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 quarter ended June 27, 1998
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 1-10218
COLLINS & AIKMAN CORPORATION
A Delaware Corporation (IRS Employer Identification
No. 13-3489233)
701 McCullough Drive
Charlotte, North Carolina 28262
Telephone (704) 547-8500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No_.
As of August 10, 1998, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 63,989,764 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
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QUARTER ENDED SIX MONTHS ENDED
------------------------------- ------------------------------
JUNE 27, 1998 JUNE 28, 1997 JUNE 27, 1998 JUNE 28, 1997
------------- ------------- -------------- -------------
Net sales ................................ $ 463,335 $ 416,018 $ 941,475 $ 831,578
--------- --------- --------- -----------
Cost of goods sold ........................ 401,459 343,829 802,377 689,144
Selling, general and administrative
expenses ................................ 38,215 30,030 75,924 60,256
--------- --------- --------- -----------
439,674 373,859 878,301 749,400
--------- --------- --------- -----------
Operating income .......................... 23,661 42,159 63,174 82,178
Interest expense, net ..................... 19,434 19,305 39,913 38,084
Loss on sale of receivables ............... 1,682 1,562 3,306 2,763
Other expense ............................. 3,485 501 3,725 972
---------- --------- --------- -----------
Income (loss) from continuing
operations before income taxes .......... (940) 20,791 16,230 40,359
Income tax expense (benefit) .............. (458) 9,191 8,034 17,494
---------- --------- --------- -----------
Income (loss) from continuing operations .. (482) 11,600 8,196 22,865
Income from discontinued operations,
net of income taxes of $2,612
and $3,171 .............................. -- 3,881 -- 4,802
Gain on sale of discontinued
operations, net of income taxes
of $53,358 .............................. -- -- -- 85,292
---------- --------- --------- -----------
Income (loss) before extraordinary loss ... (482) 15,481 8,196 112,959
Extraordinary loss, net of income taxes
of $2,452 and $443 ...................... (3,679) (721) (3,679) (721)
---------- --------- --------- -----------
Net income (loss) ......................... $ (4,161) $ 14,760 $ 4,517 $ 112,238
========== ========= ========= ===========
Net income (loss) per basic common share:
Continuing operations ................... $ (.01) $ .17 $ .12 $ .34
Discontinued operations ................. -- .06 -- .07
Gain on sale of discontinued
operations ............................ -- -- -- 1.28
Extraordinary loss ...................... (.05) (.01) (.05) (.01)
---------- --------- --------- -----------
Net income (loss) ....................... $ (.06) $ .22 $ .07 $ 1.68
========== ========= ========= ===========
Net income (loss) per diluted common share:
Continuing operations ................... $ (.01) $ .17 $ .12 $ .34
Discontinued operations ................. -- .06 -- .07
Gain on sale of discontinued
operations ............................ -- -- -- 1.26
Extraordinary loss ...................... (.05) (.01) (.05) (.01)
---------- --------- --------- -----------
Net income (loss) ....................... $ (.06) $ .22 $ .07 $ 1.66
========== ========= ========= ===========
Average common shares outstanding:
Basic ................................... 65,447 66,144 65,574 66,634
========== ========= ========= ===========
Diluted ................................. 65,447 67,485 66,392 67,823
========== ========= ========= ===========
</TABLE>
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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(UNAUDITED)
JUNE 27, DECEMBER 27,
ASSETS 1998 1997
------------- -------------
Current Assets:
Cash and cash equivalents................... $ 20,323 $ 24,004
Accounts and notes receivable, net.......... 200,913 198,125
Inventories................................. 157,300 142,042
Net assets of discontinued operations....... - 53,004
Other....................................... 108,912 92,116
------------ ------------
Total current assets....................... 487,448 509,291
Property, plant and equipment, net............ 412,951 388,087
Deferred tax assets........................... 59,593 59,293
Goodwill, net................................. 271,313 263,007
Other assets.................................. 84,135 82,714
------------ ------------
$ 1,315,440 $1,302,392
============ ============
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable............................... $ 1,531 $ 1,314
Current maturities of long-term debt........ 18,107 30,301
Accounts payable............................ 137,495 135,468
Accrued expenses............................ 160,570 148,201
------------ ------------
Total current liabilities.................. 317,703 315,284
Long-term debt................................ 780,812 752,376
Other, including postretirement benefit
obligation.................................. 283,342 301,582
Commitments and contingencies.................
Common stock (150,000 shares authorized,
70,521 shares issued and 64,972 shares
outstanding at June 27, 1998
and 70,521 shares issued and 65,851
outstanding at December 27, 1997)........... 705 705
Other paid-in capital......................... 585,490 585,890
Accumulated deficit........................... (572,334) (576,851)
Accumulated other comprehensive income........ (36,962) (39,823)
Treasury stock, at cost (5,549 shares at June
27, 1998 and 4,670 shares at
December 27, 1997).......................... (43,316) (36,771)
------------ ------------
Total common stockholders' deficit......... (66,417) (66,850)
------------ ------------
$ 1,315,440 $1,302,392
============ =============
</TABLE>
I-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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QUARTER ENDED SIX MONTHS ENDED
--------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1998 1997 1998 1997
---------- --------- --------- ---------
OPERATING ACTIVITIES
Income (loss) from continuing operations..... $ (482) $ 11,600 $ 8,196 $ 22,865
Adjustments to derive cash flow from
continuing operating activities:
Deferred income tax expense (benefit)..... (868) 3,240 3,430 6,784
Depreciation and leasehold amortization... 12,785 10,611 27,005 21,480
Amortization of goodwill.................. 1,766 1,613 3,539 3,457
Amortization of other assets.............. 2,183 1,562 4,522 3,443
Decrease (increase) in accounts and other
receivables............................. 22,897 (19,829) 16,058 6,288
Increase in inventories................... (3,124) (3,783) (12,053) (4,374)
Decrease (increase) in other current
assets.................................. 1,812 2,328 (19,319) 4,647
Increase in other non-current assets...... (2,833) (1,896) (12,377) (1,993)
Increase (decrease) in accounts payable... (15,453) 7,400 (13,374) 7,642
Decrease in interest payable.............. (15,636) (14,370) (2,092) (787)
Other, net................................ (23,252) (5,629) (463) (9,603)
----------- ---------- ---------- ---------
Net cash provided by (used in)
continuing operating activities....... (20,205) (7,153) 3,072 59,849
----------- ---------- ---------- ---------
Cash provided by (used in) Wallcoverings,
Floorcoverings, Airbag and the Mastercraft
Group discontinued operations.............. - 5,049 (15,052) 5,886
Cash used in other discontinued operations... (4,801) (1,027) (7,802) (4,728)
----------- ---------- ---------- ---------
Net cash provided by (used in)
discontinued operations.............. (4,801) 4,022 (22,854) 1,158
----------- ---------- ---------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment... (22,773) (18,099) (49,505) (34,850)
Sales of property, plant and equipment....... 186 443 3,924 772
Proceeds from disposition of discontinued
operations................................. - - 71,200 195,600
Acquisition of businesses, net of cash
acquired................................... (1,003) - (20,239) -
Other, net................................... 5,646 (18,694) 3,537 (36,754)
----------- ---------- ---------- ---------
Net cash provided by (used in)
investing activities................ (17,944) (36,350) 8,917 124,768
----------- ---------- ---------- ---------
FINANCING ACTIVITIES
Issuance of long-term debt................... 283,509 - 283,509 4,495
Repayment of long-term debt.................. (236,848) (32,948) (264,689) (42,180)
Proceeds from sales (reduction) of a
participating interest in accounts
receivables, net of redemptions............ (2,000) 30,000 (3,000) 12,000
Net borrowings (repayments) on revolving
credit facilities.......................... 10,000 35,000 - (144,000)
Purchase of treasury stock................... (4,481) (4,426) (6,545) (16,237)
Proceeds from exercise of stock options...... - 189 - 328
Other, net................................... (1,773) (2,109) (2,091) (2,074)
----------- ---------- ---------- ---------
Net cash provided by (used in)
financing activities.................. 48,407 25,706 7,184 (187,668)
----------- ---------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents............................... 5,457 (13,775) (3,681) (1,893)
Cash and cash equivalents at beginning of
period.................................... 14,866 26,196 24,004 14,314
----------- ---------- ---------- ---------
Cash and cash equivalents at end of period... $ 20,323 $ 12,421 $ 20,323 $ 12,421
=========== ========== ========== ========
</TABLE>
I-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT
(UNAUDITED)
A. ORGANIZATION:
Collins & Aikman Corporation (the "Company") (formerly Collins & Aikman
Holdings Corporation) is a Delaware corporation. As of June 27, 1998, Blackstone
Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella Partners
L.P. ("WP Partners") and their respective affiliates collectively own
approximately 83% of the common stock of the Company (the "Common Stock").
The Company conducts all of its operating activities through its
wholly-owned Collins & Aikman Products Co. ("C&A Products") subsidiary.
B. BASIS OF PRESENTATION:
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. In the opinion of management, the accompanying
condensed consolidated financial statements reflect all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation of
financial position and results of operations. Results of operations for interim
periods are not necessarily indicative of results for the full year.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Collins & Aikman Corporation Annual Report
on Form 10-K for the fiscal year ended December 27, 1997.
C. ACQUISITIONS:
The Company entered into a joint venture agreement to manufacture plastic
trim products in the United Kingdom with Kigass Automotive Group ("Kigass") in
October 1997 in which the Company and Kigass each owned 50% of the joint
venture. The Company acquired Kigass on February 2, 1998. The purchase price for
the acquisition was approximately $25.2 million. Initial goodwill resulting from
the purchase was approximately $11.4 million. Kigass has been renamed Collins &
Aikman Plastics (UK) Limited ("C&A Plastics UK"). C&A Plastics UK is an
automotive interior plastic trim products manufacturer located in the United
Kingdom. Under the terms of the purchase agreement, the Company assumed
effective control of C&A Plastics UK on January 1, 1998.
D. INTEREST RATE AND FOREIGN CURRENCY PROTECTION PROGRAMS:
The Company limited its interest rate exposure through April 2, 1998 on
$80 million of notional principal amount utilizing zero cost collars with 4.75%
floors and a weighted average cap of 7.86%. The zero cost collars were not
renewed. In addition, during April 1997, the Company entered into a two year
interest rate swap agreement in which the Company effectively exchanged $27
million of 11-1/2% fixed rate debt for floating rate debt at six month LIBOR
plus a 4.72% margin. In connection with this swap agreement, the Company also
limited its interest rate exposure on $27 million of notional principal amount
by entering into an 8.50% cap on LIBOR. Payments to be received, if any, as a
result of these agreements are accrued as an adjustment to interest expense.
During the quarter and six months ended June 27, 1998, this agreement resulted
in reductions in interest expense and other expenses of approximately $60
thousand and $115 thousand, respectively.
The primary purpose of the Company's foreign currency hedging activities
is to protect against the volatility associated with foreign currency purchase
transactions. The Company's policies prescribe the range of allowable hedging
activity. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months. The Company
has in place forward exchange contracts denominated in multiple currencies which
will mature during fiscal 1998. These contracts aggregated a U.S. dollar
equivalent of $16 million at June 27, 1998. The fair value of these contracts
approximated the contract value at June 27, 1998.
During April 1997, the Company entered into an agreement to limit its
foreign currency exposure related to $45 million of US dollar denominated
borrowings of a Canadian subsidiary. The agreement swapped LIBOR based interest
rates for the Canadian equivalent as well as fixed the exchange rate for the
principal balance upon maturation. This agreement was terminated on June 1, 1998
as a result of the repayment of the Canadian term loan. The term loan balance
was repaid in conjunction with the refinancing and replacement of the Company's
credit facilities. See Note F to Condensed Consolidated Financial Report and
"PART I - FINANCIAL INFORMATION - ITEM 2. -- Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for additional information on the new credit facility.
I-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
E. GOODWILL:
Goodwill, representing the excess of purchase price over the fair value of
net assets of the acquired entities, is being amortized on a straight-line basis
over a period of forty years. Amortization of goodwill applicable to continuing
operations was $1.8 million and $3.5 million for the quarter and six months
ended June 27, 1998, respectively, and $1.6 million and $3.5 million for the
quarter and six months ended June 28, 1997, respectively. Accumulated
amortization at June 27, 1998 was $14.4 million. The carrying value of goodwill
at an enterprise level is reviewed periodically based on the nondiscounted cash
flows and pretax income of the entities acquired over the remaining amortization
periods. Should this review indicate that the goodwill balance will not be
recoverable, the Company's carrying value of the goodwill will be reduced. At
June 27, 1998, the Company believes the recorded value of its goodwill of $271.3
million is fully recoverable.
F. LONG-TERM DEBT:
On May 28, 1998, the Company entered into new credit facilities consisting
of : (i) a senior secured term loan facility in the principal amount of $100
million payable in quarterly installments until final maturity on December 31,
2003 (the "Term Loan A Facility"); (ii) a senior secured term loan facility in
the principal amount of $125 million payable in quarterly installments until
final maturity on June 30, 2005 (the "Term Loan B Facility" and, together with
the Term Loan A Facility, the "Term Loan Facilities") and, (iii) a senior
secured revolving credit facility in an aggregate principal amount up to $250
million terminating on December 31, 2003, of which $60 million (or the
equivalent thereof in Canadian dollars) is available to two of the Company's
Canadian subsidiaries ("the Canadian Borrowers") and of which up to $50 million
is available as a letter of credit facility (the "Revolving Credit Facility",
and together with the Term Loan Facilities, the "Credit Agreement Facilities").
In addition, the Credit Agreement Facilities include a provision for a Tranche C
credit facility (the "Tranche C Facility") of up to $150 million in loan
borrowings having amortization and interest rate terms to be agreed upon between
the Company and the applicable lenders who may supply commitments at such time
as the Tranche C Facility may be utilized.
At June 27, 1998, the Company had outstanding $100.0 million on the Term
Loan A Facility, $125.0 million on the Term Loan B Facility and $67.2 million
under the Revolving Credit Facility (including $57.2 million borrowed by the
Canadian Borrowers).
The Credit Agreement Facilities, which are guaranteed by the Company and
its U.S. subsidiaries (subject to certain exceptions), contain restrictive
covenants including maintenance of interest coverage and leverage ratios and
various other restrictive covenants which are customary for such facilities and
are generally similar to the covenants and ratios contained in the Company's
previous bank credit facilities. In addition, under the Credit Agreement
Facilities, C&A Products is generally prohibited from paying dividends or
making other distributions to the Company except to the extent necessary to
allow the Company to (w) pay taxes and ordinary expenses, (x) make permitted
repurchases of shares or options, (y) make permitted investments in finance,
foreign or acquired subsidiaries and (z) pay permitted dividends. The Company
is permitted to pay dividends and repurchase shares of the Company (i) in any
fiscal year in an aggregate amount up to $12 million and (ii) if certain
financial ratios are satisfied, for the period from April 28, 1996 through
the last day of the Company's most recently ended fiscal quarter, in an
aggregate amount equal to 50% of the Company's cumulative consolidated net
income for that period and, in addition, is permitted to pay dividends and
repurchase shares in amounts representing net proceeds from the sale of its
Imperial Wallcoverings, Inc. subsidiary ("Wallcoverings"). The Company's
obligations under the Credit Agreement Facilities are secured by a pledge of
stock of C&A Products and its significant subsidiaries.
Indebtedness under the Term Loan A Facility and U.S. dollar-denominated
indebtedness under the Revolving Credit Facility bears interest at a per annum
rate equal to the Company's choice of (i) The Chase Manhattan Bank's ("Chase's")
Alternate Base Rate (which is the highest of Chase's announced prime rate, the
Federal Funds Rate plus .5% and Chase's base certificate of deposit rate plus
1%) plus a margin (the "ABR Margin") ranging from 0% to .75% or (ii) the offered
rates for Eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve
months, as selected by the Company, plus a margin (the "LIBOR Margin") ranging
from 1% to 1.75%. Margins, which are subject to adjustment based on changes in
the Company's ratio of senior funded debt to EBITDA (i.e., earnings before
interest, taxes, depreciation, amortization and other non-cash charges) were
1.75% in the case of the LIBOR Margin and .75% in the case of the ABR Margin on
June 27, 1998. Canadian-dollar denominated indebtedness incurred by the Canadian
Borrowers under the Revolving Credit Facility bears interest at a per annum rate
equal to the Canadian Borrowers' choice of (i) (x) the greater of (a) Chase's
prime rate for Canadian dollar-denominated loans in Canada and (b) the rate
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COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
applicable to Canadian dollar-denominated bankers' acceptances for one month
plus 1%, plus (y) the ABR Margin and (ii) Chase's discount rate for bankers'
acceptances having a term of 30, 60, 90 or 180 days, as applicable, plus the
LIBOR Margin. Indebtedness under the Term Loan B Facility bears interest at a
per annum rate equal to the Company's choice of (i) Chase's Alternate Base Rate
(as described above) plus a margin of 1% or (ii) LIBOR of one, two, three or six
months, as selected by the Company, plus a margin of 2%. The weighted average
rate of interest on the Credit Agreement Facilities at June 27, 1998 was 7.4%.
The Credit Agreement Facilities (including the Tranche C Facility, if
utilized) replace and refinance the Company's previously outstanding bank credit
facilities. In conjunction with the refinancing, the Company wrote off deferred
financing charges relating to the previous bank facilities of $3.6 million, net
of income taxes of $2.4 million.
In addition, JPS Automotive L.P. ("JPS Automotive") purchased on the open
market and retired $2.0 million principal amount of JPS Automotive 11-1/8%
Senior Notes due 2001 (the "JPS Automotive Senior Notes") during the quarter
ended June 27, 1998. In conjunction with the repurchase, JPS Automotive
recognized an extraordinary loss of $86,000, net of income taxes of $58,000.
At June 27, 1998, the scheduled maturities of long-term debt are as
follows (in thousands):
Remainder of fiscal year 1998 $ 9,150
Fiscal year 1999 19,863
Fiscal year 2000 24,026
Fiscal year 2001 114,432
Fiscal year 2002 28,853
Later years 602,595
--------
$798,919
========
G. FACILITY CLOSING COSTS:
In connection with the acquisition of JPS Automotive, the Company has
eliminated certain redundant sales and administrative functions and closed one
manufacturing facility in 1997, a second facility in January 1998, and a third
facility in June 1998. The Company is currently in the process of relocating
certain manufacturing processes from a JPS Automotive facility to an existing
C&A Products facility.
These actions affect approximately 640 employees. Total costs accrued for
the shutdown of facilities and severance and other personnel costs were $2.7
million and $7.7 million, respectively.
The components of the reserves for the relocation and facility closures,
which are expected to be completed during fiscal 1998, are as follows (in
thousands):
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Original Changes In Remaining
Reserve Reserve Reserve
---------- -------------- ------------
Anticipated expenditures to close and
dispose of idled facilities............ $ 2,746 $ (2,209) $ 537
Anticipated severance benefits............ 7,655 (4,203) 3,452
------------ ----------- ------------
$ 10,401 $ (6,412) $ 3,989
============ =========== ============
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H. DISCONTINUED OPERATIONS:
On March 13, 1998, the Company completed the sale of Wallcoverings to an
affiliate of Blackstone Partners for a purchase price of $71.9 million and an
option for 6.7% of the common stock of the purchaser (which includes
Wallcoverings and the wallcovering and vinyl units of Borden, Inc.) outstanding
as of the closing date. The proceeds were used to repay long-term debt. In
connection with the sale, the Company recorded a loss of approximately $21.1
million, net of an estimated income tax benefit in the third quarter of 1997 to
adjust the recorded value to the expected proceeds. Accordingly, no gain or loss
was recognized at the sale date.
Losses incurred by Wallcoverings subsequent to April 1996 (the date of
Wallcoverings' discontinuance) were charged to the Company's existing
discontinued operations reserves. The Wallcoverings operating losses were in
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COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
excess of management's forecasted expectations as of the date of discontinuance
but within previously established accruals.
On February 6, 1997, the Company completed the sale of its Floorcoverings
subsidiary ("Floorcoverings") for approximately $195.6 million and the net
proceeds were used to pay down debt incurred to finance the Company's automotive
strategy. The sale resulted in a net after tax gain of $85.3 million.
The Company's discontinued operations include the Company's Mastercraft
Group, Floorcoverings, and JPS Automotive's discontinued air restraint and
industrial fabric operation ("Airbag"). The discontinued operations reported
income of $3.9 million, net of income taxes of $2.6 million, and $4.8 million,
net of income taxes of $3.2 million, for the quarter and six months ended June
28, 1997, respectively.
Net interest expense of discontinued operations was $5.3 million and $12.6
million, respectively, for the quarter and six months ended June 28, 1997 and
was allocated based on the ratio of net book value of discontinued operations
(including reserves for loss on disposal) to consolidated invested capital. A
portion of the loss on sale of receivables has been allocated to discontinued
operations based on the ratio of (x) receivables included in the receivable pool
of the trust maintained by the Company's Carcorp, Inc. subsidiary (the "Trust")
related to discontinued operations to (y) the total of the Trust's receivables
pool. For the quarter and six months ended June 28, 1997, $0.3 million and $0.6
million, respectively, of loss on sale of receivables was allocated to
discontinued operations.
I. RELATED PARTY TRANSACTIONS:
Under the Amended and Restated Stockholders' Agreement among the Company,
C&A Products, Blackstone Partners and WP Partners, the Company pays Blackstone
Partners and WP Partners, or their respective affiliates, each an annual
monitoring fee of $1.0 million, which is payable quarterly.
On March 13, 1998, the Company completed the sale of Wallcoverings to an
affiliate of Blackstone Partners. See Note H to Condensed Consolidated Financial
Report.
During the first quarter of 1998, the Company incurred fees and expenses
for services performed by WP Partners, or its affiliates, in connection with the
sale of Wallcoverings, totaling approximately $0.8 million. During the first
quarter of 1997, the Company incurred fees and expenses for services performed
by Blackstone Partners and WP Partners, or their respective affiliates, in
connection with the sale of Floorcoverings, totaling approximately $2.7 million.
J. INFORMATION ABOUT THE COMPANY'S OPERATIONS:
The Company's continuing operations primarily supply automotive interior
systems-textile and plastic trim, acoustics and convertible top systems - to the
global automotive industry.
The Company performs periodic credit evaluations of its customers'
financial condition and, although the Company does not generally require
collateral, it does require cash payments in advance when the assessment of
credit risk associated with a customer is substantially higher than normal.
Receivables generally are due within 45 days, and credit losses have
consistently been within management's expectations and are provided for in the
consolidated financial statements.
Direct and indirect sales to significant customers in excess of ten
percent of consolidated net sales from continuing operations are as follows:
FOR THE QUARTER ENDED
----------------------
JUNE 27, JUNE 28,
1998 1997
----------- ---------
General Motors Corporation....... 29.6% 32.9%
Ford Motor Company............... 15.1% 16.2%
Chrysler Corporation............. 18.1% 19.9%
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
Information about the Company's continuing operations in different
geographic areas for the quarters and six months ended June 27, 1998, and June
28, 1997 is presented below (in thousands).
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United Other Discontinued
States Canada Mexico Countries (c) Operations Consolidated
-------- -------- -------- ------------- ------------- ------------
FOR THE QUARTER ENDED
JUNE 27, 1998
Net sales..................... $260,414 $ 96,990 $ 23,790 $ 82,141 $ - $ 463,335
Operating income (a).......... 7,254 7,730 6,622 2,055 - 23,661
Depreciation and
amortization (b)............ 9,879 2,395 427 4,033 - 16,734
Identifiable assets .......... 782,730 261,885 39,873 230,952 - 1,315,440
Capital expenditures ......... 15,405 5,524 393 1,451 - 22,773
United Other Discontinued
States Canada Mexico Countries (c) Operations Consolidated
-------- -------- -------- ------------- ------------- ------------
FOR THE QUARTER ENDED
JUNE 28, 1997
Net sales..................... $273,320 $ 91,183 $ 23,298 $ 28,217 $ - $ 416,018
Operating income (a).......... 19,531 14,098 7,011 1,519 - 42,159
Depreciation and
amortization (b)............ 9,412 2,616 532 1,226 - 13,786
Identifiable assets .......... 841,452 232,661 39,338 79,611 232,486 1,425,548
Capital expenditures ......... 7,807 3,646 38 708 5,900 18,099
United Other Discontinued
States Canada Mexico Countries (c) Operations Consolidated
-------- -------- -------- ------------- ------------- ------------
FOR THE SIX MONTHS ENDED
JUNE 27, 1998
Net sales.................. $534,837 $192,388 $46,194 $168,056 $ - $ 941,475
Operating income (a)....... 26,731 19,052 13,001 4,390 - 63,174
Depreciation and
amortization (b)......... 20,339 4,958 1,069 8,700 - 35,066
Identifiable assets ....... 782,730 261,885 39,873 230,952 - 1,315,440
Capital expenditures ...... 30,506 9,095 1,071 5,689 3,144 49,505
United Other Discontinued
States Canada Mexico Countries (c) Operations Consolidated
-------- -------- -------- ------------- ------------- ------------
FOR THE SIX MONTHS ENDED
JUNE 28, 1997
Net sales.................. $556,428 $176,475 $42,058 $ 56,617 $ - $ 831,578
Operating income (a)....... 41,079 26,239 12,656 2,204 - 82,178
Depreciation and
amortization (b)........ 19,760 4,832 1,296 2,492 - 28,380
Identifiable assets ....... 841,452 232,661 39,338 79,611 232,486 1,425,548
Capital expenditures ...... 14,856 7,426 605 2,178 9,785 34,850
</TABLE>
(a)Operating income is determined by deducting all operating expenses,
including goodwill write-off and other costs, from revenues. Operating
expenses do not include interest expense. Corporate services provided by the
Company have been allocated to the business units based on a combination of
estimated use and the relative sales of the business units to the total
consolidated operations of the Company.
(b)Depreciation and amortization includes the amortization of goodwill and
other assets and liabilities.
(c)Other countries include the United Kingdom, Sweden, Spain, Belgium, Germany,
Austria and France.
K. COMMITMENTS AND CONTINGENCIES:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The ultimate
outcome of the legal proceedings to which the Company is a party will not, in
the opinion of the Company's management, based on the facts presently known to
it, have a material effect on the Company's consolidated financial condition or
results of operations.
See also "PART I - FINANCIAL INFORMATION, Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
C&A Products has assigned leases related to real and personal property of
divested businesses. Although C&A Products has obtained releases from the
lessors of certain of these properties, C&A Products remains contingently liable
I-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
under most of the leases. C&A Products' future liability for these leases, in
management's opinion, based on the facts presently known to it, will not have a
material effect on the Company's consolidated financial condition or results of
operations.
L. COMMON STOCKHOLDERS' DEFICIT:
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. Comprehensive income includes
net income and other comprehensive income (revenues, expenses, gains and losses)
that, under generally accepted accounting principles, are included in
comprehensive income but excluded from net income. SFAS No.130 requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid in capital in the
equity section of a balance sheet. The Company adopted SFAS No. 130 on December
28, 1997. Total comprehensive income (loss) for the quarters ended June 27, 1998
and June 28, 1997 was $(5.7) million and $14.8 million, respectively. For the
six months ended June 27, 1998 and June 28, 1997, comprehensive income was $7.4
million and $109.3 million, respectively. Activity in the common stockholders'
deficit since December 27, 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Accumulated
Current Year Other
Comprehensive Retained Comprehensive Common Paid-in Treasury
Income Total Earnings Income Stock Capital Stock
------------- ------ --------- ------------- ------- ------- --------
Balance at December 27, 1997 $(66,850) $(576,851) $ (39,823) $ 705 $585,890 $(36,771)
Comprehensive income........
Net income................ $ 4,517 4,517 4,517 - - - -
Other comprehensive
income, net of tax -
Foreign currency
translation
adjustments............ 2,861 2,861 - 2,861 - - -
---------
Total comprehensive income.. $ 7,378
=========
Compensation expense
adjustment............... (400) - - - (400) -
Purchase of treasury stock
(879 shares)............. (6,545) - - - - (6,545)
---------- --------- --------- -------- ---------- --------
Balance at June 27, 1998.... $(66,417) $(572,334) $(36,962) $ 705 $585,490 $(43,316)
========== ========= ========= ======== ========== ========
</TABLE>
The accumulated balances and current period activity for each component of
Accumulated Other Comprehensive Income are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Foreign Currency Pension Accumulated Other
Translation Equity Comprehensive
Adjustments Adjustment Income
---------------- ----------------- ---------------
Beginning balance..................... $ (29,123) $ (10,700) $ (39,823)
Current-period change................. 2,861 - 2,861
---------------- ----------------- ---------------
Ending balance........................ $ (26,262) $ (10,700) $ (36,962)
================ ================= ===============
</TABLE>
I-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
M. EARNINGS PER SHARE:
The Company adopted SFAS No. 128, "Earnings Per Share," (SFAS No.128) in
December 1997. Basic earnings per common share are computed by dividing income
by the weighted average number of shares of common stock outstanding during the
period. Diluted earnings per common share are determined assuming the exercise
of the stock options issued under the Company's stock option plans. The
following table reconciles the number of common shares used in the basic and
diluted earnings per share from continuing operations (in thousands, except per
share data):
<TABLE>
<CAPTION>
<S> <C>
Quarter Ended Quarter Ended
June 27, 1998 June 28, 1997
------------------------------ ------------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
--------- ------- -------- -------- -------- --------
Basic earnings per share $ (482) 65,447 $ (0.01) $ 11,600 66,144 $ 0.17
Effect of stock option
plans................... - - - - 1,341 -
--------- --------- -------- --------- ------- --------
Diluted earnings per
share.................. $ (482) 65,447 $ (0.01) $ 11,600 67,485 $ 0.17
========= ========= ======== ========= ======= ========
Six Months Ended Six Months Ended
June 27, 1998 June 28, 1997
------------------------------ ------------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
--------- -------- --------- --------- --------- ---------
Basic earnings per share $ 8,196 65,574 $ 0.12 $ 22,865 66,634 $ 0.34
Effect of stock option
plans................... - 818 - - 1,189 -
--------- --------- -------- --------- ------- --------
Diluted earnings per
share................... $ 8,196 66,392 $ 0.12 $ 22,865 67,823 $ 0.34
========= ========= ======== ========= ======= ========
</TABLE>
N. SIGNIFICANT SUBSIDIARY:
The Company conducts all of its operating activities through its
wholly-owned subsidiary, C&A Products. The following represents summarized
consolidated financial information of C&A Products and its subsidiaries for the
following periods (in thousands):
<TABLE>
<CAPTION>
<S> <C>
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
------------------------- --------------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1998 1997 1998 1997
----------- ----------- ----------- -------------
Net sales.......................... $ 463,335 $ 416,018 $ 941,475 $ 831,578
Gross margin....................... 61,876 72,189 139,098 142,434
Income from continuing operations. 75 11,736 8,585 22,963
Income before extraordinary loss... 75 15,617 8,585 113,057
Net income (loss).................. (3,604) 14,896 4,906 112,336
JUNE 27, DECEMBER 27,
1998 1997
----------- -------------
Current assets..................... $ 487,371 $ 508,864
Noncurrent assets.................. 827,722 792,199
Current liabilities................ 316,591 315,268
Noncurrent liabilities............. 1,061,572 1,051,376
</TABLE>
Separate financial statements of C&A Products are not presented because
they would not be material to the holders of any debt securities of C&A Products
that have been or may be issued, there being no material differences between the
financial statements of C&A Products and the Company. The absence of separate
financial statements of C&A Products is also based upon the fact that any debt
of C&A Products issued, and the assumption that any debt to be issued, under the
Registration Statement on Form S-3 filed by the Company and C&A Products
(Registration No. 33-62665) is or will be fully and unconditionally guaranteed
by the Company.
I-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONCLUDED)
(UNAUDITED)
O. NEWLY ISSUED ACCOUNTING STANDARDS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement SFAS No. 133 as of the beginning of any fiscal
quarter after issuance. SFAS No. 133 cannot be applied retroactively. The
Company is currently analyzing the impact of adoption of SFAS No. 133 and
intends to adopt SFAS No. 133 at the beginning of the third quarter of 1998.
However, the adoption of SFAS No. 133 could increase volatility in earnings and
other comprehensive income.
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 98-5, "Reporting on the Costs of
Start-up Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial
reporting of start-up costs and organization costs and requires that all
nongovernmental entities expense the costs of start-up activities as these costs
are incurred instead of being capitalized and amortized. SOP 98-5 is effective
for financial statements for fiscal years beginning after December 15, 1998, and
the initial application of this pronouncement is to be reported as the
cumulative effect of a change in accounting principle. The Company currently
estimates that the impact of the adoption of SOP 98-5 at the beginning of fiscal
1999 will be in the range of $2.0 million to $3.0 million, net of tax.
P. SUBSEQUENT EVENT
On June 30, 1998, the Company acquired Pepers Beheer B.V. ("Pepers"), an
automotive accessory floormat manufacturer located in the Netherlands. The total
purchase price for the acquisition was approximately $3.8 million, subject to
adjustment. Pepers will be part of the Company's accessory floormats subsidiary,
The Akro Corporation. The Company believes that the acquisition will allow it to
better serve its existing European customers, such as Volvo and Ford, as well as
Pepers' existing customers, including Volkswagen, Audi and Renault.
I-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On June 30, 1998, the Company acquired Pepers, an automotive accessory
floormat manufacturer located in the Netherlands. The total purchase price for
the acquisition was approximately $3.8 million, subject to adjustment. Pepers
will be part of the Company's accessory floormats subsidiary, The Akro
Corporation. The Company believes that the acquisition will allow it to better
serve its existing European customers, such as Volvo and Ford, as well as
Pepers' existing customers, including Volkswagen, Audi and Renault.
GENERAL
The Company is a global supplier of automotive interior systems, including
textile and plastic trim, acoustics and convertible top systems.
The automotive supply industry in which the Company competes is cyclical
and is influenced by the level of North American and European vehicle
production. Management believes the long-term trends in the design and
manufacture of automotive products include the increased use of plastic
components, the increased sourcing of interior systems and U.S. automotive
manufacturers' movement to fewer suppliers and to suppliers with engineering and
design capabilities. The Company anticipates the reduction in the supply chain
will result in integration whereby the complete interior of an automobile will
be co-designed and developed with fewer suppliers who will manufacture and
deliver required components. The Company anticipates these capabilities will be
essential to its long-term strategic positioning as a key supplier within the
automotive industry and with its customers.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C>
QUARTER ENDED
------------------------------------------
JUNE 27, 1998 JUNE 28, 1997
-------------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
-------- -------- ------ -------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales.......................... $ 463,335 100.0% $ 416,018 100.0%
Cost of goods sold................. 401,459 86.6% 343,829 82.7%
--------- ------- --------- -------
Gross margin....................... 61,876 13.4% 72,189 17.3%
Selling, general & administrative
expenses........................ 38,215 8.3% 30,030 7.2%
--------- ------- --------- -------
Operating income................... $ 23,661 5.1% $ 42,159 10.1%
========= ======= ========= =======
EBITDA (1)......................... $ 39,663 8.6% $ 55,971 13.5%
========= ======= ========= =======
SIX MONTHS ENDED
-----------------------------------------
JUNE 27, 1998 JUNE 28, 1997
-------------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
------- --------- ------- -------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales.......................... $ 941,475 100.0% $ 831,578 100.0%
Cost of goods sold................. 802,377 85.2% 689,144 82.9%
--------- ------- --------- -------
Gross margin....................... 139,098 14.8% 142,434 17.1%
Selling, general & administrative
expenses ........................ 75,924 8.1% 60,256 7.2%
--------- ------- --------- -------
Operating income................... $ 63,174 6.7% $ 82,178 9.9%
========= ======= ========= =======
EBITDA (1)......................... $ 97,013 10.3% $ 109,801 13.2%
========= ======= ========= =======
</TABLE>
(1)EBITDA represents earnings before deductions for net interest expense, loss
on sale of receivables, income tax, other income and expense, depreciation,
amortization and the non-cash portion of non-recurring charges. EBITDA does
not represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
I-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
NET SALES: The Company's net sales increased 11.4% to approximately $463.3
million in the second quarter of 1998, up $47.3 million over the comparable 1997
quarter. For the first six months of 1998, the Company's net sales were $941.5
million, up $109.9 million from the comparable period in 1997. The overall
increase was primarily due to the acquisition from Perstorp A.B. ("Perstorp") in
December 1997 of its remaining interest in the Collins & Aikman/Perstorp
automotive acoustics joint venture operations in Sweden, Belgium and France (the
"Collins & Aikman/Perstorp Joint Venture"), the acquisition of certain of
Perstorp's German operations in August 1997 (the "German Operations") and the
acquisition of C&A Plastics UK on February 2, 1998. The Company assumed
effective control of C&A Plastics UK, which is located in the United Kingdom, on
January 1, 1998. The acquired entities generated combined sales of $53.1 million
and $109.7 million during the quarter and six months ended June 27, 1998,
respectively. The increase in second quarter net sales was offset by reduced
sales of automotive bodycloth, luggage compartment trim and other products.
Sales during the second quarter of 1998 were reduced by $17.8 million due to a
strike at General Motors, which began June 5, 1998 and ended on July 29, 1998.
Approximately 2,500 of the Company's employees, the majority of them at Collins
& Aikman Plastics, Inc. ("C&A Plastics"), were on temporary lay-off due to the
General Motors strike and are expected to return to work by mid to late August.
The Company expects the impact of the strike on revenues in the third quarter
to be between $40 million and $50 million. The Company believes that a portion
of these lost sales may be made up throughout the rest of the year. Strikes at
General Motors and Chrysler also reduced sales by approximately $17.0 million
during the second quarter of 1997. Translation of foreign revenues negatively
affected sales by approximately $3 million in the second quarter of 1998
compared to the second quarter of 1997, due to the strengthening U.S. dollar.
The Company operates five divisions, with seven primary product lines. Certain
products are sold by more than one division. Sales in the Company's product
lines are discussed below. As a result of the Company's acquisition and
expansion activities, certain prior year product line sales data has been
recategorized to provide comparability.
MOLDED FLOOR CARPET: Molded floor carpet sales increased 11.1% and 8.7% for the
quarter and six months ended June 27, 1998, respectively, over the comparable
periods in 1997. Sales were positively impacted by sales to the Dodge Durango,
Cadillac Seville, Nissan Sentra, Rover Freelander and Honda Accord, offset by
decreases to the Toyota Camry and Cadillac Eldorado.
LUGGAGE COMPARTMENT TRIM: Luggage compartment trim sales decreased 8.2% for the
quarter ended June 27, 1998 from the quarter ended June 28, 1997. Sales were
flat for the six months ended June 27, 1998 in comparison with the comparable
period in 1997. Sales increases attributable to revenues generated by the
entities constituting the former Collins & Aikman/Perstorp Joint Venture were
offset by decreased sales in the North American market due to reduced sales to
the Honda Accord, the Buick Century and the discontinued Ford Thunderbird.
ACCESSORY FLOORMATS: Accessory floormat sales increased 9.2% and 11.7% for the
quarter and six months ended June 27, 1998, respectively, over the comparable
periods in 1997. These increases are primarily attributable to sales to the
General Motors C/K truck series, including the Suburban and Tahoe, and the Ford
Explorer. Overseas sales also increased to the Honda Accord and Toyota Sienna.
AUTOMOTIVE BODYCLOTH: Automotive bodycloth sales decreased 17.9% and 16.3% for
the quarter and six months ended June 27, 1998, respectively, over the
comparable periods in 1997. Sales increases to the Nissan Altima, Saturn Sedan
and Dodge Stratus were offset by decreased sales to the Pontiac Grand Am and the
Chevrolet Cavalier and Lumina/Impala. Sales were also adversely affected by an
increased demand for leather seating applications, which management expects to
continue for the forseeable future, four program run-outs, an unfavorable mix on
several models and a decrease in build on several key vehicles.
PLASTIC-BASED INTERIOR TRIM SYSTEMS: Plastic-based interior trim systems sales
increased 43.6% and 47.8% for the quarter and six months ended June 27, 1998,
respectively, over the comparable periods in 1997. This increase is primarily
due to the acquisitions of C&A Plastics UK and Perstorp's remaining interest in
the former Collins & Aikman/Perstorp Joint Venture, which generated combined
sales of plastic components of $28.6 million and $60.1 million for the quarter
and six months ended June 27, 1998, respectively. Sales at the C&A Plastics
North American locations were positively impacted by increased sales to the
Cadillac Seville, Chevrolet Cavalier/Pontiac Sunfire and the Lincoln
Continental, offset by reduced sales in the second quarter to General Motors
resulting from the strike.
I-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CONVERTIBLE TOP SYSTEMS: Convertible top systems sales increased 11.7% and 22.4%
for the quarter and six months ended June 27, 1998, respectively, over the
comparable periods in 1997. Sales volumes increased substantially on the
Chevrolet Corvette, Ford Mustang, Alfa Romeo Spider and Plymouth Prowler.
Management currently expects build rates to continue to decrease over the
remainder of the year, as the spring ramp up continues to ease off.
ACOUSTICAL PRODUCTS: Acoustical products sales increased 46.6% and 45.0% for the
quarter and six months ended June 27, 1998, respectively, over the comparable
periods in 1997. This increase is attributable to the acquisitions of the German
Operations as well as Perstorp's remaining interest in the operations which were
formerly included in the Collins & Aikman/Perstorp Joint Venture. These
operations generated combined acoustical sales of $15.7 million and $31.5
million for the quarter and six months ended June 27, 1998, respectively.
OTHER: The Company also had sales of other products of $36.9 million and $75.8
million for the quarter and six months ended June 27, 1998, respectively. Sales
of other products were $40.6 million and $81.1 million for the quarter and six
months ended June 28, 1997, respectively. These products include headliner
fabric, casket lining, residential floormats and fabric for industrial uses.
Approximately 38% of the Company's sales for the six months ended June 27, 1998
were attributable to products utilized in vehicles built outside of North
America, compared to approximately 31% in the six months ended June 28, 1997.
The change in sales mix is attributable to the Company's acquisitions in the
United Kingdom, Germany, Sweden, France and Belgium.
The above factors resulted in the Company's average revenue per North American
produced vehicle increasing to approximately $90 for the six months ended June
27, 1998, compared to an average of approximately $89 for the 1997 fiscal year.
The North American content per build decreased in the second quarter of 1998 to
$87 due to the General Motors strike. The Company's content per build in Europe
was approximately $17 in the six months ended June 27, 1998, which equaled the
average for the 1997 fiscal year.
GROSS MARGIN: For the second quarter of 1998, gross margin was 13.4%, down from
17.3% in the comparable period in 1997. For the six months ended June 27, 1998,
gross margin was 14.8%, down from 17.1% in the comparable 1997 period. The
decrease in gross margin is due in part to the General Motors strike and
inefficiencies associated with the closure of the Company's Salisbury, North
Carolina carpet manufacturing operations, which were relocated to the Company's
Parker plant in Greenville, South Carolina. Problems relating to automotive
bodycloth sales, including lower volume, four program run-outs and unfavorable
product mix, also contributed to the decrease. In addition, the Company recorded
an inventory adjustment of $2.0 million at its accessory floormat subsidiary
during the second quarter of 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses for the second quarter of 1998 increased $8.2 million to
$38.2 million, over the comparable period in 1997. For the six months ended June
27, 1998, selling, general and administrative expenses increased $15.7 million
over the comparable period in 1997. The increase in the quarter and six months
is primarily attributable to the Company's recent acquisitions of C&A Plastics
UK, the German Operations and Perstorp's remaining interest in the operations
constituting the former Collins & Aikman/Perstorp Joint Venture. These
operations had combined selling, general and administrative expenses of $5.1
million and $9.9 million for the quarter and six months ended June 27, 1998,
respectively. In addition, expenditures increased at C&A Plastics in connection
with improvement programs. As a percentage of sales, selling, general and
administrative expenses were 8.2% in the second quarter of 1998, compared to
7.2% for the second quarter of 1997. For the six months ended June 27, 1998,
selling, general and administrative expenses were 8.1% of sales, compared to
7.2% for the comparable period in 1997. This increase in the quarter and six
months is due to lower sale volumes in automotive bodycloth and a $1.6 million
increase in accounts receivable reserves due to financial difficulty experienced
at a customer.
INTEREST EXPENSE: Interest expense, net of interest income of $1.6 million and
$0.3 million for the second quarter of 1998 and 1997, respectively, increased to
$19.4 million in the second quarter of 1998 from $19.3 million in the second
quarter of 1997. Interest expense, net of interest income of $2.2 million and
$0.6 million for the six months ended June 27, 1998 and June 28, 1997,
respectively, increased to $39.9 million for the six months ended June 27, 1998
from $38.1 million in the comparable 1997 period. This increase is primarily due
to interest expense allocated to discontinued operations in 1997, partially
offset by a lower outstanding debt balance during 1998. Total interest expense,
including amounts allocated to discontinued operations, was $24.9 million and
$51.3 million for the quarter and six months ended June 28, 1997.
I-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LOSS ON THE SALE OF RECEIVABLES: The Company sells on a continuous basis,
through its Carcorp subsidiary, interests in a pool of accounts receivable. In
connection with the receivables sales, a loss of $1.7 million was recognized
during the second quarter of 1998, compared to a $1.6 million loss, net of
amounts allocated to discontinued operations, in the second quarter of 1997.
Losses of $3.3 million and $2.8 million, net of amounts allocated to
discontinued operations, were recognized in the six months ended June 27, 1998
and June 28, 1997, respectively. The increase in the loss on the sale of
receivables is a result of C&A Plastics being added as a seller under the
Receivables Facility (as hereinafter defined) during June 1997. Total losses on
the sale of receivables, including amounts allocated to discontinued operations,
were $1.8 million and $3.4 million in the quarter and six months ended June 28,
1997.
OTHER EXPENSE: The Company recognized foreign currency transaction losses of
$3.4 million and $1.1 million in the quarters ended June 27, 1998 and June 28,
1997, respectively. The loss in the second quarter of 1998 was primarily related
to the strengthening of the U.S. dollar against the Canadian dollar. For the six
months ended June 27, 1998 and June 28, 1997, the Company recognized foreign
currency losses of $3.4 million and $1.9 million, respectively. Offsetting the
foreign currency losses during the quarter and six months ended June 28, 1997
was income from the Collins & Aikman/Perstorp Joint Venture of $0.6 million and
$0.9 million, respectively.
INCOME TAXES: In the quarter ended June 27, 1998, the Company recognized an
income tax benefit of $0.5 million, compared to income tax expense of $9.2
million in the prior year quarter. For the six months ended June 27, 1998, the
Company recognized a $8.0 million income tax provision for continuing
operations, compared to a provision of $17.5 million for the six months ended
June 28, 1997. The Company's effective tax rate for the quarter ended June 27,
1998 was 48.7%, compared to 44.2% in the prior year quarter. For the six months
ended June 27, 1998, the Company's effective tax rate was 49.5%, compared to
43.3% for the comparable period in 1997. The percentage increase is due to the
impact of certain state taxes and nondeductible goodwill, which do not fluctuate
with income.
DISCONTINUED OPERATIONS: No income from discontinued operations has been
reflected for the six months ended June 27, 1998, as the operations of
Wallcoverings prior to its sale have been charged to the Company's discontinued
operations reserves. The Company's income from discontinued operations was $3.9
million and $4.8 million for the quarter and six months ended June 28, 1997,
respectively and include the operations of the Company's Mastercraft Group,
Floorcoverings and Airbag.
As previously discussed, Wallcoverings was sold on March 13, 1998. The Company
recorded a loss of $21.1 million, net of income tax benefits, in September 1997,
to adjust the recorded value of Wallcoverings to the expected proceeds.
Accordingly, no gain or loss resulted from the sale of Wallcoverings.
The sale of Floorcoverings for approximately $195.6 million was completed in
February 1997, resulting in a gain on the sale of discontinued operations of
$85.3 million, net of income taxes of $53.4 million.
EXTRAORDINARY LOSS: For the quarter and six months ended June 27, 1998, the
Company recognized an extraordinary loss consisting of a non-cash extraordinary
charge of $3.6 million, net of income taxes of $2.4 million, relating to the
refinancing of the Company's bank facilities and a $0.1 million charge, net of
taxes of $58 thousand, recognized in connection with the purchase of $2.0
million principal amount of JPS Automotive 11-1/8% Senior Notes due 2001 (the
"JPS Automotive Senior Notes") on the market at prices in excess of the carrying
values. For the quarter and six months ended June 28, 1997, the Company
recognized a loss of $0.7 million, net of income taxes of $0.4 million, in
connection with the purchase of $19.4 million principal amount of JPS Automotive
Senior Notes on the open market at prices in excess of the carrying values.
NET INCOME: The combined effect of the foregoing resulted in a net loss of $4.2
million in the second quarter of 1998, compared to net income of $14.8 million
in the second quarter of 1997. Net income for the six months ended June 27, 1998
and June 28, 1997 was $4.5 million and $112.2 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$20.3 million and $24.0 million at June 27, 1998 and December 27, 1997,
respectively. The Company had a total of $165.1 million of borrowing
availability under its credit arrangements as of June 27, 1998. The total was
comprised of $152.9 million under a revolving credit facility (including $2.8
million available to the Canadian Borrowers, as hereinafter defined),
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COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
approximately $11.6 million under bank demand lines of credit in Austria and
Canada, and $0.6 million available under the Receivables Facility. Availability
as of June 27, 1998 under the revolving credit facility has been reduced by
outstanding letters of credit of $29.9 million.
On May 28, 1998, the Company entered into new credit facilities consisting
of: (i) a senior secured term loan facility in the principal amount of $100
million payable in quarterly installments until final maturity on December 31,
2003 (the "Term Loan A Facility"); (ii) a senior secured term loan facility in
the principal amount of $125 million payable in quarterly installments until
final maturity on June 30, 2005 (the "Term Loan B Facility" and, together with
the Term Loan A Facility, the "Term Loan Facilities"); and (iii) a senior
secured revolving credit facility in an aggregate principal amount of up to $250
million terminating on December 31, 2003, of which $60 million (or the
equivalent thereof in Canadian dollars) is available to two of the Company's
Canadian subsidiaries (the "Canadian Borrowers"), and of which up to $50 million
is available as a letter of credit facility (the "Revolving Credit Facility" and
together with the Term Loan Facilities, the "Credit Agreement Facilities"). In
addition, the Credit Agreement Facilities include a provision for a Tranche C
credit facility (the "Tranche C Facility") of up to $150 million in loan
borrowings having amortization and interest rate terms to be agreed upon between
the Company and the applicable lenders who may supply commitments at such time
as the Tranche C Facility may be utilized. The Credit Agreement Facilities
(including the Tranche C Facility, if utilized) replace and refinance the
Company's previously outstanding bank credit facilities, including the
facilities entered into in June 1994 and December 1995 and amended and restated
in June 1996 and the Delayed Draw Term Loan facility entered into by the Company
in connection with the acquisition of JPS Automotive in December 1996
(collectively, the "Replaced Facilities").
On March 13, 1998, the Company sold Wallcoverings for $71.9 million and
an option for 6.7% of the common stock of the purchaser outstanding as of the
closing date. The proceeds were used to repay long-term debt.
At June 27, 1998, the Company had outstanding $100.0 million under the
Term Loan A Facility, $125.0 million under the Term Loan B Facility, and $67.2
million under the Revolving Credit Facility (including $57.2 million borrowed by
the Canadian Borrowers).
The Credit Agreement Facilities, which are guaranteed by the Company and
its U.S. subsidiaries (subject to certain exceptions), contain restrictive
convenants including maintenance of interest coverage and leverage ratios and
various other restrictive covenants which are customary for such facilities and
are generally similar to the covenants and ratios contained in the Replaced
Facilities. In addition, under the Credit Agreement Facilities, C&A Products is
generally prohibited from paying dividends or making other distributions to the
Company except to the extent necessary to allow the Company to (w) pay taxes
and ordinary expenses, (x) make permitted repurchases of shares or options,
(y) make permitted investments in finance, foreign or acquired subsidiaries
and (z) pay permitted dividends. The Company is permitted to pay dividends
and repurchase shares of the Company (i) in any fiscal year in an aggregate
amount up to $12 million and (ii) if certain financial ratios are satisfied,
for the period from April 28, 1996 through the last day of the Company's most
recently ended fiscal quarter, in an aggregate amount equal to 50% of the
Company's cumulative consolidated net income for that period and, in addition,
is permitted to pay dividends and repurchase shares in amounts representing
net proceeds from the sale of Wallcoverings. The Company's obligations
under the Credit Agreement Facilities are secured by a pledge of the
stock of C&A Products and its significant subsidiaries. These restrictions on
dividends and distributions are generally similar to those contained in the
Replaced Facilities.
On June 10, 1996, C&A Products issued $400 million principal amount of
11-1/2% Senior Subordinated Notes due 2006 (the "Subordinated Notes"), which
mature in 2006. The Subordinated Notes are guaranteed by the Company. The
indenture governing the Subordinated Notes generally prohibits the Company, C&A
Products and any Restricted Subsidiary (as defined) from making certain payments
and investments (generally, dividends and distributions on their capital stock;
repurchases or redemptions of their capital stock; repayment prior to maturity
of debt subordinated to the Subordinated Notes; and investments (other than
permitted investments)) ("Restricted Payments") if (i) there is a default under
the Subordinated Notes or (ii) after giving pro forma effect to the Restricted
Payment, C&A Products could not incur at least $1.00 of additional indebtedness
under the indenture's general test for the incurrence of indebtedness, which is
a specified ratio (currently 2.25 to 1.0) of cash flow to interest expense or
(iii) the aggregate of all such Restricted Payments from the issue date exceeds
a specified threshold (based, generally, on 50% of cumulative consolidated net
income since the quarter in which the issue date occurred plus 100% of the net
proceeds of capital contributions to C&A Products from stock issuances by the
Company). These prohibitions are subject to a number of significant exceptions,
including dividends and other distributions to stockholders of the Company or
stock repurchases
I-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
not exceeding $10 million in any fiscal year or $20 million in the aggregate
until the maturity of the Subordinated Notes, dividends to stockholders of the
Company of the amount of net available proceeds from the sale of Wallcoverings
and dividends to the Company to permit it to pay its operating and
administrative expenses. The Subordinated Notes indenture also contains other
restrictive covenants (including, among others, limitations on the incurrence of
indebtedness, asset dispositions and transactions with affiliates) which are
customary for such securities. These covenants are also subject to a number of
significant exceptions. The Company does not currently meet the Subordinated
Notes indenture's general test for the incurrence of indebtedness, and does not
expect to meet such test during the second half of 1998. However, the Company
expects all its borrowing needs for the foreseeable future to be allowed under
exceptions for permitted indebtedness in the indenture.
The indenture governing the JPS Automotive Senior Notes generally
prohibits JPS Automotive from making certain restricted payments and investments
(generally, dividends and distributions on its equity interests; purchases or
redemptions of its equity interests; purchases of any indebtedness subordinated
to the JPS Automotive Senior Notes; and investments other than as permitted)
("JPS Automotive Restricted Payments") unless (i) there is no default under the
JPS Automotive Senior Notes indenture; (ii) after giving pro forma effect to the
JPS Automotive Restricted Payment, JPS Automotive would be permitted to incur at
least $1.00 of additional indebtedness under the indenture's general test for
the incurrence of indebtedness which is a specified ratio (currently 2.5 to 1.0)
of cashflow to interest expense, and (iii) the aggregate of all JPS Automotive
Restricted Payments from the issue date is less than a specified threshold
(based, generally, on 50% of JPS Automotive's cumulative consolidated net income
since the issue date plus 100% of the aggregate net cash proceeds of the
issuance by JPS Automotive of certain equity and convertible debt securities and
cash contributions to JPS Automotive) (the "JPS Automotive Restricted Payments
Tests"). These conditions were satisfied immediately following the closing of
the JPS Automotive Acquisition and as of June 27, 1998. The JPS Automotive
Restricted Payments Tests are subject to a number of significant exceptions. The
indenture governing the JPS Automotive Senior Notes also contains other
restrictive covenants (including, among others, limitations on the incurrence of
indebtedness and issuance of preferred stock, asset dispositions and
transactions with affiliates including the Company and C&A Products) which are
customary for such securities. These covenants are also subject to a number of
significant exceptions. During the second quarter of 1998, $2.0 million
principal amount of JPS Automotive Senior Notes were repurchased by JPS
Automotive on the open market and retired. After giving effect to the
repurchase, JPS Automotive had, as of June 27, 1998, approximately $89.3 million
of indebtedness outstanding (including a premium of $2.7 million) related to the
JPS Automotive Senior Notes. The Company is operating JPS Automotive as a
restricted subsidiary under the Credit Agreement Facilities and the indenture
governing the Subordinated Notes.
On March 31, 1995, C&A Products entered, through the Trust formed by
Carcorp, into a receivables facility (the "Receivables Facility"), comprised of
(i) term certificates, which were issued on March 31, 1995, in an aggregate face
amount of $110 million and have a term of five years and (ii) variable funding
certificates, which represent revolving commitments of up to an aggregate of $75
million and have a term of five years. Carcorp purchases on a revolving basis
and transfers to the Trust virtually all trade receivables generated by C&A
Products and certain of its subsidiaries (the "Sellers"). The certificates
represent the right to receive payments generated by the receivables held by the
Trust.
Availability under the variable funding certificates at any time depends
primarily on the amount of receivables generated by the Sellers from sales to
the automotive industry, the rate of collection on those receivables and other
characteristics of those receivables which affect their eligibility (such as the
bankruptcy or downgrading below investment grade of the obligor, delinquency and
excessive concentration). Based on these criteria, at June 27, 1998 the maximum
amount allowable under the variable funding certificates was $75 million, of
which $0.6 million was available and unutilized. Availability under the
Receivables Facility has been adversely affected by the General Motors strike,
which reduced the total amount of receivables available to be purchased by
Carcorp and to support the outstanding term certificates and variable funding
certificates. Nevertheless, the Company believes that its other sources of funds
will be adequate to meet its cash flow needs until the amount of General Motors'
receivables sold to Carcorp returns to levels experienced before the strike
began.
The proceeds received by Carcorp from collections on receivables, after
the payment of expenses and amounts due on the certificates, are used to
purchase new receivables from the Sellers. Collections on receivables are
required to remain in the Trust if at any time the Trust does not contain
sufficient eligible receivables to support the outstanding certificates. The
Receivables Facility contains certain other restrictions on Carcorp (including
maintenance of $25 million net worth) and on the Sellers (including limitations
on liens on receivables, modifications of the terms of receivables, and changes
in credit and collection practices) customary for facilities of this type. The
commitments under the Receivables
I-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Facility are subject to termination prior to their term upon the occurrence of
certain events, including payment defaults, breach of covenants, bankruptcy,
insufficient eligible receivables to support the outstanding certificates,
default by C&A Products in servicing the receivables and, in the case of the
variable funding certificates, failure of the receivables to satisfy certain
performance criteria.
During the second quarter of 1998, the Company repaid indebtedness
totaling approximately $24.6 million at its subsidiaries operating in Sweden,
Belgium and France constituting the former operations of the Collins &
Aikman/Perstorp Joint Venture. The repayments were funded through borrowings by
the Canadian Borrowers under the Revolving Credit Facility.
The Company has a master equipment lease agreement for a maximum of $50
million of machinery and equipment. At June 27, 1998, the Company had $20.0
million of potential availability under this master lease for future machinery
and equipment requirements of the Company subject to the lessor's approval. In
the quarter ended June 27, 1998, the Company made lease payments relating to
continuing operations of approximately $1.4 million for machinery and equipment
sold and leased back under this master lease. The Company expects lease payments
for continuing operations under this master lease to be $2.9 million during the
remainder of fiscal 1998.
The Company's principal sources of funds are cash generated from
continuing operating activities, borrowings under the Credit Agreement
Facilities and the sale of receivables under the Receivables Facility. Net cash
used in the continuing operating activities of the Company was $20.2 million for
the quarter ended June 27, 1998, compared to $7.2 million for the quarter ended
June 28, 1997. Net cash provided by the continuing operating activities of the
Company's continuing operations was $3.1 million for the six months ended June
27, 1998, compared to $59.8 million for the six months ended June 28, 1997.
The Company's principal uses of funds from operating activities and
borrowings for the next several years are expected to be to fund interest and
principal payments on its indebtedness, net working capital increases and
capital expenditures. At June 27, 1998, the Company had total outstanding
indebtedness of $798.9 million (excluding approximately $29.9 million of
outstanding letters of credit) at an average interest rate of 9.7% per annum. Of
the total outstanding indebtedness, $635.0 million relates to the Credit
Agreement Facilities and the Subordinated Notes.
The Company's Board of Directors authorized the expenditure of up to $25
million in 1998 to repurchase shares of the Company's Common Stock at
management's discretion. The Company believes it has sufficient liquidity under
its existing credit arrangements to effect the repurchase program. The Company
spent $4.4 million and $6.5 million to repurchase shares during the quarter and
six months ended June 27, 1998, respectively. During July 1998, the Company
spent $4.2 million to repurchase shares.
Indebtedness under the Term Loan A Facility and U.S. dollar-denominated
indebtedness under the Revolving Credit Facility bears interest at a per annum
rate equal to the Company's choice of (i) The Chase Manhattan Bank's ("Chase's")
Alternate Base Rate (which is the highest of Chase's announced prime rate, the
Federal Funds Rate plus .5% and Chase's base certificate of deposit rate plus
1%) plus a margin (the "ABR Margin") ranging from 0% to .75% or (ii) the offered
rates for Eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve
months, as selected by the Company, plus a margin (the "LIBOR Margin") ranging
from 1% to 1.75%. Margins, which are subject to adjustment based on changes in
the Company's ratio of senior funded debt to EBITDA (i.e., earnings before
interest, taxes, depreciation, amortization and other non-cash charges) were
1.75% in the case of the LIBOR Margin and .75% in the case of the ABR Margin on
June 27, 1998. Canadian-dollar denominated indebtedness incurred by the Canadian
Borrowers under the Revolving Credit Facility bears interest at a per annum rate
equal to the Canadian Borrowers' choice of (i) (x) the greater of (a) Chase's
prime rate for Canadian dollar-denominated loans in Canada and (b) the rate
applicable to Canadian dollar-denominated bankers' acceptances for one month
plus 1%, plus (y) the ABR Margin and (ii) Chase's discount rate for bankers'
acceptances having a term of 30, 60, 90 or 180 days, as applicable, plus the
LIBOR Margin. Indebtedness under the Term Loan B Facility bears interest at a
per annum rate equal to the Company's choice of (i) Chase's Alternate Base Rate
(as described above) plus a margin of 1% or (ii) LIBOR of one, two, three or six
months, as selected by the Company, plus a margin of 2%. The weighted average
rate of interest on the Credit Agreement Facilities at June 27, 1998 was 7.4%.
The weighted average interest rate on the sold interests under the Receivables
Facility at June 27, 1998 was 6.4%. Under the Receivables Facility, the term
certificates bear interest at an average rate equal to one month LIBOR plus .34%
annum and the variable funding certificates bear interest, at Carcorp's option,
at LIBOR plus .40% per annum or a prime rate. The Subordinated Notes bear
interest at 11.5% per annum. The JPS Automotive Senior Notes pay interest at a
rate of 11.125% per annum. Cash interest paid for the quarters ended
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
June 27, 1998 and June 28, 1997 was $36.1 million and $38.6 million,
respectively. Cash interest paid was $43.2 million and $50.8 million for the six
months ended June 27, 1998 and June 28, 1997, respectively.
Due to the variable interest rates under the Credit Agreement Facilities
and the Receivables Facility, the Company is sensitive to increases in interest
rates. Accordingly, during April 1996, the Company limited its exposure through
April 2, 1998 on $80 million of notional principal amount utilizing zero cost
collars with 4.75% floors and a weighted average cap of 7.86%. During April
1997, the Company entered into a two year interest rate swap agreement in which
the Company effectively exchanged $27.0 million of 11-1/2% fixed rate debt for
floating rate debt at six month LIBOR plus a 4.72% margin. In connection with
this swap agreement, the Company also limited its interest rate exposure on
$27.0 million of notional principal amount by entering into an 8.50% cap on
LIBOR. Based upon amounts outstanding at June 27, 1998, a .5% increase in LIBOR
(5.5% at June 27, 1998) would impact interest costs by approximately $1.4
million annually on the Credit Agreement Facilities and $0.6 million annually on
the Receivables Facility. During April 1997, the Company entered into an
agreement to limit its foreign currency exposure related to $45.0 million of US
dollar denominated borrowings of a Canadian subsidiary. The agreement swapped
LIBOR based interest rates for the Canadian equivalent as well as fixed the
exchange rate for the principal balance upon maturation. This agreement was
terminated on June 1, 1998 as a result of the repayment of the Canadian term
loan. The term loan balance was repaid in conjunction with the refinancing and
replacement of the Replaced Facilities.
The current maturities of long-term debt primarily consist of the current
portion of the Credit Agreement Facilities, vendor financing, an industrial
revenue bond and other miscellaneous debt. The maturities of long-term debt of
the Company's continuing operations during the remainder of 1998 and for 1999,
2000, 2001 and 2002 are $9.2 million, $19.9 million, $24.0 million, $114.4
million and $28.9 million, respectively. The JPS Automotive Senior Notes will
mature in 2001. In addition, the Credit Agreement Facilities provide for
mandatory prepayments of the Term Loan A and Term Loan B Facilities with certain
excess cash flow of the Company, net cash proceeds of certain asset sales or
other dispositions by the Company, net cash proceeds of certain sale/leaseback
transactions and net cash proceeds of certain issuances of debt obligations. The
indenture governing the Subordinated Notes provides that in the event of certain
asset dispositions, C&A Products must apply net proceeds (to the extent not
reinvested in the business) first to repay Senior Indebtedness (as defined,
which includes the Credit Agreement Facilities) and then, to the extent of
remaining net proceeds, to make an offer to purchase outstanding Subordinated
Notes at 100% of their principal amount plus accrued interest. C&A Products must
also make an offer to purchase outstanding Subordinated Notes at 101% of their
principal amount plus accrued interest if a Change in Control (as defined) of
the Company occurs. In addition, the indenture governing the JPS Automotive
Senior Notes requires JPS Automotive to apply the net proceeds from the sale of
assets of JPS Automotive to offer to purchase JPS Automotive Senior Notes, to
the extent not applied within 270 days of such asset sale to an investment in
capital expenditures or other long term tangible assets of JPS Automotive, to
permanently reduce senior indebtedness of JPS Automotive or to purchase JPS
Automotive Senior Notes in the open market. As discussed above, the Company
caused JPS Automotive to make such an offer to purchase JPS Automotive Senior
Notes in connection with the sale of Airbag.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of June 27, 1998, the Company's continuing
operations had approximately $28.3 million in outstanding capital expenditure
commitments. The Company currently anticipates that its capital expenditures for
continuing operations for fiscal 1998 (including costs incurred to date and
outstanding commitments in the remainder of fiscal 1998) will aggregate
approximately $85 million, a portion of which may be financed through leasing.
The Company's capital expenditures in future years will depend upon demand for
the Company's products and changes in technology.
The Company is sensitive to price movements in its raw material supply
base. During the second quarter of 1998, prices for most of the Company's
primary raw materials remained constant with price levels at December 27, 1997.
The prices of certain types of yarn utilized in fabric manufacturing has
declined during 1998, resulting in cost savings of approximately $3 million.
In addition, the price of polyethylene has declined slightly in both North
America and Europe. While the Company may not be able to pass on future raw
material price increases to its customers, it believes that a significant
portion of the increased cost can be offset by continued results of its value
engineering/value analysis and cost improvement programs and by continued
reductions in the cost of nonconformance.
Since Wallcoverings was classified as a discontinued operation in April
1996, Wallcoverings continued to experience sales declines. From April 1996
through October 1997, the Company expended approximately $67.1 million to fund
operations, working capital and capital expenditures and to replace receivables
previously sold to Carcorp. Of these amounts, $21.0 million represents
repayments of intercompany amounts owed to Wallcoverings. From
I-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
November 1, 1997 through its disposition, the Company expended approximately
$19.9 million principally to fund Wallcoverings' operations, working capital and
capital expenditure requirements. Of this amount, approximately $13.9 million
was added to the base purchase price of $58 million provided in the sales
agreement and was paid by the purchaser as part of the final purchase price.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
In connection with the sale and acquisition of certain businesses, the Company
has indemnified the purchasers and sellers for certain environmental
liabilities, lease obligations and other matters. In addition, the Company is
contingently liable with respect to certain lease and other obligations assumed
by certain purchasers and may be required to honor such obligations if such
purchasers are unable or unwilling to do so. Management currently anticipates
that the net cash requirements of its discontinued operations will be
approximately $20.9 million during the remainder of fiscal 1998. However,
because the requirements of the Company's discontinued operations are largely a
function of contingencies, it is possible that the actual net cash requirements
of the Company's discontinued operations could differ materially from
management's estimates. Management believes that the Company's cash needs
relating to discontinued operations can be provided by operating activities from
continuing operations and by borrowings under its credit facilities.
TAX MATTERS
At December 27, 1997, the Company had outstanding net operating loss
carryforwards ("NOLs") of approximately $119.4 million for Federal income tax
purposes. Substantially all of these NOLs expire over the period from 2008 to
2011. The Company also has unused Federal tax credits of approximately $14.9
million, $2.2 million of which expire during the period 1998 to 2006.
Approximately $17.1 million of the Company's NOLs and $2.2 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated such
losses or credits or its successors. Future sales of common stock by the Company
or its principal shareholders, or changes in the composition of its principal
shareholders, could constitute a "change in control" that would result in annual
limitations on the Company's use of its NOLs and unused tax credits. Management
cannot predict whether such a "change in control" will occur. If such a "change
in control" were to occur, the resulting annual limitations on the use of NOLs
and tax credits would depend on the value of the equity of the Company and the
amount of "built-in gain" or "built-in loss" in the Company's assets at the time
of the "change in control", which cannot be known at this time.
ENVIRONMENTAL MATTERS
The Company is subject to Federal, state and local environmental laws and
regulations that (i) affect ongoing operations and may increase capital costs
and operating expenses and (ii) impose liability for the costs of investigation
and remediation and otherwise related to on-site and off-site contamination. The
Company's management believes that it has obtained, and is in material
compliance with, all material environmental permits and approvals necessary to
conduct its various businesses. Environmental compliance costs for continuing
businesses currently are accounted for as normal operating expenses or capital
expenditures of such business units. In the opinion of management, based on the
facts presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
future results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a potentially responsible party
("PRP") in a number of proceedings. The Company may be named as a PRP at other
sites in the future, including with respect to divested and acquired businesses.
The Company is currently engaged in investigation or remediation at certain
sites. In estimating the total cost of investigation and remediation, the
Company has considered, among other things, the Company's prior experience in
remediating contaminated sites, remediation efforts by other parties, data
released by the United States Environmental Protection Agency, the professional
judgment of the Company's environmental experts, outside environmental
specialists and other experts, and the likelihood that other parties which have
been named as PRPs will have the financial resources to fulfill their
obligations at sites where they and the Company may be jointly and severally
liable. Under the theory of joint and several liability, the Company could be
liable for the full costs of investigation and remediation even if additional
parties are found to be responsible under the applicable laws. It is difficult
to estimate the total cost of investigation and remediation due to various
factors including incomplete information regarding particular sites and other
PRPs, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
approaches, the complexity of environmental laws and regulations and changes in
cleanup standards and techniques. When it has been possible to provide
reasonable estimates of the Company's liability with respect to environmental
sites, provisions have been made in accordance with generally accepted
accounting principles. As of June 27, 1998, excluding sites at which the
Company's participation is anticipated to be de minimis or otherwise
insignificant or where the Company is being indemnified by a third party for the
liability, there are 25 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 9 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of June 27, 1998, the
Company's estimate of its liability for these 34 sites is approximately $29.8
million. As of June 27, 1998, the Company has established reserves of
approximately $42.2 million for the estimated future costs related to all its
known environmental sites. In the opinion of management, based on the facts
presently known to it, the environmental costs and contingencies will not have a
material adverse effect on the Company's consolidated financial condition or
future results of operations. However, there can be no assurance that the
Company has identified or properly assessed all potential environmental
liability arising from the activities or properties of the Company, its present
and former subsidiaries and their corporate predecessors.
IMPACT OF YEAR 2000 COMPLIANCE
In order to improve operating performance, the Company has undertaken, or
will undertake in the near future, a number of significant information systems
initiatives. One goal of such systems initiatives is to make the Company's
systems Year 2000 compliant. Based upon a recent assessment, the Company expects
at this time that the cost of the overall information systems initiatives (which
includes the cost of ensuring that its remaining computer systems are Year 2000
compliant) should not have a material adverse effect on the Company. The Company
has completed a preliminary assessment of each of its operations and their Year
2000 readiness and believes that appropriate actions are being taken. The
Company currently expects to complete its overall Year 2000 remediation prior to
any anticipated impact on its operations. The Company believes that, with
modifications to existing software and conversions to new systems, the Year 2000
issue should not pose significant operational problems for its computer systems.
However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material adverse impact on
the operations of the Company. Whether such modifications and conversions are
timely completed may to some extent depend on the availability of outside
consultants as well as establishing reliable telecommunication links with the
Company's operations in Europe and Mexico. Further, while the Company has
initiated communications with a number of its significant suppliers to determine
the extent to which the Company's interface systems are vulnerable to those
third parties' failure to remediate their own Year 2000 issues, and plans to
initiate similar communications with the balance of its major suppliers and
major customers in 1998, there is no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted and would
not have an adverse effect on the Company's systems.
CURRENCY RATE EXPOSURE
The primary purpose of the Company's foreign currency hedging activities
is to protect against the volatility associated with foreign currency purchase
transactions. Corporate policy prescribes the range of allowable hedging
activity. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months.
Gains and losses related to qualifying hedges of foreign currency firm
commitments or anticipated transactions are included in the basis of the
underlying transactions. To the extent that a qualifying hedge is terminated or
ceases to be effective as a hedge, any deferred gains and losses up to that
point continue to be deferred and are included in the basis of the underlying
transaction. All other foreign exchange contracts are marked-to-market on a
current basis and are generally charged to other income (expense). To the extent
that the anticipated transactions are no longer likely to occur, the related
hedges are closed with gains or losses charged to earnings on a current basis.
Based on the Company's overall currency rate exposure as of June 27, 1998,
including derivative and other foreign currency sensitive instruments, a
near-term change in currency rates in amounts indicated by historical currency
rate movements would not materially affect the consolidated financial position,
results of operations, or cash flows of the Company.
On January 1, 1999, eleven of the fifteen member countries of the European Union
(the Participating Countries") are scheduled to establish fixed conversion
rates between their existing sovereign currencies and the euro.
I-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONCLUDED)
The Participating Countries have agreed to adopt the euro as their common legal
currency on that date. The Company is currently analyzing the impact of the
conversion to the euro on its operations, but does not anticipate that the
conversion will have a material adverse effect on the Company's consolidated
financial position or results of operations.
SAFE HARBOR STATEMENT
This Report on Form 10-Q contains statements which, to the extent they are
not historical fact, constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements
involve risks and uncertainties. The forward-looking statements in this Report
on Form 10-Q are intended to be subject to the safe harbor protection provided
by the Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this Report
on Form 10-Q include industry-based factors such as possible declines in the
North American or European automobile and light truck build, labor strikes at
the Company's major customers, changes in consumer preferences, dependence on
significant automotive customers, the level of competition in the automotive
supply industry, and Year 2000 compliance issues, as well as factors more
specific to the Company, such as the substantial leverage of the Company and its
subsidiaries, limitations imposed by the Company's debt facilities and changes
made in connection with the integration of operations acquired by the Company.
The Company's divisions may also be affected by changes in the popularity of
particular car models or the loss of programs on particular car models. For a
discussion of certain of these and other important factors which may affect the
Company's operations, products and markets, see the Company's Securities and
Exchange filings, including without limitation "BUSINESS" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 27, 1997 (the
"10-K"), and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" in the 10-K, the Company's Report on Form 10-Q for the
fiscal quarter ended March 28, 1998 and above in this Form 10-Q and also see the
Company's other filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Disclosures not required at this time.
I-22
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material developments in legal proceedings involving
the Company or its subsidiaries since those reported in the Company's Report on
Form 10-K for fiscal year ended December 27, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a), (c) On May 20, 1998, the Company held its Annual Meeting of
Stockholders. At such meeting, stockholders voted upon the election of three
directors to hold office until the year 2001 Annual Meeting of Stockholders. The
results of the voting were as follows:
Nominee For Withheld Broker Nonvotes
------- --- -------- ---------------
Thomas E. Hannah 64,646,333 205,825 0
George L. Majoros, Jr. 64,646,020 206,138 0
Stephen A. Schwarzman 64,646,276 205,882 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
Please note that in the following description of exhibits, the title of
any document entered into, or filing made, prior to July 7, 1994 reflects the
name of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to Collins & Aikman
Holdings Corporation, Collins & Aikman Group, Inc. or Wickes Companies, Inc., if
such documents and filings were made prior to July 7, 1994.
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 - Restated Certificate of Incorporation of Collins & Aikman Corporation
is hereby incorporated by reference to Exhibit 4.1 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July 30,
1994.
3.2 - By-laws of Collins & Aikman Corporation, as amended, are hereby
incorporated by reference to Exhibit 3.2 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January 27,
1996.
3.3 - Certificate of Elimination of Cumulative Exchangeable Redeemable Preferred Stock
of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit
3.3 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter
ended October 28, 1995.
4.1 - Specimen Stock Certificate for the Common Stock is hereby incorporated by
reference to Exhibit 4.3 of Amendment No. 3 to Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2 (Registration No. 33-53179)
filed June 21, 1994.
4.2 - Indenture, dated as of June 1, 1996, between Collins & Aikman Products Co.,
Collins & Aikman Corporation and First Union National Bank of North Carolina, as
Trustee, is hereby incorporated by reference to Exhibit 4.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996.
4.3 - First Supplemental Indenture dated as of June 1, 1996, between Collins & Aikman
Products Co., Collins & Aikman Corporation and First Union National Bank of
North Carolina, as Trustee, is hereby incorporated by reference to Exhibit 4.3
of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter
ended April 27, 1996.
II-1
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
4.4 - Credit Agreement, dated as of May 28, 1998, among Collins & Aikman Products Co.,
as Borrower, Collins & Aikman Canada, Inc. and Collins & Aikman Plastics, Ltd.,
as Canadian Borrowers, Collins & Aikman Corporation, as Guarantor, the lenders
named therein, Bank of America N.T.S.A., as Documentation Agent, The Chase
Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank of Canada,
as Canadian Administrative Agent.
4.5 - Indenture dated as of June 28, 1994, between JPS Automotive Products Corp., as
Issuer, JPS Automotive L.P., as Guarantor and Shawmut Bank Connecticut, N.A., as
Trustee, is hereby incorporated by reference to Exhibit 4.2 of JPS Automotive
Corp.'s Registration Statement on Form S-1, Registration No. 33-75510.
4.6 - First Supplemental Indenture, dated as of October 5, 1994, between JPS
Automotive Products Corp. and JPS Automotive L.P., as Co-Obligors, and Shawmut
Bank Connecticut, N.A., as Trustee is hereby incorporated by reference to
Exhibit 4.48A of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s
Report on Form 10-Q for the fiscal quarter ended October 2, 1994.
Collins & Aikman Corporation agrees to furnish to the Commission upon
request in accordance with Item 601 (b)(4) (iii) (A) of Regulation S-K
copies of instruments defining the rights of holders of long-term debt
of Collins & Aikman Corporation or any of its subsidiaries, which debt
does not exceed 10% of the total assets of Collins & Aikman Corporation
and its subsidiaries on a consolidated basis.
10.1 - Amended and Restated Stockholders Agreement dated as of June 29, 1994 among the
Company, Collins & Aikman Group, Inc., Blackstone Capital Partners L.P. and
Wasserstein Perella Partners, L.P. is hereby incorporated by reference to
Exhibit 10.1 of Collins & Aikman Corporation's Report on Form 10-K for the
fiscal year ended January 28, 1995.
10.2 - Employment Agreement dated as of July 18, 1990 between Wickes
Companies, Inc. and an executive officer is hereby incorporated by
reference to Exhibit 10.3 of Wickes Companies, Inc.'s Report on Form
10-K for the fiscal year ended January 26, 1991.
10.3 - Letter Agreement dated as of May 16, 1991 and Employment Agreement
dated as of July 22, 1992 between Collins & Aikman Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.7
of Collins & Aikman Holdings Corporation's Report on Form 10-K for the
fiscal year ended January 30, 1993.
10.4 - First Amendment to Employment Agreement dated as of February 24, 1994
between Collins & Aikman Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2 (Registration No.
33-53179) filed April 19,
1994.
10.5 - Second Amendment, dated as of October 3, 1996, to the Employment Agreement,
dated as of July 22, 1992, as amended, between Collins & Aikman Products Co. and
an executive officer is hereby incorporated by reference to Exhibit 10.26 of
Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
October 26, 1996.
10.6 - Third Amendment dated as of August 1, 1997, to the Employment Agreement dated as
of July 22, 1992, as amended, between the Corporation and an executive officer
is hereby incorporated by reference to Exhibit 10.35 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended September 27,
1997.
10.7 - Letter Agreement dated as of May 16, 1991 between Collins & Aikman
Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.14 of Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No. 33-53179) filed
April 19, 1994.
10.8 - Letter Agreement dated as of June 30, 1995 between Collins & Aikman
Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.6 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended January 27, 1996.
10.9 - Letter Agreement dated October 9, 1992 between Collins & Aikman
Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.10 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended December 27, 1997.
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
10.10 - Employment Agreement dated as of March 3, 1997 between Collins &
Aikman Plastics, Inc. and an executive officer is hereby incorporated
by reference to Exhibit 10.11 of Collins & Aikman Corporation's Report
on Form 10-Q for the fiscal quarter ended March 28, 1998.
10.11 - Collins & Aikman Corporation 1997 Executive Incentive Compensation
Plan is hereby incorporated by reference to Exhibit 10.9 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
September 27, 1997.
10.12 - Collins & Aikman Corporation Supplemental Retirement Income Plan is
hereby incorporated by reference to Exhibit 10.23 of Amendment No. 5 to
Collins & Aikman Holdings Corporation's Registration Statement on Form
S-2 (Registration No. 33-53179) filed July 6, 1994.
10.13 - 1993 Employee Stock Option Plan, as amended and restated, is hereby
incorporated by reference to Exhibit 10.13 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended April
29, 1995.
10.14 - 1994 Employee Stock Option Plan, as amended through February 7, 1997,
is hereby incorporated by reference to Exhibit 10.12 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
March 29, 1997.
10.15 - 1994 Directors Stock Option Plan is hereby incorporated by reference
to Exhibit 10.15 of Collins & Aikman Corporation's Report on Form 10-K
for the fiscal year ended January 28, 1995.
10.16 - Excess Benefit Plan of Collins & Aikman Corporation is hereby
incorporated by reference to Exhibit 10.25 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January 28,
1995.
10.17 - Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.17 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended December 27, 1997.
10.18 - Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.18 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended December 27, 1997.
10.19 - Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.19 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended December 27, 1997.
10.20 - Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended December 27, 1997.
10.21 - Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.22 of Collins & Aikman Corporation's report on
Form 10-Q for the fiscal quarter ended March 28, 1998.
10.22 - Lease, executed as of the 1st day of June 1987, between Dura
Corporation and Dura Acquisition Corp. is hereby incorporated by
reference to Exhibit 10.24 of Amendment No. 5 to Collins & Aikman
Holdings Corporation's Registration Statement on Form S-2 (Registration
No. 33-53179) filed July 6, 1994.
10.23 - Amended and Restated Receivables Sale Agreement dated as of March 30, 1995 among
Collins & Aikman Products Co., Ack-Ti-Lining, Inc., WCA Canada Inc., Imperial
Wallcoverings, Inc., The Akro Corporation, Dura Convertible Systems Inc., each
of the other subsidiaries of Collins & Aikman Products Co. from time to time
parties thereto and Carcorp, Inc. is hereby incorporated by reference to Exhibit
10.18 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year
ended January 28, 1995.
10.24 - Servicing Agreement, dated as of March 30, 1995, among Carcorp, Inc., Collins &
Aikman Products Co., as Master Servicer, each of the subsidiaries of Collins &
Aikman Products Co. from time to time parties thereto and Chemical Bank, as
Trustee is hereby incorporated by reference to Exhibit 10.19 of Collins & Aikman
Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995.
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
10.25 - Pooling Agreement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer and Chemical Bank, as
Trustee, is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Corporation's Report on Form 10-K to the fiscal year
ended January 28, 1995.
10.26 - Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer and Chemical
Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21
of Collins & Aikman Corporation's Report on Form 10-K to the fiscal
year ended January 28, 1995.
10.27 - Series 1995-2 Supplement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer, the Initial Purchasers
parties thereto, Societe Generale, as Agent for the Purchasers and Chemical
Bank, as Trustee is hereby incorporated by reference to Exhibit 10.22 of Collins
& Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28,
1995.
10.28 - Amendment No. 1, dated September 5, 1995, among Carcorp, Inc., as Company,
Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as
Trustee, to the Pooling Agreement, dated as of March 30, 1995, among the
Company, the Master Servicer and Trustee is hereby incorporated by reference to
Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended July 29, 1995.
10.29 - Amendment No. 2, dated October 25, 1995, among Carcorp, Inc., as Company,
Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as
Trustee, to the Pooling Agreement, dated as of March 30, 1995, among the
Company, the Master Servicer and the Trustee is hereby incorporated by reference
to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended October 28, 1995.
10.30 - Amendment No. 1, dated February 29, 1996, to the Series 1995-1 Supplement, dated
as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as
Master Servicer, and Chemical Bank, as Trustee, is hereby incorporated by
reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on Form 10-K
for the fiscal year ended January 27, 1996.
10.31 - Amendment No. 1, dated February 29, 1996, to the Series 1995-2 Supplement, dated
as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as
Master Servicer, Societe Generale, as agent, and Chemical Bank, as Trustee, is
hereby incorporated by reference to Exhibit 10.21 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996.
10.32 - Master Equipment Lease Agreement dated as of September 30, 1994,
between NationsBanc Leasing Corporation of North Carolina and Collins &
Aikman Products Co. is hereby incorporated by reference to Exhibit
10.27 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended October 29, 1994.
10.33 - Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS
Automotive L.P. and Collins & Aikman Products Co. dated August 28, 1996
is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July 27,
1996.
10.34 - Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc., Foamex -
JPS Automotive L.P., Foamex International Inc. and Collins & Aikman Products Co.
dated as of December 11, 1996 is hereby incorporated by reference to Exhibit 2.2
of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10,
1996.
10.35 - Equity Purchase Agreement by and among Seiren U.S.A. Corporation, Seiren
Automotive Textile Corporation, Seiren Co., Ltd. and Collins & Aikman Products
Co. dated December 11, 1996, is hereby incorporated by reference to Exhibit 2.3
of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10,
1996.
10.36 - Acquisition Agreement between Perstorp A.B. and Collins & Aikman
Products Co. dated December 11, 1996 is hereby incorporated by
reference to Exhibit 2.4 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
II-4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
10.37 - Agreement among Perstorp A.B., Perstorp GmbH, Perstorp Biotec A.B. and
Collins & Aikman Products Co. dated December 11, 1996 is hereby
incorporated by reference to Exhibit 2.5 of Collins & Aikman
Corporation's current report on Form 8-K dated December 10, 1996.
10.38 - Acquisition Agreement dated as of December 9, 1996 among Collins & Aikman
Products Co., Collins & Aikman Floor Coverings Group, Inc., Collins & Aikman
Floor Coverings, Inc., CAF Holdings, Inc. and CAF Acquisition Corp. is hereby
incorporated by reference to Exhibit 2.7 of Collins & Aikman Corporation's
Current Report on Form 8-K dated December 10, 1996.
10.39 - Mastercraft Group Acquisition Agreement dated as of April 25, 1997
among Collins & Aikman Products Co., Joan Fabrics Corporation and MC
Group Acquisition Company L.L.C., is hereby incorporated by reference
to Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q
for this fiscal quarter ended March 29, 1997.
10.40 - Asset Purchase Agreement dated as of June 30, 1997 by and between JPS
Automotive L.P. and Safety Components International, Inc. is hereby
incorporated by reference to Exhibit 2.1 of JPS Automotive L.P.'s and
JPS Automotive Products Corp.'s Current Report on Form 8-K dated July
24, 1997.
10.41 - Closing Agreement dated July 24, 1997 between JPS Automotive L.P.,
Safety Components International, Inc. and Safety Components Fabric
Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2
of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Current
Report on Form 8-K dated July 24, 1997.
10.42 - Amended and Restated Acquisition Agreement dated as of November 4,
1997 and amended and restated as of March 9, 1998, among Collins &
Aikman Products Co., Imperial Wallcoverings Inc. and BDPI Holdings
Corporation is hereby incorporated by reference to Exhibit 2.4 of
Collins & Aikman Corporation's Report on Form 10-K for the fiscal year
ended December 27, 1997.
11 - Computation of Earnings Per Share.
27 - Financial Data Schedule.
99 - Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein
Perella Partners, L.P. is hereby incorporated by reference to Exhibit 99 of
Amendment No. 4 to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed June 27, 1994.
</TABLE>
(b) REPORTS ON FORM 8-K
During the quarter for which this Report on Form 10-Q is being filed, the
Company filed no reports on Form 8-K.
II-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.
Dated: August 11, 1998
COLLINS & AIKMAN COPORATION
(Registrant)
By: /s/ J. Michael Stepp
-----------------------------
J. Michael Stepp
Chief Financial Officer and
Executive Vice President
(On behalf of the Registrant
and as Principal Financial and
Accounting Officer)
<PAGE>
EXECUTION COPY
CREDIT AGREEMENT
Dated as of May 28, 1998
Among
COLLINS & AIKMAN PRODUCTS CO.,
as Borrower,
COLLINS & AIKMAN CANADA INC.,
as a Canadian Borrower,
COLLINS & AIKMAN PLASTICS, LTD.,
as a Canadian Borrower,
COLLINS & AIKMAN CORPORATION,
as Guarantor,
THE LENDERS NAMED HEREIN,
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Documentation Agent,
THE CHASE MANHATTAN BANK,
as Administrative Agent
And
THE CHASE MANHATTAN BANK OF CANADA
as Canadian Administrative Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE SECTION
PAGE
I.
DEFINITIONS
SECTION 1.01. DEFINED TERMS................................................ 1
SECTION 1.02. TERMS GENERALLY.............................................. 23
II.
THE CREDITS
SECTION 2.01. LOANS; COMMITMENTS........................................... 24
SECTION 2.02. LOANS........................................................ 26
SECTION 2.03. NOTICE OF REVOLVING BORROWINGS............................... 28
SECTION 2.04. NOTES; REPAYMENT OF LOANS.................................... 29
SECTION 2.05. FEES......................................................... 30
SECTION 2.06. INTEREST ON LOANS............................................ 31
SECTION 2.07. DEFAULT INTEREST............................................. 31
SECTION 2.08. ALTERNATE RATE OF INTEREST................................... 32
SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS..................... 32
SECTION 2.10. CONVERSION AND CONTINUATION OF TRANCHE A TERM, TRANCHE B TERM
AND TRANCHE C TERM LOANS.................................... 32
SECTION 2.11. REPAYMENT OF TRANCHE A TERM, TRANCHE B TERM AND TRANCHE C
TERM BORROWINGS.............................................. 34
SECTION 2.12. PREPAYMENT................................................... 34
SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES................ 36
SECTION 2.14. CHANGE IN LEGALITY........................................... 38
SECTION 2.15. INDEMNITY.................................................... 38
SECTION 2.16. PRORATA TREATMENT............................................ 39
SECTION 2.17. PAYMENTS..................................................... 39
SECTION 2.18. TAXES........................................................ 39
SECTION 2.19. ISSUANCE OF LETTERS OF CREDIT................................ 42
SECTION 2.20. PARTICIPATIONS; UNCONDITIONAL OBLIGATIONS.................... 43
SECTION 2.21. LETTER OF CREDIT FEE......................................... 43
SECTION 2.22. AGREEMENT TO REPAY LETTER OF CREDIT DISBURSEMENTS............ 43
SECTION 2.23. LETTER OF CREDIT OPERATIONS.................................. 44
SECTION 2.24. CASH COLLATERALIZATION....................................... 45
SECTION 2.25. TERMINATION AND REDUCTION OF LETTER OF CREDIT COMMITMENT..... 45
SECTION 2.26. BANKERS'ACCEPTANCES.......................................... 45
III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. ORGANIZATION, CORPORATE POWERS............................... 49
SECTION 3.02. AUTHORIZATION................................................ 49
SECTION 3.03. ENFORCEABILITY............................................... 49
SECTION 3.04. ............................................................ 49
SECTION 3.05. USE OF PROCEEDS............................................. 49
SECTION 3.06. FEDERAL RESERVE REGULATIONS.................................. 49
SECTION 3.07. CAPITALIZATION OF THE COMPANY AND HOLDINGS................... 50
SECTION 3.08. PLEDGE AGREEMENT............................................. 50
SECTION 3.09. FINANCIAL STATEMENTS......................................... 50
SECTION 3.10. NO MATERIAL ADVERSE CHANGE................................... 51
i
<PAGE>
SECTION 3.11. TITLE TO PROPERTIES; POSSESSION UNDER LEASES................. 51
SECTION 3.12. SUBSIDIARIES................................................. 51
SECTION 3.13. LITIGATION; COMPLIANCE WITH LAWS............................. 51
SECTION 3.14. AGREEMENTS................................................... 51
SECTION 3.15. INVESTMENT COMPANY ACT....................................... 52
SECTION 3.16. PUBLIC UTILITY HOLDING COMPANY ACT........................... 52
SECTION 3.17. TAX RETURNS.................................................. 52
SECTION 3.18. NO MATERIAL MISSTATEMENTS.................................... 52
SECTION 3.19. EMPLOYEE BENEFIT PLANS....................................... 52
SECTION 3.20. LABOR MATTERS................................................ 53
SECTION 3.21. ENVIRONMENTAL MATTERS........................................ 53
SECTION 3.22. SOLVENCY..................................................... 54
SECTION 3.23. ABSENCE OF CERTAIN RESTRICTIONS.............................. 54
SECTION 3.24. NOFOREIGN ASSETS CONTROL REGULATION VIOLATION................ 55
SECTION 3.25. INSURANCE.................................................... 55
SECTION 3.26. CERTAIN OTHER REPRESENTATIONS................................ 55
SECTION 3.27. SENIOR DEBT.................................................. 55
SECTION 3.28. YEAR 2000 COMPLIANCE......................................... 55
SECTION 4.01. ALL CREDIT EVENTS............................................ 55
SECTION 4.02. CONDITIONS TO EFFECTIVENESS.................................. 56
V.
AFFIRMATIVE COVENANTS
SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES......................... 58
SECTION 5.02. INSURANCE.................................................... 58
SECTION 5.03. TAXES........................................................ 58
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, AMENDMENTS, ETC............... 59
SECTION 5.05. LITIGATION AND OTHER NOTICES................................. 60
SECTION 5.06. ERISA....................................................... 61
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS.... 61
SECTION 5.08. USE OF PROCEEDS............................................. 61
SECTION 5.09. FURTHER ASSURANCES........................................... 61
SECTION 5.10. CHANGE IN OWNERSHIP......................................... 62
SECTION 5.11. FISCAL YEAR; ACCOUNTING..................................... 62
SECTION 5.12. DIVIDENDS.................................................... 62
SECTION 5.13. [INTENTIONALLY OMITTED]...................................... 62
SECTION 5.14. CORPORATE SEPARATENESS....................................... 62
SECTION 5.15. BUSINESS OF RESTRICTED SUBSIDIARIES.......................... 62
VI.
NEGATIVE COVENANTS
SECTION 6.01. INDEBTEDNESS................................................. 62
SECTION 6.02. DIVIDENDS AND DISTRIBUTIONS.................................. 65
SECTION 6.03. CAPITAL EXPENDITURES......................................... 66
SECTION 6.04. LIENS........................................................ 66
SECTION 6.05. PRIORITY OF LOAN PAYMENTS.................................... 68
SECTION 6.06. SALE AND LEASE-BACK TRANSACTIONS............................. 69
SECTION 6.07. INVESTMENTS, LOANS AND ADVANCES.............................. 69
SECTION 6.08. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS.... 70
SECTION 6.09. TRANSACTIONS WITH AFFILIATES AND STOCKHOLDERS................ 72
SECTION 6.10. SUBORDINATED INDEBTEDNESS.................................... 72
SECTION 6.11. AMENDMENT OF CONSTITUTIVE DOCUMENTS; CHANGE IN CORPORATE
STRUCTURE.................................................... 72
SECTION 6.12. BUSINESS OF HOLDINGS AND RESTRICTED SUBSIDIARIES............. 72
SECTION 6.13. RESTRICTIVE AGREEMENTS....................................... 72
ii
<PAGE>
SECTION 6.14. INTEREST COVERAGE RATIO...................................... 73
SECTION 6.15. ............................................................ 73
SECTION 6.16. LEVERAGE RATIO............................................... 73
SECTION 6.17. ............................................................ 73
SECTION 6.18. TAX SHARING.................................................. 73
SECTION 6.19. SIGNIFICANT SUBSIDIARIES..................................... 73
SECTION 6.20. INACTIVE SUBSIDIARIES........................................ 73
VII.
EVENTS OF DEFAULT
VIII.
AGENT
IX.
MISCELLANEOUS
SECTION 9.01. NOTICES...................................................... 78
SECTION 9.02. SURVIVAL OF AGREEMENT........................................ 79
SECTION 9.03. BINDING EFFECT............................................... 79
SECTION 9.04. SUCCESSORS AND ASSIGNS....................................... 79
SECTION 9.05. EXPENSES; INDEMNITY.......................................... 82
SECTION 9.06. RIGHT OF SET-OFF; SHARING.................................... 83
SECTION 9.07. APPLICABLE LAW............................................... 84
SECTION 9.08. WAIVERS; AMENDMENT........................................... 84
SECTION 9.09. INTEREST RATE LIMITATION..................................... 85
SECTION 9.10. ENTIRE AGREEMENT............................................. 85
SECTION 9.11. WAIVER OF JURY TRIAL......................................... 85
SECTION 9.12. SEVERABILITY................................................. 85
SECTION 9.13. COUNTERPARTS................................................. 85
SECTION 9.14. HEADINGS..................................................... 85
SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS.................. 85
SECTION 9.16. CONVERSION OF CURRENCIES..................................... 86
SECTION 9.17. CONFIDENTIALITY.............................................. 86
iii
<PAGE>
CREDIT AGREEMENT dated as of May 28, 1998, among COLLINS & AIKMAN
PRODUCTS CO., a Delaware corporation (the "COMPANY"), COLLINS & AIKMAN
CANADA INC., a Canadian corporation ("COLLINS & AIKMAN CANADA"),
COLLINS & AIKMAN PLASTICS, LTD., a Canadian corporation ("COLLINS &
AIKMAN PLASTICS," and collectively with Collins & Aikman Canada, the
"CANADIAN BORROWERS"), COLLINS & AIKMAN CORPORATION, a Delaware
corporation ("HOLDINGS"), the financial institutions parties hereto
(as hereinafter further defined, the "LENDERS"), BANK OF AMERICA
NATIONAL TRUST & SAVINGS ASSOCIATION, as documentation agent (in such
capacity, the "DOCUMENTATION AGENT") and THE CHASE MANHATTAN BANK, a
New York banking corporation ("CHASE"), as administrative agent (in
such capacity, the "ADMINISTRATIVE AGENT"), and THE CHASE MANHATTAN
BANK OF CANADA, a Canadian chartered bank ("CHASE CANADA"), as
Canadian administrative agent (in such capacity, the "CANADIAN
ADMINISTRATIVE AGENT").
The Company, Collins & Aikman Canada, Holdings, the lenders parties
thereto and the Administrative Agent are parties to the Amended and Restated
Credit Agreement, dated as of June 3, 1996 (as amended, supplemented or
otherwise modified to the date hereof, the "JUNE 1996 CREDIT AGREEMENT")
pursuant to which such Lenders have made loans and other extensions of credit to
the Company and Collins & Aikman Canada. The Company, Holdings, the lenders
parties thereto and the Administrative Agent are parties to the Credit
Agreement, dated as of December 5, 1996 (as amended, supplemented or otherwise
modified to the date hereof, the "DECEMBER 1996 CREDIT AGREEMENT"; and together
with the June 1996 Credit Agreement, the "EXISTING CREDIT AGREEMENTS") pursuant
to which such Lenders have made term loans to the Company.
The Company has requested the Lenders to extend credit in order to
enable the Company, subject to the terms and conditions of this Agreement, to
borrow (i) on a five-year term basis, an aggregate principal amount not in
excess of $100,000,000, (ii) on a seven-year term basis, an aggregate principal
amount not in excess of $125,000,000 and (iii) on a five-year revolving basis,
an aggregate principal amount initially not in excess of $190,000,000. The
Company has also requested the Lenders to extend credit in order to enable the
Canadian Borrowers, subject to the terms and conditions of this Agreement, to
borrow on a five-year revolving basis an aggregate principal amount not in
excess of $60,000,000 (or the equivalent thereof in Canadian dollars). The
Company also has requested the Issuing Banks to issue letters of credit for the
account of the Company and the Canadian Borrowers (with the exposure on such
letters of credit being limited to $50,000,000 (including the equivalent thereof
for letters of credit issued in Canadian dollars)) and resulting in a reduction
to the availability of borrowings on a revolving basis. The Lenders are willing
to extend such credit to the Company and the Canadian Borrowers on the terms and
subject to the conditions set forth herein.
The facilities hereunder will be used for the purposes set forth
herein, including the replacement and refinancing of the Existing Credit
Agreements.
Accordingly, the Company, the Canadian Borrowers, Holdings, the Lenders,
the Issuing Banks, the Documentation Agent, the Administrative Agent and the
Canadian Administrative Agent agree as follows:
ARTICLE I0
DEFINITIONS
SECTION 1.01. DEFINED TERMS. In addition to the terms defined above, as
used in this Agreement the following terms shall have the meanings specified
below:
"ABR BORROWING" shall mean a Borrowing comprised of ABR Loans.
"ABR LOAN" shall mean any ABR Tranche A Term Loan, ABR Tranche B Term
Loan, ABR Tranche C Term Loan, ABR Revolving Loan or Swingline Loan.
<PAGE>
2
"ABR REVOLVING LOAN" shall mean any Revolving Loan, Additional
Revolving Loan or Canadian Revolving Loan in dollars bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with
the provisions of Article II.
"ABR TRANCHE A TERM LOAN" shall mean any Tranche A Term Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR TRANCHE B TERM LOAN" shall mean any Tranche B Term Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR TRANCHE C TERM LOAN" shall mean any Tranche C Term Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ACCEPTANCE FEE" shall mean a fee payable in C$ by the applicable
Canadian Borrower to the Canadian Administrative Agent for the benefit of
a Canadian Lender with respect to the acceptance of a B/A, calculated on
the face amount of the B/A at the rate per annum equal to the Applicable
Margin therefor on the basis of the number of days in the applicable
Contract Period (inclusive of the first day and exclusive of the last day)
and a year of 365 days.
"ADDITIONAL REVOLVING CREDIT COMMITMENTS" shall have the meaning
assigned such term in Section 2.27.
"ADDITIONAL REVOLVING LENDER" shall mean each Canadian Lender (or, if
a Canadian Lender is a Canadian Schedule II chartered bank, the affiliate
of such Lender that is a Revolving Lender).
"ADDITIONAL REVOLVING LOANS" shall mean any revolving loans made to
the Company under the Additional Revolving Credit Commitments. Each
Additional Revolving Loan shall be a Eurodollar Revolving Loan or an ABR
Revolving Loan.
"ADDITIONAL REVOLVING CREDIT NOTE" shall mean a promissory note of the
Company, substantially in the form of Exhibit A-7, evidencing Additional
Revolving Loans.
"ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a)
the LIBO Rate in effect for such Interest Period and (b) Statutory
Reserves. For purposes hereof, (a) if at least two offered rates for
deposits in dollars for a period comparable to the applicable Interest
Period appear on page 3750 (or any successor page) of the Dow Jones
Telerate Screen as of 11:00 a.m., London time, on the day that is two
Business Days prior to the first day of such Interest Period, the term
"LIBO RATE" shall mean the arithmetic mean of all such offered rates and
(b) if fewer than two such offered rates so appear on page 3750 (or any
successor page) of the Dow Jones Telerate Screen, the term "LIBO RATE"
shall mean the rate (rounded upwards, if necessary, to the next 1/16 of
1%) at which dollar deposits approximately equal in principal amount to
Chase's portion (or, if Chase shall not have any portion, the portion of
the Lender having the largest applicable Type of Loan) of the applicable
Eurodollar Borrowing and for a period comparable to the applicable
Interest Period are offered to Chase's office in which its eurodollar
operations in respect of eurodollar loans are being conducted in
immediately available funds in the eurodollar market at approximately
11:00 a.m., New York time, on the day that is two Business Days prior to
the first day of such Interest Period.
"ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative
Questionnaire substantially in the form of Exhibit C.
"AFFILIATE" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with the person specified.
<PAGE>
3
"AGENCY FEES" shall have the meaning assigned to such term in Section
2.05(c).
"AGENTS" shall mean the collective reference to the Administrative
Agent, the Canadian Administrative Agent, the Collateral Agent and the
Documentation Agent.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof, "PRIME RATE" shall
mean the rate of interest per annum publicly announced from time to time
by Chase as its prime rate for dollars in effect at its principal office
in New York City; each change in the Prime Rate shall be effective on the
date such change is publicly announced as being effective. "BASE CD RATE"
shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment Rate. "THREE-MONTH
SECONDARY CD RATE" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line
of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if
such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day,
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base
CD Rate or the Federal Funds Effective Rate or both for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD Rate or the
Federal Funds Effective Rate, respectively. For the purposes of any
Canadian Revolving Credit Borrowing, Alternate Base Rate means the rate of
interest per annum equal to the greater of (a) the floating annual rate of
interest calculated from time to time by the Canadian Administrative Agent
as the base rate which it will use to determine rates of interest on
dollar Borrowings to customers in Canada and designated as its U.S. base
rate and (b) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%.
"APPLICABLE AGENT" shall mean (i) the Administrative Agent with
respect to the Revolving Credit Commitments and the Additional Revolving
Credit Commitments and any Term Loans made to the Company and (ii) the
Canadian Administrative Agent with respect to the Canadian Revolving
Credit Commitments and any Tranche C Term Loans made to a Canadian
Borrower.
"APPLICABLE ASSET SALE PREPAYMENT PERCENTAGE" shall mean (i) 100% or
(ii) in the case of all Sale and Leaseback Transactions, 50%.
"APPLICABLE EXCESS CASH FLOW PREPAYMENT PERCENTAGE" shall mean
initially 50% or, if the Applicable Level at any time is higher than Level
I, the Excess Cash Flow Prepayment Percentage set forth in Schedule
1.01(B) opposite the Applicable Level in effect on the last day of the
fiscal year to which the prepayment relates.
<PAGE>
4
"APPLICABLE LEVEL" shall mean at any time the highest of Level I,
Level II, Level III and Level IV in effect determined in accordance with
Schedule 1.01(A).
"APPLICABLE MARGIN" means (i) for any date on or after the Closing
Date to but excluding the first day after delivery of the financial
statements of Holdings for the fiscal quarter of Holdings ending September
26, 1998, with respect to Eurodollar Loans and B/As, 1-3/4% and with
respect to ABR Loans and Canadian Prime Rate Loans, 3/4 of 1%, and (ii)
for any date on or after the first day after delivery of the financial
statements referred to in the immediately preceding clause (i) above, with
respect to any Eurodollar Loans, B/As, ABR Loans or Canadian Prime Rate
Loans, as the case may be, the applicable margin set forth on Schedule
1.01(A) opposite the Applicable Level, in each case as of the last day of
Holdings' fiscal quarter most recently ended as of such date; PROVIDED
that, notwithstanding the foregoing, (x) for Tranche B Term Loans the
Applicable Margin with respect to Eurodollar Loans shall be 2% and with
respect to ABR Loans shall be 1% and (y) for Tranche C Term Loans, the
Applicable Margin shall be set forth in the Tranche C Term Loan
Supplement.
"APPLICABLE PERCENTAGE" shall mean (x) with respect to any Revolving
Lender, the percentage of the aggregate Revolving Credit Commitments
represented by such Revolving Lender's Revolving Credit Commitment, (y)
with respect to any Additional Revolving Lender, the percentage of the
aggregate Additional Revolving Credit Commitments represented by such
Additional Revolving Lender's Additional Revolving Credit Commitment or
(z) with respect to any Canadian Lender, the percentage of the aggregate
Canadian Revolving Credit Commitments represented by such Canadian
Lender's Canadian Revolving Credit Commitment.
"ASSESSMENT RATE" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by
the Administrative Agent as the then current net annual assessment rate
that will be employed in determining amounts payable by Chase to the
Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in dollars at
Chase's domestic offices.
"ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the
Administrative Agent, substantially in the form of Exhibit B or such other
form as shall be approved by the Administrative Agent.
"AVAILABLE WALLCOVERINGS PROCEEDS" shall mean the Net Proceeds of
approximately $70,000,000 from the sale of the Wallcoverings Subsidiaries.
"BANKERS' ACCEPTANCES" and "B/A" shall mean a bill of exchange
denominated in C$ drawn by a Canadian Borrower and accepted by a Canadian
Lender in accordance with this Agreement.
"BANKERS' ACCEPTANCES EXPOSURE" shall mean at any time the aggregate
amount of Canadian Revolving Credit Borrowings which is outstanding as
B/As.
"BLACKSTONE" shall mean Blackstone Capital Partners L.P., a Delaware
limited partnership.
"BLACKSTONE ENTITIES" shall mean Blackstone, Blackstone Group,
Blackstone Management Partners, L.P., Blackstone Management Associates,
L.P. or any of their Affiliates.
"BLACKSTONE GROUP" shall mean The Blackstone Group L.P., a Delaware
limited partnership.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"BORROWERS" shall mean the collective reference to the Company and the
Canadian Borrowers; any of them, a "BORROWER".
<PAGE>
5
"BORROWING" shall mean (i) a group of Loans of a single Type made to a
Borrower on a single date and as to which a single Interest Period is in
effect and (ii) a group of Bankers' Acceptances purchased on a single date
and as to which a single Contract Period is in effect.
"BUSINESS DAY" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks
are open for business in New York City; PROVIDED, HOWEVER, that, when used
in connection with a Eurodollar Loan, the term "BUSINESS DAY" shall also
exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market; and PROVIDED, FURTHER, that when
used in connection with a Canadian Revolving Loan, the term "BUSINESS DAY"
shall mean any day (other than a day which is a Saturday, Sunday or legal
holiday in the Province of Ontario) on which banks are open for business
in Toronto, Canada.
"CANADIAN ADMINISTRATIVE AGENT" shall mean The Chase Manhattan Bank of
Canada and its successors, as administrative agent for the Canadian
Lenders.
"CANADIAN B/A BORROWING" shall mean a Canadian Revolving Credit
Borrowing comprised of Bankers' Acceptances.
"CANADIAN DOLLARS" and "C$" shall mean lawful currency of Canada.
"CANADIAN LENDERS" shall mean Lenders having Canadian Revolving
Credit Commitments. Each Canadian Lender shall be a Canadian Scheduled
Lender.
"CANADIAN SCHEDULE II CHARTERED LENDER" shall mean each Canadian
Lender that is a Schedule II chartered bank under the BANK ACT (Canada).
"CANADIAN SCHEDULED LENDER" shall mean any Person named on Schedule I
to the BANK ACT (Canada) or Schedule II to the BANK ACT (Canada).
"C$ PRIME RATE" shall mean, on any day, the annual rate of interest
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of:
(a)the annual rate of interest announced from time to time by the
Canadian Administrative Agent as its prime rate in effect at its
principal office in Toronto on such day for determining interest
rates on C$ denominated commercial loans in Canada; and
(b)the annual rate of interest equal to the sum of (A) the CDOR Rate
in effect on such date and (B) 1%.
"CDOR RATE" means, on any day, the annual rate of interest which is
the rate determined as being the arithmetic average of the "BA 1 month"
rate applicable to Canadian dollar bankers' acceptances displayed and
identified as such on the "Reuters Screen CAD-CDOR Page" as at
approximately 10:00 a.m. (Toronto time) on such day, or if such day is not
a Business Day then on the immediately preceding Business Day (as adjusted
by the Canadian Administrative Agent after 10:00 a.m. (Toronto time) to
reflect any error in a posted rate of interest or in the posted average
annual rate of interest); provided, however, if such rates do not appear
on the Reuters Screen CAD-CDOR Page as contemplated, then the CDOR Rate on
any day shall be calculated as the simple arithmetic average of the 30-day
discount rates applicable to Canadian dollar bankers' acceptances quoted
by the Canadian Revolving Lenders as of 10:00 a.m. (Toronto time) on such
day, or if such day is not a Business Day, then on the immediately
preceding Business Day. If fewer than three of the reference Lenders quote
the aforementioned rate on the days and at the times prescribed above, the
"CDOR Rate" shall be such other rate or rates as the parties may agree.
"CANADIAN PRIME RATE BORROWING" shall mean a Borrowing comprised of
Canadian Prime Rate Loans.
<PAGE>
6
"CANADIAN PRIME RATE LOAN" shall mean a Canadian Revolving Loan
denominated in C$ which bears interest at a rate based upon the C$ Prime
Rate
"CANADIAN REVOLVING CREDIT BORROWING" shall mean a group of Canadian
Revolving Loans made to a Canadian Borrower on a single date and as to
which a single Interest Period is in effect.
"CANADIAN REVOLVING CREDIT COMMITMENT" shall mean, with respect to
each Lender, the commitment, if any, of such Lender to make Canadian
Revolving Loans to the Canadian Borrowers hereunder as set forth in
Schedule 2.01, as the same may be reduced from time to time pursuant to
Section 2.09 or reduced or increased pursuant to Section 2.27. The
aggregate Canadian Revolving Credit Commitments are initially $60,000,000.
"CANADIAN REVOLVING CREDIT MATURITY DATE" shall mean December 31,
2003.
"CANADIAN REVOLVING CREDIT NOTE" shall mean a promissory note of a
Canadian Borrower, substantially in the form of Exhibit A-5, evidencing
Canadian Revolving Loans (other than Canadian B/A Borrowings).
"CANADIAN REVOLVING LOANS" shall mean the revolving loans (including
loans made through B/As) made to either Canadian Borrower pursuant to
Section 2.01(e). Each Canadian Revolving Loan denominated in dollars shall
be a Eurodollar Revolving Loan or an ABR Revolving Loan. Each Canadian
Revolving Loan denominated in Canadian dollars shall be a Canadian Prime
Rate Loan or a Canadian B/A Borrowing.
"C$ CANADIAN BORROWING" shall mean a Borrowing denominated in C$.
"CAPITAL EXPENDITURES" shall mean, for any person in any period, the
aggregate amount of all capital expenditures of such person during such
period (but not including Permitted Business Acquisitions or Investments
permitted pursuant to subsection 6.07(l)). For the purposes hereof, the
amount of any Capital Expenditure shall not include (i) an amount equal to
that portion of the proceeds received upon any sale, transfer or other
disposition of assets or properties pursuant to Section 6.08(a), (g) or
(i) which is applied to the purchase of replacement assets or properties
within 12 months of the receipt thereof, (ii) expenditures that are
accounted for as capital expenditures of such person and that actually are
paid for by a third party (excluding Holdings or any subsidiary thereof)
and for which neither Holdings nor any subsidiary thereof has provided or
is required to provide, directly or indirectly, any consideration to such
third party or any other person (whether before, during or after such
period), (iii) the book value of any asset owned by such person prior to
or during such period to the extent that such book value is included as a
capital expenditure during such period as a result of such person reusing
or beginning to reuse such asset during such period without a
corresponding expenditure actually having been made in such period,
PROVIDED that any expenditure necessary in order to permit such asset to
be reused shall be included as a Capital Expenditure during the period
that such expenditure actually is made or (iv) expenditures of insurance
proceeds or condemnation awards received in connection with the loss,
damage, destruction or condemnation of property of Holdings or its
subsidiaries.
"CAPITAL LEASE OBLIGATIONS" of any person shall mean 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, for the purposes hereof, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"CASH INTEREST EXPENSE" shall mean Interest Expense paid or required
to be paid in cash (but excluding any amortization of debt discounts and
fees included in the calculation of Interest Expense).
A "CHANGE IN CONTROL" shall be deemed to have occurred if (a) Holdings
shall cease to directly own, beneficially and of record, free and clear of
any and all Liens (other than Liens in favor of the Collateral Agent
pursuant to the Pledge Agreement), 100% of the issued and outstanding
capital stock of the Company; (b) any person or group (within the meaning
of Rule 13d-5 of the Securities and Exchange Commission as
<PAGE>
7
in effect on the date hereof) (other than (i) any Designated Person or
(ii) any combination of Designated Persons) shall own beneficially,
directly or indirectly, shares representing more than 25% of the aggregate
ordinary voting power represented by the issued and outstanding capital
stock of Holdings at a time when Designated Persons or any combination of
Designated Persons do not beneficially own shares representing at least
50% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of Holdings; or (c) the Continuing Directors
shall cease to occupy a majority of the seats (excluding vacant seats) on
the Board of Directors of Holdings. For purposes of clause (b) of this
definition, the term "Designated Person" shall be deemed to include any
other holder or holders of shares of Holdings having ordinary voting power
if any Blackstone Entity or WP Entity shall hold the irrevocable general
proxy of each such holder in respect of the shares held by such holder.
"CHARGES" shall have the meaning assigned to that term in Section
9.09.
"CLOSING DATE" shall mean the date on which the first Loan is made
pursuant to this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"COLLATERAL AGENT" shall mean Chase, as Collateral Agent under the
Pledge Agreement and the Guarantee Agreement.
"COMMITMENT" shall mean, with respect to any Lender, such Lender's
Swingline Loan Commitment, Revolving Credit Commitment, Additional
Revolving Credit Commitment and Canadian Revolving Credit Commitment
"COMMITMENT FEE" shall have the meaning assigned to such term in
Section 2.05(a).
"COMPANY COMMON STOCK" shall have the meaning assigned to that term in
Section 3.07(a).
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to such term
in Section 5.04(c).
"CONTAMINANTS" means those substances which are regulated by or form
the basis of liability under any Environmental Law, including asbestos,
polychlorinated biphenyls, Hazardous Materials, pollutants or solid
wastes.
"CONTINUING DIRECTORS" shall mean the collective reference to (i) all
members of the Board of Directors of Holdings who have held office
continuously since the Closing Date and (ii) all members of the Board of
Directors of Holdings who assumed office after the Closing Date and whose
election and nomination for election by Holdings' shareholders was
approved by a vote of a majority of the then Continuing Directors.
"CONTRACT PERIOD" shall mean the term of a B/A selected by a Canadian
Borrower in accordance with Section 2.26 commencing on the borrowing date,
rollover date or conversion date of such B/A, as the case may be, of such
B/A and expiring on a Business Day which shall be either 30 days, 60 days,
90 days or 180 days thereafter, in all cases subject to availability,
provided that no Contract Period shall extend beyond the Canadian
Revolving Credit Maturity Date.
"CONTROL" shall mean 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 ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings
correlative thereto.
"CRAMERTON" shall mean Cramerton Automotive Products, Inc., a Delaware
corporation and a subsidiary of JPS Automotive.
"CREDIT AGREEMENT CREDITORS" shall mean the Administrative Agent,
the Canadian Administrative Agent, the Issuing Banks and the Lenders.
<PAGE>
8
"CURRENT ASSETS" shall mean, with respect to any person at any date,
the consolidated aggregate amount of all assets of such person which would
be classified as current assets at such date, other than cash and cash
equivalents.
"CURRENT LIABILITIES" shall mean, with respect to any person at any
date, the consolidated aggregate amount of all liabilities of such person
(including tax and other proper accruals) which would be classified as
current liabilities at such date, other than (without duplication) (i) the
current portion of long-term debt, (ii) accruals of Interest Expense
(excluding Interest Expense which is due and unpaid) and losses or
expenses on the sale of receivables to the Finance Subsidiary, (iii)
Revolving Loans, Additional Revolving Loans and Canadian Revolving Loans
classified as current, (iv) accruals of transaction costs resulting from
the Transactions and the JPS Automotive Acquisition and (v) accruals of
any costs or expenses related to severance or termination of employees
accrued prior to the date hereof.
"DEFAULT" shall mean any event or condition which upon notice, lapse
of time or both would constitute an Event of Default.
"DESIGNATED PERSONS" shall mean any one or more of the Blackstone
Entities, the WP Entities and the persons listed on Schedule 1.01(C).
"DISCOUNT PROCEEDS" shall mean for any B/A, an amount (rounded to the
nearest whole cent, and with one-half of one cent being rounded up)
calculated on the applicable borrowing date, rollover date or conversion
date, as the case may be, by multiplying:
(i) the face amount of the B/A; by
(ii) the quotient of one divided by the sum of one plus the product
of:
1. the Discount Rate (expressed as a decimal) applicable to such
B/A, and
2. a fraction, the numerator of which is the number of days in the
Contract Period of the B/A (inclusive of the first day and
exclusive of the last day) and the denominator of which is 365.
with such quotient being rounded up or down to the fifth decimal place and
.000005 being rounded up.
"DISCOUNT RATE" shall mean, with respect to any Canadian Lender, as
applicable to a B/A being purchased by such Canadian Lender on any day,
the percentage discount rate (expressed to two decimal places and rounded
upward, if necessary, to the nearest 0.01%) quoted by the Canadian
Administrative Agent as the percentage discount rate at which the Canadian
Administrative Agent would, in accordance with its normal practices, at or
about 10:00 a.m., Toronto time, on such day, be prepared to purchase
Bankers' Acceptances accepted by it having a face amount and term
comparable to the face amount and term of such B/A.
"DIVIDEND CONDITION" shall mean that the Applicable Level is at least
Level II.
"DOLLARS" or "$" shall mean lawful money of the United States of
America. Except as otherwise provided herein, all Loans and Letters of
Credit shall be denominated in dollars and all payment obligations of the
Company and the Canadian Borrowers under the Loan Documents shall be in
dollars.
"$ CANADIAN BORROWING" shall mean a Canadian Revolving Credit
Borrowing denominated in $.
"DOLLAR EQUIVALENT AMOUNT" shall mean with respect to (i) any Canadian
Revolving Loan or Letter of Credit denominated in C$ or any B/A, the
equivalent amount in dollars of such Canadian Revolving Loan, Letter of
Credit or B/A, as determined by the Canadian Administrative Agent using
The Bank of Canada "noon rate", (ii) the amount of any Indebtedness of a
Foreign Restricted Subsidiary under Section 6.01(d)(iv),
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9
(r) or (s) denominated in a Foreign Currency on any date, the equivalent
amount in dollars of such amount of Foreign Currency, as determined by the
Administrative Agent using the Exchange Rate and (iii) any amount
denominated in dollars, such amount in dollars.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary
incorporated or organized under the laws of the United States of America
or any state thereof at least 90% of the capital stock of which is owned
directly or indirectly by the Company (including any dual incorporated
subsidiary that is treated as a Domestic Restricted Subsidiary for tax
purposes).
"EBITDA" shall mean, without duplication, for any fiscal period, the
sum of the amounts for such fiscal period of (i) after-tax income from
continuing and discontinued operations, (ii) provision for taxes based on
income, (iii) depreciation expense, (iv) total interest expense (whether
shown as interest expense or as loss and expenses on sales of
receivables), (v) amortization expense, (vi) other non-cash items reducing
income from continuing and discontinued operations, all as determined on a
consolidated basis for Holdings and its Restricted Subsidiaries in
conformity with GAAP, (vii) other income and expense and (viii) the
non-cash portion of non-recurring charges; provided, however, that for
purposes of calculating the Leverage Ratio under Section 6.16, EBITDA
shall include, in addition, the PRO FORMA EBITDA of any person (calculated
as aforesaid but with respect to such person and its subsidiaries on a
consolidated basis and after giving effect to PRO FORMA adjustments) prior
to the date it becomes a Restricted Subsidiary of Holdings or is merged
into or is consolidated with Holdings or any of the Restricted
Subsidiaries or that person's assets are acquired by Holdings or any of
the Restricted Subsidiaries; provided that EBITDA for the period of four
fiscal quarters ending on or about June 27, 1998 shall not be reduced by
the $57.9 million one-time charge incurred by the Company in the third
quarter of 1997.
"ENVIRONMENTAL CLAIM" means any written accusation, allegation, notice
of violation, claim, demand, order, directive, cost recovery action or
proceeding by any Governmental Authority or, if any Responsible Officer of
Holdings has knowledge of it, by any person for damages, injunctive or
equitable relief, personal injury (including sickness, disease or death),
remedial action costs, tangible or intangible property damage, damage to
the environment or natural resources, nuisance, pollution, contamination
or other adverse effects on the environment, or for fines, penalties or
restrictions, resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including sudden or
non-sudden, accidental or non-accidental Releases) of, or exposure to, any
Contaminant or odor, (ii) the presence, use, handling, transportation,
storage, treatment or the disposal of Contaminants in connection with the
operation of the facilities to which such Release relates or (iii) the
violation or alleged violation of any Environmental Law.
"ENVIRONMENTAL LAW" means any and all applicable treaties, laws,
regulations, enforceable requirements, binding determinations, orders,
decrees, judgments, injunctions, permits, approvals, authorizations,
licenses, variances, permissions, notices or binding agreements issued,
promulgated or entered by any Governmental Authority, relating to the
environment, preservation or reclamation of natural resources or to the
management, Release or threatened Release of Contaminants or noxious odor,
including the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss.
1801 ET SEQ., Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 ET SEQ., Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.ss.
6901, ET SEQ., Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. ss.ss. 1251 ET SEQ., Clean Air Act of
1970, as amended 42. U.S.C. ss.ss. 7401 ET SEQ., Toxic Substances Control
Act of 1976, 15 U.S.C. ss.ss. 2601 ET SEQ., Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 ET SEQ.,
National Environmental Policy Act of 1975, 42 U.S.C. ss.ss. 4321 ET SEQ.,
<PAGE>
10
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss. 300(f)
ET SEQ., and any similar or implementing state or foreign law, and all
amendments or regulations promulgated thereunder.
"ENVIRONMENTAL PERMIT" means any permit, approval, authorization,
license, variance, or permission required from any Governmental Authority
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"ERISA AFFILIATE" with respect to any person shall mean any trade or
business (whether or not incorporated) that is a member of a group of
which such person is a member and which is treated as a single employer
under Section 414 of the Code.
"ESOP" shall mean any employee stock ownership plan to be established
by the Company or a subsidiary Guarantor thereof to make the ESOP
Investment.
"ESOP INVESTMENT" shall mean the issuance and sale of shares of
Holdings Common Stock to, or the purchase of shares of Holdings Common
Stock in open market or privately negotiated transactions by, the ESOP
from time to time.
"ESOP LOANS" shall mean a loan or loans to be made from time to time
by the Company to the ESOP in an aggregate amount not to exceed
$25,000,000, solely to enable the ESOP to effect the ESOP Investment.
"EURODOLLAR BORROWING" shall mean a Borrowing comprised of
Eurodollar Loans.
"EURODOLLAR LOAN" shall mean any Eurodollar Tranche A Term Loan,
Eurodollar Tranche B Term Loan, Eurodollar Tranche C Term Loan or
Eurodollar Revolving Loan.
"EURODOLLAR REVOLVING LOAN" shall mean any Revolving Loan, Additional
Revolving Loan or Canadian Revolving Loan in dollars bearing interest at a
rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"EURODOLLAR TRANCHE A TERM LOAN" shall mean any Tranche A Term Loan
bearing interest at a rate determined by reference to the Adjusted LIBO
Rate in accordance with the provisions of Article II.
"EURODOLLAR TRANCHE B TERM LOAN" shall mean any Tranche B Term Loan
bearing interest at a rate determined by reference to the Adjusted LIBO
Rate in accordance with the provisions of Article II.
"EURODOLLAR TRANCHE C TERM LOAN" shall mean any Tranche C Term Loan
bearing interest at a rate determined by reference to the Adjusted LIBO
Rate in accordance with the provisions of Article II.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Article VII.
"EXCESS CASH FLOW" shall mean for any period (i) the Net Income for
such period PLUS (minus) (ii) the amount of depreciation, depletion,
amortization of intangibles, deferred taxes, accreted and zero coupon bond
interest and other noncash expenses (revenues) which, pursuant to GAAP,
were deducted (added) in determining such Net Income MINUS (plus) (iii)
additions (reductions, other than reductions attributable solely to
Specified Asset Sales) to working capital for such period (I.E., the
increase or decrease in Current Assets of Holdings and the Restricted
Subsidiaries minus Current Liabilities of Holdings and the Restricted
Subsidiaries from the beginning to the end of such period, as adjusted to
exclude reductions attributable solely to Specified Asset Sales) MINUS
(iv) the amount of Capital Expenditures for such period paid by Holdings
and the Restricted Subsidiaries in cash from funds other than from the
proceeds of Borrowings MINUS (v) the sum of (a) scheduled Loan repayments
made during such period pursuant to Section 2.11, (b)
<PAGE>
11
optional prepayments of the Tranche A Term Loans, the Tranche B Term Loans
and the Tranche C Term Loans made during such period pursuant to Section
2.12(a) and (c) Revolving Loan, Additional Revolving Loan and Canadian
Revolving Credit Loan repayments made during such period that were
required to be made as a result of voluntary reductions of the Revolving
Credit Commitments, Additional Revolving Credit Commitments or Canadian
Revolving Credit Commitments pursuant to Section 2.09(b) MINUS (vi)
scheduled mandatory payments of principal of Indebtedness of Holdings and
the Restricted Subsidiaries other than the Loans made during such period
MINUS (vii) fees and expenses paid in cash in connection with the
Transactions to the extent not deducted in determining Net Income MINUS
(viii) until such time as no JPS Automotive Senior Notes are outstanding,
any gain from any asset sale or other disposition by JPS Automotive or
any of its subsidiaries.
"EXCHANGE RATE" shall mean with respect to any Foreign Currency on any
Business Day, the rate at which such Foreign Currency may be exchanged
into dollars, as set forth in the Wall Street Journal on such Business
Day. In the event that such rate does not appear in the Wall Street
Journal on such Business Day, the "Exchange Rate" with respect to such
Foreign Currency shall be determined by reference to such publicly
available service for displaying exchange rates as may be agreed upon by
the Administrative Agent and the Company or, in the absence of such
agreement, such "Exchange Rate" shall instead be the Administrative
Agent's spot rate of exchange in the interbank market where its foreign
currency exchange operations in respect of such Foreign Currency are then
being conducted, at or about 10:00 A.M., local time, at such date for the
purchase of dollars with such Foreign Currency, for delivery two Business
Days later; provided, that if at the time of any such determination, no
such spot rate can reasonably be quoted, the Administrative Agent may use
any reasonable method as it deems applicable to determine such rate, and
such determination shall be conclusive absent manifest error (without
prejudice to the determination of the reasonableness of such method).
"EXECUTIVE OFFICER" of any corporation shall mean the president, any
senior vice president or any vice president of such person.
"EXISTING CREDIT AGREEMENTS" have the meaning given thereto in the
recitals hereto.
"FEES" shall mean the Agency Fees, the Fronting Fees, the Commitment
Fees, the Letter of Credit Fees and other fees described in Section 2.05.
"FINANCE SUBSIDIARY" shall mean Carcorp, Inc. and any other
wholly-owned subsidiary of the Company that is formed for the sole
purpose of engaging in Permitted Receivables Financings.
"FINANCIAL OFFICER" of any corporation shall mean the chief financial
officer, Senior Vice President-Finance and Accounting, Vice
President-Finance, Controller, or Treasurer of such corporation.
"FOREIGN CURRENCY" shall mean any available and freely-convertible
non-dollar currency selected by the Company and approved by the
Administrative Agent.
"FOREIGN CURRENCY FLUCTUATION AMOUNT" means, with respect to any
Indebtedness of a Foreign Restricted Subsidiary incurred pursuant to
Section 6.01(d)(iv), (r) or (s), an increase in the Dollar Equivalent
Amount of the principal amount of such Indebtedness resulting from foreign
currency fluctuations after the incurrence of such Indebtedness not to
exceed 5% of the original Dollar Equivalent Amount of the principal amount
of such Indebtedness.
"FOREIGN RESTRICTED SUBSIDIARY" shall mean any Restricted Subsidiary
not organized or incorporated under the laws of the United States of
America or any state thereof at least 90% of the capital stock of each
class of which is owned directly or indirectly by the Company.
"FOREIGN SUBSIDIARY LETTER OF CREDIT" shall mean a Letter of Credit
issued to support Indebtedness of a Foreign Restricted Subsidiary incurred
pursuant to Section 6.01(r).
<PAGE>
12
"FRONTING FEES" shall have the meaning assigned to such term in
Section 2.05(d).
"FUNDED DEBT" shall mean, as applied to any person, all Indebtedness
for borrowed money (including, without limitation, Capital Lease
Obligations and unreimbursed drawings under letters of credit) or
evidenced by a note, bond, debenture or similar instrument of that person
(it being understood that all Loans shall at all times constitute "Funded
Debt" for all purposes hereunder) but excluding all intercompany
obligations that would be eliminated in a consolidated balance sheet of
such person determined in accordance with GAAP.
"GAAP" shall mean United States generally accepted accounting
principles.
"GOVERNMENTAL AUTHORITY" shall mean any international, Federal, state,
regional, local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"GUARANTORS" shall mean Holdings and each Restricted Subsidiary (other
than Inactive Subsidiaries) incorporated or organized under the laws of
the United States or any State thereof (including any dual incorporated
Subsidiary that is treated as a Domestic Restricted Subsidiary for tax
purposes) (other than JPS Automotive and its subsidiaries to the extent
prohibited by the JPS Automotive Senior Note Indenture).
"GUARANTEE" of or by any person shall mean (i) any obligation,
contingent or otherwise, of such person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, and
including any obligation of such person, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness (whether arising by virtue of partnership
arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay or otherwise) or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (b) to purchase property, securities or services for
the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness, (c) to maintain working capital, equity capital or
other financial statement conditions or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness or (d)
entered into for the purpose of assuring in any other manner the holders
of such Indebtedness of the payment thereof or to protect such holders
against loss in respect thereof (in whole or in part), or (ii) any Lien on
any assets of such person securing any Indebtedness of any other person,
whether or not such Indebtedness is assumed by such person; PROVIDED,
HOWEVER, that the term Guarantee shall not include endorsements for
collection or deposit, in either case in the ordinary course of business.
"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement substantially
in the form of Exhibit F made by Holdings, the Company and each other
Guarantor in favor of the Collateral Agent, as amended and in effect from
time to time.
"HAZARDOUS MATERIALS" means all explosive or regulated radioactive
materials or substances, hazardous or toxic wastes or substances,
petroleum (including crude oil or any fraction thereof) or petroleum
distillates, asbestos or material containing asbestos and all materials
regulated pursuant to any Environmental Law, including materials listed in
49 C.F.R. Section 172.101 and materials defined as hazardous pursuant to
Section 101(14) of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"HOLDINGS COMMON STOCK" shall mean the Common Stock, par value $.01
per Share, of Holdings.
"INACTIVE SUBSIDIARY" shall mean the Restricted Subsidiaries listed as
Inactive Subsidiaries on Schedule 3.12(a) and which Restricted
Subsidiaries (i) individually and in the aggregate have no material net
assets and (ii) do not engage in any operating activity (other than
payroll or the leasing of immaterial property).
"INDEBTEDNESS" of any person shall mean, without duplication, (a) all
indebtedness of such person for borrowed money or for the deferred
purchase price of property or services (other than current trade
<PAGE>
13
liabilities incurred in the ordinary course of business), (b) any other
indebtedness of such person which is evidenced by a note, bond, debenture
or similar instrument, (c) all Capital Lease Obligations of such person,
(d) all obligations of such person in respect of bankers' acceptances
issued or created for the account of such person, (e) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on any
property owned or acquired by such person even though such person has not
assumed or otherwise become liable for the payment thereof, (f) all
obligations of such person in respect of Interest Rate Agreements which,
in accordance with the definition of Interest Rate Agreement, constitute
(or would upon early termination constitute) Indebtedness and (g) all
Guarantees by such person of Indebtedness of others. The Indebtedness of
any person shall include the Indebtedness of any partnership in which such
person is a general partner; PROVIDED that, if the sole asset of such
person is its general partnership interest in such partnership, the amount
of such Indebtedness shall be deemed equal to the value of such general
partnership interest and the amount of any Indebtedness in respect of any
Guarantee of such partnership Indebtedness shall be limited to the same
extent as such Guarantee may be limited.
"INDEMNITEE" shall have the meaning assigned to that term in
Section 9.05(b).
"INTERCOMPANY LOAN" shall mean a loan made by any subsidiary of the
Company to the Company or any Domestic Restricted Subsidiary or by any
Restricted Subsidiary to any other Restricted Subsidiary.
"INTERCOMPANY NOTE" shall mean an intercompany note evidencing
Indebtedness owed by the Company or any of its wholly-owned subsidiaries
to the Company or any of its wholly-owned subsidiaries and pledged
pursuant to the Pledge Agreement in accordance with Section 6.01(d), in
substantially the form of Exhibit A-8 annexed hereto.
"INTERCREDITOR AGREEMENT" shall mean the Master Collateral and
Intercreditor Agreement substantially in the form of Exhibit G among the
Guarantors, the Administrative Agent and the Collateral Agent, as amended
and in effect from time to time.
"INTEREST COVERAGE RATIO" shall mean, for any period of four
consecutive fiscal quarters, the ratio of (a) EBITDA on a consolidated
basis for such period to (b) the sum of Cash Interest Expense of Holdings
and the Restricted Subsidiaries on a consolidated basis for such period
and losses or expenses on the sale of receivables to the Finance
Subsidiary.
"INTEREST EXPENSE" shall mean, with respect to any person for any
period, the gross interest expense of such person for such period
determined on a consolidated basis in accordance with GAAP consistently
applied, including (a) the amortization of debt discounts, (b) the
amortization of all fees (including fees with respect to interest rate
protection agreements) payable in connection with the incurrence of
Indebtedness to the extent included in interest expense and (c) the
portion of any payments or accruals with respect to Capital Lease
Obligations allocable to interest expense, net of all interest income for
such period (except for purposes of the definition of Cash Interest
Expense, in which case only interest income paid or required to be paid in
cash shall be netted against cash interest expense). For purposes of the
foregoing, gross interest expense shall be determined after giving effect
to any net payments made or received by such person with respect to
interest rate protection agreements entered into as a hedge against
interest rate exposure.
"INTEREST PAYMENT DATE" shall mean, (a)(i) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration,
each day that would have been an Interest Payment Date had successive
Interest Periods of three months' duration been applicable to such
Borrowing, and, in addition, the date of any prepayment, refinancing or
conversion of such Borrowing with or to a Borrowing of a different Type
and (ii) with respect to any ABR Loan, Canadian Prime Rate Loan or
Swingline Loan, the last day of each March, June, September and December
and (b) the Revolving Credit
<PAGE>
14
Maturity Date, the Tranche A Term Loan Maturity Date, the Tranche B Term
Loan Maturity Date or the Tranche C Term Loan Maturity Date, as
applicable.
"INTEREST PERIOD" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the
case may be, and ending on the numerically corresponding day (or, if there
is no numerically corresponding day, on the last day) in the calendar
month that is 1, 2, 3 or 6 (or, except with respect to Tranche B Loans and
Tranche C Loans, subject to availability (as determined by all applicable
Lenders), 9 or 12) months thereafter, as the applicable Borrower may elect
and (b) as to any ABR Borrowing, Canadian Prime Rate Loan or Swingline
Loan, the period commencing on the date of such Borrowing or Loan or on
the last day of the immediately preceding Interest Period applicable to
such Borrowing or Loan, as the case may be, and ending on the earliest of
(i) the next succeeding March 31, June 30, September 30 or December 31,
(ii) the Revolving Credit Maturity Date, the Tranche A Term Loan Maturity
Date, the Tranche B Term Loan Maturity Date or the Tranche C Term Loan
Maturity Date, as applicable, and (iii) the date such Borrowing is
converted to a Borrowing of a different Type in accordance with Section
2.10 or 2.26, as the case may be, or repaid or prepaid in accordance with
Section 2.01(d), 2.11 or 2.12; PROVIDED, HOWEVER, that if any Interest
Period would end on a day other than a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day. Interest shall accrue from and
including the first day of an Interest Period to but excluding the last
day of such Interest Period.
"INTEREST RATE AGREEMENT" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, currency
hedge agreement or other similar agreement or arrangement designed to
protect the Company or any of its Restricted Subsidiaries against
fluctuations in interest rates or currency exchange rates; PROVIDED that
the calculation of payments for early termination shall be made on a
reasonable basis in accordance with customary industry practices; PROVIDED
FURTHER that all obligations to make such payments for early termination
(guaranteed or unguaranteed) shall, to the extent matured, constitute
Indebtedness.
"ISSUING BANK" shall mean, with respect to any Letter of Credit, The
Chase Manhattan Bank and its Affiliates including Chase Manhattan Bank
(Delaware), the Revolving Lender or Canadian Lender, as the case may be,
which has agreed to issue such Letter of Credit.
"JPS AUTOMOTIVE" shall mean JPS Automotive L.P., a limited partnership
organized under the laws of the state of Delaware.
"JPS AUTOMOTIVE ACQUISITION" shall mean the acquisition by the Company
in December 1996 of (a) the issued and outstanding equity interests of JPS
Automotive and (b) the minority interest of Cramerton not owned by JPS
Automotive.
"JPS AUTOMOTIVE SENIOR NOTE INDENTURE" shall mean the indenture
pursuant to which the JPS Automotive Senior Notes are issued.
"JPS AUTOMOTIVE SENIOR NOTES" shall mean the 11-1/8% Senior Notes of
JPS Automotive due June 15, 2001.
"LENDERS" shall mean the Persons identified as Lenders in this
Agreement, including Persons who become Lenders pursuant to Section 9.04
or in accordance with the definition of "Tranche C Term Loan Supplement".
"LETTER OF CREDIT" shall mean any letter of credit issued by an
Issuing Bank pursuant to Section 2.19(a) (including, without limitation,
any Foreign Subsidiary Letter of Credit).
<PAGE>
15
"LETTER OF CREDIT COMMITMENT" shall mean $50,000,000, as the same may
be reduced from time to time pursuant to Section 2.25.
"LETTER OF CREDIT DISBURSEMENT" shall mean a payment or disbursement
made by an Issuing Bank pursuant to a Letter of Credit.
"LETTER OF CREDIT EXPOSURE" shall mean at any time the Dollar
Equivalent Amount of the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit and (b) the aggregate amount of all Letter
of Credit Disbursements not yet reimbursed by the Borrowers as provided in
Section 2.22. Letter of Credit Exposure with respect to Letters of Credit
issued for the account of the Company is "Company Letter of Credit
Exposure". Letter of Credit Exposure with respect to Letters of Credit
issued for the account of one or both of the Canadian Borrowers is
"Canadian Borrower Letter of Credit Exposure."
"LETTER OF CREDIT FEE" shall have the meaning assigned to such term in
Section 2.21.
"LEVERAGE RATIO" shall mean, with respect to Holdings and the
Restricted Subsidiaries on the last day of any fiscal quarter, the ratio
of (a) Funded Debt of Holdings and the Restricted Subsidiaries as of such
date to (b) EBITDA for the period of twelve consecutive fiscal months then
ended.
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement relating to
such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"LOANS" shall mean the Revolving Loans, the Additional Revolving
Loans, the Canadian Revolving Loans, the Tranche A Term Loans, the
Swingline Loans, the Tranche B Term Loans and, if applicable, the Tranche
C Term Loans.
"LOAN DOCUMENTS" shall mean this Agreement and the Notes, the Letters
of Credit (and any instrument or document executed by any Borrower
relating to any Letter of Credit), the Pledge Agreement, the Guarantee
Agreement and the Intercreditor Agreement.
"MARGIN STOCK" shall have the meaning assigned to such term under
Regulation U.
"MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse effect
on the business, assets, properties, operations or financial condition of
Holdings and the Restricted Subsidiaries, taken as a whole, (b) a material
impairment of the ability of Holdings or any Subsidiary of Holdings to
perform any of its material obligations under any Loan Document to which
it is or will be a party or to consummate the Recapitalization
Transactions or (c) an impairment of the validity or enforceability of, or
material impairment of the rights, remedies or benefits available to the
Credit Agreement Creditors under, any Loan Document.
"MAXIMUM RATE" shall have the meaning assigned to such term in Section
9.09.
"MULTIEMPLOYER PLAN" with respect to any person shall mean a
multiemployer plan as defined in Section 4001(a)(3) of ERISA to which such
person or any ERISA Affiliate of such person (other than one considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of
the Code) is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"NET INCOME" shall mean, for any fiscal period, the net income (or
loss) of Holdings and its Restricted Subsidiaries and the Finance
Subsidiary on a consolidated basis for such fiscal period taken as a
single accounting period determined in conformity with GAAP; PROVIDED that
there shall be excluded (i) the income (or loss) of any Unrestricted
Subsidiary (other than the Finance Subsidiary) or any person (other
<PAGE>
16
than a Restricted Subsidiary) in which any other person (other than
Holdings or any of the Restricted Subsidiaries) has a joint interest, but
shall include the amount of dividends or other distributions (including
return of capital or any other cash receipt in respect of ownership or
beneficial interest) actually paid to Holdings or any of the Restricted
Subsidiaries by such Unrestricted Subsidiary or such person during such
period, (ii) the income (or loss) of any person accrued prior to the date
it becomes a Restricted Subsidiary of Holdings or is merged into or
consolidated with Holdings or any of the Restricted Subsidiaries or that
person's assets are acquired by Holdings or any of the Restricted
Subsidiaries, (iii) the income of any Restricted Subsidiary of Holdings to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation and (iv) after tax gains or losses attributable to Specified
Asset Sales; PROVIDED FURTHER, that, solely for the purposes of
determining EBITDA, there shall be excluded any charges, losses, fees or
expenses to Net Income incurred in connection with the consummation of the
Transactions and the JPS Automotive Acquisition; PROVIDED FURTHER, that,
solely for purposes of Section 6.02, for any period an amount equal to the
product of (I) the Net Deferred Tax Asset at January 27, 1996 as reflected
in Note 19 to the Consolidated Financial Statements of Holdings at January
27, 1996 and (II) a fraction, the numerator of which is the Net Operating
Losses (regular tax) utilized during such period and the denominator of
which is the total Net Operating Losses (regular tax) at January 27, 1996
as reflected in Note 19 to the Consolidated Financial Statements of
Holdings at January 27, 1996 (such product, the "EXCESS TAX EXPENSE")
shall be added to Net Income for such period; PROVIDED, HOWEVER, that the
maximum amount of Excess Tax Expense that may be added to Net Income
pursuant to this clause is $20,000,000 in any fiscal year and any Excess
Tax Expense in any fiscal year in excess of such annual limitation may be
carried forward and added to Net Income in any succeeding fiscal year.
"NET PROCEEDS" shall mean with respect to any sale, transfer or other
disposition (including by casualty, loss or condemnation) of any assets or
properties or any other Prepayment Event (a "PROCEEDS TRANSACTION") (i)
the gross amount of any cash paid to or received by Holdings or any of the
Restricted Subsidiaries in respect of such Proceeds Transaction (including
insurance proceeds, condemnation awards and payments from time to time in
respect of installment obligations, if applicable), less (ii) the amount,
if any, of (a) Holdings' good faith best estimate of all taxes
attributable to such Proceeds Transaction which it in good faith expects
to be paid in the taxable year in which such Proceeds Transaction shall
occur or in the next taxable year, (b) reasonable and customary fees,
discounts, commissions, costs and other expenses (other than those payable
to Holdings or any Affiliate of Holdings, except that Blackstone and WP
and their respective Affiliates may receive customary fees on terms no
less favorable to Holdings or any of the Restricted Subsidiaries than
would be obtained in a comparable arm's-length transaction for acting as
financial advisor in connection with such Proceeds Transaction) which are
incurred in connection with such Proceeds Transaction and are payable by
Holdings or any of the Restricted Subsidiaries and (c) in the case of a
Proceeds Transaction that is a sale, transfer or other disposition of
assets or properties, proceeds required to (x) discharge Liens in respect
of such assets or properties permitted by Section 6.04 or (y) to repay, or
compensate for reductions in availability under, any Permitted Receivables
Financing as a result thereof or (z) be applied under the JPS Automotive
Senior Note Indenture; PROVIDED, HOWEVER, that Net Proceeds shall not
include (1) any amount that otherwise would constitute Net Proceeds to the
extent such amount is excluded from the definition of the term "Capital
Expenditures" pursuant to clause (i) or (iv) of the second sentence
thereof; or (2) any amount being reserved for application as contemplated
in clause (i) or (iv) of such second sentence, except that in the event
any amount so reserved is not in fact so applied or contractually
committed to be applied within the permitted 12-month period, such amount
shall be deemed for all purposes (including the definition of Excess Cash
Flow and Section 2.12(g)) to be Net Proceeds of a Proceeds Transaction
received upon such Proceeds Transaction.
"NOTES" shall mean the Tranche A Term Notes, the Tranche B Term Notes,
the Swingline Note, the Revolving Credit Notes, the Additional Revolving
Credit Notes, the Canadian Revolving Credit Notes and, if applicable, the
Tranche C Term Notes.
<PAGE>
17
"OBLIGATIONS" shall mean all obligations defined as "Guaranteed
Obligations" in the Guarantee Agreement and "Secured Obligations" in the
Pledge Agreement in each case owing by the Company, the Canadian Borrowers
and the other Guarantors, or any of them, as the context may require, to
any Credit Agreement Creditor.
"OPERATING LEASE" shall mean a lease which is not required to be
accounted for or classified as a capital lease under GAAP. The "amount" of
any Operating Lease shall be the amount that, if such Operating Lease were
accounted for as a Capital Lease Obligation, would be recorded as a
liability in accordance with GAAP.
"OTHER TAXES" shall have the meaning assigned to such term in Section
2.18.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA (or any such successor).
"PERMITTED ACQUISITION INDEBTEDNESS" shall mean Indebtedness of the
Company permitted by Section 6.01(l).
"PERMITTED BUSINESS ACQUISITIONS" shall mean acquisitions of all or
substantially all of the assets of, or shares or other equity interests
in, a person or division or line of business of a person engaged in the
same business as Holdings and the Restricted Subsidiaries or in a related
business if immediately after giving effect thereto: (i) no Default or
Event of Default shall have occurred and be continuing, (ii) all
transactions related thereto shall be consummated in accordance with
applicable laws, (iii) at least 90% of the outstanding capital stock or
other ownership interests of any acquired or newly formed corporation or
other entity must be owned directly by the Company or a Domestic
Restricted Subsidiary and, except as provided in Section 5.09, such
corporation or entity shall become a Restricted Subsidiary and a Guarantor
and execute a counterpart to the Guarantee Agreement, and, except as
provided in Section 5.09, all capital stock or other equity interest
created or acquired in connection with such acquisition shall be duly and
validly pledged to the Collateral Agent for the ratable benefit of the
Lenders, and (iv) (A) Holdings shall be in compliance, on a PRO FORMA
basis, with the covenants contained in Sections 6.14 and 6.16 recomputed
as at the last day of the most recently ended fiscal quarter of Holdings,
and the Company shall have delivered to the Administrative Agent an
officers' certificate to such effect, together with all relevant financial
information for such acquired corporation, entity or assets, and (B) the
acquired corporation or entity shall not be liable for any Indebtedness
(except for Indebtedness permitted by Section 6.01 and the Guarantee
Agreement). For purposes of Section 6, any Restricted Subsidiary
satisfying the requirements of clause (iii) above shall be deemed to be a
"WHOLLY OWNED SUBSIDIARY".
"PERMITTED INVESTMENTS" shall mean:
(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 marketable general obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within six months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings generally obtainable from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.;
(c investments in commercial paper maturing no more than six months
from the date of acquisition thereof and having, at such date of
acquisition, a credit rating of A-1 or higher from Standard & Poor's
Ratings Group or P-1 or higher from Moody's Investors Service, Inc.;
<PAGE>
18
(d investments in domestic and Eurodollar certificates of deposit,
banker's acceptances and time deposits maturing within six months from the
date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by (w) any domestic office
of any commercial bank organized or licensed 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, (x) any
Lender, (y) any branch of any Lender or any commercial bank organized
under the laws of the United Kingdom, Canada, France or Japan having
combined capital, surplus and undivided profits (less any undivided
losses) of not less than $500,000,000 or (z) other than in the case of
banker's acceptances, any domestic commercial bank whose deposits are
guaranteed by the Federal Deposit Insurance Corporation (or any successor)
and with whom deposits maintained by Holdings or any of its subsidiaries
do not exceed the amount so guaranteed; and
(e investments in money market funds or other mutual funds that invest
in the types of Permitted Investments described in clauses (a) through (d)
above.
"PERMITTED RECEIVABLES FINANCING" shall mean any sale by the Company
or a Restricted Subsidiary of accounts receivable to a Finance Subsidiary
intended to be (and which shall be treated for the purposes hereof as) a
true sale transaction with customary limited recourse based upon the
collectibility of the receivables sold and the corresponding sale or
pledge of such accounts receivable (or an interest therein) by the Finance
Subsidiary, in each case without any Guarantee by Holdings or any other
subsidiary thereof, including, without limitation, the transactions
contemplated by the Amended and Restated Receivables Sales Agreement dated
as of March 30, 1995 among the Company, as master servicer, the Sellers
parties thereto and Carcorp, Inc., as amended from time to time, and the
documents executed in connection therewith; PROVIDED, HOWEVER, that the
terms, conditions and structure (including the legal and organizational
structure of the Finance Subsidiary and the restrictions imposed on its
activities) of and the documentation incident to any such transactions
entered into after the date hereof must be reasonably acceptable to the
Administrative Agent.
"PERMITTED SUBORDINATED INDEBTEDNESS" shall mean the collective
reference to (a) the Senior Subordinated Notes and (b) additional
unsecured subordinated indebtedness of the Company or Holdings having no
amortization of principal and a scheduled final maturity no earlier than
December 31, 2005 and having subordination terms at least as favorable to
the Lenders as set forth on Schedule 1.01(D) and other terms and
conditions (including, covenants, events of default, interest rate) as
shall be reasonably satisfactory to the Required Lenders in the exercise
of their sole discretion.
"PERMITTED TAX PAYMENT" means for any taxable year of the Company in
which it joins in filing a consolidated federal income tax return with
Holdings, a payment by the Company to Holdings in an amount not in excess
of the amount required to be paid by the Company under the Tax Sharing
Agreement, dated as of November 1, 1989, between Holdings and the Company,
as in effect on the date hereof, as amended solely to reflect the
creation, acquisition or disposition of Subsidiaries of Holdings permitted
hereunder and the mergers involving Holdings and the Company effected in
July 1994; PROVIDED that within 20 days of receipt of such payment
Holdings applies the amount thereof to satisfy such tax liability or its
obligations under the Tax Sharing Agreement or to make an equity
contribution or loan to the Company.
"PERSON" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"PLAN" with respect to any person shall mean any pension plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA
or Section 412 of the Code which is maintained for employees of such
person or any ERISA Affiliate of such person.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement substantially in
the form of Exhibit H made by Holdings, the Company and each other Pledgor
named therein in favor of the Collateral Agent, as amended and in effect
from time to time.
<PAGE>
19
"PLEDGED SECURITIES" shall have the meaning assigned to such term in
the Pledge Agreement.
"PREPAYMENT EVENT" shall mean (i) any Specified Asset Sale, (ii) any
Sale and Lease-Back Transaction deemed to be a Prepayment Event pursuant
to Section 6.06, and (iii) the incurrence by Holdings or any Restricted
Subsidiary of any Indebtedness (other than Indebtedness permitted by
Section 6.01), PROVIDED, HOWEVER, that for purposes of Section 2.12(e) (a)
a Prepayment Event shall not be deemed to occur until the aggregate Net
Proceeds from Prepayment Events not yet applied pursuant to Section
2.12(e) by reason of this proviso equals or exceeds $20,000,000, at which
time a Prepayment Event shall, except as set forth in clause (b) below, be
deemed to occur having Net Proceeds equal to the aggregate Net Proceeds
from Prepayment Events not yet so applied and (b) with respect to
Specified Asset Sales, a Prepayment Event shall be deemed to occur only
with respect to that portion of the Net Proceeds thereof required to be
repaid pursuant to Section 6.08(i).
"PURCHASE MONEY INDEBTEDNESS" shall mean Indebtedness incurred for
capital expenditures, which may be secured in compliance with Section
6.04(i).
"REALLOCATION NOTICE" shall have the meaning assigned to that term in
Section 2.27.
"REGISTER" shall have the meaning given such term in Section
9.04(d).
"REGULATION D" shall mean Regulation D of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"REGULATION T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"REGULATION U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"REGULATION X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"RELEASE" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, emanation or
migration in, into, onto or through the environment (including ambient
air, surface water, ground water, land surface, subsurface strata or
workplace), including the movement of any Contaminant through or in the
air, soil, surface water or ground water.
"REMEDIAL ACTION" means (i) "remedial action" as such term is defined
in 42 U.S.C. Section 9601(24) and (ii) all other actions required or
voluntarily undertaken to (x) clean up, remove, treat, abate or in any
other way address any Contaminant in the environment or workplace, (y)
prevent the Release or threat of Release, or minimize the further Release
of any Contaminant so it does not migrate or endanger or threaten to
endanger public health or welfare of the environment or workplace, or (z)
perform studies and investigations in connection with (x) or (y) above.
"REPORTABLE EVENT" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect
to a Plan (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code).
"REQUIRED LENDERS" shall mean, at any time, Lenders holding the Dollar
Equivalent Amount of Loans (other than Swingline Loans), Letter of Credit
Exposure and unused Commitments representing at least a majority of the
Dollar Equivalent Amount of the sum of the aggregate principal amount of
the Loans (other than Swingline Loans) outstanding, the aggregate amount
of the Letter of Credit Exposure and unused Commitments at such time.
<PAGE>
20
"RESPONSIBLE OFFICER" of any corporation shall mean any Executive
Officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement. Unless the
context otherwise requires, Responsible Officer shall mean a Responsible
Officer of Holdings.
"RESTRICTED SUBSIDIARY" shall mean each Subsidiary in existence as of
the Closing Date and any direct or indirect Subsidiary formed or acquired
after the Closing Date, in each case, other than Unrestricted
Subsidiaries.
"REVOLVING CREDIT BORROWING" shall mean a Borrowing comprised of
Revolving Loans.
"REVOLVING CREDIT COMMITMENT" shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make Revolving Loans to the
Company hereunder as set forth in Schedule 2.01, as the same may be
reduced from time to time pursuant to Section 2.09 or reduced or increased
pursuant to Section 2.27 or a Tranche C Term Loan Supplement. The
aggregate Revolving Credit Commitments are initially $190,000,000. The
Additional Revolving Credit Commitments shall be in addition to the
Revolving Credit Commitments.
"REVOLVING CREDIT MATURITY DATE" shall mean December 31, 2003.
"REVOLVING CREDIT NOTE" shall mean a promissory note of the Company,
substantially in the form of Exhibit A-1, evidencing Revolving Loans.
"REVOLVING LENDER" shall mean any Lender with a Revolving Credit
Commitment.
"REVOLVING LOANS" shall mean the revolving loans made to the Company
pursuant to Section 2.01(c). Each Revolving Loan shall be a Eurodollar
Revolving Loan or an ABR Revolving Loan.
"SALE AND LEASE-BACK TRANSACTION" shall have the meaning assigned to
that term in Section 6.06.
"SECURED PARTIES" shall mean the Credit Agreement Creditors and any
holders, if any, of any Permitted Acquisition Indebtedness which have
executed and delivered to the Collateral Agent an Acknowledgement to the
Intercreditor Agreement in the form of Exhibit A thereto.
"SENIOR SUBORDINATED NOTES" shall mean the Company's 11 1/2% Senior
Subordinated Notes due 2006 in an aggregate initial principal amount of
$400,000,000.
"SENIOR SUBORDINATED NOTES DOCUMENTS" shall mean the Senior
Subordinated Notes, the Senior Subordinated Notes Indenture and each other
document and agreement executed in connection with the Senior
Subordinated Notes.
"SENIOR SUBORDINATED NOTES INDENTURE" shall mean the Indenture dated
as of June 1, 1996 among First Union Bank of North Carolina, as trustee,
the Company, as issuer, and Holdings, as guarantor, pursuant to which the
Senior Subordinated Notes are issued.
"SIGNIFICANT SUBSIDIARY" shall mean each Borrower and any subsidiary
of Holdings that at the date of any determination (i) accounts for 5% or
more of the consolidated assets of Holdings, (ii) has accounted for 5% or
more of the consolidated EBITDA of Holdings for each of the two
consecutive periods of four fiscal quarters immediately preceding the date
of determination or (iii) has been designated by the Company in writing to
the Administrative Agent as a Significant Subsidiary.
<PAGE>
21
"SPECIFIED ASSET SALE" shall mean any sale, lease, transfer,
assignment or other disposition of assets, business units or property of
Holdings or any of its subsidiaries for Net Proceeds in excess of $100,000
in any transaction or series of related transactions described in
paragraph (i) of Section 6.08.
"STATUTORY RESERVES" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board and any other banking
authority to which the Administrative Agent is subject (a) with respect to
the Base CD Rate (as such term is used in the definition of "Alternate
Base Rate"), for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to three months, and (b)
with respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and to be subject
to such reserve requirements without benefit of or credit for proration,
exemptions or offsets which may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"SUBSIDIARY" shall mean, with respect to any person (herein referred
to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or more than 50% of the general partnership interests are, at
the time any determination is being made, owned, controlled or held, or
(b) which is, at the time any determination is made, otherwise Controlled
(except Controlled pursuant to any joint venture documentation), by the
parent or one or more subsidiaries of the parent or by the parent and one
or more subsidiaries of the parent.
"SUBSIDIARY" shall mean any subsidiary of Holdings.
"SWINGLINE LENDER" shall mean Chase, in its capacity as Swingline
Lender hereunder and under the other Loan Documents.
"SWINGLINE LOAN COMMITMENT" shall mean the commitment of the Swingline
Lender to make Swingline Loans as set forth in Section 2.01(d).
"SWINGLINE LOANS" shall mean the swingline loans made by the Swingline
Lender to the Company pursuant to Section 2.01(d).
"SWINGLINE NOTE" shall mean a promissory note of the Company,
substantially in the form of Exhibit A-4, evidencing the Swingline Loans.
"TAXES" shall have the meaning assigned to such term in Section
2.18.
"TOTAL INDEBTEDNESS" shall mean, without duplication, all outstanding
Indebtedness of Holdings and its subsidiaries, on a consolidated basis.
"TRANCHE A TERM BORROWING" shall mean a Borrowing comprised of Tranche
A Term Loans.
"TRANCHE A TERM LOAN COMMITMENT" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Tranche A Term
Loans hereunder as set forth in Schedule 2.01, as the same may be reduced
from time to time pursuant to Section 2.09. The aggregate Tranche A Term
Loan Commitments are $100,000,000.
"TRANCHE A TERM LOAN MATURITY DATE" shall mean December 31, 2003.
"TRANCHE A TERM LOAN REPAYMENT DATE" shall have the meaning assigned
to such term in Section 2.11.
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22
"TRANCHE A TERM LOANS" shall mean the "Term Loans" made to the Company
pursuant to Section 2.01(a). Each Tranche A Term Loan shall be a
Eurodollar Tranche A Term Loan or an ABR Tranche A Term Loan.
"TRANCHE A TERM NOTE" shall mean a promissory note of the Company,
substantially in the form of Exhibit A-2, evidencing Tranche A Term Loans.
"TRANCHE B TERM BORROWING" shall mean a Borrowing comprised of Tranche
B Term Loans.
"TRANCHE B TERM LOAN COMMITMENT" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Tranche B Term
Loans hereunder as set forth in Schedule 2.01, as the same may be reduced
from time to time pursuant to Section 2.09. The aggregate Tranche B Term
Loan Commitments are $125,000,000.
"TRANCHE B TERM LOAN MATURITY DATE" shall mean June 30, 2005.
"TRANCHE B TERM LOAN REPAYMENT DATE" shall have the meaning assigned
to such term in Section 2.11.
"TRANCHE B TERM LOANS" shall mean the "Loans" made to the Company
pursuant to Section 2.01(b). Each Tranche B Term Loan shall be a
Eurodollar Tranche B Term Loan or an ABR Tranche B Term Loan.
"TRANCHE B TERM NOTE" shall mean a promissory note of the Company,
substantially in the form of Exhibit A-3, evidencing Tranche B Term Loans.
"TRANCHE C TERM BORROWING" shall mean a Borrowing comprised of Tranche
C Term Loans.
"TRANCHE C TERM LOAN COMMITMENT" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Tranche C Term
Loans hereunder as set forth in the Tranche C Term Loan Supplement, as the
same may be reduced from time to time pursuant to Section 2.09.
"TRANCHE C TERM LOAN MATURITY DATE" shall have the meaning assigned
thereto in the Tranche C Term Loan Supplement.
"TRANCHE C TERM LOAN REPAYMENT DATE" shall have the meaning assigned
to such term in Section 2.11.
"TRANCHE C TERM LOANS" shall mean the "Loans" made to the applicable
Borrower pursuant to Section 2.01(f). Each Tranche C Term Loan shall be a
Eurodollar Tranche C Term Loan or an ABR Tranche C Term Loan.
"TRANCHE C TERM NOTE" shall mean a promissory note of the Company,
substantially in the form of Exhibit A-6, evidencing Tranche C Term Loans.
"TRANCHE C TERM LOAN SUPPLEMENT" shall mean a supplement hereto in
form and substance satisfactory to the Administrative Agent, among the
Administrative Agent, the Company and the holders of the Tranche C Term
Loan Commitments or agreeing holders of the Revolving Credit Commitments
which sets forth the Tranche C Term Loan Commitments and, if applicable,
increases in the Revolving Credit Commitments, the Tranche C Term Loan
Maturity Date, applicable margins, amortization schedule and such other
terms as are required hereby; provided that the aggregate amount of the
Tranche C Term Loan Commitments and increase in the Revolving Credit
Commitments may not exceed $150,000,000. No Tranche C Term Loan Supplement
shall became effective if (i) at the time thereof, there is a Default or
Event of Default or (ii) after giving effect thereto Holdings would not be
in compliance on a pro forma basis with the covenants set forth in
Sections 6.14 and 6.16 as of the last day of the most recently ended
fiscal quarter.
"TRANSACTIONS" shall have the meanings assigned to such term in
Section 3.02.
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23
"TYPE", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans
(including Loans made through B/As) comprising such Borrowing is
determined. For purposes hereof, "RATE" shall include the Adjusted LIBO
Rate, the Alternate Base Rate and the C$ Prime Rate.
"UCC" shall mean the Uniform Commercial Code of New York.
"UNRESTRICTED SUBSIDIARY" shall mean (i) each Finance Subsidiary, (ii)
any Subsidiary of Holdings (other than the Company) none of the Capital
Stock or other ownership interest of which is owned by the Company or any
of its Subsidiaries, provided that Holdings has notified the
Administrative Agent of its acquisition or creation of such Subsidiary and
its ownership interest therein concurrently with such acquisition or
creation and the intended purposes of such Subsidiary and (iii) any
Subsidiary of an Unrestricted Subsidiary. Each Unrestricted Subsidiary,
other than a non-U.S. Unrestricted Subsidiary, shall have entered into the
existing Tax Sharing Agreement with Holdings and the Company (or another
tax sharing agreement containing terms which, in the reasonable judgment
of the Administrative Agent, are customary in similar circumstances to
provide an appropriate allocation of tax liabilities and benefits).
The Unrestricted Subsidiaries shall be capitalized solely from the
following sources: (a) any Investment in such Unrestricted Subsidiary by
any Person other than Holdings and the Restricted Subsidiaries; (b)
Indebtedness issued by such Unrestricted Subsidiary, or proceeds thereof;
(c) capital stock of any Unrestricted Subsidiary, or proceeds thereof; (d)
capital stock of Holdings issued by Holdings after the Closing Date, or
proceeds thereof; and (e) Investments permitted to be made in Unrestricted
Subsidiaries pursuant to Section 6.07(l).
"'WALLCOVERINGS SUBSIDIARIES" shall mean Imperial Wallcoverings,
Inc., a Delaware corporation ("Wallcoverings"), Imperial Wallcoverings
(Canada) Inc., a Canadian corporation, Imperial Wallcoverings Limited,
a United Kingdom corporation, and Marketing Service, Inc., a Delaware
corporation.
"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan,
as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"WP" shall mean Wasserstein Perella Partners, L.P.
"WP ENTITIES" shall mean WP, WPMP or any of their Affiliates.
"WPMP" shall mean Wasserstein Perella Management Partners, Inc.
SECTION 1.02 TERMS GENERALLY. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. For all purposes of this Agreement
(other than preparation of the financial statements to be delivered pursuant to
Section 5.04), all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect on the date of this Agreement
applied on a basis consistent with the application used in preparing Holdings'
audited financial statements for its fiscal year ended December 27, 1997
referred to in Section 3.09.
<PAGE>
24
ARTICLE II.
THE CREDITS
SECTION 2.01. LOANS; COMMITMENTS (a) Subject to the terms and conditions
and relying upon the representations and warranties set forth herein, each
Lender with a Tranche A Term Loan Commitment agrees, severally and not jointly,
to make a Tranche A Term Loan to the Company on the Closing Date in a principal
amount not to exceed its Tranche A Term Loan Commitment set forth opposite its
name in Schedule 2.01. Amounts paid or prepaid in respect of Tranche A Term
Loans may not be reborrowed.
(b) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Lender with a Tranche B
Term Loan Commitment agrees, severally and not jointly, to make a Tranche B Term
Loan to the Company on the Closing Date in a principal amount not to exceed its
Tranche B Term Loan Commitment set forth opposite its name in Schedule 2.01.
Amounts paid or prepaid in respect of Tranche B Term Loans may not be
reborrowed.
(c) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Revolving Lender agrees,
severally and not jointly, to make Revolving Loans to the Company, at any time
and from time to time on or after the Closing Date and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding not to exceed the excess of (i) its
Revolving Credit Commitment minus (ii) its Applicable Percentage of the sum of
the Company Letter of Credit Exposure and Swingline Loans plus the Dollar
Equivalent Amount of the Indebtedness of Foreign Restricted Subsidiaries
outstanding under Section 6.01(r) not supported by a Foreign Subsidiary Letter
of Credit at such time to the extent the aggregate amount of such unsupported
Indebtedness exceeds permanent reductions in the Revolving Credit Commitments
made from the Closing Date. Within the foregoing limits, the Company may borrow,
pay or prepay and reborrow Revolving Loans on or after the Closing Date and
prior to the Revolving Credit Maturity Date, subject to the terms, conditions
and limitations set forth herein. As provided in Section 2.19, the Revolving
Credit Commitment may be utilized for the issuance of Letters of Credit.
(d) (i) The Swingline Lender hereby agrees, subject to the limitations set
forth below with respect to the maximum amount of Swingline Loans permitted to
be outstanding from time to time, to make a portion of the Revolving Credit
Commitments available to the Company from time to time during the period from
the Closing Date through and excluding the earlier of Revolving Credit Maturity
Date and the termination of the Revolving Credit Commitments in an aggregate
principal amount not to exceed the Swingline Loan Commitment, by making
Swingline Loans to the Company. Swingline Loans may be made notwithstanding the
fact that such Swingline Loans, when aggregated with the Swingline Lender's
outstanding Revolving Loans and outstanding Swingline Loans, may exceed the
Swingline Lender's Revolving Credit Commitment. The Swingline Lender's
commitment to make Swingline Loans to the Company pursuant to this Section
2.01(d) is herein called its "SWINGLINE LOAN COMMITMENT." The original amount of
the Swingline Lender's Swingline Loan Commitment is $10,000,000. The Swingline
Lender's Swingline Loan Commitment shall expire on the date the Revolving Credit
Commitments are terminated and all Swingline Loans and all other amounts owed
hereunder with respect to Swingline Loans shall be paid in full no later than
that date. Amounts borrowed under this Section 2.01(d) may be repaid and
reborrowed to but excluding the date of termination of the Revolving Credit
Commitments.
(ii) In no event shall (a) the aggregate principal amount of
Swingline Loans outstanding at any time exceed the aggregate Swingline Loan
Commitment in effect at such time, (b) the aggregate principal amount of
Revolving Loans and Swingline Loans outstanding at any time exceed the Revolving
Credit Commitments as reduced by (i) the aggregate Company Letter of Credit
Exposure plus (ii) the Dollar Equivalent Amount of the Indebtedness of Foreign
Restricted Subsidiaries outstanding under Section 6.01(r) not supported by a
Foreign Subsidiary Letter of Credit at such time to the extent the aggregate
amount of such unsupported Indebtedness exceeds permanent reductions in the
Revolving Credit Commitments made from the Closing Date or (c) the aggregate
Swingline Loan Commitment exceed at any time the aggregate Revolving Credit
Commitments in effect at such time. Swingline Loans may only be made as ABR
Loans.
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25
(iii) With respect to any Swingline Loans which have not been
voluntarily prepaid by the Company, the Swingline Lender (by request to the
Administrative Agent) or Administrative Agent at any time may, on one Business
Day's notice, require each Lender, including the Swingline Lender, and each
Lender hereby agrees, subject to the provisions of this Section 2.01(d), to make
a Revolving Loan (which shall be funded as an ABR Loan) in an amount equal to
such Lender's Applicable Percentage of the amount of the Swingline Loans
("REFUNDED SWINGLINE LOANS") outstanding on the date notice is given which
Swingline Lender requests the Lenders to prepay; PROVIDED that so long as no
Default or Event of Default shall have occurred and be continuing, Lenders shall
not be required to make such Revolving Loans if the aggregate principal amount
of Swingline Loans outstanding as of any Tuesday of each week (or the first
Business Day occurring after any such Tuesday if such Tuesday is not a Business
Day) is less than $1,000,000.
(iv) In the case of Revolving Loans made by Lenders other than the
Swingline Lender under the immediately preceding paragraph (iii), each such
Lender shall make the amount of its Revolving Loan available to the
Administrative Agent, in same day funds, at the office of the Administrative
Agent located at 270 Park Avenue, New York, New York, not later than 1:00 P.M.
(New York time) on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Loans shall be immediately delivered to
the Swingline Lender (and not to the Company) and applied to repay the Refunded
Swingline Loans. On the day such Revolving Loans are made, the Swingline
Lender's Applicable Percentage of the Refunded Swingline Loans shall be deemed
to be paid with the proceeds of a Revolving Loan made by the Swingline Lender
and such portion of Swingline Loans deemed to be so paid shall no longer be
outstanding as Swingline Loans and shall be outstanding as Revolving Loans of
Lenders. The Company authorizes the Administrative Agent and the Swingline
Lender to charge the Company's account with Administrative Agent (up to the
amount available in such account) in order to pay immediately to the Swingline
Lender the amount of such Refunded Swingline Loans to the extent amounts
received from Lenders, including amounts deemed to be received from the
Swingline Lender, are not sufficient to repay in full such Refunded Swingline
Loans. If any portion of any such amount paid (or deemed to be paid) to the
Swingline Lender should be recovered by or on behalf of the Company from the
Swingline Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared among all
Lenders in the manner contemplated by Section 9.06(b). Subject to the proviso
contained in the first sentence of the preceding paragraph and to the compliance
by the Swingline Lender with the provisions of Section 2.01(d)(vii), each
Lender's obligation to make the Revolving Loans referred to in this paragraph
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Lender may have against the
Swingline Lender, the Company or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of an Event of Default or a Default; (iii)
any adverse change in the condition (financial or otherwise) of Holdings or any
of its subsidiaries; (iv) any breach of this Agreement by Holdings, the Company
or any other Lender; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. Nothing in this
Section 2.01(d) shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that the Company
may have against any Lender as a result of any default by such Lender hereunder.
(v) A copy of each notice given by the Swingline Lender or the
Administrative Agent pursuant to this Section 2.01(d) shall be promptly
delivered by the Swingline Lender to the Administrative Agent and the Company.
Upon the making of a Revolving Loan by a Lender pursuant to this Section
2.01(d), the amount so funded shall no longer be owed in respect of Swingline
Loans.
(vi) If as a result of any bankruptcy or similar proceeding,
Revolving Loans are not made pursuant to this Section 2.01(d) sufficient to
repay any amounts owed to the Swingline Lender as a result of a nonpayment of
outstanding Swingline Loans, each Lender agrees to purchase, and shall be deemed
to have purchased, a participation in such outstanding Swingline Loans in an
amount equal to its Applicable Percentage of the unpaid amount together with
accrued interest thereon. Upon one Business Day's notice from the Swingline
Lender, each Lender shall deliver to the Swingline Lender an amount equal to its
respective participation in same day funds at the office of the Swingline Lender
in New York, New York. In order to evidence such participation each Lender
agrees to enter into a participation agreement at the request of the Swingline
Lender in form and substance reasonably satisfactory to all parties. In the
event any Lender fails to make available to the Swingline Lender the amount of
such Lender's participation as provided in this Section 2.01(d), the Swingline
Lender shall be entitled to
<PAGE>
26
recover such amount on demand from such Lender together with interest at the
customary rate set by the Swingline Lender for correction of errors among banks
in New York City for one Business Day and thereafter at the Alternate Base Rate
plus the Applicable Margin then in effect.
(vii) Notwithstanding anything herein to the contrary, the
Swingline Lender shall not make any Swingline Loans after the occurrence and
during the continuation of a Default or Event of Default of which it is aware
unless the Required Lenders have consented thereto.
(e) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Canadian Lender agrees,
severally and not jointly, to make Canadian Revolving Loans to each Canadian
Borrower, at any time and from time to time on or after the Closing Date and
until the earlier of the Canadian Revolving Credit Maturity Date and the
termination of the Canadian Revolving Credit Commitment of such Canadian Lender
in accordance with the terms hereof, in an aggregate principal amount at any
time outstanding not to exceed the Dollar Equivalent Amount of the excess of (i)
its Canadian Revolving Credit Commitment minus (ii) its Applicable Percentage of
the sum of the Canadian Borrower Letter of Credit Exposure. Within the foregoing
limits, a Canadian Borrower may borrow, pay or prepay and reborrow Canadian
Revolving Loans on or after the Closing Date and prior to the Canadian Revolving
Credit Maturity Date, subject to the terms, conditions and limitations set forth
herein.
(f) Subject to the terms and conditions herein and in the Tranche C
Term Loan Supplement and relying upon the representations and warranties set
forth herein and therein, each Lender with a Tranche C Term Loan Commitment
agrees, severally and not jointly, to make a Tranche C Term Loan to the
applicable Borrower in a principal amount not to exceed its Tranche C Term Loan
Commitment set forth therein, as the same may be reduced from time to time
pursuant to Section 2.09. Amounts paid or prepaid in respect of Tranche C Term
Loans may not be reborrowed.
(g) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Additional Revolving
Lender agrees, severally and not jointly, to make Additional Revolving Loans to
the Company, at any time and from time to time on or after the Closing Date and
until the earlier of the Revolving Credit Maturity Date and the termination of
the Additional Revolving Credit Commitment of such Lender in accordance with the
terms hereof as set forth in Section 2.27.
SECTION 2.02. LOANS. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the applicable Lenders ratably in accordance with
their respective Commitments; PROVIDED, HOWEVER, that the failure of any Lender
to make any Loan shall not in itself relieve any other Lender of its obligation
to lend hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan required to be
made by such other Lender). The Loans comprising each ABR Borrowing or
Eurodollar Borrowing shall be in an aggregate principal amount which is an
integral multiple of $1,000,000 (or, in the case of Swingline Loans, $500,000)
and not less than $5,000,000 (or, in the case of Swingline Loans, $500,000) (or
in the case of an ABR Borrowing, an aggregate principal amount equal to the
remaining balance of the Revolving Credit Commitments). The Loans comprising
each Canadian Prime Rate Borrowing or Canadian B/A Borrowing shall be in an
aggregate principal amount which is an integral multiple of C$1,000,000 and not
less than C$5,000,000 (or an aggregate principal amount equal to the remaining
balance of the Canadian Revolving Credit Commitments); PROVIDED that the
aggregate amount of any Loans comprising a Canadian B/A Borrowing shall be
subject to a minimum principal amount of C$5,000,000 and shall be an integral
multiple of C$1,000,000.
(b) Each Revolving Credit Borrowing shall be comprised of ABR Loans, or
(except in the case of Swingline Loans) Eurodollar Loans, as the Company may
request pursuant to Section 2.03. Each Canadian Revolving Credit Borrowing shall
be comprised of (i) in the case of a $ Canadian Borrowing, ABR Loans, or
Eurodollar Loans, or (ii) in the case of C$ Canadian Borrowing, Canadian Prime
Rate Loans or Bankers' Acceptances, as the applicable Canadian Borrower may
request pursuant to Section 2.03. Each Lender may at its option fulfill its
Commitment with respect to any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that any
exercise of such option shall not affect the obligation of the applicable
Borrower to repay such Loan in accordance with the terms of this Agreement and
the applicable
<PAGE>
27
Note. Borrowings of more than one Type may be outstanding at the same time;
PROVIDED, HOWEVER, that (except in the case of Swingline Loans) a Borrower shall
not be entitled to request any Borrowing which, if made, would result in an
aggregate of more than 20 separate Eurodollar Borrowings or more than six
separate Canadian B/A Borrowings being outstanding hereunder at any one time.
For purposes of the foregoing, Loans having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Loans.
(c) (i) Subject to paragraph (d) below, each Lender shall make a Revolving
Credit Loan to the Company in the amount of its Applicable Percentage of each
Revolving Credit Borrowing hereunder on the proposed date thereof by wire
transfer of immediately available funds to the Administrative Agent in New York,
New York, not later than 11:00 a.m., New York City time, and the Administrative
Agent shall credit the amounts so received to the general deposit account of the
Company with the Administrative Agent or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders. Unless the
Administrative Agent shall have received notice from a Lender prior to the date
of any Borrowing that such Lender will not make available to the Administrative
Agent such Lender's portion of such Borrowing, the Administrative Agent may
assume that such Lender has made such portion available to the Administrative
Agent on the date of such Borrowing in accordance with this paragraph (c) and
the Administrative Agent may, in reliance upon such assumption, make available
to the Company on such date a corresponding amount. If and to the extent that
such Lender shall not have made such portion available to the Administrative
Agent, such Lender and the Company severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Company until the date such amount is repaid by either the Company or such
Lender to the Administrative Agent at (i) in the case of the Company, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, the Federal Funds Effective Rate. If such
Lender shall repay to the Administrative Agent such corresponding amount
together with the applicable interest thereon, such amount shall constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement and the
Company's obligations under the preceding sentence shall terminate. If the
Company shall repay to the Administrative Agent such corresponding amount
together with the applicable interest thereon, then such amount shall not
constitute a Loan hereunder and the Company shall have no further obligations
hereunder in respect thereof.
(ii) Subject to paragraph (d) below, each Canadian Lender shall make a
Loan to the applicable Canadian Borrower in the amount of its Applicable
Percentage of each Canadian Revolving Credit Borrowing hereunder on the proposed
date thereof by wire transfer of immediately available funds to the Canadian
Administrative Agent in Toronto, Canada not later than 11:00 a.m., Toronto time,
and the Canadian Administrative Agent shall credit the amounts so received to
the general deposit account of the applicable Canadian Borrower with the
Canadian Administrative Agent or, if a Canadian Revolving Credit Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Canadian
Lenders. Unless the Canadian Administrative Agent shall have received notice
from a Canadian Lender prior to the date of any Canadian Revolving Credit
Borrowing that such Canadian Lender will not make available to the Canadian
Administrative Agent such Canadian Lender's portion of such Canadian Revolving
Credit Borrowing, the Canadian Administrative Agent may assume that such
Canadian Lender has made such portion available to the Canadian Administrative
Agent on the date of such Canadian Revolving Credit Borrowing in accordance with
this paragraph (c) and the Canadian Administrative Agent may, in reliance upon
such assumption, make available to the applicable Canadian Borrower on such date
a corresponding amount. If and to the extent that such Canadian Lender shall not
have made such portion available to the Canadian Administrative Agent, such
Canadian Lender and the applicable Canadian Borrower agree to repay to the
Canadian Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the applicable Canadian Borrower until the date such amount is
repaid by the applicable Canadian Borrower or such Canadian Lender to the
Canadian Administrative Agent at (i) in the case of the Canadian Borrowers, the
interest rate applicable at the time to the Loans comprising such Canadian
Revolving Credit Borrowing and (ii) in the case of such Canadian Lender, such
rate determined by the Canadian Administrative Agent as the rate then in effect
for dealings among Canadian banks. If such Canadian Lender shall repay to the
Canadian Administrative Agent such corresponding amount together with the
applicable interest thereon, such amount shall constitute such Canadian Lender's
Loan as part of such Canadian Revolving Credit Borrowing for purposes of this
Agreement and the applicable Canadian Borrower's obligations under the preceding
sentence shall terminate. If the applicable Canadian
<PAGE>
28
Borrower shall repay to the Canadian Administrative Agent such corresponding
amount together with the applicable interest thereon, then such amount shall not
constitute a Loan hereunder and the Canadian Borrowers shall have no further
obligations hereunder in respect thereof. Notwithstanding the foregoing,
Canadian B/A Borrowings shall be made in accordance with the provisions of
Section 2.26.
(d) Notwithstanding any other provision of this Agreement, (x) the Company
shall not be entitled to request any Revolving Credit Borrowing if the Interest
Period requested with respect thereto would end after the Revolving Credit
Maturity Date and (y) neither Canadian Borrower shall be entitled to request any
Canadian Revolving Credit Borrowing if the Interest Period or Contract Period
requested with respect thereto would end after the Canadian Revolving Credit
Maturity Date.
(e) Each Borrower may refinance all or any part of any Revolving Credit
Borrowing or Canadian Revolving Credit Borrowing with a Revolving Credit
Borrowing or Canadian Revolving Credit Borrowing, as the case may be, of the
same or a different Type, subject to the conditions and limitations set forth in
this Agreement. Any Revolving Credit Borrowing or Canadian Revolving Credit
Borrowing or part thereof so refinanced shall be deemed to be repaid or prepaid
in accordance with Section 2.04 or 2.12, as applicable, with the proceeds of a
new Revolving Credit Borrowing or Canadian Revolving Credit Borrowing, as the
case may be, and the proceeds of the new Revolving Credit Borrowing or Canadian
Revolving Credit Borrowing, to the extent they do not exceed the principal
amount of the Revolving Credit Borrowing or Canadian Revolving Credit Borrowing,
as the case may be, being refinanced, shall not be paid by the applicable
Lenders or Canadian Lenders, as the case may be, to the Applicable Agent, or by
the Applicable Agent to the Company or the applicable Canadian Borrower, as the
case may be, pursuant to paragraph (c) above.
(f) If the Applicable Agent has not received from the Company or the
applicable Canadian Borrower, as the case may be, the payment required by
Section 2.22(a) by 12:00 noon, New York City time, on the date on which an
Issuing Bank has notified the Company or the applicable Canadian Borrower, as
the case may be, and the Applicable Agent that payment of a draft presented
under any Letter of Credit will be made (or such later time permitted by Section
2.22(a)), as provided in Section 2.22, the Applicable Agent will promptly notify
such Issuing Bank and each Revolving Lender or Canadian Revolving Lender, as the
case may be, of the Letter of Credit Disbursement and, in the case of each such
Lender, its Applicable Percentage of such Letter of Credit Disbursement. Each
Revolving Lender or Canadian Revolving Lender, as the case may be (other than
the applicable Issuing Bank), will pay to the Applicable Agent, not later than
2:00 p.m., New York City time, on such date (or, if payment by the applicable
Borrower is not required until after 11:00 a.m., New York City time, on such
date, by 10:00 a.m. on the immediately following Business Day) such Lender's
Applicable Percentage of such Letter of Credit Disbursement, which the
Applicable Agent will promptly pay to such Issuing Bank. The Applicable Agent
will promptly remit to each Revolving Lender or Canadian Revolving Lender, as
the case be, its Applicable Percentage of any amounts subsequently received by
the Applicable Agent from the Company or the applicable Canadian Borrower, as
the case may be, in respect of such Letter of Credit Disbursement.
SECTION 2.03. NOTICE OF REVOLVING BORROWINGS. (a) The Company shall give
the Administrative Agent written notice (or telephone notice promptly confirmed
in writing) (a) in the case of a Eurodollar Borrowing, not later than 12:00
noon, New York City time, three Business Days before a proposed borrowing and
(b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City
time, one Business Day before a proposed borrowing. Such notice shall be
irrevocable and shall in each case refer to this Agreement and specify (i) the
date of such Borrowing (which shall be a Business Day) and the amount thereof;
and (ii) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period
with respect thereto. If no election as to the Type of Borrowing is specified in
any such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Company shall be deemed to have selected an Interest
Period of one month's duration. If the Company shall not have given notice in
accordance with this Section 2.03 of its election to refinance a Revolving
Credit Borrowing prior to the end of the Interest Period in effect for such
Borrowing, then the Company shall (unless such Borrowing is repaid at the end of
such Interest Period) be deemed to have given notice of an election to refinance
such Borrowing with an ABR Borrowing. The Administrative Agent shall promptly
advise the applicable Lenders of any notice given pursuant to this Section 2.03
and of each Lender's portion of the requested Borrowing.
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29
(b) The applicable Canadian Borrower shall give the Canadian
Administrative Agent written notice (or telephone notice promptly confirmed in
writing) (a) in the case of a Eurodollar Borrowing or a Canadian B/A Borrowing,
not later than 12:00 noon, Toronto time, three Business Days before a proposed
borrowing and (b) in the case of an ABR Borrowing or a Canadian Prime Rate
Borrowing, not later than 12:00 noon, Toronto time, one Business Day before a
proposed borrowing. Such notice shall be irrevocable and shall in each case
refer to this Agreement and specify (i) the date of such Borrowing (which shall
be a Business Day) and the amount thereof; (ii) whether such Borrowing shall be
a $ Canadian Borrowing or a C$ Canadian Borrowing; (iii) if such Borrowing is to
be a Eurodollar Borrowing, the Interest Period with respect thereto; and (iv) if
such Borrowing is to be a Canadian B/A Borrowing, the Contract Period therefor.
If no election as to the Type of Borrowing is specified in any such notice, then
the requested Borrowing shall be an ABR Borrowing or a Canadian Prime Rate
Borrowing, as the case may be. If no Interest Period with respect to any
Eurodollar Borrowing is specified in any such notice, then the applicable
Canadian Borrower shall be deemed to have selected an Interest Period of one
month's duration. If no Contract Period with respect to any Canadian B/A
Borrowing is specified in any such notice, then the applicable Canadian Borrower
shall be deemed to have selected a Contract Period of thirty days' duration. If
the applicable Canadian Borrower shall not have given notice in accordance with
this Section 2.03 of its election to refinance a Canadian Revolving Credit
Borrowing in dollars prior to the end of the Interest Period in effect for such
Borrowing, then the applicable Canadian Borrower shall (unless such Borrowing is
repaid at the end of such Interest Period) be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing. The Canadian
Administrative Agent shall promptly advise the Canadian Lenders of any notice
given pursuant to this Section 2.03 and of each Canadian Lender's portion of the
requested Borrowing.
SECTION 2.04. NOTES; REPAYMENT OF LOANS. (a) The Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender (i) the then unpaid principal amount of each Revolving Loan and
Swingline Loan of such Lender on the Revolving Credit Maturity Date (or such
earlier date on which the Revolving Loans, Additional Revolving Loans and Swing
Line Loans become due and payable pursuant to Article VII), (ii) the principal
amount of the Tranche A Term Loan of such Lender, in 21 consecutive quarterly
installments, respectively, payable each March 31, June 30, September 30 and
December 31 in accordance with Section 2.11 (or the then unpaid principal amount
of such Tranche A Term Loan, on the date that such Tranche A Term Loan becomes
due and payable pursuant to Article VII), (iii) the principal amount of the
Tranche B Term Loan of such Lender, in 26 consecutive quarterly installments,
payable on each March 31, June 30, September 30 and December 31 in accordance
with Section 2.11 (or the then unpaid principal amount of such Loan, on the date
that such Tranche B Term Loan becomes due and payable pursuant to Article VII)
and (iv) if applicable, the principal amount of the Tranche C Term Loan of such
Lender on the terms set forth in the Tranche C Term Loan Supplement (or the then
unpaid principal amount of such Loan, on the date that such Tranche C Term Loan
becomes due and payable pursuant to Article VII). Each Canadian Borrower hereby
unconditionally promises to pay to the Canadian Administrative Agent for the
account of each Canadian Lender (i) the then unpaid principal amount of each
Canadian B/A Borrowing at the expiration of each Contract Period, if such
Borrowing is not rolled over or converted pursuant to Section 2.26 (or the then
unpaid principal amount of such B/A, on the date that such B/A becomes due and
payable pursuant to Article VII) or (ii) the then unpaid principal amount of
each Canadian Revolving Loan of such Lender on the Canadian Revolving Credit
Maturity Date (or such earlier date on which the Canadian Revolving Loans become
due and payable pursuant to Article VII). Each Borrower hereby further agrees to
pay interest on the unpaid principal amount of the Loans made to it from time to
time outstanding from the date hereof until payment in full thereof at the rates
per annum, and on the dates, set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of each Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) (1) The Administrative Agent shall maintain the Register pursuant
to Section 9.04(d), and a subaccount therein for each Lender in which shall be
recorded (i) the amount of each Revolving Loan, Additional Revolving Loan,
Swingline Loan, Tranche A Term Loan, Tranche B Term Loan and, if applicable,
Tranche C Term Loan made hereunder, the Type thereof and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Company to each Lender hereunder and (iii)
both
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30
the amount of any sum received by the Administrative Agent hereunder from the
Company and each Lender's share thereof.
(2) The Canadian Administrative Agent shall maintain the Register
pursuant to Section 9.04(d), and a subaccount therein for each Canadian Lender
in which shall be recorded (i) the amount of each Canadian Revolving Loan and,
if applicable, each Tranche C Term Loan made hereunder, the Type thereof and
each Interest Period or Contract Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
applicable Canadian Borrower to each Canadian Lender hereunder, (iii) the face
amount of all B/As accepted by the Canadian Lenders and (iv) both the amount of
any sum received by the Canadian Administrative Agent hereunder from the
applicable Canadian Borrower and each Canadian Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.04(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of each Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent or the Canadian Administrative
Agent to maintain the Register or any such account, or any error therein, shall
not in any manner affect the obligation of any Borrower to repay (with
applicable interest) the Loans made to such Borrower by such Lender in
accordance with the terms of this Agreement.
(e) The Company agrees that, upon the request to the Administrative
Agent by any Lender, the Company will execute and deliver to such Lender (i) a
Revolving Credit Note and, if applicable, an Additional Revolving Credit Note
with appropriate insertions as to date and principal amount, and/or (ii) a
Tranche A Term Note with appropriate insertions as to date and principal amount,
and/or (iii) a Tranche B Term Note with appropriate insertions as to date and
principal amount, and/or (iv) if applicable, a Tranche C Term Note with
appropriate insertions as to date and principal amount, and/or (v) in the case
of the Swingline Lender, a Swingline Note with appropriate insertions as to date
and principal amount. Each Canadian Borrower agrees that, upon the request to
the Canadian Administrative Agent by any Canadian Lender, such Canadian Borrower
will execute and deliver to such Canadian Lender (A) a Canadian Revolving Credit
Note with appropriate insertions as to date and principal amount and/or (B) if
applicable, a Tranche C Term Note with appropriate insertions as to date and
principal amount.
SECTION 2.05. FEES. (a) The Company agrees to pay to each Lender, through
the Administrative Agent, on the last day of March, June, September and December
in each year, and on the date on which the Revolving Credit Commitment and, if
applicable, the Additional Revolving Credit Commitment of such Lender shall be
terminated as provided herein, a commitment fee (a "U.S. COMMITMENT FEE") of 1/2
of 1% (or, at any time when the Applicable Level is higher than Level I, 3/8 of
1%) per annum on the average daily unused amount of the Revolving Credit
Commitment and the Additional Revolving Credit Commitment of such Lender during
the preceding quarter (or shorter period ending with the Revolving Credit
Maturity Date or the date on which the Revolving Credit Commitment or, if
applicable, the Additional Revolving Credit Commitment of such Lender shall be
terminated). The Canadian Borrowers agree to pay to each Canadian Revolving
Lender, through the Canadian Administrative Agent, on the last day of March,
June, September and December in each year, and on the date on which the Canadian
Revolving Credit Commitment of such Lender shall be terminated as provided
herein, a commitment fee in dollars (a "CANADIAN COMMITMENT FEE" and, together
with the U.S. Commitment Fee, the "COMMITMENT FEES") of 1/2 of 1% (or, at any
time when the Applicable Level is higher than Level I, 3/8 of 1%) per annum on
the average daily unused amount of the Canadian Revolving Credit Commitment of
such Lender during the preceding quarter (or shorter period ending with the
Canadian Revolving Credit Maturity Date or the date on which the Canadian
Revolving Credit Commitment of such Lender shall be terminated). For purposes of
calculating any Lender's Commitment Fees, the outstanding Swingline Loans and
Foreign Restricted Subsidiary Indebtedness under Section 6.01(r) not supported
by Foreign Subsidiary Letters of Credit during the period for which such
Lender's Commitment Fees is calculated shall be deemed to be zero. The
Commitment Fees due to each Lender shall cease to accrue on the date on which
the Commitments of such Lender shall be terminated as provided herein. All
Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days.
(b) The applicable Borrowers agree to pay to the Lenders, through the
Applicable Agent, on the Closing Date, the upfront fees (the "PARTICIPATION
FEES") in the amounts previously agreed to be payable to the Lenders.
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(c) The Company agrees to pay to the Administrative Agent, for its own
account, at the times previously agreed, the fees (the "AGENCY FEES") in the
amounts previously agreed to be payable to the Administrative Agent for its own
account in accordance with the fee letter between Chase and the Company dated
April 24, 1998. The Canadian Borrowers agree to pay to the Canadian
Administrative Agent, for its own account, at the times previously agreed the
fees in the amounts previously agreed to be payable to the Canadian
Administrative Agent for its own account.
(d) Each Borrower agrees to pay to each Issuing Bank, for its own account,
a fronting fee for each Letter of Credit issued by such Issuing Bank for the
account of such Borrower, in the amount agreed upon between such Borrower and
such Issuing Bank, payable as agreed to by such Borrower and such Issuing Bank
for such Letter of Credit, and negotiation, amendment, issuing, payment and
other customary fees (collectively, the "FRONTING FEES") in the amounts
separately agreed to by such Issuing Bank and the applicable Borrower.
(e) All Fees shall be paid on the dates due, in immediately available
funds, to the Applicable Agent for distribution, if and as appropriate, among
the Lenders or to the applicable Issuing Banks, as the case may be. Once paid,
none of the Fees shall be refundable under any circumstances.
SECTION 2.06. INTEREST ON LOANS. (a) Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing and Swingline Loans shall bear
interest (computed on the basis of the actual number of days elapsed over a year
of 365 or 366 days, as the case may be, when determined by reference to the
Prime Rate and over a year of 360 days at all other times) at a rate per annum
equal to the Alternate Base Rate plus the Applicable Margin.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Margin.
(c) Subject to the provisions of Section 2.07, (i) each C$ Prime Rate Loan
shall bear interest at a rate per annum equal to the C$ Prime Rate plus the
Applicable Margin and (ii) each B/A shall be subject to an Acceptance Fee
payable as set forth in Section 2.26.
(d) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan and as otherwise provided in this Agreement. The
applicable Alternate Base Rate and Adjusted LIBO Rate for each Interest Period
or day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and the applicable C$ Prime Rate for each Interest Period
or day within an Interest Period, as the case may be, shall be determined by the
Canadian Administrative Agent, and such determinations shall be conclusive
absent manifest error.
(e) Except as provided herein, interest and fees hereunder shall accrue
and be calculated on a daily basis on the basis of a 360-day year for actual
days elapsed, except that interest calculated on the basis of the Prime Rate or
the C$ Prime Rate shall be calculated on the basis of a 365-day (or 366-day, as
the case may be) year for actual days elapsed. For purposes of the Interest Act
(Canada) (i) whenever any interest or fee under this Agreement with respect to
credit extended thereunder, is calculated using a rate based on a year of 360
days, such rate determined pursuant to such calculation, when expressed as an
annual rate, is equivalent to (x) the applicable rate based on a year of 360
days multiplied by (y) the actual number of days in the calendar year in which
the period for which such interest or fee is payable (or compounded) ends, and
(z) divided by 360 and (ii) the principle of deemed reinvestment of interest
does not apply to any such interest calculation under this Agreement, and (iii)
the rates of interest stipulated in this Agreement are intended to be nominal
rates and not effective rates or yields.
SECTION 2.07. DEFAULT INTEREST. If any Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, such Borrower shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount up to (but not including) the date of actual payment (after as well as
before judgment) at a rate per annum equal to the Alternate Base Rate or the C$
Prime Rate, as the case may be, plus the Applicable Margin plus 2% per annum.
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32
SECTION 2.08. ALTERNATE RATE OF INTEREST. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the interbank eurodollar market,
or that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telex or telecopy notice of
such determination to the Company and the applicable Lenders. In the event of
any such determination, any request by a Borrower for a Eurodollar Borrowing
pursuant to Section 2.03 or 2.10 shall, until the Administrative Agent shall
have advised the Company and the applicable Lenders that the circumstances
giving rise to such notice no longer exist, be deemed to be a request for an ABR
Borrowing. Each determination by the Administrative Agent hereunder shall be
conclusive absent manifest error.
SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Revolving
Credit Commitments and the Additional Revolving Credit Commitments shall be
automatically terminated on the Revolving Credit Maturity Date. The Canadian
Revolving Credit Commitments shall be automatically terminated on the Canadian
Revolving Credit Maturity Date. The Letter of Credit Commitment shall be
automatically terminated at 5:00 p.m., New York City time, on the date that is
five Business Days prior to the Revolving Credit Maturity Date. No Letters of
Credit may be issued under the Canadian Revolving Credit Commitments after the
Canadian Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written notice to
the Applicable Agent, the Company or a Canadian Borrower, as the case may be,
may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Revolving Credit Commitments, the Additional Revolving
Credit Commitments or the Canadian Revolving Credit Commitments; PROVIDED,
HOWEVER, that (i) each partial reduction of the Revolving Credit Commitments,
the Additional Revolving Credit Commitments or the Canadian Revolving Credit
Commitments shall be in an integral multiple of $1,000,000 and in a minimum
principal amount of $5,000,000, (ii) the Revolving Credit Commitments shall not
be reduced to an amount which is less than the Company Letter of Credit Exposure
and the outstanding Swingline Loans and Revolving Loans at such time, (iii) the
Additional Revolving Credit Commitments shall not be reduced to an amount which
is less than the outstanding Additional Revolving Loans at such time and (iv)
the Canadian Revolving Credit Commitments shall not be reduced to an amount
which is less than the Canadian Borrower Letter of Credit Exposure and the
Dollar Equivalent Amount of Canadian Revolving Loans.
(c) Each reduction in the Revolving Credit Commitments, the Additional
Revolving Credit Commitments or the Canadian Revolving Credit Commitments, as
the case may be, hereunder shall be made ratably among the applicable Lenders in
accordance with their respective applicable Revolving Credit Commitments,
Additional Revolving Credit Commitments or Canadian Revolving Credit
Commitments. The applicable Borrowers shall pay to the Applicable Agent for the
account of the applicable Lenders, on the date of each termination or reduction,
the Commitment Fees on the amount of the Commitments so terminated or reduced
accrued through the date of such termination or reduction.
SECTION 2.10. CONVERSION AND CONTINUATION OF TRANCHE A TERM, TRANCHE B
TERM AND TRANCHE C TERM LOANS. Each applicable Borrower shall have the right at
any time upon prior irrevocable notice to the Applicable Agent (i) not later
than 12:00 (noon), New York City time, one Business Day prior to conversion, to
convert any Eurodollar Tranche A Term Borrowing into an ABR Tranche A Term
Borrowing, or to convert any Eurodollar Tranche B Term Borrowing into an ABR
Tranche B Term Borrowing or to convert any Eurodollar Tranche C Term Borrowing
into an ABR Tranche C Term Borrowing, (ii) not later than 10:00 a.m., New York
City time, three Business Days prior to conversion or continuation, to convert
any ABR Tranche A Term Borrowing into a Eurodollar Tranche A Term Borrowing, or
convert any ABR Tranche B Term Borrowing into a Eurodollar Tranche B Term
Borrowing, or to convert any ABR Tranche C Term Borrowing into a Eurodollar
Tranche C Term Borrowing or to continue any Eurodollar Tranche A Term Borrowing,
Eurodollar Tranche B Term Borrowing or Eurodollar Tranche C Term Borrowing as a
Eurodollar Tranche A Term Borrowing, Eurodollar Tranche B Term Borrowing or
Eurodollar Tranche C Term Borrowing, as applicable, for an additional Interest
Period and (iii) not later than 10:00
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33
a.m., New York City time, three Business Days prior to conversion, to convert
the Interest Period with respect to any Eurodollar Tranche A Term Borrowing,
Eurodollar Tranche B Term Borrowing or Eurodollar Tranche C Term Borrowing to
another permissible Interest Period, subject to the following conditions:
(a)each conversion or continuation shall be made pro rata among the
applicable Lenders in accordance with the respective principal amounts of
the Loans comprising the converted or continued Borrowing;
(b)if less than all the outstanding principal amount of any Borrowing
shall be converted or continued, the aggregate principal amount of such
Borrowing converted or continued shall be not less than $1,000,000;
PROVIDED that the aggregate principal amount of each Eurodollar Borrowing
resulting from any such conversion or continuation shall not be less than
$1,000,000;
(c)each conversion shall be effected by each applicable Lender by such
Lender converting its applicable Loan (or portion thereof), and accrued
interest on a Loan (or portion thereof) being converted shall be paid by
the applicable Borrower at the time of conversion;
(d)if any Eurodollar Borrowing is converted at a time other than the
end of the Interest Period applicable thereto, the applicable Borrower
shall pay, upon demand, any amounts due to the applicable Lenders pursuant
to Section 2.15;
(e)any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(f)any portion of a Eurodollar Borrowing which cannot be converted
into or continued as a Eurodollar Borrowing by reason of clause (e) above
shall be automatically converted at the end of the Interest Period in
effect for such Borrowing into an ABR Borrowing;
(g)no Interest Period may be selected for any Eurodollar Borrowing
that would end later than a Tranche A Term Loan Repayment Date, Tranche B
Term Loan Repayment Date or Tranche C Term Loan Repayment Date, as
applicable, occurring on or after the first day of such Interest Period
if, after giving effect to such selection, the aggregate outstanding
amount of (i) the Eurodollar Tranche A Term Borrowings, the Eurodollar
Tranche B Term Borrowings or the Eurodollar Tranche C Term Borrowings, as
the case may be, with Interest Periods ending on or prior to such Tranche
A Term Loan Repayment Date, Tranche B Term Loan Repayment Date or Tranche
C Term Loan Repayment Date and (ii) the ABR Tranche A Term Borrowings, ABR
Tranche B Term Borrowings or ABR Tranche C Term Borrowings, as the case
may be, would not be at least equal to the principal amount of Tranche A
Term Borrowings, Tranche B Borrowings or Tranche C Term Borrowings to be
paid on such Tranche A Term Loan Repayment Date, Tranche B Term Loan
Repayment Date or Tranche C Term Loan Repayment Date; and
(h)a Borrowing may not be converted into or continued as a Eurodollar
Borrowing if a Default or an Event of Default has occurred and is
continuing and the Required Lenders have determined such conversion or
continuation is not appropriate.
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Borrowing
that the applicable Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
applicable Borrower shall be deemed to have selected an Interest Period of one
month's duration. The Applicable Agent shall promptly advise the other Lenders
of any notice given pursuant to this Section 2.10 and of each Lender's portion
of any converted or continued Borrowing. If the Applicable Borrower shall not
have given notice in accordance with this Section 2.10 to continue any Borrowing
into a subsequent Interest Period (and shall
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34
not otherwise have given notice in accordance with this Section 2.10 to convert
such Borrowing), such Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into a new Interest Period as an ABR Borrowing.
SECTION 2.11. REPAYMENT OF TRANCHE A TERM, TRANCHE B TERM AND TRANCHE C
TERM BORROWINGS (a) The Tranche A Term Borrowings shall be payable as to
principal in such number of consecutive installments, payable on such dates
(each a "TRANCHE A TERM LOAN REPAYMENT DATE") and in such amounts as set forth
on Schedule 2.11.
(b) The Tranche B Term Borrowings shall be payable as to principal in such
number of consecutive installments, payable on such dates (each a "TRANCHE B
LOAN REPAYMENT DATE") and in such amounts as set forth on Schedule 2.11.
(c) The Tranche C Term Borrowings shall be payable as to principal in
such number of consecutive installments, payable on such dates (each a "TRANCHE
C TERM LOAN REPAYMENT DATE") and in such amounts as set forth in the Tranche C
Term Loan Supplement.
(d) To the extent not previously paid, all Tranche A Term Borrowings shall
be due and payable on the Tranche A Term Loan Maturity Date, all Tranche B Term
Borrowings shall be due and payable on the Tranche B Term Loan Maturity Date and
all Tranche C Term Borrowings shall be due and payable on the Tranche C Term
Loan Maturity Date. Each payment of Eurodollar Tranche A Term Borrowings,
Eurodollar Tranche B Term Borrowings or Eurodollar Tranche C Term Borrowings
repaid pursuant to this Section 2.11 shall be accompanied by accrued interest on
the principal amount paid to but excluding the date of payment.
SECTION 2.12. PREPAYMENT. (a) Each Borrower shall have the right at any
time and from time to time to prepay any Borrowing (other than a Canadian B/A
Borrowing), in whole or in part, upon, in the case of Eurodollar Borrowings, at
least three Business Days', and in the case of ABR Borrowings and C$ Prime Rate
Borrowings, at least one Business Day's, prior written notice (or telephone
notice promptly confirmed by written notice) to the Administrative Agent or the
Canadian Administrative Agent, as the case may be; PROVIDED, HOWEVER, that each
partial prepayment (other than of a Swingline Loan) of ABR Loans and of
Eurodollar Loans shall be in a minimum principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, each partial prepayment of C$
Prime Rate Loans shall be in a minimum principal amount of C$5,000,000 or an
integral multiple of C$1,000,000 in excess thereof.
(b) On the date of any termination or reduction of the Revolving Credit
Commitments pursuant to Section 2.09, the Company shall pay or prepay so much
of, FIRST, the Swingline Loans and, SECOND, the Revolving Credit Borrowings, as
shall be necessary in order that the aggregate principal amount of the Revolving
Loans and Swingline Loans outstanding will not exceed the excess, if any, of (i)
the aggregate Revolving Credit Commitments after giving effect to such
termination or reduction, minus (ii) the Company Letter of Credit Exposure plus
the Dollar Equivalent Amount of the Indebtedness of Foreign Restricted
Subsidiaries outstanding under Section 6.01(r) not supported by a Foreign
Subsidiary Letter of Credit at the time to the extent the aggregate amount of
such unsupported Indebtedness exceeds permanent reductions in the Revolving
Credit Commitments made from the Closing Date.
(c) On the date of any termination or reduction of the Canadian Revolving
Credit Commitments pursuant to Section 2.09, the Canadian Borrowers shall pay or
prepay so much of the Canadian Revolving Credit Borrowings as shall be necessary
in order that the aggregate principal amount of the Canadian Revolving Loans
outstanding will not exceed the excess, if any, of (i) the aggregate Canadian
Revolving Credit Commitments after giving effect to such termination or
reduction, minus (ii) the Canadian Borrower Letter of Credit Exposure.
(d) On the date of any termination or reduction of the Additional
Revolving Credit Commitments pursuant to Section 2.09 or Section 2.27, the
Company shall pay or prepay so much of the Additional Revolving Credit Loans as
shall be necessary in order that the aggregate principal amount of the
Additional Revolving Loans outstanding will not exceed the aggregate Additional
Revolving Credit Commitments after giving effect to such termination or
reduction.
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35
(e) The Company shall prepay the Borrowings at the times and in the
amounts required pursuant to Section 2.12(g) and 2.12(h).
(f) Each Borrower's prepayment obligations under any paragraph of this
Section 2.12 shall be in addition to, and shall not be discharged by the
performance of, its obligations under any other such paragraph. Each notice of
prepayment shall specify the prepayment date and the principal amount of each
Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall
commit the applicable Borrower to prepay such Borrowing by the amount stated
therein on the date stated therein. All prepayments under this Section 2.12
shall be subject to Section 2.15 but otherwise without premium or penalty. All
prepayments under this Section 2.12 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.
(g) In the event and on each occasion that a Prepayment Event occurs,
subject to Section 6.08(i), the Company and any other applicable Borrower shall
apply an amount equal to the Applicable Asset Sale Prepayment Percentage of the
Net Proceeds therefrom to prepay (x) the Tranche A Term Loans, (y) the Tranche B
Term Loans and, if applicable, (z) the Tranche C Term Loans, in each case
ratably according to the aggregate outstanding amounts thereof in accordance
with Section 2.12(l) below. Substantially simultaneously with (and in any event
not later than the Business Day next following) the occurrence of a Prepayment
Event, the applicable Borrower shall pay to the Applicable Agent (for
application to the prepayment of Loans in accordance with this Section 2.12(g))
an amount equal to the Applicable Asset Sale Prepayment Percentage of the Net
Proceeds from such Prepayment Event.
(h) Not later than 90 days after the end of each fiscal year of the
Company, commencing with the fiscal year ending on or about December 31, 1998,
the Company and any other applicable Borrower shall pay to the Applicable Agent
(for application to the prepayment of the Tranche A Term Loans, the Tranche B
Term Loans and, if applicable, the Tranche C Term Loans, in each case ratably
according to the aggregate outstanding amounts thereof in accordance with
Section 2.12(i)) an amount equal to the Applicable Excess Cash Flow Prepayment
Percentage (as of the last day for the fiscal year for which Excess Cash Flow is
calculated) of the amount of the Excess Cash Flow for such fiscal year.
(i) Each prepayment of principal of the Tranche A Term Borrowings, the
Tranche B Term Borrowings or, if applicable, Tranche C Term Loans pursuant to
this Section 2.12 shall be applied to reduce scheduled payments of principal of
the applicable Borrowings due under paragraph (a), (b) or (c), as applicable, of
Section 2.11 after the date of such prepayment pro rata in accordance with the
remaining scheduled amount of each such payment; provided, HOWEVER, that in the
case of any prepayment of the Tranche A Term Borrowings, the Tranche B Term
Borrowings and, if applicable, Tranche C Term Borrowings, pursuant to Section
2.12(h) or Section 2.12(a), the principal amount of such prepayment shall be
applied to reduce scheduled payments of principal due under Section 2.11 after
the date of such prepayment in the chronological order of maturity.
Notwithstanding anything in this Section 2.12 to the contrary, so long as any
Tranche A Term Loans are outstanding, each prepayment with respect to the
Tranche B Term Loans and, if applicable, Tranche C Term Loans, shall be applied
in accordance with Section 2.12(l).
(j) [Intentionally omitted]
(k) In the event the amount of any prepayment required to be made above
shall exceed the aggregate principal amount of the applicable outstanding ABR
Loans (the amount of any such excess being called the "EXCESS AMOUNT"), the
Company and any other applicable Borrower shall have the right, in lieu of
making such prepayment in full, to prepay all the outstanding applicable ABR
Loans and to deposit an amount equal to the Excess Amount with the Collateral
Agent in a cash collateral account maintained (pursuant to documentation
satisfactory to the Administrative Agent) by and in the sole dominion and
control of the Collateral Agent. Any amounts so deposited shall be held by the
Collateral Agent as collateral for the Obligations and applied to the prepayment
of the applicable Eurodollar Loans at the end of the current Interest Periods
applicable thereto. On any Business Day on which (x) collected amounts remain on
deposit in or to the credit of such cash collateral account after giving effect
to the payments made on such day pursuant to this Section 2.12(k) and (y) the
Company shall have delivered to the Collateral Agent a written request or a
telephonic request (which shall be promptly confirmed in writing) that such
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36
remaining collected amounts be invested in the Permitted Investments specified
in such request, the Collateral Agent shall use its reasonable efforts to invest
such remaining collected amounts in such Permitted Investments; PROVIDED,
HOWEVER, that the Collateral Agent shall have continuous dominion and full
control over any such investments (and over any interest that accrues thereon)
to the same extent that it has dominion and control over such cash collateral
account and no Permitted Investment shall mature after the end of the Interest
Period for which it is to be applied. The Company and any other applicable
Borrower shall not have the right to withdraw any amount from such cash
collateral account until the applicable Eurodollar Loans and accrued interest
thereon are paid in full or if a Default or Event of Default then exists or
would result.
(l) The Company shall at least four Business Days prior to any expected
prepayment pursuant to Section 2.12(g) notify the Applicable Agent of such
prepayment and the approximate amount and date thereof. Upon receipt of any such
notice, the Applicable Agent shall promptly provide to each Tranche B Lender
and, if applicable, each Tranche C Lender, a notice (each, a "PREPAYMENT OPTION
NOTICE") (i) setting forth the amount of such prepayment to be applied to the
Tranche B Term Loans (the "TRANCHE B PREPAYMENT AMOUNT") and, if applicable, the
Tranche C Term Loans (the "TRANCHE C PREPAYMENT Amount"), the estimated portion
thereof that the applicable Tranche B Lender and, if applicable, the applicable
Tranche C Lender will be entitled to receive if it accepts such prepayment on
the prepayment date (each, a "PREPAYMENT DATE"), (ii) requesting such Tranche B
Lender and, if applicable, Tranche C Lender, to notify the Applicable Agent in
writing, no later than the Business Day preceding the Prepayment Date, of such
Tranche B Lender's and, if applicable, Tranche C Lender's, acceptance or
rejection (in each case, in whole and not in part) of such prepayment and (iii)
informing such Tranche B Lender and, if applicable, Tranche C Lender, that
failure by such Tranche B Lender to reject prepayment in writing on or before
the Business Day prior to the Prepayment Date shall be deemed an acceptance of
such prepayment. On the Prepayment Date, the Applicable Agent shall apply that
portion of (i) the Tranche B Prepayment Amount in respect of which Tranche B
Lenders have accepted or been deemed to have accepted prepayment to the
prepayment of the Tranche B Term Loans in accordance with Section 2.12(l) and
(ii) the Tranche C Prepayment Amount in respect of which Tranche C Lenders have
accepted or deemed to have accepted prepayment to the prepayment of the Tranche
C Term Loans in accordance with Section 2.12(l). The remaining amount of the
Tranche B Prepayment Amount and the Tranche C Prepayment Amount after the
payments described in the immediately preceding sentence shall be allocated to
the then-outstanding Tranche A Term Loans, Tranche B Term Loans of accepting
Lenders and Tranche C Term Loans of accepting Lenders, ratably, based on the
respective outstanding amounts thereof, in accordance with Section 2.12(l) for
prepayments of the same type.
(m) If at any time the outstanding balance of the Canadian Revolving Loans
exceeds 105% of the Canadian Revolving Credit Commitments as a result of the
fluctuation of currency values, the Canadian Borrowers shall immediately repay
the aggregate outstanding Canadian Revolving Loans to the extent required to
eliminate such excess. If any such excess remains after repayment in full of the
aggregate outstanding Canadian Revolving Loans, the Canadian Borrowers shall
provide cash collateral for the Canadian Borrower Letter of Credit Exposure and
Canadian B/A Borrowings in the manner set forth in Sections 2.24 and 2.26, as
applicable, to the extent required to eliminate such excess.
SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or any Issuing
Bank in respect of any Letter of Credit or of the principal of or interest on
any Eurodollar Loan made by such Lender or any Fees or other amounts payable
hereunder (other than changes in respect of (i) taxes imposed on the overall net
income of such Lender or such Issuing Bank by the jurisdiction in which such
Lender or such Issuing Bank has its principal office or by any political
subdivision or taxing authority therein and (ii) any Taxes described in Section
2.18), or shall impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets or deposits with or for the account of or
credit extended by or, in the case of the Letters of Credit, participated in by
such Lender (except any such reserve requirement which is reflected in the
Adjusted LIBO Rate) or such Issuing Bank or shall impose on such Lender or such
Issuing Bank or the interbank eurodollar market any other condition affecting
this Agreement, any Letter of Credit (or any participation with respect
thereto), the Letter of Credit Exposure, the Letter of Credit Commitment or
Eurodollar Loans made by such Lender, and the result of
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37
any of the foregoing shall be to increase the cost to such Lender or such
Issuing Bank of making or maintaining the Letter of Credit Exposure, the Letter
of Credit Commitment or any Eurodollar Loan (or, in the case of such Issuing
Bank, of making any payment or maintaining the Letter of Credit Commitment) or
to reduce the amount of any sum received or receivable by such Lender or such
Issuing Bank hereunder or under the Notes (whether of principal, interest or
otherwise) by an amount deemed by such Lender or such Issuing Bank to be
material, then the Company will pay to such Lender or such Issuing Bank upon
demand such additional amount or amounts as will compensate such Lender or such
Issuing Bank for such additional costs incurred or reduction suffered.
(b) If any Lender or Issuing Bank shall have determined that the adoption
after the date hereof of any law, rule, regulation, official directive or
guideline (whether or not having the force of law) regarding capital adequacy,
or any change after the date hereof in any of the foregoing or in the
interpretation or administration of any of the foregoing by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any lending office of
such Lender) or Issuing Bank or any Lender's or Issuing Bank's holding company
with any request or directive regarding capital adequacy (whether or not having
the force of law) made or issued after the date hereof by any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's or Issuing Bank's capital or on the capital of
such Lender's or Issuing Bank's holding company, if any, as a consequence of
this Agreement or its obligations pursuant hereto to a level below that which
such Lender or Issuing Bank or such Lender's or Issuing Bank's holding company
would have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or Issuing Bank's policies and the policies of such
Lender's or Issuing Bank's holding company with respect to capital adequacy) by
an amount deemed by such Lender or Issuing Bank to be material, then from time
to time the applicable Borrower shall pay to such Lender or Issuing Bank such
additional amount or amounts as will compensate such Lender or Issuing Bank or
such Lender's or Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of each Lender or Issuing Bank setting forth such amount
or amounts as shall be necessary to compensate such Lender or Issuing Bank or
its holding company as specified in paragraph (a) or (b) above, as the case may
be, shall be delivered to the applicable Borrower through the Applicable Agent
and shall be conclusive absent manifest error. The Company shall pay each Lender
or Issuing Bank the amount shown as due on any such certificate delivered by it
within 10 days after its receipt of the same.
(d) In the event any Lender or Issuing Bank delivers a notice pursuant to
paragraph (e) below, the Company may require, at the Company's expense and
subject to Section 2.15, such Lender or Issuing Bank to assign, at par plus
accrued interest and fees, without recourse (in accordance with Section 9.04)
all its interests, rights and obligations hereunder (including, in the case of a
Lender, all of its Commitment and the Loans at the time owing to it and its
Notes and participations in Letters of Credit held by it and its obligations to
acquire such participations) to a financial institution specified by the
Company, provided that (i) such assignment shall not conflict with or violate
any law, rule or regulation or order of any court or other Governmental
Authority, (ii) the applicable Borrower shall have received the written consent
of the Applicable Agent, which consent shall not unreasonably be withheld, to
such assignment, (iii) the Company shall have paid to the assigning Lender or
Issuing Bank all monies accrued and owing hereunder to it (including pursuant to
this Section) and (iv) in the case of a required assignment by an Issuing Bank,
all outstanding Letters of Credit issued by such Issuing Bank shall be canceled
and returned to such Issuing Bank.
(e) Promptly after any Lender or Issuing Bank has determined, in its sole
judgment, that it will make a request for increased compensation pursuant to
this Section, such Lender or Issuing Bank will notify the applicable Borrower
thereof. Failure on the part of any Lender or Issuing Bank so to notify the
applicable Borrower or to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of such Lender's or
Issuing Bank's right to demand compensation with respect to such period or any
other period; PROVIDED that the applicable Borrower shall not be under any
obligation to compensate any Lender or Issuing Bank under Section 2.13(b) with
respect to increased costs or reductions with respect to any period prior to the
date that is six months prior to such request if such Lender or the Issuing Bank
knew or could reasonably have been expected to be aware of the circumstances
giving rise to such increased costs or reductions and of the fact that such
circumstances would in fact result in such increased costs or reduction;
PROVIDED, FURTHER, that, the foregoing limitation shall not apply to any
increased costs or reductions arising
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38
out of the retroactive application of any law, regulation, rule, guideline or
directive as aforesaid within such six month period. The protection of this
Section shall be available to each Lender and Issuing Bank regardless of any
possible contention of the invalidity or inapplicability of the law, rule,
regulation, guideline or other change or condition which shall have occurred or
been imposed.
SECTION 2.14. CHANGE IN LEGALITY. (a) Notwithstanding any other provision
herein, if the adoption of or any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the applicable Borrower and to the Applicable Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by
such Lender hereunder, whereupon any request by the applicable Borrower
for a Eurodollar Borrowing shall, as to such Lender only, be deemed a
request for an ABR Loan unless such declaration shall be subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to a Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by such
Borrower.
SECTION 2.15. INDEMNITY. The Company and, if applicable, the Canadian
Borrowers shall severally indemnify each Lender against any loss or expense
(other than taxes) which such Lender may sustain or incur as a consequence of
(a) any failure by any Borrower to fulfill on the date of any Borrowing or
proposed Borrowing hereunder the applicable conditions set forth in Article IV,
(b) any failure by any Borrower to borrow or to refinance, convert or continue
any Loan hereunder after irrevocable notice of such Borrowing, refinancing,
conversion or continuation has been given pursuant to Section 2.03 or 2.10, (c)
any payment, prepayment or conversion of a Eurodollar Loan required by any other
provision of this Agreement or otherwise made or deemed made on a date other
than the last day of the Interest Period applicable thereto, (d) any default in
payment or prepayment of the principal amount of any Loan or B/A or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, whether by scheduled maturity, acceleration, irrevocable notice of
prepayment or otherwise) or (e) the occurrence of any Event of Default,
including, in each such case, any loss or reasonable expense sustained or
incurred or to be sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or any part thereof
as a Eurodollar Loan or B/A, as the case may be. Such loss or reasonable expense
shall exclude loss of margin hereunder but shall include an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i) its cost of
obtaining the funds for the Loan being paid, prepaid, converted or not borrowed,
converted or continued (assumed to be the Adjusted LIBO Rate or Discount Rate
applicable thereto) for the period from the date of such payment, prepayment,
conversion or failure to borrow, convert or continue to the last day of the
Interest Period or Contract Period for such Loan (or, in the case of a failure
to borrow, convert or continue, the Interest Period or Contract Period for such
Loan which would have commenced on the date of such failure) over (ii) the
amount of interest (as reasonably determined by such Lender) that would be
realized by such Lender in reemploying the funds so paid, prepaid, converted or
not borrowed, converted or continued for such period or Interest Period or
Contract Period, as the case may be. A certificate of any Lender setting forth
any amount or amounts which such Lender is entitled to receive pursuant to this
Section (and the reasons therefor) shall be delivered to the applicable Borrower
through the Applicable Agent and shall be conclusive absent manifest error.
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39
SECTION 2.16. PRO RATA TREATMENT. Except as required under Sections 2.12,
2.14, 2.18, 2.26 and 2.27 each Borrowing, each payment or prepayment of
principal of any Borrowing, each payment of interest on the Loans, each payment
of the Commitment Fees or Letter of Credit Fees, each reduction of the Revolving
Credit Commitments, the Additional Revolving Credit Commitments and the Canadian
Revolving Credit Commitments, and each refinancing of any Borrowing with,
conversion of any Borrowing to or continuation of any Borrowing as a Borrowing
of any Type shall be allocated (except in the case of Swingline Loans) pro rata
among the Lenders in accordance with their respective Revolving Credit
Commitments, Additional Revolving Credit Commitments or Canadian Revolving
Credit Commitments, as the case may be, or, if applicable outstanding Loans, as
the case may be. Each Lender agrees that in computing such Lender's portion of
any Borrowing to be made hereunder, the Applicable Agent may, in its discretion,
round each Lender's percentage of such Borrowing, computed in accordance with
Section 2.01, to the next higher or lower whole dollar amount.
SECTION 2.17. PAYMENTS. (a) The Company shall make each payment without
set-off or counterclaim (including principal of or interest on any Borrowing or
any Fees or other amounts) required to be made by it hereunder and under any
other Loan Document not later than 12:00 noon, New York City time, on the date
when due in dollars to the Administrative Agent at its offices at 270 Park
Avenue, New York, New York, Attention of Wholesale Loan Services, in immediately
available funds, for credit to The Chase Manhattan Bank, ABA Number 021000128,
Account Number 323-5-02059. Each Canadian Borrower shall make each payment
without set-off or counterclaim (including principal of or interest on any
Borrowing or any Fees or other amounts) required to be made by it hereunder and
under any other Loan Document not later than 12:00 noon, Toronto time, on the
date when due to the Canadian Administrative Agent, at its offices at 1 First
Canadian Place, 100 King Street West, Toronto, Ontario M5X 1A4, Attention
Funding Officer, in immediately available funds, (i) for the credit of The Chase
Manhattan Bank of Canada, Royal Bank of Canada, Correspondent Banking Division,
Toronto, Transit #: 09591, Account Number 219-247-4 (if such payment is made in
Canadian dollars). Such payments shall be for credit to the account of The Chase
Manhattan Bank of Canada at The Chase Manhattan Bank, New York, New York, 10081,
ABA Number: 021000021, SWIFT Number: CHASUS 33, Account Number: 001-1-150620 (if
such payment is made in dollars).
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day
(except in the case of payment of principal of a Eurodollar Borrowing if the
effect of such extension would be to extend such payment into the next
succeeding month, in which event such payment shall be due on the immediately
preceding Business Day), and such extension of time shall in such case be
included in the computation of interest or Fees, if applicable.
(c) Each obligation of the Borrowers and the Guarantors under the Loan
Documents related to any Loans or Letter of Credit denominated in dollars shall
be paid in dollars. Each obligation of the Borrowers and the Guarantors related
to any Loans or Letters of Credit denominated in Canadian dollars shall be paid
in Canadian dollars.
SECTION 2.18. TAXES. (a) Any and all payments by each Borrower to the
Administrative Agent or the Canadian Administrative Agent, as the case may be,
the Issuing Banks or the Lenders hereunder or under the other Loan Documents
shall be made, in accordance with Section 2.17 free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, EXCLUDING (i)
in the case of each Lender, each Issuing Bank and the Administrative Agent,
taxes that would not be imposed but for a connection between such Lender, such
Issuing Bank and the Administrative Agent (as the case may be) and the
jurisdiction imposing such tax, other than a connection arising solely by virtue
of the activities of such Lender, such Issuing Bank or the Administrative Agent
(as the case may be) pursuant to or in respect of this Agreement or under any
other Loan Document, including, without limitation, entering into, lending money
or extending credit pursuant to, receiving payments under, or enforcing, this
Agreement or any other Loan Document, and (ii) in the case of each Lender, each
Issuing Bank and the Administrative Agent, any United States withholding taxes
payable with respect to payments hereunder or under the other Loan Documents
under laws (including, without limitation, any statute, treaty, ruling,
determination or regulation) in effect on the Initial Date (as hereinafter
defined) for such Lender, such Issuing Bank or the Administrative Agent, as the
case may be, but not excluding any United
<PAGE>
40
States withholding taxes payable solely as a result of any change in such laws
occurring after the Initial Date (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "TAXES"). For purposes of this Section 2.18, the term "Initial Date" shall
mean (i) in the case of the Administrative Agent, any Issuing Bank or any
Lender, the date on which such person became a party to this Agreement and (ii)
in the case of any assignment including any assignment by a Lender or an Issuing
Bank to a new lending office, the date of such assignment. If any Taxes shall be
required by law to be deducted from or in respect of any sum payable hereunder
or under any other Loan Document to any Lender, any Issuing Bank, the Canadian
Administrative Agent or the Administrative Agent (i) the sum payable by the
applicable Borrower shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.18) such Lender, such Issuing Bank, the Canadian
Administrative Agent or the Administrative Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the applicable Borrower shall make such deductions and (iii) the
applicable Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. No Borrower
shall be required to pay any amounts pursuant to clause (i) of the preceding
sentence to any Lender, any Issuing Bank, the Administrative Agent or the
Canadian Administrative Agent (in the case of payments to be made by the
Company) not organized under the laws of the United States of America or a state
thereof (or, in the case of payments to be made by the Canadian Borrowers, not
organized under the laws of Canada) if such Lender, such Issuing Bank, the
Canadian Administrative Agent or the Administrative Agent fails to comply with
the requirements of paragraph (f) or (g), as the case may be, and paragraph (h)
of this Section 2.18.
(b) In addition, the Company agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "OTHER TAXES").
(c) The Company will indemnify each Lender, each Issuing Bank, the
Administrative Agent and the Canadian Administrative Agent for the full amount
of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.18) paid by such Lender,
such Issuing Bank or the Administrative Agent or the Canadian Administrative
Agent, as the case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto whether or not such Taxes or
Other Taxes were correctly or legally asserted. Such indemnification shall be
made within 10 days after the date any Lender, any Issuing Bank, the Canadian
Administrative Agent or the Administrative Agent, as the case may be, makes
written demand therefor. If a Lender, an Issuing Bank, the Administrative Agent
or the Canadian Administrative Agent shall become aware that it is entitled to
receive a refund or is reasonably requested by a Borrower to pursue a claim for
a refund in respect of Taxes or Other Taxes, it shall promptly notify such
Borrower of the availability of such refund (unless instructed to pursue a claim
by such Borrower) and shall, within 30 days after receipt of a request by such
Borrower, pursue or timely claim such refund at such Borrower's expense;
PROVIDED that such Lender shall not be required to pursue or claim such refund
if such Lender reasonably determines that the pursuit or claim of such refund
will have a disadvantageous impact upon such Lender. If any Lender, any Issuing
Bank, the Administrative Agent or the Canadian Administrative Agent receives a
refund in respect of any Taxes or Other Taxes for which such Lender, such
Issuing Bank, the Administrative Agent or the Canadian Administrative Agent has
received payment from a Borrower hereunder, it shall promptly notify such
Borrower of such refund and shall, within 30 days after receipt of a request by
such Borrower (or promptly upon receipt, if such Borrower has requested
application for such refund pursuant hereto), repay such refund (plus any
interest received) to such Borrower, provided that such Borrower, upon the
request of such Lender, such Issuing Bank, the Administrative Agent or the
Canadian Administrative Agent, agrees to return such refund (plus any penalties,
interest or other charges required to be paid) to such Lender, such Issuing
Bank, the Administrative Agent or the Canadian Administrative Agent in the event
such Lender, such Issuing Bank, the Administrative Agent or the Canadian
Administrative Agent is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or Other Taxes
withheld by any Borrower in respect of any payment to any Lender, any Issuing
Bank, the Canadian Administrative Agent or the Administrative Agent, such
Borrower will furnish to the Applicable Agent, at its address referred to in
Schedule 2.01, the original or a certified copy of a receipt evidencing payment
thereof or a copy of the return reporting payment thereof or other evidence of
such payment reasonably satisfactory to the Applicable Agent.
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41
(e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.18 shall
survive the payment in full of principal and interest hereunder and the
termination of the Commitments.
(f) In the case of any Borrowing by the Company, this paragraph (f) shall
apply. Each Lender, each Issuing Bank and the Administrative Agent that is not
organized under the laws of the United States of America or a state thereof
agrees that at least 10 days prior to the first Interest Payment Date following
the Initial Date in respect of such Issuing Bank or such Lender, it will deliver
to the Company and the Administrative Agent (if appropriate) two duly completed
copies of either (i) United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that the
Issuing Bank or such Lender or the Administrative Agent, as the case may be, is
entitled to receive payments under this Agreement and the Notes payable to it
without deduction or withholding of any United States federal income taxes and
backup withholding taxes or is entitled to receive such payments at a reduced
rate pursuant to a treaty provision or (ii) in the case of a Lender that is not
a "bank" within the meaning of Section 881(c)(3) of the Code, United States
Internal Revenue Service Form W-8 or successor applicable form and a statement
from such Lender certifying to the fact that interest payable to it hereunder
(A) will not be described in Section 871(h)(3)(A) or Section 881(c)(3)(A), (B)
or (C) of the Code and (B) will not be effectively connected with a trade or
business carried on in the United States by such Lender. Each Lender, each
Issuing Bank and the Administrative Agent required to deliver to the Company and
the Administrative Agent a Form 1001, 4224 or W-8 pursuant to the preceding
sentence further undertakes to deliver to the Company and the Administrative
Agent (if appropriate) two further copies of Form 1001, 4224 or W-8, or
successor forms, or other similar manner of certification and such extensions or
renewals thereof as may reasonably be requested by the Company and, in the case
where a Form W-8 has been delivered, a further statement certifying to the fact
set forth in clause (B) of the preceding sentence (i) at the times reasonably
requested by the Company, (ii) after the occurrence of an event requiring a
change in the most recent form or statement previously delivered by it to the
Company or (iii) in the case of Form 1001, 4224 or W-8, on or before the date
that any such form expires or becomes obsolete, and, in the case of Form 1001 or
4224, certifying that such Issuing Bank or such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes and backup withholding taxes or is entitled to
receive such payments at a reduced rate pursuant to a treaty provision, unless
such Issuing Bank or such Lender advises the Company that it is unable lawfully
to provide such forms and other certifications and notifies the Company to such
effect. Unless the Company and the Administrative Agent have received forms,
certificates and other documents satisfactory to them indicating that payments
hereunder or under or in respect of the Notes or the Letters of Credit to or for
any Issuing Bank or Lender not incorporated under the laws of the United States
or a state thereof are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, the Company
or the Administrative Agent shall withhold such taxes from such payments at the
applicable statutory rate.
(g) In the event a Canadian Borrower is required to pay additional amounts
pursuant to this Section 2.18, this paragraph (g) shall apply. Each Lender, each
Issuing Bank and the Canadian Administrative Agent that is not incorporated
within or under the laws of Canada and that is claiming such additional amounts
agrees that within a reasonable period of time following the request of a
Canadian Borrower, it will, to the extent it is legally entitled to a reduction
in the rate of or exemption from Canadian withholding taxes, deliver to such
Canadian Borrower and the Canadian Administrative Agent (if appropriate) any
form or document required under the laws, regulations, official interpretations
or treaties enacted by, made or entered into with Canada properly completed and
duly executed by such Issuing Bank, such Lender or Canadian Administrative Agent
establishing that any payments hereunder are exempt from Canadian withholding
tax or subject to a reduced rate of Canadian withholding tax, as the case may
be; provided that, in the sole determination of such Lender, such Issuing Bank
or the Canadian Administrative Agent, such form or document shall not be
otherwise disadvantageous to such Lender, such Issuing Bank or the
Administrative Agent.
(h) Any Issuing Bank and any Lender claiming any additional amounts
payable pursuant to this Section 2.18 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or document
requested by any Borrower or to change the jurisdiction of its applicable
lending office if the making of such a filing or change would avoid the need for
or reduce the amount of any such additional amounts which may thereafter accrue
and would not, in the sole determination of such Issuing Bank or such Lender, be
otherwise disadvantageous
<PAGE>
42
to such Issuing Bank or such Lender. In addition, in the event any Issuing Bank
or any Lender claims additional amounts payable pursuant to this Section 2.18,
the affected Borrower may, at its sole expense and effort, upon notice to such
Issuing Bank or such Lender and the Applicable Agent, require such Issuing Bank
or such Lender to transfer and assign, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04), all of its interests,
rights and obligations under this Agreement to an assignee that shall assume
such assigned obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (w) such assignment will result in a
reduction in the claim for additional amounts under this section 2.18, (x) such
assignment shall not conflict with any law, rule or regulation or order of any
court or other Governmental Authority having jurisdiction, (y) the affected
Borrower shall have received the prior written consent of the Applicable Agent,
which consent shall not unreasonably be withheld, and (z) the affected Borrower
or such assignee shall have paid to the affected Issuing Bank or the affected
Lender in immediately available funds an amount equal to the sum of the
principal of and interest accrued to the date of such payment on the outstanding
Letter of Credit Disbursements or such Loans of such Issuing Bank or such
Lender, respectively, plus all Fees and other amounts accrued for the account of
such Issuing Bank or such Lender hereunder.
SECTION 2.19. ISSUANCE OF LETTERS OF CREDIT
(a) Each Issuing Bank agrees, upon the terms and subject to the
conditions herein set forth, to issue Letters of Credit (including Foreign
Subsidiary Letters of Credit), in a form reasonably acceptable to the Applicable
Agent and such Issuing Bank, appropriately completed, for the account of the
Company or applicable Canadian Borrower, as the case may be, at any time and
from time to time on and after the Closing Date until the earlier of the date
five Business Days prior to the Revolving Credit Maturity Date or the Canadian
Revolving Credit Maturity Date, as the case may be, and the termination of the
Revolving Credit Commitments or the Canadian Revolving Credit Commitments, as
the case may be, in accordance with the terms hereof; PROVIDED, HOWEVER, that
any Letter of Credit shall be issued by an Issuing Bank only if, and each
request by a Borrower for the issuance of any Letter of Credit shall be deemed a
representation and warranty of such Borrower that, immediately following the
issuance of any such Letter of Credit, (i)(x) the Letter of Credit Exposure
(other than in respect of Foreign Subsidiary Letters of Credit) shall not exceed
the Letter of Credit Commitment in effect at the time, (y) the Letter of Credit
Exposure in respect of Foreign Subsidiary Letters of Credit shall not exceed
$225,000,000, and (z) the Letter of Credit Exposure shall not exceed the
Revolving Credit Commitments and Canadian Revolving Credit Commitments in effect
at the time, and (ii) the Borrowers will be in compliance with Sections 2.01(c)
and (e). In determining whether the issuance of a Letter of Credit will comply
with the preceding sentence, each Issuing Bank may rely conclusively on
information obtained from the Administrative Agent or the Canadian
Administrative Agent, as the case may be, regarding the aggregate principal
amount of outstanding Revolving Loans, Canadian Revolving Loans and the
aggregate Revolving Credit Commitments, Canadian Revolving Credit Commitments,
Letter of Credit Exposure and Swingline Loans.
(b) Each Letter of Credit shall expire no later than the fifth Business
Day preceding the Revolving Credit Maturity Date or the Canadian Revolving
Credit Maturity Date, as the case may be, unless such Letter of Credit expires
by its terms on an earlier date. Each Letter of Credit shall provide for
payments of drawings in dollars or, if requested by a Canadian Borrower,
Canadian dollars. Each Letter of Credit shall reduce availability under the
Revolving Credit Commitments or, if applicable, the Canadian Revolving Credit
Commitments.
(c) Each issuance of any Letter of Credit shall be made on at least three
Business Days' prior written notice from the applicable Borrower to the
applicable Issuing Bank and the Applicable Agent (each of which shall give
prompt notice thereof to each Revolving Lender or Canadian Lender, as the case
may be) specifying the date of issuance, the date on which such Letter of Credit
is to expire (which shall not be later than the earlier of (i) the fifth
Business Day preceding the Revolving Credit Maturity Date or the Canadian
Revolving Credit Maturity Date, as the case may be, and (ii) subject to
extension, two years after the date of any such Letter of Credit), the amount of
such Letter of Credit, the name and address of the beneficiary of such Letter of
Credit and such other information as may be necessary or desirable to complete
such Letter of Credit. Such Issuing Bank will give the Applicable Agent, and the
Applicable Agent shall give each Revolving Lender or Canadian Lender, as the
case may be, prompt notice of the issuance and amount of each Letter of Credit
and the expiration of each Letter of Credit.
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(d) No Issuing Bank shall be required to issue a Letter of Credit unless
it has agreed with the Company upon the Fronting Fees to be paid by the
applicable Borrower in connection with such Letter of Credit and the form of
such Letter of Credit is reasonably acceptable to such Issuing Bank.
(e) Each Letter of Credit issued under the Existing Credit Agreements
shall be deemed to be a Letter of Credit hereunder issued as of the Closing
Date.
SECTION 2.20. PARTICIPATIONS; UNCONDITIONAL OBLIGATIONS. (a) By the
issuance of a Letter of Credit and without any further action on the part of the
applicable Issuing Bank, the Revolving Lenders or Canadian Revolving Lenders in
respect thereof, each Issuing Bank hereby grants to each Revolving Lender or
Canadian Revolving Lender, as the case may be, and each Revolving Lender or
Canadian Revolving Lender, as the case may be, hereby agrees to acquire from
such Issuing Bank, a participation in such Letter of Credit equal to such
Revolving Lender's or Canadian Revolving Lender's, as the case may be,
Applicable Percentage of the face amount of such Letter of Credit, effective
upon the issuance of such Letter of Credit. In consideration and in furtherance
of the foregoing, each Revolving Lender or Canadian Revolving Lender, as the
case may be, hereby absolutely and unconditionally agrees to pay to the
Applicable Agent, for the account of such Issuing Bank, in accordance with
Section 2.02(f), such Revolving Lender's or Canadian Revolving Lender's, as the
case may be, Applicable Percentage of each Letter of Credit Disbursement made by
such Issuing Bank; PROVIDED, HOWEVER, that the Revolving Lenders or Canadian
Revolving Lenders, as the case may be, shall not be obligated to make any such
payment to an Issuing Bank with respect to any wrongful payment or disbursement
made as a result of the gross negligence or willful misconduct of such Issuing
Bank in determining whether documents presented in connection with such Letter
of Credit Disbursement conform to the requirements of the applicable Letter of
Credit.
(b) Each Revolving Lender and Canadian Revolving Lender acknowledges and
agrees that its obligation to acquire participations pursuant to paragraph (a)
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of an Event of Default or Default hereunder, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever other than in the case of any wrongful payment made as a result of
the gross negligence or willful misconduct of the Issuing Bank in determining
whether documents presented in connection with such Letter of Credit conform to
the requirements of the applicable Letter of Credit.
SECTION 2.21. LETTER OF CREDIT FEE. Each Borrower agrees to pay to the
Applicable Agent for the account of the Revolving Lenders or Canadian Revolving
Lenders, as the case may be, for each calendar quarter (or shorter period ending
with the first date on which the Letter of Credit Commitment shall have expired
or been terminated and there shall be no outstanding Letters of Credit) a fee
(the "LETTER OF CREDIT FEE") on the average daily amount of the outstanding
Letters of Credit issued for the account of such Borrower at a per annum rate
equal to the Applicable Margin at such time for Eurodollar Revolving Loans;
PROVIDED that with respect to any Letter of Credit as to which such Borrower has
failed to make a payment required by Section 2.22, interest calculated at the
rate set forth in Section 2.07 from the date such payment was due through the
date such payment is made shall be paid by such Borrower in lieu of the Letter
of Credit Fee on the date such payment is made. The Letter of Credit Fee shall
be computed on the basis of the actual number of days elapsed over a year of 360
days. The Administrative Agent or the Canadian Administrative Agent, as the case
may be, agrees to disburse to each Revolving Lender or Canadian Revolving
Lender, as the case may be, its pro rata portion of such Letter of Credit Fee
promptly upon receipt. The Letter of Credit Fee shall be paid in arrears on the
last day of March, June, September and December of each year and on the
Revolving Credit Maturity Date or Canadian Revolving Credit Maturity Date, as
the case may be (or the first date on which the Letter of Credit Commitment
shall have expired or been terminated and there shall be no outstanding Letters
of Credit, if earlier). Once paid the Letter of Credit Fee paid or payable shall
not be refundable in any circumstances whatsoever, absent manifest error.
SECTION 2.22. AGREEMENT TO REPAY LETTER OF CREDIT DISBURSEMENTS. (a) If an
Issuing Bank shall pay any draft presented under a Letter of Credit, the
Borrower for whose account such Letter of Credit was issued shall pay to the
Applicable Agent, on behalf of such Issuing Bank, an amount equal to the amount
of such draft before 11:00 a.m., New York City time, on the Business Day on
which such Issuing Bank shall have notified such Borrower that payment of such
draft will be made (or such later time as is not later than one hour after such
Borrower shall
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44
have received such notice or, if such Borrower shall have received such notice
later than 4:00 p.m., New York City time, on any Business Day, not later than
10:00 a.m., New York City time, on the immediately following Business Day). The
Applicable Agent will promptly pay any such amounts received by it to such
Issuing Bank.
(b) Each Borrower's obligation to repay each Issuing Bank for payments and
disbursements made by such Issuing Bank under the outstanding Letters of Credit
shall be absolute, unconditional and irrevocable under any and all circumstances
and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other right
which any Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, any Issuing Bank, the
Administrative Agent, the Canadian Administrative Agent or any Lender
(other than the defense of payment in accordance with the terms of this
Agreement or a defense based on the gross negligence or wilful misconduct
of any Issuing Bank) or any other person in connection with this Agreement
or any other agreement or transaction;
(iii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect; PROVIDED that payment by an Issuing Bank under such Letter of
Credit against presentation of such draft or document shall not have
constituted gross negligence or wilful misconduct of such Issuing Bank;
(iv) payment by an Issuing Bank under a Letter of Credit against
presentation of a draft or other document which does not comply with the
terms of such Letter of Credit; PROVIDED that such payment shall not have
constituted gross negligence or wilful misconduct of such Issuing Bank;
and
(v) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing; PROVIDED that such other circumstance or
event shall not have been the result of gross negligence or wilful
misconduct of the applicable Issuing Bank.
It is understood that in making any payment under a Letter of Credit (x)
each Issuing Bank's exclusive reliance on the documents presented to it under
such Letter of Credit as to any and all matters set forth therein, including
reliance on the amount of any draft presented under such Letter of Credit,
whether or not the amount due to the beneficiary equals the amount of such draft
and whether or not any document presented pursuant to such Letter of Credit
proves to be insufficient in any respect, if such document on its face appears
to be in order, and whether or not any other statement or any other document
presented pursuant to such Letter of Credit proves to be forged or invalid or
any statement therein proves to be inaccurate or untrue in any respect
whatsoever and (y) any noncompliance in any immaterial respect of the documents
presented under a Letter of Credit with the terms thereof shall, in each case,
not be deemed willful misconduct or gross negligence of such Issuing Bank.
SECTION 2.23. LETTER OF CREDIT OPERATIONS. Each Issuing Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under an outstanding Letter of Credit to
ascertain that the same appear on their face to be in substantial conformity
with the terms and conditions of such outstanding Letter of Credit. Such Issuing
Bank shall (i) as promptly as possible after such demand for payment give oral
notification, confirmed by telecopy, to the Applicable Agent and the applicable
Borrower of such demand for payment and (ii) as promptly as possible after such
Issuing Bank determines whether such demand for payment was in accordance with
the terms and conditions of such outstanding Letter of Credit, give notice in
the same manner to the Applicable Agent and such Borrower as to such
determination and as to whether such Issuing Bank has made or will make a Letter
of Credit Disbursement thereunder, provided that the failure to give such
notices shall not relieve any Borrower of its obligation to reimburse such
Issuing Bank with respect to any such Letter of Credit Disbursement, and the
Applicable Agent shall promptly give each Revolving Lender or Canadian Revolving
Lender, as the case may be, notice thereof.
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45
SECTION 2.24. CASH COLLATERALIZATION. If any Event of Default shall occur
and be continuing, each Borrower shall, on the Business Day it receives notice
from the Applicable Agent or the Required Lenders therefor, deposit in an
account with the Applicable Agent, for the benefit of the Lenders, an amount in
cash equal to its Letter of Credit Exposure as of such date. Such deposit shall
be held by the Applicable Agent as collateral for the payment and performance of
the Obligations. So long as such Event of Default is continuing, the Applicable
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits in Permitted Investments, which investments shall be
made at the option and sole discretion of the Applicable Agent, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall automatically be
applied by the Applicable Agent to reimburse the applicable Issuing Bank and the
Revolving Lenders or Canadian Lenders, as the case may be, for Letter of Credit
Disbursements and, if the maturity of the Loans has been accelerated, to satisfy
the Obligations. All remaining amounts on deposit shall be returned to the
applicable Borrower within three Business Days after all Events of Default have
been cured or waived.
SECTION 2.25. TERMINATION AND REDUCTION OF LETTER OF CREDIT Commitment.
(a) Notwithstanding any other provision hereof, in the event that any
restrictions or limitations are imposed upon or determined or held to be
applicable to any Issuing Bank, any Lender or any Borrower by, under or pursuant
to any law or regulation (Federal, state, provincial or local) now or hereafter
in effect or by reason of any interpretation thereof by any court or
Governmental Authority (including any interpretation by the Comptroller of the
Currency as to the applicability of 12 U.S.C. ss. 84 or any substitute statute,
as now or hereafter in effect, to the transactions contemplated hereby), which
would prevent such Lender from legally incurring liability under or in
connection with a Letter of Credit issued or to be issued pursuant hereto, then
such Lender shall give prompt written notice thereof to the Applicable Agent
(which shall notify the Company, each Issuing Bank and each other Revolving
Lender or Canadian Lender, as the case may be, thereof as soon as reasonably
practicable), whereupon the obligation of each Issuing Bank to issue additional
Letters of Credit pursuant hereto shall be reduced by the Applicable Percentage
of such Lender (and, as to any Letter of Credit thereafter issued, the
Applicable Percentages of the other Lenders shall be determined as though such
Lender does not have a Revolving Credit Commitment or Canadian Revolving Credit
Commitment, as the case may be) until the Applicable Agent shall be advised that
such event is no longer continuing or until such Lender shall have assigned its
applicable Commitments pursuant to the provisions of this Agreement.
(b) The Company may permanently terminate, or from time to time in part
permanently reduce, the Letter of Credit Commitment, in each case upon at least
three Business Days' prior written or telex notice to the Administrative Agent;
PROVIDED that the Letter of Credit Commitment shall not be reduced to an amount
that is less than the Letter of Credit Exposure at the time.
(c) In the event that the Revolving Credit Commitments and Canadian
Revolving Credit Commitments are at any time reduced pursuant to Section 2.09 to
an amount that is less than the Letter of Credit Commitment, the Letter of
Credit Commitment shall be permanently reduced to an amount equal to the
Revolving Credit Commitments and Canadian Revolving Credit Commitments.
SECTION 2.26. BANKERS' ACCEPTANCES. (a) Subject to the terms and
conditions of this Agreement, a Canadian Borrower may request a Canadian
Revolving Credit Borrowing by presenting drafts for acceptance and purchase
as B/As by the Canadian Lenders.
(b) No Contract Period with respect to a B/A shall extend beyond the
Canadian Revolving Commitment Maturity Date.
(c) To facilitate availment of the Canadian Revolving Credit
Borrowings by way of B/As, each Canadian Borrower hereby appoints each Canadian
Lender as its attorney to sign and endorse on its behalf, in handwriting or by
facsimile or mechanical signature as and when deemed necessary by such Canadian
Lender, blank forms of B/As substantially in the form of Schedule 2.26. In this
respect, it is each Canadian Lender's responsibility to maintain an adequate
supply of blank forms of B/As for acceptance under this Agreement. The Canadian
Borrowers recognize and agree that all B/As signed and/or endorsed on their
behalf by a Canadian Lender shall bind such Canadian Borrower as fully and
effectually as if signed in the handwriting of and duly issued by the proper
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46
signing officers of such Canadian Borrower. Each Canadian Lender is hereby
authorized to issue such B/As endorsed in blank in such face amounts as may be
determined by such Canadian Lender; provided that the aggregate amount thereof
is equal to the aggregate amount of B/As required to be accepted and purchased
by such Canadian Lender. No Canadian Lender shall be liable for any damage, loss
or other claim arising by reason of any loss or improper use of any such
instrument except the gross negligence or wilful misconduct of the Canadian
Lender or its officers, employees, agents or representatives. Each Canadian
Lender shall maintain a record with respect to B/As (a) received by it from the
Canadian Administrative Agent in blank hereunder, (b) voided by it for any
reason, (c) accepted and purchased by it hereunder, and (d) cancelled at their
respective maturities. Each Canadian Lender further agrees to retain such
records in the manner and for the statutory periods provided in the various
provincial or federal statutes and regulations which apply to such Canadian
Lender. Each Canadian Lender agrees to provide such records to the Canadian
Borrowers at the Canadian Borrowers' expense upon request. On request by or on
behalf of the Canadian Borrowers, a Canadian Lender shall cancel all forms of
B/A which have been pre-signed or pre-endorsed on behalf of the Canadian
Borrowers and which are held by the said Canadian Lender and are not required to
be issued in accordance with the Canadian Borrowers' irrevocable notice.
(d) Drafts of the Canadian Borrowers to be accepted as B/As hereunder
shall be signed as set forth in this subsection 2.26. Notwithstanding that any
Person whose signature appears on any B/A may no longer be an authorized
signatory for any of the Canadian Lenders or the Canadian Borrowers at the date
of issuance of a B/A, such signature shall nevertheless be valid and sufficient
for all purposes as if such authority had remained in force at the time of such
issuance and any such B/A so signed shall be binding on the Canadian Borrowers.
(e) Promptly following receipt of a notice of borrowing, notice of
rollover or notice of conversion by way of B/As, in accordance with Section
2.03(b) or Section 2.26(h), the Canadian Administrative Agent shall so advise
the Canadian Lenders and shall advise each Canadian Lender of the aggregate face
amount of the B/As to be accepted by it and the applicable Contract Period
(which shall be identical for all Canadian Lenders). The aggregate face amount
of the B/As to be accepted by a Canadian Lender shall be an integral multiple of
C$100,000 and such face amount shall be in each Canadian Lender's pro rata
portion of such Canadian Revolving Credit Borrowing; provided, that the Canadian
Administrative Agent may, in its sole discretion, increase or reduce any
Canadian Lender's portion of such B/A to the nearest C$100,000.
(f) Upon acceptance of a B/A by a Canadian Lender, such Canadian
Lender shall purchase, or arrange the purchase of, each B/A from the applicable
Canadian Borrower at the Discount Rate for such Canadian Lender applicable to
such B/A accepted by it and provide to the Canadian Administrative Agent the
Discount Proceeds for the account of such Canadian Borrower. The Acceptance Fee
payable by such Canadian Borrower to a Canadian Lender under Section 2.06 in
respect of each B/A accepted by such Canadian Lender shall be set off against
the Discount Proceeds payable by such Canadian Lender under this Section 2.26.
(g) Each Canadian Lender may at any time and from time to time hold,
sell, rediscount or otherwise dispose of any or all B/As accepted and purchased
by it.
(h) With respect to each Canadian Revolving Credit Borrowing which is
outstanding hereunder by way of B/As, at or before 11:00 a.m. (Toronto time)
three Business Days before the maturity date of such B/As, a Canadian Borrower
shall notify the Canadian Administrative Agent at the Canadian Administrative
Agent's address set forth in Section 9.01 by irrevocable telephone notice,
followed by a notice of rollover on the same day, if a Canadian Borrower intends
to issue B/As on such maturity date to provide for the payment of such maturing
B/As. If a Canadian Borrower fails to notify the Canadian Administrative Agent
of its intention to issue B/As on such maturity date, such Canadian Borrower
shall provide payment to the Canadian Administrative Agent on behalf of the
Canadian Lenders of an amount equal to the aggregate face amount of such B/As on
the maturity date of such B/As. If a Canadian Borrower fails to make such
payment, such maturing B/As shall be deemed to have been converted on their
maturity date into a C$ Prime Rate Loan in an amount equal to the face amount of
such B/As.
(i) Each Canadian Borrower waives presentment for payment and any
other defence to payment of any amounts due to a Canadian Lender in respect of a
B/A accepted and purchased by it pursuant to this Agreement which might exist
solely by reason of such B/A being held, at the maturity thereof, by such
Canadian Lender in its
<PAGE>
47
own right and each Canadian Borrower agrees not to claim any days of grace if
such Canadian Lender as holder sues a Canadian Borrower on the B/A for payment
of the amount payable by a Canadian Borrower thereunder. On the specified
maturity date of a B/A, or such earlier date as may be required or permitted
pursuant to the provisions of this Agreement, the applicable Canadian Borrower
shall pay the Canadian Lender that has accepted and purchased such B/A the full
face amount of such B/A and after such payment, the applicable Canadian Borrower
shall have no further liability in respect of such B/A and such Canadian Lender
shall be entitled to all benefits of, and be responsible for all payments due to
third parties under, such B/A.
(j) If any Event of Default shall occur and be continuing and the
Loans are accelerated pursuant to Article VII, each Canadian Borrower shall, on
the Business Day it receives notice from the Canadian Administrative Agent,
deposit in an account with the Canadian Administrative Agent, for the benefit of
the Canadian Lenders, an amount in cash equal to its Bankers' Acceptances
Exposure as of such date. Such deposit shall be held by the Canadian
Administrative Agent as collateral for the payment and performance of the
Obligations. So long as such Event of Default is continuing, the Canadian
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits in Permitted Investments, which investments
shall be made at the option and sole discretion of the Canadian Administrative
Agent, such deposits shall not bear interest. Interest or profits, if any, on
such investments shall accumulate in such account. Moneys in such account shall
automatically be applied by the Canadian Administrative Agent to reimburse the
applicable Canadian Lenders for Bankers' Acceptances Exposure and, if the
maturity of the Loans has been accelerated, to satisfy the Obligations. All
remaining amounts on deposit shall be returned to the applicable Canadian
Borrower within three Business Days after all Events of Default have been cured
or waived.
(k) Each Canadian Borrower shall have the right at any time upon
irrevocable notice to the Canadian Administrative Agent not later than 12:00
noon Toronto time, three Business Days prior to conversion to convert a C$ Prime
Rate Loan to a Canadian B/A Borrowing, subject to the following conditions:
(a) each conversion shall be made pro rata among the applicable Canadian
Lenders in accordance with the respective principal amounts of the C$ Prime Rate
Loans comprising the converted Borrowing;
(b) if less than all of the outstanding principal amount of any Borrowing
shall be converted, the aggregate principal amount of such Borrowing converted
shall not be less than C$1,000,000;
(c) each conversion shall be effected by each applicable Canadian Lender
by such Canadian Lender's converting its applicable C$ Prime Rate Loan (or a
portion thereof) into a B/A, and accrued interest on any C$ Prime Rate Loan (or
any portion thereof) being converted shall be paid by the applicable Canadian
Borrower at the time of conversion;
(d) all Bankers' Acceptances to be issued as a result of the conversion of
the C$ Prime Rate Loan shall be issued in accordance with the provisions of this
Section 2.26; and
(e) a C$ Prime Rate Borrowing may not be converted into a Canadian B/A
Borrowing if a Default or an Event of Default has occurred and is continuing and
the Canadian Administrative Agent have determined that such conversion is not
appropriate.
SECTION 2.27. REALLOCATION. (a) The Borrowers may, from time to time, but
not more than once per calendar quarter, from and after the Closing Date until
the earlier of the Canadian Revolving Credit Maturity Date and the termination
of the Canadian Revolving Credit Commitments, upon giving an irrevocable joint
written notice (each, a "REALLOCATION NOTICE") to the Canadian Administrative
Agent and the Administrative Agent at least ten (10) Business Days prior to
beginning of the next following calendar quarter, temporarily reduce, in whole
or in part, or increase, the Canadian Revolving Credit Commitments. Any
reductions or increases in the Canadian Revolving Credit Commitments or the
Additional Revolving Credit Commitments (as defined below) shall take effect on
the first day of the next following calendar quarter. Each reduction or increase
in the Canadian Revolving Credit Commitments shall result in an automatic
corresponding increase or reduction in the Additional Revolving Credit
<PAGE>
48
Commitments; provided that the amount of the Canadian Revolving Credit
Commitments shall not, at any time, (i) be reduced to an amount that is less
than the Dollar Equivalent Amount of the aggregate Canadian Revolving Loans and
Canadian Borrower Letter of Credit Exposure outstanding at such time or (ii)
exceed the amount of the Canadian Revolving Credit Commitments as of the Closing
Date, as such Canadian Revolving Credit Commitments may, from time to time, be
permanently reduced or cancelled in accordance with Section 2.12 of this
Agreement. The revolving credit commitments from time to time resulting from a
reallocation of Canadian Revolving Credit Commitments pursuant to this Section
2.27 at any time are the "Additional Revolving Credit Commitments". Any amount
of the Canadian Revolving Credit Commitments reallocated under this Section 2.27
as Additional Revolving Credit Commitments will not be available to the Canadian
Borrowers, and any amount of the Additional Revolving Credit Commitments
reallocated under this Section 2.27 as Canadian Revolving Credit Commitments
will not be available to the Company, until and only if such amounts are
reallocated back to the Canadian Revolving Credit Commitments or the Additional
Revolving Credit Commitments in accordance with the terms and conditions of this
Section 2.27.
The ability of the Borrowers to reallocate the Revolving Credit
Commitments and the Canadian Revolving Credit Commitments in accordance with
this Section 2.27 shall be subject to the conditions that (A) the
representations and warranties set forth in each Loan Document shall be true and
correct in all material respects on and as of the date of such reallocation with
the same effect as though made on and as of such date, except to the extent that
such representations and warranties expressly relate to an earlier date and (B)
at the time of and immediately following such reduction or increase, no Event of
Default or Default shall have occurred and be continuing. Each Reallocation
Notice shall specify the amount (expressed in dollars) of any reduction or
increase in the Canadian Revolving Credit Commitments and the corresponding
increase or reduction in the Additional Revolving Credit Commitments. Each
reallocation requested under this Section 2.27 shall be in a minimum aggregate
principal amount of $5,000,000 (or, if less, the remaining amount of the
applicable Commitments) and in integral multiples of $1,000,000. Each reduction
or increase in the Canadian Revolving Credit Commitments under this Section 2.27
shall be made ratably among the Canadian Lenders based on their respective
Canadian Revolving Credit Commitments. Each reduction or increase in the
Additional Revolving Credit Commitments under this Section 2.27 shall be made
ratably among the Canadian Lenders (or, if a Canadian Lender is a Canadian
Scheduled II Chartered Bank, the affiliate of such Lender that is a Revolving
Lender) based on their respective Canadian Revolving Credit Commitments. The
Canadian Administrative Agent or the Administrative Agent, as the case may be,
shall promptly after receiving a Reallocation Notice notify each Canadian Lender
or Additional Revolving Lender, as the case may be, of the amount of its
Canadian Revolving Credit Commitment or Additional Revolving Credit Commitment,
as the case may be, to be reallocated and the date of such reallocation.
(b) The Additional Revolving Credit Commitments shall be available to
the Company in addition to the Revolving Credit Commitments. Without limitation,
(i) the Company may borrow for its account under the Additional Revolving Credit
Commitments to the same extent as it may utilize the Revolving Credit
Commitments (subject to the same interest rate options, minimum borrowing and
repayment amounts and maturities), provided that the aggregate principal amount
of Additional Revolving Loans under the Additional Revolving Credit Commitments
shall not exceed the Additional Revolving Credit Commitments, (ii) only the
Additional Revolving Lenders shall have a Commitment under the Additional
Revolving Credit Commitments, (iii) Swingline Loans and Letters of Credit are
not available under the Additional Revolving Credit Commitments, (iv) the
Company will issue Additional Revolving Notes in the appropriate amounts from
time to time upon request of an Additional Revolving Lender in an amount equal
to the Additional Revolving Credit Commitment of such Lender, and (v) the
Additional Revolving Credit Lenders shall be entitled to the same rights and
subject to the same obligations with respect to the Additional Revolving Credit
Commitments as are the Revolving Lenders with respect to the Revolving Credit
Commitments.
2.28 Canadian Borrowers. Notwithstanding anything in this Agreement or in
any Loan Document to the contrary, wherever in this Agreement or any Loan
Document a representation or warranty, indemnity, covenant or other obligation
is expressed to be given or made by or imposed upon either Canadian Borrower,
such representation, warranty, indemnity, covenant or obligation shall in each
case be understood not to impose on such Canadian Borrower any obligation to
give financial assistance by way of loan, guarantee, the giving of security, the
payment of money or otherwise within the meaning of Section 44 of the Canada
Business Corporations Act (or the equivalent thereof in any similar provincial
statute), to or for the benefit of any person other than the Company, Holdings
or any other Person which is a parent company of such Canadian Borrower.
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49
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Each of Holdings, the Canadian Borrowers and the Company represents and
warrants to each of the Lenders and each Issuing Bank that:
SECTION 3.01. ORGANIZATION, CORPORATE POWERS. Each of Holdings and each
Restricted Subsidiary (i) is duly organized or formed, validly existing and in
good standing under the laws of the jurisdiction in which it is organized, (ii)
has all requisite corporate or partnership power and authority, as applicable,
and all material licenses, permits, franchises, consents and approvals, to own
or lease its property and assets and to carry on its business as now conducted
and as proposed to be conducted, (iii) is qualified and in good standing as a
foreign entity to do business in every jurisdiction where such qualification is
necessary, except where the failure so to qualify would not have a Material
Adverse Effect and (iv) has the corporate or partnership power and authority, as
applicable, to execute, deliver and perform each of the Loan Documents and each
agreement or instrument contemplated hereby or thereby to which it is or will be
a party. As of the Closing Date, none of Holdings or any Restricted Subsidiary
of Holdings has any assets or business, or is a party to any material contract
within the meaning of Item 6.01(b)(10) of Regulation S-K of the Securities and
Exchange Commission, other than as disclosed in Holdings' most recent report on
Form 10-K as filed with the Securities and Exchange Commission on March 27,
1998.
SECTION 3.02. AUTHORIZATION. The execution, delivery and performance of
each of the Loan Documents, the borrowings hereunder and the consummation of the
other transactions contemplated by any of the foregoing (collectively, the
"TRANSACTIONS") (i) have been duly authorized by all requisite corporate and, if
required, stockholder action and (ii) will not (x) violate (A) any provision of
law, statute, rule or regulation (including, without limitation, Regulations T,
U and X) or the certificate of incorporation or by-laws (or similar governing
documents) of any of Holdings and the Restricted Subsidiaries, (B) any
applicable order of any court or any rule, regulation or order of any
Governmental Authority or (C) any indenture, certificate of designation for
preferred stock, agreement or other instrument to which any of Holdings or any
Restricted Subsidiary is a party or by which any of them or any of their
property is bound, (y) be in conflict with, result in a breach of or constitute
(with notice or lapse of time or both) a default under any such indenture,
agreement or other instrument where any such conflict, violation, breach or
default referred to in clause (ii)(x) or (ii)(y) of this Section, individually
or in the aggregate, would have a Material Adverse Effect or (z) result in the
creation or imposition of any Lien upon any property or assets of Holdings or
any subsidiary of Holdings, except for Liens created by the Pledge Agreement.
SECTION 3.03. ENFORCEABILITY. This Agreement has been duly executed and
delivered by each of Holdings and the Borrowers and constitutes, and each other
Loan Document executed and delivered by any of Holdings, the Borrowers or the
Subsidiary Guarantors constitutes, a legal, valid and binding obligation of such
party enforceable against such party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 3.04. [INTENTIONALLY OMITTED]
SECTION 3.05. USE OF PROCEEDS. The Borrowers will use the proceeds of
the Revolving Loans only for the purposes set forth in Section 5.08.
SECTION 3.06. FEDERAL RESERVE REGULATIONS. (a) None of Holdings or
any subsidiary of Holdings is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying Margin Stock.
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50
(b) The making of the Loans hereunder and the use of the proceeds thereof
as contemplated hereby and the other Transactions will not violate or be
inconsistent with the provisions of the Regulations of the Board, including
Regulations T, U and X.
SECTION 3.07. CAPITALIZATION OF THE COMPANY AND HOLDINGS. (a) The
authorized capital stock of the Company consists of 2,000 shares of common
stock, par value $1.00 per share ("COMPANY COMMON STOCK"), of which 1,000 shares
will be issued and outstanding as of the Closing Date. All such outstanding
shares of Company Common Stock are fully paid and nonassessable and, are owned
beneficially and of record by Holdings, free and clear of all Liens and
encumbrances whatsoever (other than the Lien of the Pledge Agreement). Except
for the Pledge Agreement, there are no outstanding subscriptions, options,
warrants, calls, rights (including preemptive rights) or other agreements or
commitments of any nature relating to any capital stock of the Company.
(b) The authorized capital stock of Holdings consists of (i) 150,000,000
shares of Holdings Common Stock, of which approximately 65,500,000 shares will
be issued and outstanding as of the Closing Date and (ii) 16,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares will be
outstanding as of the Closing Date. On the Closing Date, all such outstanding
shares of Holdings Common Stock will be fully paid and nonassessable. On the
Closing Date, each Designated Person (or group of Designated Persons) will be
the owner, beneficially and of record, of the number of shares of Holdings
Common Stock specified on Schedule 3.07(b)(1). Except as provided in Schedule
3.07(b)(2) hereto, neither Holdings nor any Subsidiary is a party to any
outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or other agreements or commitments (other than stock options
granted to employees, consultants or directors and directors' qualifying shares)
of any nature relating to any capital stock of Holdings.
(c) The authorized capital stock of Collins & Aikman Canada consists
of an unlimited number of common shares without par value ("C&A CANADA COMMON
STOCK"), of which 612 shares will be issued and outstanding as of the Closing
Date and an unlimited number of voting, nonparticipating preferred shares, no
shares of which will be issued and outstanding as of the Closing Date. All such
outstanding shares of C&A Canada Common Stock are fully paid and nonassessable
and are owned directly or indirectly, beneficially and of record by the Company
free and clear of all Liens and encumbrances whatsoever except Liens created by
the Pledge Agreement.
(d) The authorized capital stock of Collins & Aikman Plastics consists
of an unlimited number of common shares without par value ("C&A PLASTICS COMMON
STOCK"), of which 86,850 shares will be issued and outstanding as of the Closing
Date and an unlimited number of voting, nonparticipating preferred shares, no
shares of which will be issued and outstanding as of the Closing Date. All such
outstanding shares of C&A Plastics Common Stock are fully paid and nonassessable
and are owned directly or indirectly, beneficially and of record by the Company
free and clear of all Liens and encumbrances whatsoever except Liens created by
the Pledge Agreement.
SECTION 3.08. PLEDGE AGREEMENT. The security interests created in favor of
the Collateral Agent, for the benefit of the Lenders, under the Pledge Agreement
will at all times constitute first-priority, perfected security interests in the
Pledged Securities, and such Pledged Securities will be subject to no Liens or
security interests of any other person. No filings or recordings are or will be
required in order to perfect the security interests in the Pledged Securities
created under the Pledge Agreement.
SECTION 3.09. FINANCIAL STATEMENTS. Holdings has heretofore furnished to
each of the Lenders consolidated balance sheets and consolidated statements of
income and cash flow of Holdings and its consolidated subsidiaries as of and for
the fiscal years ended December 27, 1997 and December 28, 1996, certified by
Arthur Andersen L.L.P., independent public accountants for Holdings. Such
balance sheet and statement of income and cash flows present fairly the
financial condition and results of operations of Holdings and its consolidated
subsidiaries on a consolidated basis as of the dates and for the periods
indicated. Neither Holdings nor any of its Subsidiaries had, at the date of the
most recent balance sheet referred to above, any material Guarantee, contingent
liability or liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not reflected in the
foregoing statements or
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51
in the notes thereto. The financial statements referred to in this Section 3.09
have been prepared in accordance with GAAP applied on a consistent basis.
SECTION 3.10. NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the business, properties, assets, operations or financial
condition of Holdings and its Restricted Subsidiaries, taken as a whole, since
December 27, 1997.
SECTION 3.11. TITLE TO PROPERTIES; POSSESSION UNDER LEASES. (a) Each of
Holdings, the Company and the Significant Subsidiaries has good and marketable
title to, or valid leasehold interests in, or easements on or other limited
property interests in, all their respective material properties and assets,
except for minor defects in title and limitations on property interests that do
not interfere with their respective ability to conduct their respective business
as currently conducted or to utilize such properties and assets for their
intended purposes. All such material properties and assets are free and clear of
Liens, other than Liens expressly permitted by Section 6.04.
(b) Each of Holdings, the Company and the Significant Subsidiaries has
complied with all obligations under all material leases to which it is a party,
except where the failure to comply would not have a Material Adverse Effect, and
all such leases are in full force and effect, except leases in respect of which
the failure to be in full force and effect would not have a Material Adverse
Effect. Each of Holdings, the Company and the Significant Subsidiaries enjoys
peaceful and undisturbed possession under all such material leases.
(c) Each of Holdings, the Company and the Significant Subsidiaries owns or
possesses, or could obtain ownership or possession of, on terms not materially
adverse to it, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect thereto necessary for the present conduct of
its business, without any known conflict with the rights of others, and free
from any burdensome restrictions, except where such conflicts and restrictions
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.12. SUBSIDIARIES. (a) Schedule 3.12(a) sets forth as of
the Closing Date a list of all Subsidiaries of Holdings and the percentage
ownership interest of Holdings therein and whether such Subsidiaries are
Significant Subsidiaries.
(b) There are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees, consultants or directors and directors' qualifying shares) of any
nature relating to any capital stock of any subsidiary of Holdings, except for
the Pledge Agreement or as provided in Schedule 3.12(b).
SECTION 3.13. LITIGATION; COMPLIANCE WITH LAWS. (a) Except as described in
Holdings' Annual Report on Form 10-K for the fiscal year ended December 27,
1997, there are not any actions, suits or proceedings at law or in equity or by
or before any court or Governmental Authority now pending or, to the knowledge
of Holdings or the Borrowers, threatened against or affecting Holdings or any of
its subsidiaries or any property or rights of Holdings or any of its
subsidiaries as to which there is a reasonable possibility of an adverse
determination and which (i) if adversely determined, could individually or in
the aggregate result in a Material Adverse Effect or (ii) involve the Loan
Documents or (iii) if adversely determined could materially adversely affect the
Transactions.
(b) None of Holdings or any of its Subsidiaries is in default with respect
to any law, order, judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority where such default could have a Material Adverse Effect.
The Borrowings hereunder, the use of the proceeds thereof as described in
Section 5.08 and the other Transactions will not violate any applicable law or
regulation or violate or be prohibited by any judgment, writ, injunction, decree
or order of any court or Governmental Authority or subject Holdings or any of
its subsidiaries to any civil or criminal penalty or fine.
SECTION 3.14. AGREEMENTS. (a) None of Holdings or any of its
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
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52
(b) None of Holdings or any of its Subsidiaries is in default in any
manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound, in either case where such default could result in a Material Adverse
Effect. After giving effect to the Transactions, no Default or Event of Default
shall have occurred and be continuing.
SECTION 3.15. INVESTMENT COMPANY ACT. None of Holdings or any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 3.16. PUBLIC UTILITY HOLDING COMPANY ACT. None of Holdings or any
of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 3.17. TAX RETURNS. Each of Holdings and its Subsidiaries has filed
or caused to be filed all Federal, and all material state and local, tax returns
required to have been filed by it and has paid or caused to be paid all taxes
shown thereon to be due and payable, and any assessments in excess of $2,000,000
in the aggregate received by it, except taxes that are being contested in
accordance with Section 5.03 and taxes, assessments, charges, levies or claims
in respect of property taxes for property that Holdings or one of its
Subsidiaries has determined to abandon where the sole recourse for such tax,
assessment, charge, levy or claim is to such property. Each of Holdings and its
Subsidiaries has paid in full or made adequate provision (in accordance with
GAAP) for the payment of all taxes due with respect to the periods ending on or
before December 27, 1997, which taxes, if not paid or adequately provided for,
would have a Material Adverse Effect. The tax returns of Holdings and its
Subsidiaries have been examined by relevant Federal tax authorities for all
periods through January 25, 1992, and all deficiencies asserted as a result of
such examinations have been paid. Except as set forth on Schedule 3.17, as of
the Closing Date, with respect to each of Holdings and its Subsidiaries, (i) no
material claims are being asserted in writing with respect to any taxes, (ii) no
presently effective waivers or extensions of statutes of limitation with respect
to taxes have been given or requested, (iii) no tax returns are being examined
by, and no written notification of intention to examine has been received from,
the Internal Revenue Service or any other taxing authority and (iv) no currently
pending issues have been raised in writing by the Internal Revenue Service or
any other taxing authority. For purposes hereof, "taxes" shall mean any present
or future tax, levy, impost, duty, charge, assessment or fee of any nature
(including interest, penalties and additions thereto) that is imposed by any
Governmental Authority.
SECTION 3.18. NO MATERIAL MISSTATEMENTS. (a) The information, reports,
financial statements, exhibits and schedules furnished by or on behalf of
Holdings or any of its Subsidiaries or Affiliates to the Administrative Agent or
any Lender in connection with the negotiation of any Loan Document or included
therein or delivered pursuant thereto, when taken as a whole, did not contain,
and as they may be amended, supplemented or modified from time to time, will not
contain, as of the Closing Date any material misstatement of fact and did not
omit, and as they may be amended, supplemented or modified from time to time,
will not omit, to state as of the Closing Date any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were, are or will be made, not materially misleading.
(b) All financial projections concerning Holdings and its Subsidiaries
that are or have been made available to the Administrative Agent or any Lender
by Holdings or any of its Subsidiaries or Affiliates, unless otherwise
disclosed, have been or will be prepared in good faith based upon assumptions
believed by Holdings and the Company to be reasonable.
SECTION 3.19. EMPLOYEE BENEFIT PLANS. Each of Holdings and the Restricted
Subsidiaries and each of their ERISA Affiliates is in compliance in all material
respects with the applicable provisions of ERISA and the regulations and
published interpretations thereunder except for such noncompliance which would
not be expected to result in a Material Adverse Effect. No Reportable Event has
occurred as to which Holdings or any of the Restricted Subsidiaries or any of
their ERISA Affiliates was required to file a report with the PBGC, other than
reports for which the 30 day notice requirement is waived, reports that have
been filed and reports the failure of
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53
which to file would not result in a Material Adverse Effect and as of the
Closing Date, the present value of all benefit liabilities under each Plan of
Holdings and the Restricted Subsidiaries or any of their ERISA Affiliates (on a
termination basis and based on those assumptions used to fund such Plan) did
not, as of the last annual valuation report applicable thereto, exceed by more
than $17,500,000 the value of the assets of such Plan on a termination basis.
None of Holdings or any of the Restricted Subsidiaries or any of their ERISA
Affiliates has incurred or could reasonably be expected to incur any Withdrawal
Liability that could result in a Material Adverse Effect. None of Holdings or
any of the Restricted Subsidiaries or any of their ERISA Affiliates has received
any notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated where such
reorganization or termination has resulted or could reasonably be expected to
result, through increases in the contributions required to be made to such Plan
or otherwise, in a Material Adverse Effect.
SECTION 3.20. LABOR MATTERS. There are no strikes against Holdings or any
of its Subsidiaries pending, other than any strikes which, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect. The hours worked and payment made to employees of Holdings and each of
its Subsidiaries have not been in violation in any material respect of the Fair
Labor Standards Act or any other applicable law dealing with such matters. All
material payments due from Holdings or any of its Subsidiaries, or for which any
claim may be made against Holdings or any of its Subsidiaries, on account of
wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of Holdings or such subsidiary to
the extent required by GAAP. The consummation of the Transactions will not give
rise to a right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which Holdings or any of its
Subsidiaries (or any predecessor) is a party or by which Holdings or any of its
subsidiaries (or any predecessor) is bound, other than collective bargaining
agreements which, individually or in the aggregate, are not material to Holdings
and its Subsidiaries taken as a whole.
SECTION 3.21. ENVIRONMENTAL MATTERS. (a) Except as disclosed in writing to
the Administrative Agent, each Lender and the Issuing Bank prior to the date of
this Agreement, which disclosed matters individually and in the aggregate are
not reasonably expected by Holdings or the Company to have a Material Adverse
Effect, (i) Holdings and each of its Subsidiaries has complied in all respects
with all applicable Federal, state, local and other statutes, ordinances,
orders, judgments, rulings and regulations relating to environmental pollution
or to environmental regulation or control, except to the extent of any failure
so to comply which alone and together with other such failures is not reasonably
expected to result in a Material Adverse Effect; (ii) none of Holdings or any
Subsidiary of Holdings has received notice of any failure so to comply which
alone or together with other such failures is reasonably expected to result in a
Material Adverse Effect; and (iii) none of Holdings or any of its Subsidiaries
manages, transports or stores any hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, as those terms are
used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act or the
Clean Water Act, in violation of any applicable regulations promulgated pursuant
thereto or of any other applicable law where such violation is reasonably likely
to result, individually or together with other violations, in a Material Adverse
Effect.
(b) Except with respect to matters that, individually and in the
aggregate, Holdings and the Company reasonably believe would not have a Material
Adverse Effect, as of the Closing Date: (i) the operations of Holdings and each
of its Subsidiaries comply in all respects with all Environmental Laws and, to
the knowledge of Holdings and the Borrowers after inquiry, no conditions exist
(including at properties leased or subleased to third persons) which would
subject Holdings or its Subsidiaries to damages, liabilities, penalties,
injunctive relief or clean-up costs under any Environmental Law or which require
or are reasonably likely to require any Remedial Action under any Environmental
Law; (ii) each of Holdings and its Subsidiaries has obtained all Environmental
Permits necessary for its operation or required by any Environmental Law, and
all such Environmental Permits are in good standing, and none of Holdings or its
Subsidiaries has been cited by a Governmental Authority for violating any terms
or conditions of such Environmental Permits within the five-year period prior to
the Closing Date; (iii) none of Holdings or its Subsidiaries is subject or a
party to any Environmental Claim; (iv) with respect to present facilities and
operations, none of Holdings or its Subsidiaries, or, to the knowledge of
Holdings or the Borrowers, any predecessor of such persons, is subject to any
outstanding written order or agreement with any Governmental Authority or
private
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54
party respecting (A) any Environmental Law, (B) any Remedial Action under any
Environmental Law, or (C) any Environmental Claim; (v) to the knowledge of
Holdings or the Borrowers, none of the operations of any of Holdings or its
Subsidiaries is the subject of any investigation by a Governmental Authority
evaluating whether any Remedial Action under any Environmental Law is needed;
(vi) none of Holdings or its Subsidiaries or, to the knowledge of Holdings or
the Borrowers, any predecessor of such persons has filed any notice under any
Environmental Law indicating past or present treatment, storage or disposal of a
hazardous waste as defined under 40 C.F.R. Parts 260 through 270 (in effect as
of the Closing Date) or any state equivalent, or reporting a Release of a
Contaminant; (vii) to the knowledge of Holdings or the Borrowers except as
permitted under any Environmental Law, none of Holdings or its Subsidiaries has
experienced a Release of any Contaminant, and there has been no voluntary
disposal, use, storage, recycling or treatment on, under or at any property of
such person (or in tanks or other facilities thereon) of any Contaminant which,
if known to be present on such property, or present in soils or groundwater,
would require Remedial Action under any Environmental Law; and (viii) no Lien in
favor of any Governmental Authority for (A) any liability under any
Environmental Law or (B) damages arising from or costs incurred by such
Governmental Authority in response to a Release of a Contaminant into the
environment has been recorded with respect to any property of Holdings or any of
its Subsidiaries. For purposes of this Section 3.21(b), "knowledge" means the
actual knowledge of any Responsible Officer of Holdings or any Restricted
Subsidiary, any officer of Holdings or any Restricted Subsidiary with
responsibility for environmental compliance, or any plant or facilities manager
with responsibility for overall management of such plant or facility of Holdings
or any of its Subsidiaries.
(c) Each of Holdings and its Subsidiaries reasonably believes that
Holdings and its Subsidiaries on a consolidated basis have made adequate
provision (in accordance with GAAP) for all damages, liabilities, penalties or
costs that they reasonably expect to incur in connection with any Environmental
Claim or any Remedial Action existing or, to the knowledge of Holdings or the
Company, reasonably anticipated as of the date of this Agreement.
SECTION 3.22. SOLVENCY. (a) The fair salable value of the assets of the
Company exceeds the amount that will be required to be paid on or in respect of
the existing debts and other liabilities (including contingent liabilities) of
the Company as they mature. The assets of the Company do not constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. The Company does not intend to, or believe that it will, incur
debts beyond its ability to pay such debts as they mature (taking into account
the Transactions).
(b) Upon consummation of the Transactions, the fair salable value of
the assets of the Company and its subsidiaries taken as a whole will exceed the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of the Company and its
subsidiaries.
(c) The assets of the Company and its subsidiaries taken as a whole do
not, and upon consummation of the Transactions will not, constitute unreasonably
small capital for the Company and its subsidiaries to carry out their respective
businesses as now conducted and as proposed to be conducted including the
capital needs of the Company and its subsidiaries taking into account the
particular capital requirements of the business conducted by the Company and
each of its subsidiaries, and projected capital requirements and capital
availability thereof.
(d) The Company does not intend to, or intend to permit any of its
subsidiaries to, incur debts beyond their respective ability to pay such debts
as they mature, taking into account the timing and amounts of cash to be
received by the Company and each of such subsidiaries, and of amounts to be
payable on or in respect of debt of the Company and each of such subsidiaries.
SECTION 3.23. ABSENCE OF CERTAIN RESTRICTIONS. No indenture, certificate
of designation for preferred stock, agreement or other instrument to which
Holdings or any Restricted Subsidiary is a party will prohibit or materially
restrain, or have the effect of prohibiting or materially restraining, or
imposing materially adverse conditions upon, the incurrence of Indebtedness, the
granting of Liens, the provision of Guarantees or the payment of dividends by
subsidiaries of Holdings except for restrictions (a) on the granting of Liens on
assets that are encumbered by Liens permitted under clause (a), (b), (i), (k),
(l), (r) or (t) of Section 6.04, to the extent that such restrictions apply only
to the assets so encumbered and are imposed by the agreements under which such
Liens were granted or (b) contained in agreements relating to Indebtedness
permitted by Section 6.01.
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55
SECTION 3.24. NO FOREIGN ASSETS CONTROL REGULATION VIOLATION. None of the
Transactions will result in a violation of any of the foreign assets control
regulations of the United States Treasury Department, 31 C.F.R., Subtitle B,
Chapter V, as amended (including the Foreign Assets Control Regulations, the
Transaction Control Regulations, the Cuban Assets Control Regulations, the
Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the
Nicaraguan Trade Control Regulations, the South African Transactions
Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin Regulations,
the Panamanian Transactions Regulations, the Kuwaiti Assets Control Regulations
and the Iraqi Sanctions Regulations contained in said Chapter V), or any ruling
issued thereunder or any enabling legislation or Presidential Executive Order
granting authority therefor, nor will the proceeds of the Loans be used by the
Company in a manner that would violate any thereof.
SECTION 3.25. INSURANCE. Each of Holdings and the Restricted Subsidiaries
carries and maintains with respect to its insurable properties insurance
(including self insurance) with financially sound and reputable insurers of the
types, to such extent and against such risks as is customary with companies in
the same or similar businesses, including fire and other risks insured against
by extended coverage and public liability insurance against claims for personal
injury or death or property damages occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it.
SECTION 3.26. CERTAIN OTHER REPRESENTATIONS. All representations and
warranties contained in any other Loan Document and made by any of Holdings or
any of its Subsidiaries are true and correct as of the date made or deemed to
have been made.
SECTION 3.27. SENIOR DEBT. All payment obligations of the Company under
the Loan Documents constitute Senior Indebtedness (as defined in the Senior
Subordinated Notes Indenture), and all payment obligations of Holdings under the
Loan Documents constitute Senior Guarantor Indebtedness (as defined in the
Senior Subordinated Notes Indenture). This Agreement is the Credit Agreement as
defined in the Senior Subordinated Notes Indenture.
SECTION 3.28. YEAR 2000 COMPLIANCE. Except as disclosed in Holdings'
filings with the Securities and Exchange Commission, the Company expects that
the cost of ensuring that its computer systems are Year 2000 compliant should
not have a material adverse effect on the Company and that its Year 2000
remediation will be substantially completed prior to any anticipated impact on
its operations.
ARTICLE IV.
CONDITIONS
The obligations of the Lenders to make Loans hereunder and the obligation
of the Issuing Banks to issue Letters of Credit hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. ALL CREDIT EVENTS. On the date of each Borrowing, other than
a Borrowing in which Revolving Credit Loans are refinanced with new Revolving
Credit Loans, Canadian Revolving Credit Loans are refinanced with new Canadian
Revolving Credit Loans or Additional Revolving Credit Loans are refinanced with
new Additional Revolving Credit Loans (without any increase in the aggregate
principal amount of Revolving Credit Loans, Canadian Revolving Credit Loans or
Additional Revolving Credit Loans, as the case may be outstanding) as
contemplated by Section 2.02(e), and on the date of each issuance or renewal of
a Letter of Credit:
(a)The Applicable Agent shall have received a notice of such Borrowing
as required by Section 2.03, or the Applicable Agent and the applicable
Issuing Bank shall have received a notice regarding the issuance or
renewal of such Letter of Credit as required by Section 2.19(c), as
applicable.
(b)The representations and warranties set forth in each Loan Document
shall be true and correct in all material respects on and as of the date
of such Borrowing, issuance or renewal with the same effect as
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56
though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.
(c)At the time of and immediately after such Borrowing, issuance or
renewal no Event of Default or Default shall have occurred and be
continuing.
Each Borrowing and each issuance or renewal of a Letter of Credit shall be
deemed to constitute a representation and warranty by the Company on the date of
such Borrowing as to the matters specified in paragraphs (b) and (c) of this
Section 4.01.
SECTION 4.02. CONDITIONS TO EFFECTIVENESS. On the Closing Date:
(a)Each Lender, if it so requests in accordance with subsection
2.04(e), shall have received a duly executed Revolving Credit Note,
Tranche A Term Note and Tranche B Term Note and the Swingline Lender, if
it so requests in accordance with subsection 2.04(e), shall have received
a Swingline Note, in each case, complying with the provisions of Section
2.04. Each Canadian Lender, if it so requests in accordance with
subsection 2.04(e), shall have received a duly executed Canadian Revolving
Credit Note, complying with the provisions of Section 2.04.
(b)The Administrative Agent and the Canadian Administrative Agent
shall have received all Fees and other amounts due and payable on or prior
to the Closing Date, including reimbursement of any out-of-pocket expenses
referred to in Section 9.05 (to the extent that notice thereof is given to
the Company prior to the Closing Date).
(c)The Administrative Agent shall have received evidence satisfactory
to it that the principal, interest, fees and all other amounts due and
payable under Existing Credit Agreements shall have been repaid and the
commitments therein terminated.
(d)The Administrative Agent shall have received the favorable written
opinions of (i) Cravath, Swaine & Moore, special counsel for Holdings and
its subsidiaries (ii) Elizabeth R. Philipp, Esq., general counsel for
Holdings and its subsidiaries and (iii) Stikeman Elliott, dated the
Closing Date and addressed to the Lenders, and in form and substance
satisfactory to the Administrative Agent and covering the matters set
forth in Exhibit D. In addition, the Administrative Agent shall have
received the favorable written opinions of such local counsel with respect
to legal matters relating hereto as the Administrative Agent may
reasonably have requested, in such form and to such effect as shall be
satisfactory to the Lenders and to Simpson Thacher & Bartlett, special
counsel for the Administrative Agent.
(e)The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each Borrower and of Holdings, certified as of a recent date
by the Secretary of State of the state of its organization (or, in the
case of the Canadian Borrowers, the Ministry of Consumer and Commercial
Relations of the Province of Ontario), and a certificate as to the good
standing (or the equivalent thereof) of each Borrower and of Holdings as
of a recent date, from such Secretary of State (or, in the case of the
Canadian Borrowers, the Ministry of Consumer and Commercial Relations of
the Province of Ontario); (ii) a certificate of the Secretary or Assistant
Secretary of each Borrower and of Holdings dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the
by-laws of such entity as in effect on the Closing Date and at all times
since a date prior to the date of the resolutions described in clause (B)
below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of such entity
authorizing the execution, delivery and performance of the Loan Documents
to which it is a party, the granting of the Liens thereunder and, in the
case of a Borrower, the borrowings hereunder, and that such resolutions
have not been modified, rescinded or amended and are in full force and
effect, (C) that the certificate or articles of incorporation of such
entity have not been amended since the date of the last amendment thereto
shown on the certificate of good standing furnished pursuant to clause (i)
above, and (D) as to the incumbency and specimen signature of each officer
executing any Loan Document or any other document delivered in
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connection herewith on behalf of such entity; (iii) a certificate of
another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to
(ii) above; (iv) a certificate or equivalent documentation from the
Secretary of State of each state (or, in the case of the Canadian
Borrowers, the Ministry of Consumer and Commercial Relations of the
Province of Ontario and the Inspector General of Financial Institutions of
the Province of Quebec) in which any of the Borrowers or Holdings conducts
material business or owns material assets as to the qualification of such
entity to do business and its good standing in such state; and (v) such
other documents as the Lenders or their counsel or Simpson Thacher &
Bartlett, special counsel for the Administrative Agent, may reasonably
request.
(f)The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Financial Officer of Holdings and the
Company, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(g)The Closing Date shall occur prior to June 30, 1998.
(h)The Pledge Agreement shall have been duly executed by Holdings and
each Restricted Subsidiary listed therein (the "PLEDGORS") and delivered
to the Collateral Agent and shall be in full force and effect, all
outstanding shares of capital stock of the Company and each other domestic
subsidiary of any Pledgor, 65% of the outstanding shares of capital stock
of each foreign subsidiary owned directly by any Pledgor and all
intercompany obligations in excess of $10,000,000 held by a Pledgor and
evidenced by notes, bonds or other instruments shall have been duly and
validly pledged to the Collateral Agent for the benefit of the Secured
Parties and certificates representing such shares (unless such shares are
non-certificated) and the instruments representing all such obligations
shall be in the actual possession of the Collateral Agent.
(i)The Collateral Agent shall have received each document (including
Uniform Commercial Code financing statements) required by law or
reasonably requested by the Collateral Agent to be filed, registered or
recorded in order to create in favor of the Collateral Agent for the
benefit of the Secured Parties a valid, legal and perfected first priority
security interest in or lien on the Collateral that is the subject of the
Pledge Agreement.
(j)The Guarantee Agreement shall have been duly executed by Holdings
and each other Guarantor and delivered to the Collateral Agent and shall
be in full force and effect on such date.
(k)The Intercreditor Agreement shall have been duly executed by each
party thereto and shall be in full force and effect on such date.
(l) All legal matters incident to this Agreement and the borrowings
hereunder shall be reasonably satisfactory to the Agents and to Simpson
Thacher & Bartlett, special counsel for the Administrative Agent.
(m) Each Lender and the Administrative Agent shall have received the
pro forma capitalization table of Holdings as of March 27, 1998, adjusted
to give effect to the Transactions (as if the Transactions had occurred on
such date and using assumptions believed by the Company to be reasonable).
Such pro forma capitalization table is set forth in the Confidential
Information Memorandum dated April 1998, prepared with respect to this
Agreement.
(n) The conditions precedent in Section 4.01 shall be satisfied on the
Closing Date.
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ARTICLE V.
AFFIRMATIVE COVENANTS
Each of Holdings and the Borrowers covenants and agrees that from and
after the Closing Date, so long as this Agreement or any Letter of Credit shall
remain in effect or the principal of or interest on any Loan, any Fees or any
other expenses or amounts payable under or in respect of any Loan Document or
Letter of Credit shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, Holdings and the Borrowers will, and will cause each of the
Restricted Subsidiaries to:
SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.08
and except for the liquidation or dissolution of Restricted Subsidiaries (other
than Significant Subsidiaries) if the assets of such corporations to the extent
they exceed estimated liabilities are acquired by a wholly owned Restricted
Subsidiary in such liquidation or dissolution; PROVIDED that Subsidiaries which
are Guarantors may not be liquidated into Subsidiaries that are not Guarantors
and domestic Subsidiaries may not be liquidated into foreign Subsidiaries.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
all applicable laws, rules, regulations and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all times maintain
and preserve all property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith, if any, may be properly conducted at all
times.
(c) Without limiting the generality of the provisions of Section 5.01(b),
each of Holdings and the Borrowers shall (i)(A) undertake reasonable efforts to
comply, and to cause each Subsidiary to comply, in all material respects with
all Environmental Laws and any order, decree or similar requirements of any
Governmental Authority concerning (1) a material violation of any Environmental
Law, (2) a financial contribution by Holdings or any of its Subsidiaries under
any Environmental Law or (3) a Remedial Action by or on the part of Holdings or
any of its Subsidiaries under any Environmental Law and (B) undertake reasonable
efforts to remedy and to cause each of its Subsidiaries to remedy, as soon as
reasonably practicable, any material violation of Environmental Laws, except in
any case that compliance or remedy shall not be required insofar as any failure
to undertake such efforts cannot reasonably be expected by Holdings, the
Canadian Borrowers or the Company to have a Material Adverse Effect, or so long
as (x) the validity of the same shall be contested diligently and in good faith,
(y) the subject property does not contain a material plant or other facility or
shall then be in no danger of being sold, forfeited or lost pursuant to such
contest and (z) reserves have been established in accordance with GAAP by
Holdings or such subsidiary in connection therewith; and (ii) undertake
reasonable efforts to require and to cause each of its subsidiaries to require,
to the extent practicable and appropriate, that a lease for any renewing or new
tenant contain terms substantially equivalent to those of clause (i) above.
SECTION 5.02. INSURANCE. Keep its insurable properties insured (including
through self-insurance) at all times by financially sound and reputable insurers
in such amounts as shall be customary for similar businesses and maintain such
other insurance, of such types, to such extent and against such risks, as is
customary with companies in the same or similar businesses, including insurance
against fire and other risks insured against by extended coverage and public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it; and maintain such other insurance as may be
required by law.
SECTION 5.03. TAXES. Pay and discharge promptly all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid,
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59
might give rise to a Lien upon such properties or any part thereof; PROVIDED,
HOWEVER, that such payment and discharge shall not be required with respect to
any such tax, assessment, charge, levy or claim so long as (a) the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
Holdings or any Restricted Subsidiary, as applicable, shall set aside on its
books adequate reserves as required by GAAP with respect thereto, (b) such tax,
assessment, charge, levy or claim is in respect of property taxes for property
that Holdings or one of the Restricted Subsidiaries has determined to abandon
and the sole recourse for such tax, assessment, charge, levy or claim is to
such property or (c) the amount of such taxes assessments, charges, levies and
claims and interest and penalties thereon does not exceed $1,000,000 in the
aggregate.
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, AMENDMENTS, ETC. In the case
of Holdings, furnish to the Administrative Agent for distribution to each Credit
Agreement Creditor (with sufficient copies for each Credit Agreement Creditor).
(a)within 90 (or, in the case of clause (ii) below, 105) days after
the end of each fiscal year consolidated balance sheets and related
statements of income and cash flows, showing the consolidated financial
condition of each of (i) Holdings and its Subsidiaries and (ii) unless
Carcorp, Inc. is the only Unrestricted Subsidiary, Holdings and the
Restricted Subsidiaries, in each case as of the close of such fiscal year
and the results of their operations during such year, audited in the case
of clause (i) above by Arthur Andersen LLP or other independent public
accountants of recognized national standing (who shall be reasonably
acceptable to the Administrative Agent) and accompanied by (1) in the case
of clause (i), an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present the financial condition and results of
operations of Holdings and its consolidated subsidiaries and Holdings and
the Restricted Subsidiaries, respectively, in accordance with GAAP and (2)
a certificate of a Financial Officer certifying that such consolidated
financial statements fairly present the financial condition and results of
operations of Holdings and its consolidated subsidiaries and Holdings and
the Restricted Subsidiaries, respectively, in accordance with GAAP
consistently applied (except as disclosed in such certificate, in
reasonable detail, which detail shall be reasonably acceptable to the
Administrative Agent);
(b)within 45 (or, in the case of clause (ii) below, 60) days after the
end of each of the first three fiscal quarters of each fiscal year, the
consolidated balance sheets and related statements of income and cash
flows, showing the consolidated financial condition of each of (i)
Holdings and its Subsidiaries and (ii) unless Carcorp., Inc. is the only
Unrestricted Subsidiary, Holdings and the Restricted Subsidiaries, in each
case as of the close of such fiscal quarter and the results of their
operations during such fiscal quarter and the then elapsed portion of the
fiscal year, together with the balance sheets and related statements of
income and cash flows as of the corresponding dates and for the
corresponding periods in the prior year, all certified by one of its
Financial Officers as fairly presenting the consolidated financial
condition and results of operations of Holdings and its consolidated
subsidiaries and Holdings and the Restricted Subsidiaries, respectively,
in accordance with GAAP (other than the absence of footnotes in accordance
with GAAP) consistently applied (except as disclosed in such certificate
in reasonable detail, which detail shall be reasonably acceptable to the
Administrative Agent), subject to normal year-end audit adjustments;
(c)concurrently with any delivery of financial statements under (a) or
(b) above, a certificate (a "COMPLIANCE CERTIFICATE") of the accounting
firm or Financial Officer (which certificate shall be in the form of
Exhibit E if delivered by a Financial Officer) opining on or certifying
such statements (which certificate, when furnished by an accounting firm,
may be limited to accounting matters and disclaim responsibility for legal
interpretations) (i) certifying that no Default or Event of Default has
occurred or, if such Default or Event of Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed
to be taken with respect thereto and (ii) setting forth computations in
reasonable detail (which detail shall be reasonably satisfactory to the
Administrative Agent) demonstrating compliance with the covenants
contained in Sections 6.14 and 6.16 showing the Applicable Level;
(d) if, as a result of any change in accounting principles and
policies from those as in effect on the date of this Agreement, the
consolidated financial statements of Holdings and the Subsidiaries or
Holdings
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60
and the Restricted Subsidiaries, as the case may be, delivered pursuant to
clauses (a) and (b) above will differ in any material respect from the
consolidated financial statements that would have been delivered pursuant
to such clauses had no such change in accounting principles and policies
been made, then, together with the first delivery of financial statements
pursuant to clauses (a) and (b) above following such change, a schedule
prepared by a Financial Officer reconciling such changes to what the
financial statements would have been without such changes;
(e)promptly after the same become publicly available, copies of all
periodic reports and proxy statements and, to the extent requested by the
Administrative Agent, any other materials filed by Holdings or any of its
Subsidiaries with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or any Governmental Authority succeeding
to any of or all the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders generally, as the
case may be;
(f)within 90 days after the beginning of each fiscal year, a copy of
the annual income and capital expenditure budget for such fiscal year;
(g)promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Holdings or any of
its Restricted Subsidiaries, or compliance with the terms of any Loan
Document, as any Credit Agreement Creditor, acting through the
Administrative Agent, may reasonably request;
(h)promptly, a copy of any amendment or waiver of any provisions of
any agreement which amendment or waiver is described in Section 6.10 or
6.11;
(i)promptly following the creation or acquisition of any Subsidiary, a
certificate from a Responsible Officer, identifying such new Subsidiary
and the ownership interest of Holdings and its Subsidiaries therein; and
concurrently with the delivery of financial statements under (a) or (b)
above, a description of the Investments in Unrestricted Subsidiaries made
during the fiscal quarter ending on the date of such financial statements
and the amount thereof; PROVIDED, that with respect to the Subordinated
Notes owed by Carcorp, Inc. under the receivables financing facility (the
"Sub Notes"), the Company shall not be required to report any changes in
the outstanding principal amount of the Sub Notes, unless the aggregate
outstanding principal amount of such Sub Notes exceeds $75,000,000;
(j)if requested by the Administrative Agent, within 105 days following
the end of any fiscal year of any Unrestricted Subsidiary, a balance sheet
and related statements of income and cash flow for such Unrestricted
Subsidiary at the end of and for such fiscal year; and
(k)promptly, a copy of all reports submitted in connection with any
interim or special audit made by independent accountants of the books of
Holdings or any of its Subsidiaries.
SECTION 5.05. LITIGATION AND OTHER NOTICES. Furnish to each Credit
Agreement Creditor prompt written notice of the following:
(a)any Default or Event of Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b)the filing or commencement of any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority,
against Holdings or any Subsidiary in respect of which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; and
(c)any development specific to Holdings and its Subsidiaries and
not otherwise publicly disclosed known to a Responsible Officer that
has resulted in, or could reasonably be anticipated to result in, a
Material Adverse Effect.
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SECTION 5.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and (b) furnish to each Credit Agreement Creditor
(i) as soon as possible, and in any event within 30 days after any Responsible
Officer of the Company, any Guarantor or any ERISA Affiliate of any of them
knows or has reason to know that any Reportable Event has occurred that alone or
together with any other Reportable Event could reasonably be expected to result
in liability of the Company, any Guarantor or any of their ERISA Affiliates to
the PBGC in an aggregate amount exceeding $10,000,000, a statement of a
Financial Officer setting forth details as to such Reportable Event and the
action proposed to be taken with respect thereto, together with a copy of the
notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after
any Responsible Officer learns of receipt thereof, a copy of any notice the
Company or any Guarantor or any of their ERISA Affiliates may receive from the
PBGC relating to the intention of the PBGC to terminate any Plan or Plans (other
than a Plan maintained by any of their ERISA Affiliates which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code) or to appoint a trustee to administer any Plan or Plans, (iii) within 20
days after the due date for filing with the PBGC pursuant to Section 412(n) of
the Code a notice of failure to make a required installment or other payment
with respect to a Plan, a statement of a Financial Officer setting forth details
as to such failure and the action proposed to be taken with respect thereto,
together with a copy of such notice given to the PBGC and (iv) promptly after
any Responsible Officer learns thereof and in any event within 30 days after
receipt thereof by the Company, any Guarantor or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of each notice received by the Company,
any Guarantor or such ERISA Affiliate concerning (A) the imposition of
Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is
expected to be, terminated or in reorganization, in each case within the meaning
of Title IV of ERISA.
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS.
Maintain all financial records in accordance with GAAP and permit any persons
designated by the Administrative Agent (or, during the continuance of an Event
of Default, any Lender) to visit and inspect the financial records and the
properties of Holdings or any Restricted Subsidiary at reasonable times, upon
reasonable notice and as often as reasonably requested and to make extracts from
and copies of such financial records, and permit any persons designated by the
Administrative Agent (or, during the continuance of an Event of Default, any
Lender) to discuss the affairs, finances and condition of Holdings or any
Restricted Subsidiary with the officers thereof and independent accountants
therefor (subject to reasonable requirements of confidentiality, including
requirements imposed by law or by contract).
SECTION 5.08. USE OF PROCEEDS. (a) Use the proceeds of Loans for general
corporate purposes (including to make Permitted Business Acquisitions and
Investments under Section 6.07(l)); provided no Revolving Loans or Foreign
Subsidiary Letters of Credit shall be used to finance any portion of a Permitted
Business Acquisition unless immediately after giving effect thereto the unused
Revolving Credit Commitments are at least $30,000,000.
(b) Use Letters of Credit (other than Foreign Subsidiary Letters of
Credit) solely for general corporate purposes in the ordinary course of business
of the applicable Borrower and its subsidiaries; and use Foreign Subsidiary
Letters of Credit to support Indebtedness of Foreign Restricted Subsidiaries
permitted under subsection 6.01(r).
SECTION 5.09. FURTHER ASSURANCES. Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing UCC financing statements, mortgages and deeds of trust), which
may be required under applicable law, or which the Collateral Agent may
reasonably request, in order to effectuate the transactions contemplated by the
Loan Documents, and in order to grant, preserve, protect and perfect the
validity and first priority (subject to Liens permitted by Section 6.04) of the
security interests created or intended to be created pursuant to the Pledge
Agreement. In addition, from time to time, Holdings and the Restricted
Subsidiaries will, at their cost and expense, subject to the obtaining of any
required regulatory authorizations (which Holdings and the Company agree to use
their best efforts to obtain) promptly secure the Obligations by causing the
following to occur: (i) promptly upon creating or acquiring any additional
subsidiary, the stock of such subsidiary will (unless such subsidiary is a
subsidiary of an Unrestricted Subsidiary or of a foreign subsidiary or, to the
extent prohibited by the terms of the JPS Automotive Senior Notes Indenture, of
JPS Automotive) be pledged pursuant to the Pledge Agreement, provided that no
more than 65% of the capital stock of any foreign subsidiary shall be required
to be pledged pursuant to this Section 5.09, and (ii) such subsidiary will
(unless such subsidiary is an Unrestricted Subsidiary or a foreign subsidiary
or, to the extent prohibited by the terms
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62
of the JPS Automotive Senior Notes Indenture, JPS Automotive or any of its
subsidiaries) become a party to the Guarantee Agreement (including JPS
Automotive upon repayment or redemption in full of the JPS Automotive Senior
Notes). All such security interests and Liens will be created under the Pledge
Agreement and other security agreements and other instruments and documents in
form and substance reasonably satisfactory to the Collateral Agent, and Holdings
and the Restricted Subsidiaries shall deliver or cause to be delivered to the
Administrative Agent all such instruments and documents (including legal
opinions and lien searches) as the Required Lenders shall reasonably request to
evidence compliance with this Section 5.09. Holdings and the Restricted
Subsidiaries agree to provide such evidence as the Administrative Agent shall
reasonably request as to the perfection and priority status of each such
security interest and Lien.
SECTION 5.10. CHANGE IN OWNERSHIP. In the case of Holdings, own directly
at all times, legally and beneficially, 100% of the capital stock of the
Company, free of Liens except Liens in favor of the Collateral Agent; and, in
the case of Company, own (a) directly at all times, legally and beneficially,
100% of the capital stock of the Finance Subsidiary free of Liens except Liens
in favor of the Collateral Agent and (b) directly or indirectly at all times,
legally and beneficially, 100% of the capital stock of the Canadian Borrowers
free of Liens except Liens, if any, in favor of the Collateral Agent.
SECTION 5.11. FISCAL YEAR; ACCOUNTING. In the case of each of Holdings and
its subsidiaries, cause its respective fiscal year to end on the last Saturday
in December (except that the fiscal year end may vary for any foreign subsidiary
domiciled in a jurisdiction that prohibits such last Saturday year end).
SECTION 5.12. DIVIDENDS. In the case of the Company, permit its
subsidiaries to pay dividends and cause such dividends to be paid to the
extent required to pay the monetary Obligations.
SECTION 5.13. [INTENTIONALLY OMITTED]
SECTION 5.14. CORPORATE SEPARATENESS. Cause the management, business and
affairs of each of Holdings and the Subsidiaries to be conducted in such a
manner so that each of Holdings and the Unrestricted Subsidiaries will be
perceived as a legal entity separate and distinct from each other and the
Restricted Subsidiaries.
SECTION 5.15. BUSINESS OF RESTRICTED SUBSIDIARIES. Not permit any
material portion of the business and activities of the Restricted
Subsidiaries to be performed and conducted by the Unrestricted Subsidiaries.
ARTICLE VI.
NEGATIVE COVENANTS
Each of Holdings and the Borrowers covenants and agrees that from and
after the Closing Date, so long as this Agreement or any Letter of Credit shall
remain in effect or any monetary Obligation shall be unpaid, unless the Required
Lenders shall otherwise consent in writing, Holdings, and the Borrowers will
not, and will not cause or permit any Restricted Subsidiary to:
SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist
any Indebtedness, except:
(a)Indebtedness of the Company and the Restricted Subsidiaries for
borrowed money in an amount not to exceed $35,000,000 under agreements
existing on the date of this Agreement and set forth in Schedule 6.01 and
other Indebtedness existing on the Closing Date, but not any extensions,
renewals or refinancings of such Indebtedness except (i) renewals and
extensions expressly provided for in the agreements evidencing any such
Indebtedness as the same are in effect on the date of this Agreement and
(ii) refinancings and extensions of any such Indebtedness if the interest
rate with respect thereto and other terms thereof are no less favorable
than the Indebtedness being refinanced or extended and the average life to
maturity thereof is greater than or equal to the Indebtedness being
refinanced or extended (provided that
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such Indebtedness permitted under clause (i) or clause (ii) above shall
not be (A) Indebtedness of an obligor that was not an obligor with respect
to the Indebtedness being extended, renewed or refinanced, (B) in a
principal amount which exceeds the Indebtedness being renewed, extended or
refinanced or (C) incurred, created or assumed if any Default or Event of
Default has occurred and is continuing or would result therefrom);
(b)Indebtedness of the Company consisting of contingent liabilities
arising from indemnities and other contractual obligations of the Company
existing from the sale of properties prior to the date hereof by Holdings
and the Company and their predecessors;
(c)So long as immediately after giving effect to the incurrence
thereof no Default or Event of Default shall have occurred and be
continuing, Permitted Subordinated Indebtedness and unsecured subordinated
Guarantees of such Permitted Subordinated Indebtedness;
(d)Indebtedness of (i) the Company to any subsidiary of the Company
evidenced, if the amount of such Indebtedness owing to a Domestic
Restricted Subsidiary (other than an Inactive Subsidiary, unless requested
by the Administrative Agent) exceeds $10,000,000, by an Intercompany Note
pledged to the Collateral Agent under the Pledge Agreement, (ii) any
Domestic Restricted Subsidiary to the Company evidenced, if the amount of
such Indebtedness exceeds $10,000,000, by an Intercompany Note pledged to
the Collateral Agent under the Pledge Agreement, (iii) any Domestic
Restricted Subsidiary to any other Restricted Subsidiary evidenced, if the
amount of such Indebtedness owing to a Domestic Restricted Subsidiary
(other than an Inactive Subsidiary, unless requested by the Administrative
Agent) exceeds $10,000,000, by an Intercompany Note pledged to the
Collateral Agent under the Pledge Agreement, (iv) any Foreign Restricted
Subsidiaries to the Company or to any other Domestic Restricted Subsidiary
in an aggregate principal amount, together with Investments under Section
6.07(l), Permitted Acquisition Indebtedness under 6.01(l) and Indebtedness
outstanding under Section 6.01(k) and (r), not at any time in excess of
$225,000,000 (which amount shall include approximately $36,000,000 of
Indebtedness outstanding on the Closing Date) PLUS the Foreign Currency
Fluctuation Amount and evidenced by one or more Intercompany Notes pledged
to the Collateral Agent under the Pledge Agreement if the outstanding
amount of such Indebtedness exceeds $10,000,000 in the aggregate, (v)
Holdings to Company, in an amount not greater than $6,000,000 at any time,
(vi) Collins & Aikman Plastics, to any Domestic Restricted Subsidiary in
an aggregate principal amount not to exceed $35,000,000, evidenced by one
or more Intercompany Notes pledged to the Collateral Agent under the
Pledge Agreement and (vii) any Foreign Restricted Subsidiary to any other
foreign Subsidiary;
(e)Capital Lease Obligations and Purchase Money Indebtedness incurred
by the Company (or any other Restricted Subsidiary in the case of Purchase
Money Indebtedness incurred), together with Indebtedness under clause (o)
below, not in excess of $30,000,000 in the aggregate at any time
outstanding prior to or within 270 days after a Capital Expenditure
permitted under Section 6.03 in order to finance such Capital Expenditure,
and extensions, renewals and refinancings thereof if the interest rate
with respect thereto and other terms thereof are no less favorable than
the Indebtedness being refinanced and the average life to maturity thereof
is greater than or equal to the Indebtedness being refinanced (provided
that such Indebtedness shall not be (A) Indebtedness of an obligor that
was not an obligor with respect to the Indebtedness being extended,
renewed or refinanced, (B) in a principal amount which exceeds the
Indebtedness being renewed, extended or refinanced or (C) incurred,
created or assumed if any Default or Event of Default has occurred and is
continuing or would result therefrom).
(f)Capital Lease Obligations incurred by the Company or any Restricted
Subsidiary in respect of any Sale and Leaseback Transaction that is
permitted under Section 6.06;
(g)Indebtedness of the Company and its subsidiaries in the nature of
Interest Rate Agreements and other interest rate and foreign currency
hedging transactions entered into in order to fix the effective rate of
interest, or to hedge against currency fluctuations, on the Loans and
other Indebtedness (it being
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understood that such transactions shall be entered into for business
purposes and not for the purpose of speculation);
(h)Indebtedness of a Restricted Subsidiary which represents the
assumption by such Restricted Subsidiary of Indebtedness of a Restricted
Subsidiary in connection with the merger of such Restricted Subsidiary
with or into the assuming Restricted Subsidiary or the purchase of all or
substantially all the assets of such other Restricted Subsidiary;
(i)Indebtedness of the Restricted Subsidiaries in respect of
performance bonds, bid bonds, appeal bonds, bankers acceptances, letters
of credit and surety bonds provided in the ordinary course of business,
and any extension, renewal or refinancing thereof to the extent not
provided to secure the repayment of other Indebtedness and to the extent
that the amount of refinancing Indebtedness is not greater than the amount
of Indebtedness being refinanced;
(j)Indebtedness arising from the honoring by a bank or other financial
institutions of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business; PROVIDED that such
Indebtedness is extinguished within two Business Days of its incurrence;
(k)(i) Indebtedness of a Restricted Subsidiary acquired after the date
hereof, (ii) indebtedness of a Restricted Subsidiary of the Company
incurred after the date hereof in connection with an acquisition, and
(iii) Indebtedness of a corporation merged or consolidated with or into a
Restricted Subsidiary after the date hereof, which Indebtedness exists at
the time of such acquisition, merger or consolidation (whether or not
created in contemplation of such event) and such acquisition, merger or
consolidation is permitted by this Agreement; PROVIDED that the aggregate
principal amount of Indebtedness under this clause (k) shall not exceed
$225,000,000 plus the Foreign Currency Fluctuation Amount less (a)
outstanding Indebtedness under paragraph (l) below, (b) any outstanding
Indebtedness under Section 6.01(d)(iv), (c) Investments under 6.07(l) and
(d) Indebtedness outstanding under Section 6.01(r);
(l)Indebtedness of the Company incurred after the date hereof, which
Indebtedness is created or incurred in connection with any Permitted
Business Acquisition; provided that the aggregate principal amount of
Indebtedness which may be created or incurred under this paragraph (l)
together with (i) any outstanding Indebtedness under Section 6.01(d)(iv),
(ii) any outstanding Indebtedness under Section 6.01(k), (iii) Investments
under Section 6.07(l) and (iv) Indebtedness outstanding under Section
6.01(r), shall not exceed $225,000,000 PLUS the Foreign Currency
Fluctuation Amount;
(m)Indebtedness owed to (including obligations in respect of letters
of credit for the benefit of) any person providing worker's compensation,
health, disability or other employee benefits, property, casualty,
liability or other insurance to Holdings or any Subsidiary, pursuant to
reimbursement or indemnification obligations to such person;
(n)(i) Indebtedness represented by the Loans, the Letters of Credit
and the Guarantees thereof by the Guarantors pursuant to the Guarantee
Agreement and (ii) Indebtedness represented by the Guarantees of
Indebtedness permitted under clause (l) above by the Guarantors pursuant
to the Guarantee Agreement;
(o)other Capital Lease Obligations of the Restricted Subsidiaries in
an aggregate principal amount at any time outstanding, together with
Indebtedness of Restricted Subsidiaries of the Company outstanding under
clause (e) above, not in excess of $30,000,000;
(p)other unsecured Indebtedness of the Company and the Canadian
Borrowers in an aggregate principal amount at any time outstanding not in
excess of $40,000,000 and unsecured Guarantees by the Company of any
Indebtedness of the Canadian Borrowers incurred in accordance with this
clause (p);
(q)other Indebtedness of the Company or any other Restricted
Subsidiary together with Indebtedness listed on Schedule 6.01 (as such
Indebtedness may be refinanced as permitted by Section 6.01(a)) in an
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aggregate principal amount outstanding at any time not to exceed
$35,000,000 and unsecured Guarantees by the Company of any Indebtedness of
any Restricted Subsidiary incurred in accordance with this clause (q);
(r)other Indebtedness of Foreign Restricted Subsidiaries denominated
in dollars or in Foreign Currencies in an aggregate outstanding amount at
any one time not to exceed the Dollar Equivalent Amount of, together with
Permitted Acquisition Indebtedness under Section 6.01(l), Investments
under Section 6.07(l) and outstanding Indebtedness under Section
6.01(d)(iv) and Section 6.01(k), $225,000,000 PLUS the Foreign Currency
Fluctuation Amount and unsecured Guarantees by the Company of any
Indebtedness of any Foreign Restricted Subsidiary incurred in accordance
with this paragraph (r);
(s)Indebtedness of Foreign Restricted Subsidiaries incurred for the
purpose of financing working capital in an aggregate outstanding amount at
any one time not to exceed the Dollar Equivalent Amount of $60,000,000
PLUS the Foreign Currency Fluctuation Amount and unsecured Guarantees made
by the Company of any Indebtedness of any Foreign Restricted Subsidiary
incurred in accordance with this paragraph (s);
(t)Indebtedness evidenced by the JPS Automotive Senior Notes; and
(u)all premium (if any), interest (including post-petition interest),
fees, expenses, indemnities, charges and additional or contingent interest
on obligations described in clauses (a) through (t) above.
SECTION 6.02. DIVIDENDS AND DISTRIBUTIONS. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock (other than dividends and
distributions on Holdings Common Stock payable solely by the issuance of
additional shares of Holdings Common Stock) or directly or indirectly redeem,
purchase, retire or otherwise acquire for value (or permit any Restricted
Subsidiary to purchase or acquire) any shares of any class of its capital stock
or any option, warrant or other right to acquire shares of such stock or set
aside any cash, property, securities or combination thereof amount for any such
purpose; PROVIDED, HOWEVER, that:
(a) any Subsidiary may declare and pay dividends or make other
distributions to the Company or to wholly owned Restricted Subsidiaries;
(b) if at the time thereof and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing, Holdings may
pay dividends in cash on its common stock or preferred stock or may
redeem, purchase, retire or otherwise acquire for value its common stock
or preferred stock PROVIDED that the sum of such dividends and
consideration paid for such redemptions, purchases, retirements and other
acquisitions in any fiscal year shall not exceed $12,000,000;
(c) if at the time thereof and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing and the Dividend
Condition shall have been met, Holdings may pay dividends in cash on its
common stock or any preferred stock and may redeem, purchase, retire or
otherwise acquire for value its common stock or any preferred stock in an
amount not to exceed in the aggregate for all such transactions from April
28, 1996 50% of cumulative Net Income from April 28, 1996 through the last
day of the most recently ended fiscal quarter;
(d)if at the time thereof and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing, Holdings may
repurchase director's qualifying shares of Holdings and capital stock of
Holdings and options therefor of employees and directors of Holdings and
the Restricted Subsidiaries PROVIDED that (i) no such repurchase may be
made unless Holdings is obligated to do so at the time of repurchase
pursuant to contractual agreements between Holdings and the applicable
officer or director and (ii) the aggregate amount paid by Holdings in
connection with such repurchases at any time shall not exceed $3,000,000
plus the aggregate amount (but only to the extent such amount is
simultaneously contributed by Holdings to the Company) received by
Holdings from the sale or issuance of its capital stock
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66
or options therefor to officers and directors of Holdings and the
Restricted Subsidiaries after the Closing Date;
(e)the Company may pay dividends or make other distributions to
Holdings in amounts sufficient to allow Holdings to pay (i) Permitted Tax
Payments and state and local taxes and other governmental charges, and
administrative and routine expenses required to be paid by Holdings in the
ordinary course of its business, (ii) the dividends, other consideration
(for redemptions, purchases, retirements and other acquisitions of common
stock and preferred stock) and other amounts contemplated by clauses (b)
and (c) above; PROVIDED that dividends paid to Holdings pursuant to this
clause (ii) in order to permit Holdings to pay dividends are used by
Holdings for such purpose within 20 days of the receipt of such dividends
by Holdings, (iii) the repurchase price for the capital stock and options
therefor of Holdings contemplated by clause (d) above provided that such
dividends pursuant to clause (iii) are used by Holdings for such purpose
within 20 days of the receipt of such dividends by Holdings and (iv) the
amount of any Investment in an Unrestricted Subsidiary if the Company and
the Restricted Subsidiaries could have made such Investment in
Unrestricted Subsidiaries pursuant to Section 6.07 (l) (but on the
assumption that the Company could otherwise invest in such Unrestricted
Subsidiary); PROVIDED that such dividends pursuant to clause (iv) are used
by Holdings for such purpose within 20 days of receipt of such dividends
by Holdings; PROVIDED FURTHER that no dividend may be paid to Holdings
pursuant to clause (ii) or (iii) or (iv) if at the time of such dividend
or after giving effect thereto a Default or Event of Default shall have
occurred and be continuing;
(f)the foregoing shall not prohibit the ESOP Investment or
employee-directed purchases of Holdings stock pursuant to any employee
benefit plan; and
(g)Holdings and the Restricted Subsidiaries may declare and pay
dividends and make other distributions or may redeem, repurchase or
otherwise acquire for value Holdings Common Stock in the aggregate in
amounts equal to the Available Wallcoverings Proceeds.
SECTION 6.03. CAPITAL EXPENDITURES. Permit Capital Expenditures of the
Restricted Subsidiaries on a consolidated basis during any fiscal year to be
greater than the amount set forth below for such fiscal year:
FISCAL YEAR AMOUNT
1998 $85,000,000
1999 80,000,000
2000 80,000,000
2001 80,000,000
2002 80,000,000
2003 80,000,000
2004 80,000,000
2005 80,000,000
PROVIDED, HOWEVER, that (i) to the extent Capital Expenditures made in any
fiscal year are less than the amount set forth above opposite such fiscal
year, Restricted Subsidiaries shall be permitted to carry forward the
unused amount to the succeeding fiscal years (and, in the case of the 1998
fiscal year, Restricted Subsidiaries shall be permitted to carry forward
the unused amount permitted under the Existing Credit Agreements for the
1997 fiscal year) so long as such aggregate Capital Expenditures in any
fiscal year do not exceed $130,000,000; (ii) Capital Expenditures may not
be made by Holdings; and (iii) Capital Expenditures that are refinanced
with Sale and Lease-Back Transactions within 270 days of acquisition which
result in Operating Leases shall be deemed not to be Capital Expenditures.
SECTION 6.04. LIENS. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities) now owned or
hereafter acquired by it or on any income or rights in respect of any thereof,
except:
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67
(a)Liens on property or assets of the Restricted Subsidiaries existing
on the date of this Agreement and, in the case of Liens securing
Indebtedness for borrowed money, set forth in Schedule 6.04; PROVIDED that
such Liens shall secure only those obligations which they secure on such
date (and extensions, renewals and refinancings of such obligations
permitted by Section 6.01(a)) and do not subsequently apply to any other
property or assets of Holdings or any Restricted Subsidiary;
(b)any Lien on any property or asset used by a Restricted Subsidiary
in the ordinary course of business, which Lien existed prior to the
acquisition thereof by such subsidiary; PROVIDED that (i) such Lien is not
created in contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or assets of any other
Restricted Subsidiary;
(c) any Lien on any property or asset of a Restricted Subsidiary
securing Indebtedness permitted by Section 6.01(k), PROVIDED that such
Lien does not apply to any other property or assets of Holdings or any
Restricted Subsidiary not securing such Indebtedness at the date of
acquisition of such property or asset;
(d)Liens for taxes, assessments or other governmental charges or
levies not yet due, or which are for less than $1,000,000 in the
aggregate, or which are being contested in compliance with Section 5.03 or
for property taxes for property that the Company or one of its Restricted
Subsidiaries has determined to abandon if the sole recourse for such tax,
assessment, charge, levy or claim is to such property;
(e)carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and
securing obligations which are not due or which are being contested in
good faith by appropriate proceedings and in respect of which, if
applicable, Holdings or the relevant Restricted Subsidiary shall have set
aside on its books reserves in accordance with GAAP;
(f)pledges and deposits made in the ordinary course of business in
compliance with the Federal Employers Liability Act or any other workmen's
compensation, unemployment insurance and other social security laws or
regulations and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(g)deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(h)zoning restrictions, easements, trackage rights, leases (other than
Capital Lease Obligations), licenses, special assessments, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are
not substantial in amount and do not materially detract from the value of
the property subject thereto or interfere in any material respect with the
ordinary conduct of the business of any Restricted Subsidiary;
(i)purchase money security interests in real property, improvements
thereto or equipment acquired (or, in the case of improvements,
constructed) by any Restricted Subsidiary (including without limitation,
the interests of vendors and lessors under conditional sale and title
retention agreements); PROVIDED that (i) such security interests secure
Indebtedness permitted by Section 6.01, (ii) such security interests are
incurred, and the Indebtedness secured thereby is created, within 270 days
after such acquisition (or construction), (iii) the Indebtedness secured
thereby does not exceed 100% of the cost of such real property,
improvements or equipment at the time of such acquisition (or
construction), (iv) such expenditures are Capital Expenditures permitted
under Section 6.03 and (v) such security interests do not apply to any
other property or assets of any Restricted Subsidiary (other than to
accessions to such real property, improvements or equipment and provided
that individual financings of equipment provided by a single lender may be
cross-collateralized to other financings of equipment provided solely by
such lender);
(j)Liens created in favor of the Collateral Agent for the benefit
of the Secured Parties;
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(k)Liens securing reimbursement obligations in respect of commercial
letters of credit permitted under Section 6.01 and covering the goods (or
the documents of title in respect of such goods) financed by such letters
of credit;
(l)Liens arising out of capitalized or operating lease transactions
permitted under Section 6.06, so long as such Liens (i) attach only to the
property sold in such transaction and any accessions thereto and (ii) do
not interfere with the business of Holdings and the Restricted
Subsidiaries in any material respect;
(m)any Lien on assets of a person securing Indebtedness of such
person permitted by Section 6.01(q) or Section 6.01(s);
(n)any Lien arising by operation of law pursuant to Section 107(1) of
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9607(l), or pursuant to analogous state law, for costs or
damages which are not yet due (by virtue of a written demand for payment
by a Governmental Authority) or which are being contested in compliance
with Section 5.03, or on property that a Restricted Subsidiary has
determined to abandon if the sole recourse for such costs or damages is to
such property, PROVIDED that the liability of Holdings and the Restricted
Subsidiaries with respect to the matter giving rise to such Lien shall
not, in the reasonable estimate of the Company (in light of all attendant
circumstances, including the likelihood of contribution by third parties),
exceed $10,000,000;
(o)any leases or subleases to other persons of properties or assets
owned or leased by a Restricted Subsidiary;
(p)Liens consisting of interests of lessors under capital leases
permitted by Section 6.01;
(q) Liens securing judgements for the payment of money in an aggregate
amount not in excess of $10,000,000 (to the extent not covered by
insurance) which judgements shall not be undischarged or stayed for a
period of more than 30 consecutive days;
(r)the replacement, extension or renewal of any Lien permitted by
clause (b), (c) or (i) above, PROVIDED that such replacement, extension or
renewal Lien shall not cover any property other than the property that was
subject to such Lien prior to such replacement, extension or renewal and
PROVIDED FURTHER that the Indebtedness and other obligations secured by
such replacement, extension or renewal Lien are permitted by this
Agreement;
(s)other Liens with respect to property or assets not constituting
collateral for the Obligations with an aggregate fair market value of not
more than $25,000,000 at any time;
(t)Permitted Receivables Financings; and
(u) Liens representing the pledge of equity interests in joint
ventures to secure call options with joint venture partners and to finance
such joint ventures, provided that the aggregate amount of investment in
such equity interests does not exceed $25,000,000.
SECTION 6.05. PRIORITY OF LOAN PAYMENTS. (a) Until the Commitments have
been terminated and the Obligations have been paid in full, directly or
indirectly, make any payment, retirement, repurchase or redemption on account of
the principal of any Permitted Subordinated Indebtedness or directly or
indirectly prepay any Permitted Subordinated Indebtedness prior to the stated
maturity date of such Permitted Subordinated Indebtedness, make any payment or
prepayment of any Permitted Subordinated Indebtedness which would violate the
terms of this Agreement or of such Permitted Subordinated Indebtedness, any
agreement or document evidencing, related to or securing the payment or
performance of the Permitted Subordinated Indebtedness or any subordination
agreement applicable to such Permitted Subordinated Indebtedness.
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(b) Until the Commitments have been terminated and the Obligations have
been paid in full, repay any Funded Debt of Holdings and the Restricted
Subsidiaries except:
(i) the Obligations;
(ii) payments of Funded Debt made in conformity with the regularly
scheduled maturity thereof or mandatory prepayment provisions thereof;
(iii) if no Default or Event of Default has occurred and is
continuing or would result therefrom, refinancings permitted by Section
6.01;
(iv) if no Default or Event of Default has occurred and is
continuing or would result therefrom, prepayments by a Restricted
Subsidiary of its Funded Debt acquired in connection with a Permitted
Business Acquisition;
(v) if no Default or Event of Default has occurred and is
continuing or would result therefrom, prepayments of up to $10,000,000 in
the aggregate of other Funded Debt of the Restricted Subsidiaries; and
(vi) prepayment of Indebtedness permitted under Section 6.01(k) and
(t) and under Section 6.01(u) to the extent relating to Section 6.01(k)
and (t); and
(vii) prepay, purchase or redeem the Senior Subordinated Notes with
amounts otherwise permitted for payments under Sections 6.02(b), (c) and
(g); PROVIDED that any such payments under Section 6.02(b), (c) and (g)
are accordingly reduced.
SECTION 6.06. SALE AND LEASE-BACK TRANSACTIONS. Enter into any
arrangement, directly or indirectly, with any person whereby Holdings or any
Restricted Subsidiary shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which it intends to use
for substantially the same purpose or purposes as the property being sold or
transferred (a "SALE AND LEASE-BACK TRANSACTION"), other than any Sale and
Lease-Back Transaction which involves a sale by the Company or a Restricted
Subsidiary solely for cash consideration on terms not less favorable than would
prevail in an arms'-length transaction and which (a) results in a Capital Lease
Obligation or an Operating Lease, in either case entered into to finance a
Capital Expenditure permitted by Section 6.03 consisting of the initial
acquisition by such subsidiary of the property sold or transferred in such Sale
and Lease-Back Transaction, PROVIDED that such Sale and Lease-Back Transaction
occurs within 270 days after such acquisition or (b) results in a Capital Lease
Obligation or an Operating Lease entered into for any other purpose (provided
that any such Sale and Lease-Back Transaction in reliance upon this clause (b)
shall be deemed to be a Prepayment Event).
SECTION 6.07. INVESTMENTS, LOANS AND ADVANCES. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in (collectively, an "INVESTMENT"), any other
person, except:
(a)Permitted Investments and Investments that were Permitted
Investments when made;
(b)Investments by Holdings in the Company, Investments by a
Restricted Subsidiary in a Domestic Restricted Subsidiary and
Investments by Foreign Restricted Subsidiaries in other Foreign
Restricted Subsidiaries;
(c)Investments arising out of the receipt of noncash consideration for
the sale of assets permitted under Section 6.08 provided that such
consideration (if the stated amount or value thereof is in excess of
$1,000,000) is pledged upon receipt pursuant to the Pledge Agreement;
(d)intercompany loans permitted to be incurred as Indebtedness
under Section 6.01(d);
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(e)Investments by a wholly-owned Restricted Subsidiary constituting
Permitted Business Acquisitions;
(f)(i) loans and advances to employees of any Restricted Subsidiary
not to exceed $300,000 at any time outstanding to any one employee and not
to exceed $2,000,000 in the aggregate at any time outstanding and (ii)
advances of payroll payments and expenses to employees in the ordinary
course of business;
(g)accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to
the extent reasonably necessary in order to prevent or limit loss;
(h)an Investment by the Company or any of the Restricted Subsidiaries
in any Finance Subsidiary that the Company is incorporating, but only to
the extent necessary to incorporate such Finance Subsidiary and acquire
its capital stock and subordinated indebtedness in connection with sales
of receivables, all with the minimum capitalization necessary;
(i)investments, other than investments listed in clauses (a) through
(h) of this Section, existing on the Closing Date and set forth on
Schedule 6.07;
(j)the ESOP Loans;
(k)Investments the sole consideration for which by Holdings and the
Restricted Subsidiaries is capital stock of Holdings PROVIDED that, after
giving effect thereto, no Default or Event of Default under paragraph (m)
of Article VII shall have occurred;
(l)if no Default or Event of Default exists immediately before or
after giving effect to such Investment, other Investments, including joint
ventures, and Investments in Unrestricted Subsidiaries, PROVIDED that (i)
the consideration for all such Investments described in this paragraph (l)
(whether cash or property, as valued at the time of such Investment) does
not exceed (net of any return representing return of capital of (but not
return on) any such Investment) at any time, together with the amount of
outstanding intercompany loans under Section 6.01(d)(iv), Permitted
Acquisition Indebtedness under Section 6.01(l) and outstanding
Indebtedness under Section 6.01(k) and Section 6.01(r), $225,000,000 PLUS
the Foreign Currency Fluctuation Amount in the aggregate and (ii) the
consideration for Investments in Unrestricted Subsidiaries (whether cash
or property, as valued at the time of such Investment) does not exceed
(net of any return representing return of capital of (but not return on)
any such Investment) at any time $75,000,000 in the aggregate;
(m) Investments resulting from pledges and deposits referred to in
Section 6.04(f); and
(n) payments permitted under Section 6.05(b)(vi) and (vii).
None of Holdings and the Restricted Subsidiaries may make any Investment in
Unrestricted Subsidiaries except as described in the definition of "Unrestricted
Subsidiaries" set forth in Section 1.01.
SECTION 6.08. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any part of its
assets (whether now owned or hereafter acquired) or any capital stock of any
subsidiary, or purchase, lease or otherwise acquire (in one transaction or a
series of transactions) all or any substantial part of the assets of any other
person, except that this Section 6.08 shall not prohibit:
(a)the purchase and sale of property and assets in the ordinary
course of business by any Restricted Subsidiary;
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(b)Sale and Lease-Back Transactions permitted by Section 6.06;
(c)Permitted Business Acquisitions;
(d)sales, leases or transfers from one Restricted Subsidiary of the
Company to the Company or to a Restricted Subsidiary or from the Company
to a Domestic Restricted Subsidiary, provided any sale, lease or transfer
by a Domestic Restricted Subsidiary to a Foreign Restricted Subsidiary
shall not constitute a significant portion of the assets of such Domestic
Restricted Subsidiary;
(e)sales, leases or other dispositions of (i) inventory of the
Restricted Subsidiaries determined by the Board of Directors of the
Company to be no longer useful or necessary in the operation of the
businesses of the Restricted Subsidiaries and (ii) assets of operations
that were discontinued prior to the Closing Date;
(f)any Permitted Receivables Financing;
(g)sales, leases or other dispositions of equipment or real property
of the Restricted Subsidiaries determined by the Board of Directors of the
Company to be no longer useful or necessary in the operation of the
business of the Restricted Subsidiaries, PROVIDED that the Net Proceeds
thereof in excess of $5,000,000 shall be used to prepay the Tranche A Term
Loans, the Tranche B Term Loans and, if applicable, the Tranche C Term
Loans, in accordance with Section 2.12(e) or used to purchase replacement
assets or properties used for the same purpose as the equipment or real
property disposed of within 12 months of the receipt thereof;
(h)any Restricted Subsidiary may merge with any other Restricted
Subsidiary, provided that (i) at the time of and immediately after giving
effect to any such merger no Default or Event of Default shall have
occurred, (ii) the Company shall be the surviving corporation of any
merger involving the Company, and a Canadian Borrower shall be the
surviving corporation of any merger involving such Canadian Borrower and
(iii) no Restricted Subsidiary organized under the laws of a jurisdiction
outside the United States may merge with a Domestic Restricted Subsidiary
unless the Domestic Restricted Subsidiary is the surviving corporation;
(i)the Restricted Subsidiaries may sell or otherwise dispose of assets
having a fair market value, for all such transactions, not in excess of
$300,000,000, provided that (i) each such sale shall be for a
consideration determined in good faith by the Board of Directors of the
Company to be at least equal to the fair market value (if any) of the
asset sold, (ii) the aggregate amount of all noncash consideration
included in such sale proceeds may not exceed 15% of the fair market value
of the aggregate amount of all such sale proceeds; PROVIDED, HOWEVER, that
obligations of the type referred to in clauses (a) and (b) of the
definition of "Permitted Investments" (without regard to the maturity or
the credit rating thereof) shall not be deemed non-cash proceeds if such
obligations are promptly sold for cash and the proceeds of such sale are
included in the calculation of Net Proceeds from such sale, (iii) (a) if
the aggregate Net Proceeds of all such sales and dispositions since the
Closing Date under this clause (i) exceed $20,000,000 then such Net
Proceeds are either applied to the purchase of assets or properties used
in the business of the Company and its Restricted Subsidiaries as
permitted by Section 6.12 within 12 months of the receipt thereof or are
applied to repay the Tranche A Term Loans, the Tranche B Term Loans and,
if applicable, the Tranche C Term Loans in accordance with Section 2.12(g)
and (b) if the aggregate Net Proceeds of all such sales and dispositions
since the Closing Date under this clause (i) exceed $100,000,000 then such
excess Net Proceeds are applied to repay the Tranche A Term Loans, the
Tranche B Term Loans and, if applicable, the Tranche C Term Loans in
accordance with Section 2.12(g) and (iv) no Default or Event of Default
shall have occurred and be continuing immediately prior to or after such
sale. Upon receipt by Holdings or any Restricted Subsidiary of Net
Proceeds of any Specified Asset Sale occurring after the Closing Date,
Company shall promptly deliver a certificate of a Responsible Officer to
the Administrative Agent setting forth the amount of the Net Proceeds
which Company and its subsidiaries expect to reinvest in replacement
assets or property during the subsequent 12-month period which are not
required to be applied to the repayment of the Tranche A Term Loans, the
Tranche B Term Loans and, if applicable, the Tranche C
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Term Loans. On the first anniversary of the receipt of such Net Proceeds,
Company shall (i) deliver a certificate of a Responsible Officer to the
Administrative Agent certifying as to the amount and use of such Net
Proceeds actually reinvested in replacement assets or property during the
preceding 12-month period and (ii) deliver to the Administrative Agent,
for application in accordance with Section 2.12(e), an amount equal to the
remaining uninvested Net Proceeds; and
(j)Investments permitted by Section 6.07;
Notwithstanding anything in this Section 6.08, Holdings and its
subsidiaries shall not be permitted to sell any JPS Automotive Senior Notes held
by them (except for sales to Restricted Subsidiaries).
SECTION 6.09. TRANSACTIONS WITH AFFILIATES AND STOCKHOLDERS. Sell or
transfer any property or assets to, or purchase or acquire any property or
assets of, or otherwise engage in any other transactions with, any of its
Affiliates (including Unrestricted Subsidiaries but excluding Restricted
Subsidiaries) or any known holder of 10% or more of any class of capital stock
of Holdings or any Unrestricted Subsidiary, except that Holdings or any of the
Restricted Subsidiaries may engage in any of the foregoing transactions at
prices and on terms and conditions not less favorable to each than would prevail
on an arm's-length basis from unrelated third parties; PROVIDED that Holdings
and the Restricted Subsidiaries may not pay any fees to an Affiliate (including
an Unrestricted Subsidiary) for the provision of financial or advisory services
if after giving effect thereto a Default or Event of Default shall have occurred
and is continuing.
SECTION 6.10. SUBORDINATED INDEBTEDNESS. Amend or modify any instruments,
agreements or documents evidencing or related to any Permitted Subordinated
Indebtedness or designate any Indebtedness (other than Indebtedness incurred
hereunder) "Designated Senior Indebtedness" under the Senior Subordinated Notes,
unless, in the judgement of the Required Lenders, any such amendment or
modification or designation does not substantially affect either the rights or
security interests granted to the Credit Agreement Creditors or the Collateral
Agent or the first and superior position of the Obligations owed to the Credit
Agreement Creditors relative to the second and inferior position of the holders
of the notes or other instruments evidencing the Permitted Subordinated
Indebtedness (without limiting the generality of the foregoing, it is understood
that any increase in interest, fees or other amounts payable in connection
therewith, or any amendment that imposes additional covenants or events of
default or makes more restrictive the covenants or events of default contained
therein, shall require the consent of the Required Lenders).
SECTION 6.11. AMENDMENT OF CONSTITUTIVE DOCUMENTS; CHANGE IN CORPORATE
STRUCTURE. (i) Permit any amendment or modification to be made to the
certificate of incorporation or By-laws of Holdings or of any Restricted
Subsidiary if such amendment or modification is materially adverse to the
interests of the Lenders or (ii) permit any Restricted Subsidiary to issue any
capital stock or other equity interest to any person other than the Company or
its wholly owned subsidiaries.
SECTION 6.12. BUSINESS OF HOLDINGS AND RESTRICTED SUBSIDIARIES. (a) Engage
at any time in any business or business activity other than the business
currently conducted by it and business activities reasonably incidental or
related thereto or (b) fail to maintain and operate such business in
substantially the manner in which it is presently conducted and operated (other
than as contemplated herein) if such failure would materially adversely affect
the Credit Agreement Creditors; PROVIDED, HOWEVER, that the activities of
Holdings shall be limited to (i) the ownership of the stock of the Company
together with activities directly related thereto, (ii) the ownership of the
stock of Unrestricted Subsidiaries described in clause (ii) of the definition of
such term set forth in Section 1.01 together with activities directly related
thereto, (iii) performance of its obligations under the Loan Documents and (iv)
actions required by law to maintain its status as a public company.
SECTION 6.13. RESTRICTIVE AGREEMENTS. Enter into any indenture, agreement,
instrument or other arrangement which, directly or indirectly, prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the granting of Liens, the provision of
Guarantees or the payment of dividends or the making of loans or advances or
transfers of property or assets by Holdings or any of the Restricted
Subsidiaries other than restrictions (i) on the granting of Liens on assets that
are encumbered by Liens permitted
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under clauses (b), (i), (k), (l), (r) or (t) of Section 6.04 or (ii) contained
in agreements relating to Indebtedness not in excess of $10,000,000 in the
aggregate, (iii) contained in agreements relating to Indebtedness permitted by
Section 6.01 or (iv) on the granting of pledges with respect to the Company's
ownership interest in joint ventures contained in any joint venture
documentation.
SECTION 6.14. INTEREST COVERAGE RATIO. In the case of Holdings, permit the
Interest Coverage Ratio for any period of four consecutive fiscal quarters to be
less than the ratio set forth below opposite the period which includes the last
day of such period of consecutive fiscal quarters:
QUARTER ENDING: RATIO:
Closing Date - December 1998 2.25 to 1.00
January 1999 - December 1999 2.50 to 1.00
January 2000 - December 2000 2.75 to 1.00
January 2001 and thereafter 3.00 to 1.00
SECTION 6.15. [Intentionally Omitted]
SECTION 6.16. LEVERAGE RATIO. In the case of Holdings, permit the Leverage
Ratio as of the last day of any fiscal quarter occurring during any period set
forth below to be greater than the ratio set forth below for such period:
QUARTER ENDING: RATIO:
Closing Date - December 1998 4.25 to 1.00
January 1999 - December 1999 4.00 to 1.00
January 2000 and thereafter 3.75 to 1.00
[Intentionally Omitted]
SECTION 6.18. TAX SHARING. File or consent to the filing of any
consolidated income tax return with any person (other than Holdings, the
Restricted Subsidiaries and Unrestricted Subsidiaries that have entered into the
existing Tax Sharing Agreements).
SECTION 6.19. SIGNIFICANT SUBSIDIARIES. Permit the Significant Subsidiaries
to account for less than 85% of the consolidated assets of Holdings at any time
or 90% of the consolidated EBITDA of Holdings for any two consecutive periods of
four fiscal quarters.
SECTION 6.20. INACTIVE SUBSIDIARIES. Permit any Inactive Subsidiary,
at any time, to fail to satisfy any of the criteria set forth in the
definition of Inactive Subsidiary in Section 1.01.
ARTICLE VII.
EVENTS OF DEFAULT
In case of the happening of any of the following events ("EVENTS OF
DEFAULT"):
(a)any representation or warranty made or deemed made in any Loan
Document, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other
instrument furnished in connection with or pursuant to any Loan Document,
shall prove to have been false or misleading in any material respect when
so made, deemed made or furnished;
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(b)default shall be made in the payment of any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c)default shall be made in the payment of any interest on any Loan or
reimbursement of any Letter of Credit Disbursement or any Fee or any other
amount (other than an amount referred to in (b) above) due under any Loan
Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of five Business Days;
(d)default shall be made in the due observance or performance by
Holdings or any subsidiary thereof of any covenant, condition or agreement
contained in Section 2.12(e), 5.01(a), 5.05(a), 5.08 or 5.10 or in Article
VI;
(e)default shall be made in the due observance or performance by
Holdings or any subsidiary thereof of any covenant, condition or agreement
contained in any Loan Document (other than those specified in (b), (c) or
(d) above) and such default shall continue unremedied for a period of 30
days in the case of Sections 5.01(b), 5.02, 5.09 and 5.13 and 15 days in
the case of all others, in each case after notice thereof from the
Administrative Agent or any Lender to the Company;
(f)Holdings, any Restricted Subsidiary or any Significant Subsidiary
shall (i) fail to pay any principal or interest, regardless of amount, due
in respect of Indebtedness having an aggregate principal or notional
amount in excess of $10,000,000, when and as the same shall become due and
payable, or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreements or instruments
evidencing or governing any Indebtedness having an aggregate principal
amount in excess of $10,000,000 if the effect of any failure referred to
in this clause (ii) is to cause, or to permit the holder or holders of
such Indebtedness or a trustee on its or their behalf to cause, such
Indebtedness to become due prior to its stated maturity; or a termination
event or comparable event shall occur under the documents governing the
Permitted Receivables Financing entitling the persons financing the
receivables owned by the Finance Subsidiary to stop funding the purchase
of receivables of all sellers of receivables to the Finance Subsidiary;
(g)an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Company or Holdings or any Significant
Subsidiary, or of a substantial part of the property or assets of the
Company or Holdings or any Significant Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law or
comparable foreign law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company
or Holdings or any Significant Subsidiary or for a substantial part of the
property or assets of the Company or Holdings or any Significant
Subsidiary or (iii) the winding-up or liquidation of the Company or
Holdings or any Significant Subsidiary; and such proceeding or petition
shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h)the Company or Holdings or any Significant Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law or comparable foreign law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or Holdings
or any Significant Subsidiary or for a substantial part of the property or
assets of the Company or Holdings or any Significant Subsidiary, (iv) file
an answer admitting the material allegations of a petition filed against
it in any such proceeding, (v) make a general assignment for the benefit
of creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for
the purpose of effecting any of the foregoing;
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75
(i)one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 (to the extent not covered by insurance)
shall be rendered against Holdings, any Restricted Subsidiary or any
Significant Subsidiary or any combination thereof and the same shall
remain undischarged or stayed for a period of 30 consecutive days during
which execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to levy upon assets or properties of
Holdings or any Restricted Subsidiary to enforce any such judgment;
(j)a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(1) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Company, any Guarantor or any of their ERISA Affiliates to the PBGC or to
a Plan in an aggregate amount exceeding $5,000,000 and, within 30 days
after the reporting of any such Reportable Event to the Administrative
Agent or after the receipt by the Administrative Agent of the statement
required pursuant to Section 5.06(b)(iii), the Administrative Agent shall
have notified the Company in writing that (i) the Required Lenders have
made a determination that, on the basis of such Reportable Event or
Reportable Events or the failure to make a required payment, there are
reasonable grounds (A) for the termination of such Plan or Plans by the
PBGC, (B) for the appointment by the appropriate United States District
Court of a trustee to administer such Plan or Plans or (C) for the
imposition of a lien in favor of a Plan and (ii) as a result thereof an
Event of Default exists hereunder; or a trustee shall be appointed by a
United States District Court to administer any such Plan or Plans; or the
PBGC shall institute proceedings to terminate any Plan or Plans;
(k)(i) the Company, any Guarantor or any of their ERISA Affiliates
shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the
Company, any Guarantor or such ERISA Affiliate does not have reasonable
grounds for contesting such Withdrawal Liability or is not in fact
contesting such Withdrawal Liability in a timely and appropriate manner
and (iii) the amount of the Withdrawal Liability specified in such notice,
when aggregated with all other amounts required to be paid to
Multiemployer Plans in connection with Withdrawal Liabilities (determined
as of the date or dates of such notification), exceeds $10,000,000 or
requires payments exceeding $10,000,000 in any year;
(l)the Company, any Guarantor or any of their ERISA Affiliates shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if solely as a result of such reorganization
or termination the aggregate annual contributions of the Company, the
Guarantors and their ERISA Affiliates to all Multiemployer Plans that are
then in reorganization or have been or are being terminated have been or
will be increased over the amounts required to be contributed to such
Multiemployer Plans for their most recently completed plan years by an
amount exceeding $10,000,000;
(m)there shall have occurred a Change in Control;
(n)(i) any Loan Document shall for any reason be asserted by Holdings
or any of its subsidiaries not to be a legal, valid and binding obligation
of the respective parties thereto, (ii) any security interest or Lien
purported to be created by the Pledge Agreement and to extend to assets
which are not immaterial to Holdings and its subsidiaries on a
consolidated basis shall for any reason (except to the extent resulting
from the negligent or wilful failure of the Collateral Agent to retain
possession of the applicable collateral) cease to be, or any security
interest or Lien purported to be created by the Pledge Agreement and to
extend to any assets of Holdings or its subsidiaries shall for any reason
be asserted by Holdings or any of its subsidiaries not to be, a valid,
first priority perfected security interest (subject to no Liens other than
Liens not prohibited by any applicable provision of the Loan Documents) in
such collateral (other than cash proceeds which are not identifiable
proceeds) or (iii) the Obligations and the guarantees thereof pursuant to
the Guarantee Agreement shall cease to constitute senior indebtedness
under the subordination provisions of any document or instrument
evidencing any Permitted Subordinated Indebtedness or such subordination
provisions shall be invalidated or otherwise cease to be a legal, valid
and binding obligation of the parties thereto, enforceable in accordance
with its terms; or
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(o)the Finance Subsidiary shall engage in any business or activity
other than the purchase of receivables from the Restricted Subsidiaries
and the sale of such receivables and activities incidental thereto;
then, and in every such event (other than an event with respect to any Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agents, as the case may be, may,
and at the request of the Required Lenders, shall, by notice to the Company,
take either or both of the following actions, at the same or different times:
(i) terminate forthwith the Commitments and (ii) declare the Loans then
outstanding to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrowers accrued hereunder and under any other Loan Document, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrowers,
anything contained herein or in any other Loan Document to the contrary
notwithstanding; and in any event with respect to any Borrower or described in
paragraph (g) or (h) above, the Commitments shall automatically terminate and
the principal of the Loans then outstanding, together with accrued interest
thereon and any unpaid accrued Fees and all other liabilities of the Borrowers
accrued hereunder and under any other Loan Document, shall automatically become
due and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
ARTICLE VIII.
AGENTS
In order to expedite the transactions contemplated by this Agreement, The
Chase Manhattan Bank is hereby appointed to act as Administrative Agent and
Collateral Agent on behalf of the Lenders and the Issuing Banks. Each of the
Lenders, and each subsequent holder of any Note by its acceptance thereof, and
each Issuing Bank hereby irrevocably authorizes the Administrative Agent to take
such actions on behalf of such Lender or holder or the Issuing Bank, as
applicable, and to exercise such powers as are specifically delegated to the
Administrative Agent by the terms and provisions hereof and of the other Loan
Documents (including the power to execute and deliver the Intercreditor
Agreement if and when requested to do so by any holders of any Permitted
Acquisition Indebtedness), together with such actions and powers as are
reasonably incidental thereto. The Administrative Agent is hereby expressly
authorized by the Lenders and the Issuing Banks, without hereby limiting any
implied authority, (a) to receive on behalf of the Lenders all payments of
principal of and interest on the Loans and all other amounts due to the Lenders
hereunder, and promptly to distribute to each Lender its proper share of each
payment so received; (b) to give notice on behalf of each of the Lenders to the
Borrowers of any Event of Default specified in this Agreement of which the
Administrative Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender and Issuing Bank copies of all
notices, financial statements and other materials delivered by a Borrower
pursuant to this Agreement as received by the Administrative Agent. In acting as
Collateral Agent The Chase Manhattan Bank shall be entitled to the rights and
benefits, and subject to the obligations, set forth for the Administrative Agent
under this Article VIII, MUTATIS MUTANDIS, which Article is hereby incorporated
by reference, MUTATIS MUTANDIS, in each of the Guarantee Agreement and the
Pledge Agreement.
Neither the Administrative Agent nor any Issuing Bank nor any of their
respective affiliates, directors, officers, employees or agents shall be liable
as such for any action taken or omitted by any of them except for its or his own
gross negligence or wilful misconduct, or be responsible for any statement,
warranty or representation herein or the contents of any document delivered in
connection herewith, or be required to ascertain or to make any inquiry
concerning the performance or observance by any Borrower or any Guarantor of any
of the terms, conditions, covenants or agreements contained in any Loan
Documents. The Administrative Agent shall not be responsible to the Lenders or
the holders of the Notes or the Issuing Bank for the due execution (other than
by the Administrative Agent), genuineness, validity, enforceability (other than
against the Administrative Agent) or effectiveness of this Agreement, the Notes
or any other Loan Documents or other instruments or agreements. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof until it shall have received from the payee of
such Note notice, given as provided herein, of the transfer thereof in
compliance with Section 9.04.
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The Administrative Agent shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders (and the Issuing Banks, with respect to Letters of Credit) and,
except as otherwise specifically provided herein, such instructions and any
action or inaction pursuant thereto shall be binding on all the Lenders and each
subsequent holder of any Note and the Issuing Banks. The Administrative Agent
shall, in the absence of knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper person or persons. Neither the
Administrative Agent nor the Issuing Banks nor any of their respective
directors, officers, employees or agents shall have any responsibility to the
Borrowers on account of the failure of or delay in performance or breach by any
Lender (or, in the case of the Administrative Agent, by any Issuing Bank) of any
of its obligations hereunder or to any Lender (or, in the case of the
Administrative Agent, to any Issuing Bank) on account of the failure of or delay
in performance or breach by any other Lender or any Borrower or any Guarantor of
any of their respective obligations hereunder or under any other Loan Document
or in connection herewith or therewith. Each of the Administrative Agent and
each Issuing Bank may execute any and all duties hereunder by or through agents
or affiliates and shall be entitled to rely upon the advice of legal counsel
selected by it with respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
The Lenders hereby acknowledge that neither the Administrative Agent nor
any Issuing Bank shall be under any duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement unless
it shall be requested in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Company. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor,
with the consent of the Company (not to be unreasonably withheld). If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent, with the
consent of the Company (not to be unreasonably withheld), which shall be a bank
with an office in New York, New York, having a combined capital and surplus of
at least $500,000,000 or an Affiliate of any such bank which is also a bank.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After the Administrative Agent's resignation hereunder,
the provisions of this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
With respect to the Loans made by it hereunder and the Notes issued to it
and the Letter of Credit participations acquired by it, each of the
Administrative Agent and each Issuing Bank in its individual capacity and not as
Administrative Agent or Issuing Bank, as the case may be, shall have the same
rights and powers as any other Lender and may exercise the same as though it
were not the Administrative Agent or an Issuing Bank, as the case may be, and
the Administrative Agent and its Affiliates and each Issuing Bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrowers or any subsidiary or other Affiliate thereof
as if it were not the Administrative Agent or an Issuing Bank, as the case may
be.
Each Lender recognizes that applicable laws, rules, regulations or
guidelines of Governmental Authorities may require the Administrative Agent to
determine whether the transactions contemplated hereby should be classified as
"highly leveraged" or assigned any similar or successor classification, and that
such determination may be binding upon the other Lenders. Each Lender
understands that any such determination shall be made solely by the
Administrative Agent based upon such factors (which may include, without
limitation, the Administrative Agent's internal policies and prevailing market
practices) as the Administrative Agent shall deem relevant and agrees that the
Administrative Agent shall have no liability for the consequences of any such
determination.
Each Lender agrees (i) to reimburse each of the Administrative Agent and,
if such Lender is a Revolving Lender or Additional Revolving Lender, each
Issuing Bank, on demand, in the amount of its pro rata share (based
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on its Commitments hereunder or its Revolving Credit Commitment or Additional
Revolving Credit Commitment, as the case may be, if any, in the case of
reimbursement of any Issuing Bank or Swingline Lender) of any reasonable
expenses incurred for the benefit of the Lenders by the Administrative Agent or,
if applicable, such Issuing Bank, including counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, which
shall not have been reimbursed by the Company and (ii) to indemnify and hold
harmless each of the Administrative Agent and, if such Lender is a Revolving
Lender or Additional Revolving Lender, each Issuing Bank and the Swingline
Lender and any of their respective directors, officers, employees or agents, on
demand, in the amount of such pro rata share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the
Administrative Agent or an Issuing Bank, as the case may be, or any of them in
any way relating to or arising out of this Agreement or any other Loan Document
or any action taken or omitted by it or any of them under this Agreement or any
other Loan Document, to the extent the same shall not have been reimbursed by
the Borrowers; PROVIDED that no Lender shall be liable to the Administrative
Agent or any Issuing Bank for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful misconduct of the
Administrative Agent or such Issuing Bank, as the case may be, or any of their
directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent, any Issuing Bank or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, any Issuing Bank or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.
Each of the Canadian Lenders hereby agrees and confirms that the
provisions of this Article VIII shall apply to The Chase Manhattan Bank of
Canada as Canadian Administrative Agent upon the same terms and subject to the
same conditions as provided in this Article VIII MUTATIS MUTANDIS; provided that
any successor Canadian Administrative Agent shall be a bank with an office in
Toronto, Canada or Montreal, Canada having a combined capital and surplus of at
least $500,000,000 or an Affiliate of any such bank which is also a bank.
The Documentation Agent shall have no rights or obligations under the Loan
Documents in such capacity.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. NOTICES. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telex or telecopy, as follows:
(a)if to Holdings or to the Company, to it at 701 McCullough Drive,
Charlotte, North Carolina 28262, Attention of Chief Financial Officer
(Telecopy No. 704-548-2330) with copies to 1556 Third Avenue, Suite
603, New York, New York 10128, Attention of General Counsel (Telecopy
No. 212-410-9314);
(b) if to Collins & Aikman Canada, to it at 150 Collins Street,
Farnham, Quebec, J2N 2R6, Canada, Attention Controller (Telecopy No.
514-293-6657) with copies to the Company, Attention of Chief Financial
Officer (Telecopy No. 704-548-2330) and General Counsel (Telecopy No.
212-410-9314);
(c) if to Collins & Aikman Plastics, to it at 201 West Big Beaver
Road, Suite 1043, Troy, Michigan, Attention Controller (Telecopy No.
248-524-4996) with copies to the Company, Attention of Chief Financial
Officer (Telecopy No. 704-548-2330) and General Counsel (Telecopy No.
212-410-9314);
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(d) if to the Administrative Agent, to it at 270 Park Avenue (10th
Floor), New York, New York 10017, Attention of [Bruce Borden] (Telecopy
No. 212-270-1674);
(e)if to the Canadian Administrative Agent, to it at 1 First
Canadian Place, 100 King Street West, Toronto, Ontario M5X 1A4,
Attention of Funding Officer (Telecopy No. 416-216-4162).
(f)if to a Lender, to it at its address (or telecopy number) set forth
on its signature page hereto or in the Assignment and Acceptance pursuant
to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telex or telecopy, or on the date five Business Days after dispatch by certified
or registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Borrowers and the Guarantors herein
and in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lenders and shall survive the making
by the Lenders of the Loans, and the execution and delivery to the Lenders of
the Notes evidencing such Loans, and the issuance of the Letters of Credit,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any Fee or any other amount payable under this
Agreement or any other Loan Document is outstanding and unpaid and so long as
the Commitments have not been terminated. Without prejudice to the survival of
any other agreements contained herein, indemnification and reimbursement
obligations contained herein (including pursuant to Sections 2.13, 2.15 and
9.05) shall survive the payment in full of the principal and interest hereunder
and the termination of the Commitments or this Agreement.
SECTION 9.03. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrowers, Holdings, the Administrative Agent
and the Canadian Administrative Agent and when the Administrative Agent shall
have received copies hereof which, when taken together, bear the signatures of
each Lender, and thereafter shall be binding upon and inure to the benefit of
each Borrower, Holdings, each Issuing Bank, the Administrative Agent, the
Canadian Administrative Agent and each Lender and their respective successors
and assigns, except that none of the Borrowers or Holdings shall have the right
to assign its rights hereunder or any interest herein without the prior consent
of all the Lenders.
SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Company, the Canadian Borrowers, Holdings, the
Administrative Agent, the Canadian Administrative Agent, the Issuing Banks or
the Lenders that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it and the Notes
and participations in Letters of Credit held by it, it being understood that
Lenders shall not be required to assign pro rata amounts of their Revolving
Credit Commitments, Additional Revolving Credit Commitments, Canadian Revolving
Credit Commitments, Tranche A Term Loans, Tranche B Term Loans and, if
applicable, Tranche C Term Loans); PROVIDED, HOWEVER, that (i) except in the
case of an assignment to a Lender or an Affiliate of such Lender, (w) the
Company and the Administrative Agent must give their prior written consent to
such assignment (which consents shall not be unreasonably withheld or delayed),
(x) such assignment (unless such assignment is of all of a Lender's Loans,
Letter of Credit Exposure and unused Commitments) shall be in an amount of at
least $5,000,000 unless otherwise agreed to by the Company and the
Administrative Agent, each in their sole discretion, (y) a Canadian Lender (or,
in the case of a Canadian Schedule II chartered bank, its affiliate which is a
Revolving Lender) (i) may not assign a portion of its interests under this
Agreement unless, after giving effect thereto, it shall be able to comply with
the reallocation described in Section 2.27 and (ii) shall assign ratable
portions
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of its Canadian Revolving Credit Commitment and Additional Revolving Credit
Commitment, and (z) interests under the Canadian Revolving Credit Commitments
may only be assigned to Canadian Scheduled Lenders, (ii) the parties to each
such assignment shall execute and deliver to the Administrative Agent (which
shall deliver a copy to the Canadian Administrative Agent) an Assignment and
Acceptance, together with the Note or Notes subject to such assignment and a
processing and recordation fee of $3,500 and (iii) the assignee, if it shall not
be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this
Section 9.04, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days after the
execution thereof unless agreed otherwise by the Administrative Agent (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement and (B) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.13, 2.15, 2.18 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Commitments, and the outstanding balances of its Tranche A Term Loans,
Tranche B Term Loans, Revolving Loans and, if applicable, Tranche C Term Loans,
in each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of any Borrower
or any Guarantor or the performance or observance by any Borrower or any
Guarantor of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received copies of this Agreement, together with copies of the most recent
financial statements delivered pursuant to this Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
any Issuing Bank, such assigning Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (vi) such assignee appoints and authorizes the Administrative Agent
and the Canadian Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent or the Canadian Administrative Agent, as the case may be,
by the terms hereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d) Each of the Administrative Agent and the Canadian Administrative Agent
shall maintain at its address referred to in subsection 9.01 a copy of each
Assignment and Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitments
of, and principal amount of the Loans owing to, each Lender from time to time.
Each of the Administrative Agent and the Canadian Administrative Agent shall
separately record the names and addresses of each Lender that holds Notes in the
Register. Each of the Administrative Agent and the Canadian Administrative Agent
shall also record the amount of the Commitments of, and the aggregate principal
amount of Loans owing to, B/As accepted and held by and the Letter of Credit
Exposure of, such Lender in the Register. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agent, the Canadian Administrative Agent and the Lenders shall
treat each person whose name is recorded in the Register as the owner of the
Notes, the Commitments and the Loans and Letter of Credit Exposures recorded
therein for all purposes of this Agreement. The Register shall be available for
inspection by the Borrowers, the Issuing Banks and any Lender, at any reasonable
time and from
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time to time upon reasonable prior notice. It is understood that the Canadian
Administrative Agent shall be required to maintain the Register only with
respect to the Canadian Revolving Credit Commitments and the Administrative
Agent may, but shall not be required to, maintain the Register with respect to
Canadian Revolving Credit Commitments and extensions of credit thereunder.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with the Note or Notes
subject to such assignment, an Administrative Questionnaire completed in respect
of the assignee (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) above and, if
required, the written consent of the Company and the Administrative Agent to
such assignment, the Administrative Agent or the Canadian Administrative Agent,
as the case may be, shall (i) accept such Assignment and Acceptance and (ii)
record the information contained therein in the Register. Within five Business
Days after receipt of notice, the applicable Borrower, at its own expense, shall
execute and deliver to the Administrative Agent or the Canadian Administrative
Agent, as the case may be, in exchange for the surrendered Note or Notes, a new
Note or Notes to the order of such assignee in a principal amount equal to the
applicable Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Commitment, a new Note to the order
of such assigning Lender in a principal amount equal to the applicable
Commitment retained by it. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note; such new Notes shall be dated the date of the surrendered Notes which they
replace and shall otherwise be in substantially the form of Exhibit A-1, A-2,
A-3, A-4, A-5, A-6, or A-7 hereto, as appropriate. Cancelled Notes shall be
returned to the appropriate Borrower. Notwithstanding anything to the contrary
contained herein, no assignment under Section 9.04(b) of any rights or
obligations under or in respect of the Notes or Loans evidenced by the Notes
shall be effective unless and until the Administrative Agent or the Canadian
Administrative Agent, as the case may be, shall have recorded such assignment in
the Register. The Applicable Agent, shall record the name of the transferor, the
name of the transferee, and the amount of the transfer in the Register after
receipt of all documents required pursuant to this Section 9.04, including,
without limitation, the Notes being assigned in connection with such transfer,
and such other documents as the Applicable Agent may reasonably request.
(f) Each Lender may without the consent of the Borrowers, any Issuing
Bank, the Canadian Administrative Agent or the Administrative Agent sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it and the Notes and participations in Letters
of Credit held by it); PROVIDED, HOWEVER, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the participating banks or other entities shall be entitled
to the benefit of (i) the cost protection provisions contained in Sections 2.13,
2.15, 2.18 and (ii) Section 9.06(a) to the same extent as if they were Lenders,
PROVIDED, that no such participating bank or entity shall be entitled to receive
any greater amount pursuant to such Sections than a Lender would have been
entitled to receive in respect of the amount of the participation sold by such
Lender to such participating bank or entity had no sale occurred PROVIDED,
FURTHER, that the participating banks or other entities shall not be entitled to
the benefits of Section 2.18 unless the applicable Borrower is notified of the
participation sold to such participant and such participant agrees, for the
benefit of such Borrower, to comply with Sections 2.18(f) or 2.17(g), as
applicable, and Section 2.18(h) as though it were a Lender, and (iv) the
Borrowers, the Administrative Agent, the Canadian Administrative Agent the
Issuing Banks and the other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrowers relating to the Loans and participations in Letters
of Credit and to approve any amendment, modification or waiver of any provision
of this Agreement or any other Loan Document (other than amendments,
modifications or waivers decreasing any fees payable hereunder or the amount of
principal of or the rate at which interest is payable on the Loans, extending
any final maturity date, in each case in respect of an Obligation in which the
relevant participating bank or entity is participating, or releasing all or
substantially all of the Pledged Securities or any Guarantor from the Guarantee
Agreement unless all or substantially all of the capital stock of such
subsidiary is sold in a transaction permitted by this Agreement). Each Lender
will disclose the identity of its participants to the Company and Administrative
Agent or the Canadian Administrative Agent, as the case may be, if requested by
the Company or the Administrative Agent.
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(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers; PROVIDED that, prior to any such disclosure,
each such assignee or participant or proposed assignee or participant shall
execute an agreement whereby such assignee or participant shall agree to be
bound by Section 9.17.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement and the Notes issued to it to a Federal Reserve Bank;
PROVIDED that no such assignment shall release a Lender from any of its
obligations hereunder.
(i) None of Holdings or the Borrowers shall assign or delegate any of its
rights or duties hereunder.
SECTION 9.05. EXPENSES; INDEMNITY. (a) The Company agrees to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent and the
Canadian Administrative Agent in connection with the preparation of this
Agreement and the other Loan Documents, or by the Administrative Agent or the
Canadian Administrative Agent in connection with the syndication of the
Commitments or the administration of this Agreement, or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall be consummated) or
incurred by the Administrative Agent, the Canadian Administrative Agent or any
Lender in connection with the enforcement or protection of their rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or the Notes issued hereunder, including the reasonable
fees, charges and disbursements of Simpson Thacher & Bartlett, counsel for the
Administrative Agent, and McMillan Binch, counsel to the Canadian Administrative
Agent and, in connection with any such enforcement or protection, the reasonable
fees, charges and disbursements of any other counsel (including the reasonable
allocated costs of internal counsel if a Lender elects to use internal counsel
in lieu of outside counsel) for the Administrative Agent and the Canadian
Administrative Agent any Issuing Bank or any Lender (but no more than one such
counsel for any Lender).
(b) The Company agrees to indemnify the Administrative Agent, the Canadian
Administrative Agent, each Issuing Bank, each Lender and each of their
respective directors, officers, employees and agents (each such person being
called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any other Loan Document or
any agreement or instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation of the
Transactions, (ii) the use of the proceeds of the Loans or the use of any Letter
of Credit or (iii) any claim, litigation, investigation or proceeding relating
to any of the foregoing, whether or not any Indemnitee is a party thereto;
PROVIDED that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee (treating, for this purpose only, any Lender and its directors,
officers, employees and agents as a single Indemnitee). Subject to and without
limiting the generality of the foregoing sentence, the Company agrees to
indemnify each Indemnitee against, and hold each Indemnitee harmless from, any
Environmental Claim, and any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel or consultant fees, charges and
disbursements, incurred by or asserted against any Indemnitee (and arising out
of, or in any way connected with or as a result of, any of the events described
in clause (i), (ii) or (iii) of the preceding sentence) arising out of, in any
way connected with, or as a result of (i) any Environmental Claim, (ii) any
violation of any Environmental Law, or (iii) any act, omission, event or
circumstance (including the actual, proposed or threatened, release, removal,
disposition, discharge or transportation, storage, holding, existence,
generation, processing, abatement, handling or presence on, into, from or under
any present, past or future property of Holdings or any of its subsidiaries of
any Contaminant), regardless of whether the act, omission, event or circumstance
constituted a violation of Environmental Law at the time of its existence or
occurrence; PROVIDED that such indemnity shall not, as to any Indemnitee, be
available to the extent that such Environmental Claim is, or such, losses,
claims, damages, liabilities or related expenses are, determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee or any of its
employers, officers, directors, employees or agents.
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(c) The Company shall be entitled to assume the defense of any action for
which indemnification is sought hereunder with counsel of its choice at its
expense (in which case the Company shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by an Indemnitee except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to each such Indemnitee. Notwithstanding the Company's election to
assume the defense of such action, each Indemnitee shall have the right to
employ separate counsel and to participate in the defense of such action, and
the Company shall bear the reasonable fees, costs, and expenses of such separate
counsel, if (i) the use of counsel chosen by the Company to represent such
Indemnitee would present such counsel with a conflict of interest; (ii) the
actual or potential defendants in, or targets of, any such action include both
the Company and such Indemnitee and such Indemnitee shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the Company (in which case the Company
shall not have the right to assume the defense or such action on behalf of such
Indemnitee); (iii) the Company shall not have employed counsel reasonably
satisfactory to such Indemnitee to represent it within a reasonable time after
notice of the institution of such action; or (iv) the Company shall authorize
such Indemnitee to employ separate counsel at the Company's expense. The Company
will not be liable under this Agreement for any amount paid by an Indemnitee to
settle any claims or actions if the settlement is entered into without the
Company's consent, which consent may not be withheld unless such settlement is
unreasonable in light of such claims or actions against, and defenses available
to, such Indemnitee.
(d) Holdings and the Borrowers shall not, and shall not permit any of
their subsidiaries to, bring any demand, claim, cost recovery or other action
they may now or hereafter have against any Indemnitee resulting from any
Environmental Claim; PROVIDED that this paragraph (d) shall not, as to any
Indemnitee, apply to the extent that such Environmental Claim has been
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee or any of its employers, directors, officers, employees or agents.
(e) Notwithstanding anything to the contrary in this Section 9.05, this
Section 9.05 shall not apply to taxes, it being understood that the Company's
only obligations with respect to taxes shall arise under Sections 2.13 and 2.18
and Section 19 of the Guarantee Agreement.
(f) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Administrative Agent, any Issuing Bank or any Lender. All amounts
due under this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. RIGHT OF SET-OFF; SHARING. (a) If an Event of Default shall
have occurred and be continuing, each Lender (including each Issuing Bank) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of the Company
or the Canadian Borrowers against any of and all the obligations of the Company
or the Canadian Borrowers now or hereafter existing under this Agreement and
other Loan Documents held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of set-off) which such Lender may have.
(b) If any Lender (a "BENEFITTED LENDER") shall at any time receive
any payment of all or part of its Loans or interest in Letters of Credit, or
interest thereon, then due from a Borrower, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in paragraph (g) or (h) of Article VII, or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans
and interests in Letters of Credit, or interest thereon, then due from such
Borrower (other than as specifically contemplated by this Agreement, including,
without limitation, Section 2.12), such benefitted Lender shall purchase for
cash from such other Lenders a participating interest in such portion of each
such other Lender's Loans and interests in Letters of Credit made to or issued
for the account of such Borrower, or shall provide such other Lenders with the
benefits of
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any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of such other Lenders; PROVIDED,
HOWEVER, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
SECTION 9.08. WAIVERS; AMENDMENT. (a) No failure or delay of the
Administrative Agent, the Canadian Administrative Agent, the Issuing Bank or any
Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Canadian Administrative Agent, the Issuing Banks and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies which they would otherwise have. No waiver of any provision
of this Agreement or any other Loan Document or consent to any departure by the
Borrowers or any Guarantors therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on the Borrowers or any Guarantors in any case shall
entitle any Borrower or Guarantor to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrowers and the Required Lenders; PROVIDED, HOWEVER, that no such
agreement shall (i) decrease the principal amount of, or extend the final
maturity of, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or any Letter of Credit Disbursement
or amend or modify the provisions of Section 2.09(c) or 2.16, without the prior
written consent of each Lender affected thereby, (ii) extend any Tranche A Term
Loan Repayment Date or Tranche B Term Loan Repayment Date or, if applicable, the
Tranche C Loan Repayment Date (other than, in each case, final maturity) or any
other date on which principal of the Loans is due (in each case, other than
final maturity), or extend any date on which payment of interest on any Loan or
reimbursement of any Letter of Credit Disbursement is due, without the prior
written consent of (A) in the case of Tranche A Term Loans, Tranche B Terms
Loans or, if applicable, Tranche C Term Loans, Lenders with Tranche A Term
Loans, Tranche B Term Loans or, if applicable, Tranche C Term Loans, as the case
may be, representing at least 80% of the aggregate principal amount of the
Tranche A Term Loans, Tranche B Term Loans or, if applicable Tranche C Term
Loans then outstanding, as the case may be, (B) in the case of Loans under the
Revolving Credit Commitments and Letter of Credit Disbursements thereunder,
Lenders with Revolving Credit Commitments representing at least 80% of the
aggregate Revolving Credit Commitments then in effect, (C) in the case of Loans
under the Canadian Revolving Credit Commitments and Letter of Credit
Disbursements thereunder, Lenders with Canadian Revolving Credit Commitments
representing at least 80% of the aggregate Canadian Revolving Credit Commitments
then in effect or (D) in the case of Loans under the Additional Revolving Credit
Commitments and Letter of Credit Disbursements thereunder, Lenders with
Additional Revolving Credit Commitments representing at least 80% of the
aggregate Additional Revolving Credit Commitments then in effect, (iii) increase
or extend any Commitment or decrease the Commitment Fees or Letter of Credit
Fees or other fees of any Lender without the prior written consent of such
Lender or (iv) amend or modify the provisions of Section 2.09(c) or 2.16, the
provisions of this Section or the definition of "Required Lenders", or release
substantially all the Pledged Securities from the Lien of the Pledge Agreement
or release any Guarantor from the Guarantee Agreement unless all or
substantially all of the capital stock of such subsidiary is sold or otherwise
disposed of in a transaction permitted by this Agreement, without the prior
written consent of each Lender; PROVIDED FURTHER that (a) no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Canadian Administrative Agent or the Issuing Banks
hereunder without the prior written consent of the Administrative Agent, the
Canadian Administrative Agent or the Issuing Banks acting as such at the
effective date of such agreement, as the case may be, and (b) the consent of the
Lenders shall not be required under this Section 9.08 with respect to any
amendments to the Loan Documents to effect increases in Revolving Credit
Commitments
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and the making of Tranche C Term Loans, as contemplated by the definition of
"Tranche C Term Loan Supplement", or the reallocations described in Section
2.27. Each Lender and each holder of a Note shall be bound by any waiver,
amendment or modification authorized by this Section regardless of whether its
Note shall have been marked to make reference thereto, and any consent by any
Lender or holder of a Note pursuant to this Section shall bind any person
subsequently acquiring a Note from it, whether or not such Note shall have been
so marked.
SECTION 9.09. INTEREST RATE LIMITATION. Notwithstanding anything herein or
in the Notes to the contrary, if at any time the applicable interest rate,
together with all fees and charges which are treated as interest under
applicable law (collectively the "CHARGES"), as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Lender, shall exceed the maximum
lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken,
received or reserved by such Lender in accordance with applicable law, the rate
of interest payable under the Note held by such Lender, together with all
Charges payable to such Lender, shall be limited to the Maximum Rate, PROVIDED
that such excess amount shall be paid to such Lender on the subsequent payment
dates to the extent not exceeding the legal limitation.
SECTION 9.10. ENTIRE AGREEMENT. This Agreement, the other Loan Documents
and the agreements regarding certain Fees referred to herein constitute the
entire contract between the parties relative to the subject matter hereof. Any
previous agreement among or representations from the parties with respect to the
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
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 AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 9.03.
SECTION 9.14. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each of the
Borrowers and Holdings hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in 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
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86
by suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Borrower or Holdings or their properties in the courts of any
jurisdiction.
(b) Each of the Borrowers and Holdings hereby irrevocably and
unconditionally waives, to the fullest extent they 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
or the other Loan Documents in any New York State or Federal court. 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.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. CONVERSION OF CURRENCIES. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum due hereunder
or under any other Loan Document in dollars into another currency, the parties
hereto agree, to the fullest extent that they may legally and effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Administrative Agent or the Canadian Administrative
Agent, as the case may be, could purchase dollars or Canadian dollars, as the
case amy be, with such other currency in New York, New York or Toronto, Canada,
as the case may be, on the Business Day immediately preceding the day on which
final judgment is given.
(b) The obligation of each Borrower in respect of any sum due to the
Administrative Agent, the Canadian Administrative Agent, any Lender or any
Issuing Bank hereunder or under any other Loan Document in dollars shall, to the
extent permitted by applicable law, notwithstanding any judgment in a currency
other than dollars, be discharged only to the extent that on the Business Day
following receipt of any sum adjudged to be so due in the judgment currency the
Administrative Agent, the Canadian Administrative Agent, such Lender or such
Issuing Bank may in accordance with normal banking procedures purchase dollars
in the amount originally due to the Administrative Agent, the Canadian
Administrative Agent, such Lender or such Issuing Bank with the judgment
currency. If the amount of dollars so purchased is less than the sum originally
due to the Administrative Agent, the Canadian Administrative Agent, such Lender
or such Issuing Bank, the applicable Borrower agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify the Administrative Agent,
the Canadian Administrative Agent, such Lender or such Issuing Bank against the
resulting loss.
(c) The obligation of each Canadian Borrower in respect of any sum due to
the Canadian Administrative Agent, the Administrative Agent, any Canadian Lender
or any Issuing Bank hereunder or under any other Loan Document in Canadian
dollars shall, to the extent permitted by applicable law, notwithstanding any
judgment in a currency other than Canadian dollars, be discharged only to the
extent that on the Business Day following receipt of any sum adjudged to be so
due in the judgment currency the Canadian Administrative Agent, the
Administrative Agent, such Canadian Lender or such Issuing Bank may in
accordance with normal banking procedures purchase Canadian dollars in the
amount originally due to the Canadian Administrative Agent, the Administrative
Agent,such Canadian Lender or such Issuing Bank with the judgment currency. If
the amount of Canadian dollars so purchased is less than the sum originally due
to the Canadian Administrative Agent, the Administrative Agent, such Canadian
Lender or such Issuing Bank, the Canadian Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify the Canadian
Administrative Agent, the Administrative Agent, such Canadian Lender or such
Issuing Bank against the resulting loss.
SECTION 9.17. CONFIDENTIALITY. Each of the Lenders, the Issuing Banks, the
Administrative Agent and the Canadian Administrative Agent agrees that it shall
maintain in confidence any information relating to the Borrowers furnished to it
by or on behalf of any Borrower (other than information that (x) has become
generally available to the public other than as a result of a disclosure by such
party, (y) has been independently developed by such party without violating this
Section or (z) was available to such party from a third party having, to such
party's knowledge, no obligation of confidentiality to any Borrower) and shall
not reveal the same other than (i) to its directors, officers, employees and, on
a need to know basis, advisors and (ii) as contemplated by Section 9.04(g),
<PAGE>
87
except: (a) to the extent necessary to comply with law or any legal process or
the requirements of any Governmental Authority, of the National Association of
Insurance Commissioners (the "NAIC") or of any securities exchange on which
securities of the disclosing party or any Affiliate of the disclosing party are
listed or traded, (b) as part of normal reporting or review procedures to
Governmental Authorities to the NAIC or to its parent companies, Affiliates,
auditors or regulators and (c) in order to enforce its rights under any Loan
Document in a legal proceeding.
<PAGE>
88
IN WITNESS WHEREOF, the Company, the Canadian Borrowers, Holdings, the
Administrative Agent, and the Lenders have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
COLLINS & AIKMAN PRODUCTS CO.
by /s/ J. Michael Stepp
--------------------
Name:
Title:
COLLINS & AIKMAN CORPORATION
by /s/ J. Michael Stepp
--------------------
Name:
Title:
COLLINS & AIKMAN CANADA INC.
by /s/ J. Michael Stepp
--------------------
Name:
Title:
COLLINS & AIKMAN PLASTICS, LTD.
by /s/ J. Michael Stepp
--------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent, Collateral
Agent and as a Lender
by /s/ Bruce Borden
--------------------
Name: Bruce Borden
Title: Vice President
THE CHASE MANHATTAN BANK OF CANADA,
as Canadian Administrative Agent
and as a Lender
by /s/ Christine Chan
--------------------
Name: Christine Chan
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION, as Documentation
Agent and as a Lender
by /s/ Daniel Rencricca
--------------------
Name: Daniel Rencricca
Title: Vice President
<PAGE>
BANK OF AMERICA CANADA
by
Address for Notices:
<PAGE>
THE BANK OF NEW YORK, as a Lender
By /s/ Ann Marie Hughes
--------------------
Name: Ann Marie Hughes
Title: Vice President
Address for Notices
One Wall Street
22nd Floor
New York, New York 10286
Attention: Ann Marie Hughes
Telecopy: (212) 635-6434
<PAGE>
THE BANK OF NOVA SCOTIA
By /s/ William E. Zarrett
--------------------
Name: William E. Zarrett
Title: Senior Relationship Manager
Address for Notices for U.S. Loans
The Bank of Nova Scotia
Atlanta Agency
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: W.E. Zarrett
Telecopy: (404) 888-8998
Address for Notices for Canadian
Loans
The Bank of Nova Scotia
Scotia Plaza Branch
44 King Street West
Toronto, Ontario
M5H 1H1 Canada
Attention: Gail Banich
Telecopy: (416) 866-3750
<PAGE>
BANK OF SCOTLAND, as a Lender
By /s/ Annie Chin Tat
--------------------
Name: Annie Chin Tat
Title: Vice President
Address for Notices
565 Fifth Avenue
New York, New York 10017
Attention: John Carlson
Telecopy: (212) 682-5720
<PAGE>
BANK OF TOKYO - MISTUBISHI TRUST
COMPANY, as a Lender
By /s/ P. Donnelly
--------------------
Name: P. Donnelly
Title: Vice President
Address for Notices
1251 Avenue of the Americas
New York, New York 10020
Attention: Friedrich Wilms
Telecopy: (212) 782-6445
<PAGE>
BRANCH BANKING AND TRUST COMPANY,
as a Lender
By /s/ Thatcher L. Townsend III
-----------------------------
Name: Thatcher L. Townsend III
Title: Vice President
Address for Notices
110 South Stratford Road
Suite 301
Winston-Salem, North Carolina
27103-5008
Attention: Thatcher Townsend
Telecopy: (910) 733-3254
<PAGE>
CIBC INC., as a Lender
By /s/ Timothy Doyle
--------------------
Name: Timothy Doyle
Title: Manager Director
CIBC Oppenheimer Corp.
AS AGENT
Address for Notices
227 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: Charlene Harris
Telecopy: (770) 319-4950
With a copy to:
425 Lexington Avenue
New York, NY 10017
Attention: Cyd Petre
Telecopy: (212) 856-3991
<PAGE>
COMERCIA BANK, as a Lender
By /s/ A. J. Anderson
----------------------
Name: A. J. Anderson
Title: First Vice President
Address for Notices
500 Woodward Avenue
Detroit, MI 48226
Attention: Robert Ramirez
Telecopy: (313) 222-3776
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE, as a Lender
By /s/ Anthony Rock
-------------------
Name: Anthony Rock
Title: Vice President
By /s/ Brian O'Leary
----------------------
Name: Brian O'Leary
Title: Vice President
Address for Notices
520 Madison Avenue
37th Floor
New York, New York 10022
Attention: Anthony Rock
Telecopy: (212) 715-4535
<PAGE>
COOPERATIVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /s/ Dana W. Hemenway
-----------------------
Name: Dana W. Hemenway
Title: Vice President
By /s/ W. Pieter C. Kodde
-------------------------
Name: W. Pieter C. Kodde
Title: Vice President
Address for Notices
245 Park Avenue
New York, NY 10167
Attention: Corporate Services Dept.
Telecopy: (212) 916-7930
<PAGE>
CREDIT AGRICLOE INDOSUEZ
By /s/ David Bouhl
-----------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking,
Chicago
By /s/ Katherine L. Abbott
-----------------------------
Name: Katherine L. Abbott
Title: First Vice President
Address for Notices
55 East Monroe Street
Suite 4700
Chicago, IL 60603
Attention: Ernest V. Hodge
Telecopy: (312) 372-3724
<PAGE>
CREDIT LYONNAIS ATLANTA AGENCY, as
a Lender
By /s/ David M. Cawrse
---------------------------
Name: David M. Cawrse
Title: First VicePpresident &
Manager
Address for Notices
303 Peachtree Street, N.E.
Suite 4400
Atlanta, Georgia 30308
Attention: Kevin Murphy
Telecopy: (404) 584-5249
<PAGE>
CREDITANSTALT CORPORATE FINANCE,
INC., as a Lender
By /s/ Robert M. Biringer
------------------------------
Name: Robert M. Biringer
Title: Executive Vice President
By /s/ William E. McCollum, Jr.
-------------------------------
Name: William E. McCollum, Jr.
Title: Senior Associate
Address for Notices
Two Ravinia Drive
Suite 1680
Atlanta, Georgia 30346
Attention: Pat Kennedy
Telecopy: (770) 390-1850
<PAGE>
CRESCENT/MACH I PARTNERS, L.P., a
a Lender
By: TCW Asset Management Company
its Investment Manager
By /s/ Justin L. Driscoll
---------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
Address for Notices
200 Park Avenue, Suite 220
New York, New York 10166
Attention: Mark Gold
Telecopy: (212) 297-4159
With copies to:
Crescent/Mach I Partners, L.P.
c/o State Street Bank & Trust Co.
Two International Place
Boston, MA 02110
Attention: Howie Gorman
Telecopy: (617) 664-5367
<PAGE>
CYPRESSTREE SENIOR FLOATING RATEB FUND
By: CypressTree Investment Management
Company, Inc. as Portfolio
Manager
By /s/ Peter K. Merrill
-------------------------
Name: Peter K. Merrill
Title: Managing Director
Address for Notices
125 High Street
Boston, MA 02110
Attention: Tim Barns
Telecopy: (617) 946-5687
<PAGE>
KZH CYPRESSTREE 1 CORPORATION
By /s/ Virginia Conway
------------------------
Name: Virginia Conway
Title: Authorized Agent
Address for Notices
c/o The Chase Manhattan Bank
450 West 33rd - 15th Floor
New York, NY 10001
Attention: Virginia Conway
Telecopy: (212) 946-7776
<PAGE>
DRESDNER BANK, A.G. NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By /s/ John W. Sweeney
----------------------------
Name: John W. Sweeney
Title: Assistant Vice President
By /s/ Beverly G. Cason
------------------------------
Name: Beverly G. Cason
Title: Vice President
Address for Notices
190 South LaSalle Street
Suite 2700
Chicago, Illinois 60603
Attention: Faraaz Kamran
Telecopy: (312) 444-1301
<PAGE>
ERSTE BANK DER
OESTERREICHISCHEN SPARKASSEN AG
By /s/ Rima Terradista
------------------------
Name: Rima Terradista
Title: Vice President
By /s/ John S. Runnion
----------------------------
Name: John S. Runnion
Title: First Vice President
Address for Notices
280 Park Avenue, West Building
New York, NY 10017
Attention: Rima Terradista
Telecopy: (212) 984-5627
<PAGE>
FIRST NATIONAL BANK OF CHICAGO, as
a Lender
By /s/ Judith Cornwell
------------------------
Name: Judith Cornwell
Title: Vice President
Address for Notices
1 First National Plaza
Floor 10, Suite 0324
Chicago, IL 60670-0324
Attention: Judith Cornwell
Telecopy: (312) 732-5296
<PAGE>
FIRST UNION NATIONAL BANK, as a
Lender
By /s/ David Silander
--------------------------
Name: David Silander
Title: Vice President
Address for Notices
301 South Tryon Street
Floor M-2
Charlotte, North Carolina 28288-0145
Attention: David Trotter
Telecopy: (704) 374-4000
and
201 South College Street
Suite 1300
Charlotte, North Carolina 28288-0656
Attention: Portfolio Management
Telecopy: (704) 374-4820
<PAGE>
FUJI BANK, as a Lender
By /s/ Teiji Teramoto
------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
Address for Notices
2 World Trade Center
79th Floor
New York, New York 10028
Attention: Vincent Ingato
Telecopy: (212) 912-0516
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, as a Lender
By /s/ Jun Kawada
--------------------------
Name: Jun Kawada
Title: General Manager
Address for Notices
1251 Avenue of the Americas
New York, New York 10020
Attention: Jennifer McNamara
Telecopy: (212) 282-4490
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN
LIMITED, NEW YORK BRANCH, as a
Lender
By /s/ Shuichi Tajima
--------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
Address for Notices
165 Broadway
49th Floor
New York, New York 10006
Attention: Akira Iwamoto
Telecopy: (212) 335-4524
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as a Lender
By /s/ Toshihiro Hayashi
----------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
Address for Notices
520 Madison Avenue
New York, New York 10022
Attention: Paul Arzouian
Telecopy: (212) 644-6825
<PAGE>
NATEXIS BANQUE BFCE
By /s/ G. Kevin Dooley
--------------------------
Name: G. Kevin Dooley
Title: Vice President
By /s/ William C. Maier
--------------------------
Name: William C. Maier
Title: VP-Group Manager
Address for Notices
645 Fifth Avenue, 20th Floor
New York, New York 10022
Attention: Kevin Dooley
Telecopy: (212) 872-5045
<PAGE>
NATIONSBANK, N.A. as a Lender
By /s/ E. Phifer Helms
------------------------
Name: E. Phifer Helms
Title: Senior Vice President
Address for Notices
100 North Tryon Street,
NCI-007-08-11
Charlotte, NC 28255
Attention: E. Phifer Helms
Telecopy: (704) 386-1270
<PAGE>
NEW YORK LIFE INSURANCE COMPANY
By /s/ Steven M. Benevento
---------------------------
Name: Steven M. Benevento
Title: Director
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION, as a Lender
By: New York Life Insurance Company
By /s/ Steven M. Benevento
------------------------------
Name: Steven M. Benevento
Title: Director
Address for Notices
51 Madison Avenue
New York, New York 10010
Attention: Treasury Department,
Securities Income Section - Room 209
Telecopy: (212) 447-4160
<PAGE>
OCTAGON CREDIT INVESTORS, as a
Lender
By /s/ James P. Ferguson
--------------------------
Name: James P. Ferguson
Title: Managing Director
Address for Notices
380 Madison Avenue - 12F
New York, NY 10017
Attention: Rick Stewart
Telecopy: (212) 622-3797
<PAGE>
SOCIETE GENERALE, as a Lender
By /s/ Ralph Saheb
---------------------
Name: Ralph Saheb
Title: Vice President, Manager
Address for Notices
2001 Ross Avenue, Suite 4800
Dallas, TX 75201
Attention: Laura Gloege
Telecopy: (214) 754-0171
with copies to:
404 Peachtree Street, Suite 3840
Atlanta, Georgia 30304
Attention: Craig Stamm
Telecopy: (404) 865-7419
and
Bracewell & Patterson
711 Louisiana Street, Suite 2900
Houston, TX 77002
Attention: Catherine Greaney
Telecopy: (713) 221-1212
<PAGE>
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH, as a Lender
By /s/ Siraj P. Bhatia
------------------------
Name: Siraj P. Bhatia
Title: Senior Vice President
Address for Notices
527 Madison Avenue
New York, New York 10022
Attention: Russell Bell
Telecopy: (212) 418-4848
<PAGE>
SUNTRUST BANK, ATLANTA, as a Lender
By /s/ Robert W. Honeycutt
--------------------------
Name: /s/ Robert W. Honeycutt
Title: Vice President
By /s/ Jeffrey D. Drucker
---------------------------
Name: Jeffrey D. Drucker
Title: Banking Officer
Address for Notices
25 Park Place N.E.
Atlanta, Georgia 30303
Attention: Brad Staples
Telecopy: (404) 588-8833
<PAGE>
TORONTO-DOMINION (TEXAS), Inc., as
a Lender
By /s/ J. R. Lents
--------------------------
Name: J. R. Lents
Title: Manager, Credit
Administration
Address for Notices
TD Securities (USA) Inc.
32 W. 52nd Street
New York, NY 10019
Attention: Eric Skillins
Telecopy: (212) 262-1926
THE TORONTO DOMINION BANK, as a
Lender
By /s/ G. M. Sandala
---------------------------
Name: G. M. Sandala
Title: Vice President and
Manager
Address for Notices
586 Oullette Avenue, 2nd Floor
Windsor, Ontario N9A 6J8
Attention: Nicole Strong
Telecopy: (519) 973-3880
<PAGE>
THE TRAVELERS INSURANCE COMPANY, as
a Lender
By /s/ A. W. Carnduff
------------------------
Name: A. W. Carnduff
Title: Second Vice President
THE TRAVELERS INDEMNITY COMPANY, as
a Lender
By /s/ A. W. Carnduff
------------------------
Name: A. W. Carnduff
Title: Second Vice President
Address for Notices
1 Tower Square
Hartford, Connecticut 06183
Attention: Bill Carnduff
Telecopy: (860) 954-8497
<PAGE>
WACHOVIA BANK, N.A., as a Lender
By /s/ Sarah T. Warren
----------------------------
Name: Sarah T. Warren
Title: Vice President
Address for Notices
400 S. Tryon Street
5th Floor
Charlotte, North Carolina 28285
Attention: Sarah Warren
Telecopy: (704) 378-5035
<PAGE>
WELLS FARGO BANK, as a Lender
By /s/ Delia B. Fance
----------------------
Name: Delia B. Fance
Title: Vice President
Address for Notices
333 South Grand Avenue, 9th Floor
Los Angeles, CA 90071
Attention: Delia Fance
Telephone: (213) 253-7304
Telecopy: (213) 628-9694
EXHIBIT 11
COLLINS & AIKMAN CORPORATION
COMPUTATION OF EARNINGS PER SHARE
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
QUARTER ENDED SIX MONTHS ENDED
------------------- ------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1998 1997 1998 1997
--------- ---------- -------- ----------
Average shares outstanding during the period 65,447 66,144 65,574 66,634
---------- ---------- -------- ----------
Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the period ..................... - 1,341 818 1,189
---------- ---------- -------- ----------
Total shares for diluted EPS............... 65,447 67,485 66,392 67,823
========== ========== ======== ==========
Income (loss) applicable to common shareholders:
Continuing operations................... $ (482) $ 11,600 $ 8,196 $ 22,865
Discontinued operations................. - 3,881 - 4,802
Gain on sale of discontinued operations. - - - 85,292
Extraordinary loss...................... (3,679) (721) (3,679) (721)
---------- --------- -------- ----------
Net income (loss)....................... $ (4,161) $ 14,760 $ 4,517 $ 112,238
========== ========== ======== ==========
Income (loss) per basic common share:
Continuing operations................... $ (.01) $ .17 $ .12 $ .34
Discontinued operations................. - .06 - .07
Gain on sale of discontinued operations. - - - 1.28
Extraordinary loss...................... (.05) (.01) (.05) (.01)
---------- --------- -------- ----------
Net income (loss)....................... $ (.06) $ .22 $ .07 $ 1.68
========== ========== ======== ==========
Income (loss) per diluted common share:
Continuing operations................... $ (.01) $ .17 $ .12 $ .34
Discontinued operations................. - .06 - .07
Gain on sale of discontinued operations. - - - 1.26
Extraordinary loss...................... (.05) (.01) (.05) (.01)
---------- ---------- -------- ----------
Net income (loss)....................... $ (.06) $ .22 $ .07 $ 1.66
========== ========== ======== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 27, 1998 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> JUN-27-1998
<CASH> 20,323
<SECURITIES> 0
<RECEIVABLES> 212,591
<ALLOWANCES> 11,678
<INVENTORY> 157,300
<CURRENT-ASSETS> 487,448
<PP&E> 650,324
<DEPRECIATION> 237,373
<TOTAL-ASSETS> 1,315,440
<CURRENT-LIABILITIES> 317,703
<BONDS> 780,812
0
0
<COMMON> 705
<OTHER-SE> (67,122)
<TOTAL-LIABILITY-AND-EQUITY> 1,315,440
<SALES> 941,475
<TOTAL-REVENUES> 941,475
<CGS> 802,377
<TOTAL-COSTS> 877,672
<OTHER-EXPENSES> 7,031
<LOSS-PROVISION> 629
<INTEREST-EXPENSE> 39,913
<INCOME-PRETAX> 16,230
<INCOME-TAX> 8,034
<INCOME-CONTINUING> 8,196
<DISCONTINUED> 0
<EXTRAORDINARY> (3,679)
<CHANGES> 0
<NET-INCOME> 4,517
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
