------
$ 75,880 $ 86,977
======== ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
December 27, December 28,
1997 1996
------------ -----------
<S> <C> <C>
Net sales $ 26,342 $ 33,897
Cost of sales 31,227 34,639
-------- --------
Gross profit (loss) (4,885) (742)
Selling, general and administrative
expenses 3,153 3,288
--------- --------
Loss from operations (8,038) (4,030)
Interest expense 2,016 1,880
--------- --------
Loss before provision for
income taxes (10,054) (5,910)
Benefit for income taxes -- --
--------- --------
Net loss $ (10,054) $ (5,910)
========= ========
Net loss per share (Note 3) $ (1.10) $ (.65)
======= ======
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
December 27, December 28,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(10,054) $(5,910)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 1,357 1,633
Provision for losses on accounts receivable 120 17
Consolidation charges (1,048) --
Net change in assets and liabilities 10,266 8,659
-------- --------
Net cash provided by operating activities 641 4,399
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (317) (559)
Proceeds from sale of property, plant
and equipment 24 510
-------- --------
Net cash used in investing activities (293) (49)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt and capital
lease obligations (417) (1,950)
-------- --------
Net cash used in financing activities (417) (1,950)
-------- --------
NET INCREASE (DECREASE) IN CASH (69) 2,400
CASH AT BEGINNING OF PERIOD 1,654 9,135
-------- --------
CASH AT END OF PERIOD $ 1,585 $ 11,535
======== ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited) (In thousands, except share data)
(1) Basis of Presentation -
---------------------
Oneita Industries, Inc. (the Company) manufactures and markets high quality
activewear including T-shirts and fleecewear, and infantswear primarily for the
newborn and toddler markets. These products are marketed to the imprinted
sportswear industry and to major retailers.
The accompanying consolidated financial statements have been prepared on the
basis of accounting principles applicable to a going concern and contemplates
the realization of assets and the settlement of liabilities and commitments in
the normal course of business. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
The Company incurred a net loss of $40,656 for the year ended September 27,
1997. Market pressures that resulted in reduced sales volumes and prices and
operating losses during the year ended September 27, 1997 are continuing in
fiscal 1998. Management's operating plans include continued close monitoring of
costs and concentrating the manufacturing and sales efforts on a more profitable
product mix. In September 1997, the Company announced a plan to consolidate
certain of its operations in order to further lower its costs and make its
operations more efficient. The consolidation involves the closing of one
facility, the write down to estimated fair value of certain excess production
equipment and the shift of more assembly operations to existing offshore
facilities.
At December 27, 1997, the Company was and continues to be in non-compliance
with certain terms of its long-term revolving credit agreement, a loan agreement
with an institutional lender, and subordinated notes held by Robert M. Gintel.
Mr. Gintel resigned as Chairman of the Board and as a director of the Company on
August 8, 1997. These obligations, $57,000, $6,154 and $7,500 in principal
amount, respectively, have been classified as current liabilities. The Company
has entered into agreements with its lenders to restructure these agreements
through the pre-negotiated Chapter 11 case discussed below. These obligations,
which aggregate $70,654, plus accrued interest and fees, will be exchanged for;
1) payment of $15,000 in cash, 2) the issuance of various notes totaling $38,500
and 3) 79.75% of the outstanding Common Stock of the Company.
On January 23, 1998, the Company filed a Chapter 11 petition with the
United States Bankruptcy Court for the District of Delaware under Chapter 11 of
<PAGE>
the Bankruptcy Code together with a Plan of Reorganization implementing the
restructuring with its lenders (the "Plan"). Prior to the filing, the holders of
the debt mentioned in the preceding paragraph entered into agreements with the
Company agreeing, among other things, to cooperate with the Company in
implementing the Plan. A hearing to consider approval of a Disclosure Statement
is scheduled for March 13, 1998 and a hearing to consider confirmation of the
Plan is scheduled for April 29, 1998. The Company has obtained permission from
the Bankruptcy Court to continue to pay most pre-petition claims held by trade
creditors in order to avoid any disruption in its business. In addition, the
Company has obtained interim authority from the Bankruptcy Court to continue to
use cash collateral and to borrow up to $5,000 from Foothill Capital Corp. under
a Debtor-in-Possession Facility. A hearing to consider final approval of the
cash collateral stipulation with certain of its lenders and to borrow an
additional $5,000 under the Debtor-in-Possession Facility with Foothill Capital
Corp. is scheduled for February 26, 1998. The Debtor-in-Possession Facility is
secured by a pledge of certain property, plant and equipment. The Company
estimates that it will emerge from these Bankruptcy Proceedings before June 30,
1998. However, there can be no assurance that the Plan will be confirmed by the
Bankruptcy Court or that other events will not occur in the bankruptcy case
affecting the Company's ability to implement the Plan. If either of these events
take place, a non-negotiated Chapter 11 is likely to occur. The Company has a
commitment from Foothill Capital Corp. for a new revolving credit facility
pursuant to which financing will be available upon emergence from Chapter 11
Proceedings. This facility will permit the borrowing of up to $35,000 based upon
availability under a borrowing base formula (estimated to be $25,000 at date of
emergence) and will be secured primarily by accounts receivable and inventory.
Of the $38,500 restructured debt, $37,500 consist of senior notes that are
due in three years and bears interest at 12%. The interest accrues but is not
paid in cash for the first two years of the note term, except that interest
payments in the first two years as well as note principal prepayments may be
triggered upon the Company achieving certain targets. The senior notes will be
secured by the pledge as collateral of certain property, plant and equipment.
The remaining $1,000 of restructured debt will consist of a subordinated note
with principal and interest, accruing at 10%, payable in 10 years.
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at September 27, 1997 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended December 27, 1997 are not necessarily indicative of the
results that may be expected for the year ended September 26, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report to shareholders for the year
ended September 27, 1997.
<PAGE>
(2) Inventories -
-----------
Inventories, stated at the lower of cost or market, are comprised of the
following:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
----------- ------------
<S> <C> <C>
Finished goods.................. $ 17,613 $ 20,095
Work in process................. 8,748 9,313
Raw materials and supplies...... 2,075 1,806
-------- --------
$ 28,436 $ 31,214
======== ========
</TABLE>
(3) Net Income Per Share -
--------------------
Earnings per share are calculated using the weighted average number of shares
of common stock, and where dilutive, common stock equivalents outstanding during
each period. Shares used in computing per share results were 9,149,339 for each
of the three months ended December 27, 1997 and December 28, 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(In thousands)
Results of Operations
- ---------------------
Net sales for the three months ended December 27, 1997 were $26,342 as
compared to $33,897 in the comparable period of the prior year, a decrease of
$7,555 or 22.3%. The decrease was due primarily to reduced unit selling prices
of $5,800 caused by continued production overcapacity in the industry and lower
priced imports and to the sale of inventories at discounted prices to generate
cash flow. Additionally, increased competition in the market place resulted in
lower units sold decreasing sales further by $1,750.
A gross profit (loss) for the quarter ended December 27, 1997 of $(4,885)
decreased $(4,143) from the comparable period of the prior year. Gross profit
(loss), as a percentage of net sales, decreased to (18.5)% compared to (2.2)%.
The reduction in gross profit was caused by discounted sales prices mentioned
above and additional inventory writedowns of $1,000 reflecting further reduction
in selling prices late in the first quarter, offset by generally lower operating
costs resulting from the Company's cost reduction program discussed in Note 2 of
Notes to Condensed Consolidated Financial Statements.
Selling, general and administrative expenses for the three months ended
December 27, 1997 decreased $645 from the comparable period of the prior year as
a result of the Company's cost reduction program discussed in Note 1 of Notes to
Condensed Consolidated Financial Statements offset by $510 of legal and
professional expenditures related to the debt restructuring.
Interest expense, net of interest income, for the first quarter of 1997 was
$2,016 compared to $1,880 for the corresponding period last year. The increase
was due primarily to higher borrowing rates. At December 27, 1997, the Company
was not in compliance with certain terms of its revolving credit agreement and
accordingly interest at higher rates are paid during the default period.
Liquidity and Capital Resources
- -------------------------------
The Company had a working capital deficit of $51,885 at December 27, 1997
compared to a deficit of $42,595 at September 27, 1997. This change was caused
primarily by reductions in accounts receivable and inventories.
The Company had a decrease in cash of $69 in the first quarter of fiscal 1998
compared to a net increase in cash of $2,400 in the comparable period last year.
Cash provided by operating activities for the first fiscal quarters of 1998 and
1997 were $641 and $4,399, respectively. The primary components of cash provided
by operating activities for both quarters were decreases in receivables and
inventories as well as the net loss adjustment for depreciation and amortization
offset by net losses in both quarters.
<PAGE>
Cash used in investing activities the first quarter of fiscal 1988 consisted
mostly of capital expenditures of $317.
At December 27, 1997, the Company was and continues to be in non-compliance
with certain terms of its long-term revolving credit agreement, a loan agreement
with an institutional lender, and subordinated notes held by Robert M. Gintel.
Mr. Gintel resigned as Chairman of the Board and as a director of the Company on
August 8, 1997. These obligations, $57,000, $6,154 and $7,500 in principal
amount, respectively, have been classified as current liabilities. The Company
has entered into agreements with its lenders to restructure these agreements
through the pre-negotiated Chapter 11 case discussed below. These obligations,
which aggregate $70,654, plus accrued interest and fees, will be exchanged for;
1) payment of $15,000 in cash, 2) the issuance of various notes totaling $38,500
and 3) 79.75% of the outstanding Common Stock of the Company.
On January 23, 1998, the Company filed a Chapter 11 petition with the
United States Bankruptcy Court for the District of Delaware under Chapter 11 of
the Bankruptcy Code together with a Plan of Reorganization implementing the
restructuring with its lenders (the "Plan"). Prior to the filing, the holders of
the debt mentioned in the preceding paragraph entered into agreements with the
Company agreeing, among other things, to cooperate with the Company in
implementing the Plan. A hearing to consider approval of a Disclosure Statement
is scheduled for March 13, 1998 and a hearing to consider confirmation of the
Plan is scheduled for April 29, 1998. The Company has obtained permission from
the Bankruptcy Court to continue to pay most pre-petition claims held by trade
creditors in order to avoid any disruption in its business. In addition, the
Company has obtained interim authority from the Bankruptcy Court to continue to
use cash collateral and to borrow up to $5,000 from Foothill Capital Corp. under
a Debtor-in-Possession Facility. A hearing to consider final approval of the
cash collateral stipulation with certain of its lenders and to borrow an
additional $5,000 under the Debtor-in-Possession Facility with Foothill Capital
Corp. is scheduled for February 26, 1998. The Debtor-in-Possession Facility is
secured by a pledge of certain property, plant and equipment. The Company
estimates that it will emerge from these Bankruptcy Proceedings before June 30,
1998. However, there can be no assurance that the Plan will be confirmed by the
Bankruptcy Court or that other events will not occur in the bankruptcy case
affecting the Company's ability to implement the Plan. If either of these events
take place, a non-negotiated Chapter 11 is likely to occur. The Company has a
commitment from Foothill Capital Corp. for a new revolving credit facility
pursuant to which financing will be available upon emergence from Chapter 11
Proceedings. This facility will permit the borrowing of up to $35,000 based upon
availability under a borrowing base formula (estimated to be $25,000 at date of
emergence) and will be secured primarily by accounts receivable and inventory.
Of the $38,500 restructured debt, $37,500 consist of senior notes that are
due in three years and bears interest at 12%. The interest accrues but is not
paid in cash for the first two years of the note term, except that interest
payments in the first two years as well as note principal prepayments may be
triggered upon the Company achieving certain targets. The senior notes will be
secured by the pledge as collateral of certain property, plant and equipment.
The remaining $1,000 of restructured debt will consist of a subordinated note
with principal and interest, accruing at 10%, payable in 10 years.
<PAGE>
The Company's future liquidity requirements are expected to consist primarily
of capital expenditures and working capital requirements. The Company's
liquidity requirements are expected to be financed from operating cash flow and
the proposed financing upon emerging from bankruptcy; however, no assurance can
be given that such financing will be available or sufficient. The opinion of the
Company's independent public accountants covering the financial statements for
the year ended September 27, 1997 included a paragraph questioning the Company's
ability to continue as a going concern.
All statements other than statements of historical fact included in this
release regarding the Company's financial position, business strategy and the
plans and objectives of the Company's management for the future operations, are
forward-looking statements. When used herein, words such as "anticipate,"
"believe," "estimate," "expect," intend" and similar expressions, as they relate
to the Company or its management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of the Company's management,
as well as assumptions made by and information currently available to the
Company's management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to, competitive factors and pricing pressures, changes
in legal and regulatory requirements, technological change or difficulties,
product development risks, commercialization and trade difficulties and general
economic conditions. Such statements reflect the current views of the Company
with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity of the Company. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.
Effects of Inflation
- --------------------
The Company believes that the relatively moderate rates of inflation in
recent years have not had a significant impact on its sales and profitability.
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
PART II - OTHER INFORMATION
---------------------------
Item 1 Legal Proceedings
-----------------
None
Item 2 Changes in Securities
---------------------
None
Item 3 Defaults upon Senior Securities
-------------------------------
None
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5 Other Information
-----------------
None
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
2.1 Proposed Plan of Reorganization (incorporated by reference to
Exhibit 4.2 to Form 8-K dated January 23, 1998)
4.1 Interim Order Authorizing Debtor to Obtain Secured Superpriority
Post-petition Financing, Scheduling a Hearing to Consider Final
Authorization to Obtain Secured Post-petition Financing Pursuant
to 11 U. S. C. Section 364 (c) and Bankruptcy Rule 4001
(incorporated by reference to Exhibit 4.1 to Form 8-K dated
January 23, 1998)
4.2 Loan and Security Agreement
4.3 Subordinated Note
4.4 Senior Secured Note Purchase Agreement
4.5 Intercreditor Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K filed during this quarterly period.
Report dated January 23, 1998 with respect to Item 3 and Item 5
<PAGE>
SIGNATURE
- ---------
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.
ONEITA INDUSTRIES, INC.
By: /s/ C. Michael Billingsley
---------------------------
C. Michael Billingsley
President and Chief Executive Officer
By: /s/ William H. Boyd
--------------------
William H. Boyd
Vice President and Treasurer
(Principal Accounting Officer)
Date: February 12, 1998
LOAN AND SECURITY AGREEMENT
by and between
ONEITA INDUSTRIES, INC.
ONEITA-KINSTON CORP.
and
FOOTHILL CAPITAL CORPORATION
Dated as of ______________, 1998
<PAGE>
TABLE OF CONTENTS
Page(s)
1. DEFINITIONS AND CONSTRUCTION....................................... 1
1.1 Definitions............................................... 1
1.2 Accounting Terms.......................................... 24
1.3 Code...................................................... 24
1.4 Construction.............................................. 24
1.5 Schedules and Exhibits.................................... 25
2. LOAN AND TERMS OF PAYMENT.......................................... 25
2.1 Revolving Advances........................................ 25
2.2 Letters of Credit......................................... 26
2.3 Supplemental Advances..................................... 30
2.4 [Intentionally omitted]................................... 30
2.5 Overadvances.............................................. 31
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.............................................. 31
2.7 Collection of Accounts.................................... 32
2.8 Crediting Payments; Application of Collections............ 33
2.9 Designated Account........................................ 33
2.10 Maintenance of Loan Account; Statements of Obligations.... 34
2.11 Fees...................................................... 34
2.12 Eurodollar Rate Loans..................................... 35
2.13 Illegality................................................ 36
2.14 Requirements of Law....................................... 37
2.15 Taxes..................................................... 39
2.16 Indemnity................................................. 41
3. CONDITIONS; TERM OF AGREEMENT...................................... 42
3.1 Conditions Precedent to the Initial Advance or
Letter of Credit.......................................... 42
3.2 Conditions Precedent to all Advances, all Supplemental
Advances and all Letters of Credit........................ 44
3.3 Conditions Subsequent..................................... 45
3.4 Term; Automatic Renewal................................... 45
3.5 Effect of Termination..................................... 45
3.6 Early Termination by Borrower............................. 46
3.7 Termination Upon Event of Default......................... 46
4. CREATION OF SECURITY INTEREST...................................... 46
4.1 Grant of Security Interest................................ 46
4.2 Negotiable Collateral..................................... 47
4.3 Collection of Proceeds of Inventory, Accounts, and Certain
Negotiable Collateral..................................... 47
i
<PAGE>
4.4 Delivery of Additional Documentation Required............. 47
4.5 Power of Attorney......................................... 47
4.6 Right to Inspect.......................................... 48
5. REPRESENTATIONS AND WARRANTIES..................................... 48
5.1 No Encumbrances........................................... 48
5.2 Eligible Accounts......................................... 49
5.3 Eligible Inventory........................................ 49
5.4 Equipment................................................. 49
5.5 Location of Inventory and Equipment....................... 49
5.6 Inventory Records......................................... 49
5.7 Location of Chief Executive Office; FEIN.................. 49
5.8 Due Organization and Qualification; Subsidiaries.......... 49
5.9 Due Authorization; No Conflict............................ 50
5.10 Litigation................................................ 51
5.11 No Material Adverse Change. .............................. 51
5.12 Solvency.................................................. 51
5.13 Employee Benefits......................................... 51
5.14 Environmental Condition................................... 52
5.15 Brokerage Fees............................................ 52
6. AFFIRMATIVE COVENANTS.............................................. 52
6.1 Accounting System......................................... 52
6.2 Collateral Reporting...................................... 53
6.3 Financial Statements, Reports, Certificates............... 53
6.4 Tax Returns............................................... 55
6.5 [Intentionally omitted]................................... 55
6.6 Returns................................................... 55
6.7 Title to Equipment........................................ 55
6.8 Maintenance of Equipment.................................. 55
6.9 Taxes..................................................... 55
6.10 Insurance................................................. 56
6.11 No Setoffs or Counterclaims............................... 57
6.12 Location of Inventory and Equipment....................... 58
6.13 Compliance with Laws...................................... 58
6.14 Employee Benefits......................................... 58
6.15 Leases.................................................... 59
6.16 Brokerage Commissions. ................................... 59
6.17 Chief Executive Officer................................... 59
7. NEGATIVE COVENANTS................................................. 59
7.1 Indebtedness.............................................. 60
7.2 Liens..................................................... 60
7.3 Restrictions on Fundamental Changes....................... 60
7.4 Disposal of Assets........................................ 61
ii
<PAGE>
7.5 Change Name............................................... 61
7.6 Guarantee................................................. 61
7.7 Nature of Business........................................ 61
7.8 Prepayments and Amendments................................ 61
7.9 Change of Control......................................... 61
7.10 Consignments.............................................. 62
7.11 Distributions............................................. 62
7.12 Accounting Methods........................................ 62
7.13 Investments............................................... 62
7.14 Transactions with Affiliates.............................. 62
7.15 Suspension................................................ 63
7.16 [Intentionally omitted]................................... 63
7.17 Use of Proceeds........................................... 63
7.18 Change in Location of Chief Executive Office; Inventory
and Equipment with Bailees................................ 63
7.19 No Prohibited Transactions Under ERISA.................... 63
7.20 Financial Covenant........................................ 64
7.21 Capital Expenditures...................................... 64
8. EVENTS OF DEFAULT.................................................. 64
9. FOOTHILL'S RIGHTS AND REMEDIES..................................... 67
9.1 Rights and Remedies....................................... 67
9.2 Remedies Cumulative....................................... 69
10. TAXES AND EXPENSES................................................. 69
11. WAIVERS; INDEMNIFICATION........................................... 70
11.1 Demand; Protest; etc...................................... 70
11.2 Foothill's Liability for Collateral....................... 70
11.3 Indemnification........................................... 70
12. NOTICES............................................................ 71
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................... 72
14. DESTRUCTION OF BORROWER'S DOCUMENTS................................ 72
15. GENERAL PROVISIONS................................................. 73
15.1 Effectiveness............................................. 73
15.2 Successors and Assigns.................................... 73
15.3 Section Headings.......................................... 73
15.4 Interpretation............................................ 73
15.5 Severability of Provisions................................ 73
15.6 Amendments in Writing..................................... 73
iii
<PAGE>
15.7 Counterparts; Telefacsimile Execution..................... 74
15.8 Revival and Reinstatement of Obligations.................. 74
15.9 Integration............................................... 74
SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory Locations
Schedule I-1 IDB Equipment
Schedule P-1 Permitted Dispositions
Schedule P-2 Permitted Liens
Schedule P-3 Permitted Priority Liens
Schedule R-1 Real Property Collateral
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Disclosures
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Permitted Indebtedness
Exhibit C-1 Form of Compliance Certificate
Exhibit D-1 Form of Deposit Account Security Agreement
Exhibit I-1 Form of Intercreditor Agreement
Exhibit P-1 Form of Plan of Reorganization
Exhibit S-1 Form of Stock Pledge Agreement
Exhibit S-2 Form of Suretyship Agreement
Exhibit T-1 Form of Trademark Security Agreement
Exhibit V-1 Form of VCOC Letter
iv
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as
of ___________, 1998, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, ONEITA INDUSTRIES,
INC., a Delaware corporation ("Oneita"), with its chief executive office located
at 4130 Faber Place Drive, Suite 200, Charleston, South Carolina 29405, and
ONEITA- KINSTON CORP., a North Carolina corporation ("Kinston"), with its chief
executive office located at 4130 Faber Place Drive, Suite 200, Charleston, South
Carolina 29405.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Accounts Component" means, as of any date of determination, the amount of
the component of the Borrowing Base determined pursuant to Section 2.1(a)(x).
"Adjusted Eurodollar Rate" means, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to
the next 1/16%) determined by dividing (a) the Eurodollar Rate for such Interest
Period by (b) a percentage equal to (i) 100% minus (ii) the Reserve Percentage.
The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.
"Advances" has the meaning set forth in Section 2.1(a). An Advance is not a
Supplemental Advance, but is an Obligation.
"Affiliate" means, as applied to any Person, any other Person who, directly
or indirectly, controls, is controlled by, is under common control with, or is a
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director or officer of such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to vote 5% or more of
the Stock having ordinary voting power for the election of directors (or
comparable managers) or the direct or indirect power to direct the management
and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Andrews Real Property" means the Real Property owned by Borrower in
Andrews, South Carolina.
"Applicable Percentage" means: (a) with respect to Eligible Not- In-Transit
Finished Goods, 60%; (b) with respect to Eligible In-Transit Finished Goods,
55%; (c) with respect to Eligible Raw Materials, 40%; (d) with respect to
Eligible Piece Goods, 30%; and (e) with respect to Eligible Work-In-Process,
25%.
"Atlanta Distribution Center" means the distribution center maintained by
Borrower in the vicinity of Atlanta, Georgia, as more particularly identified on
Schedule E-1.
"Authorized Person" means any officer or other employee of Borrower.
"Availability" means, as of any date of determination, the aggregate amount
of Advances Borrower would be entitled to borrow on such date under the terms of
this Agreement (including Section 2.1) after taking into account all outstanding
Obligations.
"Average Unused Portion of Maximum Amount" means, as of any date of
determination, (a) the Maximum Amount, less (b) the sum of (i) the average
aggregate Daily Balance of Advances and Supplemental Advances that were
outstanding during the immediately preceding month, plus (ii) the average Daily
Balance of the Letter of Credit Usage during the immediately preceding month.
"Bank Group" means those Persons holding "Old Revolving Credit Lender
Claims" immediately prior to the "Effective Date" as those terms are defined in
the Plan of Reorganization.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. ss.
101 et seq.), as amended, and any successor statute.
"Base Net Worth" means the greater of (a) $1,000,000, and (b) the actual
net worth of Oneita and its consolidated Subsidiaries, on a consolidated basis,
in accordance with GAAP, on the Net Worth Covenant Commencement Date.
"Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35)
of ERISA) for which Borrower, any Subsidiary of Borrower, or any ERISA Affiliate
has been an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.
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"Borrower" means Oneita and Kinston, and each of them, and either of them,
jointly and severally. Following any merger of Kinston into Oneita, with Oneita
to be the surviving corporation, or any dissolution of Kinston and distribution
of its assets to Oneita, Borrower shall mean Oneita.
"Borrower's Books" means all of Borrower's books and records including:
ledgers; records indicating, summarizing, or evidencing Borrower's properties or
assets (including the Collateral) or liabilities; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) other than Foothill or an Affiliate or
transferee of Foothill becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of more than
50% of the total voting power of all classes of stock then outstanding of
Borrower entitled to vote in the election of directors. The Permitted
Combination shall not constitute a Change of Control.
"Closing Date" means the date of the first to occur of the making of the
initial Advance or the issuance of the initial Letter of Credit.
"Code" means the New York Uniform Commercial Code.
"Collateral" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment except for and excluding the IDB Equipment,
(d) the General Intangibles,
(e) the Inventory,
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(f) the Negotiable Collateral,
(g) the Real Property Collateral,
(h) any money, or other assets of Borrower that now or hereafter come
into the possession, custody, or control of Foothill, and
(i) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, Real Property, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing items (a)
through (h), or any portion thereof or interest therein, and the proceeds
thereof.
The foregoing notwithstanding, "Collateral" shall not include any Stock of any
foreign Subsidiary of Borrower.
"Collateral Access Agreement" means a landlord waiver, mortgagee waiver,
bailee letter, or acknowledgement agreement of any warehouseman, processor,
lessor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance satisfactory to Foothill.
"Collateral Agent" has the meaning ascribed to such term in the Note
Purchase Agreement.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Combined Availability" means, as of any date of determination,
Availability plus Supplemental Availability.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 and delivered by the principal financial officer of Borrower to
Foothill. "Cullman Distribution Center" means the distribution center maintained
by Borrower in the vicinity of Cullman, Alabama, as more particularly identified
on Schedule E-1.
"Daily Balance" means, with respect to any Obligation, the amount of such
Obligation owed at the end of a given day.
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"deems itself insecure" means that the Person deems itself insecure in
accordance with the provisions of Section 1-208 of the Code. Without limitation
of the foregoing, any determination by Foothill that Foothill deems itself
insecure must be based on a good faith belief by Foothill that one or more of
the following circumstances exists: (a) that the priority of Foothill's Liens on
the Collateral is materially impaired from Foothill's priority as of the Closing
Date; (b) that the prospects of repayment by Borrower of the Obligations have
been materially impaired since the Closing Date; or (c) that Borrower has
engaged in fraud, material misrepresentation, or defalcation. The foregoing
notwithstanding, if Borrower's consolidated financial results of operations and
financial condition are in substantial compliance with the projections of
Borrower most recently furnished to Foothill prior to the date of filing of
Oneita's Chapter 11 bankruptcy case, then such financial results of operations
and financial condition shall not be considered as factors by Foothill in
determining whether Foothill deems itself insecure, and shall not be relevant to
such determination.
"Default" means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
"Deposit Account Security Agreement" means a Deposit Account Security
Agreement in the form of Exhibit D-1, executed and delivered by Borrower to
Foothill.
"Designated Account" means account number 60872058 of Oneita maintained
with the Designated Account Bank, or such other deposit account of Borrower
(located within the United States) which has been designated, in writing and
from time to time, by Borrower to Foothill.
"Designated Account Bank" means SouthTrust Bank of Alabama, N.A., whose
office is located at 420 North 20th Street, Birmingham, Alabama 35203, and whose
ABA number is 062000080.
"Designated Existing Lenders" means the Existing Lenders referred to in
clause (b) of the definition of "Existing Lenders" herein.
"Dilution" means, in each case based upon the experience of the immediately
prior twelve months, the result of dividing the Dollar amount of (a) bad debt
writeoffs (including partial writeoffs, net of recoveries), discounts,
advertising, returns, promotions, credits, or other dilution with respect to the
Accounts, by (b) Borrower's Collections (excluding extraordinary items) plus the
Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce Foothill's advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of
5.00%.
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"DIP Agreement" means that certain Loan and Security Agreement entered into
in or about December, 1997, between Foothill and Oneita, with respect to the
provision by Foothill of credit facilities to Oneita as a debtor-in-possession
during Oneita's Chapter 11 bankruptcy case, as it may from time to time be or
have been amended, modified, supplemented, or restated.
"DIP Event of Default" means an "Event of Default" as defined in the DIP
Agreement.
"Disbursement Letter" means an instructional letter executed and delivered
by Borrower to Foothill regarding the extensions of credit to be made on the
Closing Date, the form and substance of which shall be satisfactory to Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section 3.6.
"Effective Date" means the "effective date" of the Plan of Reorganization,
as defined therein.
"Eligible Accounts" means those Accounts (net of unapplied cash and net of
interest charges) created by Borrower in the ordinary course of business, that
arise out of Borrower's sale of goods or rendition of services, that strictly
comply with each and all of the representations and warranties respecting
Accounts made by Borrower to Foothill in the Loan Documents, and that are and at
all times continue to be acceptable to Foothill in all respects; provided,
however, that standards of eligibility may be fixed and revised from time to
time by Foothill in Foothill's reasonable credit judgment. Eligible Accounts
shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within 90 days of
invoice date or Accounts with selling terms of more than 60 days;
(b) Accounts owed by an Account Debtor or its Affiliates where 50% or more
of all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is an employee,
Affiliate, or agent of Borrower;
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold (except to the
extent that Borrower has obtained from the Account Debtor a "bill and hold"
letter in form reasonably acceptable to Foothill), or other terms by reason of
which the payment by the Account Debtor may be conditional;
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(e) Accounts that are not payable in Dollars or with respect to which the
Account Debtor: (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, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Foothill (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Foothill and is directly
drawable by Foothill, or (z) the Account is covered by credit insurance in form
and amount, and by an insurer, satisfactory to Foothill;
(f) Accounts in excess of $200,000 in the aggregate with respect to which
the Account Debtor is either (i) the United States or any department, agency, or
instrumentality of the United States (exclusive, however, of Accounts with
respect to which Borrower has complied, to the satisfaction of Foothill, with
the Assignment of Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the
United States (exclusive, however, of Accounts owed by any State that does not
have a statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a creditor of
Borrower, has or has asserted a right of setoff (including, without limitation,
debit memos and chargebacks), has disputed its liability, or has made any claim
with respect to the Account, in each case to the extent of such contra claim,
setoff, or dispute;
(h) Accounts with respect to an Account Debtor whose total obligations
owing to Borrower exceed 10% of all Eligible Accounts (except that with respect
to not more than two Account Debtors of Borrower at any one time, as they may be
designated by Borrower with Foothill's approval from time to time, which
approval of Foothill shall not unreasonably be withheld, provided that Foothill
shall be entitled to consider, in granting or withholding such approval, the
payment histories and creditworthiness of such proposed Account Debtors, and
which such two Account Debtors, as of the Closing Date, are San Mar Corporation
and Kayman Inc., the concentration percentage limit shall be 20% each, rather
than 10% each, provided that the combined concentration percentage limit for
both such Account Debtors, at any given time, shall not exceed 35% in the
aggregate), to the extent of the obligations owing by such Account Debtor in
excess of such percentages;
(i) Accounts with respect to which the Account Debtor is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts the collection of which Foothill, in its reasonable credit
judgment, believes to be doubtful by reason of the Account Debtor's financial
condition;
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(k) Accounts with respect to which the goods giving rise to such Account
have not been shipped and billed to the Account Debtor (except to the extent
that the transaction giving rise to the Account is a "bill and hold" transaction
and Borrower has obtained from the Account Debtor a "bill and hold" letter in
form reasonably acceptable to Foothill), the services giving rise to such
Account have not been performed and accepted by the Account Debtor, or the
Account otherwise does not represent a final sale;
(l) Accounts with respect to which the Account Debtor is located in the
states of New Jersey, Minnesota, Indiana, or West Virginia (or any other state
that requires a creditor to file a Business Activity Report or similar document
in order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless
Borrower has qualified to do business in New Jersey, Minnesota, Indiana, West
Virginia, or such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement;
(m) Accounts that represent progress payments or other advance billings
that are due prior to the completion of performance by Borrower of the subject
contract for goods or services;
(n) "Manual" Accounts (such as non-trade Accounts or rent due from
subtenants); and
(o) Accounts that are not subject to a valid and perfected first priority
security interest in favor of Foothill (except to the extent, if any, that
Foothill in its discretion has elected to include such Accounts as Eligible
Accounts and reserve for any senior Liens thereon pursuant to Section 2.1(b));
"Eligible In-Transit Finished Goods" means Eligible Inventory of the type
referred to in clause (b) of the definition of Eligible Inventory.
"Eligible Inventory" means Inventory consisting of: (a) first quality
Not-In-Transit Finished Goods held for sale in the ordinary course of Borrower's
business; (b) first quality In-Transit Finished Goods which upon receipt at the
Atlanta Distribution Center or the Cullman Distribution Center will be held for
sale in the ordinary course of Borrower's business, provided that, to the extent
any such In- Transit Finished Goods are located outside the United States, they
shall constitute Eligible Inventory while located outside the United States only
to the extent that Foothill's security interest therein is perfected by notice
to the bailees, customs brokers, or carriers in possession thereof while they
are in transit, receipt of which notice has been acknowledged by such bailees,
customs brokers, or carriers; (c) Raw Materials held for the production of
Finished Goods; (d) Piece Goods held for the production of Finished Goods; and
(e) Work-In-Process which, when completed, will constitute Finished Goods; in
each case (except for clause (b) above) that is located at one or more of
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Borrower's owned or leased premises located in the United States identified on
Schedule E-1 (or, in the case of clause (b), in transit to the Atlanta
Distribution Center or the Cullman Distribution Center), that strictly comply
with each and all of the representations and warranties respecting Inventory
made by Borrower to Foothill in the Loan Documents, and that are and at all
times continue to be acceptable to Foothill in all respects; provided, however,
that standards of eligibility may be fixed and revised from time to time by
Foothill in Foothill's reasonable credit judgment. In determining the amount to
be so included, Inventory shall be valued at the lower of cost or market on a
basis consistent with Borrower's current and historical accounting practices. At
any point in time, an item of Inventory shall only be included under one of
clauses (a) through (e) above. An item of Inventory shall not be included in
Eligible Inventory if:
(i) it is not owned solely by Borrower or Borrower does not have good,
valid, and marketable title thereto;
(ii) it is not subject to a valid and perfected first priority security
interest in favor of Foothill (except to the extent, if any, that Foothill in
its discretion has elected to include such Inventory as Eligible Inventory and
reserve for any senior Liens thereon pursuant to Section 2.1(b));
(iii) it consists of goods returned or rejected by Borrower's customers,
unless such returned or rejected goods are Finished Goods that have been
inspected by Borrower and determined to be of first quality and suitable for
sale in the ordinary course of business as such, and have been reintegrated with
the other Not-In- Transit Finished Goods of Borrower;
(iv) it is obsolete or slow moving (collectively defined as the greater of
(A) Borrower's book reserves for obsolete or slow moving inventory, (B)
Inventory held in excess of 12 months, and (C) 20% of Not-In-Transit Finished
Goods (which percentage may be removed or diminished from time to time by
Foothill based on appraisals and/or evidence provided by the Borrower, with such
percentage being determined by Foothill to be adequate and appropriate), a
restrictive or custom item, or constitutes spare parts, packaging and shipping
materials, labels and/or boxes, supplies used or consumed in Borrower's
business, Inventory subject to a Lien in favor of any third Person (other than a
Permitted Lien with priority junior to that of the Lien of Foothill), bill and
hold goods, defective goods or "seconds" not readily salable in the ordinary
course of business as "irregulars," or Inventory acquired or held on
consignment; or
(v) it is commingled with, or not segregated from, consigned goods or goods
belonging to Persons other than Borrower, or it is otherwise not subject to
proper inventory controls in the reasonable judgment of Foothill.
"Eligible Not-In-Transit Finished Goods" means Eligible Inventory of the
type referred to in Clause (a) of the definition of Eligible Inventory.
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"Eligible Piece Goods" means Eligible Inventory of the type referred to in
Clause (d) of the definition of Eligible Inventory.
"Eligible Raw Materials" means Eligible Inventory of the type referred to
in Clause (c) of the definition of Eligible Inventory.
"Eligible Transferee" means (a) a commercial bank organized under the laws
of the United States, or any state thereof, and having net worth in excess of
$50,000,000; (b) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development
or a political subdivision of any such country, and having net worth in excess
of $50,000,000; provided that such bank is acting through a branch or agency
located in the United States; (c) a finance company, insurance or other
financial institution or fund that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
net worth in excess of $25,000,000; and (d) any Affiliate (other than
individuals) of Foothill.
"Eligible Work-in-Process" means Eligible Inventory of the type referred to
in Clause (e) of the definition of Eligible Inventory.
"Enhanced Inventory Component" means, as of any date of determination, the
amount that the Inventory Component of the Borrowing Base would be if the
Borrowing Base were recalculated on such date in accordance with Section 2.1
(including application of any relevant caps, reserves, and sublimits), but (1)
using 63.5% as the Applicable Percentage for each category of Inventory included
within the definition of Eligible Inventory rather than using the lower
percentages stated in the definition of "Applicable Percentage," and (2) using
2.00 rather than 1.50 as the factor by which to multiply the Accounts Component
in subsection 2.1(a)(y)(iii).
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
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"ERISA Event" means (a) a Reportable Event with respect to any Benefit Plan
or Multiemployer Plan, (b) the withdrawal of Borrower, any of its Subsidiaries
or ERISA Affiliates from a Benefit Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Eurodollar Rate" means, with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum at which United States dollar
deposits are offered to Foothill (or its Affiliates) by major banks in the
London interbank market (or other Eurodollar Rate market selected by Foothill
(or its Affiliates) if Foothill (or its Affiliates) reasonably determines that
the London interbank market has ceased to be a suitable interbank market for the
designation of offshore United States dollar deposit interest rates) on or about
2:00 p.m. (New York time) 2 Business Days prior to the commencement of such
Interest Period in amounts comparable to the amount of the Eurodollar Rate Loans
requested by and available to Borrower in accordance with this Agreement, with a
maturity of comparable duration to the Interest Period selected by Borrower.
"Eurodollar Rate Loans" means any Advance (or any portion thereof) made or
outstanding hereunder during any period when interest on such Advance (or
portion thereof) is payable based on the Adjusted Eurodollar Rate.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lenders" means (a) Foothill, with respect to the $10,000,000
debtor-in-possession facility extended by Foothill to Oneita during Oneita's
Chapter 11 bankruptcy case, and (b) the Bank Group and Prudential, to the extent
of $15,000,000 in the aggregate of claims held by the Bank Group and Prudential.
"FEIN" means Federal Employer Identification Number.
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"Finished Goods" means Inventory that has been assembled and packaged into
cartons for transportation to the Atlanta Distribution Center (for activewear)
or the Cullman Distribution Center (for infantwear) for bagging and packaging
into dozens and half dozens, or that is at such distribution centers.
"Foothill" has the meaning set forth in the preamble to this Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: costs or expenses (including taxes, and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Foothill; reasonable out-of-pocket fees
or charges paid or incurred by Foothill in connection with Foothill's
transactions with Borrower under the Loan Documents, including, fees or charges
for photocopying, notarization, couriers and messengers, telecommunication,
public record searches (including tax lien, litigation, and UCC searches and
including searches with the patent and trademark office, the copyright office,
or the department of motor vehicles), filing, recording, publication, appraisal
(including periodic Personal Property Collateral or Real Property Collateral
appraisals), real estate surveys, real estate title policies and endorsements,
and environmental audits; actual out-of-pocket costs and expenses incurred by
Foothill in the disbursement of funds to Borrower (by wire transfer or
otherwise); actual out-of-pocket charges paid or incurred by Foothill resulting
from the dishonor of checks; reasonable out-of-pocket costs and expenses paid or
incurred by Foothill to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Personal Property Collateral or the Real Property Collateral, or any portion
thereof, irrespective of whether a sale is consummated; reasonable costs and
expenses paid or incurred by Foothill in examining Borrower's Books; reasonable
out-of-pocket costs and expenses of third party claims or any other suit paid or
incurred by Foothill in enforcing or defending the Loan Documents or in
connection with the transactions contemplated by the Loan Documents or
Foothill's relationship with Borrower, except for any costs or expenses
resulting from the gross negligence or willful misconduct of Foothill; and
Foothill's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including reasonable local counsel fees, and reasonable attorneys
fees and expenses incurred in connection with a "workout," a "restructuring," or
an Insolvency Proceeding concerning Borrower), defending, or concerning the Loan
Documents, irrespective of whether suit is brought.
"Foothill Funds" means Foothill Partners II, L.P. and/or Foothill Partners
III, L.P.
"Foothill Primary Collateral" means that portion of the Collateral in which
the Lien of Foothill has priority over the Lien of the Collateral Agent, for the
benefit of Designated Existing Lenders, pursuant to the provisions of the
Intercreditor Agreement.
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"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future general
intangibles (including contract rights, rights arising under common law,
statutes, or regulations, choses or things in action, goodwill, patents, trade
names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, rights to payment and other rights under any royalty or licensing
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims).
"Governing Documents" means the certificate or articles of incorporation,
by-laws, or other organizational or governing documents of any Person.
"Hazardous Materials" means (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"IDB Equipment" means the Equipment of Borrower subject to existing Liens
in connection with industrial development bonds, as more particularly identified
on Schedule I-1.
"Indebtedness" means: (a) all obligations of Borrower for borrowed money,
(b) all obligations of Borrower evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of Borrower in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of Borrower under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any property or
asset of Borrower, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of Borrower guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
<PAGE>
"Intercreditor Agreement" means an Intercreditor Agreement between
Foothill, the Collateral Agent, and Designated Existing Lenders, and consented
to by Borrower, in the form attached hereto as Exhibit I-1.
"Interest Period" means, for any Eurodollar Rate Loan, the period
commencing on the Business Day such Eurodollar Rate Loan is disbursed or
continued, or on the Business Day on which a Reference Rate Loan is converted to
such Eurodollar Rate Loan, and ending on the date 1, 2, or 3 months thereafter,
as selected by Borrower and notified to Foothill pursuant to Section 2.1(c), and
as further provided in Section 2.12(a)&(b).
"In-Transit Finished Goods" means Finished Goods that are in transit from
the domestic United States, Jamaican, or Mexican facilities of Borrower or its
Subsidiaries to the Atlanta Distribution Center or the Cullman Distribution
Center, and, in the case of any such goods that are located outside the United
States, that are in the possession of a bailee, customs broker, or carrier.
"Inventory" means all present and future inventory in which Borrower has
any interest, including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in process, finished goods, and packing and shipping materials, wherever
located.
"Inventory Component" means, as of any date of determination, the amount of
the component of the Borrowing Base determined pursuant to Section 2.1(a)(y).
"Inventory Reserves" means reserves (determined from time to time by
Foothill in its discretion but without duplication) for (a) the estimated costs
relating to unpaid freight charges, warehousing or storage charges, taxes,
duties, and other similar unpaid costs associated with the acquisition or
transportation of Eligible Inventory by Borrower, plus (b) the estimated
reclamation claims of unpaid sellers of Eligible Inventory sold to Borrower.
"Investment Property" means "investment property" as that term is defined
in Section 9115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Kinston" has the meaning set forth in the introductory paragraph of this
Agreement.
<PAGE>
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the context
requires.
"Letter of Credit Usage" means the sum of (a) the undrawn amount of
outstanding Letters of Credit plus (b) the amount of unreimbursed drawings under
Letters of Credit.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, any Person other than the owner of the property, whether such interest
shall be based on the common law, statute, or contract, whether such interest
shall be recorded or perfected, and whether such interest shall be contingent
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security interest
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement Letter, the Letters
of Credit, the Lockbox Agreements, the Mortgage, the Suretyship Agreement, the
VCOC Letter, the Stock Pledge Agreement, the Deposit Account Security Agreement,
the Trademark Security Agreement, any note or notes executed by Borrower and
payable to Foothill in connection with this Agreement, and any other agreement
entered into, now or in the future, in connection with this Agreement.
"Lockbox Account" shall mean a depositary account established pursuant to
one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating Procedural
Agreements and those certain Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among Borrower, Foothill,
and one of the Lockbox Banks.
"Lockbox Banks" means _____________________.
"Lockboxes" has the meaning set forth in Section 2.7.
<PAGE>
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Oneita and its consolidated Subsidiaries,
on a consolidated basis, occurring after the Closing Date, (b) the material
impairment of the ability of Oneita and its consolidated Subsidiaries, on a
consolidated basis, to perform their obligations under the Loan Documents to
which they are a party or of Foothill to enforce the Obligations or realize upon
the Collateral, occurring after the Closing Date, or (c) a material impairment
of the priority of Foothill's Liens with respect to the Collateral. The
foregoing notwithstanding, if Borrower's consolidated financial results of
operations and financial condition are in substantial compliance with the
projections of Borrower most recently furnished to Foothill prior to the date of
filing of Oneita's Chapter 11 bankruptcy case, then such financial results of
operations and financial condition shall not be considered as factors by
Foothill in determining whether a Material Adverse Change has occurred, and
shall not be relevant to such determination.
"Maturity Date" means, as of any date of determination thereof, the date
that this Agreement is then scheduled to terminate pursuant to Section 3.4.
"Maximum Amount" means $35,000,000.
"Maximum Revolving Amount" means $31,000,000.
"Maximum Supplemental Amount" means $4,000,000.
"Mortgage" means a mortgages executed by Borrower in favor of Foothill, the
form and substance of which shall be satisfactory to Foothill, that encumbers
the Real Property Collateral and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"Negotiable Collateral" means all of a Person's present and future letters
of credit, notes, drafts, instruments, Investment Property, documents, personal
property leases (wherein such Person is the lessor), chattel paper, and Books
relating to any of the foregoing.
"Net Worth Covenant Commencement Date" means, if the Effective Date is the
last day of a fiscal month of Borrower, the Effective Date, or, otherwise, the
first day to occur after the Effective Date that is the last day of a fiscal
month of Borrower.
"Net Worth Testing Dates" means the last day of each fiscal quarter of
Borrower, commencing with the first such date to occur on or after the Closing
Date (which dates, as of the Closing Date, are the last days of each March,
June, September, and December ending on or after the Closing Date).
<PAGE>
"Non-Reconciliation Reserve" means a reserve (determined from time to time
by Foothill in its discretion but without duplication) for the amount of any
unreconciled variance between, on the one hand, Borrower's Eligible Inventory as
reflected by Borrower's perpetual inventory system and, on the other hand,
Borrower's Eligible Inventory as reflected on Borrower's general ledger, which
reserve shall be determined by category of Eligible Inventory and deducted, by
category, prior to multiplication by the Applicable Percentages and prior to
application of any relevant sublimits.
"Not-In-Transit Finished Goods" means Finished Goods that have been
received at the Atlanta Distribution Center or the Cullman Distribution Center
and that are not in transit.
"Note Purchase Agreement" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Obligations" means all loans, Advances, Supplemental Advances, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums (including the Early Termination
Premium, if applicable), reimbursement or indemnity obligations (including any
such obligations with respect to Letters of Credit), liabilities (including all
amounts charged to Borrower's Loan Account pursuant hereto), obligations, fees
(including any fees or expenses that, but for the provisions of the Bankruptcy
Code, would have accrued), charges, costs, Foothill Expenses, guaranties,
covenants, and duties owing by Borrower to Foothill, in each case of any kind
and description in any way arising under or related to the Loan Documents, and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Obligor" means either of Oneita or Kinston.
"Oneita" has the meaning set forth in the introductory paragraph of this
Agreement.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which Foothill has sold a participation
interest in its rights under the Loan Documents. "Participant" includes, without
limitation, the Foothill Funds with respect to the Supplemental Liquidity
Facility.
<PAGE>
"Pay-Off/Paydown Letters" means letters, in form and substance reasonably
satisfactory to Foothill, from Existing Lenders respecting the amount necessary
to repay in full, in the case of Foothill with respect to the debtor in
possession financing provided by Foothill to Oneita during its Chapter 11
bankruptcy case, and in part, in the case of Designated Existing Lenders, the
obligations of Borrower owing to Existing Lenders; provided that, subject to
Availability hereunder, outstanding "Letters of Credit" under the Loan and
Security Agreement with Foothill as an Existing Lender may be assumed hereunder
and be deemed Letters of Credit issued hereunder as opposed to being terminated,
released, or paid in full.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title
IV of ERISA, or any successor thereto.
"Permitted Combination" means either (a) the merger of Kinston with and
into Oneita, with Oneita the surviving corporation, or (b) the dissolution of
Kinston and transfer of all its assets to Oneita (subject to the Liens of
Foothill in such assets). "Permitted Disposition" means a disposition of Andrews
Real Property, or Collateral described on Schedule P-1.
"Permitted Investments" means (a) direct obligations of the United States
of America, or any agency thereof if backed by the full faith and credit of the
United States of America, or obligations fully guaranteed by the United States
of America, or any agency thereof if backed by the full faith and credit of the
United States of America, in each case denominated in Dollars and maturing
within one (1) year from the date of creation thereof, (b) commercial paper,
denominated in Dollars, issued by a corporation (other than Borrower or any
Affiliate of Borrower) organized under the laws of any State of the United
States of America or the District of Columbia maturing within one (1) year from
the date of creation thereof rated in the highest grade by a nationally
recognized credit rating agency, (c) time deposits denominated in Dollars and
maturing within one (1) year from the date of creation thereof with, including
certificates of deposit issued by, any office located in the United States of
America of any bank or trust company which is organized under the laws of the
united States of America or any state thereof and has capital, surplus, and
undivided profits aggregating at least $500,000,000, and/or (d) shares of any
money market mutual fund holding only obligations denominated in Dollars rated
at least AAAm or the equivalent thereof by Standard & Poor's Corporation or at
least Aaa or the equivalent thereof by Moody's Investors Service, Inc.; provided
that, to the extent any such investment is made with Collateral, such investment
shall not be a Permitted Investment unless the security interest of Foothill
therein is perfected.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens for unpaid
taxes that either (i) are not yet due and payable or (ii) are the subject of
Permitted Protests, (c) Liens set forth on Schedule P-2, (d) the interests of
lessors under operating leases and purchase money Liens of lessors under capital
<PAGE>
leases to the extent that the acquisition or lease of the underlying asset is
permitted under this Agreement and so long as the Lien only attaches to the
asset purchased or acquired and only secures the purchase price of the asset,
(e) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business of Borrower and not in connection with the borrowing
of money, and which Liens either (i) are for sums not yet due and payable, or
(ii) are the subject of Permitted Protests, (f) Liens arising from deposits made
in connection with obtaining worker's compensation or other unemployment
insurance, (g) Liens or deposits to secure performance of bids, tenders, or
leases (to the extent permitted under this Agreement), incurred in the ordinary
course of business of Borrower and not in connection with the borrowing of
money, (h) Liens arising by reason of security for surety or appeal bonds in the
ordinary course of business of Borrower, (i) Liens of or resulting from any
judgment or award that would not cause or result in a Material Adverse Change
and as to which the time for the appeal or petition for rehearing of which has
not yet expired, or in respect of which Borrower is in good faith prosecuting an
appeal or proceeding for a review, and in respect of which a stay of execution
pending such appeal or proceeding for review has been secured, (j) Liens with
respect to the Real Property Collateral that are exceptions to the commitment
for title insurance or title reports issued in connection with the Mortgage, as
accepted by Foothill, (k) with respect to any Real Property that is not part of
the Real Property Collateral, easements, rights of way, zoning and similar
covenants and restrictions, and similar encumbrances that customarily exist on
properties of Persons engaged in similar activities and similarly situated and
that in any event do not materially interfere with or impair the use or
operation of the Collateral by Borrower or the value of Foothill's Lien thereon
or therein, or materially interfere with the ordinary conduct of the business of
Borrower, and (l) property taxes due and owing on the Real Property Collateral
that do not materially impair the value of Foothill's Lien thereon or therein
and so long as the relevant governmental taxing authority is not taking action
to enforce the tax lien.
"Permitted Priority Liens" means the subset of Permitted Liens consisting
of those described in clauses (b), (d), (e), (j), (k), and (l) of the definition
of Permitted Liens, and those identified on Schedule P-3, collectively being
those Permitted Liens that are entitled to have priority over the Liens of
Foothill with respect to the affected Collateral.
"Permitted Protest" means the right of Borrower to protest any Lien other
than any such Lien that secures the Obligations, tax (other than payroll taxes
or taxes that are the subject of a United States federal tax lien), or rental
payment, pro vided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Foothill, (b) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (c) Foothill is satisfied that, while
any such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Liens of Foothill in and to the Collateral.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
<PAGE>
"Personal Property Collateral" means all Collateral other than the Real
Property Collateral.
"Piece Goods" means rolls of fabric produced from Raw Materials, prior to
being cut, and which may be in the form of untouched gray, bleached, or dyed
fabric.
"Plan" means any employee benefit plan, program, or arrangement maintained
or contributed to by Borrower or with respect to which it may incur liability.
"Plan of Reorganization" means the Plan of Reorganization of Oneita
Industries, Inc. under Chapter 11 of the Bankruptcy Code, dated _____________,
199_, in substantially the form attached hereto as Exhibit P-1.
"Prudential" means The Prudential Insurance Company of America.
"Raw Materials" means yarns, dyes, thread, chemicals, labels, and supplies.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by Borrower.
"Real Property Collateral" means the parcel or parcels of real property and
the related improvements thereto identified on Schedule R-1, and any Real
Property hereafter acquired by Borrower.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reference Rate Loan" means any Advance (or any portion thereof) made or
outstanding hereunder during any period when interest on such Advance (or
portion thereof) is payable based on the Reference Rate.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in Section 4043(c) of
ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
<PAGE>
"Required Net Worth Amount" means, as of any date of determination thereof:
(a) The Base Net Worth minus $4,500,000; plus (b) The amount that is the product
of (y) $150,000 times (z) the number of months that have elapsed, as of and
including such date of determination, since the Effective Date (which number of
elapsed months, if not a whole number, shall be truncated downward to the
nearest whole number, e.g., if more than four, and less than five, months have
elapsed since the Effective Date, the number "4" would be multiplied times
$150,000 in making the foregoing determination).
"Requirement of Law" means, as to any Person, all (i) statutes and
regulations and (ii) court orders and injunctions, arbitrators's decisions,
and/or similar rulings, in each instance by any Governmental Authority, or other
body which has jurisdiction over such Person, or any property of such Person, or
of any other Person whose conduct such Person would be responsible.
"Reserve Percentage" means and refers to, as of the date of determination
thereof, the maximum percentage (rounded upward, if necessary to the nearest
1/100th of 1%), as determined by Foothill (or its Affiliates) in accordance with
its (or their) usual procedures (which determination shall be conclusive in the
absence of manifest error), that is in effect on such date as prescribed by the
Federal Reserve Board for determining the reserve requirements (including
supplemental, marginal, and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "eurocurrency liabilities") by
Foothill or its Affiliates.
"Retiree Health Plan" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (b) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (c) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Stock" means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a corporation or
equivalent entity, whether voting or nonvoting, including common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act).
<PAGE>
"Stock Pledge Agreement" means a Stock Pledge Agreement in the form of
Exhibit S-1, executed and delivered by Borrower to Foothill, with respect to the
Stock of the Subsidiaries of Borrower (but not the Stock of the foreign
Subsidiaries of Borrower except to the extent, if any, that the Collateral Agent
has a Lien thereon).
"Strathleven" means Oneita Strathleven, a Jamaican corporation, and a
Subsidiary of Borrower.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"Supplemental Advance" has the meaning set forth in Section 2.3(a). A
Supplemental Advance is not an Advance, but is an Obligation.
"Supplemental Availability" means, as of any date of determination, the
aggregate amount of Supplemental Advances Borrower would be entitled to borrow
on such date under the terms of this Agreement (including Section 2.3) after
taking into account all outstanding Obligations, determined as if Borrower first
had borrowed all Advances Borrower was entitled to borrow as of such date to the
extent of the Availability on such date.
"Supplemental Borrowing Base" means, as of any date of determination, the
amount equal to the difference obtained by subtracting the Inventory Component
from the Enhanced Inventory Component. "Supplemental Liquidity Facility" means
the $4,000,000 facility provided for in Section 2.3.
"Suretyship Agreement" means a Suretyship Agreement executed by Borrower in
favor of Foothill, containing customary suretyship provisions and waivers in
light of the co-obligor status of Oneita and Kinston, in the form attached
hereto as Exhibit S-2.
"Trademark Security Agreement" means a Trademark Security Agreement in the
form of Exhibit T-1, executed and delivered by Borrower to Foothill.
<PAGE>
"VCOC Letter" means a letter in the form of Exhibit V-1 executed and
delivered by Borrower for the benefit of the Foothill Funds as participants of
Foothill in the Supplemental Liquidity Facility.
"Voidable Transfer" has the meaning set forth in Section 15.8.
"Work-In-Process" means fabric that has been cut from Piece Goods, prior to
assembly into Finished Goods.
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its consolidated
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, subsection, clause,
schedule, and exhibit references are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to make advances ("Advances") to Borrower in an amount outstanding not to exceed
at any one time the lesser of (i) the Maximum Revolving Amount less the Letter
of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For
purposes of this Agreement, "Borrowing Base", as of any date of determination,
shall mean the result of:
<PAGE>
(x) the lesser of (i) 85% of Eligible
Accounts, less the amount, if any, of the Dilution Reserve,
and (ii) an amount equal to Borrower's Collections with
respect to Accounts for the immediately preceding 75 day
period; plus
(y) the lowest of: (i) $23,000,000; (ii) the
Applicable Percentage times the difference between, on the one
hand, the value of Eligible Inventory (determined by category,
and subject to the following sublimits: $2,500,000 (after
multiplication by the Applicable Percentage) with respect to
Advances based on Eligible Raw Materials; $2,500,000 (after
multiplication by the Applicable Percentage) with respect to
Advances based on Eligible Piece Goods; $2,500,000 (after
multiplication by the Applicable Percentage) with respect to
Advances based on Eligible Work-In-Process; and $3,000,000
(after multiplication by the Applicable Percentage) with
respect to Advances based on Eligible In-Transit Finished
Goods) and, on the other hand, the sum of the aggregate amount
of the Non-Reconciliation Reserve (deducted by category prior
to multiplication by the Applicable Percentages and prior to
application of any relevant sublimits) and the aggregate
amount of the Inventory Reserves, with such Inventory Reserves
amount being subtracted only from either the Eligible
In-Transit Finished Goods component or Eligible Raw Materials
component of Eligible Inventory, by category, prior to
multiplication by the Applicable Percentages and prior to
application of any relevant sublimits; and (iii) the Accounts
Component times 1.50; minus
(z) the aggregate amount of reserves
(without duplication of other reserves), if any, established
by Foothill under Section 2.1(b).
(b) Anything to the contrary in Section 2.1(a) above notwith standing,
Foothill may create reserves against the Borrowing Base or reduce its advance
rates based upon Eligible Accounts or Eligible Inventory without declaring an
Event of Default (i) if it determines that there has occurred a material and
adverse change in the value of the Eligible Accounts or Eligible Inventory
included within the Borrowing Base or the amount that Foothill would be likely
to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, occurring after the Closing
Date, and/or (ii) to the extent of any Liens on any Collateral included in the
Borrowing Base that have priority over the Liens of Foothill (provided that this
clause shall not require Foothill to permit inclusion in the Borrowing Base of
Collateral subject to senior Liens unless Foothill in its discretion elects to
permit such inclusion).
(c) Foothill shall have no obligation to make Advances hereunder to the
extent they would cause the outstanding Obligations (except for undrawn Letters
of Credit, unaccrued contingent Obligations, and Supplemental Advances) to
exceed the Maximum Revolving Amount minus Letter of Credit Usage. Each Advance
shall be made upon Borrower's request (pursuant to the terms of Section 2.9),
<PAGE>
which request shall be irrevocable except as set forth in Section 2.12,
specifying (i) the amount of the requested Advance; (ii) the requested funding
date of such Advance; (iii) whether the Advance is to constitute a Eurodollar
Rate Loan or a Reference Rate Loan; and (iv) if such Advance is to constitute a
Eurodollar Rate Loan, the requested Interest Period therefor. If requested
Advance constitutes a Eurodollar Rate Loan, such request must be delivered to
Foothill no later than 2:00 p.m. (New York time) two Business Days prior to the
requested funding date therefor.
(d) Amounts borrowed pursuant to this Section 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to provide a $5,000,000 subline under the Maximum Revolving Amount for the
issuance of letters of credit for the account of Borrower (each, an "L/C") or
for the issuance of guarantees of payment (each such guaranty, an "L/C
Guaranty") with respect to letters of credit issued by an issuing bank for the
account of Borrower. Foothill shall have no obligation to issue a Letter of
Credit if any of the following would result:
(i) Letter of Credit Usage would exceed the Borrowing Base less
the amount of outstanding Advances;
(ii) Letter of Credit Usage would exceed the Maximum Revolving
Amount less the amount of outstanding Advances; or
(iii) Letter of Credit Usage would exceed $5,000,000.
Borrower expressly understands and agrees that Foothill shall have no obligation
to arrange for the issuance by issuing banks of the letters of credit that are
to be the subject of L/C Guarantees; however, Foothill will use reasonable
efforts to cause its Affiliate, Norwest Bank Minnesota, National Association, to
issue such letters of credit. Borrower and Foothill acknowledge that certain
"Letters of Credit" may be outstanding on the Closing Date under the
debtor-in-possession facility provided by Foothill, as an Existing Lender, to
Oneita. Any obligations of Oneita with respect to such outstanding "Letters of
Credit" hereby expressly are assumed by Borrower and shall become Obligations of
Borrower on the Closing Date, and such "Letters of Credit" under the
debtor-in-possession facility shall be deemed and shall become Letters of Credit
hereunder on the Closing Date. Each Letter of Credit shall have an expiry date
no later than 30 days prior to the date on which this Agreement is scheduled to
terminate under Section 3.4 (without regard to any potential renewal term) and
all such Letters of Credit shall be in form and substance acceptable to Foothill
<PAGE>
in its sole discretion, it being understood that a provision in a Letter of
Credit for automatic extensions of the expiration date for additional periods of
up to one year each shall not be prohibited under the foregoing provision so
long as such Letter of Credit provides that Foothill can cease such further
automatic extensions by notice or by paying the Letter of Credit. If any Letter
of Credit shall contain a provision authorizing Foothill (or the issuing bank,
if it is not Foothill) to (i) send notice of its election not to have the Letter
of Credit renew for further periods, (ii) send notice terminating the Letter of
Credit prior to its scheduled expiration date, (iii) pay all or a portion of the
Letter of Credit prior to drawing, or (iv) take other discretionary action, then
Foothill agrees to take such action upon Borrower's written request so long as
no Event of Default exists or would be continuing after giving effect to such
request by Borrower and such action by Foothill (or the issuing bank, if it is
not Foothill). If Foothill is obligated to advance funds under a Letter of
Credit, then, and if there is Availability for Advances, Foothill and Borrower
agree that such advances with respect to the Letter of Credit shall be charged
as Advances to Borrower's Loan Account; to the extent that there is not
Availability for Advances but there is Supplemental Availability for
Supplemental Advances, Foothill and Borrower agree that such advances with
respect to the Letter of Credit shall be charged as Supplemental Advances to
Borrower's Loan Account; otherwise, Borrower immediately shall reimburse such
amounts to Foothill and, if Borrower fails to do so, the amounts so advanced
immediately and automatically shall be treated as if they were Advances
hereunder (even if such treatment would result in the existence of an
Overadvance) and, thereafter, shall bear interest at the rate then applicable to
Advances under Section 2.6.
(b) Borrower hereby agrees to indemnify, save, defend, and hold Foothill
harmless from any loss, cost, expense, or liability, including payments made by
Foothill, expenses, and reasonable attorneys fees incurred by Foothill arising
out of or in connection with any Letter of Credit, except to the extent caused
by the gross negligence or wilful misconduct of Foothill. Borrower agrees to be
bound by the issuing bank's regulations and good faith interpretations of any
Letters of Credit guarantied by Foothill and opened to or for Borrower's account
or by Foothill's good faith interpretations of any L/C issued by Foothill to or
for Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that Foothill shall not be
liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower's instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto agreed to in writing by
Borrower, in each case except to the extent caused by the gross negligence or
wilful misconduct of Foothill. Borrower understands that the L/C Guarantees may
require Foothill to indemnify the issuing bank for certain costs or liabilities
arising out of claims by Borrower against such issuing bank. Borrower hereby
agrees to indemnify, save, defend, and hold Foothill harmless with respect to
any loss, cost, expense (including reasonable attorneys fees), or liability
incurred by Foothill under any L/C Guaranty as a result of Foothill's
indemnification of any such issuing bank (provided, however, that in no event
shall Borrower indemnify, save, defend, or hold harmless Foothill or any issuing
bank for any loss, cost, expense, or liability arising out of (i) the gross
negligence or willful misconduct of Foothill or such issuing bank, or (ii) any
claim brought by Borrower against Foothill or such issuing bank with respect to
any Letter of Credit, any letter of credit issued by an issuing bank that is the
subject of an L/C Guaranty, or any action, inaction, or transaction related to
<PAGE>
any thereof, where Borrower is the prevailing party; also, in no event will
Foothill be required to issue any L/C Guaranty in favor of any issuing bank
(other than Norwest Bank Minnesota, National Association) that requires Foothill
to indemnify such issuing bank for any loss, cost, expense, or liability arising
out of the gross negligence or willful misconduct of such issuing bank).
(c) Borrower hereby authorizes and directs any bank that issues a letter of
credit guaranteed by Foothill to deliver to Foothill all instruments, documents,
and other writings and property received by the issuing bank pursuant to such
letter of credit, and to accept and rely upon Foothill's instructions and
agreements with respect to all matters arising in connection with such letter of
credit and the related application, provided that Foothill shall not authorize
the waiver of documentary conditions to drawing a Letter of Credit expressly
stated in such Letter of Credit without Borrower's approval. Borrower may or may
not be the "applicant" or "account party" with respect to such letter of credit
(i.e., the issuing bank may designate Borrower or Foothill or both as the
"applicant" or "account party").
(d) Any and all charges, commissions, fees, and costs incurred by Foothill
relating to the letters of credit guaranteed by Foothill shall be considered
Foothill Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrower to Foothill.
(e) Immediately upon the termination of this Agreement, Borrower agrees to
either (i) provide cash collateral to be held by Foothill in an amount equal to
105% of the maximum amount of Foothill's obligations under Letters of Credit
(which maximum amount, for purposes of this paragraph, in the case of an L/C
Guaranty issued by Foothill, shall not be deemed to exceed the amount available
to be drawn under the underlying letter of credit that is the subject of the L/C
Guaranty), or (ii) cause to be delivered to Foothill releases of all of
Foothill's obligations under outstanding Letters of Credit. At Foothill's
discretion, any proceeds of Collateral received by Foothill after the occurrence
and during the continuation of an Event of Default may be held as the cash
collateral required by this Section 2.2(e).
(f) If by reason of (i) any change after the date hereof in any applicable
law, treaty, rule, or regulation or any change after the date hereof in the
interpretation or application by any governmental authority of any such
applicable law, treaty, rule, or regulation, or (ii) compliance by the issuing
bank or Foothill with any post-Closing Date direction, request, or requirement
(irrespective of whether having the force of law) of any governmental authority
or monetary authority including, without limitation, Regulation D of the Board
of Governors of the Federal Reserve System as from time to time in effect (and
any successor thereto):
(A) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letters of Credit issued hereunder, or
<PAGE>
(B) there shall be imposed on the issuing bank or Foothill any other
condition regarding any letter of credit, or Letter of Credit, as applicable,
issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any letter of credit, or Letter of Credit, as applicable, or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as the issuing bank or Foothill
may specify to be necessary to compensate the issuing bank or Foothill for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate set forth in
Section 2.6(a)(i) or (c)(i), as applicable. The good faith non-discriminatory
determination by the issuing bank or Foothill, as the case may be, of any amount
due pursuant to this Section 2.2(f), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.
2.3 Supplemental Advances.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to make advances ("Supplemental Advances") to Borrower in an amount outstanding
not to exceed at any one time the lesser of (i) the Maximum Supplemental Amount,
or (ii) the Supplemental Borrowing Base. Borrower shall not be entitled to
request or receive Supplemental Advances unless the combined outstanding balance
of Advances and Letter of Credit Usage equals the Maximum Revolving Amount.
Absent an Event of Default, Supplemental Advances shall be repaid prior to
Advances. Upon the occurrence and during the continuance of an Event of Default,
as between Foothill and Borrower, all Collections, repayments, and proceeds of
Collateral received by Foothill may be allocated by Foothill to the repayment or
cash-collateralization of the Obligations by Foothill in such order as Foothill
elects in its sole and absolute discretion, even if such allocation does not
minimize Borrower's interest expense, or fees or other charges payable by
Borrower. Borrower understands that the Foothill Funds may purchase a 100%
participation interest in the Supplemental Advances, and that, under certain
circumstances during the continuance of an Event of Default, Foothill may be
entitled, as between itself and the Foothill Funds, to receive repayment of all
Obligations other than the Supplemental Advances (and interest and fees or other
charges with respect thereto) prior to the Foothill Funds becoming entitled to
repayment of their investment with respect to the Supplemental Advances (and
interest and fees or other charges with respect thereto), which entitlement may
influence the order in which Foothill elects to cause the Obligations to be
reduced, and which election may affect the amount of interest, fees, or other
charges required to be paid by Borrower.
<PAGE>
(b) Foothill shall have no obligation to make Supplemental Advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Amount, or the outstanding Supplemental Advances to exceed the
Maximum Supplemental Amount or the Supplemental Borrowing Base. If Availability
exists to borrow Advances while Supplemental Advances are outstanding, Borrower
agrees that Foothill may, without prior request by Borrower, cause Advances to
be made to the extent of Availability for the purpose of repaying outstanding
Supplemental Advances. Except as specifically aforesaid, each Supplemental
Advance shall be made upon Borrower's request (pursuant to the terms of Section
2.9), which request shall be irrevocable, specifying (i) the amount of the
requested Supplemental Advance; and (ii) the requested funding date of such
Supplemental Advance.
(c) Amounts borrowed pursuant to this Section 2.3 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.4 [Intentionally omitted].
2.5 Overadvances. If, at any time or for any reason, the aggregate amount
of Obligations owed by Borrower to Foothill pursuant to Sections 2.1, 2.2,
and/or 2.3 (except for unaccrued contingent Obligations other than Letter of
Credit Usage) is greater than either the Dollar or percentage limitations set
forth in Sections 2.1, 2.2, and/or 2.3 (an "Overadvance"), Borrower immediately
shall pay to Foothill, in cash, the amount of such excess to be used by Foothill
first, (except as otherwise provided in Section 2.3(a)) to repay Supplemental
Advances outstanding under Section 2.3, second, to repay Advances outstanding
under Section 2.1, and, thereafter, to be held by Foothill as cash collateral to
secure Borrower's obligation to repay Foothill for all amounts paid pursuant to
Letters of Credit.
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.
(a) Interest Rate. Except as provided in clause (c) below, all Obligations
(except for undrawn Letters of Credit and unaccrued contingent Obligations)
shall bear interest as follows: (i) Each Eurodollar Rate Loan shall bear
interest at a per annum rate of 3.00 percentage points above the Adjusted
Eurodollar Rate; (ii) each Supplemental Advance shall bear interest at the fixed
per annum rate of fifteen percent (15%); and (iii) all other such Obligations
shall bear interest at a per annum rate of 1.00 percentage points above the
Reference Rate.
(b) Letter of Credit Fee. Borrower shall pay Foothill a fee (in addition to
the charges, commissions, fees, and costs set forth in Section 2.2(d)) equal to
1.25% per annum times the aggregate undrawn amount of all outstanding Letters of
Credit.
<PAGE>
(c) Default Rate. Upon the occurrence and during the continuation of an
Event of Default, (i) all Obligations (except for Supplemental Advances, undrawn
Letters of Credit, and unaccrued contingent Obligations) shall bear interest at
a per annum rate equal to 3.00 percentage points above the Reference Rate, (ii)
Supplemental Advances shall bear interest at a per annum rate equal to sixteen
and one-half percent (16.5%), and (iii) the Letter of Credit Fee set forth in
Section 2.6(b) shall be increased to 3.25% per annum.
(d) Minimum Interest. In no event shall the rate of interest chargeable
hereunder for any day be less than 7.00% per annum. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.
(e) Payments. Interest in respect of Reference Rate Loans and Supplemental
Advances and Letter of Credit fees payable hereunder shall be due and payable,
in arrears, on the first day of each month during the term hereof. Interest in
respect of each Eurodollar Rate Loan shall be due and payable, in arrears, on
the last day of the Interest Period applicable thereto. Borrower hereby
authorizes Foothill, at its option, without prior notice to Borrower, to charge
such interest and Letter of Credit fees, all Foothill Expenses (as and when
incurred), the charges, commissions, fees, and costs provided for in Section
2.2(d) (as and when accrued or incurred), the -------------- fees and charges
provided for in Section 2.11 (as and when accrued or incurred), and ------------
all installments or other payments due under any Loan Document to Borrower's
Loan Account, which amounts thereafter shall accrue interest at the rate then
applicable to Reference Rate Loans hereunder. Any interest not paid when due
shall be compounded and shall thereafter accrue interest at the rate then
applicable to Reference Rate Loans hereunder.
(f) Computation. The Reference Rate as of the date of this Agreement is
____% per annum. In the event the Reference Rate is changed from time to time
hereafter, the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Reference Rate. All interest and fees chargeable under the Loan Documents
shall be computed on the basis of a 360 day year for the actual number of days
elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and Foothill, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it; provided, however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso facto as of the
date of this Agreement, Borrower is and shall be liable only for the payment of
such maximum as allowed by law, and payment received from Borrower in excess of
such legal maximum, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
<PAGE>
2.7 Collection of Accounts. Borrower shall at all times maintain lockboxes
(the "Lockboxes") and, immediately after the Closing Date, shall instruct all
Account Debtors with respect to the Accounts, proceeds of Accounts or Inventory,
and Negotiable Collateral (to the extent, and only to the extent, that such
Negotiable Collateral is proceeds of Accounts) of Borrower to remit all
Collections in respect thereof to such Lockboxes. Borrower, Foothill, and the
Lockbox Banks shall enter into the Lockbox Agreements, which among other things
shall provide for the opening of a Lockbox Account for the deposit of
Collections at a Lockbox Bank. Borrower agrees that all Collections and other
amounts received by Borrower from any Account Debtor or any other source with
respect to Accounts, proceeds of Accounts or Inventory, or Negotiable Collateral
that is proceeds of Accounts, immediately upon receipt shall be deposited into a
Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby shall
be modified by Borrower without the prior written consent of Foothill. Upon the
terms and subject to the conditions set forth in the Lockbox Agreements, all
amounts received in each Lockbox Account shall be wired each Business Day into
an account (the "Foothill Account") maintained by Foothill at a depositary
selected by Foothill.
2.8 Crediting Payments; Application of Collections. Subject to Section
2.3(a), the receipt of any Collections by Foothill (whether from transfers to
Foothill by the Lockbox Banks pursuant to the Lockbox Agreements or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Foothill Account or unless and until such Collection item is honored
when presented for payment. From and after the Closing Date, Foothill shall be
entitled to charge Borrower for two (2) Business Days of `clearance' or `float'
at the rate set forth in Section 2.6(a)(iii) or Section 2.6(c)(i), as
applicable, on all Collections that are received by Foothill (regardless of
whether forwarded by the Lockbox Banks to Foothill, whether provisionally
applied to reduce the Obligations under Section 2.1, or otherwise). This
across-the-board two (2) Business Day clearance or float charge on all
Collections is acknowledged by the parties to constitute an integral aspect of
the pricing of Foothill's financing of Borrower, and shall apply irrespective of
the characterization of whether receipts are owned by Borrower or Foothill, and
whether or not there are any outstanding Advances or Supplemental Advances, the
effect of such clearance or float charge being the equivalent of charging two
(2) Business Days of interest on such Collections. Should any Collection item
not be honored when presented for payment, then Borrower shall be deemed not to
have made such payment, and interest shall be recalculated accordingly. Anything
to the contrary contained herein notwithstanding: (a) any Collection item shall
be deemed received by Foothill only if it is received into the Foothill Account
on a Business Day on or before 2:00 p.m. New York time. If any Collection item
is received into the Foothill Account on a non-Business Day or after 2:00 p.m.
New York time on a Business Day, it shall be deemed to have been received by
Foothill as of the opening of business on the immediately following Business
<PAGE>
Day; and (b) so long as no Event of Default has occurred and is continuing,
Collections will only be applied to Obligations that are not Eurodollar Rate
Loans, and to the extent that all such Obligations other than Eurodollar Rate
Loans have been repaid, additional Collections will be, at Borrower's direction,
returned to Borrower or applied to such Eurodollar Rate Loans subject to any
required payments under Section 2.16(d).
2.9 Designated Account. Foothill is authorized to make the Advances and
Supplemental Advances and issue the Letters of Credit under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.6(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Foothill hereunder. Unless otherwise
agreed by Foothill and Borrower, any Advance or Supplemental Advance requested
by Borrower and made by Foothill hereunder shall be made to the Designated
Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Foothill shall
maintain an account on its books in the name of Borrower (the "Loan Account") on
which Borrower will be charged with all Advances or Supplemental Advances made
by Foothill to Borrower or for Borrower's account, including, accrued interest,
Foothill Expenses, and any other payment Obligations of Borrower. In accordance
with Section 2.8, the Loan Account will be credited with all payments received
by Foothill from Borrower or for Borrower's account, including all amounts
received in the Foothill Account from any Lockbox Bank. Foothill shall render
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and Foothill unless, within 30 days after receipt thereof by Borrower,
Borrower shall deliver to Foothill written objection thereto describing in
reasonable detail the objections of Borrower to any such statements or items
therein.
2.11 Fees. Borrower shall pay to Foothill the following fees:
(a) Agency Fee. On the earlier of the Closing Date and the date that
Foothill issues a written commitment letter committing to provide the facilities
provided for in this Agreement on the terms set forth in this Agreement, an
agency fee of $215,000;
(b) Unused Line Fee. On the first day of each month during the term of this
Agreement, an unused line fee in an amount equal to 0.375% per annum times the
Average Unused Portion of the Maximum Amount.
<PAGE>
(c) Annual Facility Fee. On the Closing Date, and on each anniversary of
the Closing Date, an annual facility fee in an amount equal to 0.25% of the
Maximum Amount;
(d) Financial Examination, Documentation, and Appraisal Fees. Foothill's
customary fee of $650 per day per examiner, plus out-of-pocket expenses for each
financial analysis and examination (i.e., audits) of Borrower performed by
personnel employed by Foothill; Foothill's customary appraisal fee of $1,500 per
day per appraiser, plus out-of-pocket expenses for each appraisal of the
Collateral performed by personnel employed by Foothill; and, the actual charges
paid or incurred by Foothill if it elects to employ the services of one or more
third Persons to perform such financial analyses and examinations (i.e., audits)
of Borrower or to appraise the Collateral; and, on each anniversary of the
Closing Date, Foothill's customary fee of $1,000 per year for its loan
documentation review; and
(e) Collateral Management Fee. On the first day of each calendar month
during the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a Collateral management fee payable in arrears with respect to the
preceding calendar month in an amount equal to $3,000 per month.
2.12 Eurodollar Rate Loans. Any other provisions herein to the contrary
notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a) Borrowing; Conversion; Continuation. Borrower may from time to time, on
or after the Closing Date, request in a written or telephonic communication with
Foothill: (i) Advances to constitute Eurodollar Rate Loans (pursuant to Section
2.1(c)); (ii) that Reference Rate Loans be converted into Eurodollar Rate Loans;
or (iii) that existing Eurodollar Rate Loans continue for an additional Interest
Period. Any such request shall specify the aggregate amount of the requested
Eurodollar Rate Loans, the proposed funding date therefor (which shall be a
Business Day, and with respect to continued Eurodollar Rate Loans shall be the
last day of the Interest Period of the existing Eurodollar Rate Loans being
continued), and the proposed Interest Period, in each case subject to the
limitations set forth below). Eurodollar Rate Loans may only be made, continued,
or extended if, as of the proposed funding date therefor each of the following
conditions is satisfied:
(v) no Event of Default exists;
(w) no more than five Interest Periods may be in effect at any
one time;
<PAGE>
(x) the amount of each Eurodollar Rate Loan borrowed, converted,
or continued must be in an amount not less than $1,000,000 and
integral multiples of $500,000 in excess thereof;
(y) Foothill shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Foothill and can be readily
determined as of the date of the request for such Eurodollar Rate Loan
by Borrower; and
(z) Foothill shall have received such request at least two
Business Days prior to the proposed funding date therefor.
Any request by Borrower to borrow Eurodollar Rate Loans, to convert
Reference Rate Loans to Eurodollar Rate Loans, or to continue any existing
Eurodollar Rate Loans shall be irrevocable, except to the extent that Foothill
shall determine under Sections 2.12(a), 2.13 or 2.14 that such Eurodollar Rate
Loans cannot be made or continued.
(b) Determination of Interest Period. By giving notice as set forth in
Section 2.12(a), the Borrower shall have the option of selecting a 1 month, 2
month, or 3 month Interest Period for such Eurodollar Rate Loan. The
determination of Interest Periods shall be subject to the following provisions:
(i) in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day which
is not a Business Day, the Interest Period shall be extended to expire
on the next succeeding Business Day; provided, however, that if the
next succeeding Business Day occurs in the following calendar month,
then such Interest Period shall expire on the immediately preceding
Business Day;
(iii) if any Interest Period begins on the last Business Day of a
month, or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period, then the
Interest Period shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iv) the Borrower may not select an Interest Period which expires
later than the Maturity Date.
(c) Automatic Conversion: Optional Conversion by Foothill. Any Eurodollar
Rate Loan shall automatically convert to a Reference Rate Loan upon the last day
of the applicable Interest Period, unless Foothill has received a request to
<PAGE>
continue such Eurodollar Rate Loan at least two Business Days prior to the end
of such Interest Period in accordance with the terms of Section 2.12(a). Any
Eurodollar Rate Loan shall, at Foothill's option, upon notice to Borrower,
convert to a Reference Rate Loan in the event that (i) an Event of Default shall
have occurred and be continuing as of the last day of the Interest Period for
such Eurodollar Rate Loan, or (ii) this Agreement shall terminate, and Borrower
shall pay to Foothill any amounts required by Section 2.16 as a result thereof.
2.13 Illegality. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof shall make it unlawful for Foothill
to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (a)
the obligation of Foothill hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such, and convert Reference Rate Loans to Eurodollar
Rate Loans shall forthwith be suspended and (b) Foothill's then outstanding
Eurodollar Rate Loans, if any, shall be converted automatically to Reference
Rate Loans on the respective last days of the then current Interest Periods with
respect thereto or within such earlier period as required by law; provided,
however, that before making any such demand, Foothill agrees to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or regulatory manner) to
designate a different lending office if the making of such a designation would
allow Foothill or its lending office to continue to perform its obligations to
make Eurodollar Rate Loans. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 2.16. If circumstances subsequently
change so that Foothill shall determine that it is no longer so affected,
Foothill will promptly notify Borrower, and upon receipt of such notice, the
obligations of Foothill to make or continue Eurodollar Rate Loans or to convert
Reference Rate Loans into Eurodollar Rate Loans shall be reinstated.
2.14 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by Foothill with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof
(i) shall subject Foothill to any tax, levy, charge, fee,
reduction, or withholding of any kind whatsoever with respect to this
Agreement or any Advance, or change the basis of taxation of payments
to Foothill in respect thereof (except for taxes covered by Section
2.15 and the establishment of a tax based on the net income of
Foothill or changes in the rate of tax on the net income of Foothill);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan, or similar requirement against assets held
by, deposits or other liabilities in or for the account of, Advances
or other extensions of credit by, or any other acquisition of funds
by, any office of Foothill; or
<PAGE>
(iii) shall impose on Foothill any other condition with respect
to this Agreement or any Advance;
and the result of any of the foregoing is to increase the cost to Foothill, by
an amount which Foothill in good faith deems to be material, of making,
converting into, continuing, or maintaining Advances or to increase the cost to
Foothill, by an amount which Foothill deems to be material, or to reduce any
amount receivable hereunder in respect of Advances, or to forego any other sum
payable thereunder or make any payment on account thereof, then, in any such
case, Borrower shall promptly pay Foothill, upon its demand, any additional
amounts necessary to compensate Foothill for such increased cost or reduced
amount receivable; provided, however, that before making any such demand,
Foothill agrees to use reasonable efforts (consistent with its internal policy
and legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion, in any legal, economic, or
regulatory manner) to designate a different Eurodollar lending office if the
making of such designation would allow Foothill or its Eurodollar lending office
to continue to perform its obligations to make Eurodollar Rate Loans or to
continue to fund or maintain Eurodollar Rate Loans and avoid the need for, or
materially reduce the amount of, such increased cost. If Foothill becomes
entitled to claim any additional amounts pursuant to this Section 2.14, Foothill
shall promptly notify Borrower of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
Section 2.14 submitted by Foothill to Borrower shall be conclusive in the
absence of manifest error. If Borrower so notifies Foothill within 5 Business
Days after Foothill notifies Borrower of any increased cost pursuant to the
foregoing provisions of this Section 2.14, Borrower may convert all Eurodollar
Rate Loans then outstanding into Reference Rate Loans in accordance with Section
2.12 and, additionally, reimburse Foothill for any cost in accordance with
Section 2.16. This covenant shall survive the termination of this Agreement and
the payment of the Advances and all other amounts payable hereunder for nine
months following such termination and repayment.
(b) If Foothill shall have determined that the adoption of or any change in
any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by Foothill or any Person controlling Foothill
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority made subsequent to the date
hereof does or shall have the effect of increasing the amount of capital
required to be maintained or reducing the rate of return on Foothill's or such
Person's capital as a consequence of its obligations hereunder to a level below
that which such Foothill or such Person could have achieved but for such change
or compliance (taking into consideration Foothill's or such Person's policies
with respect to capital adequacy) by an amount deemed by Foothill to be
material, then from time to time, after submission by Foothill to Borrower of a
prompt written request therefor, Borrower shall pay to Foothill such additional
<PAGE>
amount or amounts as will compensate Foothill or such Person for such reduction.
This covenant shall survive the termination of this Agreement and the payment of
the Advances and all other amount payable hereunder for nine months following
such termination and repayment.
2.15 Taxes. (a) Except as provided below in this Section 2.15, all payments
made by Borrower under this Agreement and any other Loan Documents shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions, or withholdings, now or hereafter imposed, levied,
collected, withheld, or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes imposed in lieu of net income taxes. If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to Foothill hereunder or under any other Loan Documents, the amounts so
payable to Foothill shall be increased to the extent necessary to yield to
Foothill (after payment of all Non- Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and any other Loan Documents, provided, however, that Borrower shall
be entitled to deduct and withhold any Non-Excluded Taxes and shall not be
required to increase any such amounts payable to Foothill if Foothill fails or
is unable to comply with the requirements of paragraph (b) of this Section 2.15.
Whenever any Non-Excluded Taxes are payable by Borrower, as promptly as possible
thereafter Borrower shall send to Foothill a certified copy of an original
official receipt received by Borrower showing payment thereof. If Borrower fails
to pay any Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to Foothill the required receipts or other required documentary
evidence, Borrower shall indemnify Foothill for any incremental taxes, interest
or penalties that may become payable by Foothill as a result of any such
failure. The agreements in this Section 2.15 shall survive the termination of
this Agreement and the payment of the Advances and all other amounts payable
hereunder.
(b) Any Participant or assignee of Foothill that is not incorporated under
the laws of the United States of America or a state thereof (any such Person, a
"Foreign Lender") shall:
(i) (x) on or before the date of any payment by Borrower under
this Agreement to such Foreign Lender, deliver to Borrower and
Foothill (A) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form, as
the case may be, certifying that it is entitled to receive payments
under this Agreement without any deduction or withholding of any
United States federal income taxes and (B) a duly completed Internal
Revenue Service Form W-8 or W-9, or successor applicable form, as the
case may be, certifying that it is entitled to an exemption from
United States backup withholding tax;
<PAGE>
(y) deliver to Borrower and Foothill two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously
delivered by it to Borrower, and
(z) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by Borrower or
Foothill;
or
(ii) in the case of any such Foreign Lender that is not a "bank"
within the meaning of Section 881(c)(3)(A) of the IRC and that does
not comply with subparagraph (i) of this paragraph (b),
(x) represent to Borrower (for the benefit of Borrower and
Foothill) that it is not a bank within the meaning of Section
881(c)(3)(A) of the IRC,
(y) deliver to Borrower on or before the date of any payment
by Borrower, with a copy to Foothill: (1) a certificate stating
that such Foreign Lender (A) is not a "bank" under Section
881(c)(3)(A) of the IRC, is not subject to regulatory or other
legal requirements as a bank in any jurisdiction, and has not
been treated as a bank for purposes of any tax, securities law,
or other filing or submission made to any Governmental Authority,
any application made to a rating agency or qualification for any
exemption from tax, securities law or other legal requirements,
(B) is not a 10-percent shareholder within the meaning of Section
881(c)(3)(B) of the IRC, and (C) is not a controlled foreign
corporation receiving interest from a related person within the
meaning of Section 881(c)(3)(C) of the IRC (any such certificate
a "U.S. Tax Compliance Certificate"); and (2) two duly completed
copies of Internal Revenue Service Form W-8, or successor
applicable form, certifying to such Foreign Lender's legal
entitlement at the date of such certificate to an exemption from
U.S. withholding tax under the provisions of Section 881(c) of
the IRC with respect to payments to be made under this Agreement
(and to deliver to Borrower and Foothill two further copies of
Form W-8 on or before the date it expires or becomes obsolete and
after the occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any extensions
of time reasonably requested by Borrower or Foothill for filing
and completing such forms), and
(z) agree, to the extent legally entitled to do so, upon
reasonable request by Borrower, to provide to Borrower (for the
benefit of Borrower and Foothill) such other forms as may be
reasonably required in order to establish the legal entitlement
of such Foreign Lender to an exemption from withholding with
respect to payments under this Agreement;
<PAGE>
(c) Foothill and each Foreign Lender shall, upon the reasonable request by
Borrower, deliver to Borrower or the applicable Governmental Authority, as the
case may be, any form or certificate required in order that any payment by
Borrower under this Agreement may be made free and clear of, and without
deduction or withholding for or on Non-Excluded Taxes (or to allow any such
deduction or withholding to be at a reduced rate) imposed on such payment under
the laws of any jurisdiction, provided that Foothill or such Foreign Lender, as
the case may be, is legally entitled to complete, execute and deliver such form
or certificate and such completion, execution or submission would not materially
prejudice the legal position of Foothill or such Foreign Lender, as the case may
be,
unless in any such case any change in treaty, law, or regulation has occurred
after the date such Person becomes a Foreign Lender hereunder which renders all
such forms and certificates inapplicable or which would prevent such Foreign
Lender from duly completing and delivering any such form or certificate with
respect to it and such Foreign Lender so advises Borrower and Foothill. Each
Person that shall become an assignee or a Participant shall, upon the
effectiveness of the related transfer, be required to provide all of the forms,
certifications, and statements required pursuant to this Section 2.15; provided,
however, that in the case of a Participant the obligations of such Participant
pursuant to this paragraph (b) shall be determined as if such Participant were
an assignee except that such Participant shall furnish all such required forms,
certifications, and statements to Foothill.
2.16 Indemnity. Borrower agrees to indemnify Foothill and to hold Foothill
harmless from any loss or expense which Foothill may sustain or incur as a
consequence of (a) default by Borrower in payment when due of the principal
amount of or interest on any Eurodollar Rate Loan, (b)default by Borrower in
making a borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by Borrower in making any prepayment
after Borrower has given a notice thereof in accordance with the provisions of
this Agreement, or (d) the making of a prepayment of Eurodollar Rate Loans on a
day which is not the last day of an Interest Period with respect thereto
(whether due to the termination of this Agreement upon an Event of Default or
otherwise), including, in each case, any such loss or expense (but excluding
loss of margin) arising from the reemployment of funds obtained by it or from
fees payable to terminate the deposits from which such funds were obtained.
Calculation of all amounts payable to Foothill under this Section 2.16 shall be
made as though Foothill had actually funded the relevant Eurodollar Rate Loan
through the purchase of a deposit bearing interest at the Eurodollar Rate in an
amount equal to the amount of such Eurodollar Rate Loan and having a maturity
comparable to the relevant Interest Period; provided, however, that Foothill may
fund each of the Eurodollar Rate Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 2.16. This covenant shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder for a period of nine months thereafter.
<PAGE>
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance or Letter of Credit. The
obligation of Foothill to make the initial Advance or to issue the initial
Letter of Credit is subject to the fulfillment, to the satisfaction of Foothill
and its counsel (or the waiver or postponement, by Foothill, in Foothill's sole
discretion), of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before July 31, 1998;
(b) Foothill shall have received searches reflecting the filing of its
financing statements;
(c) Foothill shall have received each of the following documents, duly
executed, and each such document shall be in full force and effect:
i. the Lockbox Agreements;
ii. the Disbursement Letter;
iii. the Pay-Off/Paydown Letters, together with UCC termination
statements and other documentation evidencing the termination by Existing
Lenders of their Liens in and to the properties and assets of Borrower to
the extent of the obligations so repaid;
iv. the Mortgage;
v. the Suretyship Agreement;
vi. the VCOC Letter;
vii. the Stock Pledge Agreement;
viii. the Deposit Account Security Agreement;
ix. the Intercreditor Agreement; and
x. the Trademark Security Agreement;
<PAGE>
(d) Foothill shall have received a certificate from the Secretary of each
Obligor attesting to the resolutions of such Obligor's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Obligor is a party and authorizing specific
officers of such Obligor to execute the same;
(e) Foothill shall have received copies of each Obligor's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Obligor;
(f) Foothill shall have received a certificate of status with respect to
each Obligor, dated within 15 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of such
Obligor, which certificate shall indicate that such Obligor is in good standing
in such jurisdiction;
(g) Foothill shall have received certificates of status with respect to
each Obligor, each dated within 15 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions in which its
failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that such Obligor is in good standing
in such jurisdictions;
(h) Foothill shall have received a certificate of insurance, together with
the endorsements thereto, as are required by Section 6.10, the form and
substance of which shall be reasonably satisfactory to Foothill and its counsel;
(i) Except to the extent that same are in the possession of the Collateral
Agent, Foothill shall have received duly executed certificates of title with
respect to that portion of the Collateral that is subject to certificates of
title;
(j) Foothill shall have received such Collateral Access Agreements from
lessors, warehousemen, bailees, and other third persons as Foothill reasonably
may require;
(k) Foothill shall have received an opinion of Borrower's counsel in form
and substance satisfactory to Foothill and Foothill's counsel;
(l) Foothill shall have received updated appraisals of the Inventory
(including any required in-person inspections) and title reports or title
commitments with respect to the Real Property Collateral;
(m) the Plan of Reorganization shall have been confirmed by a final order
of the Bankruptcy Court, and shall be substantially consummated on the Closing
Date;
<PAGE>
(n) Foothill shall have received satisfactory evidence, in the form of a
certificate of the principal financial officer of Borrower, that all tax returns
required to be filed by Borrower have been timely filed and all taxes upon
Borrower or its properties, assets, income, and franchises (including real
property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(o) on the Closing Date, after giving effect to any Advances and/or
Supplemental Advances made on such date and any Letters of Credit issued or
assumed on such date, Borrower shall have remaining Combined Availability of not
less than $5,000,000;
(p) no DIP Event of Default shall have occurred and be continuing;
(q) Foothill shall have full cooperation from the Borrower and access to
the Borrower's facilities and records in the event Foothill elects to conduct an
updated audit of Borrower to ascertain the levels of Eligible Accounts and
Eligible Inventory of Borrower and to establish the opening Borrowing Base and
Supplemental Borrowing Base (as per this Agreement) hereunder, and Borrower will
provide Foothill with written notice of the Closing Date not less than 20
Business Days before such Closing Date; and
(r) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance reasonably satisfactory to
Foothill and its counsel.
3.2 Conditions Precedent to all Advances, all Supplemental Advances and all
Letters of Credit. The following shall be conditions precedent to all Advances,
all Supplemental Advances, and all Letters of Credit hereunder:
(a) the representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct in all respects on and as of the
date of such extension of credit, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date);
(b) no Default or Event of Default shall have occurred and be continuing on
the date of such extension of credit, nor shall either result from the making
thereof; and
(c) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any governmental authority against Borrower,
Foothill, or any of their Affiliates.
<PAGE>
3.3 Conditions Subsequent. As condition subsequent to the initial closing
hereunder, Borrower shall perform or cause to be performed the following (the
failure by Borrower to so perform or cause to be performed constituting an Event
of Default):
(a) within 30 days of the Closing Date, deliver to Foothill the certified
copies of the policies of insurance, together with the endorsements thereto, as
are required by Section 6.10, the form and substance of which shall be
satisfactory to Foothill and its counsel.
(b) in the event that Foothill, in its sole discretion, elects to make an
initial Advance or issue an initial Letter of Credit pursuant to this Agreement
without the satisfaction of each of the conditions set forth in Section 3.1,
Borrower agrees that such unsatisfied conditions are conditions subsequent and
shall give rise to an Event of Default if not satisfied within 30 days after the
Closing Date.
3.4 Term; Automatic Renewal. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue in
full force and effect for a term ending on the date (the "Renewal Date") that is
three (3) years from the Closing Date and automatically shall be renewed for
successive one (1) year periods thereafter, unless sooner terminated pursuant to
the terms hereof. Either party may terminate this Agreement effective on the
Renewal Date or on any one (1) year anniversary of the Renewal Date by giving
the other party at least 90 days prior written notice. The foregoing
notwithstanding, Foothill shall have the right to terminate its obligations
under this Agreement immediately and without notice upon the occurrence and
during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrower with
respect to any outstanding Letters of Credit) immediately shall become due and
payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrower of Borrower's duties, Obligations, or
covenants hereunder, and Foothill's continuing security interests in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and Foothill's obligation to provide additional credit
hereunder is terminated. If Borrower has sent a notice of termination pursuant
to the provisions of Section 3.4, but fails to pay the Obligations in full on
the date set forth in said notice, then Foothill may, but shall not be required
to, renew this Agreement for an additional term of one (1) year.
3.6 Early Termination by Borrower. The provisions of Section 3.4 that allow
termination of this Agreement by Borrower only on the Renewal Date and certain
anniversaries thereof notwithstanding, Borrower has the option, at any time upon
90 days prior written notice to Foothill, to terminate this Agreement by paying
to Foothill, in cash, the Obligations (including an amount equal to 105% of the
undrawn amount of the Letters of Credit), in full, together with a premium (the
"Early Termination Premium") equal to (a) 4.00% of the Maximum Amount if such
<PAGE>
termination occurs on or before the first anniversary of the Closing Date, (b)
3.00% of the Maximum Amount if such termination occurs after the first
anniversary of the Closing Date and on or before the second anniversary of the
Closing Date, and (c) 2.00% of the Maximum Amount if such termination occurs
after the second anniversary of the Closing Date and other than on the Renewal
Date or any subsequent anniversary of the Renewal Date in accordance with
Section 3.4.
3.7 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Personal Property Collateral in order to secure prompt repayment of any
and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Foothill's security
interests in the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Foothill or Borrower.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business, except for Permitted Dispositions, and except for the
Permitted Combination, Borrower has no authority, express or implied, to dispose
of any item or portion of the Personal Property Collateral or the Real Property
Collateral.
4.2 Negotiable Collateral. In the event that any Accounts are converted
into or become evidenced by Negotiable Collateral, Borrower, immediately upon
the request of Foothill, shall endorse and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 Collection of Proceeds of Inventory, Accounts, and Certain Negotiable
Collateral. At any time following the occurrence and during the continuance of
an Event of Default or if Foothill deems itself insecure, Foothill or Foothill's
designee may (a) notify customers or Account Debtors of Borrower that the
Inventory, Accounts, and/or Negotiable Collateral consisting of proceeds of
Inventory or Accounts have been assigned to Foothill or that Foothill has a
security interest therein, and (b) collect the proceeds of Inventory, Accounts,
and Negotiable Collateral consisting of proceeds of Inventory or Accounts
directly and charge the collection costs and expenses to the Loan Account.
<PAGE>
Borrower agrees that it will hold in trust for Foothill, as Foothill's trustee,
any Collections that it receives with respect to any Inventory, Accounts,
proceeds of Inventory or Accounts, or Negotiable Collateral consisting of
proceeds of Inventory or Accounts and immediately will deliver said Collections
to Foothill in their original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Foothill (and any of Foothill's officers, employees, or agents
designated by Foothill) as Borrower's true and lawful attorney, at any time
while this Agreement remains in effect or at any time while any Obligations
remain outstanding, with power to (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in Section 4.4, sign the name
of Borrower on any of the documents described in Section 4.4, (b) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure, sign Borrower's name on any invoice or bill of lading relating to any
Account, drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors, (c) send requests for
verification of Accounts, (d) endorse Borrower's name on any Collection item
that may come into Foothill's possession, (e) at any time that an Event of
Default has occurred and is continuing or Foothill deems itself insecure, notify
the post office authorities to change the address for delivery of Borrower's
mail to an address designated by Foothill, to receive and open all mail
addressed to Borrower, and to retain all mail relating to the Collateral and
forward all other mail to Borrower, (f) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure, make, settle, and
adjust all claims under Borrower's policies of insurance to the extent they
pertain to Foothill Primary Collateral and make all determinations and decisions
with respect to such policies of insurance to the extent they relate to Foothill
Primary Collateral, and (g) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure, settle and adjust disputes
and claims respecting the Accounts directly with Account Debtors, for amounts
and upon terms that Foothill determines to be reasonable, and Foothill may cause
to be executed and delivered any documents and releases that Foothill determines
to be necessary. The appointment of Foothill as Borrower's attorney, and each
and every one of Foothill's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and Foothill's obligation to extend credit hereunder is
terminated.
<PAGE>
4.6 Right to Inspect. At any time that an Event of Default has occurred and
is continuing or Foothill deems itself insecure, Foothill (through any of its
officers, employees, or agents) shall have the right, from time to time
hereafter to inspect Borrower's Books and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
At any other time, Foothill (through any of its officers, employees, or agents)
shall have the right, from time to time hereafter at reasonable times and in a
reasonable manner (including periodic audits, as customarily conducted by
Foothill of its customers, which are stipulated to be reasonable), to inspect
Borrower's Books and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower makes
the following representations and warranties which shall be true, correct, and
complete in all respects as of the date hereof, and shall be true, correct, and
complete in all respects as of the Closing Date, and at and as of the date of
the making of each Advance or Supplemental Advance or issuance of each Letter of
Credit made or issued thereafter, as though made on and as of the date of such
Advance or Supplemental Advance or Letter of Credit (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens. Foothill's Liens
in the Collateral have priority over all other Liens in the Collateral except
for Permitted Priority Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide existing
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of Borrower's business,
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable
quality, free from defects (except for Inventory readily salable in the ordinary
course of business as "irregulars").
5.4 Equipment. All of the Equipment is used or held for use in Borrower's
business or the businesses of its Subsidiaries and is fit for such purposes.
<PAGE>
5.5 Location of Inventory and Equipment. The Inventory and Equipment are
not stored with a bailee, warehouseman, or similar party (without Foothill's
prior written consent) and are located only at the locations identified on
Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.
5.7 Location of Chief Executive Office; FEIN. The chief executive office of
Borrower is located at the address indicated in the preamble to this Agreement.
Oneita's FEIN is 57-0351045. Kinston's FEIN is 58-1514502.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good standing under the
laws of the jurisdiction of its incorporation and qualified and licensed to do
business in, and in good standing in, any state where the failure to be so
licensed or qualified reasonably could be expected to have a Material Adverse
Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding Stock of each such Subsidiary
has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.8, no Stock (or any securities,
instruments, warrants, options, purchase rights, conversion or exchange rights,
calls, commitments or claims of any character convertible into or exercisable
for Stock) of any direct or indirect Subsidiary of Borrower is subject to the
issuance of any security, instrument, warrant, option, purchase right,
conversion or exchange right, call, commitment or claim of any right, title, or
interest therein or thereto.
(d) Oneita Freeport Holdings Corp., organized under the laws of the British
Virgin Islands, is a holding company for a foreign Subsidiary of Oneita, and has
no material operating assets of its own. Oneita International Corp., organized
under the laws of the British Virgin Islands, is a holding company for a foreign
Subsidiary of Oneita, and has no material operating assets of its own. Oneita
Export Corp., a South Carolina corporation, has no material assets.
5.9 Due Authorization; No Conflict.
<PAGE>
(a) The execution, delivery, and performance by Borrower of this Agreement
and the Loan Documents to which it is a party have been duly authorized by all
necessary corporate action.
(b) The execution, delivery, and performance by Borrower of this Agreement
and the Loan Documents to which it is a party do not and will not (i) violate
any provision of federal, state, or local law or regulation (including
Regulations G, T, U, and X of the Federal Reserve Board) applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation or material lease of
Borrower, (iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) require any approval of stockholders or any approval or
consent of any Person under any material contractual obligation of Borrower,
except to the extent such approval or consent has been obtained.
(c) Other than the filing of appropriate financing statements, fixture
filings, and the Mortgage, the execution, delivery, and performance by Borrower
of this Agreement and the Loan Documents to which Borrower is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any federal, state, foreign, or other Governmental
Authority or other Person, except for any necessary filings or reports required
to be made to or with the Securities Exchange Commission.
(d) This Agreement and the Loan Documents to which Borrower is a party, and
all other documents contemplated hereby and thereby, when executed and delivered
by Borrower will be the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally.
(e) Except with respect to the perfection and priority of Liens on
Inventory or Equipment located outside the United States, as to which this
paragraph is not applicable, the Liens granted by Borrower to Foothill in and to
its properties and assets pursuant to this Agreement and the other Loan
Documents are validly created, perfected, and first priority Liens, subject only
to Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or against
Borrower before any court or administrative agency and Borrower does not have
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, reasonably could not be expected to result in a Material
Adverse Change.
<PAGE>
5.11 No Material Adverse Change. All financial statements relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12 Solvency. Borrower is Solvent. No transfer of property is being made
by Borrower and no obligation is being incurred by Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
Borrower.
5.13 Employee Benefits. None of Borrower, any of its Subsidiaries, or any
of their ERISA Affiliates maintains or contributes to any Benefit Plan, other
than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and each
ERISA Affiliate have satisfied the minimum funding standards of ERISA and the
IRC with respect to each Benefit Plan to which it is obligated to contribute. No
ERISA Event has occurred nor has any other event occurred that may result in an
ERISA Event that reasonably could be expected to result in a Material Adverse
Change. None of Borrower or its Subsidiaries, any ERISA Affiliate, or any
fiduciary of any Plan is subject to any direct or indirect liability with
respect to any Plan under any applicable law, treaty, rule, regulation, or
agreement. None of Borrower or its Subsidiaries or any ERISA Affiliate is
required to provide security to any Plan under Section 401(a)(29) of the IRC.
5.14 Environmental Condition. Except as specifically disclosed on Schedule
5.14, none of Borrower's properties or assets has ever been used by Borrower or,
to the best of Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials. Except as specifically disclosed on Schedule 5.14, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Except as specifically disclosed on Schedule 5.14,
Borrower has not received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower resulting in the releasing
or disposing of Hazardous Materials into the environment. None of the matters
disclosed on Schedule 5.14 reasonably could be expected to result in a Material
Adverse Change.
<PAGE>
5.15 Brokerage Fees. Except for fees paid or payable to Borrower's
financial advisors, the payment of which is Borrower's sole responsibility, no
brokerage commission or finders fees has or shall be incurred or payable in
connection with or as a result of Borrower's obtaining financing from Foothill
under this Agreement, and Borrower has not utilized the services of any broker
or finder in connection with Borrower's obtaining financing from Foothill under
this Agreement.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, and unless
Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Accounting System. Maintain a standard and modern system of accounting
that enables Borrower to produce financial statements in accordance with GAAP,
and maintain records pertaining to the Collateral that contain information as
from time to time may be requested by Foothill. Borrower also shall keep a
modern inventory reporting system that shows all additions, sales, claims,
returns, and allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Foothill with the following documents or
information at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register since the
last such schedule and a calculation of the Borrowing Base as of such date, (b)
on a monthly basis and, in any event, by no later than the 10th day of each
month during the term of this Agreement, (i) a detailed calculation of the
Borrowing Base, (ii) a detailed aging, by total, of the Accounts, together with
a reconciliation to the detailed calculation of the Borrowing Base previously
provided to Foothill, and (iii) a report showing the post-Petition Date loans
and advances outstanding from Borrower to its Jamaican and Mexican Subsidiaries,
and any changes in the balances thereof from the last such report, (c) on a
monthly basis and, in any event, by no later than the 10th day of each month
during the term of this Agreement, a summary aging, by vendor, of Borrower's
accounts payable and any book overdraft, (d) on a weekly basis, (i) Inventory
reports specifying Borrower's cost and the wholesale market value of its
Inventory by category, with additional detail showing additions to and deletions
from the Inventory, and (ii) an in-transit Inventory report specifying types and
amounts of Inventory in transit between locations of Borrower (domestic and
foreign), (e) on each Business Day, notice of all returns, disputes, or claims,
(f) upon request, copies of invoices in connection with the Accounts, customer
statements, credit memos, remittance advices and reports, deposit slips,
shipping and delivery documents in connection with the Accounts and for
Inventory and Equipment acquired by Borrower, purchase orders and invoices, (g)
on a quarterly basis, a detailed list of Borrower's customers, (h) on a monthly
basis, a calculation of the Dilution for the prior month, (i) as requested by
<PAGE>
Foothill from time to time, access to Borrower's electronic data, and (j) such
other reports as to the Collateral or the financial condition of Borrower as
Foothill reasonably may request from time to time. Original sales invoices
evidencing daily sales shall be mailed by Borrower to each Account Debtor and
payments thereon shall be directed to be made to the Lockboxes.
6.3 Financial Statements, Reports, Certificates. Deliver to Foothill: (a)
as soon as available, but in any event within 60 days after the end of each
fiscal quarter during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; and (b) as soon as available, but in any event
within 105 days after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal year, certified to have been
prepared in accordance with GAAP. Such financial statements shall include a
balance sheet, profit and loss statement, and statement of cash flow. If
Borrower is a parent company of one or more Subsidiaries, or Affiliates, or is a
Subsidiary or Affiliate of another company, then, in addition to the financial
statements referred to above, Borrower agrees to deliver financial statements
prepared on a consolidating basis so as to present Borrower and each such
related entity separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to Foothill Borrower's
Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K Current
Reports, and any other filings made by Borrower with the Securities and Exchange
Commission, if any, as soon as the same are filed, or any other information that
is provided by Borrower to its shareholders, and any other report reasonably
requested by Foothill relating to the financial condition of Borrower.
Within 45 days after the end of each calendar month, Borrower shall deliver
to Foothill consolidated monthly financial statements of Borrower and its
consolidated Subsidiaries in the same form as a distributed internally to the
members of senior management of Borrower, which statements shall be prepared in
accordance with GAAP as applicable to interim statements, provided that such
statements need not contain footnotes and may be subject to quarterly and annual
adjustments.
Each month, within 45 days after the end of the calendar month to which
such certificate relates (except that to the extent any such certificate relates
to quarterly financial statements, such certificate shall be delivered within 60
days after the end of such month that is the last month of the fiscal quarter,
rather than 45 days), Borrower shall deliver to Foothill a certificate signed by
its principal financial officer, acting in his or her capacity as an officer of
Borrower, to the effect that: (i) any and all financial statements delivered or
caused to be delivered to Foothill hereunder, as applicable, have been prepared
in accordance with GAAP (except, in the case of unaudited financial statements,
for the lack of footnotes and being subject to year-end audit adjustments (and,
in the case of monthly statements, quarter-end adjustments)) and fairly present
the financial condition of Borrower, (ii) the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
<PAGE>
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), (iii) for each
month ending date that also is the date on which a covenant in Section 7.20 or
Section 7.21 is to be tested, a Compliance Certificate demonstrating in
reasonable detail compliance at the end of such period with the applicable
covenants contained in Section 7.20 or Section 7.21, and (iv) on the date of
delivery of such certificate to Foothill there does not exist any condition or
event that constitutes a Default or Event of Default (or, in the case of clauses
(i), (ii), or (iii), to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action Borrower
has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Borrower that
Foothill may request. Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's business
affairs and financial conditions, except those matters that are subject to the
attorney-client privilege or the attorney work product privilege.
6.4 Tax Returns. Deliver to Foothill copies of each of Borrower's future
federal income tax returns, and any amendments thereto, within 30 days of the
filing thereof with the Internal Revenue Service.
6.5 [Intentionally omitted].
6.6 Returns. Cause returns and allowances, if any, as between Borrower and
its Account Debtors to be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to Borrower,
Borrower promptly shall determine the reason for such return and, if Borrower
accepts such return, issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor. If, at a time when
an Event of Default has occurred and is continuing, any Account Debtor returns
any Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Foothill consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor.
6.7 Title to Equipment. Subject to any prior rights of the Collateral
Agent, upon Foothill's request, Borrower immediately shall deliver to Foothill,
to the extent such items are in the possession or control of Borrower, or
otherwise reasonably available to Borrower, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment.
<PAGE>
6.8 Maintenance of Equipment. Maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.
6.9 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrower
shall make due and timely payment or deposit of all such federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment thereof or deposit with respect thereto. Borrower will make
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits.
6.10 Insurance.
(a) At its expense, keep the Personal Property Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Personal Property Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the type necessary
to insure the Improvements and Chattels (as such terms are defined in the
Mortgage), for the full replacement cost thereof, against any loss by fire,
lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle damage,
elevator collision, and other risks from time to time included under "extended
coverage" policies, in such amounts as Foothill reasonably may require, but in
any event in amounts sufficient to prevent Borrower from becoming a co-insurer
under such policies, (ii) combined single limit bodily injury and property
damages insurance against any loss, liability, or damages on, about, or relating
to each parcel of Real Property Collateral, in an amount of not less than
$5,000,000; and (iii) insurance for such other risks as Foothill may require.
Replacement costs, at Foothill's option, may be redetermined by an insurance
appraiser, satisfactory to Foothill, not more frequently than once every 12
months at Borrower's cost.
<PAGE>
(c) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All insurance required herein shall be written by companies which are authorized
to do insurance business in the States of Alabama and South Carolina. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as a loss payee thereof, as its
interests may appear, and shall contain a waiver of warranties. Every policy of
insurance referred to in this Section 6.10 shall contain an agreement by the
insurer that it will not cancel such policy except after 30 days prior written
notice to Foothill and that any loss payable thereunder shall be payable
notwithstanding any act or negligence of Borrower or Foothill which might,
absent such agreement, result in a forfeiture of all or a part of such insurance
payment and notwithstanding (i) occupancy or use of the Real Property Collateral
for purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by Foothill pursuant to the
Mortgage upon the happening of an Event of Default, or (iii) any change in title
or ownership of the Real Property Collateral. Borrower shall deliver to Foothill
certified copies of such policies of insurance and evidence of the payment of
all premiums therefor.
(d) Original policies or certificates thereof satisfactory to Foothill
evidencing such insurance shall be delivered to Foothill at least 30 days prior
to the expiration of the existing or preceding policies. Borrower shall give
Foothill prompt notice of any loss covered by such insurance, and Foothill shall
have the right to adjust any loss. Foothill, at Foothill's option, shall have
the exclusive right to adjust all losses payable under any such insurance
policies with respect to the Foothill Primary Collateral without any liability
to Borrower whatsoever in respect of such adjustments, absent gross negligence
or wilful misconduct on the part of Foothill. Any monies received as payment for
any loss under any insurance policy including the insurance policies mentioned
above, to the extent it pertains to the Foothill Primary Collateral, shall be
paid over to Foothill to be applied at the option of Foothill either to the
prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, but consistent with the terms of the Mortgage and the
Intercreditor Agreement, to the extent applicable, or shall be disbursed to
Borrower under staged payment terms reasonably satisfactory to Foothill for
application to the cost of repairs, replacements, or restorations. All repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction. Upon the occurrence of an Event
of Default, Foothill shall have the right to apply all prepaid premiums
pertaining to insurance that relates to the Foothill Primary Collateral to the
payment of the Obligations in such order or form as Foothill shall determine.
(e) Borrower shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 6.10, unless Foothill is included thereon as a named insured with the
<PAGE>
loss payable to Foothill, as its interests may appear, under a standard 438BFU
(NS) Mortgagee endorsement, or its local equivalent. Borrower immediately shall
notify Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Foothill.
6.11 No Setoffs or Counterclaims. Make payments hereunder and under the
other Loan Documents by or on behalf of Borrower without setoff or counterclaim
and free and clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Keep the Inventory and Equipment
only at the locations identified on Schedule 6.12 and not further remove same
from the United States except for (a) ordinary course relocation of Equipment
between locations in the United States, Mexico, and Jamaica, to meet production
requirements, and (b) ordinary course movement of Work-In-Process from locations
in the United States to locations in Mexico and/or Jamaica for assembly, so long
as the resulting Finished Goods promptly are returned to the United States;
provided, however, that Borrower may amend Schedule 6.12 so long as such
amendment occurs by written notice to Foothill not less than 10 days prior to
the date on which Inventory or Equipment is moved to such new location, and so
long as such new location is within the United States (unless Foothill consents
to removal to additional locations outside the United States), and so long as,
at the time of such written notification (except with respect to Equipment
and/or Inventory that is to be moved outside the United States with Foothill's
consent or pursuant to the provisions above that apply to certain movements of
Equipment and/or Inventory to Mexico or Jamaica), Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests in such assets and also, within such 10
day period, provides to Foothill a Collateral Access Agreement if requested by
Foothill.
6.13 Compliance with Laws. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any governmental authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.
6.14 Employee Benefits.
(a) Cause to be delivered to Foothill, each of the following: (i) promptly,
and in any event within 10 Business Days after Borrower or any of its
Subsidiaries knows or has reason to know that an ERISA Event has occurred that
reasonably could be expected to result in a Material Adverse Change, a written
statement of the principal financial officer of Borrower describing such ERISA
<PAGE>
Event and any action that is being taking with respect thereto by Borrower, any
such Subsidiary or ERISA Affiliate, and any action taken or threatened by the
IRS, Department of Labor, or PBGC. Borrower or such Subsidiary, as applicable,
shall be deemed to know all facts known by the administrator of any Benefit Plan
of which it is the plan sponsor, (ii) promptly, and in any event within 3
Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with respect to any Benefit Plan and all communications
received by Borrower, any of its Subsidiaries or, to the knowledge of Borrower,
any ERISA Affiliate with respect to such request, and (iii) promptly, and in any
event within 3 Business Days after receipt by Borrower, any of its Subsidiaries
or, to the knowledge of Borrower, any ERISA Affiliate, of the PBGC's intention
to terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's request, each of the
following: (i) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements or
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound, unless such payments are the subject of a Permitted Protest. To the
extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
<PAGE>
6.16 Brokerage Commissions. Pay any and all brokerage commission or finders
fees incurred by Borrower in connection with or as a result of Borrower's
obtaining financing from Foothill under this Agreement.
6.17 Chief Executive Officer. At all times cause Michael Billingsley or
another Person acceptable to Foothill in Foothill's reasonable discretion to be
the Chief Executive Officer of Borrower.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not do any of the following without Foothill's prior written consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with Indebtedness to
issuers of letters of credit that are the subject of L/C Guarantees;
(b) Indebtedness set forth in Schedule 7.1;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness). Nothing in this section
shall impair the right of Borrower to lease or sublease, as lessor or sublessor,
<PAGE>
any Real Property of Borrower in the ordinary course of Borrower's business and
consistent with past practice, so long as any lease or sublease of Real Property
Collateral is junior to the Lien of Foothill.
7.3 Restrictions on Fundamental Changes. Except for Permitted Dispositions,
and except for the Permitted Combination, enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock, or liquidate, wind
up, or dissolve itself (or suffer any liquidation or dissolution), or convey,
sell, assign, lease, transfer, or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its property or assets.
Nothing in this section shall impair the right of Borrower to lease or sublease,
as lessor or sublessor, any Real Property of Borrower in the ordinary course of
Borrower's business and consistent with past practice, so long as any lease or
sublease of Real Property Collateral is junior to the Lien of Foothill.
7.4 Disposal of Assets. Except for Permitted Dispositions, and except for
the Permitted Combination, sell, lease, assign, transfer, or otherwise dispose
of any of Borrower's properties or assets other than sales of Inventory to
buyers in the ordinary course of Borrower's business as currently conducted and
the sale of obsolete equipment in the ordinary course of business not to exceed
$1,000,000 per annum. Nothing in this section shall impair the right of Borrower
to lease or sublease, as lessor or sublessor, any Real Property of Borrower in
the ordinary course of Borrower's business and consistent with past practice, so
long as any lease or sublease of Real Property Collateral is junior to the Lien
of Foothill.
7.5 Change Name. Change Borrower's name, FEIN, corporate structure (within
the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect
to the obligations of any third Person except by endorsement of instruments or
items of payment for deposit to the account of Borrower or which are transmitted
or turned over to Foothill.
7.7 Nature of Business. Make any change in the principal nature of
Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section 7.1(d),
prepay (except that, if no Event of Default has occurred and is continuing,
Borrower may make mandatory prepayments of principal to the holders of the notes
issued pursuant to the Note Purchase Agreement, or to their agent, as required
by the terms of the Note Purchase Agreement as in effect on the Closing Date),
redeem, retire, defease, purchase, or otherwise acquire any Indebtedness owing
to any third Person, other than the Obligations in accordance with this
Agreement, and
<PAGE>
(b) Directly or indirectly, amend, modify, alter, increase, or change any
of the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Sections
7.1(b), (c), or (d).
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 Distributions. Make any distribution or declare or pay any dividends
(in cash or other property, other than Stock) on, or purchase, acquire, redeem,
or retire any of Borrower's Stock, of any class, whether now or hereafter
outstanding.
7.12 Accounting Methods. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Foothill pursuant to or in accordance with this Agreement, and agrees that
Foothill may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.13 Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) loans, advances, capital contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person. The foregoing notwithstanding, Borrower may
make intercompany loans to its Jamaican and Mexican Subsidiaries to the extent,
and only to the extent, that such loans (y) are provided for in written
projections provided to and approved by Foothill in advance of the making
thereof, and (z) are necessary to cover reasonable operating expenses of such
Subsidiaries. The foregoing notwithstanding, Borrower may make intercompany
loans to its Jamaican and Mexican Subsidiaries to the extent, and only to the
extent, that such loans (y) do not exceed $3,000,000 in the aggregate during any
fiscal quarter of Borrower, and (z) are necessary to cover reasonable operating
expenses of such Subsidiaries. In addition, this section shall not prohibit
Borrower from investing up to $200,000 to acquire minority interests in
Strathleven. In addition, this section shall not prohibit Permitted Investments.
In addition, this section shall not prohibit loans to employees of Borrower not
exceeding $250,000 principal in the aggregate at any one time outstanding.
<PAGE>
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms, that are fully disclosed to Foothill, and that are no
less favorable to Borrower than would be obtained in an arm's length transaction
with a non-Affiliate.
7.15 Suspension. Except in connection with the Permitted Combination,
suspend or go out of a substantial portion of its business.
7.16 [Intentionally omitted].
7.17 Use of Proceeds. Use the proceeds of the Advances and Supplemental
Advances made hereunder for any purpose other than (i) on the Closing Date, (y)
to repay in full the outstanding principal, accrued interest, and accrued fees
and expenses owing to Existing Lenders, and (z) to pay transactional costs and
expenses incurred in connection with this Agreement, and (ii) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees. Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Foothill and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests and also provides to Foothill a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Foothill's prior written consent. Foothill consents to any
bailment, warehousing or similar arrangements specifically disclosed on Schedule
6.12.
7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
<PAGE>
(c) fail, or permit any Subsidiary of Borrower to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to terminate, any
Benefit Plan where such event would result in any liability of Borrower, any of
its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay any required
installment or any other payment required under Section 412 of the IRC on or
before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a Plan resulting
in an increase in current liability for the plan year such that either of
Borrower, any Subsidiary of Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to withdraw, from any
Multiemployer Plan where such withdrawal is reasonably likely to result in any
liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.
7.20 Financial Covenant. Fail to maintain net worth (in each case of Oneita
and its consolidated Subsidiaries, on a consolidated basis, in accordance with
GAAP) in compliance with the following requirements: (a) as of each Net Worth
Testing Date, net worth of at least the Required Net Worth Amount with respect
to such date; and (b) if the Net Worth Testing Date occurs more than 12 months
after the Effective Date, net worth of not less than the net worth 12 months
prior to the Net Worth Testing Date minus $4,500,000.
7.21 Capital Expenditures. Make capital expenditures in any of Borrower's
fiscal years 1998, 1999, 2000, or 2001 in excess of: (a) $3,200,000 with respect
to 1998; (b) $3,200,000 with respect to 1999; (c) $4,800,000 with respect to
2000; and (d) $4,800,000 with respect to 2001.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
<PAGE>
8.1 If Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
provided, however, that in the case of Overadvances that are caused by the
charging of interest, fees, or Foothill Expenses to Borrower's Loan Account,
such event shall not constitute an Event of Default if, within 3 Business Days
of incurring such Overadvance, Borrower repays, or otherwise eliminates, such
Overadvance;
8.2 (a) If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in Sections 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.4
(Tax Returns), 6.7 (Title to Equipment), 6.12 (Location of Equipment), 6.13
(Compliance with Laws), 6.14 (Employee Benefits), or 6.15 (Leases) of this
Agreement and such failure continues for a period of 5 Business Days; (b) If
Borrower fails or neglects to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in Sections 6.1 (Accounting System)
or 6.8 (Maintenance of Equipment) of this Agreement and such failure continues
for a period of 15 Business Days; (c) If Borrower fails or neglects to perform,
keep, or observe any term, provision, condition, covenant, or agreement
contained in Section 6.17 (Chief Executive Officer) and such failure or neglect
continues for a period of 30 days; or (d) If Borrower fails or neglects to
perform, keep, or observe any other term, provision, condition, covenant, or
agreement contained in this Agreement, or in any of the other Loan Documents
(giving effect to any grace periods, cure periods, or required notices, if any,
expressly provided for in such Loan Documents); in each case, other than any
such term, provision, condition, covenant, or agreement that is the subject of
another provision of this Section 8, in which event such other provision of this
Section 8 shall govern); provided that, during any period of time that any such
failure or neglect of Borrower referred to in this paragraph exists, even if
such failure or neglect is not yet an Event of Default by virtue of the
existence of a grace or cure period or the pre-condition of the giving of a
notice, Foothill shall not required during such period to make Advances or
Supplemental Advances to Borrower or issue Letters of Credit for the account of
Borrower;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any third Person in connection with a claim of such
person of $100,000 or more;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and any of
the following events occur: (a) Borrower consents to the institution of the
Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within 60 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Foothill shall be relieved of its obligation to extend credit hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial portion
of the properties or assets of, or to operate all or any substantial portion of
the business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
<PAGE>
8.7 If Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs;
8.8 If notices of Lien (other than notices with respect to any Permitted
Lien of the Collateral Agent), levy, or assessment are filed of record with
respect to any of Borrower's properties or assets which have not been cured
within ten days after the Lien has been filed which (a) represent claims in an
aggregate amount of in excess of $100,000 and which have priority over the
security interests of Foothill in the Collateral, or (b) represent claims in an
aggregate amount of in excess of $250,000 and which are junior to the security
interests of Foothill in the Collateral (provided that Foothill may maintain
reserves with respect to any such Liens that affect Collateral included in the
Borrowing Base without regard to whether an Event of Default exists under this
Section 8.8);
8.9 If a judgment or other claim in excess of $100,000 becomes a Lien or
encumbrance upon any material portion of Borrower's properties or assets and
such judgment is not removed or released within 30 days of the entry of such
judgment (provided that Foothill may maintain reserves with respect to any such
Liens that affect Collateral included in the Borrowing Base without regard to
whether an Event of Default exists under this Section 8.9);
8.10 If there is a default in any material agreement to which Borrower is a
party with one or more third Persons involving claims, Indebtedness, or other
obligations in excess of $1,000,000, and such default (a) occurs at the final
maturity of the obligations thereunder, or (b) results in a right by such third
Person(s), irrespective of whether exercised, to accelerate the maturity of
Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness; or
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower.
<PAGE>
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of Foothill, but without affecting Foothill's
rights and security interests in the Personal Property Collateral or the Real
Property Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Foothill considers advisable, and in such cases,
Foothill will credit Borrower's Loan Account with only the net amounts received
by Foothill in payment of such disputed Accounts after deducting all Foothill
Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for Foothill,
segregate all returned Inventory from all other property of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Foothill;
(f) Without notice to or demand upon Borrower or any guarantor, make such
payments and do such acts as Foothill considers necessary or reasonable to
protect its security interests in the Collateral. Borrower agrees to assemble
the Personal Property Collateral if Foothill so requires, and to make the
Personal Property Collateral available to Foothill as Foothill may designate.
Borrower authorizes Foothill to enter the premises where the Personal Property
Collateral is located, to take and maintain possession of the Personal Property
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or Lien that in Foothill's determination appears to
conflict with its security interests and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned or leased
premises, Borrower hereby grants Foothill a license to enter into possession of
such premises and to occupy the same, without charge, for up to 120 days in
order to exercise any of Foothill's rights or remedies provided herein, at law,
in equity, or otherwise;
<PAGE>
(g) Without notice to Borrower (such notice being expressly waived), and
without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of Section 9505 of the Code), set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by
Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits of Borrower
held by Foothill (including any cash collateral provided to secure Obligations
with respect to Letters of Credit or indemnities), and any amounts received in
the Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Foothill is hereby granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, if and to the extent such usage is deemed
necessary or advisable by Foothill to effect a commercially reasonable
disposition of the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;
(j) Sell the Personal Property Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the Personal Property
Collateral as follows:
(1) Foothill shall give Borrower and each holder of a security interest in
the Personal Property Collateral who has filed with Foothill a written request
for notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage prepaid, to
Borrower as provided in Section 12, at least 5 days before the date fixed for
the sale, or at least 5 days before the date on or after which the private sale
or other disposition is to be made; no notice needs to be given prior to the
disposition of any portion of the Personal Property Collateral that is
perishable or threatens to decline speedily in value or that is of a type
<PAGE>
customarily sold on a recognized market. Notice to Persons other than Borrower
claiming an interest in the Personal Property Collateral shall be sent to such
addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also shall give notice of
the time and place by publishing a notice one time at least 5 days before the
date of the sale in a newspaper of general circulation in the county in which
the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale; and
(m) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by Borrower. Any excess
promptly will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or, in the case of leased properties or assets, rents or other amounts
payable under such leases) due to third Persons, or fails to make any deposits
or furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, to the extent that Foothill determines that such
failure by Borrower could result in a Material Adverse Change, in the good faith
exercise of its discretion and without prior notice to Borrower, Foothill may do
any or all of the following: (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrower's Loan Account as Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type described in Section 6.10, and take any
action with respect to such policies as Foothill deems prudent. Any such amounts
paid by Foothill shall constitute Foothill Expenses. Any such payments made by
Foothill shall not constitute an agreement by Foothill to make similar payments
in the future or a waiver by Foothill of any Event of Default under this
Agreement. Foothill need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
<PAGE>
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill complies with
its obligations, if any, under Section 9207 of the Code, Foothill shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person. All risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold
Foothill, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other Loan Document shall be in writing
and (except for financial statements and other informational documents which may
be sent by first-class mail, postage prepaid) shall be personally delivered or
sent by registered or certified mail (postage prepaid, return receipt
requested), overnight courier, or telefacsimile to Borrower or to Foothill, as
the case may be, at its address set forth below:
<PAGE>
If to Borrower: ONEITA INDUSTRIES, INC.
4130 Faber Place Drive, Suite 200
Charleston, South Carolina 29405
Attn: Mr. Michael Billingsley
Fax No. 803.264.4262
with copies to: MOSES & SINGER LLP
1301 Avenue of the Americas
New York, New York 10019-6076
Attn: Alan E. Gamza
Fax No. 212.554.7700
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Mngr. Bus. Fin. Div.
Fax No. 310.478.9788
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street, Suite 2100
Los Angeles, California 90071
Attn: Jeffrey S. Turner, Esq.
Fax No. 213.239.1324
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail. Borrower acknowledges and agrees that
notices sent by Foothill in
connection with Sections 9504 or 9505 of the Code shall be deemed sent when
deposited in the mail or personally delivered, or, where permitted by law,
transmitted telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
<PAGE>
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER AND
FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF
BORROWER AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill 4
months after they are
delivered to or received by Foothill, unless Borrower requests, in writing, the
return of said documents, schedules, or other papers and makes arrangements, at
Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or any
<PAGE>
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release Borrower from its Obligations. Foothill may assign this
Agreement and its rights hereunder, and may delegate its duties hereunder, and
no consent or approval by Borrower is required in connection with any such
assignment and delegation to an Eligible Transferee. Foothill reserves the right
to sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Foothill's rights and benefits hereunder without the
requirement of consent of Borrower. In connection with any such assignment or
participation, Foothill may disclose all documents and information which
Foothill now or hereafter may have relating to Borrower or Borrower's business.
To the extent that Foothill assigns or delegates its rights and obligations
hereunder to a third Person that is an Eligible Transferee, Foothill thereafter
shall be released from such assigned or delegated obligations to Borrower and,
to such extent, such assignment shall effect a novation between Borrower,
Foothill, and such third Person.
15.3 Section Headings. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be amended
by a writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by Borrower or any guarantor of the
<PAGE>
Obligations or the transfer by either or both of such parties to Foothill of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Foothill is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above.
ONEITA INDUSTRIES, INC.,
a Delaware corporation
By__________________________________
Title:______________________________
ONEITA-KINSTON CORP.,
a North Carolina corporation
By__________________________________
Title:______________________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By__________________________________
Title:______________________________
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED ("1933 ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT COVERING SUCH SECURITIES OR SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
ONEITA INDUSTRIES, INC.
10% SUBORDINATED PROMISSORY NOTE
DUE ____________, 2008(1)
$1,000,000.00 _________________, 1998(2)
ONEITA INDUSTRIES, INC., a Delaware corporation (the "Company"), the principal
office of which is located at 4130 Faber Place, Suite 200, Ashley Corporate
Center, Charleston, South Carolina 29405, for value received, hereby
promises to pay to Foothill Capital Corporation, having an office at 11111
Santa Monica Boulevard, Los Angeles, California 90025, or its registered
assigns (the "Holder"), the principal sum of ONE MILLION DOLLARS
($1,000,000.00), or such lesser amount as shall then equal the outstanding
principal amount hereof on the terms and conditions set forth hereinafter.
Interest on the unpaid principal amount hereof shall be payable as herein
set forth. Subject to Section 5 hereof, the entire principal amount hereof
and any unpaid accrued interest hereon shall be due and payable on the
earliest to occur of (i) ____________, 2008(3), (ii) a "Prepayment Event"
(as defined below) or (iii) when declared due and payable by the Holder
during the continuance of an Event of Default (as defined below). Except as
expressly set forth herein, payment for all amounts due hereunder shall be
made in lawful money of the United States of America. This Note is issued
pursuant to the [Plan of Reorganization of the Company dated ________ and
confirmed by the United States Bankruptcy Court for ___________ on _______
(the "Plan")].
- -------------------------
1. Insert date 10 years after the Effective Date of the Company's Plan of
Reorganization
2. Insert the Effective Date of the Company's Plan of Reorganization.
3. Insert date 10 years after the Effective Date of the Company's Plan of
Reorganization.
<PAGE>
1. Definitions. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
"Company" includes any person which shall succeed to or assume the
obligations of the Company under this Note.
"Holder," when the context refers to a holder of this Note, shall mean any
person who shall at the time be the registered holder of this Note.
"Cash Pay Interest Event" shall mean the final payment in full of all
principal, interest, fees and other amounts due on the Senior Notes.
"Change of Control" shall mean the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) of shares
representing more than 50% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Company.
"Prepayment Event" shall mean the sale of all or substantially all of the
assets of the Company or a Change of Control.
"Senior Notes" shall mean the notes issued under a Senior Secured Note
Agreement dated on about the Effective Date of the Plan in the principal amount
of $37.5 million.
"Significant Subsidiary" shall mean any domestic subsidiary of the Company
whose assets or annual net income for any calendar year comprises more than [ ]%
of the assets or annual net income, respectively, of the Company and all its
subsidiaries on a consolidated basis, all as calculated in accordance with
generally accepted accounting principles consistently applied.
2. Interest. (a) The unpaid principal balance of this Note from time to
time shall bear interest from the date hereof until paid at a rate equal to ten
percent (10%) per annum, such interest to be payable on _______________(4) in
each year in the manner set forth in Section 2(b) below. Any accrued but unpaid
- -----------------------
4 Interest is to be payable semiannually. Insert the dates which are the
first days of the first months to occur 6 and 12 complete months,
respectively, after the Effective Date of the Company's Plan of
Reorganization. For example, if the Effective Date were October 28, 1998,
insert "May 1 and November 1".
<PAGE>
interest shall be payable in full upon the date which is the earlier of (i)
maturity of this Note and (ii) the occurrence of a Cash Interest Payment Event.
In the event that the principal amount of this Note is not paid in full upon
maturity, interest shall continue to accrue at the rate provided in the first
sentence of this paragraph plus two percent (2%) per annum on the unpaid
principal balance of this Note from time to time and, to the extent permitted by
law, on any unpaid installment of interest until such balance is paid.
(b) Payments of interest shall be made in additional notes of like tenor to
this Note, issued on the date such payment is due, dated their date of issuance,
and in a principal amount equal to the aggregate amount of the interest then
payable to the Holder of this Note and any previously issued note of like tenor;
provided; however, that current interest shall be paid in cash following the
occurrence of the Cash Pay Interest Event. Any such additional notes shall be
sent to the Holder on the day of issuance in the manner provided for the giving
of notices under this Note.
3. Payments. If any payment of principal of or interest on this Note
becomes due and payable on a day which is not a Business Day (as defined below),
the due date thereof shall be automatically extended to the next succeeding day
which is a Business Day, and interest shall continue to accrue during any such
extension and such additional interest shall also be due and payable on such
next succeeding Business Day. "Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in the City of New York
are required or authorized to close.
4. Events of Default. Subject to Section 5 below, if any of the events
specified in this Section 4 shall occur (each an "Event of Default"), the Holder
of this Note may, in the sole discretion of the Holder, after giving effect to
any grace period herein provided, by notice to the Company declare the entire
principal of and unpaid accrued interest on this Note immediately due and
payable, whereupon the same shall become forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company:
(a) (i) Default shall occur in the payment of principal of this Note for
more than ten (10) days after the date when due; or (ii) default shall occur in
the payment, in the manner herein provided, of accrued interest on this Note
when due and payable if such default in the payment of accrued interest is not
cured by the Company within thirty (30) days after the Holder has given the
Company written notice of such default; or
<PAGE>
(b) the Company or any Significant Subsidiary (i) shall make an assignment
for the benefit of creditors, (ii) shall be adjudicated bankrupt or insolvent,
(iii) shall seek the appointment of, or be the subject of an order appointing, a
trustee, liquidator or receiver as to all or any material part of its assets,
(iv) shall commence, approve or consent to, any case or proceeding under any
bankruptcy, reorganization or similar law and, in the case of an involuntary
case or proceeding, such case or proceeding is not dismissed within seventy-five
(75) days following the commencement thereof, or (v) shall be the subject of an
order for relief in an involuntary case under federal bankruptcy law; or
(c) Any event of default or default shall occur with respect to any Senior
Indebtedness (as defined below) an aggregate principal amount exceeding
$2,000,000 and such Senior Indebtedness is in fact accelerated in accordance
with the provisions of the agreement or instrument pursuant to which such Senior
Indebtedness exists; or
(d) any order, judgment or decree is entered in any proceeding against the
Company or any Significant Subsidiary decreeing the dissolution of the Company
or such Significant Subsidiary and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days.
5. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all Senior Indebtedness, as
hereinafter defined.
5.1. Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of, premium, if any, unpaid accrued
interest including post-petition interest (whether or not such interest is an
allowable claim in a bankruptcy proceeding) and any other unpaid amounts on or
in respect of: (i) all indebtedness of the Company under the Senior Notes, (ii)
all indebtedness of the Company to banks, insurance companies or other financial
institutions regularly engaged in the business of lending money which is for
money borrowed by the Company (whether or not secured), (iii) any refinancings,
extensions, or replacements of any of the indebtedness described in clauses (i)
through (ii) above and (iv) any indebtedness the terms of which provide that it
is senior to this Note.
5.2. Insolvency, Etc. In the event of any insolvency or bankruptcy
proceedings, and any receivership, liquidation, reorganization, arrangement or
other similar proceedings in connection therewith, commenced after the date
hereof, relative to the Company or to its creditors, as such, or to the
Company's property, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding-up of the Company, commenced after the
date hereof, whether or not involving insolvency or bankruptcy, the holders of
<PAGE>
the Senior Indebtedness shall be entitled to receive payment in full of all
principal, premium and interest and any and all other amounts on or in respect
of all Senior Indebtedness before the Holder of this Note is entitled to receive
any payment on account of principal, premium or interest or any other amount on
or in respect of this Note, except that, pursuant to a plan of reorganization
reasonably satisfactory to the holders of Senior Indebtedness, the holder of
this Note may receive debt securities that are subordinate at least to the same
extent as this Note is subordinated to (a) Senior Indebtedness, or (b)
securities issued in exchange for Senior Indebtedness.
5.3. Prior Payment of Senior Indebtedness. The holders of the Senior
Indebtedness shall be entitled to receive payment in full of all Senior
Indebtedness before (i) the Holder of this Note is entitled to receive any
payment on account of the principal, premium, interest, fees or any other amount
on account of this Note or (ii) any repurchase, redemption or other retirement
(whether at the option of the Holder or otherwise) of this Note is made. The
Holder of this Note agrees not to seek any remedy allowed at law or at equity to
enforce payment of this Note until the holders of the Senior Indebtedness have
received payment in full of all such amounts.
5.4. Default on Senior Indebtedness. In the event that any default or event
of default shall occur and be continuing with respect to any Senior Indebtedness
permitting the holders or any holder of such Senior Indebtedness, or any portion
thereof, to accelerate the maturity thereof, no payment or prepayment of any
principal, premium, interest, fees or any other amount on account of this Note
and no repurchase, redemption or other retirement (whether at the option of the
Holder or otherwise) of this Note shall be made during the continuance of such
default or event of default.
5.5. Turnover. In the event that, notwithstanding the foregoing Sections
5.2, 5.3 or 5.4, any payment or distribution of assets of the Company of any
kind or character (whether in cash, property or securities) which is prohibited
by any one or more of such paragraphs shall be received by the Holder of this
Note before all Senior Indebtedness is paid in full, or provision is made for
such payment satisfactory to the holders of the Senior Indebtedness, such
payment or distribution shall be held in trust for the benefit of, and shall be
promptly paid over or delivered to, the holders of such Senior Indebtedness (or
their representative(s)), as their respective interests may appear, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness.
5.6. No Prejudice. No present or future holder of Senior Indebtedness shall
be prejudiced in its right to enforce subordination of this Note by any act or
failure to act on the part of the Company. The provisions of this Section 5 are
solely for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand and the Holder of this Note on the other hand, and
<PAGE>
nothing herein shall impair as between the Company and the Holder of this Note
the obligation of the Company, which is unconditional and absolute, to pay to
the Holder hereof the principal of, premium, if any, and interest on this Note
in accordance with its terms, nor shall anything herein prevent the Holder of
this Note from exercising all remedies otherwise permitted by applicable law,
subject to the provisions hereof, or pursuant to this Note upon default
hereunder, subject to the rights, if any, under this Section 5 of a holder of
Senior Indebtedness to receive cash, property or securities otherwise payable or
deliverable to the Holder of this Note.
5.7. Subrogation. Subject to the payment in full of all Senior Indebtedness
and until this Note shall be paid in full, the Holder shall be subrogated to the
rights of the holders of Senior Indebtedness (to the extent of payments or
distributions previously made to such holders of Senior Indebtedness pursuant to
the provisions of this Section 5 above) to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness. No such payments or
distributions applicable to the Senior Indebtedness shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of this Note;
and for the purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness to which the Holder would be entitled except for
the provisions of this Section 5 shall, as between the Company and its
creditors, other than the holders of Senior Indebtedness and the Holder, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness.
5.8. Undertaking. By its acceptance of this Note, the Holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the holder of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 5.
6. Prepayment. Subject to any restrictions in any instrument under which
any Senior Indebtedness is outstanding, the Company may at its option prepay
this Note, in whole or in part, together with the payment of any accrued and
unpaid interest on the amount prepaid, without premium or penalty.
7. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, return
receipt requested, or overnight courier, postage prepaid, at the respective
addresses of the parties as set forth herein. Any party hereto may by notice so
given change its address for future notice hereunder. Notice shall conclusively
be deemed to have been given when delivered in the manner set forth above and
shall be deemed to have been received when delivered. Copies of all notices to
the Company shall be given to:
Mr. William Boyd
Oneita Industries, Inc.
4130 Faber Place Drive
Suite 200
Charleston, S.C. 29405
<PAGE>
and copies of all notices to Foothill Capital Corp. shall be given to:
------------------------------
------------------------------
------------------------------
------------------------------
8. Collection. If the Holder shall institute any action to enforce
collection of this Note, and shall be successful in such litigation, there shall
become due and payable from the Company, in addition to the unpaid principal of
and interest on this Note, all reasonable costs and expenses of that action
(including reasonable attorneys' fees) and the Holder shall be entitled to
judgment for all such additional amounts.
9. No Waiver; Amendment. This Note may not be amended, modified or
discharged, nor may any provision hereof be waived, orally, by course of dealing
or otherwise, unless such amendment, modification, discharge or waiver shall be
in writing and duly executed by the Holder. The non-exercise by the Holder or by
the holder(s) of the Senior Indebtedness of any right or remedy in any
particular instance shall not constitute a waiver thereof in that or any other
instance.
10. Usury. It is the intent of the Company and the Holder to contract in
accordance with any and all applicable usury laws. If any obligation hereunder
shall exceed any applicable usury limit, then the obligation shall automatically
be reduced to such limit, and any amount paid in excess of such limit shall be
applied to the payment of principal rather than interest, and any remaining
excessive interest shall be refunded to the Company, which refund the Company
agrees to accept.
11. Binding Effect; Assignment. This Note shall be binding upon the
successors and assigns of the Company and shall inure to the benefit of the
Holder and its successors, and assigns. The Company may treat the person in
whose name this Note is registered as the owner and holder of this Note for the
purpose of receiving payment of principal of and interest on this Note and for
all other purposes whatsoever, and the Company shall not be affected or bound by
any notice to the contrary. By its acceptance of this Note, the Holder hereof
agrees to the terms and conditions of this Note, including the subordination
provisions set forth in Section 5 for the benefit of the holders of the Senior
Indebtedness.
<PAGE>
12. Severability. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
13. Governing Law. This Note is executed and delivered in, and shall be
construed and enforced in accordance with and governed by the laws of, the State
of New York, without giving effect to the conflict of laws principles thereof.
14. Headings; References. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
and delivered as of the date first set forth above.
ONEITA INDUSTRIES, INC.
By:
-----------------------------------
Name:
Title:
ACCEPTED:
FOOTHILL CAPITAL CORP.
By:
----------------------------------------
Name:
Title:
ONEITA INDUSTRIES, INC.
$37,500,000
12% Senior Secured Notes due , 2001
NOTE PURCHASE AGREEMENT
Dated [ ] __, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. AUTHORIZATION OF NOTES. . . . . . . . . . . . . . . . . . .1
2. EXCHANGE AND ISSUANCE OF NOTES. . . . . . . . . . . . . . .1
3. CLOSING.. . . . . . . . . . . . . . . . . . . . . . . . . .2
4. INTEREST ON NOTES.. . . . . . . . . . . . . . . . . . . . .2
5. CONDITIONS TO CLOSING.. . . . . . . . . . . . . . . . . . .2
5.1. Representations and Warranties . . . . . . . . . . . .3
5.2. Performance; No Default. . . . . . . . . . . . . . . .3
5.3. Compliance Certificates. . . . . . . . . . . . . . . .3
5.4. Opinions of Counsel. . . . . . . . . . . . . . . . . .3
5.5. Exchange Permitted By Applicable Law, etc. . . . . . .4
5.6. Payment of Special Counsel Fees. . . . . . . . . . . .4
5.7. Private Placement Number . . . . . . . . . . . . . . .5
5.8. Changes in Corporate Structure . . . . . . . . . . . .5
5.9. Security Documents . . . . . . . . . . . . . . . . . .5
5.10.Mortgage(s) and Title Insurance. . . . . . . . . . . .5
5.11.Fayette Facilities . . . . . . . . . . . . . . . . . .6
5.12.Intercreditor Agreement. . . . . . . . . . . . . . . .6
5.13.Financing Statements . . . . . . . . . . . . . . . . .7
5.14.Appraisals . . . . . . . . . . . . . . . . . . . . . .7
5.15.Surveys and Other Reports. . . . . . . . . . . . . . .7
5.16.Insurance. . . . . . . . . . . . . . . . . . . . . . .7
5.17.New Revolving Credit Agreement . . . . . . . . . . . .8
5.18.Foothill Subordinated Note . . . . . . . . . . . . . .8
5.19.Cash Payment . . . . . . . . . . . . . . . . . . . . .8
5.20.Issuance of New Common . . . . . . . . . . . . . . . .8
5.21.Confirmation Order . . . . . . . . . . . . . . . . . .8
5.22.Release of Certain Existing Liens. . . . . . . . . . .8
5.23.Exchange of Notes. . . . . . . . . . . . . . . . . . .9
5.24.Proceedings and Documents. . . . . . . . . . . . . . .9
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . .9
6.1. Organization; Power and Authority. . . . . . . . . . .9
6.2. Authorization, etc . . . . . . . . . . . . . . . . . .9
6.3. Disclosure . . . . . . . . . . . . . . . . . . . . . .10
6.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates . . . . . . . . . . . . . . . . . . . . . .10
6.5. Title to Property; Leases. . . . . . . . . . . . . . .11
6.6. Ownership of Certain Subsidiaries. . . . . . . . . . .11
<PAGE>
6.7. Intentionally Left Blank . . . . . . . . . . . . . . .11
6.8. Equipment. . . . . . . . . . . . . . . . . . . . . . .11
6.9. Location of Inventory and Equipment. . . . . . . . . .11
6.10.Inventory Records. . . . . . . . . . . . . . . . . . .12
6.11.Location of Chief Executive Office; FEIN . . . . . . .12
6.12.Solvency . . . . . . . . . . . . . . . . . . . . . . .12
6.13.No Material Adverse Change . . . . . . . . . . . . . .12
6.14.Intentionally Left Blank . . . . . . . . . . . . . . .12
6.15.Compliance with Laws, Other Instruments, etc . . . . .12
6.16.Litigation; Observance of Agreements, Statutes and
Orders . . . . . . . . . . . . . . . . . . . . . . . .13
6.17.Taxes. . . . . . . . . . . . . . . . . . . . . . . . .13
6.18.Licenses, Permits, etc . . . . . . . . . . . . . . . .13
6.19.Compliance with ERISA. . . . . . . . . . . . . . . . .14
6.20.Private Offering by the Company. . . . . . . . . . . .15
6.21.Existing Indebtedness; Material Agreements; Future
Liens . . . . . . . . . . . . . . . . . . . . . . . .15
6.22.Foreign Assets Control Regulations, etc. . . . . . . .15
6.23.Status under Certain Statutes. . . . . . . . . . . . .15
6.24.Environmental Matters. . . . . . . . . . . . . . . . .16
7. REPRESENTATION OF THE PURCHASERS. . . . . . . . . . . . . .16
8. INFORMATION AS TO COMPANY.. . . . . . . . . . . . . . . . .17
8.1. Financial Information. . . . . . . . . . . . . . . . .17
8.2. Business Information . . . . . . . . . . . . . . . . .18
8.3. Officer's Certificate. . . . . . . . . . . . . . . . .20
8.4. Inspection . . . . . . . . . . . . . . . . . . . . . .20
9. PREPAYMENT OF THE NOTES.. . . . . . . . . . . . . . . . . .21
9.1. Special Prepayments from Average Available Cash and
After Sale of Assets or Change of Control. . . . . . .21
9.2. Optional Prepayments . . . . . . . . . . . . . . . . .24
9.3. Allocation of Partial Prepayments. . . . . . . . . . .24
9.4. Maturity; Surrender, etc . . . . . . . . . . . . . . .24
9.5. Purchase of Notes. . . . . . . . . . . . . . . . . . .24
10. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . .25
10.1.Compliance with Law . . . . . . . . . . . . . . . . .25
10.2.Accounting Systems . . . . . . . . . . . . . . . . . .25
10.3.Collateral Reporting . . . . . . . . . . . . . . . . .25
10.4.Title to Equipment . . . . . . . . . . . . . . . . . .25
10.5.Maintain the Equipment and Improvements . . . . . . .26
10.6.Insurance . . . . . . . . . . . . . . . . . . . . . .26
10.7.No Setoffs or Counterclaims . . . . . . . . . . . . .27
10.8.Location of Equipment . . . . . . . . . . . . . . . .28
10.9.Intentionally Left Blank . . . . . . . . . . . . . . .28
<PAGE>
10.10.Leases. . . . . . . . . . . . . . . . . . . . . . . .28
10.11.Payment of Taxes and Claims . . . . . . . . . . . . .28
10.12.Corporate Existence, etc. . . . . . . . . . . . . . .28
10.13.Certain Obligations Respecting Domestic Subsidiaries.29
10.14.Chief Executive Officer . . . . . . . . . . . . . . .30
10.15.Tax Returns . . . . . . . . . . . . . . . . . . . . .30
10.16.Fayette Facilities. . . . . . . . . . . . . . . . . .30
11. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . .30
11.1. Indebtedness . . . . . . . . . . . . . . . . . . . .30
11.2. Liens. . . . . . . . . . . . . . . . . . . . . . . .30
11.3. Fundamental Changes. . . . . . . . . . . . . . . . .31
11.4. Intentionally Left Blank . . . . . . . . . . . . . .32
11.5. Lines of Business. . . . . . . . . . . . . . . . . .32
11.6. Investments. . . . . . . . . . . . . . . . . . . . .32
11.7. Restricted Payments. . . . . . . . . . . . . . . . .33
11.8. Transactions with Affiliates . . . . . . . . . . . .33
11.9. Restrictive Agreements . . . . . . . . . . . . . . .33
11.10.Change Name. . . . . . . . . . . . . . . . . . . . .34
11.11.Prepayments and Amendments . . . . . . . . . . . . .34
11.12.Sale or Discount of Accounts . . . . . . . . . . . .34
11.13.Intentionally Left Blank. . . . . . . . . . . . . . .34
11.14.Accounting Methods. . . . . . . . . . . . . . . . . .35
11.15.Suspension. . . . . . . . . . . . . . . . . . . . . .35
11.16.Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees. . . . . . . . .35
11.17.No Prohibited Transactions Under ERISA. . . . . . . .35
11.18.Minimum Net Worth . . . . . . . . . . . . . . . . . .36
11.19.Capital Expenditures. . . . . . . . . . . . . . . . .36
12. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . .36
13. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . . . . . . .40
13.1.Acceleration . . . . . . . . . . . . . . . . . . . . .40
13.2.Other Remedies . . . . . . . . . . . . . . . . . . . .40
13.3.Rescission . . . . . . . . . . . . . . . . . . . . . .40
13.4.No Waivers or Election of Remedies, Expenses, etc. . .41
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.. . . . . . .41
14.1. Registration of Notes . . . . . . . . . . . . . . .41
14.2. Assignment and Exchange of Notes . . . . . . . . . .41
14.3. Replacement of Notes . . . . . . . . . . . . . . . .42
15. PAYMENTS ON NOTES.. . . . . . . . . . . . . . . . . . . . .42
15.1.Place of Payment . . . . . . . . . . . . . . . . . . .42
<PAGE>
15.2.Home Office Payment. . . . . . . . . . . . . . . . . .42
15.3.Notification to Collateral Agent of Payment in Full. .43
16. EXPENSES, ETC . . . . . . . . . . . . . . . . . . . . . . .43
16.1.Survival . . . . . . . . . . . . . . . . . . . . . . .44
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . .44
18. AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . .44
18.1.Requirements . . . . . . . . . . . . . . . . . . . . .44
18.2.Solicitation of Holders of Notes . . . . . . . . . . .44
18.3.Binding Effect, etc. . . . . . . . . . . . . . . . . .45
18.4.Notes held by Company, etc . . . . . . . . . . . . . .45
19. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . .45
20. REPRODUCTION OF DOCUMENTS.. . . . . . . . . . . . . . . . .46
21. CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . .46
22. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . .47
22.1.Demand; Protest; etc . . . . . . . . . . . . . . . . .47
22.2.Liability of Collateral Agent and Purchasers . . . . .47
22.3.Indemnification . . . . . . . . . . . . . . . . . . .48
23. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . .48
24. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .49
24.1.Successors and Assigns . . . . . . . . . . . . . . . .49
24.2.Payments Due on Non-Business Days. . . . . . . . . . .49
24.3.Severability . . . . . . . . . . . . . . . . . . . . .49
24.4.Collateral Agent . . . . . . . . . . . . . . . . . . .49
24.5.Construction . . . . . . . . . . . . . . . . . . . . .49
24.6.Counterparts . . . . . . . . . . . . . . . . . . . . .49
24.7.Governing Law; Jurisdiction; Consent to Service of
Process. . . . . . . . . . . . . . . . . . . . . . . .50
24.8.Waiver of Jury Trial . . . . . . . . . . . . . . . . .50
SCHEDULES
- ---------
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE C -- Existing Indebtedness
SCHEDULE D -- Changes in Corporate Structure
SCHEDULE E -- Real Property
<PAGE>
SCHEDULE F -- Subsidiaries of the Company and
Ownership of Subsidiary Stock
SCHEDULE G -- Existing Liens
SCHEDULE H -- Location of Inventory and Equipment
SCHEDULE I -- Financial Statements
SCHEDULE J -- Certain Litigation
SCHEDULE K -- Intentionally Left Blank
SCHEDULE L -- Licenses, Permits, Etc.
SCHEDULE M -- Environmental Reports
SCHEDULE N -- Investments
SCHEDULE O -- Transactions with Affiliates
SCHEDULE P -- Restrictive Agreements
SCHEDULE Q -- Prohibited Transferees
SCHEDULE R -- Excluded Assets
EXHIBITS
--------
EXHIBIT 1 -- Form of 12% Senior Secured Note due [____], 2001
EXHIBIT 2 -- Form of Opinion of South Carolina Counsel for the Company
EXHIBIT 3 -- Form of Opinion of Special Counsel to the Company and each of its
Subsidiaries
EXHIBIT 4 -- Form of Opinion of Special Alabama Counsel for the Company
EXHIBIT 5 -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 6 -- Form of Agency Agreement
EXHIBIT 7 -- Form of Foothill Subordinated Note
EXHIBIT 8 -- Form of Guaranty and Security Agreement
EXHIBIT 9 -- Form of Guaranty Assumption Agreement
EXHIBIT 10 -- Form of Intercreditor Agreement
EXHIBIT 11 -- Form of New Revolving Credit Agreement
EXHIBIT 12 -- Form of Security and Pledge Agreement
EXHIBIT 13 -- Form of Trademark Security Agreement
EXHIBIT 14 -- Form of Deposit Account Security Agreement
EXHIBIT 15 -- Form of Mortgage
<PAGE>
ONEITA INDUSTRIES, INC.
4130 Faber Place
Charleston, South Carolina 29405
12% Senior Secured Notes due [ ], 2001
[_______ __, 1998]
TO IBJ SCHRODER BANK & TRUST COMPANY,
AS NOTE AGENT, AND EACH OF THE
PURCHASERS LISTED IN THE ATTACHED
SCHEDULE A
Ladies and Gentlemen:
Oneita Industries, Inc., a Delaware corporation (the "Company"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue of $37,500,000 aggregate
principal amount of its 12% Senior Secured Notes due [_________], 2001 (the
"Notes", such term to include any such notes issued in substitution therefor
pursuant to Section 14 of this Agreement). The Notes shall be substantially in
the form set out in Exhibit 1, with such changes therefrom, if any, as may be
approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
2. EXCHANGE AND ISSUANCE OF NOTES.
Subject to the terms and conditions set forth herein, the Company
hereby agrees that in exchange for the delivery by each Purchaser of the
Existing Notes held by such Purchaser, it will deliver Notes to each Purchaser
in the amounts set forth opposite such Purchaser's name on Schedule A hereto
(the "Exchange"). Upon receipt by the Purchasers of all the Notes as set forth
on Schedule A hereto, the Company shall cancel all of the Existing Notes and the
Existing Notes, and the obligations of the Obligors under the Existing Revolving
Credit Documents and the Existing Prudential Documents shall be of no further
force or effect. The Notes are to be entitled ratably to the benefits and
security of the Security Documents as herein and therein provided. To induce the
Purchasers to enter into this Agreement and to make the respective exchanges for
Notes to be made by them hereunder, the Company makes the representations and
warranties set forth in Section 6 and in the Security Documents, and the
covenants and agreements hereinafter stated.
<PAGE>
3. CLOSING.
The date and time for the Exchange as provided herein is _______ at
10:00 A.M., New York City time, or on such other Business Day thereafter on or
prior to [_______], 19[__] as may be agreed upon by the Purchasers of a majority
in principal amount of the Notes and the Company (the "Closing"). The Exchange
will be made at the offices of Milbank, Tweed, Hadley & McCloy, One Chase
Manhattan Plaza, New York, New York, or at such other place as shall be agreed
upon among the parties hereto.
Subject to satisfaction of the closing conditions listed in Section 5
hereunder, each Purchaser will, at the Closing, deliver to the Company its
Existing Notes, against delivery by the Company to such Purchaser of one or more
duly executed Notes in the respective aggregate principal amounts for Notes set
forth opposite such Purchaser's name in Schedule A, each such Note to be dated
the date of the Closing and in the form of a Note registered in the name of such
Purchaser or such Purchaser's nominee, in any denominations, all as may be
specified by timely notice to the Company (or, in the absence of such notice, a
single Note in the entire aggregate principal amount for Notes to be purchased
by such Purchaser, in denominations as set forth on Schedule A and registered in
such Purchaser's name).
4. INTEREST ON NOTES.
The Company hereby promises to pay interest on the unpaid principal
amount of each Note in arrears on the last Business Day of each calendar month
for the period commencing on the date of such Note to but excluding the date
such Note shall be paid in full, at a rate per annum equal to 12%; provided,
however, that the Company shall be permitted to pay interest on the unpaid
principal of each Note during the period up to and including [date two years
from Closing] by issuing Additional Notes in a principal amount equal to such
interest; provided, further, however, that in no event shall the Company be
permitted to issue Additional Notes in satisfaction of its obligation to pay
interest in cash on the unpaid principal amount of the Notes if the Company has
satisfied the EBITDA Requirement with respect to the date as of which such
interest is payable.
Notwithstanding the foregoing, upon the occurrence and during the
continuation of an Event of Default, the Company hereby promises to pay interest
at a rate per annum equal to 13 1/2% on any principal payable under a Note, and
on any other amount payable by the Company hereunder or under any Security
Document with respect to or under a Note, until the same is paid in full
(whether before or after judgment).
5. CONDITIONS TO CLOSING.
Your obligation to accept the Notes hereunder is subject to the
fulfillment to your satisfaction, prior to or at the Closing, of the following
conditions; provided, however, that in the event that (i) the Majority Holders
determine that modifications, if any, to the Intercreditor Agreement, the New
Revolving Credit Agreement, the Foothill Subordinated Note or this Agreement are
Immaterial Changes, (ii) all of the conditions set forth in this Section 5 other
than conditions set forth in Sections 5.12, 5.18 and 5.19 (which conditions
shall be governed by clause (i) above) are satisfied or waived by the Purchasers
in accordance with the terms of this Agreement and (iii) the Reorganization Plan
is confirmed in the form filed by the Company with no modifications other than
Immaterial Changes, then all of the Class 2 Claimants shall be bound by the
terms of this Agreement and shall be deemed to be signatories thereof: 5.1.
Representations and Warranties.
<PAGE>
The representations and warranties of the Obligors in this Agreement
and the other Basic Documents shall be correct when made and at the time of the
Closing.
5.2. Performance; No Default.
The Obligors shall have performed and complied with all agreements and
conditions contained in this Agreement and the other Basic Documents required to
be performed or complied with by it prior to or at the Closing and after giving
effect to the exchange and issue of the Notes no Default shall have occurred and
be continuing. Neither the Company nor any Subsidiary shall have entered into
any transaction since the Petition Date that would have been prohibited by
Sections 11.7, 11.8, 11.12 or 11.19 hereof had such Sections applied since such
date.
5.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
(b) Secretary's Certificate. Each of the Obligors shall have delivered to
you a certificate of the secretary or an assistant secretary of such Person
certifying the resolutions attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the Notes, this
Agreement and the other Basic Documents.
(c) Intentionally Left Blank. This paragraph has intentionally been left
blank.
(d) Other Certificates. The Purchasers shall have received (i) a
certificate of status with respect to each Obligor, dated within 15 days of the
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Obligor, which certificate shall indicate
that such Obligor is in good standing in such jurisdiction and (ii) a
certificate of status with respect to each Obligor, dated within 15 days of the
Closing Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or licensed would have a
Material Adverse Effect, which certificates shall indicate that such Obligor is
in good standing in such jurisdictions.
5.4. Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to
you, dated the date of Closing,
(a) from special South Carolina counsel for the Company, substantially
in the form set out in Exhibit 2 and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request,
<PAGE>
(b) from special New York counsel for the Company, substantially in
the form set out in Exhibit 3 and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request,
(c) from special Alabama counsel for the Company, substantially in the
form set out in Exhibit 4 and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request,
and
(d) from Milbank, Tweed, Hadley & McCloy, your special counsel in
connection with the transactions contemplated hereby.
The Company hereby instructs its counsel named in (a), (b) and (c)
above to deliver such opinions to you and the Collateral Agent.
5.5. Exchange Permitted By Applicable Law, etc.
On the date of the Closing your acceptance of the Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
5.6. Payment f Special Counsel Fees.
Without limiting the provisions of Section 16.1, the Company shall
have paid on or before the Closing in accordance with the Reorganization Plan
(a) the reasonable fees, charges and disbursements of your special counsel,
Milbank, Tweed, Hadley & McCloy and local counsel for you in Delaware, Klehr,
Harrison, Harvey, Branzburg & Ellers, to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to the
Closing, (b) the reasonable fees, charges and disbursements of the Collateral
Agent to the extent reflected in a statement of the Collateral Agent rendered to
the Company at least one Business Day prior to the date of Closing (which fees,
charges and disbursements shall be consistent with the agreement between the
Company and the Collateral Agent and acceptable to the Purchasers in their
reasonable determination), and (c) the reasonable fees, charges and
disbursements of the special counsel of the Collateral Agent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the date of Closing.
<PAGE>
5.7. Private Placement Number.
A private placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
5.8. Changes in Corporate Structure.
Except as specified in Schedule D, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule I.
5.9. Security Documents.
The Agency Agreement, the Guaranty and Security Agreement, the
Security and Pledge Agreement, the Trademark Security Agreement, the Deposit
Account Security Agreement and the Mortgages shall each have been duly executed
and delivered by the Company and each other Person contemplated to be a party
thereto all as contemplated by the Reorganization Plan and each shall be in full
force and effect and the Purchasers shall have received evidence satisfactory to
them of the perfection and priority under the laws of any applicable
jurisdiction of the Liens intended to be created by such Security Documents,
subject to the terms of the Intercreditor Agreement.
5.10. Mortgage(s) and Title Insurance.
The following documents shall each have been duly executed (and, where
appropriate, acknowledged) by Persons satisfactory to the Majority Holders:
(a) one or more Mortgages as contemplated by the Reorganization Plan
covering the Real Property Collateral identified in Schedule E with an asterisk,
in each case duly executed and delivered by the relevant Obligor in recordable
form (in such number of copies as the Majority Holders and the Collateral Agent
shall have requested);
(b) one or more mortgagee policies of title insurance on forms of and
issued by one or more title companies satisfactory to the Majority Holders and
the Collateral Agent as contemplated by the Reorganization Plan (the "Title
Companies"), insuring a valid first mortgage lien on the Mortgaged Property (as
defined in the Mortgage(s)); for and in amounts satisfactory to the Majority
Holders in their reasonable determination, subject only to such exceptions as
are reasonably satisfactory to the Majority Holders and the Collateral Agent
and, to the extent necessary under applicable law, for filing in the appropriate
county land office(s), Uniform Commercial Code financing statements covering
fixtures, in each case appropriately completed and duly executed; such title
policies shall contain such endorsements in form and substance reasonably
satisfactory to the Majority Holders;
(c) as-built surveys of recent date of each of the facilities to be
covered by the Mortgages showing such matters as may be reasonably required by
Majority Holders, which surveys shall be in form and content acceptable to the
<PAGE>
ajority Holders in their reasonable determination, and certified to the
Collateral Agent and the Title Companies, and shall have been prepared by a
registered surveyor acceptable to the Majority Holders;
(d) certified copies of permanent and unconditional certificates of
occupancy (or, if it is not the practice to issue certificates of occupancy in
the jurisdiction in which the facilities to be covered by the Mortgage(s) are
located, then such other evidence satisfactory to the Majority Holders in its
reasonable determination) permitting the fully functioning operation and
occupancy of each such facility and of such other permits necessary for the use
and operation of each such facility issued by the respective governmental
authorities having jurisdiction over each such facility; and
(e) such Collateral Access Agreements from lessors, warehousemen,
bailees, and other third persons (i) in the case of Inventory stored with a
bailee, warehouseman or similar party, as the Majority Holders and the
Collateral Agent reasonably may require, to the extent provided to the New
Revolving Credit Lender by the Company under the New Revolving Credit Agreement
and (ii) in the case of Equipment stored with a bailee, warehouseman or similar
party as the Majority Holders and the Collateral Agent may reasonably require.
In addition, the Company shall have paid to the Title Companies all
expenses and premiums of the Title Companies in connection with the issuance of
such policies and in addition shall have paid to the Title Companies an amount
equal to the recording and stamp taxes payable in connection with recording the
Mortgage(s) in the appropriate county land office(s).
Notwithstanding the foregoing, to the extent that any of the items set
forth above in this Section 5.10(e) are not obtainable by the Closing Date, it
shall not be a condition to the Closing hereunder that such items be delivered
to the Collateral Agent and the Purchasers, but such items shall be delivered to
the Collateral Agent as promptly after the Closing Date as practicable, but in
any event within 30 days thereafter, provided that it shall not be a Default
hereunder if the Obligors are unable to deliver any of such items by reason of
their inability to obtain a necessary landlord or other third-party consent
(unless such consent is to come from an Affiliate) so long as the Obligors use
commercially reasonable efforts to obtain such non-Affiliated landlord or
third-party consents.
5.11. Fayette Facilities.
The Company shall have granted the Collateral Agent a Mortgage on the
Company's interests in the real Property and Equipment located at the Fayette
Facilities, subject only to Permitted Encumbrances.
5.12. Intercreditor Agreement.
The Intercreditor Agreement shall have been duly executed and
delivered by the Purchasers, the Collateral Agent and the New Revolving Lender
in the form of Exhibit 10 and shall be in full force and effect, and no term or
condition thereof shall have been amended, modified, supplemented or waived
(except for Immaterial Changes) without the prior written consent of each of the
Purchasers.
<PAGE>
5.13. Financing Statements.
Each financing statement required to be filed, registered or recorded
in connection with the transactions contemplated by this Agreement and the
Security Documents shall have been properly filed, registered or recorded in
each office in each jurisdiction required in order to create in favor of the
Collateral Agent, for the ratable benefit of the Purchasers, a valid and/or
perfected first priority Lien (subject only to the provisions of the
Intercreditor Agreement and the Permitted Encumbrances) on the respective
collateral described therein; the Collateral Agent and you shall have received,
to the extent available, acknowledgement copies of all of such filings,
registrations and recordations stamped by the appropriate filing, registration
or recording officer (or, in lieu thereof, other evidence satisfactory to the
Collateral Agent that all such filings, registrations and recordations have been
made); and all necessary filing, recording and other similar fees, and all taxes
and other charges related to such filings, registrations and recordations
(including such other taxes and charges requested by you), shall have been paid
in full.
Uniform Commercial Code financing statement, judgment lien and Federal
income tax lien searches (collectively, the "UCC Searches") (a) in the office of
the Clerk for Gwinnet County, Georgia, (b) in the office of the Clerk for New
York County, New York and in the office of the Secretary of State of New York,
(c) in the office of the Clerk for Lenoir County, North Carolina and in the
office of the Secretary of State of North Carolina, (d) in the office of the
Secretary of State of Alabama, (e) in the office of the Secretary of State of
South Carolina and (f) in the office of the Secretary of State of Florida, each
of a recent date, shall have been delivered to you or your special counsel.
5.14. Appraisals.
Copies of updated appraisals of the Inventory and Real Property Collateral
to the extent made available to the Company by the New Revolving Credit Lender
shall have been delivered to you or your special counsel.
5.15. Surveys and Other Reports.
Copies of recent Phase I environmental surveys and assessments
together with all other environmental reports prepared within the last five
years by Persons (familiar with the identification of toxic and hazardous
substances) satisfactory to the Majority Holders and set forth on Schedule M
shall have been delivered to you or your special counsel, such environmental
surveys and assessments to be based upon physical on-site inspections by such
firm of each of the existing sites and facilities owned, operated or leased by
the Company and its Subsidiaries, as well as a historical review of the uses of
such sites and facilities and of the business and operations of the Company and
its Subsidiaries (including any former Subsidiaries or divisions of the Company
or any of its Subsidiaries that have been disposed of prior to the date of such
survey and assessment and with respect to which the Company or any of its
Subsidiaries may have retained liability for Environmental Liabilities).
<PAGE>
5.16. Insurance.
Certificates of insurance evidencing the existence of all insurance
required to be maintained by the Company pursuant to Section 10.6 and, subject
to the terms and conditions of the Intercreditor Agreement, the designation of
the Collateral Agent as the loss payee or additional named insured, as the case
may be, thereunder to the extent required by Section 10.6, such certificates to
be in such form and contain such information as is specified in Section 10.6. In
addition, the Company shall have delivered a certificate of a Senior Financial
Officer of the Company setting forth the insurance obtained by it in accordance
with the requirements of Section 10.6 and stating that such insurance is in full
force and effect and that all premiums then due and payable thereon have been
paid.
5.17. New Revolving Credit Agreement.
The New Revolving Credit Agreement shall have been duly executed and
delivered by the parties thereto in the form of Exhibit 11 and shall be in full
force and effect, and no term or condition thereof shall have been amended,
modified, supplemented or waived (except for Immaterial Changes) without the
prior written consent of each of the Purchasers.
5.18. Foothill Subordinated Note.
The Foothill Subordinated Note shall have been duly executed and
delivered by the Company to Foothill in the form of Exhibit 7 and shall be in
full force and effect, and no term or condition therefore shall have been
amended modified, supplemented or waived (except for Immaterial Changes) without
the prior written consent of each of the Purchasers.
5.19. Cash Payment.
The Company shall have paid to each of the Purchasers its pro rata
share of $15,000,000 in cash in accordance with the terms of the Reorganization
Plan.
5.20. Issuance of New Common.
The Company shall have issued to each of the Purchasers its pro rata
portion of shares of New Common in accordance with the terms of the
Reorganization Plan.
5.21. Confirmation Order.
The Confirmation Order shall have been entered.
5.22. Release of Certain Existing Liens.
Except as contemplated by the Intercreditor Agreement, Foothill shall
have delivered, or shall have caused to be delivered, to the Collateral Agent
all necessary termination statements, satisfaction pieces and other release
documentation in respect of any and all Liens it may have in and to the
Equipment and the Real Property Collateral, which shall be in form and substance
satisfactory to effect such release and for recordation in the appropriate
recording offices.
<PAGE>
5.23. Exchange of Notes.
The Company shall have executed and delivered to each Purchaser,
against surrender in exchange therefor by such Purchaser of any Existing Notes,
Notes in the respective principal amounts set forth on Schedule A, in each case
dated the date of the Closing.
5.24. Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
6.1. Organization; Power and Authority.
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each of the Company
and its Subsidiaries has the corporate power and authority to own or hold under
lease the Properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement, the Notes and the other Basic Documents and to perform the provisions
hereof and thereof.
6.2. Authorization, etc.
(a) This Agreement, the Notes and the other Basic Documents have been
duly authorized by all necessary corporate action on the part of each Obligor,
and this Agreement constitutes, and upon execution and delivery thereof each
Note and each of the other Basic Documents will constitute, a legal, valid and
binding obligation of each Obligor enforceable against such Obligor in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) Other than the filing of appropriate financing statements, fixture
filings, and mortgages, the execution, delivery, and performance by each of the
Obligors of this Agreement and the Basic Documents to which such Obligor is a
<PAGE>
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any Federal, State, foreign, or
other Governmental Authority or other Person, except for any necessary filings
or reports required to be made to or with the Securities and Exchange Commission
or in accordance with the Bankruptcy Code.
(c) Except with respect to the perfection and priority of Liens on
Inventory or Equipment located outside the United States of America, as to which
this paragraph is not applicable, subject to the filing of appropriate financing
statements, fixture filings, and mortgages, the Liens granted by each of the
Obligors to the Collateral Agent for the ratable benefit of the Purchasers in
and to their Properties pursuant to this Agreement and the other Basic Documents
are validly created, perfected, and first priority Liens to the extent
contemplated by the Intercreditor Agreement, subject only to Permitted
Encumbrances and Liens permitted by Section 11.2(b), (c) and (g).
6.3. Disclosure.
The Company has disclosed to the Purchasers all agreements,
instruments and corporate or other restrictions to which it or any of its
Subsidiaries is subject, and all other matters known to it, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of the reports, financial statements, certificates or other
information (including, without limitation, the Disclosure Statement) furnished
by or on behalf of the Obligors to the Purchasers in connection with the
negotiation of this Agreement and the other Basic Documents or delivered
hereunder or thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that, with
respect to projected financial information, the Company represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.
6.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule F contains (except as noted therein) complete and correct
lists of the (i) Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by the Company and each other Subsidiary, (ii) Persons known
by the Company to be its Affiliates, other than Subsidiaries, and (iii)
Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule F as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except in favor of the Collateral Agent or as otherwise disclosed in Schedule
G).
(c) Each Subsidiary identified in Schedule F is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
<PAGE>
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements
identified with an asterisk on Schedule C and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of profits to
the Company or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.
6.5. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to
their respective Properties, including all such Properties reflected in the most
recent audited balance sheet referred to in Schedule I or purported to have been
acquired by the Company or any Subsidiary after the date of such balance sheet
(except as sold or otherwise disposed of (i) in the ordinary course of business
or (ii) as otherwise permitted by this Agreement), in each case free and clear
of Liens prohibited by this Agreement or deed restrictions related to
environmental contamination or deed restrictions related to environmental
contamination. All leases are valid and subsisting and are in full force and
effect in all Material respects.
6.6. Ownership of Certain Subsidiaries.
Oneita Freeport Holdings Corp., organized under the laws of the
British Virgin Islands, is a holding company for a foreign Subsidiary of the
Company, and has no Material Property of its own. Oneita International Corp.,
organized under the laws of the British Virgin Islands, is a holding company for
a foreign Subsidiary of the Company, and has no Material Property of its own.
Oneita Export Corp., a South Carolina corporation, has no Material Property.
6.7. Intentionally Left Blank.
This section has intentionally been left blank.
6.8. Equipment.
All of the Equipment issued or held for use in the Company's business
or the businesses of its Subsidiaries is fit for such purposes.
6.9. Location of Inventory and Equipment.
The Equipment is not stored with a bailee, warehouseman, or similar
party (without the Collateral Agent's prior written consent). The Equipment and
Inventory are located only at the locations identified on Schedule H or
otherwise permitted by Section 10.8.
<PAGE>
6.10. Inventory Records.
The Company and its Subsidiaries keep correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and the Company's and each of its Subsidiaries' costs therefor.
6.11. Location of Chief Executive Office; FEIN.
The chief executive office of the Company is located at the address
indicated in the preamble to this Agreement. The Company's FEIN is 57-0351045.
Kinston's FEIN is 58-1514502.
6.12. Solvency.
Each of the Obligors is Solvent. No transfer of Property is being made
by the Company and no obligation is being incurred by the Company in connection
with the transactions contemplated by this Agreement or the other Basic
Documents with the intent to hinder, delay, or defraud either present or future
creditors of the Company.
6.13. No Material Adverse Change.
All consolidated financial statements relating to the Company and its
Subsidiaries listed on Schedule I have been delivered by the Company to the
Purchasers, have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end and quarter-end (in the case of monthly or quarterly financial
statements) audit adjustments) and present fairly, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of the
date thereof and the consolidated results of operations and cash flows of the
Company and its Subsidiaries for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal quarterly and year-end
adjustments). There has not been a Material Adverse Change with respect to the
Company and its Subsidiaries since the date of the latest financial statements
submitted to the Purchasers on or before the Closing Date.
6.14. Intentionally Left Blank.
This section has intentionally been left blank.
6.15. Compliance with Laws, Other Instruments, etc.
Except as otherwise permitted pursuant to a Final Order of the
Bankruptcy Court, the execution, delivery and performance by each of the
Obligors of this Agreement, the Notes, and the other Basic Documents will not
(i) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any Property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement or
<PAGE>
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective Properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary. No Default
has occurred or is continuing.
6.16. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule J there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any Property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority. None of the actions, suits or proceedings disclosed on
Schedule J, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
(b) On the Effective Date, neither the Company nor any Subsidiary is
in default under any term of any agreement or instrument to which it is a party
or by which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including without limitation Environmental Laws)
of any Governmental Authority, which default or violation, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
6.17. Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of Federal,
state or other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended [September __, ____].
6.18. Licenses, Permits, etc.
Except as disclosed in Schedule K,
(a) the Company and its Subsidiaries own or possess all of their
respective licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, necessary to
conduct their businesses, without known conflict with the rights of others;
<PAGE>
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect upon any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or other
right owned by any other Person; and
(c) to the best knowledge of the Company, there is no violation by any
Person of any right of the Company or any of its Subsidiaries with respect to
any patent, copyright, service mark, trademark, trade name or other right owned
or used by the Company or any of its Subsidiaries.
6.19. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws, except for such
instances of noncompliance as have not resulted in and would not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plans most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plans most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities [by more than $_________ in the case of
any single Plan and by more than $_________ in the aggregate for all Plans]. The
term "benefit liabilities" has the meaning specified in section 4001 of ERISA
and the terms "current value" and "present value" have the meaning specified in
section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans.
(d) The aggregate expected postretirement benefit obligation
(determined as of the last day of the Company's most recently ended fiscal year
in accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage mandated by
section 4980B of the Code) of the Company and its Subsidiaries does not exceed
$_______.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.
<PAGE>
6.20. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you and the other Purchasers. Neither the Company nor
anyone acting on its behalf has taken, or will take, any action that would
subject the issuance or sale of the Notes to the registration requirements of
Section 5 of the Securities Act.
6.21. Existing Indebtedness; Material Agreements; Future Liens.
(a) Except as described therein, Schedule C sets forth a complete and
correct list of all outstanding Indebtedness of the Company and its Subsidiaries
as of the Effective Date, since which date there has been no Material change in
the amounts, interest rates, sinking funds, installment payments or maturities
of the Indebtedness of the Company or its Subsidiaries. After giving effect to
the transactions contemplated hereby, neither the Company nor any Subsidiary
will be in default and no waiver of default will be currently in effect, in the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition will exist with respect to any Indebtedness
of the Company or any Subsidiary that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Schedule G is a complete and correct list of each Lien (other than
Permitted Encumbrances) securing Indebtedness of any Person outstanding on the
date hereof, the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $250,000, and covering any Property of the Company or
any of its Subsidiaries, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in Schedule G.
(c) Except as disclosed in Schedule G, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 11.2.
6.22. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
6.23. Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
<PAGE>
6.24. Environmental Matters.
(a) The Company has heretofore delivered to the Purchasers copies of
all environmental investigations, studies, audits, tests, reviews or other
analyses conducted by or that are in the possession of the Company or any of its
Subsidiaries in relation to facts, circumstances or conditions at or affecting
any site or facility now or previously owned, operated or leased by the Company
or any of its Subsidiaries. These environmental investigations, studies, audits,
tests, reviews or other analyses are listed on Schedule L;
(b) Neither the Company nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(c) Neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect;
(d) Neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them and has not disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws or in a manner that may give rise to
liability under any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(e) all operations and buildings on all real properties now owned,
leased or operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
7. REPRESENTATION OF THE PURCHASERS.
You represent that you are accepting the Notes in exchange for the
Existing Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their Property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
<PAGE>
8. INFORMATION AS TO COMPANY.
8.1. Financial Information.
The Company shall deliver to the Note Agent and, upon the written
request (which shall be required to be made only a single time) of any
Purchaser, to such Purchaser:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its Subsidiaries
as at the end of such quarter, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such quarter
and (in the case of the second and third quarters) for the portion of the
fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in (or, in the
case of the balance sheet, as of the end of) the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP applicable to
quarterly financial statements generally subject to year-end adjustments
and without footnotes, and certified by a Senior Financial Officer as
presenting fairly, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Company's
quarterly report on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 8.1(a);
(b) Annual Statements -- within 105 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and
<PAGE>
(B) by a certificate of such accountants (which certificate
may be limited to the extent required by accounting rules or
guidelines) stating that they have reviewed this Agreement and
stating further whether, in making their audit, they have become
aware of any condition or event that then constitutes a Default
or an Event of Default, and, if they are aware that any such
condition or event then exists, specifying the nature and period
of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default
unless such accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing
standards or did not make such an audit),
provided that the delivery within the time period specified above of the
Company's annual report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in clause
(B) above, shall be deemed to satisfy the requirements of this Section
8.1(b);
(c) Monthly Statements -- within 45 days after the end of each
calendar month, duplicate copies of the consolidated monthly financial
statements of the Company and its Subsidiaries in the same form as those
distributed internally to the members of senior management of the Company, which
statements shall be prepared in accordance with GAAP as applicable to interim
statements, provided that such statements need not contain footnotes and may be
subject to quarterly and annual adjustments;
(d) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement sent
by the Company or any Subsidiary to public securities holders generally, and
(ii) each regular or periodic report (other than Forms S-8 and 11-K), each
registration statement (without exhibits except as expressly requested by such
holder), and each prospectus and all amendments thereto filed by the Company or
any Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or any
Subsidiary to the public concerning developments that are Material;
(e) Information Required by Rule 144A -- promptly upon it becoming
available, duplicate copies of such financial and other information as such
holder may reasonably determine to be necessary in order to permit compliance
with the information requirements of Rule 144A under the Securities Act in
connection with the resale of Notes, except at such times as the Company is
subject to the reporting requirements of section 13 or 15(d) of the Exchange
Act.
8.2. Business Information.
(a) The Company shall deliver to each Purchaser:
<PAGE>
(i) Notice of Default -- promptly, and in any event within five
days after a Responsible Officer becomes aware of the existence of any
Default or that any Person has given any notice or taken any action with
respect to a claimed Default or that any Person has given any notice or
taken any action with respect to a claimed Default of the type referred to
in Section 12(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take
with respect thereto;
(ii) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect; and
(iii) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, or Properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such Purchaser.
(b) Employee Benefits. Upon the written request of any Purchaser
(which shall be required to be made only a single time), the Company shall:
(i) Cause to be delivered to such Purchaser, each of the
following: (A) promptly, and in any event within 10 Business Days after the
Company or any of its Subsidiaries knows or has reason to know that an
ERISA Event has occurred that reasonably could be expected to result in a
Material Adverse Change, a written statement of a Senior Financial Officer
of the Company describing such ERISA Event and any action that is being
taken with respect thereto by the Company, any such Subsidiary or ERISA
Affiliate, and any action taken or threatened by the IRS, Department of
Labor, or PBGC. The Company or such Subsidiary, as applicable, shall be
deemed to know all facts known by the administrator of any Benefit Plan of
which it is the plan sponsor, (B) promptly, and in any event within 3
Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with respect to any Benefit Plan and all
communications received by the Company, any of its Subsidiaries or, to the
knowledge of the Company, any ERISA Affiliate with respect to such request,
and (C) promptly, and in any event within 3 Business Days after receipt by
the Company, any of its Subsidiaries or, to the knowledge of the Company,
any ERISA Affiliate, of the PBGC's intention to terminate a Benefit Plan or
to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(ii) Cause to be delivered to such Purchaser, each of the
following: (A) a copy of each Plan (or, where any such plan is not in
writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and written descriptions thereof that have
been distributed to employees or former employees of the Company or its
Subsidiaries; (B) the most recent determination letter issued by the IRS
<PAGE>
with respect to each Benefit Plan; (C) for the three most recent plan
years, annual reports on Form 5500 Series required to be filed with any
governmental agency for each Benefit Plan; (D) all actuarial reports
prepared for the last three plan years for each Benefit Plan; (E) a listing
of all Multiemployer Plans, with the aggregate amount of the most recent
annual contributions required to be made by the Company or any ERISA
Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (F) any information that has been
provided to the Company or any ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan; and (G) the aggregate amount of the
most recent annual payments made to former employees of the Company or its
Subsidiaries under any Retiree Health Plan.
8.3. Officer's Certificate.
(a) Covenant Compliance. Each set of annual and quarterly financial
statements delivered to a holder of Notes pursuant to Section 8.1(a) and Section
8.1(b) hereof shall be accompanied by a certificate of a Senior Financial
Officer setting forth the information (including calculations in reasonable
detail) required in order to establish whether the Company was in compliance
with the requirements of Sections 9.1, 11.1, 11.2, 11.6, 11.7, 11.18 and 11.19,
inclusive, during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence);
(b) Defaults. Each set of annual, quarterly and monthly financial
statements delivered to a holder of Notes pursuant to Section 8.1(a), Section
8.1(b) or Section 8.1(c) hereof shall be accompanied by a certificate of a
Senior Financial Officer setting forth a statement that such officer has
reviewed the relevant terms thereof and has made, or caused to be made, under
his or her supervision a review of the transactions and conditions of the
Company and the Subsidiaries from the beginning of the period covered by the
statements then being furnished to the date of the certificate and that such
review has not disclosed the existence during such period of any condition or
event that constitutes a Default or, if any such condition or event existed or
exists (including, without limitation, any such event or condition resulting
from the failure of the Company to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto.
8.4. Inspection.
At the request of the Collateral Agent or any Purchaser, the Company
shall permit the representatives of the Collateral Agent and such Purchaser:
(a) if no Default then exists, at the expense of the Collateral Agent
or such Purchaser, as the case may be, and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent will not
be unreasonably withheld) its independent public accountants, and (with the
consent of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each Subsidiary, all
at such reasonable times and as often as may be reasonably requested in writing;
and
<PAGE>
(b) if a Default then exists, at the expense of the Company, to visit
and in respect any of the offices or properties of the Company or any
Subsidiary, to examine all of their respective books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers
and independent public accountants (and by this provision the Company authorizes
said accountants to discuss the affairs, finances and accounts of the Company
and its Subsidiaries), all at such times and as often as may be requested. 9.
PREPAYMENT OF THE NOTES.
9.1. Special Prepayments from Average Available Cash and After Sale of Assets or
Change of Control.
The Company shall make prepayments of the principal amount of the
Notes hereunder as follows:
(a) Average Available Cash. In the event that, as at the end of any
calendar month, the Average Available Cash for the month (the "Applicable
Month") during the preceding period of six consecutive calendar months with the
lowest Average Available Cash exceeds $11,000,000, the Company shall apply in
multiples of not less than $1,000,000 the amount by which the Average Available
Cash for the Applicable Month exceeds $11,000,000 to the pro rata prepayment of
Notes ("Available Cash Payments"); provided, however, that the total amount of
Available Cash Payments required under this subsection shall not exceed
$15,000,000. Not later than 10 Business Days after the last day of each calendar
month, the Company shall deliver a notice to the holders of the Notes, which
notice shall specify the amount of Average Available Cash for each month during
the preceding period of six consecutive calendar months and the resulting
Available Cash Payment, if any, for such month, shall refer to this subsection,
shall specify the date fixed for such prepayment (which shall not be less than 5
Business Days and not more than 10 Business Days after the date such notice is
given) and shall specify the aggregate principal amount of the Notes held by
each holder thereof to be prepaid (with calculations in reasonable detail of how
such amounts were determined). On the prepayment date specified in such notice,
the Company shall prepay the Notes at 100% of the principal amount to be
prepaid, together with accrued interest to the date fixed for prepayment.
(b) Sales of Non-Excluded Assets and Worn-Out Equipment. Without
limiting the obligation of the Company to obtain the consent of the Required
Holders to any Disposition other than a Permitted Disposition and subject to the
terms of the Intercreditor Agreement, the Company agrees, on or prior to the
occurrence of any Disposition other than a Disposition described in clause (a)
of the definition of Permitted Disposition, to deliver to the Note Agent a
statement certified by a Senior Financial Officer, in form and detail
satisfactory to the Note Agent in its reasonable determination, of the estimated
amount of (i) the Net Cash Proceeds from such Disposition of any Non-Excluded
Assets and (ii) any Net Cash Proceeds in excess of $1,600,000 in the aggregate
from the Disposition of Excluded Assets that will (on the date of such
Disposition) be received by the Company or any of its Subsidiaries in cash and,
except as provided in Section 9.1(c) below, the Company will apply to the pro
rata prepayment of the Notes hereunder, as follows:
<PAGE>
(i) upon the date 30 days following such Dispositions, an
aggregate amount equal to 75% of such estimated amount of the Net Cash
Proceeds of such Dispositions, to be determined at the time of each
Disposition, to the extent received by the Company or any of its
Subsidiaries in cash on the date of such Disposition; and
(ii) thereafter, quarterly, on the date of the delivery by the
Company to the Note Agent pursuant to Section 8.1 of the financial
statements for any quarterly fiscal period or fiscal year, to the extent
the Company or any of its Subsidiaries shall receive Net Cash Proceeds
during the quarterly fiscal period ending on the date of such financial
statements in cash under deferred payment arrangements or Disposition
Investments entered into or received in connection with any Disposition to
which this Section 9.1(b) applies, an amount equal to (a) 75% of the
aggregate amount of such Net Cash Proceeds minus (b) any transaction
expenses associated with such Dispositions and not previously deducted in
the determination of Net Cash Proceeds plus (or minus, as the case may be)
(c) any other adjustment received or paid by the Company or any of its
Subsidiaries pursuant to the respective agreements giving rise to such
Dispositions and not previously taken into account in the determination of
the Net Cash Proceeds of such Dispositions, provided that if prior to the
date upon which the Company would otherwise be required to make a
prepayment under this subclause (ii) with respect to any quarterly fiscal
period the aggregate amount of such Net Cash Proceeds (after giving effect
to the adjustments provided for in this subclause (ii)) shall exceed
$500,000, then the Company shall within 3 Business Days from the date of
receipt of such Net Cash Proceeds make a prepayment under this subclause
(ii) in an amount equal to such required prepayment.
(c) Sale of Excluded Assets. The Company shall not be required to make
a prepayment pursuant to Section 9.1(b) above with the Net Cash Proceeds from
the Disposition of Excluded Assets and shall be permitted to retain such Net
Cash Proceeds for working capital purposes, provided that,
(i) the Company advises the Purchasers at the time a prepayment
would otherwise be required to be made under Section 9.1(b) above that it
intends to use such Net Cash Proceeds for working capital purposes; and
(ii) the aggregate amount of Net Cash Proceeds from the
Disposition of Excluded Assets not subject to prepayment pursuant to
Section 9.1(b) does not exceed $1,600,000.
(d) Change in Control.
(i) Notice of Change in Control or Control Event. The Company
will, within 10 Business Days after any Responsible Officer has knowledge
of the occurrence of any Change in Control, give written notice of such
Change in Control to each holder of Notes unless notice in respect of such
<PAGE>
Change in Control shall have already been given pursuant to this Section
9.1(d). If a Change in Control has occurred, such notice shall contain and
constitute an offer to prepay Notes as described in subparagraph (iii) of
this Section 9.1(d) and shall be accompanied by the certificate described
in subparagraph (vii) of this Section 9.1(d).
(ii) Condition to Company Action. The Company will not take any
action that consummates or finalizes a Change in Control unless (i) at
least 10 days prior to such action it shall have given to each holder of
Notes written notice containing and constituting an offer to prepay Notes
as described in subparagraph (iii) of this Section 9.1(d), accompanied by
the certificate described in subparagraph (vii) of this Section 9.1(d), and
(ii) contemporaneously with such action, it prepays all Notes required to
be prepaid in accordance with this Section 9.1(d).
(iii) Offer to Prepay Notes. The offer to prepay Notes
contemplated by this Section 9.1(d) shall be an offer to prepay, in
accordance with and subject to this Section 9.1(d), all, but not less than
all, the Notes held by each holder (in this case only, "holder" in respect
of any Note registered in the name of a nominee for a disclosed beneficial
owner shall mean such beneficial owner) on a date specified in such offer
(the "Proposed Prepayment Date"). If such Proposed Prepayment Date is in
connection with an offer contemplated by this Section 9.1(d), such date
shall be not less than 20 days and not more than 30 days after the date of
such offer.
(iv) Acceptance. A holder of Notes may accept the offer to prepay
made pursuant to this Section 9.1(d) by causing a notice of such acceptance
to be delivered to the Company at least 10 days prior to the Proposed
Prepayment Date. A failure by a holder of Notes to respond to an offer to
prepay made pursuant to this Section 9.1(d) shall be deemed to constitute
an acceptance of such offer by such holder.
(v) Prepayment. Prepayment of the Notes to be prepaid pursuant to
this Section 9.1(d) shall be at 101% of the principal amount of such Notes,
together with interest on such Notes accrued to the date of prepayment.
(vi) Deferral Pending Change in Control. The obligation of the
Company to prepay Notes pursuant to the offers required by and accepted in
accordance with this Section 9.1(d) is subject to the occurrence of the
Change in Control in respect of which such offers and acceptances shall
have been made. In the event that such Change in Control does not occur on
the Proposed Prepayment Date in respect thereof, the prepayment shall be
deferred until and shall be made on the date on which such Change in
Control occurs. The Company shall keep each holder of Notes reasonably and
timely informed of (i) any such deferral of the date of prepayment, (ii)
the date on which such Change in Control and the prepayment are expected to
occur, and (iii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned (in which case the
offers and acceptances made pursuant to this Section 9.1(d) in respect of
such Change in Control shall be deemed rescinded).
<PAGE>
(vii) Officer's Certificate. Each offer to prepay the Notes
pursuant to this Section 9.1(d) shall be accompanied by a certificate,
executed by a Senior Financial Officer of the Company and dated the date of
such offer, specifying: (a) the Proposed Prepayment Date; (b) that such
offer is made pursuant to this Section 9.1(d); (c) the principal amount of
each Note offered to be prepaid; (d) the interest that would be due on each
Note offered to be prepaid, accrued to the Proposed Prepayment Date (or any
later date resulting from the deferral thereof); (e) that the conditions of
this Section 9.1(d) have been fulfilled; and (f) in reasonable detail, the
nature and date or proposed date of the Change in Control.
9.2. Optional Prepayments.
The Company may, at its option, upon notice as provided below, prepay,
without penalty or premium, at any time all, or from time to time any part of,
the Notes, in an amount not less than $1,000,000 of the aggregate principal
amount of the Notes then outstanding in the case of a partial prepayment, at
100% of the principal amount so prepaid. The Company will give each holder of
Notes written notice of each optional prepayment under this Section 9.2 not less
than 30 days and not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify such date, the aggregate principal
amount of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with Section
9.3), and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid.
9.3. Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes pursuant to
Section 9.1(a) or (b), the principal amount of the Notes to be prepaid shall be
allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
9.4. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 9,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to
the Company and cancelled and shall not be reissued, and no Note shall be issued
in lieu of any prepaid principal amount of any Note.
9.5. Purchase of Notes.
The Company will not and will not permit any Affiliate under its
control to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
<PAGE>
10. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1. Compliance with Law.
The Company will comply, and will cause each of its Subsidiaries to
comply, with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses.
10.2. Accounting Systems.
The Company will maintain a standard and modern system of accounting
that enables the Company to produce financial statements in accordance with
GAAP, and maintain records pertaining to the Collateral that contain information
as from time to time may be requested by the Required Holders. The Company also
shall keep a modern inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the Inventory.
10.3. Collateral Reporting.
The Company shall provide upon the written request (which shall be
required to be given only a single time) of any Purchaser the following
documents or information to such Purchaser provided that such documents and
information are provided to the New Revolving Credit Lender by the Company under
the New Revolving Credit Agreement at the following times in the form furnished
to the New Revolving Credit Lender: (a) on a monthly basis and, in any event, by
no later than the 10th day of each month during the term of this Agreement, (i)
a detailed calculation of the Borrowing Base, (ii) a detailed aging, by total,
of the Accounts, together with a reconciliation to the detailed calculation of
the Borrowing Base previously provided to Foothill, and (iii) a report showing
the post-Petition Date loans and advances outstanding from the Company to its
Jamaican and Mexican Subsidiaries, and any changes in the balances thereof from
the last such report, (b) on a monthly basis and, in any event, by no later than
the 10th day of each month during the term of this Agreement, a summary aging,
by vendor, of the Company's accounts payable and any book overdraft, (c) on a
quarterly basis, a detailed list of the Company's customers.
10.4. Title to Equipment.
Upon the request of the Collateral Agent or the Required Holders, the
Company shall promptly deliver, and shall cause its Subsidiaries to deliver, to
the Collateral Agent, to the extent such items are in the possession or control
of the Company, or otherwise reasonably available to the Company or any
Subsidiary, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment
included in the Collateral.
<PAGE>
10.5. Maintain the Equipment and Improvements.
The Company shall maintain, and shall cause its Subsidiaries to
maintain, the Equipment and the Improvements (as such term is defined in the
Mortgages) in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Other than those items of Equipment that constitute fixtures on the Closing
Date, neither the Company nor any Subsidiary shall permit any item of Equipment
to become a fixture to real estate or an accession to other Property, and such
Equipment shall at all times remain personal Property.
10.6. Insurance.
(a) At its expense, the Company shall keep the Personal Property
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as are ordinarily insured
against by other owners in similar businesses. The Company also shall maintain
business interruption, public liability, product liability, and Property damage
insurance relating to the Company's ownership and use of the Personal Property
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) At its expense, the Company shall obtain and maintain (i)
insurance of the type necessary to insure the Improvements and Equipment (as
such terms are defined in the Mortgages), for the full replacement cost thereof,
against any loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke
damage, vehicle damage, elevator collision, and other risks from time to time
included under "extended coverage" policies, in such amounts as the Required
Holders reasonably may require, but in any event in amounts sufficient to
prevent the Company from becoming a co-insurer under such policies, (ii)
combined single limit bodily injury and Property damages insurance against any
loss, liability, or damages on, about, or relating to each parcel of Real
Property Collateral, in an amount of not less than [$_______], and (iii)
insurance for such other risks as the Required Holders may require. Replacement
costs, at the Required Holders' option, may be redetermined by an insurance
appraiser, satisfactory to the Required Holders, not more frequently than once
every 12 months at the Company's cost.
(c) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be satisfactory to the Purchasers in their
reasonable determination. All insurance required herein shall be written by
companies which are authorized to do insurance business in the States of Alabama
and South Carolina. All hazard insurance and such other insurance as the
Required Holders shall specify, shall contain a Form 438BFU (NS) mortgagee
endorsement, or an equivalent endorsement satisfactory to the Purchasers,
showing the Collateral Agent as loss payee thereof, as its interests may appear,
and shall contain a waiver of warranties. Every policy of insurance referred to
in this Section 10.6 shall contain an agreement by the insurer that it will not
cancel such policy except after 30 days prior written notice to the Collateral
Agent and that any loss payable thereunder shall be payable notwithstanding any
act or negligence of the Company or the Collateral Agent which might, absent
such agreement, result in a forfeiture of all or a part of such insurance
payment and notwithstanding (i) occupancy or use of the Real Property Collateral
for purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by the Collateral Agent pursuant
<PAGE>
to the Mortgages upon the happening of an Event of Default, or (iii) any change
in title or ownership of the Real Property Collateral. The Company shall deliver
to the Collateral Agent certified copies of such policies of insurance and
evidence of the payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory to the
Purchasers evidencing such insurance shall be delivered to the Collateral Agent
at least 30 days prior to the expiration of the existing or preceding policies.
The Company shall give the Collateral Agent prompt notice of any loss covered by
such insurance, and the Collateral Agent shall have the right to adjust any
loss. The Collateral Agent shall have the exclusive right to adjust all losses
payable under any such insurance policies with respect to the Purchasers'
Primary Collateral without any liability to the Company whatsoever in respect of
such adjustments, absent gross negligence or willful misconduct on the part of
Collateral Agent. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, to the extent
it pertains to the Purchasers' Primary Collateral, shall be paid over to the
Collateral Agent to be applied at the option of the Required Holders either to
the prepayment of the Notes without premium, in such order or manner as the
Required Holders may elect, but consistent with the terms of the Security
Documents and the Intercreditor Agreement, to the extent applicable, or shall be
disbursed to the Company under staged payment terms reasonably satisfactory to
the Required Holders for application to the cost of repairs, replacements, or
restorations. All repairs, replacements, or restorations shall be effected with
reasonable promptness and shall be of a value at least equal to the value of the
items or Property destroyed prior to such damage or destruction. Upon the
occurrence of an Event of Default, the Required Holders shall have the right to
cause the Collateral Agent to apply all prepaid premiums pertaining to insurance
that relates to the Purchasers' Primary Collateral to the payment of the Notes
in such order or form as the Purchasers shall determine.
(e) The Company shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 10.6, unless the Collateral Agent is included thereon as
named insured with the loss payable to the Collateral Agent, as its interests
may appear, under a standard 438BFU (NS) Mortgagee endorsement, or its local
equivalent. The Company immediately shall notify the Collateral Agent whenever
such separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and originals of such
policies immediately shall be provided to the Collateral Agent.
10.7. No Setoffs or Counterclaims.
The Company will make payments, and will cause each of its
Subsidiaries to make payments, hereunder and under the other Basic Documents by
or on behalf of the Company or any of its Subsidiaries without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any Federal, state, or local taxes.
10.8. Location of Equipment.
The Company will keep, and will cause each of its Subsidiaries to
<PAGE>
keep, the Equipment only at the locations identified on Schedule H and not
further remove same from the United States of America except for ordinary course
relocation of Equipment between locations in the United States of America,
Mexico, and Jamaica, to meet production requirements; provided, however, that
the Company may amend Schedule H so long as such amendment occurs by written
notice to the Purchasers not less than 10 days prior to the date on which
Equipment is moved to such new location, and so long as such new location is
within the United States of America (unless the Purchasers consent to removal to
additional locations outside the United States of America), and so long as, at
the time of such written notification (except with respect to Equipment that is
to be moved outside the United States of America with the Required Holders'
consent or pursuant to the provisions above that apply to certain movements of
Equipment and/or Inventory to Mexico or Jamaica), the Company provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Purchasers' security interests in such Property and also, within
such 10 day period, provides to the Purchasers a Collateral Access Agreement if
requested by the Collateral Agent or the Required Holders.
10.9. Intentionally Left Blank.
This section has been intentionally left blank.
10.10. Leases.
The Company will pay when due, and will cause each of its Subsidiaries
to pay when due, all rents and other amounts payable under any leases to which
the Company or any of its Subsidiaries is a party or by which the Properties of
the Company or any of its Subsidiaries are bound, unless such payments are the
subject of a Permitted Protest.
10.11. Payment of Taxes and Claims.
The Company will file, and will cause each of its Subsidiaries to
file, all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their Properties, income or franchises, to the extent such taxes and assessments
have become due and payable and before they have become delinquent, and all
claims for which sums have become due and payable that have or might become a
Lien on Properties of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary need pay any such tax or assessment or claims if (i)
the amount, applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate proceedings,
and the Company or such Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary.
10.12. Corporate Existence, etc.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Section 11.3, the Company will at all
times preserve and keep in full force and effect (a) the corporate existence of
each of its Subsidiaries (unless merged into the Company or a Subsidiary) and
(b) all rights and franchises of the Company and its Subsidiaries, except to the
extent that the failure to preserve and keep such rights and franchises in full
<PAGE>
force and effect could not, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Effect.
10.13. Certain Obligations Respecting Domestic Subsidiaries.
(a) Guarantors. The Company will take such action, and will cause each
of its Domestic Subsidiaries to take such action, from time to time as shall be
necessary to ensure that all Domestic Subsidiaries of the Company are
"Guarantors" and "Debtors" under the Subsidiary Guaranty and Security Agreement.
Without limiting the generality of the foregoing, in the event that the Company
or any of its Subsidiaries shall form or acquire any new Domestic Subsidiary
that shall constitute a Domestic Subsidiary hereunder, the Company and its
Subsidiaries will cause such new Domestic Subsidiary to
(i) become a "Guarantor" and "Debtor" under the Subsidiary Guaranty
and Security Agreement;
(ii) subject to the rights of Foothill under the terms of the
Intercreditor Agreement, cause such Domestic Subsidiary to take such action
(including, without limitation, delivering such shares of stock, executing
and delivering such Uniform Commercial Code financing statements and
executing and delivering mortgages or deeds of trust covering the real
Property and fixtures owned or leased by such Subsidiary) as shall be
necessary to create and perfect valid and enforceable first priority Liens
on substantially all of the Property of such new Domestic Subsidiary as
collateral security for the obligations of such new Subsidiary hereunder;
and
(iii) deliver such proof of corporate action, incumbency of officers,
opinions of counsel and other documents as is consistent with those
delivered by each Guarantor as the Collateral Agent or the Required Holders
may reasonably request.
(b) Ownership of Subsidiaries. The Company will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be necessary
to ensure that each of its Subsidiaries is a Wholly Owned Subsidiary except as
disclosed on Schedule F. In the event that any shares of stock shall be issued
by any Subsidiary, the Company agrees, and agrees to cause each of its
Subsidiaries to deliver forthwith to the Collateral Agent pursuant to the
Security and Pledge Agreement or the Subsidiary Guaranty and Security Agreement,
as the case may be, the certificates evidencing such shares of stock,
accompanied by undated stock powers executed in blank and to take such other
action as the Collateral Agent or the Required Holders shall reasonably request
to perfect the security interest created therein; provided, however, that the
Company shall not be required to, or to cause any of its Domestic Subsidiaries
to, grant the Collateral Agent a security interest in shares of stock of any
Subsidiary that is not a Domestic Subsidiary in excess of 66% of all of the
outstanding shares of such Subsidiary.
10.14. Chief Executive Officer.
The Company shall at all times cause Michael Billingsley or another person
acceptable to the Required Holders in the Required Holders' reasonable
discretion to be the Chief Executive Officer of the Company.
<PAGE>
10.15. Tax Returns.
Upon the written request (which shall be required to be made only a
single time) of any Purchaser, the Company shall deliver to such Purchaser
copies of each of the Company's future Federal income tax returns, and any
amendments thereto, within thirty days of the filing thereof with the Internal
Revenue Service.
10.16. Fayette Facilities.
The Company shall repay all of the IDB Indebtedness related to the
Fayette Facilities on the dates scheduled for repayment.
11. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
11.1. Indebtedness.
The Company will not, nor will it permit any of its Subsidiaries to,
create, incur or assume any Indebtedness unless at the date subsequent to the
Effective Date that such Indebtedness is created, incurred or assumed, and after
giving effect thereto and to the application of the proceeds thereof, the
Interest Coverage Ratio is at least 2.50 to 1, except:
(a) Indebtedness created hereunder and under the Guaranty and Security
Agreement;
(b) Indebtedness (including Capital Lease Obligations) set forth in
Schedule C, including any extensions, renewals or replacements of any such
Indebtedness;
(c) Intentionally left blank;
(d) Indebtedness of any Subsidiary to the Company or any other Subsidiary;
and
(e) additional Indebtedness of the Company; provided that the aggregate
principal amount of Indebtedness permitted by this clause (e) shall not exceed
$1,000,000 at any time outstanding.
11.2. Liens.
The Company will not, nor will it permit any of its Subsidiaries to,
create, incur, assume, permit or suffer to exist any Lien on any Property now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect thereof, except:
(a) Liens created pursuant to the Security Documents;
<PAGE>
(b) any Lien on any Property of the Company or any of its Subsidiaries
existing on the Closing Date and set forth in Schedule G; provided that (i) such
Lien shall not apply to any other Property of the Company or any of its
Subsidiaries and (ii) such Lien shall secure only those obligations which it
secures on the date hereof;
(c) Permitted Encumbrances;
(d) any Lien existing on any Property of any Person that becomes a
Subsidiary after the Closing Date prior to the time such Person becomes a
Subsidiary; provided that (i) such Lien is not created in contemplation of or in
connection with such Person becoming a Subsidiary, (ii) such Lien shall not
apply to any other Property of the Company or any Subsidiary and (iii) such Lien
shall secure only those obligations which it secures on the date such Person
becomes a Subsidiary;
(e) Liens on fixed or capital assets acquired, constructed or improved
by the Company or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by Section 11.1(b) or (e), (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets, and (iv) such
security interests shall not apply to any other Property of the Company or any
Subsidiary;
(f) Liens (other than those permitted by paragraphs (a) through (e)
above) securing liabilities permitted hereunder in an aggregate amount not
exceeding $250,000 at any time outstanding; and
(g) Liens existing on the Closing Date in respect of the Indebtedness
under the New Revolving Credit Agreement.
11.3. Fundamental Changes.
(a) Mergers and Consolidations. Except for the Permitted Combination,
the Company will not, nor will it permit any of its Subsidiaries to, enter into
any transaction of merger, consolidation or amalgamation other than the
Permitted Combination, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution); provided that, if at the time thereof and
immediately after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing hereunder, (i) any Subsidiary of the Company may
merge into or consolidate with the Company or any Subsidiary so long as the
Company is the continuing or surviving Person and has Net Worth not less than
that of the Company immediately prior to the transaction, (ii) any Subsidiary of
the Company may liquidate or dissolve into the Company, (iii) any Subsidiary
that is a Guarantor may merge into or consolidate with another Subsidiary so
long as the Subsidiary that is a Guarantor is the continuing or surviving
Person, or (iv) any Subsidiary of the Company may merge into or consolidate with
any Domestic Subsidiary of the Company so long as the Domestic Subsidiary is the
continuing or surviving Person.
(b) Dispositions. The Company will not, nor will it permit any of its
Subsidiaries to, sell, transfer, lease or otherwise dispose of all or any part
<PAGE>
of its Property other than in a transaction constituting a Permitted
Disposition; provided that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing, any Subsidiary
may sell, transfer, lease or otherwise dispose of its assets to the Company or
another Subsidiary that is a Guarantor.
(c) Acquisitions. The Company will not, nor will it permit any of its
Subsidiaries to, acquire any business or Property or capital stock of, or be a
party to any acquisition of, any Person except:
(i) purchases of Equipment and other Property to be sold or used
in the ordinary course of the Company's business;
(ii) Investments permitted under Section 11.6; and
(iii) Capital Expenditures permitted under Section 11.19 of this
Agreement.
11.4. Intentionally Left Blank.
This subsection has intentionally been left blank.
11.5. Lines of Business.
The Company will continue, and will cause each Subsidiary to continue,
to engage in business of the same general type as now conducted by the Company
and its Subsidiaries, and will preserve, renew and keep in full force and
effect, and, subject to Section 11.3(a), will cause each Subsidiary to preserve,
renew and keep in full force and effect their respective corporate existence and
their respective rights, privileges and franchises necessary or desirable in the
normal conduct of business.
11.6. Investments.
The Company will not, nor will it permit any of its Subsidiaries to,
make or permit to remain outstanding any Investments except:
(a) Investments (including Investments made by the Company in any of
its Subsidiaries) outstanding on the Effective Date and identified in Schedule
N;
(b) the acquisition by the Company and/or one or more of its
Subsidiaries of the Strathleven Interest;
(c) operating deposit accounts with banks;
(d) Permitted Investments;
(e) Disposition Investments received by the Company upon a sale of
Property permitted under Section 11.3(b);
<PAGE>
(f) loans by the Company to its employees not to exceed $250,000 in
the aggregate at any one time outstanding; and
(g) intercompany loans to the Mexican and Jamaican Subsidiaries (i)
not to exceed $3,000,000 in the aggregate during any fiscal quarter of the
Company and (ii) only to the extent that such loans are necessary to cover the
reasonable operating expenses of such Subsidiaries.
11.7. Restricted Payments.
The Company will not, nor will it permit any of its Subsidiaries to,
declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except that so long as at the time thereof and after giving effect
thereto no Default shall have occurred and be continuing:
(a) the Company may declare and pay dividends with respect to its
common stock payable solely in additional shares of its common stock; and
(b) the Company may make a Restricted Payment of up to $200,000 to
acquire the Strathleven Interest.
Nothing herein shall be deemed to prohibit the payment of dividends by
any Subsidiary of the Company to the Company or to any other Subsidiary of the
Company.
11.8. Transactions with Affiliates.
The Company will not, nor will it permit any of its Subsidiaries to,
sell, lease or otherwise transfer any Property to, or purchase, lease or
otherwise acquire any Property from, or otherwise engage in any other
transactions (including aircraft leases, self-insurance compensation, real
estate transactions and loans and other Investments) with any of its Affiliates,
except (a) transactions in the ordinary course of business at prices and on
terms and conditions not less favorable to the Company or such Subsidiary than
could be obtained on an arm's-length basis from unrelated third parties as
determined in good faith by the Company's board of directors, (b) transactions
between or among the Company and its wholly owned Subsidiaries not involving any
other Affiliate, (c) transactions set forth on Schedule O hereto, (d) any
Restricted Payment permitted by Section 11.7 and (e) transactions outside of the
ordinary course of business not in excess of $60,000 in each case.
11.9. Restrictive Agreements.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into, incur or permit to exist any agreement or
other arrangement that prohibits, restricts or imposes any condition upon (a)
the ability of the Company or any Subsidiary to create, incur or permit to exist
any Lien upon any of its Property, or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Company or any other Subsidiary or
to Guaranty Indebtedness of the Company or any other Subsidiary; provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
<PAGE>
or by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions, if any, contained in agreements existing on the date hereof and
identified on Schedule P (but shall apply to any extension or renewal of, or any
amendment or modification expanding the scope of, any such restriction or
condition), (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause
(a) of the foregoing shall not apply to restrictions or conditions, if any,
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the Property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases and other contracts restricting the
assignment thereof.
11.10. Change Name.
The Company will not change its name, FEIN, corporate structure
(within the meaning of Section 9402(7) of the Code), or identify, or add any new
fictitious name.
11.11. Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section 11.1,
the Company will not, nor will it permit any of its Subsidiaries to, prepay
(except that the Company may make prepayments to the New Revolving Lender from
the proceeds of Accounts and Inventory in accordance with the terms of the new
Revolving Credit Agreement) or redeem, retire, defease, purchase, or otherwise
acquire any Indebtedness owing to any third person, other than the obligations
under the Notes, this Agreement and the other Basic Documents; and
(b) The Company will not, nor will permit any of its subsidiaries, to
amend, modify, alter, increase, or change, directly or indirectly, any of the
terms or conditions of any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Section 11.1(b).
11.12. Sale or Discount of Accounts.
The Company will not, nor will it permit any of its Subsidiaries to,
sell with recourse, or discount or otherwise sell for less than the face value
thereof, any of its Accounts.
11.13. Intentionally Left Blank.
This subsection has intentionally been left blank.
11.14. Accounting Methods.
The Company shall not, and shall not permit any Subsidiary to, modify
or change its method of accounting or enter into, modify, or terminate any
agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
the Company's accounting records without said accounting firm or service bureau
agreeing to provide the Collateral Agent and the Purchasers information
<PAGE>
regarding the Collateral or the Company's financial condition. The Company
waives, both for itself and its Subsidiaries, the right to assert a confidential
relationship, if any, it or they may have with any accounting firm or service
bureau in connection with any information requested by any Purchaser or the
Collateral Agent pursuant to or in accordance with this Agreement, and agrees
that the Collateral Agent and each Purchaser may contact directly any such
accounting firm or service bureau in order to obtain such information.
11.15. Suspension.
Except in connection with the Permitted Combination, the Company or any
Subsidiary shall not suspend or go out of a substantial portion of its business.
11.16. Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees.
The Company shall not, and shall not permit any Subsidiary to,
relocate its chief executive office to a new location without providing 30 days
prior notification thereof to the Collateral Agent and so long as, at the time
of such written notification, the Company provides any financing statements or
fixture filings necessary to perfect and continue perfected the Collateral
Agent's security interests and also provides, or causes such Subsidiary to
provide, to the Collateral Agent a Collateral Access Agreement (a) in the case
of any Equipment stored with a bailee, warehouseman or similar party and (b) to
the extent provided to the New Revolving Credit Lender with respect to such new
location, in the case of Inventory stored with a bailee, warehouseman or similar
party. The Equipment shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without the Collateral Agent's prior
written consent. The Purchasers consent, both for themselves and the Collateral
Agent, to any bailment, warehousing or similar arrangements specifically
disclosed on Schedule H.
11.17. No Prohibited Transactions Under ERISA.
The Company shall not directly or indirectly:
(a) engage, or permit any Subsidiary or the Company to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or permit any Subsidiary of the Company to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of the Company to terminate,
any Benefit Plan where such event would result in any liability of the Company,
any of its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
<PAGE>
(e) fail, or permit any Subsidiary of the Company to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of the Company to fail, to pay any
required installment or any other payment required under Section 412 of the IRC
on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of the Company to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of the Company, any Subsidiary of the Company or any ERISA Affiliate is required
to provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of the Company to withdraw,
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA; which, individually
or in the aggregate, results in or reasonably would be expected to result in a
claim against or liability of the Company, any of its Subsidiaries or any ERISA
Affiliate in excess of $100,000.
11.18. Minimum Net Worth.
The Company shall not fail to maintain Net Worth (in each case of the
Company and its consolidated Subsidiaries, on a consolidated basis, in
accordance with GAAP) in compliance with the following requirements: (a) as of
each Net Worth Testing Date, net worth of at least the Required Net Worth Amount
with respect to such date; and (b) if the Net Worth Testing Date occurs more
than 12 months after the Effective Date, net worth of not less than the net
worth 12 months prior to the Net Worth Testing Date minus $4,500,000.
11.19. Capital Expenditures.
The Company shall not make Capital Expenditures in any of the
Company's fiscal years 1998, 1999 or 2000 in excess of: (a) $3,200,000 with
respect to 1998; (b) $3,200,000 with respect to 1999; (c) $4,800,000 with
respect to 2000; and (d) $4,800,000 with respect to 2001.
12. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal of or
premium, if any, of any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than three Business Days after the same becomes due and payable; or
<PAGE>
(c) the Company defaults in the performance of or compliance with any
term contained in any of Section 8.2(a)(i), Section 10.6 or Section 11; or
(d) (i) the Company fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in Sections 8.1
(Financial Information), 8.2(a)(ii), (iii), 8.2(b) (Business Information), 10.1
(Compliance with Laws), 10.4 (Title to Equipment), 10.8 (Location of Equipment),
10.9 (Employee Benefits), 10.10 (Leases), or 10.15 (Tax Returns) of this
Agreement and such failure continues for a period of 5 Business Days; (ii) the
Company fails or neglects to perform, keep or observe any term, provision,
condition, covenant or agreement contained in Sections 10.2 (Accounting
Systems), 10.3 (Collateral Reporting), or 10.5 (Maintain the Equipment and
Improvements) of this Agreement and such failure continues for a period of 15
Business Days; (iii) the Company fails or neglects to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in Section
10.14 (Chief Executive Officer) and such failure or neglect continues for a
period of 30 days; or (iv) the Company fails or neglects to perform, keep or
observe any term, provision, condition, covenant, or agreement contained herein
or in any other Basic Document (other than those referred to in paragraphs (a),
(b), (c), (d), (i), (ii) and (iii) and (g) of this Section 12) and such default
is not remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company receiving
written notice of such default from any holder of a Note or the Collateral Agent
(any such written notice to be identified as a "notice of default" and to refer
specifically to this paragraph (d) of Section 12), provided that the occurrence
of any "event of default" under, and as defined in, any of the Basic Documents,
after the expiration of any grace period in respect thereof as provided for
therein, be deemed to be an Event of Default under this clause (d) (without
giving effect to any grace period provided in this Section 12(d)); or
(e) any representation or warranty made in writing by or on behalf of
the Company or any Subsidiary or by any officer of the Company in this
Agreement, any of the other Basic Documents or in any writing furnished in
connection with the transactions contemplated hereby proves to have been false
or incorrect in any material respect on the date as of which it is made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
as guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $1,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Company or any Subsidiary is in
default in the performance of or compliance with any term of any evidence of any
Indebtedness in an aggregate outstanding principal amount of at least $1,000,000
or of any mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Indebtedness to convert
such Indebtedness into equity interests), (x) the Company or any Subsidiary has
become obligated to purchase or repay Indebtedness before its regular maturity
or before its regularly scheduled dates of payment (except by reason of a
mandatory prepayment provided for in the agreements relating to such
Indebtedness) in an aggregate outstanding principal amount of at least
$1,000,000, or (y) one or more Persons have the right to require the Company or
any Subsidiary to so purchase or repay such Indebtedness; or
<PAGE>
(g) any Lien created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the Collateral intended to be covered
thereby (to the extent perfection by filing, registration, recordation or
possession is required herein or therein) in favor of the Collateral Agent for
the ratable benefit of the Purchasers, free and clear of all other Liens (other
than Liens permitted under Section 11.2 or under the respective Security
Documents), or, except for (i) expiration in accordance with its terms, (ii) as
a result of a sale or other disposition of the applicable Collateral in a
transaction permitted hereunder and (iii) as a result of the Collateral Agent's
failure to maintain possession of any stock certificates or other instruments
delivered to it under the Security Documents, any of the Security Documents
shall for whatever reason be terminated or cease to be in full force and effect,
or the enforceability thereof shall be contested by any Obligor; or
(h) there is a Material Adverse Change; or
(i) any material portion of the Properties of any Obligor is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any third Person in connection with a claim of such
person of $100,000 or more; or
(j) any Obligor is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs; or
(k) notices of Lien, levy, or assessment are filed of record with
respect to any of the Properties of any Obligor which have not been cured within
ten days after the Lien has been filed which (a) represent claims in an
aggregate amount of in excess of $100,000 and which have priority over the
security interests of the Collateral Agent in the Collateral, or (b) represent
claims in an aggregate amount of in excess of $250,000 and which are junior to
the security interests of the Collateral Agent in the Collateral; or
(l) the Confirmation Order is vacated; or
(m) the Company makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
principal, interest, fees, expenses and any other amounts due under any of the
Basic Documents, except to the extent such payment is permitted by the terms of
the subordination provisions applicable to such Indebtedness; or
(n) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its Property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
<PAGE>
(o) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any of its Subsidiaries,
a custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its Property, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Subsidiaries, or any such
petition shall be filed against the Company or any of its Subsidiaries and such
petition shall not be dismissed within 60 days; or
(p) a final judgment or judgments for the payment of money aggregating
in excess of $100,000 are rendered against one or more of the Company and its
Subsidiaries, which judgments are not, within 30 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 30
days after the expiration of such stay; or
(q) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined
in accordance with Title IV of ERISA, shall exceed $1,000,000, (iv) the Company
or any ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder.
As used in Section 12(q), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
13. REMEDIES ON DEFAULT, ETC.
13.1. Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (n) or (o) of Section 12 (other than an Event of Default described in
clause (i) of paragraph (n) or described in clause (vi) of paragraph (n) by
virtue of the fact that such clause encompasses clause (i) of paragraph (n)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any Event of Default described in paragraph (a) or (b) of
Section 12 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
<PAGE>
(c) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time, at their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(d) Upon any Notes becoming due and payable under this Section 13.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon and the Termination Premium, shall all be immediately due and
payable, in each and every case without presentment, demand, protest or further
notice, all of which are hereby waived. The Company acknowledges, and the
parties hereto agree, that each holder of a Note has the right to maintain its
investment in the Notes free from repayment by the Company (except as herein
specifically provided for).
13.2. Other Remedies.
If any Default has occurred and is continuing, and irrespective of
whether any Notes have become or have been declared immediately due and payable
under Section 13.1, the holder of any Note at the time outstanding may proceed
to protect and enforce the rights of such holder by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or in any Note, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise.
13.3. Rescission.
At any time after any Notes have been declared due and payable
pursuant to paragraphs (b) or (c) of Section 13.1, the holders of more than 50%
in principal amount of the Notes then outstanding, by notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the Company
has paid all overdue interest on the Notes, all principal if any, on any Note
that is due and payable and is unpaid other than by reason of such declaration,
and all interest on such overdue principal, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 18.1, and (c) no judgment or decree has
been entered for the payment of any monies due pursuant hereto or to the Notes.
No rescission and annulment under this Section 13.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
13.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
<PAGE>
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 16, the
Company will pay to the Collateral Agent and the holder of each Note on demand
such further amount as shall be sufficient to cover all reasonable costs and
expenses of the Collateral Agent and such holder incurred in any enforcement or
collection under this Section 13, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1. Registration of Notes.
The Company shall keep, or shall cause the Note Agent to keep, at its
principal executive office (or, in the case of the Note Agent, at the office
where it keeps such records) a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company (and the Note Agent) shall not be affected by any notice
or knowledge to the contrary. The Company shall give, or shall cause the Note
Agent to give, to any holder of a Note that is an Institutional Investor
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.
14.2. Assignment and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company (or in the case of the Note Agent, at the office where it keeps such
records) for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, or shall execute and deliver to the Note Agent for
redelivery, at the Company's expense (except as provided below), one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of Exhibit 1. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require, or may cause the Note
Agent to require, payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Any
Purchaser may assign to one or more assignees all or a portion of its Note to
any Person other than the Persons listed on Schedule P (which Schedule may be
amended by the Company after the date hereof to list additional Competitors
without affecting in any way the validity or enforceability of any assignment
made by any Purchaser prior to the date of such amendment), provided that the
amount of the Note subject to such assignment shall not be less than $1,000,000,
provided further that if necessary to enable the registration of the assignment
by a holder of its entire holding of Notes, one Note may be in a denomination of
less than $1,000,000. Any assignee, by its acceptance of a Note registered in
its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 7.
<PAGE>
14.3. Replacement of Notes.
Upon receipt by the Company of evidence satisfactory to it in its
reasonable determination of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and such
loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is
a nominee for, an original Purchaser or another holder of a Note with
a minimum net worth of at least $100,000,000, such Person's own
unsecured agreement of indemnity shall be deemed to be satisfactory),
or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
15. PAYMENTS ON NOTES.
15.1. Place of Payment.
Subject to Section 15.2, payments of principal and interest becoming
due and payable on the Notes shall be made in New York, New York at the
principal office of the Note Agent in such jurisdiction. The Company may change
at any time, by notice to each holder of a Note, the place of payment of the
Notes so long as such place of payment shall be either the principal office of
the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
15.2. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 15.1 or in such Note to the
contrary, the Company will pay to you or your nominee all sums becoming due on
such Note for principal and interest by the method and at the address specified
for such purpose below your name in Schedule A, or by such other method or at
such other address as you shall have from time to time specified to the Company
for such purpose, without the presentation or surrender of such Note or the
making of any notation thereon, except that upon request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office or at
the place of payment designated pursuant to Section 15.1. Prior to any sale or
other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 14.2. The
Company will afford the benefits of this Section 15.2 to any Purchaser that is
the direct or indirect transferee of any Note purchased by you under this
Agreement and that has made the same agreement relating to such Note as you have
made in this Section 15.2.
<PAGE>
15.3. Notification to Collateral Agent of Payment in Full.
Each Purchaser will notify the Collateral Agent promptly after the Note
Claims (as defined in the Intercreditor Agreement) relating to such Purchaser
and the Notes held by such Purchaser have been paid in full.
16. EXPENSES, ETC.
Except as otherwise provided in the Reorganization Plan with respect
to the fees and expenses of the Purchasers prior to the Effective Date, whether
or not the transactions contemplated hereby are consummated, the Company will
pay all costs and expenses (including reasonable attorneys' fees of a special
counsel (and, if reasonably required, local or other counsel) for all of the
holders of Notes) incurred by the Purchasers in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement, the Notes or the other Basic Documents (whether or
not such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses (including taxes, and insurance premiums)
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement, the Notes or the other Basic Documents
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement, the Notes or the
other Basic Documents, or by reason of being a holder of any Note, (b) the costs
and expenses, including financial advisors' fees, incurred in connection with
the insolvency or bankruptcy of the Company or any Subsidiary or in connection
with any work-out or restructuring of the transactions contemplated hereby, by
the Notes or by the other Basic Documents, (c) all transfers, stamp, documentary
or other similar taxes, assessments or charges levied by any Governmental
Authority in respect of this Agreement, the Notes or the other Basic Documents
or any other document referred to herein or therein and all costs, expenses,
taxes, assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Basic Document or any other document referred to therein, and (d) all costs,
expenses and other charges in respect of title insurance and surveys procured
with respect to the Liens created pursuant to the Security Documents. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses, if any, of brokers
and finders (other than those retained by you). The Company will pay all of the
costs, expenses and fees of the Collateral Agent and the Note Agent, including
the reasonable fees and expenses of counsel, as provided for in the Security
Documents.
16.1. Survival.
The obligations of the Company under this Section 16 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
<PAGE>
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein and in the other
Basic Documents shall survive the execution and delivery of this Agreement and
the Notes, the purchase or transfer by you of any Note or portion thereof or
interest therein and the payment of any Note, and may be relied upon by any
subsequent holder of a Note, regardless of any investigation made at any time by
or on behalf of you or any other holder of a Note. All statements contained in
any certificate or other instrument delivered by or on behalf of the Company
pursuant to any of the Basic Documents shall be deemed representations and
warranties of the Company under this Agreement. Subject to the preceding
sentence, the Basic Documents embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
18. AMENDMENT AND WAIVER.
18.1. Requirements.
This Agreement and the Notes and the other Basic Documents may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no provision of
the Intercreditor Agreement may be amended or waived except in accordance with
the terms of the Intercreditor Agreement and (b) no such amendment or waiver
may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) change the provisions of Section 13 relating
to acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment or
method of computation of interest on the Notes, (ii) change the percentage of
the principal amount of the Notes the holders of which are required to consent
to any such amendment or waiver, or (iii) amend any of Sections 9, 12(a), 12(b),
13, 18 or 21.
18.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each Purchaser
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of any of the other Basic Documents. The Company will deliver executed
or true and correct copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 18 to each holder of outstanding
Notes promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
<PAGE>
18.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 18
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
18.4. Notes held by Company, etc.
For the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement, the Notes or the other Basic Documents, or have directed the taking
of any action provided herein, in the Notes or the other Basic Documents to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Subsidiaries or any of its other
Affiliates controlled by it shall be deemed not to be outstanding.
19. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid).
Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address
as you or it shall have specified to the Company in writing, or
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of [____________________________],
or at such other address as the Company shall have specified to the holder
of each Note in writing, or
(iv) if to the Note Agent, to the Note Agent at its address set
forth on the signature pages hereof to the attention of
[_______________________], or at such other address as the Note Agent shall
have specified to the holder of each Note in writing, or
<PAGE>
(v) if to the Collateral Agent, to the Collateral Agent at its
address set forth on the signature pages hereof to the attention of
[_______________________], or at such other address as the Collateral Agent
shall have specified to the holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually received.
20. REPRODUCTION OF DOCUMENTS.
This Agreement, the Basic Documents and all documents relating hereto
or thereto, including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents received by you at
the Closing (except the Notes themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to you, may
be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 20 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
21. CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 8.1 that are otherwise publicly available. You will use your best
efforts to maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to (i) your directors, officers, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by your Notes), (ii)
<PAGE>
your financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 21, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 21), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 21),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes, this Agreement and the
other Basic Documents. Each Purchaser, by its acceptance of a Note, will be
deemed to have agreed to be bound by and to be entitled to the benefits of this
Section 21 as though it were a party to this Agreement. On reasonable request by
the Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 21.
22. WAIVERS; INDEMNIFICATION.
22.1. Demand; Protest; etc.
The Company, for itself and on behalf of each of its Subsidiaries, waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by the Purchasers or the Collateral Agent on which
the Company or any of its Subsidiaries may in any way be liable.
22.2. Liability of Collateral Agent and Purchasers.
So long as each of the Collateral Agent and the Purchasers comply with its
obligations, if any, under Section 9-207 of the Uniform Commercial Code, the
Company, for itself and on behalf of its Subsidiaries, agrees that neither the
Collateral Agent nor any Purchaser shall be in any way or manner liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All risk of loss,
damage or destruction of the Collateral shall be borne by the Company and the
Subsidiaries.
22.3. Indemnification.
The Company shall pay, indemnify, defend, and hold each Purchaser, each
Participant, the Collateral Agent and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified person") harmless (to the fullest extent permitted by law) from and
<PAGE>
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Basic Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, and other Basic Document,
or the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all of the foregoing,
collectively, the "Indemnified Liabilities"). The Company shall have no
obligation to any Indemnified Person under this Section 22.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of all amounts due to the Purchasers under the Notes
and the other Basic Documents.
23. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by notice
to the Company, which notice shall be signed by both you and such Affiliate,
shall contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representation set forth in Section 7. Upon receipt of such notice, wherever
the word "you" is used in this Agreement (other than in this Section 22), such
word shall be deemed to refer to such Affiliate in lieu of you. In the event
that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "you" is used in this Agreement (other than in this Section 22), such word
shall no longer be deemed to refer to such Affiliate, but shall refer to you,
and you shall have all the rights of an original holder of the Notes under this
Agreement.
24. MISCELLANEOUS.
24.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
24.2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or premium or interest on any Note
that is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business Day.
<PAGE>
24.3. Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
24.4. Collateral Agent.
The Purchasers agree that the duties of the Collateral Agent shall be
governed solely by the Agency Agreement, except as otherwise expressly set forth
herein. Notwithstanding any provision contained in this Agreement or any
Security Document, the Collateral Agent shall not be required to make any
determination or to take any action hereunder or thereunder unless it shall have
received timely instructions from the Required Holders.
24.5. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
24.6. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
24.7. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
(b) The Company hereby irrevocably and unconditionally submits, for
itself and its Property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
<PAGE>
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any Purchaser may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any other jurisdiction.
(c) The Company hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section 24.7. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 19. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
24.8. Waiver of Jury Trial.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE BASIC DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 24.8.
* * * * *
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
ONEITA INDUSTRIES, INC.
By
Title:
The foregoing is hereby
agreed to as of the
date thereof.
PURCHASERS:
ALBERT FRIED & CO. L.L.C.
40 Exchange Place
New York, NY 10005
By: ____________________________
Title:
FOOTHILL CAPITAL CORP.
11111 Santa Monica Boulevard
Los Angeles, CA 90025
By: _____________________________
Title:
UBS MORTGAGE FINANCE INC.
299 Park Avenue
New York, NY 10171
By: ____________________________
Title:
LAZARD FRERES & CO., L.L.P.
30 Rockefeller Plaza
60th Floor
New York, NY 10020
By: _____________________________
Title:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
100 Mulberry Street
Newark, NJ 07102
By: ___________________________
Title:
NOTE AGENT:
Accepted subject to the terms of
the Agency Agreement:
IBJ SCHRODER BANK & TRUST COMPANY,
as Note Agent One State Street, 11th Floor
New York, New York 10004
By: ____________________________
Title:
<PAGE>
EXHIBIT 1
ONEITA INDUSTRIES, INC.
12% SENIOR SECURED NOTE DUE 2001
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, ONEITA INDUSTRIES, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to [ ], or its registered assigns, the
principal sum of [ ] DOLLARS (or so much thereof as shall not have been prepaid)
on [ , ], with interest (computed on the basis of a 360-day year of twelve
30-day months) (a) on the unpaid balance thereof at the rate of 12% per annum
from the date hereof, payable monthly, on the [___] day of [__________] and
[_________] in each year, commencing with the [_________] or [_________] next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) following the occurrence of an Event of Default (as defined in
the Note Purchase Agreement), the unpaid balance thereof and all other unpaid
amounts at the rate of 13 1/2% per annum in accordance with the terms of the
Note Purchase Agreement, payable monthly as aforesaid (or, at the option of the
registered holder hereof, on demand).
Payments of principal of and interest on this Note are to be made in
lawful money of the United States of America at the principal office of IBJ
Schroder Bank & Trust Company in New York, New York or at such other place as
the Company shall have designated by written notice to the holder of this Note
as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Secured Notes (herein called
the "Notes") issued pursuant to a Note Purchase Agreement, dated as of
[_______], 1998 (as from time to time amended, the "Note Purchase Agreement"),
between the Company and the Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 21 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 7 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
<PAGE>
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
This Note is secured by the Collateral as defined and provided for in
the Security Documents (as defined in the Note Purchase Agreement).
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price and with the effect
provided in the Note Purchase Agreement.
This Note shall be construed and enforced in accordance with the laws
of the State of New York.
ONEITA INDUSTRIES, INC.
By_________________________
Title:
<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
(A)Albert Fried & Co. L.L.C.
40 Exchange Place
New York, NY 10005 $
(1) All payments by wire transfer
of immediately available
funds to:
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Mr. Albert Fried, Jr.
Facsimile: 212-422-7282
(3) All other communications:
Mr. Albert Fried, Jr.
Facsimile: 212-422-7282
(B)UBS Mortgage Finance, Inc.
299 Park Avenue
New York, NY 10171 $
(1) All payments by wire transfer
of immediately available
funds to:
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Mr. Gregory T. Hradsky
Facsimile: 212-821-6299
All other communications:
Mr. Gregory T. Hradsky
Facsimile: 212-821-6299
<PAGE>
(C)The Foothill Group, Inc.
11111 Santa Monica Boulevard
Los Angeles, CA 90025 $
(1) All payments by wire transfer
of immediately available
funds to:
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Ms. Karen Sandler
Facsimile: 310-478-8785
All other communications:
Ms. Karen Sandler
Facsimile: 310-478-8785
(D) Lazard Freres & Co., L.L.C.
30 Rockefeller Plaza
60th Floor
New York, NY 10020 $
(1) All payments by wire transfer
of immediately available funds to:
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Mr. Robert Patterson
Facsimile: 212-632-6631
All other communications:
Mr. Robert Patterson
Facsimile: 212-632-6631
<PAGE>
(E) The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102 $
(1) All payments by wire transfer
of immediately available funds to:
Account No. 890-0304-391
The Bank of New York
New York, New York
Prudential Managed Account
(ABA No.: 021-000-018)
each such wire transfer shall set forth the name of the Company, a reference to
"12% Senior Secured Notes due ______, 2001, Security No. __________", and the
due date and application (as among principal, interest and premium) of the
payment being made.
(2) All notices of payments and
written confirmations of such
wire transfers:
Attention: Investment Operations Group
(Attention: Manager)
All other communications:
Mr. Ric Abel
Facsimile: 973-802-2333
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Accounts" means all currently existing and hereafter arising
accounts, contracts rights, and all other forms of obligations owing to the
Company or any of its Subsidiaries arising out of the sale or lease of goods or
the rendition of services by the Company, or such Subsidiary, as the case may
be, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
"Additional Notes" means the 12% Senior Secured Notes due ______, 2001
issued by the Company in satisfaction of its obligation to pay interest on the
Notes , to the extent permitted under this Agreement.
"Affiliate" means, at any time, and with respect to any Person other
than a Purchaser that is a signatory to this Agreement, (a) any other Person
that at such time directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, such first
Person, and (b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests.
"Agency Agreement" means an Agency Agreement substantially in the form of
Exhibit 6 between IBJ, as Note Agent and Collateral Agent, and the Purchasers.
"Availability" has the meaning set forth in the New Revolving Credit
Agreement.
"Average Available Cash" means, for any calendar month, an amount equal to
the sum of (i) the average daily aggregate Availability and Supplemental
Availability (taking into account the Borrowing Base) plus (ii) the average
daily amount of the Company's cash and cash equivalents.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as heretofore
and hereafter amended, and codified as 11 U.S.C. Sections 101 et seq.
"Base Net Worth" means the greater of (a) $1,000,000, and (b) the Net Worth
of the Company and its Subsidiaries, on a consolidated basis, on the Net Worth
Covenant Commencement Date.
"Basic Documents" means, collectively, this Agreement, the Notes, the
Security Documents, all UCC-1 financing statements and other instruments of
perfection executed in connection therewith and all other documents and
instruments relating to, guaranteeing or securing the obligations of the Company
hereunder and under the Notes, as the same may be amended, restated,
supplemented or otherwise made from time to time.
<PAGE>
"Borrowing Base" has the meaning set forth in the New Revolving Credit
Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York are required or authorized to be closed.
"Capital Expenditures" means, for any period, expenditures, whether paid in
cash or accrued as a liability (including the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal Property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) other than any of the Purchasers or any
Affiliate of any of the Purchasers becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of more than 50% of the total voting power of all classes of stock of the
Company then outstanding and entitled to vote in the election of directors. The
Permitted Combination shall not constitute a Change of Control.
"Class 2 Claims" shall have the meaning given to such term in the
Reorganization Plan.
"Closing" has the meaning set forth in Section 3.
"Closing Date" means the date on which the conditions specified in Section
5 are satisfied (or waived in accordance with Section 18).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" means the Property of the Obligors subject to the Liens
granted under the Security Documents to the Collateral Agent for the ratable
benefit of the Purchasers.
"Collateral Access Agreement" means a landlord waiver, mortgagee waiver,
bailee letter, or acknowledgement agreement of any warehouseman, processor,
lessor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance satisfactory to the Purchasers.
"Collateral Agent" means IBJ, in its capacity as Collateral Agent under the
Security Documents.
"Company" means Oneita Industries, Inc., a Delaware corporation.
"Competitor" means any Person other than a "Qualified Institutional Buyer"
as such term is used in Rule 144A of the Securities Act with whom the Company
competes in its lines of business.
"Confidential Information" is defined in Section 21.
<PAGE>
"Confirmation Order" means an order of the Court confirming the
Reorganization Plan under Section 1129 of the Bankruptcy Code, which order shall
be in full force and effect and shall not have been stayed, reversed or
modified.
"Consolidated Assets" means, at any time, the total assets of the
Company and its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of Subsidiaries.
"Consolidated Net Income" means the net income of the Company and its
Subsidiaries, determined on a consolidated basis without duplication in
accordance with GAAP, excluding:
(a) the proceeds of any life insurance policy;
(b) any net gain or loss arising from (1) the sale or other
disposition of any Property (other than current assets) to the extent that
the aggregate amount of the gain exceeds the aggregate amount of losses
from the sale, abandonment or other disposition of Property (other than
current assets), (2) any write-up of assets, or (3) the acquisition of
outstanding Indebtedness securities of the Company or any Subsidiary;
(c) any net amount representing any interest in the undistributed
earnings of any other Person (other than a Subsidiary);
(d) any net earnings, prior to the date of acquisition, of any Person
acquired in any manner, and any earnings of any Subsidiary accrued prior to
becoming a Subsidiary;
(e) any net deferred credit (or amortization of a deferred credit)
arising from the acquisition of any Person;
(f) any net earnings denominated in any currency which is not fully
convertible into Dollars, provided that any net earnings excluded pursuant
to this clause (G) may be included in the year in which they are actually
converted into Dollars;
(g) any net gain arising from the termination of a Plan; and (h) any
portion of the net income of any Subsidiary which for any reason is
unavailable for payment of dividends to the Company.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Court" means the United States Bankruptcy Court for the District of
Delaware.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means the rate of 13 1/2% per annum.
"Deposit Account Security Agreement" means the Deposit Account Security
Agreement between the Company and the Collateral Agent substantially in the form
of Exhibit 15.
"Disclosure Statement" shall mean the Disclosure Statement filed by the
Company with the Court on January __, 1998, as the same may be amended,
supplemented or otherwise modified (except for Immaterial Changes).
"Disposition" means any sale, assignment, transfer or other disposition of
any Property (whether now owned or hereafter acquired) by the Company or any of
its Subsidiaries to any other Person.
<PAGE>
"Disposition Investment" means, with respect to any Disposition, any
promissory notes or other evidences of Indebtedness or Investments received by
the Company or any of its Subsidiaries in connection with such Disposition.
"dollars" or "$" refers to lawful money of the United States of America.
"Domestic Subsidiary" means any Subsidiary of the Company organized under
the laws of the United States of America or any State thereof.
"EBITDA" means, for any period, Consolidated Net Income plus all amounts
deducted in computing such Consolidated Net Income on account of Interest
Expense, taxes, amortization of intangibles and depreciation.
"EBITDA Requirement" shall mean, with respect to any period of 12 full
consecutive calendar months immediately preceding the month during which the
Company proposes to pay interest on the unpaid principal on the Notes by the
issuance of Additional Notes, EBITDA equal to or greater than $6,000,000,
determined in accordance with GAAP.
"Effective Date" means the "effective date" of the Reorganization Plan, as
defined therein.
"Environmental Laws" means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties, legal and expert fees or indemnities, and including any Lien filed
against any of the Real Property Collateral or any part thereof in favor of any
governmental entity), of the Company or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"Equipment" means all of the Company's and each of its Domestic
Subsidiaries' present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles
and trailers), tools, parts, goods (other than consumer goods, farm products, or
Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"ERISA Event" means (a) a Reportable Event with respect to any Plan or
Multiemployer Plan, (b) the withdrawal of the Company, any of its Subsidiaries
or ERISA Affiliates from a Benefit Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c) the
<PAGE>
providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of the Company, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by the Company or its Subsidiaries or any of their ERISA
Affiliates.
"Event of Default" is defined in Section 12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means the Property of the Company and its Subsidiaries
identified on Schedule R.
"Existing Notes" means the Existing Revolving Notes and the Existing
Prudential Note.
"Existing Prudential Documents" means the Existing Prudential Note, the
Note Agreement dated as of December 20, 1988 between the Company and Prudential,
as amended prior to the Petition Date, and all of the related security
agreements, instruments and other documents executed and delivered by the
parties in connection therewith.
"Existing Prudential Note" means the promissory note executed and delivered
by the Company pursuant to that certain Note Agreement dated as of December 20,
1988 between the Company and Prudential, as amended prior to the Petition Date.
"Existing Revolving Credit Agreement" means that certain Revolving Credit
Agreement, dated as of January 26, 1996, as amended prior to the Petition Date,
by and among the Company and the institutions signatory thereto.
"Existing Revolving Credit Documents" means the Existing Revolving Credit
Agreement, the Existing Revolving Credit Notes and all of the security
agreements, instruments, the and other documents executed and delivered by the
parties in connection therewith.
"Existing Revolving Notes" means, collectively, the promissory notes
executed and delivered by the Company to the institutions party to the Existing
Revolving Credit Agreement.
"Fair Market Value" means, at any time and with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).
"Fayette Facilities" means the apparel and textile plants operated by the
Company in Fayette, Alabama.
"FEIN" means Federal Employer Identification Number.
"Foothill" means Foothill Capital Corporation, a California corporation.
"Foothill Subordinated Note" means the 10% Subordinated Promissory Note due
2008 substantially in the form of Exhibit 7 issued by the Company to Foothill.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means
<PAGE>
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any Property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation;
(c) to lease Properties or to purchase Properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness or obligation
against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Guaranty Assumption Agreement" means a Guaranty Assumption Agreement
substantially in the form of Exhibit 10 by any Subsidiary that pursuant to
Section 10.13 is required to become a "Guarantor" in favor of the Collateral
Agent.
"Hazardous Material" means any and all pollutants, petroleum products,
toxic or hazardous wastes or any other substances including Hazardous Substances
(as defined by CERCLA) that might pose a hazard to health or safety, the removal
of which may be required or give rise to liability or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage,
or filtration of which is or shall be restricted, prohibited or penalized by any
applicable law (including, without limitation, asbestos, urea formaldehyde foam
insulation and polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Note Agent pursuant to
Section 14.1.
"IBJ" means IBJ Schroder Bank & Trust Company.
"IDB Indebtedness" means Indebtedness of the Company arising in
connection with its transactions with The Industrial Development Board of The
City of Fayette, Alabama.
<PAGE>
"Immaterial Changes" shall mean, when used with respect to any motion,
order, stipulation, document, instrument or other writing, changes to the most
recent draft thereof distributed to the holders of Class 2 Claims and their
special counsel which, individually and in the aggregate, shall have been
determined in the reasonable judgment of the Majority Holders, acting in good
faith, not to be materially adverse to the interests of the holders of the Class
2 Claims; provided that a modification or amendment that results in other than
uniform treatment of all Class 2 Claims may in no event be determined to be an
"Immaterial Change".
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of Property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such Property);
(c) all Capital Lease Obligations;
(d) all liabilities for borrowed money secured by any Lien with
respect to any Property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Intercreditor Agreement" means an Intercreditor Agreement
substantially in the form of Exhibit 10 between IBJ, as Note Agent and
Collateral Agent, the Purchasers and the New Revolving Lender.
"Interest Coverage Ratio" means, as at any date of determination
thereof, the ratio of (a) EBITDA for the period of four fiscal quarters ending
on, or most recently ended prior to, such date to (b) Interest Expense for such
period.
"Interest Expense" means, for any period, the sum, for the Company and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of all interest in respect of Indebtedness (including,
without limitation, the interest component of any payments in respect of Capital
Lease Obligations) accrued or capitalized during such period (whether or not
actually paid during such period) but excluding the amortization of loan costs
charged to interest expense.
<PAGE>
Notwithstanding the foregoing, (i) if during any period for which
Interest Expense is being determined the Company shall have consummated any
Disposition then, for all purposes of this Agreement, Interest Expense shall be
determined on a pro forma basis as if such Disposition had been made or
consummated (and any Indebtedness repaid as a result of such Disposition had
been incurred or repaid) on the first day of such period and (ii) if as at any
date (a "calculation date") fewer than four complete consecutive fiscal quarters
have elapsed subsequent to the Closing Date, Interest Expense shall be
calculated only for the portion of such period commencing on the Closing Date
and ending on the calculation date, and then shall be annualized by multiplying
the amount of such Interest Expense by a fraction, the numerator of which is 365
and the denominator of which is the number of days during the period commencing
on the day immediately following the Closing Date through and including the
calculation date.
"Inventory" means all present and future inventory in which the
Company has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of the Company's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Investment" means, for any Person: (a) the acquisition (whether for
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days arising in connection with the
sale of programming or advertising time by such Person in the ordinary course of
business; (c) the entering into of any Guaranty of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person.
"Kinston" means Oneita-Kinston Corp.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any Property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Majority Holders" shall mean, (a) Persons holding at least 51% in the
aggregate principal amount of all Class 2 Claims and (b) Persons (other than
Foothill and its Affiliates) holding at least 41% in the aggregate principal
amount of all Class 2 Claims.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, Properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Company and its consolidated
Subsidiaries, on a consolidated basis, occurring after the Closing Date, (b) the
<PAGE>
material impairment of the ability of the Company and its consolidated
Subsidiaries, on a consolidated basis, to perform their obligations under the
Basic Documents to which they are a party or of the Purchasers or the Collateral
Agent to enforce the obligations of the Obligors under the Basic Documents or
realize upon the Collateral, occurring after the Closing Date, or (c) a material
impairment of the priority of the Collateral Agent's Liens with respect to the
Collateral. The foregoing notwithstanding, if the Company's consolidated
financial results of operations and financial condition are in substantial
compliance with the projections of the Company most recently furnished to the
Purchasers prior to the Petition Date (as described in a letter from the Company
to the Purchasers dated January 20, 1998), then such financial results of
operations and financial condition shall not be considered as factors by the
Purchasers in determining whether a Material Adverse Change has occurred, and
shall not be relevant to such determination.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
or any of its Subsidiaries to perform its obligations under this Agreement, the
Notes or any of the other Basic Documents or (c) the validity or enforceability
of this Agreement, the Notes, or any of the other Basic Documents.
"Mortgage" means one or more Mortgage(s) executed by the Company and the
Subsidiaries covering the Real Property Collateral, including the real Property
and leasehold interests identified on Schedule E hereto.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"Net Cash Proceeds" means the aggregate amount of all cash payments
received by the Company and its Subsidiaries directly or indirectly in
connection with any Disposition, whether at the time of such Disposition or
after such Disposition under deferred payment arrangements or Investments
entered into or received in connection with such Disposition (including, without
limitation, Disposition Investments); provided, that
(a) Net Cash Proceeds of any Disposition shall be net of (i) the
amount of any legal, title and recording tax expenses, commissions and
other fees and expenses paid by the Company and its Subsidiaries in
connection with such Disposition and (ii) any Federal, state and local
income or other taxes estimated to be payable by the Company and its
Subsidiaries as a result of such Disposition (but only to the extent that
such estimated taxes are in fact paid to the relevant Federal, state or
local governmental authority within three months of the date of such
Disposition); and
(b) Net Cash Proceeds of any Disposition shall be net of any
repayments by the Company or any of its Subsidiaries of Indebtedness to the
extent that (i) such Indebtedness is secured by a Lien on the Property that
is the subject of such Disposition and (ii) the transferee of (or holder of
a Lien on) such Property requires that such Indebtedness be repaid as a
condition to the purchase of such Property.
"Net Worth" means total stockholders' equity determined in accordance with
GAAP.
"Net Worth Covenant Commencement Date" means, if the Effective Date is the
last day of a fiscal month of the Company, the Effective Date, or, otherwise,
the first day to occur after the Effective Date that is the last day of a fiscal
month of the Company.
"Net Worth Testing Dates" means the last day of each fiscal quarter of the
Company, commencing with the first such date to occur on or after the Closing
Date (which dates, as of the Closing Date, are the last days of each March,
June, September, and December ending on or after the Closing Date).
<PAGE>
"New Common" means the shares of new common stock to be issued by the
Company pursuant to the Reorganization Plan.
"New Revolving Credit Agreement" means that certain Revolving Credit
Agreement substantially in the form of Exhibit 11 by and among the Company and
the New Revolving Credit Lender.
"New Revolving Credit Lender" means Foothill in its capacity as a party to
the New Revolving Credit Agreement.
"Non-Excluded Assets" means any Property of the Obligors other than (i)
Excluded Assets and (ii) subject to Section 11.12, Accounts and Inventory of any
Obligor.
"Notes" mean the 12% Senior Secured Notes due 2001 issued by the Company to
the Purchasers, including Additional Notes.
"Note Agent" means IBJ, in its capacity as Note Agent under this Agreement.
"Obligor" means, collectively, the Company, each Guarantor and any other
Subsidiary that is a party to any of the Basic Documents.
"Officer's Certificate" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"Original Principal Amount" means $37,500,000.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Permitted Combination" means either (a) the merger of Kinston with and
into the Company, with the Company as the surviving corporation, or (b) the
dissolution of Kinston and transfer of all its assets to the Company (subject to
the Liens of the Collateral Agent in such assets).
"Permitted Disposition" means any Disposition by any Obligor of (a) any
Inventory sold or disposed of in the ordinary course of business and on ordinary
business terms or, if otherwise disposed of, only if ten days' prior notice of
such disposition in reasonable detail shall have been furnished to the
Collateral Agent and the Purchasers, (b) any Disposition of Excluded Assets and
(c) any Disposition of obsolete or worn-out Equipment in the ordinary course of
business.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 10.11;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 60 days
or are being contested in compliance with Section 10.11;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
<PAGE>
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under Section 12(l); and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real Property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected Property or interfere
with the ordinary conduct of business of the Company or any Subsidiary.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 365 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard & Poor's Ratings Group or
Moody's Investors Services, Inc.;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 365 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) of this definition
and entered into with a financial institution satisfying the criteria
described in clause (c) of this definition.
"Permitted Protest" means the right of the Company and its Subsidiaries to
protest any Lien other than any such Lien that secures the obligations under the
Notes or the other basic Documents, tax (other than payroll taxes or taxes that
are the subject of a United States federal tax lien), or rental payment,
provided that (a) a reserve with respect to such obligations is established on
the books of the Company in an amount that is reasonably satisfactory to the
Purchasers, (b) any such protest is instituted and diligently prosecuted by the
Company or its Subsidiaries in good faith, and (c) the Purchasers are satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of the Collateral
Agent in and to the Collateral.
"Person" means an individual, partnership, corporation, company, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Personal Property Collateral" means all Collateral other than the Real
Property Collateral.
"Petition Date" means January __, 1998.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or are required to be made, by the Company or any ERISA Affiliate
or with respect to which the Company or any ERISA Affiliate may have any
liability.
<PAGE>
"Preferred Stock" means any class of capital stock of a corporation that is
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Property" or "Properties" means, unless otherwise specifically limited,
real or personal Property of any kind, tangible or intangible, choate or
inchoate.
"Prudential" means The Prudential Insurance Company of America.
"Purchasers" means each holder of a Note and any of such holder's
successors and assigns.
"Purchasers' Primary Collateral" means that portion of the Collateral in
which the Lien of the Collateral Agent, for the ratable benefit of the
Purchasers, has priority over the Lien of the New Revolving Credit Lender
pursuant to the provisions of the Intercreditor Agreement.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"Real Property Collateral" means the parcel or parcels of real Property and
the related improvements thereto identified as Real Property Collateral on
Schedule ,and any real Property hereafter acquired by the Company or any of its
Subsidiaries.
"Reorganization Plan" means the plan of reorganization filed by the Company
and confirmed pursuant to a Final Order of the Bankruptcy Court.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Required Net Worth Amount" means, as of any date of determination thereof:
(a) the Base Net Worth minus $4,500,000; plus (b) the amount that is the product
of (y) $150,000 times (z) the number of months that have elapsed, as of and
including such date of determination, since the Effective Date (which number of
elapsed months, if not a whole number, shall be truncated downward to the
nearest whole number, e.g., if more than four, and less than five, months have
elapsed since the Effective Date, the number "4" would be multiplied times
$150,000 in making the foregoing determination).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"Restricted Payment" means (a) any cash interest payment to Foothill under
the Foothill Subordinated Note prior to the occurrence of a Cash Pay Interest
Event (as defined in the Foothill Subordinated Note), (b) any dividend or other
distribution (whether in cash, securities or other Property) in the aggregate
during any fiscal year with respect to any shares of any class of capital stock
of the Company or any of its Subsidiaries, or (c) any payment (whether in cash,
securities or other Property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such shares of capital stock of the Company or any of its
Subsidiaries or any option, warrant or other right to acquire any such shares of
capital stock of the Company or any of its Subsidiaries.
"Retiree Health Plan" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Security" has the meaning set forth in section 2(1) of the Securities
Act.
<PAGE>
"Security and Pledge Agreement" means the Security and Pledge Agreement
between the Company and the Collateral Agent substantially in the form of
Exhibit 12.
"Security Documents" means, collectively, the Security and Pledge
Agreement, the Subsidiary Guaranty and Security Agreement, the Mortgage(s), the
Agency Agreement, the Intercreditor Agreement and all UCC-1 financing statements
and other instruments of perfection executed in connection therewith and all
other documents and instruments relating to, guaranteeing or securing the
obligations of the Company hereunder and under the Notes, as the same may be
amended, restated, supplemented or otherwise made from time to time.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (b) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (c) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Strathleven Interest" means the ownership interest not held by the Company
as of the date hereof in Oneita Strathleven, a Jamaican corporation.
"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its Subsidiaries
(unless such partnership or joint venture can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Guaranty and Security Agreement" means the Subsidiary Guaranty
and Security Agreement(s) substantially in the form of Exhibit 8 between the
Domestic Subsidiaries party thereto and the Collateral Agent.
"Supplemental Availability" has the meaning set forth in the New Revolving
Credit Agreement.
"Swaps" means, with respect to any Person, payment obligations with respect
to interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
<PAGE>
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
"Termination Premium" means (i) in the case of an acceleration of any Note
on or before the first anniversary of the Closing Date, an amount equal to 4% of
the Original Principal Amount times a fraction (the "Fraction") the numerator of
which is the principal amount of such Note and the denominator of which is the
aggregate principal amount of all Notes at the time outstanding (excluding Notes
held directly or indirectly by the Company or any of its Subsidiaries), (ii) in
the case of an acceleration of any Note after the first anniversary of the
Closing Date and on or before the second anniversary of the Closing Date, 3% of
the Original Principal Amount times the Fraction, and (iii) in the case of an
acceleration of any Note after the second anniversary of the Closing Date, 2% of
the Original Principal Amount times the Fraction.
"Trademark Security Agreement" means the Trademark Security Agreement
between the Company and the Collateral Agent substantially in the form of
Exhibit 14.
"Uniform Commercial Code" means the Uniform Commercial Code as in effect
from time to time in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection, or priority of the security interests and liens specified in the
Security Documents is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company's other Wholly-Owned Subsidiaries at such time.
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") is entered into as of
_____________, 1998, between Foothill Capital Corporation (the "Revolving
Credit Lender"), IBJ Schroder Bank and Trust Company (the "Collateral
Agent" and the "Note Agent"), as agent under the Note Purchase Agreement
dated as of _____________, 1998, for the Purchasers of the 12% Senior
Secured Notes (the "Notes") of Oneita Industries, Inc., a Delaware
corporation (the "Debtor"), and as Collateral Agent under the Security and
Pledge Agreement and the Subsidiary Guaranty and Security Agreement, each
dated as of _____________, 1998, and the undersigned Purchasers of the
Notes, with reference to the following recitals of fact:
A. The Revolving Credit Lender provides financing to the Debtor and
its Subsidiary, Oneita-Kinston Corp. ("Oneita-Kinston"), pursuant to the
Revolving Credit Documents. The Revolving Credit Claims are secured by
security interests in the Collateral.
B. For good and valuable consideration the Purchasers acquired the
Notes pursuant to the Note Financing Documents. The Note Claims are secured
by security interests in the Collateral.
C. The Revolving Credit Lender, the Agent, and the Purchasers wish to
enter into this Agreement to establish the respective rights and priorities
of the Revolving Credit Lender, the Agent, and the Purchasers in and to the
Collateral.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which hereby are acknowledged by each party hereto, the parties
hereto hereby agree that:
1. Definitions. Terms used herein that are defined in the UCC have the
meanings defined for those terms in the UCC unless otherwise expressly
defined herein. As used herein, the following terms shall have the meanings
respectively set forth after each:
"Agent" shall mean (a) the Note Agent with respect to any
provision hereof that pertains to the Note Claims, (b) the
Collateral Agent with respect to any provision hereof that
pertains to the Collateral, and (c) both the Note Agent and the
Collateral Agent with respect to any provision hereof that
pertains both to the Note Claims and the Collateral, or if the
context so requires.
<PAGE>
"Claims" means the Revolving Credit Claims and the Note
Claims.
"Collateral" means all tangible and intangible real and/or
personal property of the Debtor and any of its Subsidiaries in
which any Creditor or Agent has a Lien, including without
limitation their respective accounts, inventory, general
intangibles, documents, chattel paper, instruments, money,
deposit accounts, securities, investment property, machinery,
equipment, furnishings, fixtures, real property and improvements
thereon, now owned or hereafter acquired, wherever located,, and
all products and proceeds of any thereof, as such terms are
defined in the UCC, as applicable.
"Collateral Agent" has the meaning ascribed thereto in the
introductory paragraph hereof.
"Creditors" means, collectively, the Revolving Credit Lender
and its successors and assigns, if any, and the Purchasers, and
their successors and assigns, if any.
"Creditor Group" means either, but not both, the Revolving
Credit Lender or the Purchasers.
"Creditor Group Claim" shall mean either the Revolving
Credit Claims or the Note Claims, as the context may require.
"Enforcement Action" means, with respect to any Collateral
and any Creditor Group: collecting, repossessing, selling,
leasing or otherwise disposing of all or any part of such
Collateral, or exercising notification or collection rights with
respect to all or any portion thereof, or attempting or agreeing
to do so; commencing the enforcement with respect to such
Collateral of any of the default remedies under any Financing
Documents, the UCC or other applicable laws; or appropriating,
setting off, or applying any part or all of such Collateral in
the possession of, or coming into the possession of, such
Creditor Group or its agent or bailee, to such Creditor Group
Claim.
"Enforcement Period" means, with respect to the Claims of
either Creditor Group, any period of time commencing upon the
occurrence of any default with respect to such Claim that permits
such Creditor Group or its agent or bailee to take any
Enforcement Action, and continuing until the earlier of (a) the
satisfaction in full of such Creditor Group Claims or (b) the
Creditor Group's agreement in writing to terminate such
Enforcement Period.
<PAGE>
"Financing Documents" means the Revolving Credit Financing
Documents and the Note Financing Documents.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, charge or deposit arrangement, or other
arrangement having the practical effect of the foregoing.
"Note Agent" has the meaning ascribed thereto in the
introductory paragraph hereof.
"Note Claims" means all present and future claims of the
Purchasers under or related to the Note Financing Documents,
against the Debtor or its Subsidiaries for the payment of money,
including all claims for principal and interest (including
interest accruing after the commencement of a bankruptcy
proceeding by or against the Debtor or its Subsidiaries, whether
or not such interest is an allowed claim), or for reimbursement
of fees, costs or expenses, or otherwise, whether fixed or
contingent, matured or unmatured, liquidated or unliquidated, and
whether sounding in contract, in tort or otherwise, and including
all fees and expenses of the Agent in any capacity (including as
Registrar, Transfer Agent, Paying Agent, Note Agent, and
Collateral Agent).
"Note Collateral" means all Collateral other than the
Revolving Credit Collateral.
"Note Financing Documents" means the Note Purchase
Agreement, the Note Security Agreement, and all notes, security
documents or other documents or agreements in any way evidencing
or relating to the Note Claims, as the same may from time to time
be amended, modified, renewed, extended or restated.
"Note Purchase Agreement" means that certain Note Purchase
Agreement, dated as of _____________, 1998, among the Debtor, the
Purchasers, and the Note Agent, as agent for the Purchasers.
"Note Security Agreement" means the "Security Documents" as
such term is defined in the Note Purchase Agreement.
"proceeds" has the meaning ascribed to such term in Article
9 of the UCC.
"Purchasers" means the institutions party to the Note
Purchase Agreement in that capacity, and who are signatories to
this Agreement, and their respective successors and assigns.
<PAGE>
"Revolving Credit Claims" mean all present and future claims
of the Revolving Credit Lender under or related to the Revolving
Credit Financing Documents, against the Debtor or its
Subsidiaries for the payment of money, including all claims for
principal and interest (including interest accruing after the
commencement of a bankruptcy proceeding by or against the Debtor
or its Subsidiaries, whether or not such interest is an allowed
claim), or for reimbursement in connection with amounts paid
under letters of credit, or for reimbursement of fees, costs or
expenses, or otherwise, whether fixed or contingent, matured or
unmatured, liquidated or unliquidated, and whether sounding in
contract, in tort or otherwise.
"Revolving Credit Collateral" means all accounts, inventory,
and deposit accounts of the Debtor and any of its Subsidiaries
that have granted a Lien in such Collateral to Revolving Credit
Lender, any and all instruments taken in connection with any
accounts, all books and records of the Debtor and any such
Subsidiary to the extent that such books and records relate to
any of the foregoing, and any and all proceeds of any of the
foregoing, including proceeds of proceeds. As used in this
definition, "accounts," "inventory," "deposit accounts,"
"instruments," and "proceeds" have the meanings ascribed thereto
in Article 9 of the UCC.
"Revolving Credit Agreement" means that certain Loan and
Security Agreement dated as of ____________, 1998, between the
Revolving Credit Lender, the Debtor, and Oneita-Kinston.
"Revolving Credit Financing Documents" mean the Revolving
Credit Agreement, the other "Loan Documents" referred to therein,
and all other notes, reimbursement agreements, security documents
or other documents or agreements in any way evidencing or
documenting the Revolving Credit Claims, as the same may from
time to time be amended, modified, renewed, extended or restated.
"Revolving Credit Lender" means Foothill Capital
Corporation, a California corporation.
"Subsidiary" of a person or entity means a corporation,
partnership, limited liability company, or other entity in which
that person or entity directly or indirectly owns or controls the
shares of stock having ordinary voting power to elect a majority
of the board of directors (or appoint other comparable managers)
of such corporation, partnership, limited liability company, or
other entity.
<PAGE>
"UCC" means the Uniform Commercial Code, as in effect from
time to time in the State of New York.
2. Security Interest Priorities. Notwithstanding (a) the date, manner or
order of attachment or perfection of the security interests and Liens
granted in favor of the Revolving Credit Lender, on the one hand, or the
Collateral Agent acting on behalf of the Purchasers, or the Purchasers, on
the other hand, (b) the provisions of the UCC or any other applicable law
or judicial decisions, (c) the provisions of any contract or Financing
Document in effect between either Creditor Group, on the one hand, and the
Debtor or any Subsidiary thereof, on the other, and (d) whether either
Creditor Group or any agent or bailee thereof holds possession of any part
or all of the Collateral, the following, as between the Revolving Credit
Lender, the Purchasers, and the Collateral Agent, shall be the relative
priority of the perfected security interests and Liens of the Creditors in
the Collateral:
a. The Revolving Credit Lender shall have a first priority security
interest in the Revolving Credit Collateral to the extent of the
Revolving Credit Claims, and the Collateral Agent, as agent on behalf
of the Purchasers, shall have a second priority security interest
therein to the extent of the Note Claims.
b. The Collateral Agent, as agent on behalf of the Purchasers, shall
have a first priority security interest in the Note Collateral to the
extent of the Note Claims, and the Revolving Credit Lender shall have
a second priority security interest therein to the extent of the
Revolving Credit Claims.
For the purposes of the foregoing allocation of priorities, any claim of a
right of setoff shall be treated in all respects as a security interest,
and no claimed right of setoff shall be asserted to defeat or diminish the
rights or priorities provided for herein. The priorities set forth herein
are solely for the purpose of establishing the relative rights of the
Creditor Groups and there are no other persons or entities who are intended
to be benefitted or otherwise affected in any way by this Agreement.
3. Distribution of Proceeds of Collateral. During any Enforcement Period,
all proceeds of Collateral shall be distributed in accordance with the
following procedure:
a. All proceeds of Revolving Credit Collateral first shall be applied
to the Revolving Credit Claims. After the Revolving Credit Claims are
paid or otherwise satisfied in full, any remaining proceeds of
Revolving Credit Collateral shall be paid by the Revolving Credit
Lender to the Collateral Agent for application to the Note Claims
until they are paid or otherwise satisfied in full.
<PAGE>
b. All proceeds of Note Collateral first shall be applied to the Note
Claims. After the Note Claims are paid or otherwise satisfied in full,
any remaining proceeds of Note Collateral shall be paid by the
Collateral Agent to the Revolving Credit Lender for application to the
Revolving Credit Claims until they are paid or otherwise satisfied in
full. The Agent shall have no duty to assume the application of such
proceeds by the Revolving Credit Lender. The Agent shall be entitled
to assume that Foothill Capital Corporation is the Revolving Credit
Lender until it receives a written notice signed by a person
purporting to be an authorized officer of Foothill Capital Corporation
that some other designated person or entity is the Revolving Credit
Lender.
c. After all of the Claims have been irrevocably paid or otherwise
satisfied in full, the balance of proceeds of Collateral, if any,
shall be paid to the Debtor or the Subsidiary of the Debtor that owns
or otherwise has rights in such Collateral, as the case may be, or as
otherwise required by applicable law. The Agent shall be entitled to
rely conclusively on a certificate from the Revolving Credit Lender as
to the amount of any unsatisfied Revolving Credit Claims, and shall
not be obligated to distribute funds pursuant to this Section 3(c)
unless and until it has received confirmation from the Revolving
Credit Lender that all Revolving Credit Claims have been paid or
otherwise satisfied in full.
4. Enforcement Actions. The parties hereto agree that:
a. The Revolving Credit Lender may, at its option, but subject to the
provisions of this Section 4, during any Enforcement Period relating
to the Revolving Credit Claims, take any Enforcement Action it deems
appropriate with respect to the Revolving Credit Collateral, without
any requirement that it obtain the prior consent of the Collateral
Agent or any Purchaser. Nothing herein excuses the Revolving Credit
Lender from giving to the Collateral Agent any notice required to be
given by the Revolving Credit Lender to the Collateral Agent under the
UCC.
b. The Collateral Agent may, at its option, but subject to the
provisions of this Section 4, during any Enforcement Period relating
to the Note Claims, take any Enforcement Action it deems appropriate
with respect to the Note Collateral, without any requirement that it
obtain the prior consent of the Revolving Credit Lender; provided,
however, that, prior to the taking of any such Enforcement Action by
the Collateral Agent (other than an Enforcement Action that would not
<PAGE>
interfere with the Revolving Credit Lender's 45-day use right and
license provided for below, such as, without limitation, the
publication or giving of a notice), the Revolving Credit Lender, at
its option, shall have the right and license (which right and license
is granted by the Debtor and Oneita-Kinston, and acknowledged and
consented to by the Collateral Agent and the Purchasers, who agree
that the Collateral Agent's security interest in the property affected
by such right and license is subject to the rights of the Revolving
Credit Lender with respect to such right and license) to use all or
part of the equipment, fixtures, real property, trademarks, and/or
tradenames included in the Note Collateral for a reasonable period of
time not to exceed 45 days after receipt of notice from the Collateral
Agent of the Collateral Agent's intention to take Enforcement Action
with respect thereto, to complete the production of such portion of
the inventory as constitutes "Piece Goods" or "Work-In-Process" (as
such terms are defined in the Revolving Credit Agreement) at the time
of the receipt of such notice, with payment for the reasonable usage
value therefor to be made by the Revolving Credit Lender to the
Collateral Agent, for the ratable benefit of the Purchasers, for the
use of such property and property rights and for the corresponding
standstill and postponement for such period of time of certain
Enforcement Actions in respect of such items by the Collateral Agent
and the Purchasers as provided for above. Nothing herein excuses the
Collateral Agent from giving to the Revolving Credit Lender any notice
required to be given by the Collateral Agent to the Revolving Credit
Lender under the UCC.
c. Notwithstanding anything to the contrary herein contained, the
Agent and the Purchasers hereby agree and acknowledge that the
Revolving Credit Lender shall have a first priority security interest
in and Lien on the Revolving Credit Collateral and the Collateral
Agent's or the Purchasers' security interest in and Lien on the
Revolving Credit Collateral shall be junior and subordinate to the
security interest in and Lien on the Revolving Credit Collateral of
the Revolving Credit Lender, and the Agent and the Purchasers hereby
agree and acknowledge that they shall hold back, standstill and
otherwise refrain from taking any Enforcement Action (including
notification to any account debtors of the Lien of the Collateral
Agent or any Purchaser on any account, instruction to pay any amount
in respect of any such account to the Agent or any Person other than
the Revolving Credit Lender, or action to collect any account) to
which the Collateral Agent or any Purchaser is entitled as a secured
party under the UCC or otherwise under applicable law in respect of
the Collateral constituting the Revolving Credit Collateral, or which
the Collateral Agent or any Purchaser is entitled to take in respect
<PAGE>
of its interest in the Revolving Credit Collateral upon the occurrence
and continuation of an Event of Default under any Note Financing
Document until such time as the Revolving Credit Claims have been paid
in full; provided that nothing herein shall prevent the Collateral
Agent from taking any actions (other than notification or instruction
of, or collection from, account debtors with respect to accounts)
necessary or desirable to perfect, maintain, preserve and protect its
or the Purchasers' security interest in any Revolving Credit
Collateral so long as the same does not prevent or interfere with the
ability of the Revolving Credit Lender from realizing the benefit of
its prior and superior security interest in the Collateral
constituting the Revolving Credit Collateral. The Revolving Credit
Lender shall use its best efforts to notify the Agent pursuant to
Section 19 hereof in writing when the Revolving Credit Claims shall
have been paid in full and the Revolving Credit Lender has no further
commitment to extend credit with respect thereto (provided that the
Revolving Credit Lender shall have no liability for any failure to
give such notice unless such failure was intentional or in bad faith),
and, during any Enforcement Period, shall promptly remit to the
Collateral Agent, for the ratable benefit of the Purchasers, any
surplus proceeds of the Revolving Credit Collateral held or received
by the Revolving Credit Lender after the Revolving Credit Claims have
been paid in full and the Revolving Credit Lender has no further
commitment to extend credit under the Revolving Credit Financing
Documents.
d. Notwithstanding anything to the contrary herein contained, the
Revolving Credit Lender hereby agrees and acknowledges that the
Collateral Agent shall have a first priority security interest in and
Lien on the Note Collateral and the Revolving Credit Lender's security
interest in and Lien on the Note Collateral shall be junior and
subordinate to the security interest in and Lien on the Note
Collateral of the Collateral Agent, and the Revolving Credit Lender
hereby agrees and acknowledges that it shall hold back, standstill and
otherwise refrain from taking any Enforcement Action to which the
Revolving Credit Lender is entitled as a secured party under the UCC
or otherwise under applicable law in respect of the Collateral
constituting the Note Collateral, or which the Revolving Credit Lender
is entitled to take in respect of its interest in the Note Collateral
upon the occurrence and continuation of an Event of Default under any
Revolving Credit Financing Document until such time as the Note Claims
have been paid in full; provided that nothing herein shall prevent the
Revolving Credit Lender from taking any actions necessary or desirable
<PAGE>
to perfect, maintain, preserve and protect its security interest in
any Note Collateral so long as the same does not prevent or interfere
with the ability of the Collateral Agent from realizing the benefit of
its prior and superior security interest in the Collateral
constituting the Note Collateral, or from exercising its right to use
Note Collateral to the extent permitted by, and subject to the terms
of, Section 4b hereof. The Collateral Agent shall use its best efforts
to notify the Revolving Credit Lender pursuant to Section 19 hereof in
writing when the Note Claims shall have been paid in full (provided
that the Collateral Agent shall have no liability for any failure to
give such notice unless such failure was intentional or in bad faith),
and, during any Enforcement Period, the Agent and each Purchaser, as
applicable, shall promptly remit to the Revolving Credit Lender any
surplus proceeds of the Note Collateral held or received by it after
the Note Claims have been paid in full.
5. Waiver of Right to Require Marshaling. The Revolving Credit Lender and
the Collateral Agent on behalf of its respective Creditor Group hereby
expressly waives any right that it otherwise might have to require the
other Creditor Group, or its agent, to marshal assets or to resort to
Collateral in any particular order or manner, whether provided for by
common law or statute, provided however, that this paragraph shall not
override any specific provision of this Agreement. Neither Creditor Group
nor its agent shall be required to enforce any guaranty or any security
interest given by any person or entity other than the Debtor as a condition
precedent or concurrent to the taking of any Enforcement Action.
6. Exercise of Remedies. Subject only to any express provision of this
Agreement that requires a Creditor Group, or its agent (including the
Collateral Agent), to take or refrain from taking any action, each Creditor
Group, or its agent acting on its behalf (including the Collateral Agent on
behalf of the Purchasers), may exercise its good faith discretion with
respect to exercising or refraining from exercising any of its rights and
remedies or taking any Enforcement Action. The Agent and the Purchasers
agree that the Revolving Credit Lender shall not incur any liability to the
Agent or the Purchasers for taking or refraining from taking any action
with respect to the Revolving Credit Collateral so long as the Revolving
<PAGE>
Credit Lender complies with the express provisions of this Agreement, to
the extent applicable to it. The Revolving Credit Lender agrees that none
of the Agent and the Purchasers shall incur any liability to the Revolving
Credit Lender for taking or refraining from taking any action with respect
to the Note Collateral so long as, in the case of any of them, it complies
with the express provisions of this Agreement, to the extent applicable to
it.
7. UCC Notices. The provisions of this Agreement shall satisfy any
requirement that a subordinated secured party must give notice to the
holder of a senior security interest of its claim to the proceeds of
realization of the collateral and any requirement for furnishing of an
indemnity bond pursuant to Section 9-504(1)(c) or any similar statute is
hereby waived. In the event that any Creditor Group, or its agent, shall be
required by the UCC or any other applicable law to give any notice to the
other Creditor Group, or its agent, such notice shall be given in
accordance with Section 19 hereof and ten (10) days' notice shall be
conclusively deemed to be commercially reasonable.
8. Independent Credit Investigations. No Creditor, nor the Agent, nor any
of their respective directors, officers, agents or employees shall be
responsible to any other Creditor, the other Creditor Group or the Agent or
to any other person or entity for the Debtor's solvency, creditworthiness,
financial condition or ability to repay any of the Claims or for the
accuracy of any recitals, statements, representations or warranties of the
Debtor, oral or written, or for the validity, sufficiency, enforceability
or perfection of the Claims or the Financing Documents, or any security
interests or Liens granted by the Debtor to any Creditor or Creditor Group
in connection therewith. The Revolving Credit Lender hereby represents to
each member of the other Creditor Group and the Agent, each Purchaser has
represented to the Agent and other members of its Creditor Group, and the
Agent hereby represents to the Revolving Credit Lender on its behalf and on
behalf of the Purchasers, that each such person has entered into its
respective financing agreements with the Debtor and any of its Subsidiaries
based upon its own independent investigation, and makes no warranty or
representation to the other Creditors, the other Creditor Group or the
Agent, nor does it rely upon any representation of any of the other
Creditors, the other Creditor Group, or the Agent, with respect to matters
identified or referred to in this paragraph. Subject to the terms of the
"Agency Agreement" (as such term is defined in the Note Purchase
Agreement), no Creditor, Creditor Group, nor the Agent shall have any
responsibility to any other Creditor, Creditor Group, or the Agent, for
monitoring or assuring compliance by the Debtor or any of its Subsidiaries
<PAGE>
with any of the Debtor's or such Subsidiary's covenants or representations
made to any Creditor. Without limiting the generality of the foregoing,
either Creditor Group may perform in accordance with the terms of its
Financing Documents (subject to this Agreement) without regard to whether
the Debtor's or such Subsidiary's performance in accordance with the terms
thereof might or would constitute or result in a breach of covenants or
representations under the other Creditor Group's Financing Documents, and
under no circumstances shall any Creditor, Creditor Group, or the Agent be
liable to any other Creditor, Creditor Group or the Agent for inducing a
breach or violation of the other's Financing Documents by virtue of
performing in accordance with the terms of its Financing Documents (subject
to the terms of this Agreement).
9. Non-Avoidability and Perfection of Liens. The Lien subordinations and
relative priorities set forth in this
Agreement are expressly conditioned upon the non-avoidability and
perfection of the security interest to which another security interest is
subordinated. If the security interest to which another security interest
is subordinated is not perfected or is void or voidable for any reason,
then the subordination provided for herein shall not be effective to the
extent of such non-perfection or avoidability.
10. Perfection of Possessory Security Interests. For the limited purpose of
perfecting the security interests of any Creditor, the Collateral Agent for
the benefit of the Purchasers, or any Purchaser, in those types or items of
Collateral in which a security interest may be perfected by possession,
each Creditor Group hereby appoints (subject to the priorities established
by Section 2) the Revolving Credit Lender or the Collateral Agent, as the
case may be, as its agent and bailee for the limited purpose of possessing
on its behalf any such Collateral that may come into the possession of the
other from time to time, the Purchasers agree to instruct the Collateral
Agent to act, and the Collateral Agent agrees so to act, as the Revolving
Credit Lender's agent and bailee for such limited purpose of perfecting the
Revolving Credit Lender's security interest by possession through an agent
or bailee, and the Revolving Credit Lender agrees to act as the Collateral
Agent's and Purchasers' agent and bailee for such limited purpose of
perfecting the Collateral Agent's or Purchasers' security interest by
possession through an agent or bailee, provided that neither Creditor Group
shall incur any liability to the other Creditor Group by virtue of acting
or having its agent act as the other's agent or bailee hereunder, and
either Creditor Group may relinquish possession of Collateral in its
possession without the consent of the other Creditor Group (except as
provided in Section 4c and 4d above), and without incurring liability to
the other Creditor Group, unless there is an express written agreement to
the contrary in effect between the Creditor Groups.
<PAGE>
11. Amendments, Modifications and Increases. Each Creditor Group, directly
or through the Agent in the case of the Purchasers, may enter into
amendments, modifications, renewals or extensions of its Financing
Documents with the Debtor or any of its Subsidiaries, or may increase or
decrease the credit facilities made available by it to the Debtor or any of
its Subsidiaries, or may release or surrender any part or all of its
Collateral without in any way affecting the rights and obligations of the
other Creditor Group or the Agent under this Agreement or its respective
Financing Documents. Should either or both Creditor Groups cease extending
further credit to the Debtor, this Agreement nevertheless shall continue in
effect as to the outstanding Claims of each Creditor Group until this
Agreement is terminated as set forth in Section 12 hereof.
12. Termination. This Agreement is a continuing agreement, and, unless both
Creditor Groups, or the Revolving Credit Lender and the Collateral Agent on
behalf of the Purchasers, have specifically consented in writing to its
earlier termination, this Agreement shall remain in full force and effect
in all respects until the earlier of (a) the date on which (i) the
Revolving Credit Claims are paid or otherwise satisfied in full, (ii) the
Revolving Credit Lender has no further commitment to extend or maintain the
Revolving Credit Financing Documents with the Debtor or any of its
Subsidiaries, (iii) the Revolving Credit Lender has released or terminated
its security interest in the Collateral, and (iv) the Revolving Credit
Lender shall have delivered to the Collateral Agent any surplus proceeds of
Revolving Credit Collateral if and to the extent required by Section 4c, as
provided therein, or (b) the date on which (x) the Note Claims are paid or
otherwise satisfied in full, (y) the Purchasers, acting through the
Collateral Agent have released or terminated their security interest in the
Note Collateral, and (z) the Collateral Agent shall have delivered to the
Revolving Credit Lender any surplus Note Collateral if and to the extent
required by Section 4d.
13. Accountings. Each of the Revolving Credit Lender and the Agent agrees,
upon the occurrence and during the continuance of any Enforcement Action,
to provide the other, upon reasonable request, periodic accountings of the
amount of Claims being asserted, and not satisfied, giving effect to any
applications of realizations upon Collateral.
14. Effect of Bankruptcy. This Agreement shall be and remain enforceable
notwithstanding any bankruptcy or other insolvency proceeding by or against
the Debtor.
15. Effect of Dispositions of Collateral on Junior Security Interests. The
Revolving Credit Lender, the Collateral Agent, and the Purchasers agree
that (a) any collection, sale or other disposition of the Revolving Credit
<PAGE>
Collateral by the Revolving Credit Lender pursuant to the UCC or any other
applicable law, shall be free and clear of the junior security interest,
Lien, claim or offset of the Collateral Agent or the Purchasers in such
Revolving Credit Collateral (but subject to the Collateral Agent's security
interest and Lien in any surplus proceeds); and (b) any sale or other
disposition of the Note Collateral by the Collateral Agent or any Purchaser
pursuant to any applicable law, shall be free and clear of the junior Lien
or security interest or claim of the Revolving Credit Lender in such Note
Collateral (but subject to the Revolving Credit Lender's security interest
and Lien in any surplus proceeds). To the extent reasonably requested by
the Revolving Credit Lender or the Collateral Agent, as the case may be,
and in accordance with the terms of this Agreement, the Collateral Agent,
the Purchasers, and the Revolving Credit Lender, respectively, will
cooperate in providing any necessary or appropriate releases, termination
and satisfaction of Liens to permit a collection, sale or other disposition
of the Revolving Credit Collateral by the Revolving Credit Lender and of
the Note Collateral by the Collateral Agent, free and clear of the
Collateral Agent's, the Purchasers', or the Revolving Credit Lender's
junior security interest, without releasing or affecting any obligation of
the Revolving Credit Lender under Section 4c or any obligation of the
Collateral Agent or any Purchaser under Section 4d.
16. Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not
limiting, and "or" has the inclusive meaning represented by the phrase
"and/or." The words "hereof," "herein," "hereby," "hereunder," and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Section references are to this
Agreement unless otherwise specified.
17. Modifications in Writing. No amendment, modification, supplement,
termination, consent, or waiver of or to any provision of this Agreement
nor any consent to any departure therefrom shall in any event be effective
unless the same shall be in writing and signed by or on behalf of the party
against whom enforcement is sought; except that no amendment, modification,
supplement, termination, consent, or waiver of or to paragraph 2, 3 or 4 of
this Agreement nor any consent to any departure therefrom shall in any
event be effective unless the same shall be in writing and signed by all of
the parties hereto. Any waiver of any provision of this Agreement, or any
consent to any departure from the terms of any provisions of this
Agreement, shall be effective only in the specific instance and for the
specific purpose for which given.
<PAGE>
18. Waivers; Failure or Delay. No failure or delay on the part of either
the Revolving Credit Lender or the Agent in the exercise of any power,
right, remedy, or privilege under this Agreement shall impair such power,
right, remedy, or privilege or shall operate as a waiver thereof; nor shall
any single or partial exercise of any such power, right, or privilege
preclude any other or further exercise of any other power, right, or
privilege. The waiver of any such right, power, remedy, or privilege with
respect to particular facts and circumstances shall not be deemed to be a
waiver with respect to other facts and circumstances.
19. Notices and Communications. All notices, demands, instructions, and
other communications required or permitted to be given to or made upon any
party hereto shall be in
writing and shall be delivered or sent by hand, nationally-recognized
overnight courier, first-class certified or registered mail, postage
prepaid, or telefaxed, and shall be deemed to be given for purposes of this
Agreement when received, if delivered by hand, on the second Business Day
after sending, if sent by a nationally-recognized overnight courier, on the
third Business Day after sending, if sent by U.S. mail, postage prepaid, or
when sent, if sent by confirmed telefax. Unless otherwise specified in a
notice mailed or delivered in accordance with the foregoing provisions of
this Section, notices, demands, instructions and other communications in
writing shall be given to or made upon the respective parties hereto at
their respective addresses indicated on the signature pages hereof.
20. Headings. Section headings used in this Agreement are for convenience
of reference only and shall not constitute a part of this Agreement for any
purpose or affect the construction of this Agreement.
21. Execution in Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be
an original and all of which counterparts, taken together, shall constitute
but one and the same Agreement. This Agreement shall become effective upon
the execution and delivery of a counterpart hereof by each of the parties
hereto.
22. Severability of Provisions. Any provision of this Agreement which is
illegal, invalid, prohibited, or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such illegality,
invalidity, prohibition, or unenforceability without invalidating or
impairing the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
<PAGE>
23. Complete Agreement. This Agreement is intended by the parties as a
final expression of their agreement in respect of the subject matter hereof
and is intended as a complete statement of the terms and conditions of
their agreement. This Agreement shall not be modified except in a writing
signed by the party to be charged, and may not be modified by course of
conduct or oral agreements.
24. Successors and Assigns. This Agreement is binding upon and inures to
the benefit of the successors and assigns of each party hereto. The Agent
and each Purchaser agrees to maintain a copy of this Agreement together
with its copies of the Financing Documents relating to the Claims of the
Purchasers. The Agent and the Purchasers expressly reserve their right to
transfer or assign their Claims, in whole or in part, together with their
rights hereunder, provided that, prior to transferring or assigning any
interest in any such Claims to any person or entity, the Agent or the
transferring or assigning Purchaser shall disclose to such person or entity
the existence and contents of this Agreement, shall provide to such person
or entity a complete and legible copy hereof, and shall advise such person
or entity that the Agent's or such Purchaser's security interest in the
Collateral is subject to the terms hereof. The Revolving Credit Lender
agrees to maintain a copy of this Agreement together with its copies of the
Financing Documents relating to its Claims. The Revolving Credit Lender
expressly reserves its right to transfer or assign its Claims, in whole or
in part, together with its rights hereunder, provided that, prior to
transferring or assigning any interest in any such Claims to any person or
entity, the Revolving Credit Lender shall disclose to such person or entity
the existence and contents of this Agreement, shall provide to such person
or entity a complete and legible copy hereof, and shall advise such person
or entity that the Revolving Credit Lender's security interest in the
Collateral is subject to the terms hereof.
25. Release of Collateral. Each of the parties agrees that, subject to the
provisions of this Agreement, either may release or refrain from enforcing
its security interest in any Collateral, or permit the use or consumption
of such Collateral by Debtor or any of its Subsidiaries that pledged such
Collateral, free of its security interest, without incurring any liability
to the other party hereto.
26. Governing Law; Jurisdiction; Venue. This Agreement shall be construed
in accordance with and governed by the laws of the State of New York. Each
party submits to the non-exclusive jurisdiction of the federal and state
courts sitting in New York County, New York, and any appellate courts
therefrom, in connection with any matter arising out of or relating to this
Agreement. Each party waives any objection to venue in any such court in
New York County, New York, in respect of any such matter, including any
objection based on any claim of inconvenience.
<PAGE>
27. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY MAKES THE
FOREGOING WAIVER HAVING HAD THE BENEFIT OF THE ADVICE OF COUNSEL, AND
DESIRING TO FOREGO THE COST, DELAY, INEFFICIENCY, AND UNPREDICTABILITY OF A
JURY TRIAL IN A COMPLEX CIVIL MATTER. NO PARTY OR ITS REPRESENTATIVE HAS
REPRESENTED THAT IT WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above, intending to be legally bound hereby.
IBJ SCHRODER BANK AND TRUST
COMPANY, as the Note Agent and the
Collateral Agent acting on behalf
of the Purchasers
By_________________________________
Name:
Title:
Address:
One State Street
New York, New York 10004
Telefax: _______________________
Attention: _______________________
FOOTHILL CAPITAL CORPORATION, as
the Revolving Credit Lender
By_________________________________
Name:
Title:
Address:
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025-3333
Telefax: _______________________
Attention: _______________________
The Purchasers:
ALBERT FRIED & CO., L.L.C.
By_________________________________
Name:
Title:
Address:
40 Exchange Place
New York, New York 10005
Telefax: (212) 422-7293
Attention: Mr. Albert Fried, Jr.
<PAGE>
FOOTHILL PARTNERS II, L.P. and
FOOTHILL PARTNERS III, L.P. and
FOOTHILL CAPITAL CORPORATION
By_________________________________
Name:
Title:
Address:
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025-3333
Telefax: (310) 478-8785
Attention: Ms. Karen Sandler
UBS MORTGAGE FINANCING INC.
By_________________________________
Name:
Title:
Address:
299 Park Avenue
New York, New York 10171
Telefax: (212) 821-6299
Attention: Mr. Gregory T. Hradsky
LAZARD FRERES & CO., L.L.C.
By_________________________________
Name:
Title:
Address:
__ Rockefeller Plaza
New York, New York _____
Telefax: _________________
Attention: _________________
<PAGE>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By_________________________________
Name:
Title:
Address:
100 Mulberry Street
Newark, New Jersey 07102
Telefax: (201) 802-2333
Attention: Mr. Ric Abel
Consented:
ONEITA INDUSTRIES, INC.,
on behalf of itself and its
Subsidiaries
By
Name:
Title:
ONEITA-KINSTON CORP.
By
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements for the quarter ended December 27,
1997 and is qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-END> DEC-27-1997
<CASH> 1,585
<SECURITIES> 0
<RECEIVABLES> 10,487
<ALLOWANCES> 981
<INVENTORY> 28,436
<CURRENT-ASSETS> 41,176
<PP&E> 41,366
<DEPRECIATION> 9,518
<TOTAL-ASSETS> 75,880
<CURRENT-LIABILITIES> 93,061
<BONDS> 1,615
0
0
<COMMON> 2,287
<OTHER-SE> (21,083)
<TOTAL-LIABILITY-AND-EQUITY> 75,880
<SALES> 26,342
<TOTAL-REVENUES> 26,342
<CGS> 31,227
<TOTAL-COSTS> 31,227
<OTHER-EXPENSES> 3,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,016
<INCOME-PRETAX> (10,054)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,054)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,054)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
