UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 27, 1997
Commission file number 1-10984
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BURLINGTON INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 56-1584586
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(State of incorporation) ( I.R.S. Employer
Identification No.)
3330 West Friendly Avenue
Greensboro, N.C. 27410
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 379-2000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, New York Stock Exchange
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of December 5, 1997, the aggregate market value of Registrant's voting stock
held of record by nonaffiliates of Registrant was approximately $832,896,940
(based upon the closing composite price on the New York Stock Exchange on that
date), excluding Treasury shares and, without acknowledging affiliate status,
864,519 shares held beneficially by Directors and executive officers as a group.
As of December 5, 1997, there were outstanding 56,623,310 shares of Registrant's
Common Stock, par value $.01 per share, and 3,048,888 shares of Registrant's
Nonvoting Common Stock, par value $.01 per share.
Documents Incorporated by Reference
Portions of Registrant's 1997 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV hereof.
Portions of Registrant's Proxy Statement dated December 16, 1997 in connection
with its Annual Meeting of Stockholders to be held on February 4, 1998 are
incorporated by reference into Part III hereof.
<PAGE>
PART I
Item 1. Business
General
The Corporation is one of the world's largest and most diversified
manufacturers of textile products. It is a leading developer, marketer and
manufacturer of fabrics and other textile products used in a wide variety of
apparel and interior furnishings end uses. The Corporation operates in two
principal industry segments, products for apparel markets and products for
interior furnishings markets.
As of September 27, 1997, the Corporation operated 36 U.S.
manufacturing plants in seven states and three manufacturing plants in Mexico
and employed approximately 20,100 persons. It also held a 50% interest in a
joint venture in India with one manufacturing plant.
References herein to the "Corporation" mean Burlington Industries,
Inc. ("Burlington") and its subsidiaries.
Products for Apparel Markets
The Corporation serves the apparel market through five divisions,
each of which manufactures a distinct product line in terms of end uses.
Wool worsted and worsted blend fabrics. The Corporation's Menswear
division is the leading domestic manufacturer of woven wool worsted and worsted
blend fabrics supplied to manufacturers of men's and women's apparel as well as
to major clothing retailers. Over the past two years, the division's product
development efforts have produced many high value-added products using finer
wools, creative blends and innovative nonwool fabrics. Products made with the
division's fabrics are sold to the moderate, better, bridge and designer
segments of men's and women's apparel. The division also sells fabrics to
manufacturers of better career and public service apparel and military dress
uniforms.
Five business units direct the division's sales. Men's Suiting
constitutes the majority of sales and is focused on the moderate, better and
designer suit customers, both at the manufacturer and retail level. Men's
Sportswear is positioned to address the consumer casualization trend and has
been the division's fastest growing segment over the past year. Coordinate
sportswear and innovative products for slacks, blazers and sportscoats are the
focus of this unit. Womenswear provides innovative worsted wool, wool blends and
high value-added nonwool fabrics in customized colors to the makers of branded
womenswear. Private Label markets the division's fabrics to retailer store
labels and self-branded retailers in both menswear and womenswear. The
division's Raeford group markets wool worsted and worsted blend fabrics to
manufacturers of a variety of career and uniform apparel, including apparel for
airlines, banks, school bands, governmental agencies and military and law
enforcement personnel.
Woven synthetic fabrics. The Corporation's Burlington Klopman
Fabrics division is a leading manufacturer of woven synthetic fabrics made with
100% polyester, 100% nylon and polyester blended with wool, rayon or other
fibers that are supplied to manufacturers of a wide variety of apparel,
activewear, interior furnishings, medical and industrial products.
The division produces lightweight polyester and polyester blend
fabrics and 100% nylon fabrics for men's, women's and children's wear sold in a
variety of price ranges, for high performance sportswear and activewear and for
a variety of other apparel, medical, interior furnishings and industrial uses.
The division also produces heavyweight polyester fabrics for use in the
manufacture of slacks, suits, skirts and sport coats as well as in the
manufacture of military and law enforcement uniforms.
The division is a leading manufacturer of waterproof, water
repellent, breathable and moisture management synthetic fabrics used by makers
of outerwear and high performance sportswear and activewear. A number of its
products, including its Ultrex(R) line of breathable, waterproof fabrics, are
used in leading brands of skiwear and other activewear and by suppliers to
leading activewear retailers. The division is also a producer of performance
fabrics for the reusable health care market and contamination control
environments. The division recently introduced a new family of Xalt(TM)
composite, laminate fabrics for the outdoor activewear market.
The division's fabrics for interior furnishings include flame
resistant fabrics for use as draperies and bed coverings in major hotels, health
care facilities and on cruise ships. Additionally, the division's fabrics are
used as window coverings in the home and by makers of upholstered furniture and
wall coverings for commercial environments.
The division also markets lightweight, reusable, protective
barrier fabrics under the Maxima(R) brand name to makers of, among other things,
clothing worn by hospital personnel and by industrial workers who are required
to work in clean and static-free environments.
The division is a leader in developing new applications and end
uses for synthetic fibers. In addition to its Ultrex(R) and Xalt(TM) fabrics,
the division has continued to develop a number of fabrics made with microdenier
filament yarn, a yarn made from fiber that is thinner than silk. These products
combine a natural appearance and touch with the performance characteristics of
synthetic fibers. The Corporation's microdenier fabrics are currently being used
in men's and women's apparel fabrics, activewear, protective medical clothing
and in home furnishings. The Corporation is the leading domestic producer of
microdenier fabrics made from 100% polyester and polyester blended with wool or
rayon.
Denim fabrics. Burlington Global Denim is a leading manufacturer
of fashion, value-added, specialty denim fabrics. The division produces a
diversified product line that services the major brands with innovative and
engineered products for denim customization. It is a major supplier to all
segments of the branded, designer and private label business.
Through its Denim Apparel Services unit, the division brings to
its customers a full package capability to produce denim garments made from the
division's fabric.
The Corporation has a 50% interest in a joint venture with
Mafatlal Industries Limited to manufacture denim in India for Asian, Middle
Eastern and European markets. Production began in mid-1997.
Cotton fabrics. In 1996, the Corporation formed a new business
unit, Burlington Sportswear, to produce 100% cotton and cotton/polyester blend
woven and knitted fabrics. Burlington Sportswear's products serve the better
men's sportswear and uniform markets. The division also arranges for production
of finished garments for its customers using its fabrics.
Synthetic yarn. The Burlington Madison Yarn Company division is
the only major manufacturer and marketer of both filament and spun synthetic
yarns in the United States. The division believes that its ability to produce
both types of synthetic yarn is an important competitive advantage because a
significant number of its customers require the different end-product
characteristics offered by these two types of synthetic yarns. While a portion
of the division's products are used by other divisions of the Corporation, the
majority is marketed to more than 300 unaffiliated customers in the apparel,
technical, medical products and home furnishings markets.
Mexican operations. In Mexico, the Corporation manufactures woven
fabrics for apparel which are marketed in the local market and in the form of
garments exported to the United States. The Company recently began construction
of facilities in Mexico for its Menswear and Denim divisions and for a joint
venture to produce cotton yarns, principally for use in denim fabric.
Products for Interior Furnishings Markets
In the interior furnishings market, the Corporation operates four
businesses, one of which focuses on interior furnishings products and decorative
fabrics and three of which serve distinct segments of the carpet and rug
markets.
Interior furnishings fabrics and products. The Burlington House
division is a leading manufacturer of ready-made and made-to-measure draperies,
window coverings and coordinating bedroom ensembles, mattress ticking,
upholstery fabrics, and decorative fabrics for use by makers of bedroom
ensembles, draperies and window coverings.
The Burlington House division's product lines consist of:
o ready-made and made-to-measure draperies, window coverings,
coordinating bedroom ensembles, table linens and throws. These
finished products are sold under the Burlington House(R) name
to department and specialty stores, under the Burlington House
American Lifestyle(TM) name to discount stores and on a
private label basis to several major retailers.
o woven jacquard mattress ticking (primarily damasks).
Burlington House is the leading manufacturer of jacquard
mattress ticking supplied to domestic manufacturers of
mattresses. Mattress ticking is the exterior fabric surface of
a finished mattress. The Corporation believes that it produces
the widest variety of ticking patterns of any domestic
manufacturer. Burlington House sells mattress ticking to all
major domestic manufacturers of mattresses for both the
residential and institutional markets.
o woven jacquard and textured fabrics for residential
upholstered furniture. Upholstery fabrics are marketed to a
broad range of furniture manufacturers.
o woven jacquard and other decorative fabrics used by
manufacturers of bedroom ensembles, comforters, draperies and
window coverings.
Carpets. The Lees division is a leading domestic manufacturer of
tufted synthetic carpet, carpet tiles and six-foot vinyl-backed carpet for
commercial uses. During the 1997 fiscal year, the division terminated its
production of carpet for residential uses. Reference is made to "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note B to the Notes to Consolidated Financial Statements in the
Corporation's 1997 Annual Report to Shareholders for information concerning
exiting this product line.
The division markets and sells a wide variety of standard and
custom commercial carpet products under the Corporation's Lees(R) brand name
primarily for use in offices, institutions, airports, hotels, schools, and
health care facilities. The Corporation's commercial carpet products are sold in
the middle to high priced segments of the commercial carpet market, and are
marketed through dealers primarily to architects, designers and commercial
builders, as well as directly to end users.
The division developed and patented a yarn dyeing process that
permits it to produce carpeting that resists staining and fading on a permanent
basis. Products incorporating this dyeing technology, which are marketed under
the Duracolor(R) name in the commercial market, represent a major portion of the
current carpet sales of the division. The division also has developed and
markets a proprietary thermoplastic carpet backing process for commercial
carpets, known as Unibond(R), which enhances the carpet's durability.
The division's yarn dyeing capability allows it to offer carpeting
in a wide range of colors. Through its Colorfax(R) program, the division offers
customers the ability to order sample yardage manufactured to their exact color
specifications. Such samples are generally deliverable within 72 hours after the
division's receipt of specifications.
Area rugs. The Burlington House Area Rugs division is a leading
producer in the United States of tufted area and bath rugs for home use,
primarily under the Burlington House American Lifestyle(TM) label. The
division's customers are major retail chains.
Accent rugs. The Bacova Guild, Ltd. is a leading producer of
printed accent rugs and welcome mats. Bacova markets these products, in addition
to fully coordinated bath ensembles, to diverse market segments that include the
leading U.S. department stores, mail order catalogs, mass merchants, specialty
stores and international customers.
Mexican operations. The Corporation manufactures residential and
commercial carpeting and fabrics for home furnishings in Mexico.
Financial Information Concerning Industry Segments
Reference is made to Note O to the Notes to Consolidated Financial
Statements in the Corporation's 1997 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning industry segments
for the Corporation's 1997, 1996 and 1995 fiscal years.
Exports
The Corporation's exports have increased to 11.4% of revenues in
fiscal year 1997, with export sales of $239 million. The Corporation's export
sales were $213 million in fiscal year 1996 and $161 million in fiscal year
1995.
Operations
The Corporation's domestic operations are organized primarily by
product category and, except in the case of the Corporation's yarn operations,
interdivisional sales are minimal. Each is essentially a stand-alone
merchandising and manufacturing operation. Products are distributed through
direct sales by divisional personnel, except in a few cases, mainly export
sales, where products are sold through independent agents or distributors.
The Corporation's corporate headquarters, principal sales and
merchandising offices and principal staff operations are located in Greensboro,
North Carolina. The Corporation maintains a major domestic sales and
merchandising office in New York City and sales offices in other major cities in
the United States.
Internationally, the Corporation has manufactured woven fabrics
for apparel, fabrics for home furnishings and carpet in Mexico for over 50 years
through wholly owned subsidiaries. The products of the Mexican operations are
sold in Mexico, either by subsidiary personnel or by agents or distributors, and
are also exported to the United States and other countries. During 1997,
production of denim fabric commenced at the Corporation's Indian joint venture.
Manufacturing
The Corporation is a vertically integrated manufacturer.
Generally, raw fibers are purchased and spun into yarn, or filament yarns are
purchased and processed. Yarns, after dyeing in some cases, are woven, knitted
or tufted into fabric. Fabric is then sold either in dyed and finished form, as
greige (unfinished) goods or processed into finished apparel products.
Residential and commercial interior furnishings products are further processed
and packaged for sale by retailers.
"Just-in-time" manufacturing techniques, which reduce in-process
inventories, floor space requirements and the time required to process a
particular order, are used in most facilities. Programs to link customers and
suppliers of the Corporation by means of electronic data transmission are also
in place in most divisions. These programs improve efficiency and reduce lead
times by improving communication, planning and processing times at the various
stages of production. They also assist the Corporation in working effectively
with manufacturers to coordinate their operations with the demands of retailers
and, as such, are an important part of the domestic textile industry's "Quick
Response" program designed to improve its competitive position vis-a-vis
imports.
Raw Materials
The Corporation uses many types of fiber, both natural (wool,
cotton, rayon and Tencel(R)) and man-made (polyester, nylon, polypropylene,
acrylic and acetate), in the manufacture of its textile products. Total raw
material costs were 33.4% of net sales in the 1997 fiscal year, 33.8% of net
sales in the 1996 fiscal year and 34.1% of net sales in the 1995 fiscal year.
(Reference is made to "Management's Discussion and Analysis of Results of
Operations and Financial Condition" in the Corporation's 1997 Annual Report to
Shareholders for information concerning the impact of price increases of the
Corporation's key raw materials). The Corporation believes that future price
levels for all fibers will depend primarily upon supply and demand conditions,
general inflation, U. S. and foreign government fiscal policies and agricultural
programs and prices of underlying raw materials such as petroleum.
Generally, the Corporation has had no difficulty in obtaining raw
materials. Wool and man-made fibers are available from a wide variety of sources
both domestically and abroad. Cotton is available from a wide variety of
domestic sources. Other materials, such as dyes and chemicals, are generally
available, but, as in the case of raw materials, continued availability is
dependent to varying degrees upon the adequacy of petroleum supplies. The
Corporation purchases essentially all its raw materials and dyes.
<PAGE>
Research and Development
Textile manufacturers generally focus their research and
development efforts on product development rather than basic research. Major
innovations in the textile industry have come primarily from fiber producers
(microdenier fiber, for example) or machinery manufacturers (shuttleless looms).
While breakthroughs by textile manufacturers in fabric development have occurred
(for example, the Corporation's Duracolor(R) carpets using stain-resistant
technology), generally, textile makers have enhanced their competitiveness
through continual development and refinement of products to meet or create new
consumer needs (for example, the Corporation's use of microdenier fibers in a
wide range of apparel and other applications). Accordingly, with few exceptions,
basic research and development expenditures have not been as significant a
component of textile manufacturing success as expenditures on design innovation
or capability and on capital equipment that increase the range of end products
and enhance productivity.
Basic research and development responsibility for particular
product areas is located in the divisions, where process and product development
efforts focus on the specific needs of that division. Total expenditures for
research, product development, productivity enhancements, enhanced styling and
market samples aggregated $57.3 million in the 1997 fiscal year, $62.3 million
in the 1996 fiscal year and $67.4 million in the 1995 fiscal year. Included in
these amounts are research and development expenditures, which totaled $11.8
million in the 1997 fiscal year ($8.2 million in the apparel products segment
and $3.6 million in the interior furnishings products segment), compared with
$13.5 million and $17.1 million in the 1996 and 1995 fiscal years, respectively.
Trademarks and Patents
The Corporation owns all trademarks and tradenames that it
believes are material to the operation of its business. The Corporation markets
its products under a variety of trademarks and tradenames, principally utilizing
variations of the Burlington(R) name. Certain products are marketed under
nationally recognized names such as Lees(R) for carpets and Klopman(R) for
fabrics.
From time to time, the Corporation's product development efforts
have resulted in new processes or products, some of which have been patented.
Examples of Burlington-developed technology include the patented Ultrex(R)
waterproof breathable woven fabric used in activewear and barrier fabrics and
Duracolor(R) carpets, manufactured using stain-resistant technology with respect
to which the Corporation has obtained patents. Because the Corporation's
business is not dependent to any significant degree upon patents and licenses
(with the possible exception of the patented stain resistant carpet technology
in the case of the interior furnishings segment), the loss of any patents or
licenses now held by the Corporation would not have a material adverse effect
upon its business or results of operations.
The Corporation derives licensing income (approximately $2.8
million in the 1997 fiscal year) from licenses of the Corporation's technology
and from licenses of the Burlington(R) name, principally to manufacturers of
socks and hosiery products in the United States and Europe.
Competition
The global and United States textile industries are highly
competitive. No one firm dominates the United States market and many companies
compete only in limited segments of the textile market. Certain of the
Corporation's products also compete with nontextile products. Textile
competition is based in varying degrees on price, product styling and
differentiation, quality, response time and customer service. The importance of
each of these factors depends upon the needs of particular customers and the
degree of fashion risk inherent in the product.
Imports of foreign-made textile and apparel products are a
significant source of competition for many sectors of the domestic textile
industry. The U.S. Government has attempted to regulate the growth of certain
textile and apparel imports through tariffs and bilateral agreements which
establish quotas on imports from lesser-developed countries that historically
account for significant shares of U.S. imports. Despite these efforts, imported
apparel and apparel textile fabrics, which represent the area of heaviest import
penetration, represent in excess of 60% of the U.S. market, up from less than
approximately 24% in 1975.
U.S. retailers' and apparel manufacturers' sourcing decisions are
affected by numerous factors, including relative labor and raw material costs,
lead times, political instability and infrastructure deficiencies of newly
industrializing countries, fluctuating currency exchange rates, individual
government policies and international agreements regarding textile and apparel
trade. As evidence of the impact of these factors, sourcing of textile and
apparel imports for goods shipped into the United States -- once dominated
primarily by Hong Kong, Taiwan and Korea -- has been shifting to other
lower-cost producer countries such as The People's Republic of China, the
Philippines, Mexico and countries in the Caribbean Basin. The Corporation
believes that changing cost structures, delivery lead times, political
uncertainty and infrastructure deficiencies associated with many of these
producers have caused importers to reassess the degree of reliance placed upon
certain of these sources, and to reconsider the importance of the reliability of
domestic manufacturing sources. In addition to these factors, the U.S.
Government's policies designed to benefit Mexico and the Caribbean Basin,
through favored quota and tariff treatment, have accelerated the shift in
production of garments away from Far East sources, indirectly benefiting U.S.
textile producers.
Under the North American Free Trade Agreement ("NAFTA") with
Mexico and Canada, there are no textile/apparel quotas between the United States
and either Mexico or Canada for products that meet certain origin criteria.
Tariffs among the three countries are either already zero or are being phased
out. There are provisions in NAFTA that should give Mexican apparel makers
incentives to use fabric made in the United States. Because the Corporation is a
major U.S. apparel fabrics manufacturer and a resident, diversified textile
manufacturer in Mexico, the Corporation believes that NAFTA is advantageous to
the Corporation. In addition, the U.S. "807" tariff program benefits U.S.
textile producers whose fabrics are incorporated into garments assembled in
Caribbean countries before returning to U.S. markets, where duty is charged upon
only the value added in assembling the garments.
The impact of the economic factors and legislative/treaty
provisions described above are apparent in the rapid growth of U.S. apparel
imports from the Caribbean Basin, Canada and Mexico, primarily due to the
advantages of quota/tariff provisions described above. Apparel imports from the
Caribbean Basin and Mexico have grown from 6.5% of total apparel imports in 1984
to 35.5% in 1996, surpassing imports from the Asian bloc. Mexico has now become
the largest exporter of apparel to the U.S., surpassing China, which had been
the largest since 1989.
Also of significance to domestic textile and apparel companies is
the ultimate impact of multilateral agreements intended to liberalize global
trade. The World Trade Organization ("WTO") established under GATT in January,
1995 has responsibility for overseeing international trade in manufactured
goods, agriculture, intellectual property and services. The WTO will oversee the
phaseout of textile and apparel quotas over a ten-year period. In addition,
tariffs on textile/apparel products will be reduced (but not eliminated) over
the same ten-year period. After the end of the ten years, textile/apparel trade
would revert to regular GATT rules that would prohibit quotas and most other
non-tariff barriers. The Clinton Administration is also engaged in discussions
with a number of countries or trading blocs with the intent of further
liberalizing trade, although "fast track" authority to negotiate new agreements
was recently denied by Congress.
Over the years, the Corporation has attempted to offset the
negative impact of increased imports by focusing on product lines and markets
that are less vulnerable to import penetration. Capital expenditures and systems
improvements have centered on strengthening value-added product strategies and
on increasing productivity, lowering costs and improving quality. The
Corporation has also introduced manufacturing techniques such as "just-in-time"
and "Quick Response" and created electronic data links with customers and
suppliers, thereby shortening lead times and improving service. The Corporation
is also investing in apparel fabric manufacturing and processing facilities in
Mexico and India in response to the forces affecting global textile and apparel
trade which have been described above.
The long-run success of the Corporation will be influenced in
varying degrees by its response to legislation and administrative actions
restricting or liberalizing trade among world textile producing and consuming
countries such as NAFTA and the GATT/WTO changes, the effectiveness of
anti-dumping and countervailing duty remedies and of enforcement activities by
the U.S. Government, the value of the United States dollar in relation to other
currencies and world economic developments generally. The Corporation's success
will also be affected by the ability of certain of the Corporation's apparel
fabrics customers to remain competitive, the success of the Corporation's global
diversification, modernization and cost-reduction efforts and, most importantly,
the ongoing ability of the Corporation to produce innovative, quality products
to satisfy specific customer needs at competitive costs.
Employees
The number of persons employed by the Corporation in both its
domestic and foreign operations as of September 27, 1997, was approximately
20,100. The Corporation's workforce in the United States is not represented by
labor unions. All wage employees in the Corporation's Mexican operations
(approximately 1,100 persons) are represented by labor unions.
Customers
The Corporation primarily markets its products to approximately
12,000 customers in the United States. The Corporation also markets its products
to customers in Canada, Mexico, Latin America, Europe and Asian countries. For
the 1997 fiscal year, no single customer represented more than 10% of the
Corporation's net sales, and the Corporation's 10 largest customers accounted
for approximately 28% of net sales.
Backlog
Several of the Corporation's divisions operate in businesses that
are characterized by very short forward order positions. The businesses of other
operations have more extended positions. In the aggregate, however, the backlog
of orders at any time is not material, since most orders are deliverable within
a few months. The backlog of forward orders, after eliminating sales within the
Corporation, was approximately 14.2% of annual net sales at the end of the 1997
fiscal year, compared with approximately 13.3% of annual net sales at the end of
the 1996 fiscal year, virtually all of which was expected to be shipped within
less than a year. Backlog at the end of the 1997 fiscal year for the apparel
products segment was 17.9% of annual net sales of the segment and for the
interior furnishings products segment was 8.6% of annual net sales of the
segment.
Governmental Regulation
The Corporation is subject to various Federal, state and local
laws and regulations limiting the production, discharge, storage, handling and
disposal of a variety of substances, particularly the Federal Clean Water Act,
the Federal Clean Air Act (as amended in 1990), the Resource Conservation and
Recovery Act (including amendments relating to underground tanks) and the
Federal Comprehensive Environmental Response, Compensation and Liability Act as
amended by the Superfund Amendment and Reauthorization Act of 1986, and other
Federal, state and local laws and regulations for the protection of public
health and the environment. The Corporation is presently engaged in a number of
environmental remediation plans and has reported dispositions of waste that
could result in future remediation obligations. The Corporation cannot with
certainty assess at this time the impact of future emission standards and
enforcement practices under the 1990 Clean Air Act upon its operations or
capital expenditure requirements. Reference is also made to the discussion of
"Legal and Environmental Contingencies" under "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Corporation's
1997 Annual Report to Shareholders, which is incorporated herein by reference.
The Corporation's operations also are governed by laws and
regulations relating to workplace safety and worker health, principally the
Occupational Safety and Health Act and regulations thereunder which, among other
things, establish cotton dust, formaldehyde, asbestos and noise standards, and
regulate the use of hazardous chemicals in the workplace. The Corporation uses
numerous chemicals, including resins containing formaldehyde, in processing some
of its products. Although the Corporation does not use asbestos in the
manufacture of its products, some of its facilities contain some structural
asbestos.
The Corporation believes that it has complied in all material
respects with the foregoing environmental or health and safety laws or
regulations and does not believe that future compliance with such laws or
regulations will have a material adverse effect on its results of operations or
financial condition.
Item 2. Properties
As of September 27, 1997, the Corporation operated 36
manufacturing plants in the United States, of which 22 were located in North
Carolina, seven were in Virginia, two each were in Arkansas and Mississippi and
one each was in Georgia, South Carolina and Tennessee. All but two of these
plants are owned in fee. The aggregate floor area of these manufacturing plants
in the United States is approximately 14.1 million square feet. The
Corporation's international operations include three manufacturing plants in
Mexico and a joint venture plant in India.
Of the Corporation's manufacturing plants, 22 are used principally
in the apparel products segment and 17 are used in the interior furnishings
products segment. In addition, the Corporation has five manufacturing plants not
currently in operation. The Corporation's plants generally operate on a
three-shift basis for five-, six- or seven-day weeks during 49 weeks per year,
or fewer weeks per year during curtailments. The Corporation considers its
plants and equipment to be in excellent condition.
The corporate headquarters building in Greensboro, North Carolina,
containing approximately 430,000 square feet, was completed and occupied in
1971. The building is located on property occupied under a 99-year ground lease
that began in 1969. The Corporation has a major sales and merchandising office
in New York City, New York under a lease expiring in 2009.
<PAGE>
Item 3. Legal Proceedings
The Corporation and its subsidiaries have sundry claims and other
lawsuits pending against them and also have made certain guarantees in the
ordinary course of business. It is not possible to determine with certainty the
ultimate liability, if any, of the Corporation in any of the matters referred to
in this item, but in the opinion of management, their outcome should have no
material adverse effect upon the financial condition or results of operations of
the Corporation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Executive Officers of the Corporation
The Corporation's executive officers are listed below.
Name Age Position
---- --- --------
George W. Henderson, III......... 49 Director, President and Chief
Executive Officer
Bernard A. Leventhal............. 64 Vice Chairman
(retiring January 31, 1998)
Abraham B. Stenberg.............. 62 Director and Vice Chairman
Gary P. Welchman................. 54 Executive Vice President
John D. Englar................... 50 Director, Senior Vice President,
Corporate Development and Law
Charles E. Peters, Jr. .......... 46 Senior Vice President and Chief
Financial Officer
Barbara K. Eisenberg............. 52 Vice President, Corporate Secretary
and Associate General Counsel
James M. Guin.................... 54 Vice President, Human Resources and
Public Relations
Lynn L. Lane..................... 46 Vice President, Treasurer and Investor
Relations
George C. Waldrep, Jr. .......... 58 Group Vice President
Robert A. Wicker................. 53 Vice President and General Counsel
Mr. Henderson has been Chief Executive Officer of the Corporation
since 1995 and President and Chief Operating Officer of the Corporation since
1993. He was a Group Vice President of the Corporation for more than five years
prior to 1993. The Corporation's Board of Directors has announced its intention
to elect Mr. Henderson Chairman of the Board and Chief Executive Officer of the
Corporation upon the retirement of Mr. Greenberg when his term of office expires
at the February 1998 Annual Meeting of Stockholders.
Mr. Leventhal has been Vice Chairman of the Corporation since
1995. Prior thereto, he was an Executive Vice President of the Corporation (from
1993) and President of the Corporation's Menswear division for more than five
years. Mr. Leventhal was a Group Vice President of the Corporation for more than
five years prior to 1993. Mr. Leventhal will be retiring January 31, 1998.
Mr. Stenberg has been Vice Chairman of the Corporation since
November, 1997. Prior thereto, he was an Executive Vice President of the
Corporation (from 1993), Chief Operating Officer of the Burlington Interior
Furnishings Group (from 1995), and a Group Vice President of the Corporation for
more than five years prior to 1993.
Mr. Welchman has been Executive Vice President of the Corporation
since 1993. Prior thereto, he was a Group Vice President of the Corporation
(from 1991). He has served as President of the Klopman Fabrics division for more
than five years.
Mr. Englar has been Senior Vice President, Corporate Development
and Law of the Corporation since 1995. Prior thereto, he was a Senior Vice
President, Finance and Law (from 1993) and Chief Financial Officer of the
Corporation (from 1994). He was Vice President and General Counsel of the
Corporation for more than five years prior to 1994 and Secretary for more than
five years prior to 1993.
Mr. Peters has been Senior Vice President and Chief Financial
Officer of the Corporation since 1995. He was Senior Vice President-Finance of
Boston Edison Company from 1991 until joining Burlington.
Ms. Eisenberg has been Vice President of the Corporation since
1995. She has been Secretary of the Corporation since 1993 and Associate General
Counsel of the Corporation for more than five years.
Mr. Guin has been Vice President, Human Resources and Public
Relations, since 1996. He was Director of Human Resources for the Corporation
from 1993 through 1995 and prior thereto he was a divisional personnel manager
for various divisions of the Corporation.
Ms. Lane has been Vice President and Treasurer since 1996, and in
October 1997 was elected Vice President, Treasurer and Investor Relations. She
was Vice President and Treasurer of R.J. Reynolds Tobacco Company from 1995
until joining Burlington and was Vice President and Assistant Treasurer, Capital
Markets of RJR Nabisco, Inc. from 1991 to 1995.
Mr. Waldrep has been a Group Vice President of the Corporation for
more than five years.
Mr. Wicker has been Vice President and General Counsel of the
Corporation since 1995. Prior thereto, he was Associate General Counsel of the
Corporation (from 1993) and was a partner at the law firm of Smith, Helms,
Mulliss & Moore for more than five years prior thereto.
Executive officers of the Corporation are elected by, and serve at
the discretion of, its Board of Directors. None of the executive officers or
Directors of the Corporation is related by blood, marriage or adoption to any
other executive officer or Director of the Corporation.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Reference is made to Note R to the Notes to Consolidated Financial
Statements in the Corporation's 1997 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning the composite high
and low sales prices for the Corporation's Common Stock for each fiscal quarter
of fiscal years 1997 and 1996. The Corporation's common stock is traded on the
New York Stock Exchange.
As of November 20, 1997, there were approximately 1,623 holders of
record of the Corporation's common stock and two holders of record of the
Corporation's nonvoting common stock.
The Corporation has not paid any cash dividends on its common
stock during fiscal years 1997 and 1996. The Corporation's bank credit agreement
places annual limitations on the payment of dividends on the Corporation's
common stock. Under such agreement, the Corporation may not pay dividends in an
aggregate amount in any fiscal year, on a cumulative basis since the beginning
of such fiscal year through such time, in an amount exceeding 50% of
Consolidated Net Income (as defined in such bank credit agreement) for the
preceding fiscal year.
Item 6. Selected Financial Data
The information required by this Item is set forth in the table
entitled "Statistical Review" in the Corporation's 1997 Annual Report to
Shareholders, and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The information required by this Item is set forth under the
caption "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in the Corporation's 1997 Annual Report to Shareholders and
is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Report of the
Corporation's Independent Auditors, required by this Item are incorporated
herein by reference to the Corporation's 1997 Annual Report to Shareholders. See
Item 14 for a list of those financial statements and the pages of the
Corporation's 1997 Annual Report to Shareholders from which they are
incorporated.
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page No.
---------
Burlington Industries, Inc. and Subsidiary Companies:
II. Valuation and Qualifying Accounts. S-1
All other schedules have been omitted because they are not
applicable, not required or because the required information is included in the
consolidated financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is set forth under the
caption "Information about Nominees and Directors" in the Corporation's Proxy
Statement dated December 16, 1997 and is incorporated herein by reference.
Information with respect to the Corporation's executive officers
is included in Part I of this Report.
Item 11. Executive Compensation
The information required by this Item is set forth under the
captions "Compensation of Directors"; "Report of the Compensation and Benefits
Committee on Executive Compensation"; "Executive Compensation"; and "Stock
Performance Graph" in the Corporation's Proxy Statement dated December 16, 1997
and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth under the
caption "Security Ownership of Certain Beneficial Owners and Management" in the
Corporation's Proxy Statement dated December 16, 1997 and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The information contained in the Corporation's 1997 Annual
Report to Shareholders under the captions and on the pages
indicated below is incorporated herein by reference:
Report of Ernst & Young LLP,
Independent Auditors (page 34)
Consolidated Statements of Operations for the fiscal
years ended September 27, 1997, September 28,
1996 and September 30, 1995 (page 16)
Consolidated Balance Sheets -
as of September 27, 1997 and September 28, 1996
(page 17)
Consolidated Statements of Cash Flows - for the
fiscal years ended September 27, 1997, September
28, 1996 and September 30, 1995 (page 18)
Notes to Consolidated Financial Statements (pages 19
to 32)
2. Financial Statement Schedules
The financial statement schedule listed under Item 8 is
filed as a part of this Report.
<PAGE>
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits
are filed as a part of this Report.
(b) The Corporation filed the following report on Form 8-K
during the last quarter of fiscal year 1997:
1. A report on Form 8-K, dated August 8, 1997. The report
was "Item 5. Other Events".
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BURLINGTON INDUSTRIES, INC.
Date: December 12, 1997
By /s/ George W. Henderson, III
--------------------------------
George W. Henderson, III
President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Corporation and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ George W. Henderson, III Director, President and December 12, 1997
- ---------------------------- Chief Executive Officer
George W. Henderson, III (Principal Executive Officer)
/s/ Charles E. Peters, Jr. Senior Vice President and December 12, 1997
- ---------------------------- Chief Financial Officer
Charles E. Peters, Jr. (Principal Financial Officer and
Principal Accounting Officer)
/s/ Joseph F. Abely, Jr. Director December 12, 1997
- ----------------------------
Joseph F. Abely, Jr.
/s/ John D. Englar Director December 12, 1997
- ----------------------------
John D. Englar
/s/ Frank S. Greenberg Director December 12, 1997
- ----------------------------
Frank S. Greenberg
/s/ David I. Margolis Director December 12, 1997
- ----------------------------
David I. Margolis
/s/ John G. Medlin, Jr. Director December 12, 1997
- ----------------------------
John G. Medlin, Jr.
/s/ Nelson Schwab III Director December 12, 1997
- ----------------------------
Nelson Schwab III
/s/ Abraham B. Stenberg Director December 12, 1997
- ----------------------------
Abraham B. Stenberg
/s/ John F. Ward Director December 12, 1997
- ----------------------------
John F. Ward
<PAGE>
Index to Exhibits
(Item 14(a)(3))
Exhibit
No. Description
3.1 Restated Certificate of Incorporation of the Corporation
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994).
3.2 Bylaws of the Corporation (incorporated by reference from the
Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended March 29, 1997).
4.1 Credit Agreement dated as of September 30, 1988, as amended
and restated as of November 8, 1995, among the Corporation,
the Lenders listed therein, Chemical Bank ("Chemical"), Bank
of America, N.A., The Bank of Nova Scotia ("Scotiabank"),
Chase Bank ("Chase"), First Union National Bank, NationsBank,
N.A. and Wachovia Bank, N.A. ("Wachovia"), as Managing Agents,
Chase (as successor to Chemical), as Administrative Agent, and
Scotiabank, as Fronting Bank (incorporated by reference from
the Corporation's Form 8-K Report dated November 9, 1995).
4.2 Indenture dated as of September 1, 1995, between the
Corporation and Wachovia, as Trustee, relating to the 7.25%
Notes of the Corporation due 2005 (incorporated by reference
from the Corporation's Registration Statement on Form S-3,
filed on August 2, 1995).
4.3 Form of Rights Agreement dated as of December 3, 1997, between
the Corporation and Wachovia, as Rights Agent, including the
Form of Rights Certificate as Exhibit A, the Summary of
Preferred Stock Purchase Rights as Exhibit B and the Form of
Certificate of Designation as Exhibit C (incorporated by
reference from the Corporation's Form-8-K Report dated
December 4, 1997).
NOTE: Pursuant to the provisions of Item 601(b)(4)(iii) of
Regulation S-K, the Corporation hereby undertakes to furnish
to the Commission upon request copies of other instruments
pursuant to which various entities hold long-term debt of the
Corporation or its consolidated or unconsolidated
subsidiaries, none of which instruments governs indebtedness
exceeding 10% of the total assets of the Corporation and its
subsidiaries on a consolidated basis.
10.1 Lease dated as of May 1, 1994, between the Corporation and The
Fisher-Sixth Avenue Company and Hawaiian Sixth Ave. Corp.
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994).
10.2 Indenture of Lease dated February 26, 1969, between Blanche S.
Benjamin and Edward B. Benjamin, and a predecessor to the
Corporation, including the amendment thereto (incorporated by
reference from Burlington Holdings Inc.'s Registration
Statement on Form S-1, File No. 33-16437, filed on August 12,
1987).
10.3 Agreement dated as of February 1, 1997, between the
Corporation and George W. Henderson, III (incorporated by
reference from the Corporation's Form 10-Q Quarterly Report
for the fiscal quarter ended March 29, 1997). (Management
contract or compensatory plan, contract or arrangement.)
10.4 Agreement dated as of November 8, 1994, between the
Corporation and Bernard A. Leventhal (incorporated by
reference from the Corporation's Form 10-K Annual Report for
the fiscal year ended October 1, 1994). (Management contract
or compensatory plan, contract or arrangement.)
10.5 Agreement dated as of November 8, 1994, between the
Corporation and Abraham B. Stenberg (incorporated by reference
from the Corporation's Form 10-K Annual Report for the fiscal
year ended October 1, 1994). (Management contract or
compensatory plan, contract or arrangement.)
10.6 Agreement dated as of February 1, 1997, between the
Corporation and John D. Englar (incorporated by reference from
the Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended March 29, 1997). (Management contract or
compensatory plan, contract or arrangement.)
10.7 Agreement dated as of February 1, 1996, between the
Corporation and James M. Guin (incorporated by reference from
the Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended March 30, 1996). (Management contract or
compensatory plan, contract or arrangement.)
10.8 Agreement dated as of February 1, 1996, between the
Corporation and Gary P. Welchman (incorporated by reference
from the Corporation's Form 10-Q Quarterly Report for the
fiscal quarter ended March 30, 1996). (Management contract or
compensatory plan, contract or arrangement.)
10.9 Agreement dated as of May 1, 1996, between the Corporation and
George C. Waldrep, Jr. (incorporated by reference from the
Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended June 29, 1996). (Management contract or
compensatory plan, contract or arrangement.)
10.10 Agreement dated as of November 13, 1995, between the
Corporation and Charles E. Peters, Jr. (incorporated by
reference from the Corporation's Form 10-K Annual Report for
the fiscal year ended September 30, 1995). (Management
contract or compensatory plan, contract or arrangement.)
10.11 Agreement dated as of July 5, 1996, between the Corporation
and Lynn L. Lane (incorporated by reference from the
Corporation's Form 10-K Annual Report for the fiscal year
ended September 28, 1996). (Management contract or
compensatory plan, contract or arrangement.)
10.12 1994 Deferred Compensation Plan (incorporated by reference
from the Form 10-K Annual Report for Burlington Industries
Equity Inc. ("Burlington Equity") for the fiscal year ended
October 2, 1993). (Management contract or compensatory plan,
contract or arrangement.)
10.13 Form of Stock Purchase Agreement dated as of March 19, 1992,
between Burlington Equity and The Equitable Life Assurance
Society of the United States and its affiliates (the
"Equitable Investors") (incorporated by reference from
Amendment No. 6 to Burlington Equity's Registration Statement
on Form S-1, File No. 33-45149, filed on March 19, 1992).
(Management contract or compensatory plan, contract or
arrangement.)
10.14 Description of Supplemental Pre-Retirement and Post-Retirement
Benefits Plan, as amended, and form of participant agreement
(incorporated by reference from the Form 10-K Annual Report
for Burlington Equity for the fiscal year ended October 2,
1993). (Management contract or compensatory plan, contract or
arrangement.)
10.15 Benefits Equalization Plan, as amended and restated on July
28, 1994 (incorporated by reference from the Corporation's
Form 10-K Annual Report for the fiscal year ended October
1994). (Management contract or compensatory plan, contract or
arrangement.)
10.16 Stock Plan for Non-Employee Directors, as amended
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994). (Management
contract or compensatory plan, contract or arrangement.)
10.17 Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference from the Form 10-Q Quarterly Report
for the fiscal quarter ended March 29, 1997). (Management
contract or compensatory plan, contract or arrangement).
10.18(a) Burlington Industries Equity Inc. 1992 Equity Incentive Plan
("1992 Incentive Plan") (incorporated by reference from
Amendment No. 3 to Burlington Equity's Registration Statement
on Form S-1, File No. 33-45149, filed on March 5, 1992).
(Management contract or compensatory plan, contract or
arrangement.)
10.18(b) Amendments to the 1992 Incentive Plan, effective as of July
22, 1992 (incorporated by reference from the Form 10-K Annual
Report for Burlington Equity for the fiscal year ended October
3, 1992). (Management contract or compensatory plan, contract
or arrangement.)
10.18(c) Forms of agreements under 1992 Incentive Plan (incorporated by
reference from the Form 10-K Annual Report for Burlington
Equity for the fiscal year ended October 3, 1992). (Management
contract or compensatory plan, contract or arrangement.)
10.18(d) Forms of amendments to agreements under 1992 Incentive Plan,
effective as of July 28, 1993 (incorporated by reference from
the Form 10-K Annual Report for Burlington Equity for the
fiscal year ended October 2, 1993). (Management contract or
compensatory plan, contract or arrangement.)
10.19(a) Burlington Industries, Inc. 1995 Equity Incentive Plan ("1995
Incentive Plan") (incorporated by reference from Exhibit A to
the Corporation's proxy statement dated December 18, 1995).
(Management contract or compensatory plan, contract or
arrangement.)
10.19(b) Amendment to 1995 Incentive Plan, effective as of November 1,
1995. (Incorporated by reference from the Form 10-K Annual
Report for the fiscal year ended September 28, 1996).
(Management contract or compensatory plan, contract or
arrangement.)
10.19(c) Form of agreement under 1995 Incentive Plan (incorporated by
reference from the Corporation's Form 10-Q Quarterly Report
for the fiscal quarter ended March 30, 1996). (Management
contract or compensatory plan, contract or arrangement.)
10.20(a) Consulting Agreement between the Corporation and Frank S.
Greenberg for calendar year 1997, effective January 1, 1997
(incorporated by reference from the Corporation's Form 10-K
Annual Report for the fiscal year ended September 28, 1996).
(Management contract or compensatory plan, contract or
arrangement.)
10.20(b) Consulting Agreement between the Corporation and Frank S.
Greenberg for calendar year 1998, effective January 1, 1998.
(Management contract or compensatory plan, contract or
arrangement.)
10.21(a) Stockholder Agreement ("Stockholder Agreement") dated as of
October 23, 1990, among Burlington Equity and the other
parties listed on the signature pages thereof (incorporated by
reference from the Form 10-K Annual Report for Burlington
Industries Capital Inc. for the fiscal year ended September
29, 1990).
10.21(b) Amendment dated January 17, 1992, to the Stockholder Agreement
(incorporated by reference from Amendment No. 3 to Burlington
Equity's Registration Statement on Form S-1, File No.33-45149,
filed on March 5, 1992).
10.21(c) Letter agreement dated October 25, 1993, with respect to the
Stockholder Agreement (incorporated by reference from the
Corporation's Form 10-K Annual Report for the fiscal year
ended September 30, 1995).
10.22 Amended and Restated Receivables Purchase Agreement dated as
of December 10, 1997, among B.I. Funding, Inc. ("BIF"), the
Corporation, B.I. Transportation, Inc. ("BIT"), Burlington
Apparel Services Company ("BASC"), Burlington International
Services Company ("BISC"), Burlington Fabrics Inc. ("Fabrics")
and The Bacova Guild, Ltd. ("Bacova").
10.23 Facility Agreement dated as of December 10, 1997, among BIF,
the Corporation, as Servicer, and Wachovia, as Agent and
Collateral Agent.
10.24 Loan Agreement dated as of December 10, 1997, among BIF,
certain financial institutions as Liquidity Lenders, Blue
Ridge Asset Funding Corporation, as Conduit Lender, and
Wachovia as Agent for the Lenders.
10.25 Security Agreement dated as of December 10, 1997, among BIF
and Wachovia, as Agent and Collateral Agent.
10.26 Amended and Restated Subordination Agreement, Consent and
Acknowledgment, dated as of December 10, 1997, among BIF, the
Corporation, BIT, BASC, BISC, Fabrics, Bacova and Wachovia, as
Agent and Collateral Agent.
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Corporation's 1997 Annual Report to
Shareholders expressly incorporated by reference.
22 List of subsidiaries of the Corporation.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
<PAGE>
Schedule II
BURLINGTON INDUSTRIES INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
(Amounts in Thousands)
Additions
------------------------------
Charged
(Credited)
Balance at to Costs Charged Balance
Beginning and to Other at Close
Description of Period Expenses Accounts Deductions of Period
----------- ---------- --------- -------- ---------- ---------
Fiscal year ended September 27, 1997
- ------------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 6,154 $ 3,478 $ - $ 4,184 (2) $ 5,439
9 (3)
Discounts............ 909 12 (1) - - 921
Returns and
allowances.......... 14,403 (75)(1) - - 14,328
------- ------- --- ------- -------
$21,466 $ 3,415 $ - $ 4,193 $20,688
======= ======= === ======= =======
Fiscal year ended September 28, 1996
- ------------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 4,226 $ 6,457 $ - $ 4,487 (2) $ 6,154
42 (3)
Discounts............ 1,022 (113)(1) - - 909
Returns and
allowances.......... 13,974 429 (1) - - 14,403
------- ------- --- ------- -------
$19,222 $ 6,773 $ - $ 4,529 $21,466
======= ======= === ======= =======
Fiscal year ended September 30, 1995
- ------------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 4,001 $10,382 $103(4) $10,184 (2) $ 4,226
76 (3)
Discounts............ 995 27 (1) - - 1,022
Returns and
allowances.......... 12,250 1,559 (1) 165(4) - 13,974
------- ------- --- ------- -------
$17,246 $11,968 $268 $10,260 $19,222
======= ======= ==== ======= =======
(1) Represents net increase (decrease) in required reserves.
(2) Uncollectible accounts receivable written off, net of recoveries.
(3) Represents changes in reserves due to foreign exchange fluctuation.
(4) Represents increase attributable to acquisition.
S-1
Exhibit 10.20(b)
January 1, 1998
Mr. Frank S. Greenberg
500 East Shore Road
Kings Point, New York 11024
Dear Frank:
This letter will confirm our understanding of the arrangements under which you
are to provide consulting services for Burlington Industries, Inc. ("Burlington"
or the "Company"). The terms of this arrangement are set out below.
1. You will render services as an independent private consultant to
Burlington at times and places deemed mutually agreeable. In your consulting
activities for the Company, you will report to George Henderson or his
designated representative.
2. Your services will be rendered as needed over the period of
January 1, 1998 through December 31, 1998 (the "Consulting Period").
3. It is understood that during the Consulting Period, for all
consulting days requested and provided, by mutual agreement, the Company will
pay you at the rate of $4,000.00 per day, provided that the annual aggregate
amount of per diem fees will not exceed $100,000.00. An invoice for services
rendered shall be submitted by the 5th day of each month for the preceding
month's services.
4. This Agreement can be terminated at any time during the period by
yourself upon the provision of ninety (90) days written notice. This Agreement
may be extended beyond the Consulting Period upon the mutual agreement and
written consent of the parties.
5. It is understood that the Company will reimburse you for air travel,
or any other reasonable travel expense to and from the location of your
assignment, including lodging, meals, travel, and miscellaneous expenses as
provided by the Burlington expense report policy. All such expenses are to be
submitted on a monthly basis, covered by a properly completed and signed
Burlington expense report form. You acknowledge and agree that you will not be
covered by Burlington's business travel/accident insurance policies when
traveling in performance of the services being rendered hereunder.
<PAGE>
6. During the period hereof, you shall remain free to undertake both
professional and consulting agreements with other parties, provided, however,
that you will not become employed by or render advisory or consulting services
to any competitor (present or potential) of Burlington without our prior written
consent and approval. If you accept full time employment by a person or entity
other than Burlington during the period hereof or become employed by or perform
any services for a competitor without our consent, this Agreement will
automatically terminate. Your commitments hereunder with respect to refraining
from providing services to any competitor (or become employed thereby) are
separate from and independent of other non-compete, non-disclosure obligations
which you may have under any employment or benefit arrangement with the Company,
and no consent to provide services to a competitor under this Agreement or
cancellation of this Agreement shall affect in any way any such other
obligation, or be deemed to consent to any potential violation thereof.
7. You recognize and confirm your continuing obligation,
notwithstanding any provision of this Agreement to the contrary, to maintain
confidential all information, operations or situations treated by Burlington as
secret and/or confidential which became known to you during the course of your
employment prior to the date of this Agreement. You recognize that in working
with us under this Agreement it will be necessary to disclose to you and expose
you to information, operations, and situations which we treat as confidential.
You agree accordingly to keep these matters, any trade secrets and the scope of
your work with us entirely secret and confidential until made public by
Burlington.
8. You recognize and confirm, notwithstanding any provision of this
Agreement to the contrary, that all improvements, inventions, designs and useful
ideas conceived or made by you during your past employment with Burlington which
relate in any way to Burlington's business shall be disclosed promptly in
writing, drawing or other tangible form to Burlington and shall be its exclusive
property. All improvements, inventions, designs and useful ideas and other works
of authorship conceived or made by you in connection with your performance of
services under this Agreement shall be disclosed promptly in writing, drawing or
other tangible form to Burlington and shall be its exclusive property. All such
property described herein shall be assigned or conveyed to Burlington. You agree
further to execute all necessary applications and assignments with respect to
such property which we may prepare at our own expense. There will be no
additional costs or charges to the Company for the assignment or conveyance of
such rights or applications, if any, to the Company.
9. You acknowledge and agree that Burlington has no obligation to pay you
severance pay or any other compensation not expressly provided for herein by
virtue of your performance of services under this Agreement.
10. It is understood and agreed that the services to be rendered by you
under this Agreement shall be rendered by you as an independent
contractor/consultant and you will not be deemed an employee of Burlington
Industries, Inc. or any of its subsidiaries, and as such you will not be covered
under any of the Company's employee benefit programs, except those for which you
may have become eligible by virtue of your previous employment with Burlington.
11. Burlington will deduct applicable FICA and income taxes from payments
for services rendered under this Agreement.
12. You hereby represent that, to your knowledge, there are no impediments
or preexisting obligations which could prevent or impair your ability to perform
the terms of this Agreement. In the event you are unable to perform your
obligations hereunder by reason of such impediments or preexisting obligations,
then Burlington shall be released from all obligations under this Agreement.
13. This integrated document (as it may be amended or extended from time to
time pursuant to paragraph 4 herein) constitutes the entire Agreement concerning
your consulting activities for Burlington, as addressed herein; and it
supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning all the services covered herein.
14. Your obligations under paragraphs 7 and 8 will survive the expiration or
termination of this Agreement.
If the foregoing confirms our understanding, would you please sign and return to
us the enclosed duplicate original of this letter.
Sincerely,
BURLINGTON INDUSTRIES, INC.
By: /s/George W. Henderson, III
George W. Henderson, III
President and Chief
Executive Officer
Confirmed and Agreed to:
/s/Frank S. Greenberg
Frank S. Greenberg
Date: November 3, 1997
Exhibit 10.22
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 10, 1997
(amending and restating the
Receivables Purchase Agreement dated as of August 17, 1994)
Among
B.I. FUNDING, INC.,
BURLINGTON INDUSTRIES, INC.,
And
THE OTHER SELLERS PARTIES HERETO
<PAGE>
TABLE OF CONTENTS
||
ARTICLE I
DEFINITIONS; RESTATEMENT...............................................1
SECTION 1.01. ................................................1
SECTION 1.02. Restatement of Prior Agreement........................2
SECTION 1.03. Qualification Regarding Bacova........................2
ARTICLE II
PURCHASE OF RECEIVABLES; CONSIDERATION AND PAYMENT.....................2
SECTION 2.01. Purchase of Receivables...............................2
SECTION 2.02. Purchase Price........................................3
SECTION 2.03. Payment of Purchase Price.............................4
SECTION 2.04. No Repurchase.........................................5
SECTION 2.05. Dilutive Credits......................................5
SECTION 2.06. Certain Charges.......................................6
SECTION 2.07. Termination...........................................6
SECTION 2.08. Limitation on Liability of the Sellers and Others.....6
SECTION 2.09. Inclusion of Additional Sellers.......................7
ARTICLE III
CONDITIONS PRECEDENT............................................ .......8
SECTION 3.01. Conditions Precedent to the Effectiveness of this
Agreement...................................... .......8
SECTION 3.02. Conditions Precedent to the Company's Purchases of
Receivables.................................. .........9
SECTION 3.03. Conditions Precedent to Sellers' Obligations on Effective
Date....................................... ...........10
SECTION 3.04. Conditions Precedent to Sellers' Obligations on Payment
Dates..................................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES..........................................11
SECTION 4.01. Representations and Warranties of the Parties...11
SECTION 4.02. Additional Representations of the Sellers.......12
ARTICLE V
COVENANTS...............................................................14
SECTION 5.01. Affirmative Covenants of the Sellers............14
SECTION 5.02. Negative Covenants of the Sellers...............21
<PAGE>
ARTICLE VI
PURCHASE TERMINATION EVENTS.............................................22
SECTION 6.01. Purchase Termination Events.....................22
SECTION 6.02. Remedies........................................23
ARTICLE VII
INDEMNIFICATION.........................................................23
SECTION 7.01. Indemnities by the Sellers......................23
SECTION 7.02. Indemnities by the Company......................25
ARTICLE VIII
SUBORDINATED NOTE; PREFERRED STOCK......................................25
SECTION 8.01. Subordinated Note...............................25
SECTION 8.02. Preferred Stock.................................26
SECTION 8.03. Restructuring on Transfer of Subordinated Note and
Preferred Stock............................26
ARTICLE IX
MISCELLANEOUS...........................................................26
SECTION 9.01. Amendments, Etc.................................26
SECTION 9.02. Notices, Etc....................................26
SECTION 9.03. No Waiver; Remedies.............................27
SECTION 9.04. Binding Effect; Governing Law...................27
SECTION 9.05. Costs, Expenses and Taxes.......................27
SECTION 9.06. Headings........................................28
SECTION 9.07. Grant of License to Use Patents and Trademarks..28
SECTION 9.08. Acknowledgment of Transaction Documents.........28
SECTION 9.09. Waiver of Jury Trial............................28
SECTION 9.10. Severability....................................28
SECTION 9.11. Counterparts....................................28
SECTION 9.12. Jurisdiction; Consent to Service of Process.....28
||
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Schedules
SCHEDULE I Authorized Officers
SCHEDULE II Fiscal Months and Fiscal Quarters
SCHEDULE III Trade Names
SCHEDULE IV Accounts
SCHEDULE V Location of Records
SCHEDULE VI Notices
Exhibits
EXHIBIT A Form of Monthly Settlement Statement
EXHIBIT B Form of Weekly Report
EXHIBIT C Form of Subordinated Note
Annexes
ANNEX Z Definitions
<PAGE>
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (the "Agreement")
dated as of December 10, 1997 (amending and restating the Receivables Purchase
Agreement dated as of August 17, 1994) among B.I. FUNDING, INC., a Delaware
corporation (the "Company"), BURLINGTON INDUSTRIES, INC., a Delaware corporation
("BII"), B.I. TRANSPORTATION, INC., a Delaware corporation ("BTI"), BURLINGTON
FABRICS INC., a Delaware corporation ("BFI"); BURLINGTON APPAREL SERVICES
COMPANY, a Delaware corporation ("BASC"); BURLINGTON INTERNATIONAL SERVICES
COMPANY, a Delaware corporation ("BISC"); THE BACOVA GUILD, LTD., a Delaware
corporation ("Bacova"); and each Additional Seller which may hereafter become
party hereto; (BII, BTI, BFI, BASC, BISC, Bacova and the Additional Sellers are
herein referred to collectively as the "Sellers").
The Company is in the business of acquiring accounts receivable of the
Sellers. The Company intends from time to time to sell an interest in the pool
of accounts receivable purchased by the Company from the Sellers pursuant to,
and in accordance with the terms of, this Agreement. In order to enable the
Company to sell such interest, the Sellers are willing to sell to the Company,
and the Company is willing to Purchase from the Sellers, the Receivables on the
terms and subject to the conditions set forth herein.
Accordingly, the Company and each of the Sellers agree as follows:
ARTICLE I
DEFINITIONS; RESTATEMENT
SECTION 1.01.
(a) Definitions. Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in Annex Z attached
hereto.
(b) Terms Generally. The definitions referred to in paragraph
(a) above 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. Except as
otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP.
(c) UCC Terms. All terms used in Article 9 of the UCC that are
used but not defined herein or in Annex Z shall have the meanings
assigned to such terms in such Article 9.
(d) Computation of Time Periods. Unless otherwise specified in
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this Agreement, in the computation of a period of time from a specified
date to a later specified date, the word "from" means "from and
including," and the words "to" and "until" each mean "to but
excluding".
SECTION 1.02. Restatement of Prior Agreement. This Agreement amends and
restates in its entirety the Receivables Purchase Agreement dated as of March
26, 1992, as amended and restated as of August 17, 1994 (the "Prior Sale
Agreement"), among certain of the Sellers and the Company. All Receivables and
other assets conveyed to the Company under the Prior Agreement shall be deemed
to have been conveyed hereunder, and all obligations of the Sellers hereunder
shall apply to such assets to the same extent as assets conveyed after the date
hereof.
SECTION 1.03. Qualification Regarding Bacova. Notwithstanding anything
to the contrary in any of the Transaction Documents, Receivables originated by
Bacova shall not be conveyed to the Company hereunder, and shall not be
classified as Eligible Receivables or be subject to the terms of the Transaction
Documents regarding the collection of Receivables or the reporting of
information regarding the Receivables, until the Company and the Agent shall
have agreed to the inclusion of such Receivables in the transactions
contemplated by the Transaction Documents, which agreement shall be deemed to
have occurred once the reporting systems of Bacova have been integrated into the
systems of the Parent Group in a manner reasonably satisfactory to the Agent and
notified to the Servicers in writing.
ARTICLE II
PURCHASE OF RECEIVABLES;
CONSIDERATION AND PAYMENT
SECTION 2.01. Purchase of Receivables.
(a) Each of the Sellers (other than BII) hereby sells, assigns
transfers and conveys to BII, and BII hereby sells, assigns, transfers
and conveys to the Company, on the Closing Date and from time to time
thereafter, on the terms and subject to the conditions specifically set
forth herein, all its respective right, title and interest, in, to and
under (i) all Receivables now existing and hereafter arising from time
to time, as provided in paragraph (b) below, and all payment and
enforcement rights (but none of the obligations) with respect to
Receivables, (ii) all Related Security in respect of such Receivables,
(iii) all Collections and other monies due or to become due with
respect to the foregoing and (iv) all proceeds of the foregoing. It is
understood that all Receivables, Related Security, monies and proceeds
conveyed by the Sellers (other than BII) to BII pursuant to this
Section 2.01 (the "Subsidiary Assets") are simultaneously being
conveyed by BII to the Company, together with Receivables originated by
BII (and Related Security, monies and proceeds relating to such
Receivables originated by BII). BII retains no interest in the
Subsidiary Assets. The Company shall be entitled to exercise all of its
rights and remedies hereunder with respect to the Subsidiary Assets
against either BII or the Seller that originated such Subsidiary
Assets, or both, to the
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same extent as would be the case if (in the case of BII) BII had
originated such Subsidiary Assets or (in the case of such Seller) if
the Company acquired such Subsidiary Assets directly from such Seller.
(b) Upon the fulfillment of the conditions set forth in
Article III with respect to each newly created Receivable, all of the
applicable Seller's right, title and interest in and to such newly
created Receivable and all Related Security in respect of such
Receivable shall be immediately and automatically sold, assigned,
transferred and conveyed to the Company pursuant to paragraph (a) above
without any further action by such Seller or any other Person.
(c) The parties to this Agreement intend that the transactions
contemplated hereby shall be, and shall be treated as, a purchase by
the Company and a sale by the applicable Seller of the Purchased
Receivables and not as a lending transaction. All sales of Receivables
and Related Security by any Seller hereunder shall be without recourse
to, or representation or warranty of any kind (express or implied) by,
any Seller, except as otherwise specifically provided herein. The
foregoing sale, assignment, transfer and conveyance does not constitute
and is not intended to result in a creation or assumption by the
Company of any obligation of any Seller or any other Person in
connection with the Receivables or any agreement relating thereto,
including any obligation to any Obligor.
(d) In connection with the foregoing conveyances, each Seller
agrees to record and file, at its own expense, financing statements
(and continuation statements with respect to such financing statements
when applicable) with respect to the Receivables and Related Security
now existing and hereafter acquired by the Company from the Sellers
meeting the requirements of applicable state law in such manner and in
such jurisdictions as are necessary to perfect the purchases of the
Receivables and Related Security by the Company from the Sellers, and
to deliver such financing statements to the Company on or prior to the
Effective Date.
(e) In connection with the foregoing conveyances, each Seller
agrees at its own expense, as agent of the Company, (i) to indicate on
the computer files and other physical records relating to the
Receivables (by means of a general legend that will automatically
appear at or near the beginning of any list or print-out of the
Receivables) that, unless otherwise specifically identified on such
list or print-out as a Receivable not so sold or transferred, all
Receivables included in such list or print-out and Related Security
have been sold to the Company in accordance with this Agreement and
(ii) to deliver to the Company computer files or microfiche lists
containing true and complete lists of all such Receivables, identified
by Obligor and by the Receivables balance as of a date acceptable to
the Company prior to the Effective Date. Such files or lists shall be
delivered to the Company as confidential and proprietary.
SECTION 2.02. Purchase Price. The amount payable by the Company to BII
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the "Purchase Price") for newly created Receivables and Related Security on any
Payment Date to the Company under this Agreement shall be equal to the product
of (a) the aggregate Outstanding Balances of such Receivables and (b) the
Discounted Percentage. Such Purchase Price shall be paid pursuant to Section
2.03. The amount payable by BII to another Seller for newly created Receivables
and Related Security on any Payment Date shall be equal to the aggregate
Outstanding Balances of such Receivables. Such amount shall be paid by BII in
cash to such Seller on such Payment Date, and the Company shall have no
liability with respect to the payment of such amount. BII's failure to pay such
amount to such Seller shall not affect in any way the Company's rights in and to
such Receivables and Related Security.
SECTION 2.03. Payment of Purchase Price.
(a) The Purchase Price for Receivables and the Related
Security shall be paid or provided for by the Company to BII on the
Effective Date and thereafter on each Business Day (each such day, a
"Payment Date") as follows:
(i) to the extent available for such purpose, in
cash from Collections, provided that all cash payments on a
day other than a Weekly Settlement Date shall be interim
payments subject to adjustment as provided in clause(b) below;
(ii) to the extent available for such purpose, in
cash from the proceeds of Advances obtained by the Company
under the Loan Agreement;
(iii) at the option of the Company, by means of
any one or more of the following: (A) amounts contributed by
BII to the Company, and (B) an addition to the principal
amount of the Subordinated Note and the issuance of shares of
Preferred Stock so that the sum of the addition to such
principal amount and the liquidation preferences of such
shares shall equal the remaining portion of the Purchase
Price; provided, however, that the addition of the principal
amount of Subordinated Note on such Payment Date shall not, in
any event, exceed the maximum principal amount of Subordinated
Note that may be outstanding on such Payment Date as
determined from information contained in the most recent
Weekly Report in accordance with Section 8.01.
(b) In each Weekly Report, the Servicer shall determine:
(i) the aggregate amount paid by the Company to
BII pursuant to Section 2.03(a)(i) during
the Related Period (as defined below) plus
the aggregate amount of Indemnified Amounts
(as defined in Section 7.01) for the Related
Period;
(ii) the portion of Collections for the Related
Period required to be applied to the payment
of principal of, or interest on, Advances,
fees payable under the Loan Agreement and
other amounts
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required to be paid or set aside under the
Loan Agreement; and
(iii) the excess of the amount determined pursuant
to clause (i) above over the amount
determined pursuant to clause (ii) above.
"Related Period" means a period from one Weekly Cut-Off Date (or, in
the case of the first Related Period, the date hereof) to the next Weekly
Cut-Off Date, and the Related Period with respect to any Weekly Report means the
Related Period ending on the Weekly Cut-Off Date immediately prior to the date
of such Weekly Report.
If the amount determined pursuant to clause (iii) above is a positive
number, BII agrees to pay to the Company an amount equal to the amount set forth
in clause (ii) above, on the related Weekly Settlement Date in immediately
available funds. If the amount determined pursuant to clause (iii) above is a
negative number, BII agrees to pay to the Company an amount equal to the amount
set forth in clause (i) above, on the related Weekly Settlement Date in
immediately available funds. Concurrently with such payment, in accordance with
(and subject to the limitations of) Section 2.03(a)(iii)), the Subordinated Note
will be increased by such amount and/or shares of Preferred Shares will be
issued to BII.
(c) All payments under this Agreement shall be made not later
than 2:30 p.m., Atlanta time, on the date specified therefor in lawful
money of the United States of America in same day funds and (i) if to
any Seller, to the respective bank account designated in writing by
such Seller to the Company and (ii) if to the Company, to the bank
account designated in writing by the Company to the Sellers. Amounts
not paid when due shall bear interest at a rate equal at all times to
the Alternate Base Rate plus 2%, payable on demand.
(d) Whenever any payment to be made under this Agreement shall
be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
SECTION 2.04. No Repurchase. Notwithstanding anything herein to the
contrary, no Seller shall have any right or obligation under this Agreement, by
implication or otherwise, to repurchase from the Company any Purchased
Receivables or to rescind or otherwise retroactively affect any purchase of any
Purchased Receivables after the Purchase Date relating thereto.
SECTION 2.05. Dilutive Credits. The Sellers may accept returns of goods
for full or partial credit or make a daily adjustment in the principal amount
payable with respect to a customer who has purchased merchandise or services on
credit in accordance with the Policies. Such adjustment shall be made by the
applicable Seller on each Date of Processing. Such adjustment shall be in an
amount equal to the aggregate amount of all Dilutive Credits on such Date of
Processing. Dilutive Credits shall be subtracted from the Outstanding Balance of
Eligible Receivables appearing on the next Weekly Report.
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SECTION 2.06. Certain Charges. Each of the Sellers and the Company
agrees that late charge revenue, other fees and charges and other similar items,
whenever created, accrued in respect of Purchased Receivables shall be the
property of the Company notwithstanding the occurrence of a Purchase Termination
Event and all Collections with respect thereto shall continue to be allocated
and treated as Collections in respect of Purchased Receivables.
SECTION 2.07. Termination. Each Seller's respective obligation to sell
the Receivables under this Agreement shall terminate on the date (the "Purchase
Termination Date") that is the earlier of (a) the termination of the Liquidity
Commitments pursuant to the Loan Agreement and (b) the date on which the
Company's obligation to purchase Receivables shall terminate pursuant to Section
6.01.
SECTION 2.08. Limitation on Liability of the Sellers and Others. No
recourse under or upon any obligation or covenant of this Agreement, or the
Receivables, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, shareholder, employee, agent, officer or
director, in its capacity as such, past, present or future, of any Seller or of
any successor corporation, either directly or through such Seller, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Agreement and the obligations issued hereunder are solely corporate obligations,
and that no such personal liability whatever shall attach to, or is or shall be
incurred by the incorporators, shareholders, employees, agents, officers or
directors, as such, of any Seller or of any successor corporation, or any of
them, under or by reason of the obligations, covenants or agreements contained
in this Agreement or in the Receivables or implied therefrom; and that any and
all such personal liability, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, shareholder, employee, agent, officer or director, as
such, under or by reason of the obligations or covenants contained in this
Agreement or in the Receivables or implied therefrom, are hereby expressly
waived and released as a condition of, and as consideration for, the execution
of this Agreement provided, however, that this provision shall not protect any
such Person against any liability which would otherwise be imposed by reason of
wilful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties hereunder. Each
Seller and any director or officer or employee or agent of such Seller may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. No Seller
shall be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties to service the Receivables in accordance
with this Agreement if such appearance, prosecution or defense may, in such
party's reasonable opinion, cause it to incur any expense or liability. In
furtherance of the foregoing, to the extent permitted by applicable law, the
Company and the Sellers agree that (a) no Seller shall be entitled to (or to an
accounting for) any surplus or be liable for any deficiency resulting from
actual Collections of Receivables and (b) each Seller irrevocably waives any
right or equity of redemption in respect of the Receivables.
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SECTION 2.09. Inclusion of Additional Sellers. At any time and from
time to time, upon the prior delivery to the Company and the Agent of a
certificate (together with an executed copy of the agreement attached thereto in
accordance with clause (ii) below, and "Additional Seller Certificate") to that
effect, BII may designate one or more of its then wholly owned Subsidiaries as
(and, upon approval by the Agent of the addition and the materials required to
be delivered under this Section 2.09 and the Agent's receipt of confirmation
that the addition will not cause the rating on any Commercial Paper Notes to be
reduced or withdrawn, such Subsidiaries shall automatically, without any further
notice or other action, become) Sellers under this Agreement (each such Seller
being an "Additional Seller"); whereupon this Agreement shall automatically,
without any further notice or other action, be amended, supplemented or
otherwise modified, to the extent necessary, to reflect the information
contained in such Additional Seller Certificate. Each Additional Seller
Certificate (i) shall contain the following information:
(A) the name and the state of incorporation
of the proposed Additional Seller;
(B) a statement that such proposed
Additional Seller is a wholly owned Subsidiary of
BII;
(C) a description of the business of such
proposed Additional Seller (which shall be similar
or related to one or more of the businesses
conducted by any of the Sellers (other than the
Additional Sellers) on the Effective Date,
including, without limitation those businesses
that, in the ordinary course, (a) purchase or use
goods manufactured or processed and services
rendered by, or (b) manufacture goods or render
services purchased or used by, any business in
which any such other Seller is so engaged on the
Effective Date) and a description of the types of
Obligors whose Receivables will be sold to the
Company by such proposed Additional Sellers (which
shall be substantially similar to the types of
Obligors whose Receivables are being purchased by
the Company from the Sellers at that time);
(D) the date (an "Additional Seller Date")
on which such proposed Additional Seller is to
become an Additional Seller; and
(E) certification as to the matters
contained in the certificates of the Chief
Financial Officer of BII delivered pursuant to
Section 6.1.18 of the Loan Agreement;
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(ii) shall attach an agreement between such proposed Additional Seller, BII and
the Company, for their benefit and the benefit of the other Sellers, pursuant to
which such proposed Additional Seller:
(A) shall have certified that it has satisfied all conditions
as to itself, its activities and its property contained in Section 3.01
(substituting, for purposes of this clause (A), the related Additional
Seller Date for the Effective Date referred to therein);
(B) shall furnish all information as to itself, its activities
and its property required by this Agreement (including the information
required under each applicable Schedule);
(C) shall agree to be bound by the terms, conditions and
provisions of this Agreement and the Subordination Agreement, Consent
and Acknowledgment purporting to bind the Sellers;
(D) shall make on and as of such Additional Seller Date all
representations and warranties, as to itself, its activities and its
property, contained in Sections 4.01 and 4.02; and
(iii) shall attach an opinion satisfactory in form and substance to the Agent as
to the matters set forth in the opinion required to be delivered pursuant to
Section 6.1.17 of the Loan Agreement. The consent of the Agent to the addition
of a Seller shall not be withheld if (i) such proposed Additional Seller's
Receivables balance as of a date not earlier than 10 days prior to the delivery
of the Additional Seller Certificate does not exceed 2.0% of the Outstanding
Balance of all Receivables as of such date (an "Immaterial Seller"); (ii) BII is
the Servicer at such time; and (iii) the types of Obligors which are obligated
with respect to such proposed Additional Seller's Receivables are substantially
similar to types of Obligors which are obligated with respect to the Receivables
then being purchased by the Company from the Sellers; provided further that in
the event that any such Immaterial Seller's Receivables balance shall during the
12 months immediately following such Additional Seller Date, exceed 5% of the
Outstanding Balance of all Receivables, such excess amount shall not be
classified as Eligible Receivables until the expiration of such 12 month period.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to the Effectiveness of this
Agreement. The effectiveness of this Agreement is subject to the conditions
precedent that (a) each of the other Purchase Documents shall be in full force
and effect and (b) the conditions set forth below shall have been satisfied on
or before the Effective Date:
(i) the Company shall have received copies of duly
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adopted resolutions of the Board of Directors of each Seller
as in effect on the Effective Date and in form and substance
satisfactory to the Company, authorizing this Agreement, the
documents to be delivered by such Seller hereunder and the
transactions contemplated hereby, certified by the Secretary
or Assistant Secretary of such Seller;
(ii) the Company shall have received duly executed
certificates of the Secretary or an Assistant Secretary of
each Seller, dated the day of the Effective Date and in form
and substance satisfactory to the Company, certifying the
names and true signatures of the officers authorized on behalf
of such Seller to sign this Agreement or any instruments or
documents in connection with this Agreement;
(iii) the Concentration Account and the Lockbox
Accounts shall have been established in the name of the
Company, and lockbox arrangements made in connection with the
1994 Liquidity Agreement shall have been terminated as to the
collateral agent under such agreement;
(iv) the Company shall have received (i) duly
executed UCC-1 financing statements from each of the Sellers
with respect to the Receivables and the Related Security for
filing in such manner and in such jurisdictions as are
necessary or desirable to perfect the Company's ownership
interest thereof under the UCC; (ii) duly executed UCC
statements assigning to the Agent any UCC-1 financing
statements filed in connection with the Prior Sale Agreement
against BII in favor of the Company; and (iii) all other
action necessary or desirable, in the opinion of the Company,
to perfect the Company's ownership of the Purchased
Receivables shall have been duly taken;
(v) each Seller shall have delivered to the
Company a microfiche or other tangible evidence acceptable to
the Company showing as of a date acceptable to the Company
prior to the Effective Date the Obligors whose Receivables are
to be transferred to the Company and the balance of the
Receivables with respect to each such Obligor as of such date;
(vi) the Company shall have received reports of
UCC and other searches of each Seller with respect to the
Receivables and the Related Security reflecting the absence of
Liens thereon, except Liens created in connection with the
sale by the Company of an interest in the Purchased
Receivables and except for Liens as to which the Company has
received UCC termination statements; and
(vii) the Company shall have modified the existing
lockbox arrangements with the Lockbox Banks to reflect the
transactions contemplated by the new Transaction Documents.
SECTION 3.02. Conditions Precedent to the Company's Purchases of
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Receivables. The obligation of the Company to accept and pay for each Receivable
and the Related Security on each Payment Date (including the Effective Date)
from the Sellers shall be subject to the further conditions precedent that on
such Payment Date:
(a) the following statements shall be true (and the acceptance
by each Seller of their respective Purchase Prices for any Receivables
on any Payment Date shall constitute a representation and warranty by
such Seller that on such Payment Date such statements are true):
(i) the representations and warranties of each
Seller contained in Sections 4.01 and 4.02 shall be true and
correct in all material respects on and as of such Payment
Date as though made on and as of such date; and
(ii) no Purchase Termination Event or Incipient
Purchase Termination Event with respect to any Seller shall
have occurred and be continuing;
(b) the Company shall be satisfied that each Seller's systems,
procedures and record keeping relating to the Purchased Receivables are
in all respects sufficient and satisfactory in order to permit the
purchase and administration of the Purchased Receivables in accordance
with the terms and intent of this Agreement;
(c) the Company shall have received payment in full of all
amounts for which payment has been requested by the Company pursuant to
Article VII or Section 9.05;
(d) the Company shall have received such other approvals,
opinions or documents as the Company may reasonably request;
(e) each Seller shall have complied with all its covenants and
satisfied all its obligations under this Agreement required to be
complied with or satisfied as of such date; and
(f) the Company shall be satisfied that, after giving effect
to the transactions contemplated to occur on such Purchase Date, no
Purchase Termination Event or Incipient Purchase Termination Event with
respect to the Company shall have occurred and be continuing.
SECTION 3.03. Conditions Precedent to Sellers' Obligations on Effective
Date. The obligations of each Seller on the Effective Date shall be subject to
the conditions precedent that such Seller shall have received on or before the
Effective Date the following, each dated the day of the Effective Date and in
form and substance satisfactory to such Seller:
(a) a copy of duly adopted resolutions of the Board of
Directors of the Company authorizing this Agreement, the documents to
be delivered by the Company
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hereunder and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of the Company; and
(b) a duly executed certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers authorized on its behalf to sign this Agreement and the
other documents to be delivered by it hereunder.
SECTION 3.04. Conditions Precedent to Sellers' Obligations on Payment
Dates. The obligations of each Seller on any Payment Date (including the
Effective Date) shall be subject to the further conditions precedent that the
representations and warranties of the Company contained in Section 4.01 are true
and correct on and as of such Payment Date as though made on and as of such date
(and the payment by the Company of the Purchase Price shall constitute a
representation and warranty by the Company that on such date such statements are
true).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Parties. The
Company represents and warrants as to itself, and each Seller represents and
warrants as to itself, as follows:
(a) Organization and Good Standing. It (i) is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on
the conduct of its business, (ii) has the requisite corporate power and
authority to effect the transactions contemplated hereby and (iii) has
all requisite corporate power and authority and the legal right to own,
sell, pledge, mortgage and operate its properties, and to conduct its
business as now or currently proposed to be conducted.
(b) Due Authorization and No Conflict. The execution, delivery
and performance by it of this Agreement, and all instruments and
documents to be delivered hereunder by it, and the transactions
contemplated hereby and thereby, (i) are within its corporate powers,
have been duly authorized by all necessary corporate action, including
the consent of shareholders where required, and do not (A) contravene
its charter or by-laws, (B) violate any law or regulation or any order
or decree of any court or governmental instrumentality, (C) conflict
with or result in the breach of, or constitute a default under, any
material indenture, mortgage or deed of trust binding on or affecting
it or any of its respective subsidiaries or any of its properties or
(D) result in or require the creation or imposition of any Lien,
including pursuant to any agreement or instrument referred to in clause
(C) above, except as created or imposed hereunder or under the Security
Agreement, and no transaction contemplated hereby requires compliance
on its part with any bulk sales act or similar law and (ii) do not
require the consent, authorization by or approval of or notice to or
filing or registration with, any
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governmental body, agency, authority, regulatory body or any other
Person other than those referred to in Article III hereof, which have
been obtained. This Agreement has been duly executed and delivered by
the Company and each Seller and constitutes its legal, valid and
binding obligations enforceable against it in accordance with its
terms. The Subordinated Note has been duly executed and delivered by
the Company and constitutes its legal, valid and binding obligation
enforceable against it in accordance with its terms. The Preferred
Stock has been duly authorized and against payment therefor as provided
herein will be validly issued, fully paid and nonassessable.
(c) No Proceedings. There is no action, suit or proceeding
pending or, to its knowledge threatened against or affecting it or any
of its subsidiaries before any court, governmental agency or arbitrator
that is reasonably likely to be determined adversely to such
corporation and that, if so determined, would materially and adversely
affect its condition (financial or otherwise), business, operations,
properties or assets or that purports to affect the legality, validity
or enforceability of this Agreement, and none of the transactions
contemplated hereby is or is threatened to be restrained or enjoined
(temporarily, preliminarily or permanently).
(d) Accounting Treatment. It will not prepare any financial
statements that shall account for the transactions contemplated hereby,
nor will it in any other respect account for the transactions
contemplated hereby, in a manner that is inconsistent with the
Company's ownership interest in the Receivables.
SECTION 4.02. Additional Representations of the Sellers. Each Seller
additionally represents and warrants as follows:
(a) Eligible Receivables. Each Receivable sold by any Seller
hereunder and designated on a Weekly Report to be an Eligible
Receivable will be, at its respective Purchase Date, an Eligible
Receivable.
(b) Sale of Receivables. Such Seller is the sole legal and
beneficial owner of its Receivables, and upon the sale of each
Purchased Receivable of such Seller, the Company will become the sole
legal and beneficial owner of the Purchased Receivables, free and clear
of any Liens (except for Liens granted by such Seller in favor of the
Company and the security interest in such Purchased Receivables granted
by the Company to other Persons), and no effective financing statement
or other instrument similar in effect covering all or any part of such
Purchased Receivable, Related Security or Collections with respect
thereto will at such time be on file in any filing or recording office
except such as have been filed in favor of the Company in accordance
with this Agreement.
(c) No Material Misstatements. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of
any Seller to the Company in connection with the negotiation of any
Purchase Document or included therein or
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delivered pursuant thereto contained, contains or will contain any
material misstatement of fact or omitted, omits or will omit to state
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 misleading. Any reaffirmation of the foregoing sentence is subject
to any change in the facts and conditions on which such information,
report, financial statement, exhibit or schedule is based, which
changes are required or permitted under this Agreement; provided,
however, that in all cases no information, report, financial statement,
exhibit or schedule furnished by or on behalf of any Seller to the
Company in connection with the negotiation of any Purchase Document or
included therein or delivered pursuant thereto contained at the time
made any untrue statement of a material fact or omitted at the time
made to state a material fact (known to any such Person in the case of
any document not furnished by it) necessary in order to make the
statement contained herein or therein not misleading.
(d) Location of Office and Records. The chief place of
business and chief executive office of each Seller and the only offices
where each Seller keeps all its books, records and documents evidencing
Purchased Receivables are located at the locations listed on Schedule V
hereto.
(e) Trade Names. Set forth opposite the name of each Seller in
Schedule III is a complete and accurate list of the trade names used by
such Seller during the six-year period preceding the date of this
Agreement.
(f) Financial Statements. Each Seller has heretofore furnished
to the Company copies of all periodic and other reports, proxy
statements and other materials filed by BII or by any member of the
Parent Group or by it with the Securities and Exchange Commission or
with any national securities exchange since September 28, 1996. All
financial statements contained therein present fairly the financial
information contained therein as of the dates thereof and were prepared
in accordance with GAAP. None of the practices set forth in the
Policies conflict with GAAP.
(g) No Consent. No action, consent or approval of,
registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the transactions
contemplated by this Agreement, except such as have been made or
obtained and are in full force and effect.
(h) Company Can Perform. The Company has been furnished with
all materials and data necessary to permit immediate collection of the
Purchased Receivables without the participation of any Seller in such
collection.
(i) No Adverse Change. Since June 28, 1997, there has been no
change in the business, operations, properties, assets or condition
(financial or otherwise) of BII and its Subsidiaries which has been,
either in any case or in the aggregate, materially adverse to BII and
its Subsidiaries taken as a whole, other than changes contemplated by
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or disclosed in any of the Purchase Documents or in any Schedules
attached thereto.
(j) No Previous Debt. Immediately prior to consummation of the
transactions contemplated hereby on the Effective Date, the Company had
no outstanding indebtedness to the Sellers, other than the Subordinated
Note.
(k) Accounts. Set forth in Schedule IV is a complete and
accurate description of the Concentration Account, each Lockbox
Account, and each bank account maintained by any of the Sellers, the
Servicer or the Company for the purpose of receiving collections with
respect to Purchased Receivables. There are no other bank accounts
maintained by any of such corporations for any such or similar
purposes. Each of the Concentration Bank Letter and the Lockbox Bank
Letters continues to be the legal, valid and binding obligation of the
parties thereto, enforceable against such parties in accordance with
its terms, and each Seller acknowledges that all cash and other
proceeds of the Collateral will continue to be deposited in a
Collection Account and are subject to the terms and conditions of this
Agreement.
(l) Solvency. Both prior to and after giving effect to the
transactions occurring on the Effective Date and after giving effect to
each subsequent transaction contemplated hereunder, (i) the fair value
of the assets of such Seller at a fair valuation will exceed the debts
and liabilities, subordinated, contingent or otherwise, of such Seller;
(ii) the present fair salable value of the property of such Seller will
be greater than the amount that will be required to pay the probable
liability of such Seller on its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (iii) such Seller will be able
to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured;
and (iv) such Seller will not have unreasonably small capital with
which to conduct the business in which it is engaged as such business
is now conducted and is proposed to be conducted. No Seller intends to,
nor believes that it will, incur debts beyond its ability to pay such
debts as they mature, taking into account the timing of and amounts of
cash to be received by it and the timing of the amounts of cash to be
payable on or in respect of its indebtedness.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Sellers. So long as the
Company shall have any interest in any Purchased Receivable or until the
Purchase Termination Date, whichever is later, each Seller shall, unless the
Company otherwise consents in writing:
(a) Statements, Reports, etc. Deliver to the Company:
(i) promptly after the same become publicly
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available, copies of all periodic and other reports, proxy
statements and other materials filed by it with the Securities
and Exchange Commission, 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, as the case may be;
(ii) concurrently with any delivery of reports
under (i) above, and on each Monthly Settlement Date a
certificate of a Financial Officer, certifying such statements
and certifying that no Purchase Termination Event or Incipient
Purchase Termination Event has occurred, or, if such an event
has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect
thereto; and
(iii) promptly, from time to time, such other
information regarding the operations, business affairs and
financial condition of such Seller, or compliance with the
terms of any Purchase Document, as the Company may reasonably
request.
Each financial statement of the Company will state that the Company is
a separate corporate entity with its own separate creditors and that such
creditors will be entitled to be satisfied out of the Company's assets prior to
any value in the Company becoming available to the Company's equity holders or
the creditors of such equity holders.
(b) Compliance with Laws, etc. Comply in all material respects
with all applicable laws, rules, regulations, directions of any
Governmental Authority and orders applicable to the Purchased
Receivables where failure to so comply could reasonably be expected to
have an adverse impact on the amount of Collections thereunder;
provided, however, that each of the Sellers may contest any act,
regulation, order, decree or direction in any reasonable manner which
shall not adversely affect the rights of the Company in the Purchased
Receivables. Each Seller will comply, in all material respects, with
its obligations under contracts with Obligors relating to the Purchased
Receivables.
(c) Preservation of Corporate Existence. Do or cause to be
done all things necessary to preserve, renew and keep in full force and
effect its legal existence and maintain such legal existence separate
from that of the Company.
(d) Visitation Rights. At any reasonable time during normal
business hours and from time to time permit (i) the Company, or any of
its agents or representatives, (A) to examine and make copies of and
abstracts from the records, books of account and documents (including
computer tapes and disks) of each Seller relating to the Purchased
Receivables hereunder and (B) following the termination of the
appointment of BII as Servicer with respect to the Purchased
Receivables, to be present at the offices and properties of each Seller
to administer and control the Collection of the Purchased Receivables
and (ii) the Company, or any of its agents or representatives, to
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visit the properties of each Seller for the purpose of examining such
records, books of account and documents, and to discuss the affairs,
finances and accounts of each Seller relating to the Purchased
Receivables or such Seller's performance hereunder with any of its
officers or directors and with its independent certified public
accountants.
(e) Keeping of Records and Books of Account. Maintain and
implement, or cause to be maintained or implemented, administrative and
operating procedures reasonably necessary or advisable for the
collection of amounts owing on all Purchased Receivables, and, until
delivery to the Company, keep and maintain, or cause to be kept and
maintained, all documents, books, records and other information
reasonably necessary or advisable for the collection of amounts owing
on all such Purchased Receivables.
(f) Location of Records. Keep its chief place of business and
chief executive office, and the offices where it keeps the records
concerning the Purchased Receivables (and all original documents
relating thereto) at the locations referred to for it on Schedule V
hereto or upon 30 days' prior written notice to the Company, at such
other locations in a jurisdiction where all action required by Section
5.01(r) shall have been taken and completed and be in full force and
effect.
(g) Computer Files. At its own cost and expense, (i) retain
the electronic ledger used by such Seller as a master record of the
Obligors and copies of all documents relating to each Obligor as
custodian for the Company and other Persons with interests in the
Purchased Receivables and (ii) mark the computer tape or other physical
records of the Purchased Receivables to the effect that interests in
the Purchased Receivables from time to time existing with respect to
the Obligors listed thereon have been conveyed to the Company and that
the Company has sold an interest therein and has granted a security
interest in the Company's retained interest therein.
(h) Policies. Perform its obligations in accordance with and
comply in all material respects with the Policies and will not change
or modify the Policies, except insofar as any change or failure so to
comply or conform would not adversely affect the Collections or the
amount and collections of Receivables or the timing and receipt thereof
or the rights or interests of the Company or if such changes are
necessary under any Requirement of Law. Except as limited by the
preceding sentence, the Sellers shall be free to change the terms and
provisions of the Policies in a commercially reasonable manner
consistent with prudent commercial practices. In furtherance of the
foregoing, each Seller shall give the Company 10 days' advance notice
of any change in the Policies, except that if such change is necessary
under any Requirement of Law prior to the expiration of such 10-day
period, such Seller shall give advance notice of any such change as
soon as practicable.
(i) Weekly Reports and Monthly Settlement Statements. Furnish
to the Company (or provide to the Company such information as shall be
required by it to
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prepare) Weekly Reports on each Weekly Settlement Date and Monthly
Settlement Statements on each Monthly Settlement Statement Date, as
well as financial statements, cash flow reports and other records that
show the performance of the Purchased Receivables and such other
reports as may be reasonably requested by the Company.
(j) Obligations and Taxes. Pay its Indebtedness and other
material obligations promptly before the same shall become delinquent
or in default and in accordance with their terms and pay and discharge
promptly when due all material 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 that, if unpaid, 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 the validity or amount
thereof shall be contested in good faith by appropriate proceedings and
such Seller shall have set aside on its books adequate reserves with
respect thereto.
(k) Collections. Instruct all Obligors in respect of Purchased
Receivables to make any payments with respect to any Receivables only
to a Lockbox Account or by wire transfer to the Concentration Account
and comply in all material respects with procedures with respect to
Collections specified from time to time by the Company.
(l) Furnishing Copies, etc. Furnish to the Company:
(i) within two Business Days of the Company's
request, a certificate of the chief financial officer of each
Seller certifying, as of the date thereof, that no Purchase
Termination Event referred to in Section 6.10(a) has occurred
and is continuing and setting forth the computations used by
the chief financial officer of the applicable Seller, in
making such determination;
(ii) promptly upon obtaining knowledge of the
occurrence of any Purchase Termination Event or Incipient
Purchase Termination Event, written notice thereof setting
forth details of such Purchase Termination Event or Incipient
Purchase Termination Event and a statement of the chief
financial officer of the applicable Seller, setting forth the
action that such Seller proposes to
take or has taken with respect thereto;
(iii) promptly following request therefor, such
other information, documents, records or reports with respect
to the Purchased Receivables or the conditions or operations,
financial or otherwise, of the applicable Seller, as the
Company may from time to time reasonably request;
(iv) immediately after the occurrence thereof,
written notice of any event of default or default under any
other Purchase Document;
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(v) promptly upon the chief legal officer
obtaining knowledge of (a) the institution of or nonfrivolous
threat of any action, suit, proceeding, governmental
investigation or arbitration against or affecting such Seller
or (b) any material development in any such action, suit,
proceeding, governmental investigation or arbitration, which,
in either case, if adversely determined against such Seller,
might materially adversely affect (a) the business,
operations, property, assets or condition (financial or
otherwise) of such Seller, (b) the validity or enforceability
of, or the ability of such Seller to perform its obligations
under, the Purchase Documents or (c) the validity,
enforceability or priority of Liens created by the grant of a
security interest in the Purchased Receivables by the Company
to other Persons, written notice thereof;
(vi) written notice of any other development that
has resulted in, or could reasonably be anticipated to result
in, a material adverse effect on (a) the business, operations,
property, assets or financial condition of such Seller, (b)
the validity or enforceability of, or the ability of such
Seller to perform its obligations under, the Purchase
Documents or (c) the validity, enforceability or priority of
Liens created by the grant of a security interest in the
Purchased Receivables to other Persons; and
(vii) promptly upon determining that any Purchased
Receivable designated as an Eligible Receivable on the
applicable Weekly Report was an Ineligible Receivable as of
the date provided therefor, written notice of such
determination.
(m) Obligations with Respect to Obligors and Receivables. Take
all actions on its part reasonably necessary to maintain in full force
and effect its rights under all contracts relating to the Purchased
Receivables.
(n) Chattel Paper. (i) Maintain original copies of all chattel
paper evidencing Receivables, including any purchase agreement, at any
of the locations specified for such purpose on Schedule V; (ii) upon
the request of the Company, move and thereafter maintain all such
original copies to a single location; (iii) upon the request of the
Company, deliver all such original copies to the Company; and (iv) take
any action, at its expense, reasonably requested by the Company
necessary or desirable to protect or more fully evidence any security
interest granted by the Company in any chattel paper.
(o) Receivables Processing Facility; Storage Facility. BII
shall maintain the facilities from which it services the Purchased
Receivables in such facilities, present condition, ordinary wear and
tear excepted, or shall maintain another facility of similar quality,
security and safety as BII may select from time to time. BII shall make
all property tax payments, lease payments and other payments with
respect to such facility,
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including payments in respect of any indebtedness secured by such
facility, whether BII shall be the Servicer or a Successor Servicer
shall have been appointed. BII shall (i) ensure that any Successor
Servicer shall have complete and unrestricted access, at BII's expense,
to such facility and all computers and other systems relating to the
servicing of the Purchased Receivables, (ii) use its best efforts to
retain the employees based at such facility to provide assistance to
any Successor Servicer after the appointment of such Successor Servicer
and (iii) continue to store on a daily basis all backup files relating
to the Purchased Receivables and the servicing of the Purchased
Receivables at Burlington Terminal, Burlington, North Carolina, or
another storage facility of similar quality, security and safety as BII
may select from time to time, in the case of each of clauses (i), (ii)
and (iii) until the earlier of (A) the payment in full in cash of the
Advances and other amounts payable to the Lenders, (B) the receipt by
the Company of all Collections in respect of all Purchased Receivables,
and (c) the Successor Servicer advising BII that it is able to perform
its obligations under this Agreement without the assistance of BII.
(p) Trade Names. Promptly notify the Company and the
Collateral Agent of any new trade names of any Seller.
(q) Responsibilities of the Sellers. Notwithstanding anything
herein to the contrary, (i) each Seller shall perform all its
obligations under the Policies related to the Purchased Receivables to
the same extent as if such Purchased Receivables had not been
transferred to the Company hereunder, (ii) the exercise by the Company
of any of its rights hereunder shall not relieve any Seller of its
obligations with respect to such Purchased Receivables (other than the
obligations of BII as Servicer if the Company has terminated the
appointment of BII as the Servicer) and (iii) except as provided by
law, the Company shall not have any obligation or liability with
respect to any Purchased Receivables, nor shall the Company be
obligated to perform any of the obligations or duties of any Seller
thereunder.
(r) Further Action. In addition to the foregoing:
(i) Each Seller agrees that from time to time, at
its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that
may be necessary or desirable in such Seller's reasonable
judgment or that the Company may reasonably request, in order
to protect or more fully evidence the Company's right, title
and interest in the Purchased Receivables, or to enable the
Company to exercise or enforce any of its rights in respect
thereof. Without limiting the generality of the foregoing,
each Seller will upon the request of the Company (A) execute
and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as
may be necessary or, in the opinion of the Company, advisable,
(B) indicate on its books and records that the Purchased
Receivables have been purchased by the Company, and provide to
the Company, upon request, copies of any such records, and (C)
obtain the agreement of any Person having a Lien on
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any Receivables owned by any Seller (other than any Lien
created or imposed hereunder or under the Security Agreement)
to release such Lien upon the purchase of any such Receivables
by the Company.
(ii) Each Seller hereby irrevocably authorizes the
Company to file one or more financing or continuation
statements, and amendments thereto, relative to all or any
part of the Purchased Receivables sold or to be sold by such
Seller without the signature of such Seller.
(iii) If any Seller fails to perform any of its
agreements or obligations under this Agreement, the Company
may (but shall not be required to) perform, or cause
performance of, such agreements or obligations, and the
expenses of the Company incurred in connection therewith shall
be payable by such Seller as provided in Section 9.05.
(iv) Each Seller agrees that, whether or not a
Purchase Termination Event has occurred:
(A) the Company (and its assignees) shall
have the right at any time to (x) notify the
respective Obligors of the Company's ownership of
the Purchased Receivables and may direct that
payment of all amounts due or to become due under
the Purchased Receivables be made directly to the
Company or its designee or (y) give notice, or
require that any Seller, at such Seller's expense,
as the case may be, give notice, of such ownership
to each such Obligor and direct that all payments
be made directly to the Company or its designee;
(B) the Company (and its assignees) shall
have the right to (x) sue for collection on any
Purchased Receivables or (y) sell any Purchased
Receivables to any Person for a price that is
acceptable to the Company. If required by the
terms of Sections 9-504 or 9-505 of the UCC, the
Company (and its assignees) may offer to sell any
Purchased Receivable to any Person, together, at
its option, with all other Receivables created by
the Obligor under such Purchased Receivable. Any
such Purchased Receivable shall cease to be a
Receivable for all purposes under this Agreement
as of the effective date of such sale;
(C) each Seller shall, upon the Company's
request and at such Seller's expense, or upon
termination of the Company's obligations pursuant
to Section 6.01, (x) assemble all such Seller's
documents, instruments and other records
(including credit files and computer tapes or
disks) that (1) evidence or will evidence or
record Receivables sold by such Seller and (2) are
otherwise necessary or desirable to effect
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Collections of such Purchased Receivables
(collectively, the "Documents") and (y) deliver
the Documents to the Company or its designee at a
place designated by the Company;
(D) each Seller hereby irrevocably
authorizes the Company or its designee to take any
and all steps in such Seller's name and on such
Seller's behalf necessary or desirable, in the
reasonable opinion of the Company, to collect all
amounts due under the Purchased Receivables,
including endorsing such Seller's name on checks
and other instruments representing collections,
enforcing the Purchased Receivables and exercising
all rights and remedies in respect thereof; and
(E) upon request of the Company, or upon
termination of the Company's obligations pursuant
to Section 6.01, each Seller will (x) deliver to
the Company all licenses, rights, computer
programs, related material, computer tapes, disks,
cassettes and data necessary to the immediate
collection of the Purchased Receivables by the
Company, or a party designated by the Company,
with or without the participation of any Seller
and (y) make such arrangements with respect to the
collection of the Purchased Receivables as may be
reasonably required by the Company.
SECTION 5.02. Negative Covenants of the Sellers. So long as the Company
shall have any interest in any Purchased Receivables or until the Purchase
Termination Date shall have occurred, whichever is later, each Seller shall not,
unless the Company otherwise consents in writing:
(a) Liens. Except as otherwise herein provided, sell, assign
(by operation of law or otherwise) or otherwise dispose of, or create
or suffer to exist any Lien upon or with respect to, any Purchased
Receivables, or assign any right to receive proceeds in respect thereof
except for Liens created or imposed hereunder or under the Security
Agreement.
(b) Extension or Amendment of Receivables. Extend, amend or
otherwise modify, or attempt or purport to extend, amend or otherwise
modify, the terms of any Purchased Receivables, except in accordance
with the terms of the Policies.
(c) Change in Payment Instructions to Obligors. Instruct the
Obligors of any Purchased Receivables to make any payments with respect
to any Receivables other than to a Lockbox Account or by wire transfer
to the Concentration Account.
(d) Change in Name. Change its name, identity or corporate
structure in any manner which would or might make any financing
statement or continuation statement relating to this Agreement
seriously misleading within the meaning of Section
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9-402(7) of the UCC.
(e) Modification of Ledger. Delete or otherwise modify the
marking on the electronic ledger referred to in Section 5.01(g).
(f) Accounting of Purchases. Prepare any financial statements
which shall account for the transactions contemplated hereby (other
than capital contributions contemplated hereby) in any manner other
than as sales of the Purchased Receivables by such Seller to the
Company or in any other respect account for or treat the transactions
contemplated hereby (including for accounting purposes and, where taxes
are not consolidated, for tax reporting purposes, except as required by
law) (other than capital contributions contemplated hereby) in any
manner other than as sales of the Purchased Receivables by such Seller
to the Company.
ARTICLE VI
PURCHASE TERMINATION EVENTS
SECTION 6.01. Purchase Termination Events. If any of the following
events (each, a "Purchase Termination Event") shall occur and be continuing:
(a) any representation or warranty made or deemed made by or
on behalf of any Seller under or in connection with this Agreement or
any Settlement Report or other information or report delivered by any
Seller pursuant hereto shall prove to have been false or incorrect in
any material respect when made or deemed made;
(b) any Seller shall fail to (i) perform or observe any term,
covenant or agreement contained in Section 5.01(c), 5.01(f), 5.01(g),
5.01(h), 5.01(i), 5.01(k), 5.01(l), or 5.01(n), 5.01(o), 5.01(p) or
5.01(r) or Section 5.02 or (ii) make any payment or deposit to be made
by it hereunder when the same becomes due and payable;
(c) any Seller shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed and any such failure shall remain unremedied
for ten days;
(d) any Purchase Document shall cease to be in full force and
effect or the Liquidity Commitments shall have been terminated or an
"Amortization Event" shall have occurred under the Loan Agreement;
(e) (i) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of any Seller in an
involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
which decree or order is not stayed, or any other similar relief shall
be granted under any applicable federal or state law or (ii) an
involuntary case is commenced against any Seller
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under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Seller, or over all or a substantial part of its
respective property, shall have been entered; or an interim receiver,
trustee or other custodian of any Seller for all or a substantial part
of its respective property is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any
substantial part of the property of any Seller, and the continuance of
any such events in subclause (ii) for 60 days unless dismissed, bonded
or discharged;
(f) any Seller shall have an order for relief entered with
respect to it or shall commence a voluntary case under the Bankruptcy
Code or any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or the making
by any Seller of any assignment for the benefit of creditors; or the
inability or failure of any Seller, or the admission by any Seller in
writing of its inability to pay its debts as such debts become due; or
the Board of Directors of any Seller (or any committee thereof) adopts
any resolution or otherwise authorizes action to approve any of the
foregoing;
then, and in any such event, the Company may, by notice to each Seller declare
its obligation to acquire Receivables from such Seller to be terminated,
whereupon such obligation shall forthwith be terminated; provided, however, that
upon the occurrence of a Termination Event described in paragraph (e) or (f)
above or upon termination of the Liquidity Commitments pursuant to the Loan
Agreement, the Company's obligations to purchase Receivables from the Sellers
will automatically terminate without notice to any of the Sellers (which notice
is hereby waived by each of the Sellers).
SECTION 6.02. Remedies. If a Purchase Termination Event has occurred
and is continuing the Company (and its assignees) shall have all of the rights
and remedies provided to a secured creditor or a purchaser of accounts under the
UCC by applicable law in respect thereto.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnities by the Sellers. Without limiting any other
rights that the Company may have under this Agreement or under applicable law,
each Seller hereby agrees to indemnify the Company from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) (all the
foregoing being collectively referred to as "Indemnified Amounts") arising out
of, resulting from or based on the arrangements created by, this Agreement and
the actions of the Servicer in its capacity as the Servicer, or in respect of
23
<PAGE>
any Ineligible Receivable, excluding, however, Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of the
Company. Without limiting or being limited by the foregoing, each Seller shall
pay on demand to the Company any and all amounts necessary to indemnify the
Company from and against any and all Indemnified Amounts (without duplication)
relating to or resulting from:
(a) the sale of any Purchased Receivable of any Seller that is
designated on the next Weekly Report following the sale to be an
Eligible Receivable and is determined to have been at the date of such
sale an Ineligible Receivable or any Receivable which thereafter
becomes subject to a Dilutive Credit;
(b) reliance on any representation or warranty (other than any
representation or warranty contained in Sections 4.02(c), 4.02(f) or
4.02(i) to the extent any such representation or warranty does not
relate to the Receivables) or statement made or deemed made by any
Seller (or any of its officers) under or in connection with this
Agreement, in any certificate delivered pursuant to this Agreement or
in any other Transaction Document that, shall have been false or
incorrect in any material respect when made or deemed made;
(c) the failure by any Seller to comply with any applicable
law, rule or regulation with respect to any Purchased Receivable, or
the nonconformity of any Receivable with any such applicable law, rule
or regulation;
(d) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Purchased Receivables;
(e) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Purchased Receivable of any Seller (including, without
limitation, a defense based on such Purchased Receivable not being a
legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms or any other event or circumstance that
would give rise to a Dilutive Credit) or any other claim resulting from
the sale of the merchandise or services related to any such Purchased
Receivable or the furnishing or failure to furnish such merchandise or
services;
(f) any failure of any Seller to perform its duties or
obligations under this Agreement;
(g) any products liability claim arising out of or in
connection with merchandise, insurance or service that are the subject
of any Receivable;
(h) the commingling of Collections of Purchased Receivables at
any time with other funds;
24
<PAGE>
(i) any investigation, litigation or proceeding in respect of
this Agreement or any Receivable;
(j) the payment by the Company of any taxes owed by any of the
Sellers, including federal, state or local income taxes, excise taxes
or business taxes; or
(k) any current or future intangible property taxes, charges
or similar levies imposed on the Company or any Person to whom the
Company has an indemnification obligation with respect thereto that
arise from or otherwise relate to the ownership of the Receivables or
any interest therein.
Notwithstanding the foregoing, no Seller shall under any circumstances indemnify
the Company for any Indemnified Amounts that result from a default by an Obligor
with respect to any Receivables, other than as described in clause (e) above or
resulting from the circumstances described in clause (a) or (f) above. The
indemnity under clause (a) above shall on any day equal (x) with respect to
Receivables that have become subject to Dilutive Credits on such day, the
aggregate amount of any such Dilutive Credits and (y) with respect to
Receivables that have been determined on such day to have been Ineligible
Receivables at the date of sale thereof, the lesser of (a) the face amount of
such Ineligible Receivables and (b) the difference between (i) the aggregate
amount of outstanding payment obligations of the Company pursuant to the terms
of the Loan Agreement (other than payment obligations to Affiliates of the
Company) and (ii) the aggregate amount of cash Collections that are available
for distribution on such day from the Collection Deposit Account. All
Indemnified Amounts paid to the Company shall be deposited in the Collection
Deposit Account for application pursuant to the terms thereof.
SECTION 7.02. Indemnities by the Company. Without limiting any other
rights that any Seller may have hereunder or under applicable law, the Company
hereby agrees to indemnify each Seller from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) arising out of or
resulting from any breach of contract by the Company or such Seller's reliance
on any representation or warranty made by the Company in this Agreement, in any
certificate delivered pursuant to this Agreement or in any other Transaction
Document that, shall have been false or incorrect in any material respect when
made or deemed made.
ARTICLE VIII
SUBORDINATED NOTE; PREFERRED STOCK
SECTION 8.01. Subordinated Note. The Company has issued to BII a
subordinated note substantially in the form of Exhibit C (together with any
amendments or modifications thereto and or replacements thereof, the
"Subordinated Note"). The aggregate principal amount of the Subordinated Note at
any time shall be equal to the difference between (a) the aggregate principal
amount of the issuance of and each addition to the principal amount of such
Subordinated Note (or a predecessor Subordinated Note under the Prior Sale
Agreement)
25
<PAGE>
pursuant to the terms of Section 2.03 minus (b) the aggregate amount of all
payments made in respect of the principal of such Subordinated Note; provided,
that Subordinated Note may be increased on any day only to the extent that the
aggregate principal amount of the Subordinated Note outstanding on such day
shall not exceed an amount equal to the result of (a) the Borrowing Base minus
Aggregate Outstandings; plus (b) the result of 25% multiplied by the Required
Reserves, calculated using the information set forth on the most recent Weekly
Report. Interest on the principal amount of the Subordinated Note shall accrue
on the last day of each fiscal month at the "Prime Rate" as published from time
to time in the Wall Street Journal plus 3% from and including the date of
issuance thereof and shall be paid on each Monthly Settlement Date with respect
to amounts accrued and not paid as of the last day of the preceding fiscal month
and/or the Maturity Date; provided that such interest may be prepaid at any
time. Principal not prepaid pursuant to the terms hereof and of the other
Purchase Documents shall be payable on the Maturity Date. Default in the payment
of principal or interest under the Subordinated Note shall not constitute a
Purchase Termination Event hereunder or an Amortization Event under the Loan
Agreement.
SECTION 8.02. Preferred Stock. The Company may issue to each Seller or
to BII shares of Preferred Stock on each Payment Date. The dividend rate,
redemption price and liquidation preference of the Preferred Stock shall be set
forth in the resolutions of the Board of Directors of the Company in respect of
the Preferred Stock (the "Certificate of Designation").
SECTION 8.03. Restructuring on Transfer of Subordinated Note and
Preferred Stock. None of the Subordinated Note and Preferred Stock, or any right
of BII to receive payments thereunder, shall be assigned, transferred,
exchanged, pledged, hypothecated, participated or otherwise conveyed except as
contemplated pursuant to the terms of the BII Credit Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any Seller therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Company and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 9.02. Notices, Etc. Unless otherwise provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by United
States mail and shall be deemed to have been given when delivered in person,
receipt of telecopy or telex or four Business Days after depositing it in the
United States mail, registered or certified, with postage prepaid and properly
addressed. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 9.02) shall
be:
(a) if to the Company, to it at 2775 Highway 40, Suite No.
26
<PAGE>
522, P.O. Box 1449, Verdi, Nevada 84939-1449, Attention: General
Counsel; and
(b) if to a Seller, to it at its address (or telecopy number)
set forth in Schedule VI.
SECTION 9.03. No Waiver; Remedies. No failure on the part of the
Company to exercise, and no delay in exercising, any right under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 9.04. Binding Effect; Governing Law. This Agreement shall
become effective when it shall have been executed by the Company and each
Seller. From and after the date this Agreement shall have so become effective,
this Agreement shall be binding upon and inure to the benefit of the Company and
each Seller and their respective successors assigns, except that no Seller shall
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Company. This Agreement shall create and constitute
the continuing obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until such time, after the Purchase
Termination Date, as the Company shall not have any interest in any Purchased
Receivables; provided, however, that the indemnification provisions of Article
VII shall be continuing and shall survive any termination of this Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE COMPANY'S INTEREST IN THE ELIGIBLE RECEIVABLES, OR REMEDIES HEREUNDER IN
RESPECT THEREOF, MAY BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
SECTION 9.05. Costs, Expenses and Taxes. In addition to the rights of
indemnification granted to the Company under Article VII, the Sellers jointly
and severally agree to pay on demand all reasonable costs and expenses of the
Company in connection with the preparation, execution and delivery of this
Agreement and the documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Company with respect thereto and with respect to advising the Company as to its
rights and remedies under this Agreement and all costs and expenses (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement and the documents to be delivered hereunder. In addition, each
Seller jointly and severally agrees to pay any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement or the other documents to be
delivered hereunder, and agree to hold the Company harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omitting to pay such taxes and fees.
27
<PAGE>
SECTION 9.06. Headings. Section headings and the Table of Contents used
in this Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
SECTION 9.07. Grant of License to Use Patents and Trademarks. For the
purpose of enabling the Company or a Successor Servicer to perform the functions
of servicing and collecting the Receivables upon a Purchase Termination Event,
each Seller hereby grants to the Company and shall be deemed to grant to any
Successor Servicer an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to either Seller) to use, license or
sublicense any patent, copyright, trade name, trademark or similar rights or
properties now owned or hereafter acquired by either Seller, and whenever the
same may be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer and automatic machinery software and programs used for the compilation
or printout thereof. The aforementioned servicing and collecting functions shall
be performed in accordance with customary business practices and in a manner
which will not materially adversely affect any of such licenses or licensed
items.
SECTION 9.08. Acknowledgment of Transaction Documents. Each Seller
hereby acknowledges and consents to the execution, delivery and performance of
the Loan Agreement, the Security Agreement, the Facility Agreement and the other
Transaction Documents and the grant of a security interest in the Company's
interest in the Receivables to the Collateral Agent. Each Seller agrees that any
successor in the interest of the Company to the Receivables and Related Security
may enforce this Agreement to the same extent as the Company.
SECTION 9.09. Waiver of Jury Trial. Each party hereto 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.
SECTION 9.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
enforceable 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 9.11. Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Delivery of any
executed counterpart of any signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 9.12. Jurisdiction; Consent to Service of Process. (a) Each
28
<PAGE>
Seller 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 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 by suit on the judgment or in any other manner provided by law.
(b) Each Seller hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any 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 9.02. Nothing in this
Agreement will affect the right of any party of this Agreement to serve process
in any other manner permitted by law.
29
<PAGE>
IN WITNESS WHEREOF, each Seller and the Company have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
B.I. FUNDING, INC.,
by: /s/Mary Ellen Ramseyer
Name: Mary Ellen Ramseyer
Title: Assistant Secretary
BURLINGTON INDUSTRIES, INC.,
individually and as a Servicer,
by: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President, Treasurer
and Investor Relations
B.I. TRANSPORTATION, INC.,
by: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
BURLINGTON FABRICS INC.,
by: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
BURLINGTON APPAREL
SERVICES COMPANY
by: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
<PAGE>
BURLINGTON INTERNATIONAL
SERVICES COMPANY
by: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
THE BACOVA GUILD, LTD.
by: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
<PAGE>
SCHEDULE I
B.I. FUNDING, INC.
BOARD OF DIRECTORS
Barbara K. Eisenberg
Lynn L. Lane
Charles E. Peters, Jr.
Roy M. Phipps, Jr.
Mary Ellen Ramsayer
Kenneth E. Tutterow
OFFICERS
Charles E. Peters, Jr. President
John D. Englar Senior Vice President
Barbara K. Eisenberg Vice President and Secretary
Lynn L. Lane Vice President and Treasurer
Robert A. Wicker Vice President, General Counsel and
Assistant Secretary
Mary Ellen Ramsayer Assistant Secretary and Assistant
Treasurer
Randall A. Hanson Assistant Secretary
Roy M. Phipps, Jr. Assistant Treasurer
<PAGE>
SCHEDULE II
Fiscal Months and Fiscal Quarters
See attached.
<PAGE>
SCHEDULE III
BURLINGTON INDUSTRIES, INC.
UNITED STATES TRADENAMES
AMERICAN LIFESTYLES
B.I.T.
B.I. TRANSPORTATION, INC.
BURLINGTON
BURLINGTON DENIM
BURLINGTON FABRICS
BURLINGTON GLOBAL DENIM
BGD
BURLINGTON HOUSE
BURLINGTON HOUSE AREA RUGS and BHAR
BURLINGTON INTERNATIONAL TRAFFIC
BURLINGTON APPAREL SERVICES
BURLINGTON KNITTED FABRICS
BURLINGTON MADISON YARN
BURLINGTON MENSWEAR
BURLINGTON MS.
BURLINGTON SPORTSWEAR
BURLINGTON WORLDWIDE
CHARM-TRED
KLOPMAN
LEES
LEES CARPETS
MONTICELLO
RAEFORD
<PAGE>
SCHEDULE IV
Accounts
1.) Ms. Veronica Smith Account #71-49484
Lockbox Processing Manager Box #96217 - Chicago
Bank of America, N.A. Box #96217 - Los Angeles
840 S. Canal Street
6th Floor
Chicago, IL 60293
Phone: (312) 974-0686
Fax: (312) 828-2391
2.) Mr. Nick Fulginiti Account #0105-2064
Vice President Box #8500-S2485
Corestates Financial
FC 1-2-11-7
P.O. Box 7618
Philadelphia, PA 19101-7618
Phone: (215) 973-5792
Fax: (215) 786-8529
3.) Mr. Haywood Edmundson
Senior Vice President
Wachovia Bank, N.A.
100 North Main Street
Winston-Salem, NC 27150-7202
Phone: (910) 732-7614
Fax: (910) 732-6935
4.) Mr. Michael Lewis Account #3562-014671
Customer Support Supervisor Box #75080
Wachovia Lockbox Services
P.O. Box 31608
Charlotte, NC 28231
Phone: (704) 548-4172
Fax: (704) 548-4159
5.) Ms. Sally Perkins Account #3562-014671
Customer Service Manager Box #101876
Wachovia Lockbox Services
3585 Atlanta Avenue
Hapeville, GA 30354
Phone: (404) 559-2552
Fax: (404) 559-2562
<PAGE>
SCHEDULE V
Location of Records
Chief place of business and chief executive office for BII, BTI, BFI, BASC and
BISC:
3330 West Friendly Avenue
Greensboro, North Carolina 27410
Chief place of business and chief executive office for Bacova:
1 Main Street
Bacova, Virginia 24412
Offices where all books, records and documents evidencing Purchases Receivables
are located:
BII
3330 West Friendly Avenue Monticello Plant
Greensboro, North Carolina 27410 Monticello, Arkansas
Reidsville Drapery Plant Mayfair Plant
Reidsville, North Carolina Burlington, North Carolina
Burlington House Plant 1345 Avenue of the Americas
Burlington, North Carolina New York, New York 10105
Clarksville Plant Burlington Terminal 1/
-
Clarksville, Virginia Burlington, North Carolina
Hurt Plant Burlington Terminal
Altavista, Virginia Burlington, North Carolina
Statesville Plant 1345 Avenue of the Americas
Statesville, North Carolina New York, New York 10105
Plant Sedgefield
Jamestown, North Carolina
BTI
- ---
3330 West Friendly Avenue
Greensboro, North Carolina 27410
BFI
- ---
3330 West Friendly Avenue
Greensboro, North Carolina 27410
- --------
1/ No chattel paper is located in this facility.
<PAGE>
BASC
3330 West Friendly Avenue
Greensboro, North Carolina 27410
BISC
3330 West Friendly Avenue
Greensboro, North Carolina 27410
Bacova
3330 West Friendly Avenue
Greensboro, North Carolina 27410
1 Main Street
Bacova, Virginia 24412
<PAGE>
SCHEDULE VI
Notices
Burlington Industries, Inc.
3330 West Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
Burlington Fabrics, Inc.
3330 West Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
B.I. Transportation, Inc.
3330 West Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
Burlington Apparel Services Company
3330 West Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
Burlington International Services Company
3330 West Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
The Bacova Guild, Ltd.
3330 West Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
<PAGE>
B.I. FUNDING, INC.
Monthly Settlement Statement
Monthly Settlement Statement
Fiscal Period Beginning
Fiscal Period Ending
The undersigned, a Financial Officer of Burlington Industries, Inc., as
Servicer is delivering this Monthly Settlement Statement pursuant to (i) the
Amended and Restated Facility Agreement, dated as of December 10, 1997, among
B.I. Funding Inc. (the "Company"), Burlington Industries, Inc., as Servicer, and
Wachovia Bank, N.A. ("Wachovia"), as Agent and Collateral Agent, and (ii) the
Loan Agreement, dated as of December 10, 1997 (the "Loan Agreement"), among the
Company, the financial institutions as are or may become parties thereto (the
"Liquidity Lenders") and Wachovia, as Agent for the Lenders. The undersigned
certifies that (i) the attached is a Monthly Settlement Statement (as such term
is defined in Annex Z to the Loan Agreement), (ii) the information provided
therein is true, accurate and complete in all respects as of the date provided
thereof and (iii) as of the date hereof no Amortization Event or Potential
Amortization Event has occurred.
Name:
Title:
<PAGE>
EXHIBIT B
Burlington Industries, Inc.
Fax: 910-379-2245
Phone: 910-379-2155
B.I. FUNDING, INC.
Weekly Report Dated ____________, 199_
Date of Processing as of ________________, 199_
The undersigned, a Financial Officer of Burlington Industries, Inc., as
Servicer, is delivering this Weekly Report pursuant to (i) the Amended and
Restated Facility Agreement, dated as of December 10, 1997, among B.I. Funding
Inc. (the "Company"), Burlington Industries, Inc., as Servicer, and Wachovia
Bank, N.A. ("Wachovia"), as Agent and Collateral Agent, and (ii) the Loan
Agreement, dated as of December 10, 1997 (the "Loan Agreement"), among the
Company, the financial institutions as are or may become parties thereto (the
"Liquidity Lenders") and Wachovia, as Agent for the Lenders. The undersigned
certifies that (i) the attached is a Weekly Report as such term is defined in
Annex Z of the Loan Agreement, (ii) the information provided therein is
materially accurate as of the date provided therefor unless, and to the extent
that, such information is amended or corrected by the Servicer within five
Business Days as of the date hereof, in which case such information, as so
amended or corrected, is materially accurate as of the date provided therefor;
and (iii) as of the date hereof no Amortization Event or Potential Amortization
Event has occurred and is continuing.
Name:
Title:
<PAGE>
EXHIBIT C
[FORM OF]
SUBORDINATED NOTE
[Date]
B.I. FUNDING, INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of BURLINGTON INDUSTRIES, INC., a Delaware
corporation ("BII"), the principal amount of this Subordinated Note, determined
as described below, together with interest thereon at a rate per annum equal to
the "Prime Rate" as published from time to time in the Wall Street Journal plus
3% in lawful money of the United States of America. Capitalized terms used
herein but not defined herein shall have the meanings assigned to such terms in
the Amended and Restated Receivables Purchase Agreement dated as of December 10,
1997, among the Company, Burlington Industries, Inc., B.I. Transportation, Inc.,
Burlington Fabrics Inc., Burlington Apparel Services Company, Burlington
International Services Company and The Bacova Guild, Ltd. (such agreement, as it
may from time to time be amended, supplemented or otherwise modified in
accordance with its terms, the "Purchase Agreement").
The principal amount of this Subordinated Note at any time shall be
determined in accordance with the provisions of Article VIII of the Purchase
Agreement. Payments of principal of this Subordinated Note shall be made on the
Maturity Date (provided that principal may be prepaid at any time). Payments of
interest on this Subordinated Note shall be paid on each Monthly Settlement Date
(with respect to interest accrued as of the end of the preceding fiscal month)
and on the Maturity Date (provided that interest may be prepaid at any time) by
wire transfer of immediately available funds to such account of the Seller as
the Seller may designate in writing. Notwithstanding the foregoing, no payments
of interest or principal may be made under this Subordinated Note at any time
except as permitted under the Subordination Agreement (as defined below).
The indebtedness evidenced by this instrument is subordinated to the
prior payment in full of the Senior Obligations (as defined in the Subordination
Agreement hereinafter referred to) pursuant to, and to the extent provided in,
the Subordination Agreement, Consent and Acknowledgment dated as of December 10,
1997, as amended, supplemented or otherwise modified from time to time (the
"Subordination Agreement") among the maker hereof, the payee named herein and
certain other parties. This Subordinated Note is the Subordinated Note referred
to in the Purchase Agreement, and is subordinate and junior in right of payment
to all the Obligations to the extent and in the manner provided in the
Subordination Agreement.
The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
<PAGE>
This Subordinated Note amends and restates the Subordinated Note dated
March 26, 1992 (the "Prior Note"), payable by the Company to the order of BII
for the benefit of the Sellers (as defined in the Purchase Agreement). All
indebtedness outstanding under the Prior Note shall be deemed to be outstanding
hereunder, and nothing herein shall be deemed to evidence payment or release of
such indebtedness.
THIS SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
B.I. FUNDING, INC.
by
Title:
<PAGE>
Exhibit 10.23
AMENDED AND RESTATED
FACILITY AGREEMENT
Dated as of December 10, 1997
among
B. I. FUNDING, INC.,
as Company
BURLINGTON INDUSTRIES, INC.,
as Servicer
and
WACHOVIA BANK, N.A.,
as Agent and Collateral Agent
<PAGE>
TABLE OF CONTENTS||
Page
PRELIMINARY STATEMENTS
ARTICLE I.
DEFINITIONS; CONSTRUCTION
SECTION 1.01 Definitions; Construction..........................2
ARTICLE II.
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 2.01 Appointment of and Acceptance by BII of Servicing
Obligations...............................2
SECTION 2.02 Servicing Compensation; Servicer Advances..........3
SECTION 2.03 Representations and Warranties of the Servicer.....4
SECTION 2.04 Accountant's Servicing Report......................5
SECTION 2.05 Compliance Statements..............................6
SECTION 2.06 Collection Procedures..............................7
SECTION 2.07 Weekly Report......................................7
SECTION 2.08 Monthly Settlement Statement.......................8
SECTION 2.09 Servicer Resignation...............................8
SECTION 2.10 Access to Certain Documentation and Information
Regarding the Receivables.................8
SECTION 2.11 Servicer Termination Notice........................8
SECTION 2.12 Successor Servicer.................................9
SECTION 2.13 Appointment of Successor..........................10
SECTION 2.14 Covenants of the Servicer.........................10
ARTICLE III.
ALLOCATIONS AND APPLICATIONS OF PROCEEDS OF
ADVANCES, COLLECTIONS AND OTHER AMOUNTS
SECTION 3.01 Use of Advances, Servicer Advances and Collections...13
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ARTICLE IV.
MISCELLANEOUS
SECTION 4.01 Notices............................................17
SECTION 4.02 Binding Effect.....................................18
SECTION 4.03 Applicable Law.....................................18
SECTION 4.04 Waivers; Amendment.................................18
SECTION 4.05 Waiver of Jury Trial...............................18
SECTION 4.06 Severability.......................................19
SECTION 4.07 Counterparts.......................................19
SECTION 4.08 No Recourse........................................19
SECTION 4.09 Consent to Jurisdiction............................19
SECTION 4.10 Bankruptcy Petition Against the Company............20
SECTION 4.11 No Recourse........................................20
SECTION 4.12 Attorney-in-Fact...................................20
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AMENDED AND RESTATED FACILITY AGREEMENT
AMENDED AND RESTATED FACILITY AGREEMENT, dated as of December 10, 1997
among B. I. FUNDING, INC., a Delaware corporation (the "Company"), BURLINGTON
INDUSTRIES, INC., a Delaware corporation ("BII"), as Servicer, and WACHOVIA
BANK, N.A. ("Wachovia"), in its capacity as agent under the Loan Agreement (as
herein defined) (in such capacity, the "Agent") and as collateral agent under
the Security Agreement (as herein defined) (in such capacity, the "Collateral
Agent").
PRELIMINARY STATEMENTS
1. Wachovia, at the Company's request, has arranged for the extension
of financing to the Company pursuant to the terms of the Loan Agreement dated as
of December 10, 1997, as it may be amended, supplemented or modified from time
to time (as so amended, supplemented or modified, the "Loan Agreement") among
the Company, the Agent, the financial institutions party thereto (collectively,
the "Liquidity Lenders"), Blue Ridge Asset Funding Corp., as the commercial
paper lender (the "Conduit Lender") (the Liquidity Lenders and the Conduit
Lender, collectively, the "Lenders").
2. Pursuant to the Amended and Restated Receivables Purchase Agreement
dated as of December 10, 1997, as it may be amended, modified or supplemented
from time to time (as so amended, supplemented or modified, the "Purchase
Agreement") among BII, B.I. Transportation, Inc., Burlington Fabrics, Inc.,
Burlington Apparel Services Company, Burlington International Services Company,
The Bacova Guild, Ltd. and any Additional Sellers (collectively, the "Sellers")
and the Company, the Company is purchasing Receivables (such term and other
capitalized terms used herein being defined as provided in Section 1.01) from
the Sellers, and is pledging all of its right, title and interest in such
Receivables and certain other assets of the Company to the Collateral Agent
pursuant to the Security Agreement.
3. The Servicer has agreed to service the Receivables and account to
the Company, the Collateral Agent and the Agent as provided herein.
Accordingly, in consideration for the premises and the mutual covenants
contained herein and other good and valuable consideration (the sufficiency and
receipt of which are hereby acknowledged), the parties hereto agree as follows:
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ARTICLE I.
DEFINITIONS; CONSTRUCTION
SECTION 1.01 Definitions; Construction. (a) Capitalized terms used and
not defined herein shall have the meanings assigned to such terms in Annex Z
attached hereto. For all purposes in this Agreement, the following terms shall
have the following meanings:
"Facilities Costs" means fixed fees payable to the Agent, the Lenders,
and to the extent the Servicer is not an Affiliate of the Company, the Servicing
Fee.
"Servicing Fee" has the meaning assigned to such term in Section 2.02.
"Servicing Fee Base" means (i) prior to the Commencement of the
Amortization Period, the Liquidity Commitment Amount, and (ii) during the
Amortization Period, the lesser of (x) the Liquidity Commitment Amount and (y)
the aggregate Outstanding Balance of Receivables held by the Company.
"Successor Servicer" shall have the meaning assigned to such term in
Section 2.13.
(b) The definitions referred to or set forth in this Article I
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, and the words "include", "includes," and
"including" shall be deemed to followed by the phrase "without limitation." All
references herein to Articles and Sections shall be deemed reference to Articles
and Sections of this Agreement unless the context shall otherwise require.
Except as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP.
ARTICLE II.
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 2.01 Appointment of and Acceptance by BII of Servicing
Obligations. (a) The Company hereby appoints BII as servicer of the Receivables
(BII in such capacity and any Successor Servicer being the "Servicer"). BII
agrees to act as the Servicer under this Agreement on behalf of the Company, for
the benefit of the Agent, the Lenders and the Collateral Agent. The Servicer
shall (i) except as otherwise limited herein, manage, administer and collect the
Receivables and exercise all discretionary powers involved in such management,
administration and collections and (ii) bear all costs and expenses incurred in
connection therewith that may be necessary or advisable and permitted for
carrying out the transactions contemplated by the Transaction Documents. In the
management, administration and collection of the Receivables, the Servicer shall
exercise the same care that it has exercised in handling similar matters for its
own account, and the Servicer shall comply with the Policies. In connection with
the foregoing, the Servicer shall be
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permitted to subcontract its obligations under this Section 2.01 to any Person
satisfactory to the Company and the Required Lenders that agrees to perform such
obligations in accordance with the terms of this Agreement and the Policies;
provided, however, that the Servicer shall remain fully responsible to the
Company, the Agent, the Collateral Agent and the Lenders for any and all acts or
failures to act of any such subcontractor to the same extent as if the Servicer
were fully directly responsible for such subcontractor's duties and
responsibilities.
(b) The Servicer shall, at its own cost and expense, (i)
retain the electronic ledger used by the Servicer as a master record of
the Receivables and copies of all documents relating to each Receivable
as custodian for the Company and (ii) mark the computer files and other
physical records of the Receivables (by means of a general legend that
will automatically appear at or near the beginning of any list or
print-out of the Receivables) to the effect that, unless otherwise
specifically identified on such list or print-out as a Receivable not
so sold or transferred, all Receivables included in such list or
print-out have been sold to the Company, and a security interest in
such Receivables has been subsequently granted to the Collateral Agent
for the benefit of the Secured Parties (as defined in the Security
Agreement) pursuant to the Security Agreement.
(c) The Servicer shall notify the Company and the Agent
promptly after obtaining knowledge that any Receivable has become
subject to a Lien other than any Lien created or imposed under any
Transaction Document.
SECTION 2.02 Servicing Compensation; Servicer Advances. (a) As
compensation for its servicing activities hereunder and reimbursement for its
expenses incurred as the Servicer, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") from the Company equal to the Servicing Fee
Rate multiplied by the average daily Servicing Fee Base, such Servicing Fee to
be payable in respect of each fiscal month in arrears on the Monthly Settlement
Date immediately succeeding such fiscal month, commencing on the first such date
to occur after the Effective Date, calculated in each case on the basis of a
360-day year and the actual number of days elapsed. "Servicing Fee Rate" means
(x) 0.5% per annum at a time when (i) BII is the Servicer, (ii) no Amortization
Event has occurred and is continuing, and (iii) the Dilution Reserve Trigger has
not occurred, and (y) 1.0% per annum at all other times. The Servicer shall bear
all costs and expenses (without right of reimbursement) incurred in connection
with performing its activities hereunder, including fees and disbursements of
independent accountants and all other expenses incurred by the Servicer in
connection with its activities hereunder; provided, that in no event shall the
Servicer be liable for any federal, state or local income or franchise tax, or
any interest or penalties with respect thereto, assessed on the Agent, the
Collateral Agent, any Lenders or the Company. The Servicer shall be required to
pay such costs and any expenses for its own account, and shall not be entitled
to any payment therefor other than the Servicing Fee.
(b) The Servicer may elect, in its discretion, to make
unsecured advances to the Company ("Servicer Advances") to pay amounts due under
the Loan Agreement, provided that the Servicer reasonably expects to be
reimbursed therefor from Collections as provided in this Agreement. The Servicer
Advances shall be due and payable on the first Anniversary of the
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Termination Date; provided that the Servicer Advances shall be prepaid to the
extent of payments provided for in Article III.
SECTION 2.03 Representations and Warranties of the Servicer. The
Servicer represents and warrants to the Company, the Agent and each Lender that:
(a) The Servicer (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and (ii) has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted, to enter into each Transaction Document to which it is a party and to
carry out the transactions contemplated hereby and thereby.
(b) The Servicer is qualified as a foreign corporation in each
jurisdiction where it is required to be so qualified to service the Receivables
as required by the Transaction Documents and has obtained all necessary licenses
and approvals as required under federal and state law, except in jurisdictions
where the failure to be so qualified, licensed or approved will not have a
material adverse effect on the ability of the Servicer to comply with the terms
of the Transaction Documents.
(c) The execution, delivery and performance by the Servicer of
each Transaction Document to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action and will not (i) violate any provision of law applicable to it,
its Certificate of Incorporation or Bylaws, or any order, judgment or decree of
any court or other agency of government binding on it, (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any of its Contractual Obligations, (iii) result in or require the
creation or imposition of any Lien upon any of its properties or assets or (iv)
require any approval of Stockholders or any approval or consent of any Persons
under any Contractual Obligation of the Servicer or any member of the Parent
Group, except for (A) such approvals or consents which will be obtained on or
before the Effective Date and are set forth in Schedule 2.03 (c) and (B) such
violations, conflicts, breaches, Liens and defaults which would not have, and
such approvals the absence of which would not have, a material adverse effect on
(1) the business, operations, property, assets or financial condition of the
Servicer, (2) the validity or enforceability of, or the ability of the Servicer
to perform its obligations under, the Transaction Documents or (3) the validity,
enforceability or priority of the Liens created by the Purchase Agreement or the
Security Agreement.
(d) The execution, delivery and performance by the Servicer of
the Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body except for
filings, consents, notices, authorizations, and approvals the absence of which
would not have a material adverse effect on (i) the business, operations,
property, assets or financial condition of the Servicer, (ii) the validity or
enforceability of, or the ability of the Servicer to perform its obligations
under, the Transaction Documents or (iii) the validity, enforceability or
priority of the Liens created by the Purchase Agreement or the Security
Agreement.
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(e) This Agreement is, and the other Transaction Documents to
which the Servicer is a party, when executed and delivered by the Servicer will
be, the legally valid and binding obligations of the Servicer, enforceable
against the Servicer in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(f) There is no action, suit, proceeding or governmental
investigation of which the Servicer has knowledge or arbitration (whether or not
purportedly on behalf of the Servicer) at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, pending or, to the
knowledge of the Servicer, threatened against or affecting the Servicer or any
of its property which would reasonably be expected to have a material adverse
effect on (i) the business, operations, property, assets or financial condition
of the Servicer, (ii) the validity or enforceability of, or the ability of the
Servicer to perform its obligations under, the Transaction Documents or (iii)
the validity, enforceability or priority of the Liens created by the Purchase
Agreement or the Security Agreement.
(g) (i) No representation or warranty of the Servicer
contained in this Agreement, any other Transaction Document, or any other
document, certificate or written statement furnished to the Lenders or the Agent
by or on behalf of the Servicer for use in connection with the transactions
contemplated by this Agreement (including any Settlement Report) contains any
untrue statement of a material fact or omits to state a material fact (known to
the Servicer in the case of any document not furnished by it) necessary in order
to make the statements contained herein or therein not misleading. Any
reaffirmation of the foregoing sentence is subject to any change in the facts
and conditions on which such representations and warranties are based, which
changes are required or permitted under this Agreement; provided, however, that
in all cases no representation or warranty of the Servicer contained in this
Agreement, any Transaction Document, or any other document, certificate or
written statement furnished to the Lenders or the Agent by or on behalf of any
such Person for use in connection with the transactions contemplated by this
Agreement contained at the time made any untrue statement of a material fact
(known to any such Person in the case of any document not furnished by it)
necessary in order to make the statement contained herein or therein not
misleading.
(ii) The historical financial statements of the
Servicer and its Subsidiaries contained in its most recent
audited financial statements, dated September 28, 1996, as
such financial statements may be supplemented from time to
time, fairly present their results of operations and financial
condition for the periods and as of the dates presented
(subject to year-end audit adjustments).
SECTION 2.04 Accountant's Servicing Report. At the direction of the
Required Lenders (which direction may be given at any time), the Agent shall
instruct the Servicer to (and the Servicer shall) cause a firm of nationally
recognized independent public accountants (who may also
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render other services to the Servicer or any Seller) to furnish a report (an
"Outside Report") to the Company and the Agent, to the effect set forth below.
The Servicer shall (i) select the firm of nationally recognized independent
public accountants to prepare the first such Outside Report for each Fiscal Year
and (ii) pay all costs and expenses of the first such Outside Report prepared
for each Fiscal Year. All other Outside Reports for such Fiscal Year shall be at
the pro rata expense of the Liquidity Lenders.
An Outside Report shall be to the effect that:
(a) such firm has made a study and evaluation, in accordance
with generally accepted auditing standards, of the Servicer's and the Sellers'
internal accounting controls relating to the Receivables,
(b) on the basis of such examination, such firm is of the
opinion that the system of internal accounting controls in effect on the date
set forth in such report, relating to the Receivables and the Collections taken
as a whole, were sufficient for the prevention and detection of errors and
irregularities in amounts that would be material,
(c) the Servicer was servicing the Receivables in compliance
with the provisions of this Agreement with which the independent public
accountants possess adequate professional knowledge and which are reasonably
subject to positive assurance by them, except for such exceptions as they
believe to be immaterial and such other exceptions as shall be set forth in such
report, and
(d) using generally accepted auditing standards, they have
compared a representative sample of Weekly Reports and Monthly Settlement
Statements randomly chosen during such period and delivered to the Company
pursuant to Sections 2.07 and 2.08 during the period covered by such report with
each Seller's and the Servicer's computer reports that were the source of such
amounts and that on the basis of such comparison, such accountants are of the
opinion that such reports are in agreement, except for such exceptions as they
believe to be immaterial and such other exceptions as shall be set forth in such
statement.
The Servicer shall make its officers and employees available (during
normal business hours and upon reasonable notice) for discussion with the
Persons preparing any such Outside Report.
SECTION 2.05 Compliance Statements. The Servicer will deliver to the
Company and the Agent on or before the date 45 days after the end of each Fiscal
Quarter, commencing with the fourth Fiscal Quarter of fiscal year 1997 of the
Company, a certificate signed by an executive officer or Financial Officer (or
any other officer or similar official responsible for the administration of the
obligations of the Servicer) (a "Responsible Officer") of the Servicer, stating
that (i) a review of the activities of the Servicer relating to the servicing of
the Receivables during the prior quarter and of performance under this Agreement
has been made under such officer's supervision, (ii) such Responsible Officer
has reviewed any reports prepared by the internal audit department or the
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independent auditors for the Servicer or the Sellers, in either case relating to
the Receivables (including the servicing thereof) for the period since the date
of the last such report (it being understood that such reports shall be prepared
at times and in form consistent with past practice), and (iii) to the best of
such Responsible Officer's knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout the period covered
by such review, or, if there has been a default in the fulfillment of any such
obligations, specifying each such default known to such officers and the nature
and status thereof.
SECTION 2.06 Collection Procedures. (a) The Servicer, the Sellers and
the Company have established and shall maintain hereafter the system of
collecting and processing Collections of Receivables set forth in paragraphs (b)
through (e) below.
(b) The Obligors shall have been instructed to make payments
with respect to Receivables only to a Lockbox Account or by wire
transfer to the Concentration Account. The Servicer shall, at least as
often as once each day that is both a Business Day and a day on which
the Servicer is open for business, process such payments by recording
the amount of the payment received from the Obligor and the identity of
the Obligor, and, with the Requisite Frequency in same day funds, the
Company and the Servicer shall cause all moneys and other evidences of
payment collection (other than checks which are to have been submitted
for collection) deposited in the Lockbox Accounts to be transferred to
the Concentration Account; provided, that to the extent a Lockbox
Account is also the Concentration Account, such transfer shall be
deemed made upon deposit therein. The Company and the Servicer shall
cause all moneys and evidences of payments deposited in the
Concentration Account to be transferred with the Requisite Frequency in
same day funds (including amounts transferred on such day from any
Lockbox Account pursuant to the preceding sentence and amounts referred
to in Section 2.06(c)), to the Collection Deposit Account; provided,
that (i) if the Collateral Agent shall not have terminated the
Servicer's authority to initiate transfers as provided in the Lockbox
Agreements, such transfer shall be required only on days when the
Servicer is open for business, and (ii) during any Amortization Period
all such amounts shall be transferred from the Concentration Account to
Collection Account "B".
(c) The Servicer and the Company shall cause all Collections
otherwise received by them to be deposited in the Concentration Account
as soon as practicable after receipt thereof, but in no event later
than the Business Day after such receipt.
(d) Any funds held by the Company or the Servicer representing
Collections shall, until deposited in a Collection Account, be held in
trust by such Person for and as the Collateral Agent's property, for
the ratable benefit of the Secured Parties (as defined in the Security
Agreement).
(e) Each of the Company and the Servicer irrevocably waives
any right to set off against, or otherwise deduct from, any
Collections.
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SECTION 2.07 Weekly Report. (a) The Servicer shall prepare and deliver
to the Agent, the Collateral Agent and the Company (by telecopy) a Weekly
Report, certified by a Financial Officer or Assistant Treasurer on the Weekly
Settlement Date (containing information as of the immediately preceding Weekly
Cut-Off Date) on or before 9:00 a.m., Atlanta time on such date; provided,
however, that if a "system failure" or other similar technical failure shall
occur in the operations of the Servicer that produce data included in the Weekly
Report, such Weekly Report shall be prepared and telecopied to the Agent, the
Collateral Agent and the Company within two Business Days of the date such
Weekly Report was otherwise required to be prepared and telecopied to the Agent,
the Collateral Agent and the Company.
(b) Upon discovery of any error in any Weekly Report, the
Agent, the Company, the Servicer, and the Sellers shall confer and
shall agree upon any necessary adjustments to correct such error. Until
correction of such error, all Collections shall be retained in the
Collection Deposit Account. Unless the Agent has received actual notice
of any discrepancy, the Agent, the Lenders and the Company may rely on
such Weekly Report for all purposes hereunder, and for all purposes
under any other Transaction Document.
SECTION 2.08 Monthly Settlement Statement. On each Monthly Settlement
Statement Date, the Servicer shall, prior to 12:00 noon (Atlanta time), deliver
to the Company and the Agent, the Monthly Settlement Statement for the preceding
fiscal month certified by a Financial Officer, and the Agent shall forward a
copy of such Monthly Settlement Statement to the Lenders; provided, however,
that if a "system failure" or other similar technical failure shall occur in the
operations of the Servicer that produce data included in the Monthly Settlement
Statement, such Monthly Settlement Statement shall be prepared and provided to
the Company and the Agent within two Business Days of the date such Monthly
Settlement Statement was otherwise required to the prepared and provided to the
Company and the Agent.
SECTION 2.09 Servicer Resignation. The Servicer shall not resign from
the obligations and duties under this Agreement hereby imposed on it except upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
opinion of counsel to such effect delivered to the Agent. No such resignation
shall become effective until a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with this Section
and Sections 2.11 and 2.12.
SECTION 2.10 Access to Certain Documentation and Information Regarding
the Receivables. The Servicer shall provide the Company, the Agent and their
respective representatives access to the documentation regarding the
Receivables, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and (iv) at offices
designated by the Servicer. The obligation of the Servicer to provide such
reasonable access to information regarding
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the Receivables shall survive its termination as Servicer until all of the
Obligations of the Company to the Lenders under the Loan Agreement have been
satisfied in full.
SECTION 2.11 Servicer Termination Notice. If (i) an Amortization Event
shall have occurred and be continuing or (ii) there has been a failure by the
Servicer to perform its obligations as Servicer and such failure could have a
material adverse effect on the collection of the Receivables, the value of the
Collateral or the ability of the Collateral Agent to exercise its remedies under
the Security Agreement, the Agent may, at the direction of the Required Lenders,
by notice given in writing to the Servicer, the Collateral Agent and the Company
(each such notice and each notice to the Servicer referred to in the following
sentence, being a "Servicer Termination Notice") terminate all of the rights and
obligations of the Servicer under this Agreement pursuant to the terms of
Section 2.12. The Company may at any time, with the prior written consent of the
Required Lenders by notice given in writing to the Servicer and the Agent,
terminate all the rights and obligations of the Servicer pursuant to the terms
of Section 2.12. Notwithstanding any termination of the rights and obligations
of the Servicer, such terminated Servicer shall remain responsible for any acts
or omissions to act by it as Servicer prior to such termination.
SECTION 2.12 Successor Servicer. (a) After receipt by the Servicer of a
Servicer Termination Notice, or after resignation of a Servicer pursuant to
Section 2.09, and on the date that a Successor Servicer shall have been
appointed by the Collateral Agent pursuant to Section 2.13, all authority and
power of the Servicer under this Agreement shall pass to and be vested in a
Successor Servicer; and the Collateral Agent is hereby authorized and empowered
(upon the failure of the Servicer to cooperate) to execute and deliver, on
behalf of the Servicer as attorney-in-fact or otherwise, all documents and other
instruments upon the failure of the Servicer to execute or deliver such
documents or instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purposes of such transfer of servicing
rights.
(b) The Servicer agrees to cooperate with the Collateral Agent
and such Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing
hereunder, including the transfer to such Successor Servicer of all
authority of the Servicer to service the Receivables provided for under
this Agreement, including all authority over all Collections which
shall on the date of transfer be held by the Servicer for deposit, or
which shall thereafter be received with respect to the Receivables.
(c) The Servicer shall promptly transfer its electronic
records relating to the Receivables to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of
the Receivables in the manner and at such times as the Successor
Servicer shall reasonably request. To the extent that compliance with
this Section shall require the Servicer to disclose to the Successor
Servicer information of any kind which the Servicer or Company
reasonably deems to be confidential, the Successor Servicer shall be
required to enter into such customary licensing and confidentiality
agreements as the Servicer or Company shall deem necessary to protect
its interest. All costs and expenses incurred in connection with a
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transfer of servicing shall be borne by the outgoing Servicer. Each of
the Sellers and the Company shall, upon request, at all times provide
such information and assistance to the Servicer as shall be required
for the Servicer to perform its obligations hereunder.
SECTION 2.13 Appointment of Successor. (a) On and after the receipt by
the Servicer of a Servicer Termination Notice pursuant to Section 2.11, or after
resignation of a Servicer pursuant to Section 2.09, the Servicer shall continue
to perform all servicing functions under this Agreement until the date specified
in the Servicer Termination Notice or otherwise specified by the Collateral
Agent in writing or, if no such date is specified in the Servicer Termination
Notice or otherwise specified by the Collateral Agent, until a date mutually
agreed upon by the Servicer and the Collateral Agent. The Agent, after
consultation with the Lenders, shall as promptly as possible after the giving of
a Servicer Termination Notice appoint a Successor Servicer (the "Successor
Servicer") and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Agent. The Agent may obtain bids from any
potential Successor Servicer.
(b) Upon its appointment, the Successor Servicer shall be
successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on BII
in its capacity as Servicer or on the Servicer by the terms and
provisions hereof, and all references in this Agreement to BII in its
capacity as Servicer or to the Servicer shall be deemed to refer to the
Successor Servicer. Any Successor Servicer that is not an Affiliate of
the Company or any of the Sellers shall expressly consent to and
acknowledge the security interest granted to the Collateral Agent
pursuant to the Security Agreement.
(c) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon
termination of this Agreement and shall pass to and be vested in the
Company and the Company is hereby authorized and empowered to execute
and deliver, on behalf of the Successor Servicer, as attorney-in-fact
or otherwise, all documents and other instruments, and to do and
accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights. The Successor
Servicer agrees to cooperate with the Company in effecting the
termination of the responsibilities and rights of the Successor
Servicer to conduct servicing on the Receivables. The Successor
Servicer shall transfer its electronic records relating to the
Receivables therein to the Company (or, at the request of the Company,
a Seller) in such electronic form as the Company may reasonably request
and shall transfer all other records, correspondence and documents to
the Company (or, at the request of the Company, a Seller) in the manner
and at such times as the Company shall reasonably request. To the
extent that compliance with this Section 2.13 shall require the
Successor Servicer to disclose to the Company or the Sellers
information of any kind which the Successor Servicer deems to be
confidential, the Company shall be required to enter into such
customary licensing and confidentiality agreements as the Successor
Servicer shall deem necessary to protect its interests. All costs and
expenses incurred in connection with a transfer servicing shall be
borne by the outgoing Successor Servicer.
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SECTION 2.14 Covenants of the Servicer. The Servicer covenants that:
(a) Condition of Assets; Insurance. The Servicer shall (i)
keep all property and assets useful and necessary in its business as
Servicer in good working order and condition (normal wear and tear
excepted), (ii) maintain, with financially sound and reputable
insurance companies, insurance on all its property and assets necessary
in its business as Servicer in at least such amounts and against at
least such risks (and with such risk retention) as are usually insured
against in the same general area by companies of established repute
engaged in the same or a similar business and reasonably satisfactory
to the Agent, (iii) furnish to the Agent, upon written request, full
information as to the insurance carried, (iv) within five days of
receipt of notice from any insurer, furnish the Agent with a copy of
any notice of cancellation or material change in coverage from that
existing on the Effective Date and (v) forthwith, furnish the Agent
with notice of any cancellation or nonrenewal of coverage by the
Servicer. The Servicer shall (i) maintain disaster recovery systems and
back-up computer and other information management systems that, in the
Servicer's reasonable judgment, are sufficient to protect its business
as Servicer against material interruption or loss in the event of
damage to, or loss or destruction of, its primary computer and
information management systems and (ii) furnish to the Agent, upon
written request, full information as to such disaster recovery systems
and back-up computer and information management systems.
(b) Indemnification. (i) In any suit, proceeding or action
brought by the Agent, any Seller, the Company, the Collateral Agent or
any Lender for any sum owing with respect to any of such persons'
interest in a Receivable, the Servicer will save, indemnify and keep
the Agent, the Sellers, the Company, the Collateral Agent or such
Lender, as the case may be, harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever arising out of a breach
by the Servicer of any obligation of the Servicer with respect to an
Obligor or arising out of any agreement, indebtedness or liability at
any time owing to or in favor of such Obligor or its successor from the
Servicer, and all such obligations of the Servicer shall be and remain
enforceable against and only against the Servicer and shall not be
enforceable against the Agent, the Collateral Agent, any Seller, the
Company, or any Lender, as the case may be.
(ii) The Servicer shall indemnify and hold harmless
the Agent, the Sellers, the Company, the Collateral Agent and
the Lenders against any claim, loss, liability, cost, expense,
damage or injury suffered or sustained by reason of any action
taken by the Servicer relating to any Receivable.
(c) Compliance with Requirements of Law. The Servicer shall
duly satisfy all obligations on its part to be fulfilled under or in
connection with each Receivable and the related Obligor, will maintain
in effect all qualifications required under Requirements of Law in
order to service properly each Receivable and the related Obligor and
will comply in all material respects with all other Requirements of Law
in connection with servicing each
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Receivable and the related Obligor the failure to comply with which
would have a material adverse effect on the Lenders or the Agent.
(d) No Rescission or Cancellation. The Servicer shall not
permit any rescission or cancellation of any Receivable except as
ordered by a court of competent jurisdiction or other Governmental
Authority and except in connection with Dilutive Credits and Write-Offs
in conformity with the Policies or as otherwise permitted in the
Security Agreement.
(e) Protection of Rights. The Servicer shall not take any
action which, or omit to take any action the omission of which, would
impair the rights of the Company, the Agent, the Collateral Agent and
the Lenders in any Receivable or with respect to the related Obligor or
the rights of the Agent, nor shall it reschedule, revise or defer
payments due on any Receivable except in accordance with the Policies.
(f) Change in Payment Instructions to Obligors. The Servicer
will not instruct the Obligors of any Purchased Receivables to make any
payments with respect to such Purchased Receivables other than
hereunder or under the Security Agreement.
(g) Modification of Ledger. The Servicer will not delete or
otherwise modify the marking on the electronic ledger referred to in
Section 5.01(g) of the Purchase Agreement.
(h) Extension or Amendment of Receivables or Policies. The
Servicer will not extend, amend or otherwise modify, or attempt or
purport to extend, amend or otherwise modify, the terms of any
Purchased Receivables, except in accordance with the terms of the
Policies, or amend or otherwise modify or waive any term or condition
of the Policies.
(i) Collection of Receivables. (i) Upon the occurrence and
during the continuance of an Amortization Event and upon the request of
the Collateral Agent, or upon the commencement of the Amortization
Period, the Servicer will deliver to the Collateral Agent all licenses,
rights, computer programs, related materials, computer tapes, cassettes
and data then owned or held by the Company necessary to the immediate
collection of the Receivables by the Collateral Agent or a party
designated by the Collateral Agent without the participation of any
Seller or the Company.
(ii) Upon the occurrence of and during the
continuance of an Amortization Event and upon the request of
the Collateral Agent, or upon the commencement of an
Amortization Period, the Servicer will deliver to the
Collateral Agent on a weekly basis, unless requested not to do
so by the Collateral Agent, backup files prepared on a daily
basis of information relating to the collection of the
Receivables that would permit the Collateral Agent, or a party
designated by the Collateral Agent, to collect the Receivables
without the participation of any Seller or the Company.
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(j) Commingled Funds. The Servicer shall use its best efforts
to determine as promptly as possible whether any funds of any of the
Sellers or of any Affiliate of any Sellers (other than the Company)
have been commingled with the funds of the Company and separate any
such commingled funds as soon as possible thereafter.
ARTICLE III.
ALLOCATIONS AND APPLICATIONS OF PROCEEDS OF
ADVANCES, COLLECTIONS AND OTHER AMOUNTS
SECTION 3.01 Use of Advances, Servicer Advances and Collections. (a)
The proceeds of Collections and of Advances deposited in the Collection Deposit
Account, and the proceeds of any Servicer Advances, for application each
Business Day shall be applied by the Collateral Agent as follows:
On the Effective Date, and on each Business Day thereafter, as follows:
(i) On each Business Day occurring prior to the
Amortization Commencement Date,
(1) first, to the payment of Facilities Costs then
due and, to the extent any principal portion of a Servicer
Advance was used to pay Facilities Costs, the repayment to the
Servicer of such Servicer Advance,
(2) second, to the payment of interest due and
payable in respect of Advances and, to the extent any
principal portion of a Servicer Advance was used to pay
interest due and payable in respect of Advances, the repayment
to the Servicer of such Servicer Advance,
(3) third, to the payment, if any, of the principal
amount of Advances in such proportion as designated by the
Servicer (so long as the Servicer is also a Seller) and
thereafter in such proportion as BII shall direct, but in each
case only to the extent required pursuant to Section 4.1.2 of
the Loan Agreement, together with interest thereon on the
principal amount paid and, to the extent any principal portion
of a Servicer Advance was used to pay principal of the
Advances, together with interest thereon, the repayment to the
Servicer of such Servicer Advance,
(4) fourth, to the payment of the operating expenses
of the Company not included in clause first above,
(5) fifth, to the payment of increased costs and
other expenses and indemnity payments that are due to the
Collateral Agent, the Agent and the Lenders,
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(6) sixth, to the payment of the Servicing Fee, if
the Servicer is an Affiliate of the Company, and to the
payment of interest due and payable on Servicer Advances, and
(7) seventh, at the Company's option, (A) to the
Company to enable the Company to purchase Receivables from the
Sellers pursuant to the Purchase Agreement, (B) to make
payments on account of the Subordinated Note, (C) to the
Company to enable the Company to make payments on account of
Restricted Distributions or to make loans to BII but only (1)
pursuant to a resolution of the Board of Directors of the
Company authorizing such Restricted Distribution or loan, (2)
to the extent permitted by Sections 8.2.9 and 8.2.20 (e) of
the Loan Agreement and (3) so long as no Amortization Event or
Potential Amortization Event shall have occurred and be
continuing or would occur as a result of such payment or loan,
(D) to make payments on the principal outstanding amount of
any Advances and interest thereon (together with any payments
required under Section 5.4 of the Loan Agreement, if
applicable), and (E) to set aside for repayment to any Lender
terminated pursuant to the terms of Section 3.3 (b) of the
Loan Agreement of any amounts due or to become due upon
termination;
provided, that (except for payments made to the Sellers prior to the
identification of a Borrowing Base Deficiency that may be required to be
returned pursuant to Section 2.03(b) of the Purchase Agreement) in no event
shall any Collections be distributed from the Collection Deposit Account with
respect to clauses (4), (6) or (7) above to the extent that such distribution
would result in a Borrowing Base Deficiency.
(ii) On each Business Day occurring on or after the
Amortization Commencement Date (if no Trigger Event has
occurred), all Collections and proceeds from Advances
deposited in the Collection Deposit Account for application
shall be applied by the Collateral Agent as follows:
(1) first, to set aside an amount equal to accrued
and unpaid interest in respect of Liquidity Advances or to pay
such interest if due and payable and, to the extent any
principal portion of a Servicer Advance was used to pay
interest on the Liquidity Advances, the repayment to the
Servicer of such Servicer Advance,
(2) second, to set aside an amount equal to the
principal amount of Liquidity Advances or to pay such
principal if due and payable and, to the extent any principal
portion of a Servicer Advance was used to pay principal of the
Liquidity Advances, the repayment to the Servicer of such
Servicer Advance,
(3) third, to set aside an amount equal to accrued
and unpaid interest in respect of CP Rate Advances or to pay
such interest if due and payable and, to the extent any
principal portion of a Servicer Advance was used to pay
interest on the CP Rate Advances, the repayment to the
Servicer of such Servicer Advance,
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(4) fourth, to set aside an amount equal to the
principal amount of CP Rate Advances or to pay such principal
if due and payable and, to the extent any principal portion of
a Servicer Advance was used to pay principal on the CP Rate
Advances, the repayment to the Servicer of such Servicer
Advance,
(5) fifth, to set aside an amount equal to accrued
Facilities Costs or to pay such Facilities Costs if due and
payable and, to the extent any principal portion of a Servicer
Advance was used to pay such Facilities Costs, the repayment
to the Servicer of such Servicer Advance,
(6) sixth, to pay increased costs and other expenses
and indemnity payments that are due to the Agent, the
Collateral Agent and the Lenders,
(7) seventh, to set aside an amount equal to the
accrued Servicing Fee, if the Servicer is an Affiliate of the
Company, or to pay such Servicing Fee if due and payable and
to pay interest due and payable on Servicer Advances;
provided, that no proceeds of Liquidity Advances will be used to pay principal
of (or interest on) Liquidity Advances.
(iii) On each Business Day occurring on or after the
Amortization Commencement Date, if a Trigger Event has
occurred, all Collections and proceeds from Advances deposited
in the Collection Deposit Account for application shall be
applied by the Collateral Agent as follows:
(1) first, to pay an amount equal to accrued and
unpaid interest in respect of Liquidity Advances and, to the
extent any principal portion of a Servicer Advance was used to
pay interest on the Liquidity Advances, the repayment to the
Servicer of such Servicer Advance,
(2) second, to pay an amount equal to the principal
amount of Liquidity Advances and, to the extent any principal
portion of a Servicer Advance was used to pay principal of the
Liquidity Advances, the repayment to the Servicer of such
Servicer Advance,
(3) third, to set aside an amount equal to accrued
and unpaid interest in respect of CP Rate Advances or to pay
such interest if due and payable and, to the extent any
principal portion of a Servicer Advance was used to pay
interest on the CP Rate Advances, the repayment to the
Servicer of such Servicer Advance,
(4) fourth, to set aside an amount equal to pay the
principal amount of CP Rate Advances or to pay such principal
if due and payable and, to the extent any principal portion of
a Servicer Advance was used to pay principal on the CP Rate
Advances, the repayment to the Servicer of such Servicer
Advance,
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(5) fifth, to pay accrued Facilities Costs and, to
the extent any principal portion of a Servicer Advance was
used to pay such Facilities Costs, the repayment to the
Servicer of such Servicer Advance,
(6) sixth, to pay increased costs and other expenses
and indemnity payments that are due to the Agent, the
Collateral Agent and the Lenders,
(7) seventh, to pay the Servicing Fee, if the
Servicer is an Affiliate of the Company and to pay interest
due and payable on Servicer Advances;
provided, that if any CP Rate Advances remain unpaid (x) the amount of
Collections applied on any day to payment of principal of (and interest on) the
Liquidity Advances shall not exceed the Trigger Percentage of such Collections,
and (y) proceeds of Liquidity Advances shall not be applied to the payment of
principal of (or interest on) Liquidity Advances.
All Collections and proceeds from Advances shall be paid by the
Collateral Agent to the Company when and as received, but only on and after the
first Business Day following the occurrence of all of the following:
(A) all Liquidity Commitments shall have been terminated;
(B) all Advances shall have been repaid in full (together with
interest thereon) (or funds for the repayment or payment in full
thereof shall have been set aside by the Collateral Agent in accordance
with paragraph (ii) or (iii) above); and
(C) all other amounts due and payable (determined as of the
first date on which the conditions specified in clauses (A) and (B)
above shall have been satisfied under any Transaction Document) to the
Lenders shall have been paid in full (or funds for the payment in full
thereof shall have been set aside by the Collateral Agent in accordance
with paragraph (ii) above) and no such amount shall be in dispute on
such first date.
(b) Prior to the Amortization Commencement Date, the Servicer
shall as soon as possible after receipt of any Collections and other
proceeds, determine whether they are not with respect to Purchased
Receivables and shall as soon as possible notify the Agent of such
determination. The Collateral Agent shall as soon as possible
thereafter transfer any Collections that are not with respect to
Purchased Receivables from the Collection Deposit Account to Collection
Account "B" for payment to the applicable Person.
(c) During any Amortization Period, the Servicer shall as soon
as possible after receipt of any Collections and other proceeds
determine whether they are Collections with respect to Purchased
Receivables or otherwise and shall as soon as possible notify the
Collateral Agent of such determination. The Collateral Agent shall as
soon as possible thereafter (i) transfer any Collections that are with
respect to Purchased Receivables from the Collection Account "B" to the
Collection Deposit Account for application pursuant to
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the terms of paragraph (a)(ii) or (a)(iii) above and (ii) pay any
Collections that are not with respect to Purchased Receivables to the
Person entitled thereto; provided, that with respect to any Collections
for which the Collateral Agent has not been provided such a
determination by the Servicer by the end of the Business Day ten
Business Days from the date of receipt thereof, such Collections shall
be deemed to be Collections with respect to Purchased Receivables and
shall be transferred to the Collection Deposit Account, and no other
Person shall have any rights therein.
(d) All proceeds received by the Company pursuant to clause
(a) of Section 7.01 of the Purchase Agreement shall be Collections and
shall be applied under this Article III in the same manner as cash
Collections; provided, that the Collections deemed made and for which
payment has not been made by the Sellers pursuant to Section 7.01 of
the Purchase Agreement shall not be applied to payments hereunder of
obligations to any Lender or the Agent or any other obligee who is not
an Affiliate of the Company.
(e) The Servicer agrees that in making each determination with
respect to Collections and other proceeds as set forth in paragraphs
(b) or (c) above, the Servicer represents and warrants at such time
that such determination is true and correct in all material respects.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.01 Notices. Unless otherwise provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telecopied or sent by United States mail and shall
be deemed to have been given when delivered in person, receipt of telecopy or
telecopy or four Business Days after depositing it in the United States mail,
registered or certified, with postage prepaid and properly addressed; provided,
that notices to the Agent shall not be effective until received by such Agent.
For the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section 4.01) shall be:
(a) if to the Company, to it at 2775 Highway 40, Suite 522, P.O. Box
1449, Verdi, Nevada 89439-1449;
(b) if to the Servicer, to it at 3330 West Friendly Avenue, Greensboro,
North Carolina 27410;
(c) If to the Agent or the Collateral Agent, to it at 191 Peachtree
Street, GA-423, Atlanta, GA 30303 Attn: Deborah Williams-Asset Backed Finance;
(d) if to a Lender, to it at its address set forth in the Loan
Agreement.
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SECTION 4.02 Binding Effect. This Agreement shall become effective when
it shall have been executed by the Company, the Servicer, the Agent and the
Collateral Agent and thereafter shall be binding upon and inure to the benefit
of the Company, the Servicer and the Agent and their respective successors and
assigns, except that the Company shall not have the right to assign its rights
hereunder or any interest herein without the prior consent of all the Lenders.
SECTION 4.03 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.04 Waivers; Amendment. (a) No failure or delay of the Agent
or the Collateral Agent 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 discontinuation 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 Agent or the Collateral
Agent hereunder are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Company therefrom shall in any event be
effective unless the same shall be permitted by subsection (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 Company in any case
shall entitle the Company to any other or further notice or demand in similar or
other circumstances.
(b) No provision of this Agreement may be waived, amended or
modified except in accordance with Section 11.1(b) of the Loan Agreement.
(c) Notwithstanding the foregoing, the form of Weekly Report
and the form of Monthly Settlement Statement attached as Exhibits H-1 and G,
respectively, to the Loan Agreement may be amended or modified pursuant to an
agreement of agreements in writing among only the Company and the Agent only for
the purpose of clarifying such form of Weekly Report or form of Monthly
Settlement Statement, as the case may be, or more fully conforming such form of
Weekly Report or Monthly Settlement Statement to the purposes thereof as set
forth in this Agreement.
SECTION 4.05 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 TRANSACTION
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OR 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 TRANSACTION DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 4.05.
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SECTION 4.06 Severability. In the event any one or more of the
provisions contained in or obligation under this Agreement or in or under any
other Transaction 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 4.07 Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 4.08 No Recourse. Each party hereto agrees that no recourse
with respect to any obligation, covenant or agreement of the Servicer or the
Company contained in this Agreement or any other Transaction Document to which
the Company or the Servicer is a party shall be had against any shareholder of
the Company or any affiliate of such shareholder, or any officer, director or
employee of any such Person (each such person a "Protected Party") by the
enforcement of any assessment or by any legal or equitable proceeding, by virtue
of any statute or otherwise; it being expressly agreed and understood that this
Agreement and each other Transaction Document to which the Company is a party is
solely an obligation of the Company and that no personal liability whatever
shall attach to or be incurred by any Protected Party under or by reason of any
of the obligations, covenants or agreements of the Company contained in this
Agreement or any other Transaction Document to which the Company is a party, or
implied therefrom; and it being further expressly agreed and understood that any
and all personal liability for breaches by the Company of any of such
obligations, covenants or agreements, either at common law or at equity or by
statute or constitution or otherwise, of every Protected Party is hereby
expressly waived.
SECTION 4.09 Consent to Jurisdiction. EACH OF THE PARTIES HERETO
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ANY COURT IN THE STATE OF
NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT
FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND
RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT OR ACTION OR
PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HEREBY WAIVES AND AGREES NOT TO ASSERT BY
WAY OF MOTION, AS A
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DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR ANY OF THE
OTHER TRANSACTION DOCUMENTS OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN
OR BY SUCH COURTS. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.
SECTION 4.10 Bankruptcy Petition Against the Company. The Servicer
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all outstanding Obligations, it will not
institute against, or join any other Person in instituting against, the Company
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States. In the event that the Servicer takes action in
violation of this Section 4.10, the Company agrees, for the benefit of the
holders of the Obligations, that it shall file an answer with the bankruptcy
court or otherwise properly contest the filing of such a petition or the
commencement of such action and raise the defense that the Servicer has agreed
in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as its counsel advises that it may
assert. The provisions of this Section 4.10 shall survive the termination of
this Agreement.
SECTION 4.11 No Recourse. Without limitation to the obligations of the
Company hereunder, no recourse shall be had for the payment of any amount owing
in respect of Servicer Advances against any stockholder, employee, officer,
director or incorporator of the Company based solely on their status as such.
The provisions of this Section 4.11 shall survive the termination of this
Agreement and the replacement of the Servicer.
SECTION 4.12 Attorney-in-Fact. The Company appoints the Servicer as the
Company's attorney-in-fact, with full authority in the place and stead of the
Company and in the name of the Company or otherwise (but subject to revocation
by the Company at any time), to ask, demand, collect, sue for, recover and
receipt for moneys due and to become due under or in connection with the
Collateral; and to file any claims or take any action or institute any
proceedings that the Servicer deem to be necessary or desirable for the
collection of the Receivables, in each case in accordance with (and subject to
the limitations of) the Transaction Documents.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
B.I. FUNDING, INC.
By: /s/Mary Ellen Ramsayer
Name: Mary Ellen Ramsayer
Title: Assistant Secretary
BURLINGTON INDUSTRIES, INC., as
Servicer
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President, Treasurer
and Investor Relations
WACHOVIA BANK, N.A., as
Agent and Collateral Agent
By: /s/ W.E. Covington
Name: William E. Covington
Title: Senior Vice President
<PAGE>
Schedule 2.03(c)
Consent or Approvals
Approval of the Boards of Directors of Burlington Industries, Inc. and
B.I. Funding, Inc.
<PAGE>
Exhibit 10.24
- --------------------------------------------------------------------------------
LOAN AGREEMENT,
Dated as of December 10, 1997,
among
B.I. FUNDING, INC.,
CERTAIN FINANCIAL INSTITUTIONS,
as the Liquidity Lenders
BLUE RIDGE ASSET FUNDING CORPORATION,
as the Conduit Lender
and
WACHOVIA BANK, N.A.,
as the Agent for the Lenders
- --------------------------------------------------------------------------------
<PAGE>
||
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS................................1
SECTION 1.1. Definitions......................................1
SECTION 1.2. Cross-References.................................1
SECTION 1.3. Accounting and Financial Determinations; No
Duplication...................................1
ARTICLE II CP BORROWING PROCEDURES, CP ADVANCES AND
CP RATE NOTE....................................................2
SECTION 2.1. Discretionary CP Rate Advances...................2
SECTION 2.2. Borrower Unable to Receive CP Rate Advances......2
SECTION 2.3. Borrowing Procedures.............................2
SECTION 2.4. Disbursement of Funds............................2
SECTION 2.5. CP Rate Note.....................................3
ARTICLE III LIQUIDITY COMMITMENTS, BORROWING PROCEDURES,
LIQUIDITY ADVANCES AND NOTES....................................3
SECTION 3.1. Liquidity Commitments............................3
SECTION 3.1.1. Revolving Advance Commitment...................3
SECTION 3.1.2. Refunding Advance Commitment...................3
SECTION 3.2. Liquidity Lenders Not Required to Make Liquidity
Advances. .....................................4
SECTION 3.3. Termination and Reduction of the Liquidity
Commitment.....................................4
SECTION 3.4. Borrowing Procedures.............................5
SECTION 3.4.1. Revolving Advances.............................5
SECTION 3.4.2. Refunding Advances.............................5
SECTION 3.5. Disbursement of Funds............................6
SECTION 3.6. Continuation and Conversion Elections............6
SECTION 3.7. LIBOR Funding....................................6
SECTION 3.8. Notes............................................7
ARTICLE IV REPAYMENTS, PREPAYMENTS, INTEREST AND FEES, ETC.................7
SECTION 4.1. Repayments and Prepayments.......................7
SECTION 4.1.1. Voluntary Prepayments..........................7
SECTION 4.1.2. Mandatory Prepayments..........................8
SECTION 4.2. Interest Provisions..............................8
SECTION 4.2.1. Liquidity Rates................................8
SECTION 4.2.2. CP Rates.......................................9
SECTION 4.2.3. Post-Maturity Rates............................9
SECTION 4.3. Payments of Interest............................10
SECTION 4.3.1. Interest Rate Determination...................10
SECTION 4.4. Fees............................................10
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ARTICLE V OTHER TERMS RELATING TO THE ADVANCES...........................11
SECTION 5.1. LIBO Rate Lending Unlawful......................11
SECTION 5.2. Deposits Unavailable............................11
SECTION 5.3. Increased Fixed Rate Advance Costs, etc.........11
SECTION 5.4. Funding Losses..................................12
SECTION 5.5. Increased Capital Costs.........................12
SECTION 5.6. Taxes...........................................13
SECTION 5.7. Payments, Computations, etc...................17
SECTION 5.8. Sharing of Payments............................17
SECTION 5.9. Setoff..........................................18
SECTION 5.10. Replacement of Liquidity Lenders...............18
SECTION 5.11. Subordination..................................21
ARTICLE VI CONDITIONS PRECEDENT...........................................21
SECTION 6.1. Conditions to Effectiveness.....................21
SECTION 6.1.1. Resolutions...................................21
SECTION 6.1.2. Agreement.....................................22
SECTION 6.1.3. Notes.........................................22
SECTION 6.1.4. UCC Filings...................................22
SECTION 6.1.5. Purchase Agreement............................22
SECTION 6.1.6. Facility Agreement; Security Agreement........22
SECTION 6.1.7. Effective Date Certificate....................22
SECTION 6.1.8. Purchase Agreement Conditions.................23
SECTION 6.1.9. Licenses, etc.................................23
SECTION 6.1.10. Lockbox Accounts and Concentration Account...23
SECTION 6.1.11. Policies.....................................23
SECTION 6.1.12. Board of Directors...........................23
SECTION 6.1.13. Financial Statements.........................23
SECTION 6.1.14. Solvency Certificate.........................23
SECTION 6.1.15. Insurance....................................23
SECTION 6.1.16. No Material Adverse Change...................23
SECTION 6.1.17. Legal Opinions...............................24
SECTION 6.1.18. Certification as to Separateness.............24
SECTION 6.1.19. Closing Fees.................................24
SECTION 6.1.20. Satisfactory Legal Form......................24
SECTION 6.2. Conditions to the Making of Each Revolving
Advance and Each CP Rate Advance.......24
SECTION 6.2.1. Representations and Warranties..........24
SECTION 6.2.2. No Amortization Event...................24
SECTION 6.2.3. No Bankruptcy Proceeding................24
SECTION 6.2.4. No Borrowing Base Deficiency............24
SECTION 6.2.5. Receipt of Weekly Report................25
SECTION 6.2.6. Borrowing Request.......................25
SECTION 6.2.7. Initial Funding.........................25
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SECTION 6.3. Conditions Precedent to the Making of Each
Refunding Advance................................25
SECTION 6.3.1. No Bankruptcy....................................25
SECTION 6.3.2. Availability.....................................26
SECTION 6.4. Conditions Precedent to Continuation/
Conversion Roll-Over............................26
ARTICLE VII REPRESENTATIONS AND WARRANTIES..................................26
SECTION 7.1. Organization; Powers.............................26
SECTION 7.2. Ownership; Subsidiaries..........................27
SECTION 7.3. Authorization....................................27
SECTION 7.4. Governmental Consents............................27
SECTION 7.5. Binding Obligations..............................27
SECTION 7.6. Litigation; Adverse Facts........................28
SECTION 7.7. Investment Company Act; Public Utility Holding
Company Act..............................28
SECTION 7.8. Financial Information............................28
SECTION 7.9. Financing Statements.............................28
SECTION 7.10. Filings.........................................29
SECTION 7.11. Location of Office and Records..................29
SECTION 7.12. No Other Liens..................................29
SECTION 7.13. Security Agreement..............................29
SECTION 7.14. Liens on Assets.................................29
SECTION 7.15. No Amortization Event...........................29
SECTION 7.16. Collateral Agent Can Perform....................30
SECTION 7.17. The Borrower as Distinct Legal Entity...........30
SECTION 7.18. Disclosure......................................30
SECTION 7.19. No Material Adverse Change......................30
SECTION 7.20. Solvency........................................31
SECTION 7.21. Employee Benefit Plans..........................31
SECTION 7.22. Regulations G, U, and X.........................32
SECTION 7.23. Taxes...........................................32
ARTICLE VIII COVENANTS.......................................................32
SECTION 8.1. Affirmative Covenants............................32
SECTION 8.1.1. Existence......................................32
SECTION 8.1.2. Business and Properties........................32
SECTION 8.1.3. Insurance......................................33
SECTION 8.1.4. Obligations and Taxes..........................33
SECTION 8.1.5. Financial Statements, Reports, etc.............33
SECTION 8.1.6 Litigation and Other Notices....................34
SECTION 8.1.7 Maintaining Records; Access to Properties and
Inspections....................................35
SECTION 8.1.8 Use of Proceeds.................................35
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SECTION 8.1.9 Settlement Reports..............................36
SECTION 8.1.10 Compliance with Laws...........................36
SECTION 8.1.11 Directors, Officers and Employees..............37
SECTION 8.1.12 Lockbox Accounts and Concentration Account.....37
SECTION 8.1.13 Commingled Funds...............................37
SECTION 8.1.14 Additional Financial Statements................37
SECTION 8.2 Negative Covenants.............................37
SECTION 8.2.1 Indebtedness....................................37
SECTION 8.2.2 Liens...........................................38
SECTION 8.2.3 Creditors.......................................38
SECTION 8.2.4 Business of the Borrower........................38
SECTION 8.2.5 Sale and Lease-Back Transactions................38
SECTION 8.2.6 Investments.....................................38
SECTION 8.2.7 Mergers, Consolidations, Acquisitions of Assets
and Sales of Assets......................38
SECTION 8.2.8 Lease Obligations...............................39
SECTION 8.2.9 Dividends, Distributions and Loans to BII.......39
SECTION 8.2.10 Employees......................................39
SECTION 8.2.11 Transactions with Affiliates...................39
SECTION 8.2.12 Subordinated Note..............................39
SECTION 8.2.13 Accounting Changes.............................39
SECTION 8.2.14 Capital Stock..................................39
SECTION 8.2.15 Amendments.....................................40
SECTION 8.2.16 Other Agreements...............................40
SECTION 8.2.17 No Powers of Attorney..........................40
SECTION 8.2.18 Separate Existence.............................40
SECTION 8.2.19 Receivables Not To Be Evidenced by Promissory
Notes....................................41
SECTION 8.2.20 Financial Covenants............................41
SECTION 8.2.21 Ownership of Assets and Property...............42
SECTION 8.2.22 Employee Benefit Plans.........................42
ARTICLE IX AMORTIZATION EVENTS.............................................43
SECTION 9.1 Amortization Event................................43
SECTION 9.1.1 Non-Payment of Obligations......................43
SECTION 9.1.2 Breach of Warranty..............................43
SECTION 9.1.3 Non-Performance of Certain Covenants and
Obligations.............................43
SECTION 9.1.4 Non-Performance of Other Covenants and
Obligations.............................43
SECTION 9.1.5 Default on Other Indebtedness...................43
SECTION 9.1.6 Judgments.......................................43
SECTION 9.1.7 Bankruptcy, Insolvency, etc.....................44
SECTION 9.1.8 Impairment of Security, etc.....................44
SECTION 9.1.9 Liens...........................................45
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SECTION 9.1.10 Other Defaults.................................45
SECTION 9.1.11 Change in Control..............................45
SECTION 9.1.12 Purchase Termination Event.....................45
SECTION 9.1.13 Acceleration of Certain Indebtedness of the
Sellers; Termination of Commitments Under BII
Credit Agreement..............................45
SECTION 9.1.14 Enforceability of Transaction Documents........45
SECTION 9.1.15 Investment Company.............................45
SECTION 9.2 Action if Amortization Event.............46
ARTICLE X THE AGENT.......................................................46
SECTION 10.1 Actions..........................................46
SECTION 10.2 Funding Reliance, etc............................47
SECTION 10.3 Exculpation......................................47
SECTION 10.4 Successor........................................48
SECTION 10.5 Liquidity Advances by Wachovia...................48
SECTION 10.6 Credit Decisions.................................48
SECTION 10.7 Copies, etc......................................48
SECTION 10.8 Collateral Agent.................................49
ARTICLE XI MISCELLANEOUS PROVISIONS........................................49
SECTION 11.1 Waivers, Amendments, etc.........................49
SECTION 11.2 Notices..........................................50
SECTION 11.3 Payment of Costs and Expenses....................51
SECTION 11.4 Indemnification..................................52
SECTION 11.5 Survival.........................................53
SECTION 11.6 Severability.....................................53
SECTION 11.7 Headings.........................................54
SECTION 11.8 Execution in Counterparts, Effectiveness, etc....54
SECTION 11.9 Governing Law; Entire Agreement..................54
SECTION 11.10 Successors and Assigns..........................54
SECTION 11.11 Sale and Transfer of Advances and Notes;
Participations in Loans and Notes........54
SECTION 11.11.1 Assignments...................................54
SECTION 11.11.2 Participations................................57
SECTION 11.12 Other Transactions..............................58
SECTION 11.13 Bankruptcy Petition Against the Borrower or the
Conduit Lender..........................58
SECTION 11.14 No Recourse.....................................59
SECTION 11.15 Survival of Representations and Warranties......59
SECTION 11.16 Confidentiality.................................59
SECTION 11.17 Jurisdiction; Consent to Service of Process.....60
SECTION 11.18 Waiver of Jury Trial............................61
SECTION 11.19 Qualification Regarding Bacova..................61
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SCHEDULES
SCHEDULE I - Fiscal Months and Fiscal Quarters
SCHEDULE II - Approvals and Consents
EXHIBITS
EXHIBIT A - Form of Liquidity Note
EXHIBIT B - Form of CP Rate Note
EXHIBIT C - Form of Borrowing Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E-1 - Form of Liquidity Lender Assignment Agreement
EXHIBIT E-2 - Form of Conduit Lender Assignment Agreement
EXHIBIT F - Form of Effective Date Certificate
EXHIBIT G - Form of Settlement Statement
EXHIBIT H - Form of Weekly Report
EXHIBIT I - Form of Opinion of the General Counsel to the Borrower
EXHIBIT J - Form of Promissory Note
EXHIBIT K - Certificate as to Separateness
ANNEXES
ANNEX Z - Definitions
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of December 10, 1997 (as amended,
supplemented, restated or otherwise modified from time to time, this
"Agreement") among B.I. FUNDING, INC., a Delaware corporation (the "Borrower"),
the financial institutions listed on the signature pages hereof under the
heading "Liquidity Lenders" (such financial institutions, together with
financial institutions that have become parties hereto pursuant to Section
11.11.1, being each a "Liquidity Lender" and, collectively, the "Liquidity
Lenders"), BLUE RIDGE ASSET FUNDING CORPORATION, a Delaware corporation, as the
commercial paper lender (the "Conduit Lender") (the Liquidity Lenders and the
Conduit Lender, being each a "Lender" and, collectively, the "Lenders"), and
WACHOVIA BANK, N.A. ("Wachovia"), as agent (the "Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lenders to make certain credit
facilities available to the Borrower as described herein; and
WHEREAS, the Lenders are willing to make such facilities available, on
the terms and subject to the conditions hereinafter set forth (including Article
VI);
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Definitions. Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in Annex Z hereto.
SECTION 1.2. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Transaction Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Transaction Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references to
such clause of such Article, Section or definition.
SECTION 1.3. Accounting and Financial Determinations; No Duplication.
Unless otherwise specified, (i) all accounting terms used herein shall be
interpreted, all accounting determinations and computations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared in accordance with GAAP, in each case consistently applied and (ii) all
accounting determinations and computations hereunder or under any other
Transaction Documents shall be made without duplication.
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ARTICLE II
CP BORROWING PROCEDURES,
CP ADVANCES AND CP RATE NOTE
SECTION 2.1. Discretionary CP Rate Advances. (a) On the terms and
subject to the conditions of this Agreement (including Article VI), the Borrower
may request and the Conduit Lender may agree to, make loans ("CP Rate Advances")
to the Borrower pursuant to the procedures described in this Article II.
(b) The Conduit Lender may make, in its discretion, from time to time,
on or before the CP Rate Advance Termination Date, CP Rate Advances to the
Borrower on any Weekly Settlement Date in an amount equal to the Borrowing of CP
Rate Advances requested by the Borrower to be made on such day. On the terms and
subject to the conditions hereof, the Borrower may from time to time borrow,
prepay and reborrow CP Rate Advances.
SECTION 2.2. Borrower Unable to Receive CP Rate Advances. The Borrower
will not be able to receive, and the Conduit Lender will not be allowed to make
CP Rate Advances if, after giving effect to such CP Rate Advance, (i) the sum of
(x) the CP Exposure plus (y) the Aggregate Outstanding Liquidity Advances, would
exceed the Liquidity Commitment Amount.
SECTION 2.3. Borrowing Procedures. Borrowings of CP Rate Advances shall
be made in accordance with this Section 2.3.
(a) By delivering a Borrowing Request to the Agent for a borrowing of a
CP Rate Advance, the Borrower may irrevocably request, not later than 10:00
a.m., Atlanta time, on a Business Day of a proposed Borrowing, but in any case
not more than five Business Days before a proposed Borrowing (specifying the
proposed Borrowing Date and the proposed maturity date thereof), that a
Borrowing be made in a minimum amount of $1,000,000 and an integral multiple of
$100,000. Upon receipt of each Borrowing Request, the Agent shall give to the
Conduit Lender notice thereof on the Business Day of such receipt. The Conduit
Lender shall notify the Agent whether or not the Conduit Lender will make the CP
Rate Advance requested by the Borrower and the amount of the requested Borrowing
that the Conduit Lender would make. If the Agent is notified by the Conduit
Lender that it will not make any part of the CP Rate Advance requested by the
Borrower, the Agent will promptly notify the Borrower of such fact, and the
Borrower may submit a Borrowing Request to the Agent for a borrowing of Base
Rate Advances.
(b) Each outstanding CP Rate Advance shall mature on the last day of
the Interest Period therefor.
SECTION 2.4. Disbursement of Funds. On or before 1:00 p.m., Atlanta
time, on the Borrowing Date proposed by the Borrower, the Conduit Lender shall
deposit with the Agent same day funds in an amount equal to the amount of the
requested Borrowing of CP Rate Advances the Conduit Lender had previously
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notified the Agent it would make pursuant to Section 2.3(a). Such deposit will
be made to an account which the Agent shall specify from time to time by notice
to the Conduit Lender. Unless the Agent determines that any applicable condition
specified in Section 6.2 has not been satisfied, the Agent will remit the amount
of the CP Rate Advances so made available by the Conduit Lender to the
Collection Deposit Account, not later than 2:30 p.m., Atlanta time, and the
Agent shall provide the Borrower with written confirmation of the amount of such
CP Rate Advance and the Interest Period applicable to such CP Rate Advance, not
later than 5:00 p.m., Atlanta time, in each case on the Borrowing Date for such
CP Rate Advance.
SECTION 2.5. CP Rate Note. The Conduit Lender's Advances shall be
evidenced by a CP Rate Note, duly executed on behalf of the Borrower, payable to
the order of the Conduit Lender in a maximum principal amount equal to the
Maximum Conduit Facility Amount. The Borrower hereby irrevocably authorizes the
Conduit Lender to make (or cause to be made) appropriate notations on the grid
attached to the CP Rate Note (or on any continuation of such grid), which
notations, if made, shall evidence, inter alia, the date of, the outstanding
principal of, and the interest rate and Interest Period applicable to the
Advances evidenced thereby. Such notations shall be conclusive and binding on
the Borrower absent manifest error; provided, however, that the failure of the
Conduit Lender to make any such notation or any error in any such notation shall
not limit or otherwise affect any Obligation of the Borrower.
ARTICLE III
LIQUIDITY COMMITMENTS, BORROWING PROCEDURES,
LIQUIDITY ADVANCES AND NOTES
SECTION 3.1. Liquidity Commitments. On the terms and subject to the
conditions of this Agreement (including Article VI), each Liquidity Lender
severally agrees to make loans characterized hereunder as "Revolving Advances"
and "Refunding Advances" (relative to such Liquidity Lender, collectively, its
"Liquidity Advances") to the Borrower pursuant to the Liquidity Commitments
described in this Section 3.1.
SECTION 3.1.1. Revolving Advance Commitment. Each Liquidity Lender
severally agrees to make, from time to time, on or before the Revolving Advance
Commitment Termination Date, revolving loans (relative to such Liquidity Lender,
its "Revolving Advances") to the Borrower equal to such Liquidity Lender's
Percentage, as such Percentage may be decreased pursuant to Section 3.3, of the
aggregate amount of the Borrowing of Revolving Advances requested by the
Borrower to be made on such day. On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow, prepay and reborrow Revolving
Advances.
SECTION 3.1.2. Refunding Advance Commitment. Each Liquidity Lender
severally agrees to make, from time to time, on or before the Refunding Advance
Commitment Termination Date, refunding loans (relative to such Liquidity
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Lender, its "Refunding Advances") to the Borrower equal to such Liquidity
Lender's Percentage, as such Percentage may be decreased pursuant to Section
3.3, of the aggregate amount of the Borrowing of Refunding Advances requested by
the Borrower to be made on such day. On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow, prepay and reborrow Refunding
Advances.
SECTION 3.2. Liquidity Lenders Not Required to Make Liquidity Advances.
No Liquidity Lender shall be required to make any Liquidity Advances under any
circumstance described below in the Section 3.2.
SECTION 3.2.1. Revolving Advances. No Liquidity Lender shall be
required to make a Revolving Advance if, after giving effect to such Revolving
Advance, (i) the sum of (x) the Aggregate Outstanding Liquidity Advances, plus
(y) the CP Exposure would exceed the Liquidity Commitment Amount or (ii) the sum
of the Aggregate Outstanding Liquidity Advances with respect to such Liquidity
Lender and such Liquidity Lender's Percentage of the CP Exposure would exceed
such Liquidity Lender's Percentage of the Liquidity Commitment Amount.
SECTION 3.2.2. Refunding Advances. No Liquidity Lender shall be
required to make a Refunding Advance to the extent that, after giving effect to
such Refunding Advance, (i) the sum of (x) the Aggregate Outstanding Liquidity
Advances, plus (y) the CP Exposure would exceed the Available Liquidity
Commitment or (ii) the sum of the Aggregate Outstanding Liquidity Advances with
respect to such Liquidity Lender and such Liquidity Lender's Percentage of the
CP Exposure would exceed such Liquidity Lender's Percentage of the Available
Liquidity Commitment.
SECTION 3.2.3. All Liquidity Advances. No Liquidity Advances shall be
made by any Liquidity Lender if, after giving effect thereto, the Aggregate
Outstanding Liquidity Advances with respect to such Liquidity Lender would
exceed such Liquidity Lender's Percentage of the Liquidity Commitment Amount.
SECTION 3.3. Termination and Reduction of the Liquidity Commitment. (a)
The Borrower may, upon at least 30 days' prior written notice to the Agent (who
shall give prompt written notice thereof to each Liquidity Lender), irrevocably
terminate or reduce the Liquidity Commitment Amount; provided, however, that the
Liquidity Commitment Amount shall not be reduced on any day to an amount less
than the sum of (i) the CP Exposure plus (ii) the Aggregate Outstanding
Liquidity Advances on such day. Upon the effectiveness of any reduction of the
Liquidity Commitment Amount, there will be a pro rata reduction of the Liquidity
Commitment of each Liquidity Lender.
(b) The Borrower shall have the right, at any time, to terminate the
Liquidity Commitment of any Liquidity Lender whose short-term ratings have been
downgraded below A-1 by S&P or P-1 by Moody's if the Borrower did not obtain an
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Assignee Lender with appropriate ratings within 90 days of such downgrade. Upon
the effectiveness of any such termination, (i) the Liquidity Commitment Amount
shall be reduced by a corresponding amount, (ii) the Percentage of each
Liquidity Lender will be adjusted accordingly and (iii) the Borrower shall pay
to such terminated Liquidity Lender in same day funds on the date of such
termination the principal of and interest accrued to the date of payment on the
Liquidity Advances made by such Liquidity Lender hereunder and all other amounts
accrued for such Liquidity Lender's account or owed to it hereunder, including
those amounts owed pursuant to Sections 5.3 through 5.6.
SECTION 3.4. Borrowing Procedures. Borrowings of Revolving Advances and
Refunding Advances shall be made in accordance with this Section 3.4.
SECTION 3.4.1. Revolving Advances. (a) By delivering a Borrowing
Request to the Agent for a borrowing of Revolving Advances, the Borrower may
irrevocably request, (i) in the case of LIBO Rate Advances, not later than 11:00
a.m., Atlanta time, three Business Days before a proposed Borrowing but not more
than five Business Days before a proposed Borrowing that a Borrowing be made in
a minimum amount of $1,000,000 and an integral multiple of $1,000,000, or (ii)
in the case of Base Rate Advances, not later than 11:00 a.m., Atlanta time, one
Business Day prior to the date of a proposed Borrowing but not more than five
Business Days before a proposed Borrowing, that a Borrowing be made in a minimum
amount of $1,000,000 and an integral multiple of $100,000. Upon receipt of each
Borrowing Request, the Agent shall give to each Liquidity Lender notice thereof
on the Business Day of such receipt and of such Liquidity Lender's share of such
Borrowing. On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Revolving Advances, and shall be
made on the Business Day, specified in such Borrowing Request.
(b) Each outstanding Revolving Advance shall mature on the Scheduled
Maturity Date.
SECTION 3.4.2. Refunding Advances. (a) Subject to the requirements of
Section 6.3, the Conduit Lender (on any Business Day) may require each Liquidity
Lender to acquire all or part of any CP Rate Advance, together with accrued and
unpaid interest thereon. The purchase price for such acquisition shall be the
outstanding principal amount of such CP Rate Advance plus the amount of such
accrued interest. Such acquisition shall by funded by the Liquidity Lenders
proportionately according to its Liquidity Commitment, and each portion of a CP
Rate Advance so acquired by a Liquidity Lender (and accrued interest thereon)
shall automatically constitute the principal amount of a Refunding Advance made
by such Liquidity Lender hereunder, without any further action by any Person.
The Agent shall notify each Liquidity Lender in writing or by telephone
(telephone notice to be confirmed in writing as soon as practicable) no later
than 11:00 a.m. on the date of any such acquisition (which notice shall specify
the amount required to be funded by such Liquidity Lender). Each resulting
Refunding Advance shall initially be a Base Rate Advance.
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(b) Each outstanding Refunding Advance shall mature on the Scheduled
Maturity Date.
SECTION 3.5. Disbursement of Funds. On or before 2:30 p.m. (or, in the
case of a Refunding Advance as of which the Agent gave notice to the Liquidity
Lenders after 11:00 a.m., on the proposed Borrowing date, on or before 4:00
p.m.), Atlanta time, on the proposed Borrowing date, each Liquidity Lender shall
deposit with the Agent same day funds in an amount equal to such Liquidity
Lender's Percentage of the requested Borrowing of Revolving Advances or
Refunding Advances, as the case may be. Such deposit will be made to an account
which the Agent shall specify from time to time by notice to the Liquidity
Lenders. No Liquidity Lender's obligation to make any Revolving Advances or
Refunding Advances, as the case may be, shall be affected by any other Liquidity
Lender's failure to make any Revolving Advances or Refunding Advances, as the
case may be. Unless the Agent determines that any condition specified in Section
6.2, in the case of Revolving Advances, or Section 6.3, in the case of Refunding
Advances, has not been satisfied, the Agent will remit the aggregate of the
amounts of (i) Refunding Advances so made available by the Liquidity Lenders to
the account or accounts designated by the Conduit Lender and (ii) Revolving
Advances so made available by the Liquidity Lenders to the Collection Deposit
Account, in each case not later than 2:30 p.m., Atlanta time.
SECTION 3.6. Continuation and Conversion Elections. Subject to Section
6.4, by delivering a Continuation/Conversion Notice to the Agent (which will
give prompt notice to the Liquidity Lenders) on or before 11:00 a.m., Atlanta
time, on a Business Day, the Borrower may from time to time irrevocably elect
(i) that (x) all or any portion of Base Rate Advances be converted into LIBO
Rate Advances in a minimum amount of $1,000,000 and an integral multiple of
$1,000,000 or (y) LIBO Rate Advances be continued as LIBO Rate Advances, in each
case, on not less than three nor more than five Business Days' notice or (ii)
that all, or any portion in a minimum amount of $1,000,000 and an integral
multiple of $1,000,000 of LIBO Rate Advances be converted into Base Rate
Advances on not less than one nor more than three Business Days' notice (in the
absence of delivery of a Continuation/Conversion Notice with respect to any LIBO
Rate Advance at least three Business Days before the last day of the then
current Interest Period with respect thereto, such LIBO Rate Advance shall, on
such last day, automatically convert to a Base Rate Advance); provided, however,
that (i) each such conversion or continuation shall be pro rated among the
applicable outstanding Advances of all Liquidity Lenders, and (ii) no portion of
the outstanding principal amount of any Liquidity Advances may be continued as,
or be converted into, LIBO Rate Advances when any Amortization Event has
occurred and is continuing.
SECTION 3.7. LIBOR Funding. Each Liquidity Lender may, if it so elects,
fulfill its obligation to make, continue or convert LIBO Rate Advances hereunder
by causing one of its foreign branches or Affiliates (or an international
banking facility created by such Liquidity Lender) to make or maintain such LIBO
Rate Advance; provided, however, that such LIBO Rate Advance shall nonetheless
be deemed to have been made and to be held by such Liquidity Lender, and the
obligation of the Borrower to repay such LIBO Rate Advance shall nevertheless be
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to such Liquidity Lender for the account of such foreign branch, Affiliate or
international banking facility. In addition, the Borrower hereby consents and
agrees that, for purposes of any determination to be made for purposes of
Section 5.1, 5.2, 5.3 or 5.4, it shall be conclusively assumed that each
Liquidity Lender elected to fund all LIBO Rate Advances by purchasing Dollar
deposits in the interbank Eurodollar market.
SECTION 3.8. Notes. Each Liquidity Lender's Liquidity Advances under
its Liquidity Commitment shall be evidenced by a Revolving Note or a Refunding
Note, duly executed on behalf of the Borrower, payable to the order of such
Liquidity Lender in a maximum principal amount equal to such Liquidity Lender's
Percentage of the original Liquidity Commitment Amount. The Borrower hereby
irrevocably authorizes each Liquidity Lender to make (or cause to be made)
appropriate notations on the grid attached to such Liquidity Lender's Notes (or
on any continuation of such grid), which notations, if made, shall evidence,
inter alia, the date of, the outstanding principal of, and the interest rate and
Interest Period applicable to the Advances evidenced thereby. Such notations
shall be conclusive and binding on the Borrower absent manifest error; provided,
however, that the failure of any Liquidity Lender to make any such notation or
any error in any such notation shall not limit or otherwise affect any
Obligation of the Borrower.
ARTICLE IV
REPAYMENTS, PREPAYMENTS,
INTEREST AND FEES, ETC.
SECTION 4.1. Repayments and Prepayments. Subject to Section 9.2(ii),
the Borrower shall repay in full (x) the unpaid principal amount of each CP Rate
Advance on the last day of the Interest Period therefor, and (y) the unpaid
principal amount of each LIBO Rate Advance and each Base Rate Advance on the
Scheduled Maturity Date. Prior thereto, repayments and prepayments of Advances
shall be made as set forth in this Section 4.1. Each repayment or prepayment of
any Advances made pursuant to this Section 4.1 shall be without premium or
penalty, except as may be required by Section 5.4.
SECTION 4.1.1. Voluntary Prepayments. From time to time on any Business
Day, the Borrower may make a voluntary prepayment, in whole or in part, of the
outstanding principal of any Advances; provided, however, that
(a) the Borrower shall: (i) in the case of the prepayment of
LIBO Rate Loans, give the Agent at least three but no more than five
Business Days' prior written notice of its intent to prepay such LIBO
Rate Loans, (ii) in the case of the prepayment of Base Rate Advances,
give the Agent at least two but no more than five Business Days' prior
written notice of its intent to prepay such Base Rate Advances, (iii)
in the case of the prepayment of CP Rate Advances, give the Agent at
least two but no more than five Business Days' prior written notice of
its intent to prepay such CP Rate Advances; and, in each case, the
amount of such prepayment;
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(b) all such prepayments shall be in an aggregate minimum
amount of $1,000,000 and an integral multiple of $1,000,000 (or, if
less, equal to the then outstanding principal amount of all Advances);
and
(c) all such prepayments shall be applied to the payment of,
first, Base Rate Advances, second LIBO Rate Loans having the same
Interest Period, and third CP Rate Advances.
SECTION 4.1.2. Mandatory Prepayments. (a) Concurrently with any
reduction or termination of the Liquidity Commitment Amount pursuant to Section
3.3, all Collections available on such day as provided in Section 3.01 of the
Facility Agreement shall be applied to repay so much of the Liquidity Advances
(and interest accrued thereon) as shall be necessary so that the Aggregate
Outstanding Liquidity Advances will not exceed the Liquidity Commitment Amount
after giving effect to such termination or reduction and, to the extent such
Collections are not sufficient to pay such excess (and interest accrued
thereon), all subsequent Collections shall be applied to pay such excess (and
interest accrued thereon) until so paid. Collections not so applied shall be
applied as provided in Section 3.01 of the Facility Agreement.
(b) If on any Weekly Cut-Off Date prior to the Amortization
Commencement Date a Borrowing Base Deficiency exists, all Collections available
on such day as provided in Section 3.01 of the Facility Agreement; and all
amounts paid to the Borrower pursuant to Section 2.03(b) of the Purchase
Agreement, shall be applied to (i) repay so much of the Liquidity Advances (and
interest accrued thereon) or (ii) repay so much of the CP Rate Advances (and
interest accrued thereon), in each case, as shall be necessary so that after
giving effect to such application there shall be no such Borrowing Base
Deficiency and, to the extent such Collections or other amounts are not
sufficient to pay such excess (and interest accrued thereon), all subsequent
Collections shall be applied to pay such excess (and interest accrued thereon),
until so paid.
(c) On each Business Day during the Amortization Period, funds set
aside pursuant to Section 3.01 of the Facility Agreement in respect to principal
of Liquidity Advances shall be applied to the payment of such principal at such
times and in such order as the Liquidity Agent shall specify.
SECTION 4.2. Interest Provisions. Interest on the outstanding principal
amount of Advances shall accrue and be payable in accordance with this Section
4.2.
SECTION 4.2.1. Liquidity Rates. Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that
Liquidity Advances comprising a Borrowing accrue interest:
(a) on that portion maintained from time to time as a Base Rate
Advance, at a rate per annum equal to the Alternate Base Rate from time to time
in effect, or
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(b) on that portion maintained as a LIBO Rate Advance, during each
Interest Period or portion thereof applicable thereto, at a rate per annum equal
to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus a
margin of 0.425%.
The "LIBO Rate (Reserve Adjusted)" means, relative to any Advance to be
made, continued or maintained as, or converted into, a LIBO Rate Advance for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Advances will be determined by the Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Agent from the Reference Lenders, two Business Days before the first day of
such Interest Period, subject, however, to the provisions of Section 4.3.1.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Advances, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as then currently defined in Regulation D of the
F.R.S. Board, having a term approximately equal or comparable to such Interest
Period.
All LIBO Rate Advances shall bear interest from and including the first
day of the applicable Interest Period to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such LIBO
Rate Advance.
SECTION 4.2.2. CP Rates. CP Rate Advances shall accrue interest, during
each Interest Period or portion thereof applicable thereto, at a rate per annum
equal to the CP Rate for such Interest Period.
SECTION 4.2.3. Post-Maturity Rates. After the date any amount of any
Advance is due and payable (whether on the Scheduled Maturity Date, upon
acceleration or otherwise), or after any other monetary Obligation (including
without limitation any obligation to pay interest) of the Borrower shall have
become due and payable, the Borrower shall pay, but only to the extent permitted
by law, interest (after as well as before judgment) on such amounts at a rate
per annum equal to the interest rate otherwise applicable to the borrowing to
which such defaulted payment relates plus a margin of 2%.
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SECTION 4.3. Payments of Interest. Accrued interest in respect of each
Advance shall be payable in arrears (whether by acceleration, demand or
otherwise) on each payment date set forth below:
(a) on the Scheduled Maturity Date therefor;
(b) with respect to Base Rate Advances, on each Settlement
Date that immediately follows the Fiscal Month most recently ended
after such Base Rate Advance is made;
(c) with respect to LIBO Rate Advances, the last day of each
applicable Interest Period (and, if such Interest Period shall exceed 3
months, on the last Business Day of the third, and if applicable, six
and ninth calendar months of such Interest Period);
(d) with respect to CP Rate Advances, the last day of each
applicable Interest Period;
(e) in the case of any payment or prepayment, in whole or in
part, of principal outstanding on any Advance, on the amount and on the
date of such payment or prepayment;
(f) with respect to Base Rate Advances converted into LIBO
Rate Advances on a day when interest would not otherwise have been
payable pursuant to clause (b), on the date of such conversion; and
(g) on that portion of any Advances the Scheduled Maturity
Date of which is accelerated pursuant to Section 9.2, immediately upon
such acceleration.
Interest accrued on Advances or other monetary Obligations arising under the
Agreement or any other Transaction Document after the date such amount is due
and payable (whether on the Scheduled Maturity Date, upon acceleration or
otherwise) shall be payable upon demand.
SECTION 4.3.1. Interest Rate Determination. Each Reference Lender
agrees to furnish to the Agent timely information for the purpose of determining
each LIBO Rate. If any one or more of the Reference Lenders shall fail to timely
furnish such information to the Agent, the Agent shall determine the LIBO Rate
on the basis of the information furnished by the remaining Reference Lenders.
SECTION 4.4. Fees. (a) Commitment Fee. The Borrower agrees to pay to
the Agent for the pro rata account of each Liquidity Lender an ongoing
commitment fee equal to 0.125% per annum of the aggregate average daily excess
(if any) of the Liquidity Commitment Amount over the aggregate outstanding
principal amount of the Advances, such fee to accrue from the Effective Date
until the Liquidity Commitment Termination Date. The commitment fee shall be
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payable in arrears for each month on the first Weekly Settlement Date in the
following fiscal month.
(b) Program Fee. The Borrower agrees to pay the Agent for the account
of the Conduit Lender an ongoing program fee equal to 0.1875% per annum of the
aggregate average daily outstanding principal amount of CP Rate Advances, such
fee to accrue from the Effective Date until the date, following the Liquidity
Commitment Termination Date, on which the CP Exposure is reduced to zero. The
program fee shall be payable in arrears for each fiscal month on the first
Weekly Settlement Date in the following fiscal month.
ARTICLE V
OTHER TERMS RELATING TO THE ADVANCES
SECTION 5.1. LIBO Rate Lending Unlawful. If any Liquidity Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Liquidity Lenders, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other Governmental
Authority asserts that it is unlawful, for such Liquidity Lender to make,
continue or maintain any Liquidity Advance as, or to convert any Liquidity
Advance into, a LIBO Rate Advance, the obligation of such Liquidity Lender to
make, continue, maintain or convert any such Liquidity Advance as a LIBO Rate
Advance shall, upon such determination, forthwith be suspended until such
Liquidity Lender shall notify the Liquidity Agent and the Borrower that the
circumstances causing such suspension no longer exist, and all LIBO Rate
Advances of such type shall automatically convert into Base Rate Advances at the
end of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
SECTION 5.2. Deposits Unavailable. If the Agent shall have determined
that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to all Reference Lenders in
its relevant market; or
(b) by reason of circumstances affecting all Reference
Lenders' relevant market, adequate means do not exist for ascertaining
the interest rate applicable hereunder to LIBO Rate Advances,
then, upon notice from the Agent to the Borrower and the Liquidity Lenders, the
obligations of all Liquidity Lenders under Section 3.4 and Section 3.6 to make
or continue any Liquidity Advance as, or to convert any Liquidity Advances into,
LIBO Rate Advances shall forthwith be suspended until the Agent shall notify the
Borrower and the Liquidity Lenders that the circumstances causing such
suspension no longer exist.
SECTION 5.3. Increased Fixed Rate Advance Costs, etc. The Borrower
agrees to reimburse each Lender for any increase in the cost to such Lender of,
or any reduction in the amount of any sum receivable by such Lender in respect
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of, making, continuing or maintaining (or its obligation to make, continue or
maintain) any Fixed Rate Advances as such, or of converting (or of its
obligation to convert) any Liquidity Advances into LIBO Rate Advances. Such
Lender shall promptly notify the Agent and the Borrower in writing of the
occurrence of any such event, such notice to state, in reasonable detail, the
reasons therefor and the additional amount required fully to compensate such
Lender for such increased costs or reduced amount. Such additional amounts shall
be payable by the Borrower directly to such Lender within five days of its
receipt of such notice and such notice shall, in the absence of manifest error,
be conclusive and binding on the Borrower.
SECTION 5.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Advance
as a Fixed Rate Advance, or to convert any portion of the principal amount of
any Liquidity Advance into a LIBO Rate Advance) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any Fixed Rate Advances on a date other than the scheduled
last day of the Interest Period applicable thereto;
(b) any Advances not being made as a Fixed Rate Advance in
accordance with the Borrowing Request therefor; or
(c) any Liquidity Advances not being continued as, or
converted into, LIBO Rate Advances in accordance with the
Continuation/Conversion Notice therefor,
then, after notice of such Lender to the Borrower (with a copy to the Agent),
the Borrower shall, within five days of its receipt thereof, pay directly to
such Lender such amount as will (in the reasonable determination of such Lender)
reimburse such Lender for such loss or expense. Such written notice (which shall
include calculations in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on the Borrower.
SECTION 5.5. Increased Capital Costs. If any change in, or the
introduction, adoption, interpretation or reinterpretation or phase-in of, any
law or regulation, directive, guideline, decision or request (whether or not
having the force of law) of any court, central bank, regulator or other
Governmental Authority of competent jurisdiction affects or would affect the
amount of capital required or expected to be maintained by any Lender or any
Person directly or indirectly controlling such Lender, and such Lender
reasonably determines (in its sole and absolute discretion) that the rate of
return on its or such controlling Person's capital as a consequence of its
Liquidity Commitment or the Advances made by such Lender is materially reduced
to a level below that which such Lender or such controlling Person would have
achieved but for the occurrence of any such circumstance, then, in any such case
after notice from time to time by such Lender to the Borrower, the Borrower
shall immediately pay directly to such Lender or to such controlling Person
additional amounts sufficient to compensate such Lender or such controlling
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Person for such reduction in rate of return. A statement of such Lender as to
any such additional amount or amounts (including calculations thereof in
reasonable detail), shall, in the absence of manifest error, be conclusive and
binding on the Borrower. In determining such amount, such Lender may use any
method of averaging and attribution that it (in its reasonable discretion) shall
deem applicable.
SECTION 5.6. Taxes. The Borrower agrees that:
(a) Any and all payments by the Borrower hereunder shall be
made free and clear of and without deduction for any and all current or
future taxes, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding (i) taxes imposed on
the net income of, franchise taxes imposed on, and taxes (other than
withholding taxes) imposed on the gross receipts or gross income of,
the Agent or any Lender (or any direct or indirect assignee thereof,
including a participation holder or any other transferee pursuant to
the terms of this Agreement (any such entity being called a
"Transferee")) by the United States or any jurisdiction under the laws
of which the Agent or any such Lender (or Transferee) is organized or
in which the office through which it makes its Advances is located or
any political subdivision thereof, (ii) taxes that would not have been
imposed if the only connection between the Agent or any Lender (or
Transferee) and the jurisdiction imposing such taxes were the
activities of the Agent or such Lender (or Transferee) pursuant to or
in respect of this Agreement (including entering into, lending money or
extending credit pursuant to, receiving payments under or enforcing
this Agreement) and the activities of such party pursuant to or in
respect of similar agreements and (iii) in the case of a Lender other
than a Transferee, the amount of withholding taxes imposed by the
United States or any political subdivision thereof ("U.S. Withholding
Taxes") on a payment hereunder to such Lender to the extent of the
amount of U.S. Withholding Taxes that would have been imposed on such
payment if such payment had been made to such Lender on the date it
became a party to this Agreement (all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required
by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender (or any Transferee) or the Agent, (A) the sum
payable shall be increased by the amount necessary so that after making
all required deductions (including deductions applicable to additional
amounts payable under this Section 5.6) such Lender (or Transferee) or
the Agent, as the case may be, shall receive an amount equal to the sum
it would have received had no such deductions been made, (B) the
Borrower shall make such deductions and (C) the Borrower shall pay the
full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law; provided,
however, that no Transferee shall be entitled to receive any greater
payment under this clause (a) than the transferor with respect to such
Transferee would have been entitled to receive with respect to the
rights assigned, participated or otherwise transferred pursuant to the
terms of this Agreement except (x) subject to the last sentence of
Section 11.11.2, to the extent that such greater payment arises as a
result of a change in applicable law, regulation or official
interpretation thereof, or an amendment, modification or revocation of
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any applicable tax treaty or a change in official position regarding
the application or interpretation thereof (a "Change in Law"), in each
case that is enacted, executed, promulgated or otherwise issued after
the date of such assignment, participation or transfer, or, in the case
of a Change in Law promulgated or issued in proposed form prior to such
date, that becomes effective after such date, or (y) if such
assignment, participation or Advance shall have been made at the
request of the Borrower.
(b) The Borrower shall pay any current or future stamp or
documentary taxes or any other excise or property (including intangible
property) taxes, charges or similar levies which arise from any payment
made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Transaction
Document (all such taxes, charges or similar levies being hereinafter
referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender (or Transferee)
and the Agent for the full amount of Taxes and Other Taxes paid by such
Lender (or Transferee) or the 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 by the relevant taxing
authority or other Governmental Authority. Such indemnification shall
be made within 30 days after the later of (i) the date any Lender (or
Transferee) or the Agent, as the case may be, pays such Taxes or Other
Taxes to the relevant taxing authority or other Governmental Authority
and (ii) the date on which written demand is made in accordance with
the following sentence. Each Lender (or Transferee) or the Agent shall
make written demand for such indemnification no later than 30 days
after the earlier of (i) the date on which such Lender (or Transferee)
or the Agent makes such payment of such Taxes or Other Taxes and (ii)
the date on which such relevant taxing authority or other Governmental
Authority makes written demand upon such Lender (or Transferee) or the
Agent for payment of such Taxes or Other Taxes.
(d) If a Lender (or Transferee) or the Agent shall become
aware that it is entitled to receive a refund or credit in respect of
Taxers or Other Taxes (including any penalties or interest with respect
thereto) as to which it has been indemnified by the Borrower pursuant
to this Section 5.6, it shall promptly notify the Borrower of the
availability of such refund or credit and shall, within 30 days after
receipt of a request by the Borrower, apply for such refund or credit
at the Borrower's expense, and in the case of an application for such
refund or credit by the Borrower, shall, if legally able to do so,
deliver to the Borrower such certificates, forms or other documentation
as may be reasonably necessary to assist the Borrower in such
application. If any Lender (or Transferee) or Agent receives a refund
or credit in respect of any Taxes or Other Taxes as to which it has
been indemnified by the Borrower pursuant to this Section 5.6, it shall
promptly notify the Borrower of such refund or credit and shall, within
10 days after receipt of such refund or the benefit of such credit,
repay the amount of such refund or enefit of such credit to the
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Borrower (to the extent of amounts that have been paid by the Borrower
under this Section 5.6 with respect to Taxes or other Taxes giving rise
to such refund or credit), plus any interest received with respect
thereto, net of all out-of-pocket expenses (including taxes imposed
with respect to such refund, credit or any interest received with
respect thereto) of such Lender (or Transferee) or Agent and without
interest (other than interest actually received from the relevant
taxing authority or other Governmental Authority with respect to such
refund or credit); provided that the Borrower, upon the request of such
Lender (or Transferee) or Agent, agrees to return the amount of such
refund or credit (plus penalties, interest or other charges) to such
Lender (or Transferee) or the Agent in the event such Lender (or
Transferee ) or the Agent is required to repay the amount of such
refund or credit to the relevant taxing authority or other Governmental
Authority. Nothing contained in this clause (d) shall require any
Lender (or Transferee) or the Agent to make available any of its tax
returns (or any other information relating to its taxes which it deems
to be confidential).
(e) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrower in respect of any payment to any
Lender (or Transferee) or the Agent, the Borrower will furnish to the
Agent the original or a certified copy of a receipt evidencing payment
thereof (or, if no such receipt is provided by the relevant taxing
authority or other Governmental Authority, other satisfactory
documentation evidencing payment of such Taxes or Other Taxes).
(f) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this
Section 5.6 shall survive the payment in full of the principal of and
interest on all Advances and all other amounts hereunder.
(g) On or before the date it becomes a party to this Agreement
and from time to time thereafter as renewals are due, each Lender (or
Transferee) that is organized under the laws of a jurisdiction outside
the United States shall (but (x) in the case of a Transferee or (y) in
the case of a Lender other than a Transferee only with respect to any
renewal, if legally able to do so) deliver to the Borrower such
certificates, documents or other evidence, as required by the Code or
Treasury Regulations issued pursuant thereto, including two original
copies of Internal Revenue Service Form 1001 or Form 4224 and any other
certificate or statement of exemption required by Treasury Regulation
Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version
thereof or successors thereto, properly completed and duly executed by
such Lender (or Transferee) establishing that such payment is (i) not
subject to United States Federal withholding tax under the Code because
such payments are effectively connected with the conduct by such Lender
(or Transferee) of a trade or business in the United States or (ii) (A)
totally exempt from United States Federal withholding tax under a
provision of an applicable tax treaty or (B) other than in the case of
a Lender (other than a Transferee) on the date such Lender becomes a
party to this Agreement, subject to a reduced rate of such tax under a
provision of such a treaty. Unless the Borrower and the Agent have
received forms or other documents satisfactory to them indicating that
such payments hereunder are not subject to United States Federal
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withholding tax, the Borrower or the Agent shall withhold taxes from
such payments at the applicable statutory or treaty rate. Each Lender
(or Transferee) that is organized under the laws of the United States
of America or any jurisdiction thereof shall deliver to the Borrower an
original copy of Internal Revenue Service Form W-9 (or applicable
successor form) properly completed and duly executed by such Lender (or
Transferee). Each Lender (or Transferee) and the Agent shall, if
legally able to do so, and upon written reasonable request by the
Borrower (or if a Lender (or Transferee) or the Agent shall otherwise
become aware that it is legally able to deliver such forms or
documentation, within 30 days after the date it becomes so aware),
deliver to the Borrower such other forms or documentation as may be
appropriate to minimize any Taxes on payments made pursuant to this
Agreement or Other Taxes; provided, however, that nothing contained in
this clause (g) shall require any Lender (or Transferee), or the Agent
to make available any tax returns (or any other information relating to
its taxes that it deems confidential).
(h) The Borrower shall not be required to pay any additional
amounts to any Lender (or Transferee) in respect of United States
Federal withholding tax pursuant to this Section 5.6 to the extent that
the obligation to pay such additional amounts would not have arisen but
for a failure by such Lender (or Transferee) to comply with the
provisions of clause (g).
(i) Each Lender (or Transferee) shall promptly notify the
Borrower and the Agent of any change in the office through which it
makes its Advances to an office outside the United States. In the event
any Lender (or Transferee) so changes such office, such Lender (or
Transferee) shall not be entitled to receive any greater payment under
this Section 5.6 than such Lender (or Transferee) would have been
entitled to receive had such change not occurred, unless (i) such
greater payment arises as a result of a Change in Law enacted,
executed, promulgated or otherwise issued after the date of such change
in such office, or, in the case of a Change in Law promulgated or
issued in proposed form prior to such date, that becomes effective
after such date, or (ii) such change in such office shall have been
made at the request of the Borrower.
(j) Any Lender (or Transferee) claiming any additional amounts
payable pursuant to this Section 5.6 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to take any action
to avoid or minimize any amounts that otherwise may be payable by the
Borrower pursuant to this Section 5.6, including filing any certificate
or document or changing the jurisdiction of its applicable lending
office, provided that such action would not, in the good faith
determination of such Lender (or Transferee), be materially
disadvantageous to such Lender (or Transferee) (it being understood
that materiality for these purposes shall be determined by reference to
the benefits received by such Lender under this Agreement).
(k) Notwithstanding any other provision in this Agreement,
except Section 5.5, as such Section relates to reserve, deposit or
similar requirements that take the form of a tax, Sections 11.10, and
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8.1.4, or in any other Transaction Document, this Section 5.6 provides
the exclusive remedy to any Lender, Transferee or other party hereto
with respect to taxes under this Agreement or under any other
Transaction Document.
SECTION 5.7. Payments, Computations, etc. (a) Unless otherwise
expressly provided and subject to clause (b) below, all payments by the Borrower
pursuant to this Agreement, the Notes and any other Transaction Document shall
be made by the Borrower to the Agent for the pro rata account of the Lenders
entitled to receive such payment. All such payments required to be made to the
Agent by the Borrower shall be made, without setoff, deduction or counterclaim,
not later than 2:30 p.m., Atlanta time, on the date due, in same day or
immediately available funds, to such account as the Agent shall specify from
time to time by notice to the Borrower. Funds received after that time shall be
deemed to have been received by the Agent on the next succeeding Business Day.
The Agent shall promptly remit in same day funds to each Lender its share, if
any, of such funds received by the Agent for the account of such Lender. All
interest and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the period
for which such interest or fee is payable over a year comprised of 360 days (or,
in the case of interest on a Base Rate Advance, 365 days or, if appropriate, 366
days). Whenever any payment to be made shall otherwise be due on a day which is
not a Business Day, such payment shall (except as otherwise required by the
definition of the term "Interest Period" with respect to Fixed Rate Advances) be
made on the next succeeding Business Day and such extension of time shall be
included in computing interest and fees, if any, in connection with such
payment.
(b) During the Amortization Period, if no Trigger Event has occurred,
payments made in respect of principal of, or interest on, the Advances shall be
applied first to the Aggregate Outstanding Liquidity Advances, and accrued
interest thereon, and second to the Aggregate Outstanding CP Rate Advances, and
accrued interest therein. If a Trigger Event has occurred and the Amortization
Period is in effect, (x) the Trigger Percentage of such payments of principal
and interest shall be applied to the Aggregate Outstanding Liquidity Advances
and accrued interest thereon, and (y) the remainder of such principal and
interest shall be applied to the Aggregate Outstanding CP Rate Advances and
accrued interest thereon.
SECTION 5.8. Sharing of Payments. If any Liquidity Lender shall obtain
any payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Liquidity Advance (other than pursuant to
the terms of Sections 5.3, 5.4, 5.5 and 5.6) in excess of its pro rata share of
payments then or therewith obtained by all Liquidity Lenders, such Liquidity
Lender shall purchase from the other Liquidity Lenders such participations in
Liquidity Advances made by them as shall be necessary to cause such purchasing
Liquidity Lender to share the excess payment or other recovery with each of them
on a pro rata basis, computed on the basis of each Liquidity Lender's
outstanding Liquidity Advances; provided, however, that if all or any portion of
the excess payment or other recovery is thereafter recovered from such
purchasing Liquidity Lender, the purchase shall be rescinded and each Liquidity
Lender which has sold a participation to the purchasing Liquidity Lender shall
repay to the purchasing Liquidity Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Liquidity
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Lender's ratable share (according to the proportion of : (a) the amount of such
selling Liquidity Lender's required repayment to the purchasing Liquidity
Lender, to (b) the total amount so recovered from the purchasing Liquidity
Lender) of any interest or other amount paid or payable by the purchasing
Liquidity Lender in respect of the total amount so recovered.
The Borrower agrees that any Liquidity Lender so purchasing a
participation from another Liquidity Lender pursuant to this Section may, to the
fullest extent permitted by law, exercise all its rights of payment (including
pursuant to Section 5.9) with respect to such participation as fully as if such
Liquidity Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Liquidity Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Liquidity Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Liquidity Lenders entitled under this Section to share in the
benefits of any recovery on such secured claim.
SECTION 5.9. Setoff. Each Lender shall, upon the occurrence of any
Potential Amortization Event, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), and (as
security for such Obligations) the Borrower hereby grants to each Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with such
Lender; provided, however, that any such appropriation and application shall be
subject to the provisions of Section 5.8. Each Lender agrees promptly to notify
the Borrower and the Agent after any such setoff and application made by such
Lender; provided, however, that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff under applicable law or otherwise) which such Lender may have.
SECTION 5.10. Replacement of Liquidity Lenders. (a) If at any time the
credit rating assigned to the short-term obligations of any Liquidity Lender by
S&P or Moody's is withdrawn or downgraded below A-1 or P-1, as applicable, the
Borrower may
(i) upon five Business Days' prior written notice given to the
Agent and such affected Liquidity Lender, replace such affected
Liquidity Lender with (x) an Eligible Assignee and such replacement
shall be made in accordance with clause (b) of Section 11.11.1;
provided that the consent of the Agent shall not be required for such
replacement or (y) a Liquidity Lender already a party to this
Agreement, but no such replacement pursuant to this clause (i) shall be
effective unless S&P and Moody's shall have confirmed in writing to the
Borrower and the Agent that such replacement would not result in a
withdrawal or reduction of the rating on the Commercial Paper Notes by
S&P or Moody's below A-1 or P-1; or
(ii) request a Liquidity Advance from such affected Liquidity
Lender (the "Affected Liquidity Lender") in the amount of such affected
Liquidity Lender's unfunded Liquidity Commitment (such Liquidity
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Advance shall be known as a "Prefunded Advance") if each of the
conditions specified in Section 6.3.1 have been satisfied and subject
to the following:
(A) The Prefunded Advance will be deposited by the
Affected Liquidity Lender into a segregated trust account (the
"Escrow Account") held by the Agent on behalf of such Affected
Liquidity Lender. On the date of any proposed Borrowing, the
Collateral Agent shall deposit with the Agent all or a portion
of the Prefunded Advance in the amount of such Affected
Liquidity Lender's Percentage of the requested Borrowing
determined in accordance with the provisions contained in
Section 3.5.
(B) After a Prefunded Advance has been made and prior
to the Refunding Advance Commitment Termination Date, all
repayments made by the Borrower in respect of any Borrowing
shall be made in accordance with Section 5.7; provided,
however, that instead of paying the Affected Liquidity
Lender's pro rata share of all principal repayments to such
Affected Liquidity Lender, the Agent shall deposit all such
amounts into the Escrow Account.
(C) Upon the occurrence of the Refunding Advance
Commitment Termination Date, the Collateral Agent shall return
to the Affected Liquidity Lender all amounts on deposit in the
Escrow Account.
(D) At the Borrower's option, the amounts held in the
Escrow Account shall bear interest at (i) the rate set forth
in Section 4.2.1(i)(a) or (ii)(a), as applicable, or (ii) the
rate set forth in Section 4.2.1.(i)(b) or (ii)(b), as
applicable, and such interest payments shall be made into the
Escrow Account and payable in accordance with Section 4.3.
(E) The Collateral Agent shall invest or reinvest
amounts held in the Escrow Account on any Business Day in
Permitted Investments pursuant to the written direction of the
Borrower or its designee. All earnings in respect of such
Permitted Investments will be deposited monthly on the
Business Day preceding each Payment Date in the Collection
Deposit Account and will be available to be applied in
accordance with Section 3.01 of the Facility Agreement. The
Collateral Agent will not be responsible or liable for any
loss resulting from the investment performance of any
investment or reinvestment of any amounts held in the Escrow
Account, in Permitted Investments or from the sale or
liquidation of any Permitted Investments in accordance with
this Agreement.
(F) The Collateral Agent may liquidate any Permitted
Investment when the Affected Liquidity Lender is required to
fund its Percentage of a requested Borrowing. The Collateral
Agent agrees to use its best efforts to schedule the maturity
of such Permitted Investments so as to avoid the necessity of
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liquidating any Permitted Investment. The Collateral Agent
shall, with respect to all such Permitted Investments (i) make
such Permitted Investments in the name of, and payable to, the
Collateral Agent or its nominee, and (ii) include in the
Collateral Agent's books and records the notation that such
Permitted Investments are maintained pursuant to the Security
Agreement. On each Settlement Date, all earnings received on
the Permitted Investments in the Escrow Account maturing on or
prior to the Settlement Date which have not been previously
deposited in the Escrow Account will be deposited into the
Escrow Account.
(G) All amounts deposited in the Escrow Account shall
be applied to the making of Liquidity Advances in accordance
with Sections 3.4, 3.5 and 3.6; or
(b) In the event that (i) any Liquidity Lender shall have refused (and
shall not have retracted such refusal) to make available any Liquidity Advance
on its part to be made available hereunder, other than solely as a result of a
failure of any condition set forth in Article VI to be satisfied (such condition
not having been effectively waived in accordance with the terms hereof); (ii)
any Liquidity Lender shall have notified the Agent or the Borrower (and shall
not have retracted such notification) that it does not intend to comply with any
of its obligations hereunder, other than solely as a result of the failure of
any condition set forth in Article VI to be satisfied (such condition not having
been effectively waived in accordance with the terms hereof); (iii) (A) a
receiver, trustee, conservator or other custodian shall have been appointed with
respect to any Liquidity Lender or its property at the direction or request of
any regulatory agency or authority or (B) an order, action, process or
proceeding of the type contemplated by Section 7.6 shall be commenced by or
against such Liquidity Lender (or such Liquidity Lender shall have consented to
any such order, action, process or proceeding), or (iv) the Borrower is required
pursuant to Sections 5.3 through 5.6 to make any payment to or on behalf of any
Liquidity Lender (or Transferee) (or would be so required on or prior to the
next following date on which a payment hereunder (other than pursuant to Section
5.6) is required to be made to or for any such Liquidity Lender), then the
Borrower shall have the right, at its own expense, upon notice to such Liquidity
Lender and the Agent, to require such Liquidity Lender, and such Liquidity
Lender hereby agrees to transfer and assign without recourse (in accordance with
and subject to the restrictions contained in Section 11.11) all the interests,
rights and obligations of such Liquidity Lender to an Eligible Assignee provided
by the Borrower; provided, however, that (i) no such assignment shall conflict
with any law, rule, regulation or Governmental Authority, (ii) such assignment
shall be without recourse, representation and warranty and shall be on terms and
conditions reasonably satisfactory to such replaced Liquidity Lender and such
designated financial institution, (iii) the purchase price paid by such
designated financial institution shall be in an amount equal to the aggregate
amount of all Liquidity Advances owed to such replaced Liquidity Lender and (iv)
the Borrower or such Eligible Assignee, as the case may be, shall pay to such
replaced Liquidity Lender in same day funds on the date of such assignment the
principal of and interest accrued to the date of payment on the Liquidity
Advances made by such replaced Liquidity Lender hereunder and all other amounts
accrued for such replaced Liquidity Lender's account or owed to it hereunder,
including those amounts owed pursuant to Sections 5.3 through 5.6. Upon the
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effective date of such assignment, such Borrower shall issue a replacement Note
or Notes, as the case may be, to such designated financial institution and such
institution shall become a "Liquidity Lender" for all purposes under this
Agreement and all other Transaction Documents.
(c) The Borrower shall be permitted at any time to reduce the Liquidity
Commitment Amount in accordance with clause (a) of Section 3.3.
SECTION 5.11. Subordination. The Agent and the Lenders agree that the
obligations of the Borrower set forth in Sections 5.3, 5.4, 5.5, 5.6, 11.3, and
11.4 hereof shall be subordinate in right of payment to the obligations of the
Borrower to make payments of principal of and interest on the Advances and shall
constitute claims against the Borrower only to the extent (if any) that the
assets of the Borrower are sufficient for the payment thereof in accordance with
the distributions of Collections and other amounts pursuant to Section 3.01 of
the Facility Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Effectiveness. This Agreement shall become
effective on the date (the "Effective Date") which shall be the first day on
which all of the conditions set forth in Section 6.1 have been satisfied.
SECTION 6.1.1. Resolutions. The Agent shall have received: (i) a copy
of the certificate or articles of incorporation, including all amendments
thereto, of the Borrower and each Seller, certified as of a recent date by the
Secretary of State of its state of incorporation, and such certificate or
articles shall be in form and substance satisfactory to the Agent and its
counsel, and a certificate as to the good standing of the Borrower and each
Seller as of a recent date, from such Secretary of State; (ii) a certificate of
the Secretary or Assistant Secretary of the Borrower and each Seller dated the
Effective Date and certifying (A) that attached thereto is a true and complete
copy of the Bylaws of such Person as in effect on the Effective 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 in
form and substance satisfactory to the Agent and its counsel and duly adopted by
the Board of Directors of such Person authorizing the execution, delivery and
performance of each of the Transaction Documents to which such Person is a party
and the transactions contemplated thereby, 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 Person has 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 Transaction Document or any
other document delivered in connection herewith on behalf of such Person; (iii)
a certificate of another officer as to the incumbency and specimen signature of
the Secretary or Assistant Secretary executing the certificate pursuant to
clause (ii) above; and (iv) such other documents as the Agent or its counsel,
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Mayer, Brown & Platt, may reasonably request.
SECTION 6.1.2. Agreement. The Agent shall have received executed
counterparts of this Agreement, duly executed by the Borrower, the Agent, and
each Lender.
SECTION 6.1.3. Notes. The Agent shall have received, for the account of
each Lender, such Lender's Liquidity Note or CP Rate Note duly executed and
delivered by the Borrower; and the Company shall have executed and delivered the
Subordinated Note to BII, and shall have delivered a copy thereof to the Agent.
SECTION 6.1.4. UCC Filings. The Agent shall have received
(a) duly executed Uniform Commercial Code financing statements
(Form UCC-1), naming the Borrower as the debtor and the Collateral
Agent as the secured party, or other similar instruments or documents,
to be filed under the Uniform Commercial Code of all jurisdictions as
may be necessary or, in the opinion of the Collateral Agent, desirable
to perfect the security interest of the Collateral Agent in the
Collateral, other than the Related Security constituting inventory or
other tangible property, pursuant to the Security Agreement; and
(b) a payout letter from the Bank of Nova Scotia, specifying
the amount required to be paid as a condition to the termination of the
1994 Liquidity Agreement; and executed copies of proper Uniform
Commercial Code Form UCC-3 termination statements, if any, necessary to
release all Prior Liens (provided that such termination statements may
be held in escrow until termination of the 1994 Liquidity Agreement)
and other rights of any Person in any collateral described in the
Security Agreement previously granted by any Person, together with such
other Uniform Commercial Code Form UCC-3 termination statements as the
Agent may reasonably request from the Borrower.
SECTION 6.1.5. Purchase Agreement. The Agent shall have received
executed counterparts of the Purchase Agreement and all other documents
delivered pursuant to Article III thereof, in form and substance satisfactory to
the Agent and its counsel.
SECTION 6.1.6. Facility Agreement; Security Agreement. The Agent shall
have received executed counterparts of the Facility Agreement and the Security
Agreement, dated the date hereof, and duly executed by the Borrower, the
Servicer, the Collateral Agent and the Agent.
SECTION 6.1.7. Effective Date Certificate. The Agent shall have
received an Effective Date Certificate, dated the Effective Date, and duly
executed and delivered by an Authorized Officer of the Borrower, in which
Effective Date Certificate, the Borrower shall have represented and warranted
that the statements made therein are true and correct as of the Effective Date
and that no Purchase Termination Event or Amortization Event has occurred and is
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continuing, and, at the time such certificate is delivered, the Agent shall be
satisfied that such statements are in fact true and correct. All documents and
agreements, including certain Transaction Documents, shall be in form and
substance satisfactory to the Agent.
SECTION 6.1.8. Purchase Agreement Conditions. All conditions to the
obligations of the Borrower and the Sellers under the Purchase Agreement shall
have been satisfied in all respects.
SECTION 6.1.9. Licenses, etc. The Collateral Agent shall have received
licenses, or the Collateral Agent shall otherwise be satisfied with its ability,
to use any computer programs, material tapes, disks, cassettes and data
necessary or advisable to permit the collection of the Receivables by a servicer
without the participation of any Seller or the Borrower and the Agent shall have
reviewed and been satisfied with such materials.
SECTION 6.1.10. Lockbox Accounts and Concentration Account. The Agent
shall have received evidence that the Lockbox Accounts and the Concentration
Account have been established and maintained in accordance with the terms of
this Agreement, the Security Agreement and the Facility Agreement, and the Agent
shall be satisfied with the arrangements for the collection of the Receivables.
SECTION 6.1.11. Policies. The Agent shall be satisfied with respect to
the Policies in effect as of the Effective Date.
SECTION 6.1.12. Board of Directors. The Agent shall be satisfied with
the independence of the Borrower's independent director.
SECTION 6.1.13. Financial Statements. The Agent shall have received
audited financial statements, including a balance sheet and income statement of
the Borrower for the period ended September 28, 1996.
SECTION 6.1.14. Solvency Certificate. The Agent shall have received a
certificate, dated the Effective Date, and duly executed by a Financial Officer
of the Borrower, in scope and substance satisfactory to the Agent, to the effect
that the Borrower will be solvent after giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents.
SECTION 6.1.15. Insurance. The Agent shall have received evidence that
all insurance policies and coverages required pursuant to Section 8.1.3 are in
effect.
SECTION 6.1.16. No Material Adverse Change. No material adverse change
in the condition (financial or otherwise), operations, business, properties,
assets or prospects of the Borrower and its Subsidiaries shall have occurred
from those set forth in the consolidated financial statements of BII and its
Subsidiaries for the period ending June 28, 1997.
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SECTION 6.1.17. Legal Opinions. The Agent shall have received favorable
written opinions, dated the Effective Date, and addressed to the Lenders, from
the general counsel to the Borrower, substantially in the form of Exhibit I
hereto.
SECTION 6.1.18. Certification as to Separateness. The Agent shall have
received a certificate in the form of Exhibit K hereto of the Chief Financial
Officer of BII (which certificate shall relate to circumstances in effect on the
date hereof).
SECTION 6.1.19. Closing Fees. The Agent shall have received for its own
account and for the account of the Lenders any fees due and payable pursuant to
any fee letters or commitment letters entered into with the Lenders.
SECTION 6.1.20. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory
in form and substance to the Agent and its counsel; the Agent and its counsel
shall have received all information, approvals, opinions, documents or
instruments as the Agent or its counsel may reasonably request.
SECTION 6.2. Conditions to the Making of Each Revolving Advance and
Each CP Rate Advance. The obligation of any Liquidity Lender to make any
Revolving Advance and (if the Conduit Lender elects to do so) of the Conduit
Lender to make any CP Rate Advance hereunder are subject to the satisfaction of
the following conditions:
SECTION 6.2.1. Representations and Warranties. On the date of the
making of such Revolving Advance or CP Rate Advance and after giving effect
thereto, the representations and warranties of the Borrower set forth in this
Agreement or any other Transaction Documents to which it is a party shall be
true and correct with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date).
SECTION 6.2.2. No Amortization Event. At the time of the making of such
Revolving Advance or CP Rate Advance and after giving effect thereto, there
shall have occurred and be continuing no Amortization Event and no Potential
Amortization Event.
SECTION 6.2.3. No Bankruptcy Proceeding. No Amortization Event or
Potential Amortization Event of the type described in Section 9.1.7 (without
giving effect to the 60 day grace periods referred to therein) shall have
occurred and be continuing.
SECTION 6.2.4. No Borrowing Base Deficiency. A Borrowing Base
Deficiency shall not exist after giving effect to the application of funds in
accordance with Section 3.01 of the Facility Agreement and the making of such
Revolving Advance or CP Rate Advance would not result in a Borrowing Base
Deficiency.
SECTION 6.2.5. Receipt of Weekly Report. The Agent shall have received
(i) the Weekly Report due on the date of the initial Advance and the Weekly
Report due on any date on which the aggregate principal amount of outstanding
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Advances increases and (ii) a Monthly Settlement Statement for the Fiscal Month
relating to the Monthly Settlement Date occurring on or immediately preceding
such date.
SECTION 6.2.6. Borrowing Request. The Agent shall have received a
Borrowing Request for such Borrowing.
SECTION 6.2.7. Initial Funding. Prior to the initial Revolving Advance
or CP Rate Advance, each of the following shall be true:
(i) The Bank of Nova Scotia, as Agent under the 1994 Liquidity
Agreement, shall have released the UCC-3 termination statements
described in Section 6.1.4 and shall have taken such other action as
the Agent shall reasonably request to terminate the Prior Liens; and
(ii) the Concentration Bank Letter and the Lockbox Bank
Letters shall be in full force and effect, and the lockbox arrangements
made in connection with the 1994 Liquidity Agreement shall have been
terminated.
SECTION 6.3. Conditions Precedent to the Making of Each Refunding
Advance. The obligation of any Liquidity Lender to acquire a CP Rate Advance
(thereby effecting a Refunding Advance) shall be subject to the satisfaction of
the following conditions at the time of such acquisition:
SECTION 6.3.1. No Bankruptcy. No bankruptcy proceeding of the type
described in this Section 6.3.1(a) or (b) with respect to the Conduit Lender
shall have occurred and (after giving effect to all applicable grace periods) be
continuing:
(a) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Conduit Lender in an involuntary
case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not stayed, or
any other similar relief shall be granted under any applicable federal or state
law; or (ii) an involuntary case is commenced against the Conduit Lender under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the Conduit Lender, or over all or a
substantial part of its respective property, shall have been entered; or an
interim receiver, trustee or other custodian of the Conduit Lender for all or a
substantial part of its respective property is involuntarily appointed; or a
warrant of attachment, execution or similar process is issued against any
substantial part of the property of the Conduit Lender, and the continuance of
any such events in subclause (ii) for 60 days unless dismissed, bonded or
discharged; or
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(b) the Conduit Lender shall have an order for relief entered with
respect to it or shall commence a voluntary case under the Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in any involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or the making by the Conduit
Lender of any assignment for the benefit of creditors; or the inability or
failure of the Conduit Lender, or the admission by the Conduit Lender in writing
of its inability to pay, its debts as such debts become due; or the Board of
Directors of the Conduit Lender (or any committee thereof) adopts any resolution
or otherwise authorizes action to approve any of the foregoing.
SECTION 6.3.2. Availability. The principal amount of the Refunding Loan
being requested, when added to the Aggregate Outstanding Liquidity Advances as
of the close of business on the date of such Refunding Advance does not exceed
the Available Liquidity Commitment.
SECTION 6.4. Conditions Precedent to Continuation/Conversion Roll-Over.
The ability of the Borrower to continue any Liquidity Advance, or to convert any
Liquidity Advance, into a Liquidity Advance of a different type, shall be
subject to the satisfaction of the following condition at the time of such
continuation or conversion: the representations and warranties of the Borrower
set forth in Section 7.19 of this Agreement shall be true and correct as if then
made.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Agent to enter into this Agreement and to
make Advances hereunder, the Borrower represents and warrants to the Agent and
each Lender as set forth in this Section 7.1.
SECTION 7.1. Organization; Powers. The Borrower (a) is a limited
purpose corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware whose activities are restricted to the matters
of the nature contemplated or permitted by this Agreement and the other
Transaction Documents, (b) has at least one independent director who (i) is not
a direct, indirect or beneficial stockholder (other than as an investor in
mutual funds which hold an interest in the stock of any member of the Parent
Group), officer, director, employee, Affiliate, supplier or direct customer of
any member of the Parent Group and (ii) does not serve as trustee in bankruptcy
for any member of the Parent Group, (c) has all requisite corporate power and
authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (d) is qualified to do business in
every jurisdiction where such qualification is required, except where the
failure to be so qualified will not have a material adverse effect on the
conduct of the business assets, operations, condition (financial or otherwise),
properties or prospects of the Borrower, and (e) has the corporate power and
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authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated
thereby to which it is or will be a party, and to consummate the transactions
contemplated hereby and thereby.
SECTION 7.2. Ownership; Subsidiaries. All the issued and outstanding
capital stock of the Borrower (i) has been validly issued, is fully paid and
non-assessable and is owned of record and (ii) except as otherwise permitted by
Section 8.2.14, is owned, legally and beneficially, by BII. The Borrower has no
Subsidiaries and owns no capital stock of, or other interest in, any Person.
SECTION 7.3. Authorization. The execution, delivery and performance by
the Borrower of each of the Transaction Documents and the consummation of the
other transactions contemplated hereby and thereby (a) have been duly authorized
by all requisite corporate and, if required, stockholder action and (b) will not
(i) violate any provision of law applicable to it, its Certificate of
Incorporation or Bylaws, or any order, judgment or decree of any court or other
agency of government binding on it, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any of its
Contractual Obligations, (iii) result in or require the creation or imposition
of any Lien upon any of its properties or assets (except as contemplated by the
Transaction Documents) or (iv) require any approval of stockholders or any
approval or consent of any Persons under any Contractual Obligation of the
Borrower or any member of the Parent Group, except for (A) such approvals or
consents which will be obtained on or before the Effective Date and are set
forth in Schedule II and (B) such violations, conflicts, breaches, Liens and
defaults which would not have, and such approvals the absence of which would not
have, a material adverse effect on (1) the business, operations, property,
assets or condition (financial or otherwise) of the Borrower, (2) the validity
or enforceability of, or the ability of the Borrower to perform its obligations
under, the Transaction Documents or (3) the validity, enforceability or priority
of the Liens created by the Purchase Agreement, this Agreement and the Security
Agreement.
SECTION 7.4. Governmental Consents. The execution, delivery and
performance by the Borrower of each Transaction Document and the consummation of
the transactions contemplated hereby and thereby do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other Governmental Authority except for (i)
the UCC financing statements referred to in clause (a) of Section 6.1.4 and (ii)
filings, consents, notices, authorizations, and approvals the absence of which
would not have a material adverse effect on (A) the business, operations,
property, assets or condition (financial or otherwise) of the Borrower, (B) the
validity or enforceability of, or the ability of the Borrower to perform its
obligations under, the Transaction Documents or (C) the validity, enforceability
or priority of the Liens created by the Purchase Agreement and the Security
Agreement.
SECTION 7.5. Binding Obligations. This Agreement is, and the other
Transaction Documents to which the Borrower is a party, when executed and
delivered will be, the legally valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
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except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
SECTION 7.6. Litigation; Adverse Facts. There is no action, suit,
proceeding, governmental investigation of which the Borrower has knowledge or
arbitration (whether or not purportedly on behalf of the Borrower) at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any of its property thereof which would reasonably be
expected to have a material adverse effect on (i) the business, operations,
property, assets or condition (financial or otherwise) of the Borrower, (ii) the
validity or enforceability of, or the ability of the Borrower to perform its
obligations under, the Transaction Documents or (iii) the validity,
enforceability or priority of the Liens created by the Purchase Agreement and
the Security Agreement.
SECTION 7.7. Investment Company Act; Public Utility Holding Company
Act. The Borrower is not (a) an "investment company" or an "affiliated person"
of, or "principal underwriter" or "promoter" for, an "investment company", as
such terms are defined in, or subject to regulation under, the Investment
Company Act of 1940 or (b) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935. The
transactions contemplated by this Agreement and the other Transaction Documents
will not violate any provision of such Acts or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
SECTION 7.8. Financial Information. All financial statements of the
Borrower furnished to the Lenders pursuant to Section 6.1.16 and clauses (b) and
(c) of Section 8.1.5 have been prepared in accordance with GAAP, consistently
applied, and present fairly the financial condition of the Borrower, as at the
dates thereof and the results of its operations for the periods then ended.
SECTION 7.9. Financing Statements. Except for financing statements as
to which releases have been provided to the Agent (as specified in Sections
6.1.4 and 6.2.7), there is no effective financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) now
on file or registered in any public office filed by or on behalf of the Borrower
or the Sellers covering any interest of any kind in the Receivables, and the
Borrower will not execute nor will there be on file in any public office any
effective financing statement (or similar statement or instrument of
registration under the laws of any jurisdiction) relating to the Receivables,
except, in each case, for (i) any financing statements filed by the Sellers
pursuant to the Purchase Agreement, (ii) any financing statements filed in
respect of and covering the interests of the Collateral Agent pursuant to the
Security Agreement and (iii) financing statements for which a Form UCC-3
termination statement has been delivered to the Agent pursuant to clause (b) of
Section 6.1.4.
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SECTION 7.10. Filings. All filings and recordings (other than the UCC
financing statements and termination statements described in Section 6.1 which
duly executed financing statements and termination statements will have been
delivered to the Agent by the Effective Date) required to perfect the undivided
interests of the Lenders in the Receivables (other than Receivables having
Obligors resident in Canada) will have been accomplished by the Effective Date
and will be in full force and effect; provided, however, that the Borrower
agrees promptly upon the request of the Collateral Agent (which request shall be
at the direction of the Required Lenders) to perfect the undivided interests of
the Lenders in such Receivables having obligors resident in Canada if (i) the
amount of Required Reserves on any day exceeds 15% of the face amount of
Eligible Receivables on such day or (ii) a Potential Amortization Event has
occurred.
SECTION 7.11. Location of Office and Records. As of the Effective Date,
(a) the chief place of business and chief executive offices of the Borrower are
located at such address in Nevada as is provided by the Borrower to the Agent on
the Effective Date and (b) the offices where the Borrower keeps all the
documents, agreements, books and records relating to the Receivables are located
at the locations specified on Schedule V to the Purchase Agreement.
SECTION 7.12. No Other Liens. The Borrower has, at the Closing Date,
immediately prior to the conveyance to the Collateral Agent pursuant to the
Security Agreement, sole legal title to the Receivables existing as of the
Closing Date and the Borrower will have, immediately prior to the conveyance to
the Collateral Agent pursuant to the Security Agreement of the Receivables
transferred to the Borrower after the Closing Date, sole legal title to such
Receivables, and none of the Receivables are subject to any Lien (other than the
Prior Liens, which shall be released within 14 days of the Effective Date), or
other claim of any kind or to any offset, counterclaim or defense of any kind,
other than Liens created pursuant to the Transaction Documents or asserted by an
Obligor in its capacity as such.
SECTION 7.13. Security Agreement. The Liens created in favor of the
Collateral Agent for the benefit of the Secured Parties (as defined in the
Security Agreement) under the Security Agreement will, at all times on and after
the Closing Date (except for the Prior Liens, which shall be terminated within
the 14 days of the Effective Date), constitute first priority perfected security
interests in the Collateral as security for payment of the Obligations, and the
Collateral will not be subject to any Liens, other than the Prior Liens.
SECTION 7.14. Liens on Assets. There are no Liens of any nature on any
of the property or assets of the Borrower, except the Liens created pursuant to
the Transaction Documents and the Prior Liens. The Borrower is not a party to
any contract, agreement, lease or instrument the performance of which, either
unconditionally or upon the happening of any event, will result in or require
the creation of a Lien on any of the property or assets of the Borrower or
otherwise result in a violation of any of the Transaction Documents. The Prior
Liens will be released within 14 days of the Effective Date.
SECTION 7.15. No Amortization Event. On the date hereof and on the
Effective Date, there exists no Amortization Event or Potential Amortization
Event.
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SECTION 7.16. Collateral Agent Can Perform. The Collateral Agent shall
have been furnished with all materials and data necessary to permit immediate
collection of the Receivables by the Collateral Agent, or any party designated
by the Collateral Agent, without the participation of any Seller or the Borrower
in such collection.
SECTION 7.17. The Borrower as Distinct Legal Entity. The Borrower
acknowledges and confirms that each Seller has also acknowledged in the Purchase
Agreement, that the parties are entering into the transactions contemplated
herein and in the other Transaction Documents in reliance on the Borrower's
identity as a legal entity separate and distinct from the other members of the
Parent Group.
SECTION 7.18. Disclosure. (a) No representation or warranty of the
Borrower contained in this Agreement, any other Transaction Document, or any
other document, certificate or written statement furnished to the Lenders or the
Agent by or on behalf of the Borrower for use in connection with the
transactions contemplated by this Agreement (including any Settlement Report)
contains any untrue statement of a material fact or omits to state a material
fact (known to the Borrower in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading. Any reaffirmation of the foregoing sentence is subject to (i) any
change in the facts and conditions on which such representations and warranties
are based, which changes are required or permitted under this Agreement and (ii)
any disclosure made by the Borrower pursuant to Article VIII in connection with
the Advances contemplated in this Agreement, which Advance occurred prior to a
reaffirmation of the representation and warranty set forth in the foregoing
sentence; provided, however, that in all cases no representation or warranty of
the Borrower contained in this Agreement, any Transaction Document, or any other
document, certificate or written statement furnished to the Lenders by or on
behalf of any such Person for use in connection with the transactions
contemplated by this Agreement contained at the time made any untrue statement
of a material fact or omitted at the time made to state a material fact (known
to any such Person in the case of any document not furnished by it) necessary in
order to make the statement contained herein or therein not misleading.
(b) Each Receivable described in a Settlement Report as an Eligible
Receivable satisfied, as of the date of such report, the requirement of the
definition of "Eligible Receivable."
SECTION 7.19. No Material Adverse Change. (a) On the Effective Date,
there has been no material adverse condition or material adverse change in or
affecting the business, assets, liabilities, operations, condition (financial or
otherwise) or prospects of the Borrower from those shown in the information
referred to in Section 7.18.
(b) Since the Effective Date, there has been no adverse condition or
adverse change in or affecting the business, assets, liabilities, properties,
operations or condition (financial or otherwise) of the Borrower.
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SECTION 7.20. Solvency. Both prior to and after giving effect to the
transactions occurring on the Closing Date, and after giving effect to each
subsequent transaction contemplated hereunder,
(a) the fair value of the assets of the Borrower at a fair
valuation, will exceed the debts and liabilities, subordinated,
contingent or otherwise, of the Borrower;
(b) the present fair saleable value of the property of the
Borrower will be greater than the amount that will be required to pay
the probable liability of the Borrower on its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured;
(c) the Borrower will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and
(d) the Borrower will not have unreasonably small capital with
which to conduct the business in which engaged as such business is now
conducted and is proposed to be conducted.
The Borrower does not intend to, and does not believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of the amounts
of cash to be payable on or in respect of its Indebtedness.
SECTION 7.21. Employee Benefit Plans. (a) The Borrower and its
respective ERISA Affiliates are in compliance in all material respects with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Pension Plans and Multiemployer Plans.
(b) No ERISA Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan.
(c) The sum of the amount of unfunded benefit liabilities
under all Pension Plans (excluding each Pension Plan with an amount of
unfunded benefit liabilities of zero or less) is not more than
$150,000,000.
(d) None of the Borrower or any of its ERISA Affiliates has
incurred or reasonably expects to incur any withdrawal liability under
Title IV of ERISA to any Multiemployer Plan or Multiemployer Plans
individually or in the aggregate in excess of $25,000,000.
(e) None of the Borrower or any of its ERISA Affiliates has
received any notification that any Multiemployer Plan is reasonably
expected to be in reorganization or to be terminated, where such
reorganization or termination has resulted or can reasonably be
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expected to result in an increase in the contributions required to be
made to such plan that would materially and adversely affect the
financial condition of the Parent Group taken as a whole.
(f) As used in this Section 7.21, the term "amount of unfunded
benefit liabilities" has the meaning specified in Section 4001(a)(18)
of ERISA.
SECTION 7.22. Regulations G, U, and X. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Advances will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, U, or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 7.23. Taxes. The Borrower has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its books.
ARTICLE VIII
COVENANTS
SECTION 8.1. Affirmative Covenants. The Borrower covenants and agrees
with the Agent and each Lender that, until all Liquidity Commitments have
terminated and all Obligations have been paid or performed in full, unless the
Required Lenders shall otherwise consent in writing, the Borrower will perform
the covenants set forth in this Section 8.1.
SECTION 8.1.1. Existence. The Borrower will or will cause to be done
all things necessary to preserve, renew and keep in full force and effect its
legal existence and maintain such legal existence separate from the Sellers.
SECTION 8.1.2. Business and Properties. The Borrower will or will 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, trade names and all consents material to the
conduct of its business; maintain and operate such business in substantially the
manner in which it is currently conducted and operated; comply in all material
respects with all applicable laws, rules, regulations and orders of any federal,
state or other governmental or regulatory authority, whether now in effect or
hereafter enacted; 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
necessary and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times; and maintain all its property in such a
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manner so as to facilitate its identification and segregation from the property
of the other members of the Parent Group.
SECTION 8.1.3. Insurance. The Borrower will keep its insurable
properties adequately insured at all times by financially sound and reputable
insurers; maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies of the same or similar size in the same or similar
businesses, including 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 in such
amounts and with such deductibles as are customary with companies of the same or
similar size in the same or similar business and in the same geographic area;
and maintain such other insurance as may be required by law.
SECTION 8.1.4. Obligations and Taxes. The Borrower will pay its
Indebtedness and other material obligations promptly before the same shall
become delinquent or in default and in accordance with their terms and pay and
discharge promptly when due all material 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 that, if
unpaid, 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 the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Borrower shall have set aside on its books adequate reserves
with respect thereto.
SECTION 8.1.5. Financial Statements, Reports, etc. The Borrower will
furnish to the Agent, and the Agent will furnish to each Lender:
(a) on each Settlement Date, a certificate of a Financial Officer (i)
certifying that no Potential Amortization Event or Amortization Event has
occurred since the previous Settlement Date or, if such a Potential Amortization
Event or Amortization Event has occurred or is continuing, 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
satisfactory to the Agent demonstrating compliance with (x) in the case of a
Monthly Settlement Statement, the covenants set forth in clauses (a), (c) and
(d) of Section 8.2.20, and (y) in the case of a Weekly Report, the covenants set
forth in clauses (b), (d) and (e) of Section 8.2.20;
(b) As soon as practicable and in any event within 90 days after the
end of each Fiscal Year, its balance sheet and related statements of income,
showing the financial condition of the Borrower as of the close of such Fiscal
Year and the results of its operations during such year, all audited by Ernst &
Young or other independent public accountants of recognized national standing
acceptable to the Required Lenders and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the effect
that such financial statements fairly present the financial condition and
results of operations of the Borrower in accordance with GAAP consistently
applied;
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(c) as soon as practicable and in any event within 45 days after the
end of the first three Fiscal Quarters of each Fiscal Year, its balance sheets
and related statements of income, showing the financial condition of the
Borrower as of the close of such Fiscal Quarter, and the results of its
operations during such Fiscal Quarter and the then elapsed portion of the Fiscal
Year, all certified by a Financial Officer as fairly presenting the financial
condition and results of operations of the Borrower in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and without
footnotes;
(d) promptly upon receipt thereof, all materials received from any
Seller pursuant to Article V of the Purchase Agreement, including materials
received under Sections 5.01(a), 5.01(f), 5.01(h), 5.01(i) and 5.01(l), of the
Purchase Agreement;
(e) promptly after the sending or filing thereof, copies of all reports
which the Sellers or any of their Affiliates send to any security holders and
all reports and registration statements, if any, which the Sellers or any of
their Affiliates file with the Securities and Exchange Commission or any
national securities exchange if not otherwise required to be provided to the
Agent by BII;
(f) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower, or
compliance with the terms of any Transaction Document, as any Agent or any
Lender may reasonably request, and
(g) promptly, upon the occurrence of a Dilution Reserve Trigger, the
Borrower shall (i) retain Nevada counsel, reasonably acceptable to the Agent, to
deliver a legal opinion, reasonably acceptable to the Agent, to the effect that
the Agent has a first priority perfected security interest in the Collateral,
and (ii) retain Virginia counsel, reasonably acceptable to the Agent, to deliver
a legal opinion, reasonably acceptable to the Agent, to the effect that no lien
or encumbrance attaches to any Collateral related to Collateral orginated by
Bacova, and the Agent has a first priority perfected security interest in such
Collateral.
Each financial statement referred to in clauses (b) and (c) above will state
that the Borrower is a separate corporate entity with its own separate creditors
and that such creditors will be entitled to be satisfied out of the Borrower's
assets prior to any value in the Borrower becoming available to the Borrower's
equity holders.
SECTION 8.1.6 Litigation and Other Notices. The Borrower will furnish
to the Agent and each Lender immediate written notice of the following:
(a) any Potential Amortization Event or Amortization Event, 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, or any threat or notice of intention
of any Person to file or commence, any action, suit, proceeding, governmental
investigation or arbitration, whether at law or in equity or by or before any
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Federal, state or other Governmental Authority, against or affecting the
Borrower or any material development in any such action, suit, proceeding,
governmental investigation or arbitration, which, in either case, if adversely
determined, might materially adversely affect (i) the business, operations,
property, assets or condition (financial or otherwise) of the Borrower, (ii) the
validity or enforceability of, or the ability of the Borrower to perform its
obligations under, the Transaction Documents or (iii) the validity,
enforceability or priority of the Liens created by the Purchase Agreement and
the Security Agreement;
(c) any notices received by the Borrower under the Purchase Agreement
(together with copies thereof);
(d) any Purchase Termination Event; and
(e) any other development that has resulted in, or is reasonably
anticipated to result in, a material adverse effect on (i) the business,
operations, property, assets or condition (financial or otherwise) of the
Borrower, (ii) the validity or enforceability of, or the ability of the Borrower
to perform its obligations under, the Transaction Documents or (iii) the
validity, enforceability or priority of the Liens created by the Purchase
Agreement and the Security Agreement.
SECTION 8.1.7 Maintaining Records; Access to Properties and
Inspections. The Borrower will maintain or cause to be maintained true and
complete books and financial records which accurately reflect all of its
business affairs and transactions, including those records reasonably necessary
or advisable for the collection of Receivables, which records shall be
segregated and separately identifiable from the books and financial records of
the other members of the Parent Group and shall, among other things, (i) permit
the daily identification of each new Receivable and the collection of each
existing Receivable, (ii) permit any representatives designated by any Lender to
visit and inspect the financial records and the properties of the Borrower
during normal business hours and as often as requested and to make extracts from
and copies of such books and financial records (including those relating to the
Receivables and the Collections) for the purpose of verifying the accuracy of
the various reports delivered by the Borrower to the Agent or the Lenders or for
otherwise ascertaining compliance with the Transaction Documents, (iii) permit
any representatives designated by any Lender to discuss the affairs, finances
and condition of the Borrower with representatives thereof and of the Servicer
during normal business hours, (iv) permit any representatives designated by the
Agent to discuss the affairs, finances and condition of the Borrower with the
independent accountants therefor, and (v) designate the Agent and the Collateral
Agent as its agents for purposes of the visitation rights granted to the
Borrower under clause (d) of Section 5.01 of the Purchase Agreement.
SECTION 8.1.8 Use of Proceeds. The Borrower will use the proceeds of
the Advances and Notes as set forth in Section 3.01 of the Facility Agreement.
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SECTION 8.1.9 Settlement Reports. The Borrower will:
(a) prepare or cause the Servicer to prepare and deliver to the Agent
(by telecopy) a Weekly Report on each Weekly Settlement Date (containing
information as of the immediately preceding Weekly Cut-Off Date) on or before
9:00 a.m., Atlanta time, on such Business Day, and the Borrower shall
simultaneously provide copies thereof to the Collateral Agent; provided,
however, that if a "system failure" or other similar technical failure shall
occur in the operations of the Borrower or the Servicer that produce data
included in any Weekly Report, such Weekly Report shall be prepared and
telecopied to the Agent and the Collateral Agent within two Business Days of the
date such Weekly Report was otherwise required to be prepared and telecopied to
the Agent and the Collateral Agent; and provided further that if delivery of a
Weekly Report shall be delayed as provided above, the Aggregate Outstandings may
not be increased during the period of such delay;
(b) prepare or cause the Servicer to prepare a Monthly Settlement
Statement and provide such Monthly Settlement Statement to the Agent and the
Agent will furnish to each Lender and the Collateral Agent as soon as possible
but in no event later than 12:00 noon, Atlanta time, on each Monthly Settlement
Statement Date; provided, however, that if a "system failure" or other similar
technical failure shall occur in the operations of the Borrower or the Servicer
that produce data included in the Monthly Settlement Statement, such Monthly
Settlement Statement shall be prepared and provided to the Agent and the
Collateral Agent within two Business Days of the date such Monthly Settlement
Statement was otherwise required to be prepared and provided to the Agent and
the Collateral Agent; and provided, further that if delivery of a Monthly
Settlement Statement shall be delayed as provided above, the Aggregate
Outstandings may not be increased during the period of such delay; and
(c) permit and cause the Servicer to permit the Agent, at the direction
of the Required Lenders, and the Collateral Agent to verify any Weekly Report or
Monthly Settlement Statement by conducting field audits or performing other
investigations or inspections of the calculations or methodology serving as the
basis of such Weekly Report or Monthly Settlement Statement.
SECTION 8.1.10 Compliance with Laws. The Borrower will at all times
exercise all due diligence in order to comply with the requirements of all
applicable laws, rules, regulations and orders of any federal, state or other
governmental or regulatory authority, noncompliance with which could reasonably
be expected to have a material adverse effect on (i) the business, operations,
property, assets or condition (financial or otherwise) of the Borrower, (ii) the
validity or enforceability of, or the ability of the Borrower to perform its
obligations under, the Transaction Documents or (iii) the validity,
enforceability or priority of the Liens created by the Purchase Agreement and
the Security Agreement.
SECTION 8.1.11 Directors, Officers and Employees. The Borrower will:
(a) ensure that at least one member of its board of directors (i) shall
not be a direct, indirect or beneficial stockholder, officer, director,
employee, Affiliate, supplier or direct customer of any member of the Parent
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Group, (ii) shall not at any time serve as a trustee in bankruptcy for any
member of the Parent Group and (iii) shall at all times be reasonably acceptable
to the Required Lenders;
(b) compensate any employee or consultant of the Borrower from the
Borrower's own bank accounts for services provided to the Borrower;
(c) compensate any officer or director of a member of the Parent Group
in a dollar amount determined to reflect the services rendered to the Borrower;
provided that services of a ministerial nature shall not be compensated by the
Borrower; and
(d) to the extent the Borrower and any member of the Parent Group share
any item of expense not reflected in the Servicing Fee, allocate such expense to
the extent practicable on the basis of actual use or the value of services
rendered, and otherwise on a basis reasonably related to actual use or the value
of services rendered.
SECTION 8.1.12 Lockbox Accounts and Concentration Account. The Borrower
will designate the Lockbox Accounts and the Concentration Account as the lockbox
accounts and concentration accounts referred to in clause (k) of Section 5.01
and clause (c) of Section 5.02 of the Purchase Agreement.
SECTION 8.1.13 Commingled Funds. The Borrower will use its best efforts
to determine as promptly as possible whether any funds of any of the Sellers or
of any Affiliate of any Sellers (other than the Borrower) have been commingled
with the funds of the Borrower and separate any such commingled funds as soon as
possible thereafter.
SECTION 8.1.14 Additional Financial Statements. The Borrower will
furnish to the Agent as soon as practicable such information regarding the
Special Obligors as the Agent shall reasonably request, provided that (i) such
information is available to the Seller Parties, (ii) the Seller Parties are
legally able to disclose such information, and (iii) such information could not
readily be obtained by the Agent from the Securities and Exchange Commission.
SECTION 8.2 Negative Covenants. The Borrower covenants and agrees with
the Agent and each Lender that until all Liquidity Commitments have been
terminated and all Obligations have been paid or performed in full, unless the
Required Lenders otherwise consent in writing, the Borrower will perform the
obligations set forth in this Section 8.2.
SECTION 8.2.1 Indebtedness. The Borrower will not incur, create, assume
or permit to exist any Indebtedness, other than, without duplication, the
following:
(a) Indebtedness in respect of the Advances and other Obligations;
(b) Indebtedness evidenced by the Subordinated Note;
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(c) Indebtedness representing fees, expenses and indemnities payable
pursuant to and in accordance with the Transaction Documents;
(d) Indebtedness for services supplied or furnished to the Borrower in
an amount not to exceed $100,000 at any time outstanding; and
(e) Indebtedness in respect of Servicer Advances.
SECTION 8.2.2 Liens. The Borrower will not incur, create, 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 revenues
or rights in respect of any thereof, other than the Liens created pursuant to
the Transaction Documents.
SECTION 8.2.3 Creditors. The Borrower will not permit to exist any
creditors other than the Agent, the Lenders, the holders of Indebtedness
permitted by Section 8.2.1 and the other parties expressly contemplated and
permitted by the Transaction Documents
SECTION 8.2.4 Business of the Borrower. The Borrower will not engage at
any time in any business or business activity other than (i) the acquisition of
Receivables pursuant to the Purchase Agreement, (ii) the Advances hereunder,
(iii) the other transactions contemplated by the Transaction Documents and (iv)
any activity incidental to the foregoing and necessary or convenient to
accomplish the foregoing.
SECTION 8.2.5 Sale and Lease-Back Transactions. The Borrower will not
enter into any arrangement, directly or indirectly, with any Person whereby it
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 that it intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
SECTION 8.2.6 Investments. The Borrower will not make, incur, assume or
suffer to exist any Investment in any Person, other than (i) the Receivables,
(ii) Permitted Investments and (iii) as permitted under Section 8.2.9.
SECTION 8.2.7 Mergers, Consolidations, Acquisitions of Assets and Sales
of Assets. Except as specified in the Transaction Documents, the Borrower will
not liquidate or dissolve, 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) any of its assets (whether now owned or hereafter acquired), or
purchase, lease or otherwise acquire (in one transaction or a series of
transactions) any of the assets of any other Person, other than the acquisition
of Receivables pursuant to, and in accordance with the terms of, the Purchase
Agreement.
SECTION 8.2.8 Lease Obligations. The Borrower will not incur, create,
assume or permit to exist any Lease Obligations other than (i) arms'-length
Lease Obligations in respect of office space, equipment and computer time or
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(ii) with the reasonable approval of the Required Lenders.
SECTION 8.2.9 Dividends, Distributions and Loans to BII. The Borrower
will not (i) directly or indirectly, declare, order, pay, make or set apart any
sum of any Restricted Distribution or (ii) make loans to BII, unless (x) each
such loan shall be evidenced by a promissory note of BII substantially in the
form of Exhibit J hereto and shall be properly recorded on the books of the
Borrower and BII and (y) after giving effect to any such Restricted Distribution
or loan to BII, the Borrower shall be in compliance with clause (e) of Section
8.2.20 and funds for such Restricted Distribution or Loan to BII shall be
available pursuant to the terms of Section 3.01 of the Facility Agreement.
SECTION 8.2.10 Employees. The Borrower will not:
(a) with the exception of one clerical employee, employ individuals who
are not officers or directors of the Borrower.
(b) engage any agents other than the Servicer or provide the Servicer
with compensation or reimbursement of expenses other than in accordance with
Section 2.02 of the Facility Agreement.
SECTION 8.2.11 Transactions with Affiliates. The Borrower will not sell
or transfer any property or assets to, or purchase or acquire any property or
assets from, or otherwise engage in any other transactions with, or enter into,
or cause or permit to exist any arrangement or contract with, any of its
Affiliates except as expressly contemplated by the Transaction Documents.
SECTION 8.2.12 Subordinated Note. The Borrower will not make, directly
or indirectly, payments in any form in respect of the Subordinated Note except
to the extent that funds for such payments shall be available pursuant to
Section 3.01 of the Facility Agreement.
SECTION 8.2.13 Accounting Changes. The Borrower will not make any
change (a) in accounting treatment and reporting practices except as required by
GAAP or (b) in tax reporting treatment except as required by law and, in each
case, as disclosed to the Agent and the Lenders in the Borrower's financial
information submitted pursuant to Section 6.1.16 and clauses (b) and (c) of
Section 8.1.5.
SECTION 8.2.14 Capital Stock. The Borrower will not issue any capital
stock to any Person, permit any of its capital stock to be transferred to any
Person or otherwise change its equity structure in any manner; provided that the
Borrower may from time to time issue additional shares of its common stock to
BII, and the Borrower may from time to time issue Preferred Stock in accordance
with the terms of the Purchase Agreement.
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SECTION 8.2.15 Amendments. The Borrower will not amend, supplement or
modify (or permit to be amended, supplemented or modified) any of the terms or
provisions contained in, or applicable to the Borrower's Organic Documents, the
Transaction Documents or the Policies or the implementation of the Policies
other than (i) amendments or modifications that would not have a material
adverse effect on the amount of Collections of Receivables or the timing and
receipt thereof and (ii) changes that are required by applicable law.
SECTION 8.2.16 Other Agreements. The Borrower will not enter into or be
a party to any agreement or instrument other than the Transaction Documents or
any agreement incidental thereto or required by law or otherwise to perform or
observe its obligations under the Transaction Documents or to perform activities
on its part permitted to be performed under the Transaction Documents.
SECTION 8.2.17 No Powers of Attorney. The Borrower will not grant any
powers of attorney to any Person for any purposes except (a) for the purpose of
permitting any Person to perform any ministerial functions on behalf of the
Borrower that are not prohibited by or inconsistent with the terms of the
Transaction Documents, (b) to the Collateral Agent in connection with the
Security Agreement and the Facility Agreement or (c) except as expressly
permitted by the Transaction Documents.
SECTION 8.2.18 Separate Existence. The Borrower will not
(a) fail to do all things necessary to maintain its corporate existence
separate and apart from each of the Sellers, any division of any of the Sellers
and any Affiliate of any of the Sellers, including, failing to hold regular
meetings of its stockholders and Board of Directors and failing to maintain its
stockholders and Board of Directors minute books and other corporate books and
records on a current basis;
(b) permit any limitation on the authority of its own directors and
officers to conduct its business and affairs in accordance with their
independent business judgment, or authorize or permit any Person other than its
own officers and directors to act on its own behalf with respect to matters
(other than matters customarily delegated to others under powers of attorney)
for which a corporation's own officers and directors would customarily be
responsible;
(c) fail to (i) maintain or cause to be maintained by an agent under
the Borrower's control physical possession of all its books and records, (ii)
maintain capitalization adequate for the conduct of its business, (iii) account
for and manage all of its liabilities separately from those of any other Person,
including, payment by it of all payroll and other administrative expenses and
taxes from its own assets, (iv) segregate and identify or cause to be segregated
and identified separately all its assets from those of any other Person, (v)
maintain its own officers and directors or (vi) maintain separate offices with a
separate telephone number from those of any of the Sellers or any Affiliate of
any of the Sellers;
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(d) commingle or permit the commingling of its funds with the funds of
any of the Sellers or any Affiliate of any of the Sellers or use its funds for
other than the Borrower's uses, except as permitted by the Purchase Agreement
and except as the result of the failure of any Obligor to follow the payment
instructions given to such Obligor under the Purchase Agreement; provided that
the Borrower will use its best efforts to ensure that no such commingling or
pooling occurs, to determine as promptly as possible whether it has occurred and
to separate any such commingled or pooled funds as soon as possible after any
such determination;
(e) commingle or pool or permit the commingling or pooling of its funds
or other assets with those of any other member of the Parent Group or maintain
or permit the maintenance of joint bank accounts or other depository accounts to
which any other member of the Parent Group would have independent access;
(f) fail to pay its pro rata share of the insurance premium of the
blanket insurance policy of the Parent Group; or
(g) be or hold itself out to be responsible for the decisions or
actions relating to the daily business and affairs of, or for any obligation
(contingent or otherwise) of, any other member of the Parent Group, or permit
any other member of the Parent Group to be or hold itself out to be responsible
for the decisions or actions relating to the daily business and affairs of, or
for any obligation (contingent or otherwise) of, the Borrower.
SECTION 8.2.19 Receivables Not To Be Evidenced by Promissory Notes. The
Borrower will not take any action to cause any Receivable to be evidenced by any
"instrument" (as defined in the UCC as in effect in any state in which the
Borrower's, or any Seller's, chief executive offices or books and records
relating to such Receivable are located) other than in accordance with the
Policies.
SECTION 8.2.20 Financial Covenants. The Borrower will not:
(a) permit, as of any Monthly Cut-Off Date, the average of the Default
Ratios for the three Fiscal Months ending on or immediately before such Monthly
Cut-Off Date to exceed 2.0%;
(b) permit the ratio (expressed as a percentage) of (i) the Outstanding
Balance of Receivables that are more than 60 days past due as of any Weekly
Cut-Off Date to (ii) the Outstanding Balance of all Receivables on such Weekly
Cut-Off Date to exceed 5.0%;
(c) permit Days Sales Outstanding for any Fiscal Month to exceed 75
days;
(d) permit, as at any Settlement Date, after giving effect to the
calculation of Required Reserves on such Settlement Date and after application
of Collections and all other payments and amounts made available on such
Settlement Date (including payments under Section 2.03 of the Purchase
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Agreement), the Aggregate Outstandings (net of the portion thereof that has been
repaid out of Collections) to exceed the Borrowing Base; or
(e) permit shareholder's equity of the Borrower at any time to be less
than $15,000,000 (exclusive of any assets consisting of loans made to BII by the
Borrower pursuant to Section 8.2.9).
SECTION 8.2.21 Ownership of Assets and Property. The Borrower will not
own or lease any tangible assets or facilities other than (i) as expressly
contemplated pursuant to the terms of this Agreement and the other Transaction
Documents or (ii) with the reasonable approval of the Agent.
SECTION 8.2.22 Employee Benefit Plans. The Borrower will not:
(a) Engage or permit any of its ERISA Affiliates to engage in any
transaction in connection with which the Borrower, or any of its ERISA
Affiliates, could reasonably be expected to be subject to either a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code in either case in an amount in excess of $1,000,000;
(b) Fail or permit any of its ERISA Affiliates to fail to make full
payment when due of all amounts which, under the provisions of any Pension Plan,
the Borrower or any of its ERISA Affiliates is required to pay as contributions
thereto; or permit to exist any accumulated funding deficiencies, whether or not
waived, with respect to all Pension Plans in an aggregate amount greater than
$3,000,000;
(c) Permit or permit any of its ERISA Affiliates to permit the sum of
the amount of unfunded benefit liabilities under all Pension Plans (excluding
each Pension Plan with an amount of unfunded benefit liabilities of zero or
less) to exceed $150,000,000; or
(d) Fail or permit any of its ERISA Affiliates to fail to make any
payments in an amount individually or in the aggregate greater than $3,000,000
to any Multiemployer Plan or Multiemployer Plans that the Borrower, or any of
its ERISA Affiliates, may be required to make under any agreement relating to
such plan or plans, or any law pertaining thereto.
As used in this Section 8.2.22, the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of
the Code, and the term "amount of unfunded benefit liabilities" has the meaning
specified in Section 4001(a)(18) of ERISA.
ARTICLE IX
AMORTIZATION EVENTS
SECTION 9.1 Amortization Event. Each of the following events or
occurrences described in this Section 9.1 shall constitute an "Amortization
Event".
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SECTION 9.1.1 Non-Payment of Obligations. The Borrower shall default in
the payment or prepayment of any amount when due hereunder, including without
limitation any principal or interest on an Advance or any fee payable hereunder,
and with respect to interest on a Liquidity Advance or any fee hereunder, such
default shall continue unremedied for a period of two Business Days.
SECTION 9.1.2 Breach of Warranty. Any representation or warranty of the
Borrower, any Seller or the Servicer made hereunder or in any other Transaction
Document executed by it or any certificate or financial statement or other
writing furnished by or on behalf of the Borrower to the Agent or any Lender for
the purposes of or in connection with this Agreement or any such other
Transaction Document (including any certificates delivered pursuant to Article
VI) is or shall be incorrect when made in any material respect (other than with
respect to the eligibility of Receivables or the absence of Dilutions).
SECTION 9.1.3 Non-Performance of Certain Covenants and Obligations. The
Borrower shall default in the due performance and observance of any of its
obligations under Sections 8.1.1, 8.1.6, 8.1.8, 8.1.12 or Section 8.2.
SECTION 9.1.4 Non-Performance of Other Covenants and Obligations. (a)
The Borrower shall default in the due performance and observance of any other
agreement contained herein or in any other Transaction Document (other than
those specified in Sections 8.1.1, 8.1.6, 8.1.8, 8.1.12 or 8.2) executed by it,
and such default shall continue unremedied for a period of ten days.
SECTION 9.1.5 Default on Other Indebtedness. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in clause (a) of Section 8.2.1 or Indebtedness owing to any member of
the Parent Group) of the Borrower in a principal amount, individually or in the
aggregate, in excess of $25,000 or more; or a default shall occur in the
performance or observance of any obligation or condition with respect to such
Indebtedness if the effect of such default is to accelerate the maturity of any
such Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity.
SECTION 9.1.6 Judgments. Any judgment or order for the payment of money
in excess of $100,000 shall be rendered against the Borrower and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order; or (ii) there shall be any period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 9.1.7 Bankruptcy, Insolvency, etc. (a) (i) a court having
jurisdiction in the premises shall enter a decree or order for relief in respect
of the Borrower or any Significant Seller in an involuntary case under the
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Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, which decree or order is not stayed, or any other
similar relief shall be granted under any applicable federal or state law; or
(ii) an involuntary case is commenced against the Borrower, the Servicer or any
Significant Seller under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over the
Borrower, the Servicer or any Significant Seller, or over all or a substantial
part of its respective property, shall have been entered; or an interim
receiver, trustee or other custodian of the Borrower, the Servicer or any
Significant Seller for all or a substantial part of its respective property is
involuntarily appointed; or a warrant of attachment, execution or similar
process is issued against any substantial part of the property of the Borrower,
the Servicer or any Significant Seller, and the continuance of any such events
in subclause (ii) for 60 days unless dismissed, bonded or discharged; or
(b) the Borrower or any Significant Seller shall have an order for
relief entered with respect to it or shall commence a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order for relief
in any involuntary case to a voluntary case, under any such law, or shall
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; or the making by
the Borrower, the Servicer or any Significant Seller of any assignment for the
benefit of creditors; or the inability or failure of the Borrower, the Servicer
or any Significant Seller, or the admission by the Borrower, the Servicer or any
Significant Seller in writing of its inability to pay, its debts as such debts
become due; or the Board of Directors of the Borrower, the Servicer or any
Significant Seller (or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing.
SECTION 9.1.8 Impairment of Security, etc. (a) Any Lien granted under
any Transaction Document shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of the Borrower or any other party shall,
directly or indirectly, contest in any manner such effectiveness, validity,
binding nature or enforceability; or any Lien securing any Obligation shall, in
whole or in part, cease to be a perfected first priority Lien, subject only to
those exceptions expressly permitted by such Transaction Document.
(b) The Internal Revenue Service shall file notice of a lien pursuant
to Section 6323 of the Internal Revenue Code with regard to any of the
Collateral and such lien shall not have been released within five days, or the
Pension Benefit Guaranty Corporation shall, or shall indicate its intention to,
file notice of the lien pursuant to Section 4068 of ERISA with regard to any of
the Collateral and such lien shall not have been released within five days.
SECTION 9.1.9 Liens. The Borrower shall cease to own all the
Receivables free and clear of all Liens except as otherwise provided under the
Purchase Agreement, the Security Agreement or contemplated by this Agreement.
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SECTION 9.1.10 Other Defaults. (a) Default shall be made on the part of
the Servicer, a Seller or the Borrower to remit any Collections which are
required to be remitted to the Collection Deposit Account or the Concentration
Account or to pay when due any amounts (including commitment fees and interest
but excluding, in any event, any amount referred to in Section 9.1.1) in respect
of any Transaction Document.
(b) Default shall be made on the part of the Servicer to deliver a
Settlement Report in accordance with the provisions hereof.
(c) Failure of any Seller to pay any indemnities or other amounts
required to be paid under the Purchase Agreement.
(d) Servicer shall default in the due performance and observance of any
other agreement contained in any Transaction Document executed by it, and such
default shall continue unremedied for a period of ten days.
SECTION 9.1.11 Change in Control. Any Change in Control shall occur.
SECTION 9.1.12 Purchase Termination Event. A Purchase Termination Event
shall have occurred and be continuing under the Purchase Agreement.
SECTION 9.1.13 Acceleration of Certain Indebtedness of the Sellers;
Termination of Commitments Under BII Credit Agreement. (i) BII and/or the other
Sellers shall fail to pay any Specified Indebtedness at its final maturity; or
any other failure, breach or default shall have occurred with respect to the
terms of Indebtedness of BII and/or the other Sellers and shall have resulted in
the acceleration of any Specified Indebtedness; or (ii) the commitments under
the BII Credit Agreement and under any replacement or refinancing thereof from
time to time shall have been terminated.
SECTION 9.1.14 Enforceability of Transaction Documents. Any of the
Transaction Documents or any portion thereof shall not be in full force and
effect, enforceable in accordance with its terms or the Borrower, a Seller or
the Servicer shall so assert in writing.
SECTION 9.1.15 Investment Company. The Borrower shall have become an
"investment company" under the Investment Company Act of 1940.
SECTION 9.2 Action if Amortization Event. If any Amortization Event set
forth in Section 9.1.7 has occurred and is continuing, the Collateral Agent,
without the request or consent of the Agent or Required Lenders, in every such
event at any time thereafter during the continuance of such event, shall, and if
any other Amortization Event has occurred, the Collateral Agent, at the request
or with the consent of the Required Lenders, conveyed through the Agent, shall,
in every such event at any time thereafter during the continuance of such event,
by notice to the Borrower and the Sellers, at the same or different times:
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(i) compel the assignment and/or delivery of any computer software that
is necessary to collect the Receivables and delivery of all books and records
pertaining to the Receivables,
(ii) declare the outstanding principal amount of the Advances to be due
and payable, whereupon such principal amount shall become due and payable
immediately, provided that such acceleration shall not relieve any Liquidity
Lender of its obligation to make Refunding Advances in accordance with the terms
hereof; provided further that this Section 9.2(ii) shall not apply to
Amortization Events resulting solely from the failure of the Borrower to comply
with any covenant set forth in clause (a), (b), (c) or (d) of Section 8.2.20.
(iii) collect the Receivables,
(iv) take sole dominion and control of the Lockbox Accounts,
(v) exercise all the rights and remedies provided to a purchaser of
accounts (or secured creditor) under the UCC in the applicable states or
otherwise, which rights and remedies shall be cumulative to those provided in
this Agreement and the other Transaction Documents, and
(vi) pursue any other right or remedy under this Agreement and the
other Transaction Documents.
ARTICLE X
THE AGENT
SECTION 10.1 Actions. Each Lender hereby appoints Wachovia as its Agent
under and for purposes of this Agreement, the Notes and each other Transaction
Document. Each Lender authorizes the Agent to act on behalf of such Lender under
this Agreement, the Notes and each other Transaction Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by the Agent (with respect to which the Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Without limiting the
foregoing, each Liquidity Lender acknowledges and agrees to the terms of Section
3 of the Security Agreement. Each Liquidity Lender hereby indemnifies (which
indemnity shall survive any termination of this Agreement) the Agent, pro rata
according to such Liquidity Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Transaction Document, including reasonable
attorneys' fees, and as to which the Agent, is not reimbursed by the Borrower;
provided, however, that no Liquidity Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent jurisdiction in a final
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proceeding to have resulted solely from the Agent's gross negligence or willful
misconduct. The Agent shall not be required to take any action hereunder, under
the Notes or under any other Transaction Document or to prosecute or defend any
suit in respect of this Agreement, the Notes or any other Transaction Document,
unless it is indemnified hereunder to its satisfaction. If any indemnity in
favor of the Agent shall be or become, in the Agent's determination, inadequate,
the Agent may call for additional indemnification from the Liquidity Lenders and
cease to do the acts indemnified against hereunder until such additional
indemnity is given.
SECTION 10.2 Funding Reliance, etc. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Liquidity Lender by 5:00
p.m., Atlanta time, on the day prior to a Borrowing that such Liquidity Lender
will not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Agent may assume that such
Liquidity Lender has made such amount available to the Agent and, in reliance
upon such assumption, make available to the Borrower a corresponding amount. If
and to the extent that such Liquidity Lender shall not have made such amount
available to the Agent, such Liquidity Lender and the Borrower severally agree
to repay the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date the Agent made such amount
available to the Borrower to the date such amount is repaid to the Agent, in the
case of such Liquidity Lender at the applicable Federal Funds Rate and, in the
case of the Borrower, at the interest rate applicable at the time to the
Liquidity Advances comprising such Borrowing.
SECTION 10.3 Exculpation. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it under this Agreement or any other Transaction
Document, or in connection herewith or therewith, except for its own willful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Transaction Document, nor for the
creation, perfection or priority of any Liens purported to be created by any of
the Transaction Documents, or the validity, genuineness, enforceability,
existence, value or sufficiency of any collateral security, nor to make any
inquiry respecting the performance by the Borrower of its obligations hereunder
or under any other Transaction Document. Any such inquiry which may be made by
the Agent shall not obligate it to make any further inquiry or to take any
action. The Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Agent believes to be genuine and to have been presented by a proper
Person.
SECTION 10.4 Successor. The Agent may resign as such at any time upon
at least 30 days' prior notice to the Borrower and all Lenders. If the Agent at
any time shall resign, the Required Lenders may appoint another Liquidity Lender
as a successor Agent which shall thereupon become the Agent hereunder. If no
successor Liquidity Agent shall have been so appointed by the Required Lenders,
and shall have accepted such appointment, within 30 days after the retiring
Agent's giving notice of resignation, then the retiring Agent may, on behalf of
the Lenders, appoint a successor Agent, which shall be one of the Liquidity
Lenders or a commercial banking institution organized under the laws of the U.S.
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(or any State thereof) or a U. S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall be entitled to receive from the retiring Agent such
documents of transfer and assignment as such successor Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Agent's resignation hereunder as the Agent, the provisions of (a)
this Article X shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was the Agent under this Agreement; and (b) Section 11.3
and Section 11.4 shall continue to inure to its benefit.
SECTION 10.5 Liquidity Advances by Wachovia. Wachovia shall have the
same rights and powers with respect to (x) the Liquidity Advances made by it or
any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as
any other Liquidity Lender and may exercise the same as if it were not the
Agent. Wachovia and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Affiliate of
the Borrower as if Wachovia were not the Agent hereunder.
SECTION 10.6 Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Transaction Documents (the terms and provisions of which being satisfactory to
such Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to extend Advances
and its Liquidity Commitment. Each Lender also acknowledges that it will,
independently of the Agent and each other Lender, and based on such other
documents, information and investigations as it shall deem appropriate at any
time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Transaction Document.
SECTION 10.7 Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution to
the Lenders by the Agent in accordance with the terms of this Agreement.
SECTION 10.8 Collateral Agent. The provisions of this Article X shall
apply to Wachovia in its capacity as Collateral Agent to the same extent as such
provisions apply to Wachovia in its capacity as Agent. Without limiting the
foregoing, each Liquidity Lender agrees to be bound by the provisions of the
Security Agreement regarding the release of Collateral.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Waivers, Amendments, etc. (a) The provisions of this
Agreement and each other Transaction Document (other than the Security Agreement
and the Facility Agreement) may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; provided, however, that:
(i) any modification of this clause (a) of Section 11.1 shall
require the consent of each Lender, and any requirement hereunder that
any particular action be taken by all the Liquidity Lenders, the
Required Liquidity Lenders or the Required Lenders or any change in the
definition of "Required Liquidity Lenders" or "Required Lenders" or any
defined term used for the purpose of such definition shall require the
consent of each Liquidity Lender;
(ii) any amendment to or modification that would increase the
Liquidity Commitment or the Percentage (other than any increase
resulting form Section 3.3(b)) of any Liquidity Lender or reduce any
fees described in Article IV payable to any Liquidity Lender shall
require the consent of such Liquidity Lender;
(iii) any amendment to or modification that would extend the
Liquidity Commitment Termination Date, shall require the consent of
each Liquidity Lender;
(iv) any amendment to or modification that would extend the
due date for, or reduce the amount of, any scheduled repayment or
prepayment of principal of or interest on any Advance of any Lender (or
reduce the principal amount of or rate of interest on any Advance of
any Lender) shall require the consent of each Lender;
(v) any amendment to or modification or waiver that would
affect adversely the interests, rights or obligations of the Agent qua
the Agent shall require the consent of the Agent;
(vi) any amendment to or waiver of any Amortization Event
shall require the consent of Liquidity Lenders holding more than
66-2/3% of the Liquidity Commitments, and the Conduit Lender if any CP
Rate Advances are outstanding; and
(vii) any reduction of the Liquidity Commitment Amount
pursuant to clause (b) of Section 3.3 to an amount less than
$75,000,000 shall require the consent of each Liquidity Lender.
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(b) The provisions of the Facility Agreement and the Security
Agreement may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to by the
Required Lenders; provided, however, that
(i) any amendment to or modification of any provision
effecting the release of any Collateral and any amendment to
Section 19 of the Security Agreement shall require the consent
of all Lenders;
(ii) any amendment to or waiver of the priority of
applications of Collections shall require the consent of all
Lenders;
(iii) any amendment to or waiver of the provisions
providing for the number or percentage of Liquidity Lenders
required to approve any amendment to or waiver of any
provision of the Security Agreement or the Facility Agreement
shall require the consent of all Liquidity Lenders; and
(iv) any (A) amendment to or waiver relating to the
Borrowing Base or any definitions related to the determination
thereof, (B) amendment to the definition of "Eligible
Receivables", "Eligible Obligors" or "Required Reserves" or to
any defined terms used for the purpose of such definitions
shall require the consent of Liquidity Lenders holding more
than 66-2/3% of the Liquidity Commitments, and the Conduit
Lender if any CP Rate Advances are outstanding.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other
Transaction Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Agent, any Lender
or the holder of any Note under this Agreement or any other Transaction Document
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 11.2 Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Transaction Document shall be
in writing and addressed, delivered or transmitted to such party at its address
or facsimile number set forth below its signature hereto or set forth in the
Liquidity Lender Assignment Agreement or at such other address or facsimile
number as may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted upon receipt of electronic confirmation of transmission.
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SECTION 11.3 Payment of Costs and Expenses. The Borrower agrees to pay
on demand all expenses of the Agent incurred after the date hereof (including
the reasonable fees and out-of-pocket expenses of counsel to the Agent and of
local counsel, if any, who may be retained by counsel to the Agent) in
connection with
(a) the negotiation, preparation, execution and delivery of
any amendments, waivers, consents, supplements or other modifications
to this Agreement or any other Transaction Document as may from time to
time hereafter be required, whether or not the transactions
contemplated hereby are consummated,
(b) the filing, recording, refiling or rerecording of the
Security Agreement and/or any Uniform Commercial Code financing
statements relating thereto and all amendments, supplements and
modifications to any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or of the Security Agreement,
except costs in connection with the filing of such UCC financing
statements and termination statements delivered to the Agent pursuant
to Section 6 hereof,
(c) the syndication of the Liquidity Commitment, including but
not limited to printing, duplicating, mailing and similar expenses,
(d) the performance of due diligence by the Agent after the
date hereof,
(e) the preparation and review after the date hereof of the
form of any document or instrument relevant to this Agreement, or to
any other Transaction Document,
(f) the transactions contemplated by this Agreement and the
Transaction Documents (other than the negotiation, preparation,
execution and delivery of the Transaction Documents delivered on or
before the Effective Date), and
(g) the preparation and negotiation after the date hereof of
the legal opinions of counsel to each Lender.
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, (i) any breach by the Borrower of any of its
obligations under this Agreement, (ii) all costs incurred by the Agent or the
Lenders in enforcing this Agreement and (iii) any stamp, documentary or other
taxes which may be payable in connection with the execution or delivery of this
Agreement, the borrowings hereunder, or the issuance of the Notes or any other
Transaction Documents. The Borrower also agrees to reimburse the Agent and each
Lender upon demand for all reasonable out-of-pocket expenses (including
attorneys' fees and legal expenses) incurred by the Agent or such Lender in
connection with (x) the negotiation of any restructuring or "work-out", whether
or not consummated, of any Obligations and (y) the enforcement of any
Obligations.
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Nothing in this Section 11.3 shall relieve any Seller Party of its
obligation to pay any fee to the Agent, or to reimburse the Agent for any cost
or expense, to the extent described in a separate fee letter between such Seller
Party and the Agent.
SECTION 11.4 Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Liquidity
Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent and
each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to the Transaction Documents, or the funding of any Advance or in
respect of any Collateral, except for any such Indemnified Liabilities arising
for the account of a particular Indemnified Party by reason of the relevant
Indemnified Party's gross negligence or willful misconduct. Without limiting the
foregoing, the Borrower shall indemnify each Indemnified Party for Indemnified
Liabilities arising out of or relating to:
(i) any representation or warranty made by the Borrower (or
any of its officers or Affiliates) under or in connection with any
Transaction Document, any Settlement Report or any other information or
report delivered by or on behalf of such Person in connection with the
transactions contemplated by the Transaction Documents, which shall
have been false, incorrect or misleading in any material respect when
made or deemed made or delivered, as the case may be;
(ii) the failure by the Borrower or any of its Affiliates to
comply with any applicable law, rule or regulation with respect to any
Receivable, or the nonconformity of any Receivable with any such
applicable law, rule or regulation;
(iii) the failure to vest and maintain vested in the
Collateral Agent a first priority perfected security interest in the
Collateral, free and clear of any Lien;
(iv) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivables not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms or any
other event or circumstance that would give rise to a Dilutive Credit),
or any other claim resulting from the sale of the merchandise or
services related to such Receivable or the furnishing or failure to
furnish such merchandise or services;
(v) any payment of Collections to Seller of Collections on the
basis of estimated amounts, to the extent that such estimated amounts
vary from actual amounts subsequently determined;
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(vi) any failure of the Borrower or BII, as Servicer, to
perform its duties or obligations in under the Transaction Documents;
(vii) any products liability claim arising out of or in
connection with merchandise or services that are the subject of any
Receivable; or
(viii) any claim of breach by any Seller or BII, as Servicer
of any related contract with respect to any Receivable.
If and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity set forth in this Section 11.4
shall in no event include indemnification for any Taxes (which indemnification
is provided in Section 5.6).
SECTION 11.5 Survival.
(a) The obligations of the Borrower under Sections 5.3, 5.4,
5.5, 5.6, 11.3, and 1.4, and the obligations of the Lenders under
Section 10.1, shall in each case survive any termination of this
Agreement, the payment in full of all the Obligations and the
termination of all the Liquidity Commitments. The representations and
warranties made in this Agreement and in each other Transaction
Document shall survive the execution and delivery of this Agreement and
each such other Transaction Document.
(b) Notwithstanding anything in this Agreement to the
contrary, the agreements of the Borrower set forth in Sections 8.1.1,
8.1.10 and 8.1.11 and Section 8.2 (other than Sections 8.2.20 and
8.2.21), as such covenants may be amended, modified or supplemented
from time to time pursuant to the terms hereof or any agreement
replacing or refinancing this Agreement, shall survive the payment of
the Advances and the Notes and the termination of this Agreement and
shall not terminate until the fifth anniversary of the first date
following the latest of the Revolving Commitment Termination Date, the
Refunding Commitment Termination Date or the CP Rate Advance
Termination Date, on which no Obligations are outstanding.
SECTION 11.6 Severability. Any provision of this Agreement or any other
Transaction Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Transaction Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 11.7 Headings. The various headings of this Agreement and of
each other Transaction Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Transaction
Document or any provisions hereof or thereof.
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SECTION 11.8 Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Borrower and the Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Borrower and each Lender.
SECTION 11.9 Governing Law; Entire Agreement. THIS AGREEMENT AND THE
NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
This Agreement, the Notes and the other Transaction Documents constitute the
entire understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 11.10 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Agent
and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 11.11.
SECTION 11.11 Sale and Transfer of Advances and Notes; Participations
in Loans and Notes. Each Lender may assign, or sell Participations in, its
Advances and Liquidity Commitments to one or more other Persons in accordance
with this Section 11.11.
SECTION 11.11.1 Assignments.
(a) Any Liquidity Lender,
(i) with the written consents of the Borrower and the
Agent (which consents shall not be unreasonably delayed or
withheld) may at any time assign and delegate to an Eligible
Assignee, and
(ii) with notice to the Borrower and the Agent, but
without the consent of the Borrower or the Agent, may assign
and delegate to any of its Affiliates or to any other
Liquidity Lender;
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Liquidity Lender's total
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Liquidity Advances and Liquidity Commitments (which assignment and delegation
shall be of a constant, and not a varying, percentage of all the assigning
Liquidity Lender's Liquidity Advances and Liquidity Commitments) in a minimum
aggregate amount of $5,000,000; provided, however, that any such Assignee Lender
will comply, if applicable, with the provisions contained in the penultimate
sentence of Section 5.6(g); provided further, however, that, the Borrower and
the Agent shall be entitled to continue to deal solely and directly with such
Liquidity Lender in connection with the interests so assigned and delegated to
an Assignee Lender until
(iii) written notice of such assignment and
delegation, together with payment instructions, addresses and
related information with respect to such Assignee Lender,
shall have been given to the Borrower and the Agent by such
Liquidity Lender and such Assignee Lender;
(iv) such Assignee Lender shall have executed and
delivered to the Borrower and the Agent a Liquidity Lender
Assignment Agreement, accepted by the Agent; and
(v) the processing fees described below shall have
been paid.
From and after the date that the Agent accepts such Liquidity Lender Assignment
Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in connection
with such Liquidity Lender Assignment Agreement, shall have the rights and
obligations of a Liquidity Lender hereunder and under the other Transaction
Documents, and (y) the assignor Liquidity Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection with
such Liquidity Lender Assignment Agreement, shall be released from its
obligations hereunder and under the other Transaction Documents. Within five
Business Days after its receipt of notice that the Agent has received an
executed Liquidity Lender Assignment Agreement, the Borrower shall, upon receipt
of the Notes evidencing such assignor Liquidity Lender's Liquidity Advance and
Liquidity Commitments, execute and deliver to the Agent (for delivery to the
relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned
Liquidity Advances and Liquidity Commitments and, if the assignor Liquidity
Lender has retained Liquidity Advances and Liquidity Commitments hereunder,
replacement Notes in the principal amount of the Liquidity Advances and
Liquidity Commitments retained by the assignor Liquidity Lender hereunder (such
Notes to be in exchange for, but not in payment of, those Notes then held by
such assignor Liquidity Lender). Each such Note shall be dated the date of the
predecessor Notes. The assignor Liquidity Lender shall mark the predecessor
Notes "exchanged" and deliver them to the Borrower. Accrued interest on that
part of the predecessor Notes evidenced by the new Notes, and accrued fees,
shall be paid as provided in the Liquidity Lender Assignment Agreement. Accrued
interest on that part of the predecessor Notes evidenced by the replacement
Notes shall be paid to the assignor Liquidity Lender. Accrued interest and
accrued fees shall be paid at the same time or times provided in the predecessor
Notes and in this Agreement. Such assignor Liquidity Lender or such Assignee
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Lender must also pay a processing fee to the Liquidity Agent upon delivery of
any Liquidity Lender Assignment Agreement in the amount of $3,500. Any attempted
assignment and delegation not made in accordance with this Section 11.11.1 shall
be null and void.
(b) The Conduit Lender may assign its CP Rate Advances as
contemplated by Sections 2.3 and 3.4. In addition, the Conduit Lender,
with the written consents of the Borrower and the Agent (which consents
shall not be unreasonably delayed or withheld) may at any time assign
and delegate to an Eligible Assignee or any issuer of Commercial Paper
Notes (each Person described in the foregoing sentence as being the
Person to whom such assignment and delegation is to be made, being
hereinafter referred to as an "Assignee Conduit Lender"), all or any
fraction of the Conduit Lender's total CP Rate Advances in a minimum
aggregate amount of $5,000,000; provided, however, that any such
Assignee Conduit Lender will comply, if applicable, with the provisions
contained in the penultimate sentence of Section 5.6(g); provided
further, however, that, the Borrower and the Agent shall be entitled to
continue to deal solely and directly with the Conduit Lender in
connection with the interests so assigned and delegated to an Assignee
Conduit Lender until
(i) written notice of such assignment and delegation,
together with payment instructions, addresses and related
information with respect to such Assignee Conduit Lender,
shall have been given to the Borrower and the Agent by such
Conduit Lender and such Assignee Conduit Lender;
(ii) such Assignee Conduit Lender shall have executed
and delivered to the Borrower and the Agent a Conduit Lender
Assignment Agreement, accepted by the Agent; and
(iii) the processing fees described below shall have
been paid.
From and after the date that the Agent accepts such Conduit Lender Assignment
Agreement, (x) the Assignee Conduit Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Conduit
Lender in connection with such Conduit Lender Assignment Agreement, shall have
the rights and obligations of a Conduit Lender hereunder and under the other
Transaction Documents, and (y) the assignor Conduit Lender, to the extent that
rights and obligations hereunder have been assigned and delegated by it in
connection with such Conduit Lender Assignment Agreement, shall be released from
its obligations hereunder and under the other Transaction Documents. Within five
Business Days after its receipt of notice that the Agent has received an
executed Conduit Lender Assignment Agreement, the Borrower shall, upon receipt
of the Note evidencing such assignor Conduit Lender's CP Rate Advance execute
and deliver to the Agent (for delivery to the relevant Assignee Conduit Lender)
new Notes evidencing such Assignee Conduit Lender's assigned CP Rate Advances
and, if the assignor Conduit Lender has retained CP Rate Advances hereunder, a
replacement Note in the principal amount of the CP Rate Advances retained by the
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assignor Conduit Lender hereunder (such Note to be in exchange for, but not in
payment of, the Note then held by such assignor Conduit Lender). Such Note shall
be dated the date of the predecessor Note. The assignor Conduit Lender shall
mark the predecessor Note "exchanged" and deliver them to the Borrower. Accrued
interest on that part of the predecessor Note evidenced by the new Note, and
accrued fees, shall be paid as provided in the Conduit Lender Assignment
Agreement. Accrued interest on that part of the predecessor Note evidenced by
the replacement Note shall be paid to the assignor Conduit Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Note and in this Agreement. The assignor Conduit Lender or such
Assignee Conduit Lender must also pay a processing fee to the Agent upon
delivery of any Conduit Lender Assignment Agreement in the amount of $3,500. Any
attempted assignment and delegation not made in accordance with this Section
11.11.1 shall be null and void.
(c) The Borrower may, with the prior written consent of the
Agent, replace any Liquidity Lender with one or more Eligible Assignees
provided (x) that the Liquidity Lender being replaced has been paid in
full the outstanding amount of all Liquidity Advances made by such
Liquidity Lender and all other amounts accrued or due to such Liquidity
Lender hereunder, (y) that the full amount of the Liquidity Commitment
Amount remains unchanged and (z) that the Percentages of the total
Liquidity Commitments allocated to the other Liquidity Lenders do not
increase unless prior written consent from such Liquidity Lender has
been obtained. Upon any such replacement, such Liquidity Lender shall
cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 5.3, 5.4, 5.5, 5.6, 11.3, and 11.4, as well as to
any fees accrued for its account under Section 4.4 and not yet paid;
provided, however, that the Borrower and the Agent shall be entitled to
continue to deal solely and directly with the Liquidity Lender being
replaced in connection with the interests so assigned and delegated to
an Assignee Lender until
(i) such Assignee Lender shall have executed and
delivered to the Borrower and the Agent a Liquidity Lender
Assignment Agreement, accepted by the Agent; and
(ii) the processing fees described above shall have
been paid.
SECTION 11.11.2 Participations. Any Lender may at any time sell to one
or more commercial banks or other financial institution, and the Conduit Lender
may sell to one or more issuers of Commercial Paper Notes (each of such
commercial banks, financial institution or other entity being herein called a
"Participant") participating interests in any of the Advances, Liquidity
Commitments, or other interests of such Lender hereunder; provided, however,
that
(a) no participation contemplated in this Section 11.11 shall
relieve such Liquidity Lender from its Liquidity Commitments or its
other obligations hereunder or under any other Transaction Document or
such Conduit Lender from its obligations hereunder or under any other
Transaction Document;
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(b) such Liquidity Lender shall remain solely responsible for
the performance of its Liquidity Commitments and such other
obligations;
(c) the Borrower and the Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement and each of the other Transaction
Documents;
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Transaction Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (a)(iii) or
(a)(iv) of Section 11.1; and
(e) the Borrower shall not be required to pay any amount under
Sections 5.3, 5.4, 5.5 or 5.6 that is greater than the amount which it
would have been required to pay had no participating interest been
sold.
The Borrower acknowledges and agrees that, to the extent permitted by applicable
law, each Participant, subject to clause (e) above, for purposes of Sections
5.3, 5.4, 5.5, 5.6, 5.8, 5.9, 11.3, 11.4, 11.13 and 11.16 shall be considered a
Lender.
SECTION 11.12 Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Transaction
Document, with the Borrower or any of its Affiliates in which the Borrower or
such Affiliate is not restricted hereby from engaging with any other Person.
SECTION 11.13 Bankruptcy Petition Against the Borrower or the Conduit
Lender. The Agent (including in its capacity as Collateral Agent) and each
Liquidity Lender hereby covenants and agrees that, prior to the date which is
one year and one day after the payment in full of all outstanding Obligations,
it will not institute against, or join any other Person in instituting against,
the Borrower or the Conduit Lender any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States. In the event that any
Liquidity Lender takes action in violation of this Section 11.13, the Borrower
and the Conduit Lender agree, for the benefit of the holders of the Obligations,
that they shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such a petition by the Liquidity Lender against the
Borrower and/or the Conduit Lender or the commencement of such action and raise
the defense that such Liquidity Lender has agreed in writing not to take such
action and should be estopped and precluded therefrom and such other defenses,
if any, as its counsel advises that it may assert. The provisions of this
Section 11.13 shall survive the termination of this Agreement, and, with respect
to the Agent, the resignation or removal of the Agent and, with respect to any
Liquidity Lender, the replacement of such Liquidity Lender.
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SECTION 11.14 No Recourse. Without limitation to the obligations of the
Borrower hereunder, no recourse shall be had for the payment of any amount owing
in respect of Advances or for the payment of any fee hereunder or any other
obligation or claim arising out of or based upon this Agreement, the Notes or
any other Transaction Document against any stockholder, employee, officer,
director or incorporator of the Borrower based solely on their status as such.
The provisions of this Section 11.14 shall survive the termination of this
Agreement, and with respect to the Agent the resignation or removal of the Agent
and with respect to any Liquidity Lender the replacement of such Liquidity
Lender.
SECTION 11.15 Survival of Representations and Warranties. All
covenants, agreements, representations and warranties made by the Borrower
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Transaction Document
shall be considered to have been relied upon by the Lenders and shall survive
the execution and delivery of this Agreement and the making by the Lenders of
the Advances, and the execution and delivery to the Lenders of the Notes
evidencing such Advances, regardless of any investigation made by the Lenders or
on their behalf and shall continue so long as and until such time as all
Obligations hereunder and all Indebtedness under the Notes shall have been paid
in full and the Liquidity Lenders no longer have any Liquidity Commitment
hereunder.
SECTION 11.16 Confidentiality. The Lenders shall hold all non-public
information (which has been identified as such by the Borrower) obtained
pursuant to the requirements of this Agreement in accordance with their
customary procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure to any of their examiners, Affiliates, outside auditors, counsel and
other professional advisors in connection with this Agreement or as reasonably
required by any bona fide transferee, participant or assignee or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process; provided, however, that
(a) unless specifically prohibited by applicable law or court
order, each Lender shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such
non-public information prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this Section
11.16, each Lender shall require any such bona fide transferee,
participant and assignee receiving a disclosure of non-public
information to agree in writing
(i) to be bound by this Section 11.16; and
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.16; and
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(c) except as may be required by an order of a court or
competent jurisdiction and to the extent set forth therein, no Lender
shall be obligated or required to return any materials furnished by the
Borrower.
SECTION 11.17 Jurisdiction; Consent to Service of Process.
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ALL JUDICIAL ROCEEDINGS BROUGHT AGAINST THE BORROWER OR ANY LENDER WITH RESPECT
TO THIS AGREEMENT OR ANY NOTE MAY BE BROUGHT IN ANY STATE OR (TO THE EXTENT
PERMITTED BY LAW) FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW
YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE BORROWER AND EACH
LENDER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE BORROWER AND EACH LENDER DESIGNATE AND APPOINT CT
CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY THE BORROWER OR SUCH LENDER IRREVOCABLY
AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE BORROWER AND EACH LENDER TO BE EFFECTIVE AND BINDING SERVICE
IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO THE BORROWER OR SUCH LENDER SO SERVED AT ITS ADDRESS PROVIDED IN THE
APPLICABLE SIGNATURE PAGE HERETO, EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE BORROWER OR SUCH LENDER
REFUSES TO ACCEPT SERVICE, THE BORROWER AND EACH LENDER HEREBY AGREE THAT
SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF ANY LENDER OR THE AGENT TO BRING PROCEEDINGS AGAINST THE
BORROWER OR THE BORROWER TO BRING PROCEEDINGS AGAINST ANY LENDER IN THE COURTS
OF ANY OTHER JURISDICTION.
SECTION 11.18 Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER.
THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER
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TRANSACTION DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT
AND EACH SUCH OTHER TRANSACTION DOCUMENT.
SECTION 11.19 Qualification Regarding Bacova. The Agent and the Lenders
agree to the provisions of Section 1.03 of the Purchase Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
B.I. FUNDING, INC.
By: /s/Mary Ellen Ramsayer
Name: Mary Ellen Ramsayer
Title: Assistant Secretary
Address: 2775 Highway 40
Suite 522
P.O. Box 1449
Verdi, Nevada 89439-1449
Attention: General Counsel
Facsimile No.: (702) 345-6166
Telephone No.: (702) 345-6100
WACHOVIA BANK, N.A., as Agent
By: /s/ W.E. Covington
Name: William E. Covington
Title: Senior Vice President
Address: 191 Peachtree Street, GA-423
Atlanta, GA 30303
Attention: Deborah Williams
Asset Backed Finance
Facsimile No.: (404) 332-4005
Telephone No.: (404) 332-4363
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BLUE RIDGE ASSET FUNDING
CORPORATION, as Conduit Lender
By: /s/ W.E. Covington
Name: William E. Covington
Title: Senior Vice President
Address: c/o Wachovia Bank, N.A.,
191 Peachtree Street, GA-423
Atlanta, GA 30303
Attention: Deborah Williams
Asset Backed Finance
Facsimile No.: (404) 332-4005
Telephone No.: (404) 332-4363
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WACHOVIA BANK, N.A., as Liquidity
Lender
By: /s/ W.E. Covington
Name: William E. Covington
Title: Senior Vice President
By:
Name:
Title:
Domestic
Office: 191 Peachtree Street, GA-423
Atlanta, GA 30303
Attention: Deborah Williams
Asset Backed Finance
Facsimile No.: (404) 332-4005
Telephone No.:
LIBOR
Office: 191 Peachtree Street, GA-423
Atlanta, GA 30303
Attention: Deborah Williams
Asset Backed Finance
Facsimile No.: (404) 332-4005
Telephone No.: (404) 332-4363
64
Exhibit 10.25
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Security Agreement"), dated as of December
10, 1997, among B.I. FUNDING, INC., a Delaware corporation (the "Grantor"),
WACHOVIA BANK, N.A. ("Wachovia"), as agent (the "Agent") for the Lenders (as
defined below) and Wachovia, as collateral agent (the "Collateral Agent") for
the Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Loan Agreement, dated as of December 10, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Loan Agreement"), among the Grantor, the various
lenders as are or may become parties thereto (the "Lenders") and the Agent, the
Lenders have agreed to make certain credit facilities available to the Grantor;
and
WHEREAS, it is a condition precedent to the making of the Advances
under the Loan Agreement that the Grantor execute and deliver this Security
Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make Advances to the Grantor pursuant to the Loan Agreement, the Grantor
agrees, for the benefit of each Secured Party, as follows:
SECTION 1. Definitions; Terms Generally. (a) Unless otherwise defined
herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in Annex Z to
the Loan Agreement. (b) Unless otherwise defined herein or the context otherwise
requires, terms for which meanings are provided in the U.C.C. are used in this
Security Agreement, including its preamble and recitals, with such meanings. The
following terms, when used in this Security Agreement, including its preamble
and recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Account Collateral" is defined in clause (e) of Section 2.
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"Agent" is defined in the preamble.
"Agreements Collateral" is defined in clause (d) of Section 2.
"Collateral" is defined in Section 2.
"Collateral Agent" is defined in the preamble.
"Concentration Bank Letter" is defined in Section 8.
"Equipment" is defined in clause (c) of Section 2.
"Indemnified Liabilities" is defined in Section 20.
"Indemnitees" is defined in Section 20.
"Lenders" is defined in the first recital.
"Loan Agreement" is defined in the first recital.
"Lockbox Bank Letters" is defined in Section 7.
"Notes Receivable" means those receivables for merchandise sold by the
Borrower which are converted into a promissory note after the last shipment of
merchandise has been made and the necessary documentation has been executed and
returned to the Borrower and pursuant to which six equal monthly payments are
made.
"Receivables" is defined in clause (a) of Section 2.
"Related Security" is defined in clause (b)(iii) of Section 2.
"Secured Obligations" is defined in Section 3.
"Secured Party" means, as the context may require, any Lender, the
Agent, the Collateral Agent and each of their respective successors, transferees
and assigns.
"Security Agreement" is defined in the preamble.
"Specified Defaulted Receivable" means (x) a Defaulted Receivable owed
by an Obligor as to which voluntary or involuntary bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or similar proceedings have been
commenced, or (y) any other Defaulted Receivable, provided that the aggregate
amount of Defaulted Receivables classified as Specified Defaulted Receivables
pursuant to this clause (y) in any Fiscal Year shall not exceed $300,000 or such
larger amount (not to exceed $750,000) as the Agent shall approve in writing; it
being
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understood and agreed that the Agent may give such consent without consulting,
or receiving approval of, the Lenders.
"State or Local Tax" is defined in Section 15.
"Wachovia" is defined in the preamble.
SECTION 2. Grant of Security Interest. The Grantor hereby assigns,
pledges, grants, conveys, transfers, delivers and sets over to the Collateral
Agent for its benefit and for the ratable benefit of each Secured Party a
security interest in all the Grantor's right, title and interest in, to and
under the following, whether now owned or hereafter acquired (collectively, the
"Collateral"):
(a) all accounts, contract rights, chattel paper, instruments,
general intangibles and other obligations of any kind and indebtedness
of any kind, now or hereafter existing, whether or not arising out of
or in connection with the sale or lease of goods or merchandise or the
rendering of services or the purchase of receivables of other persons,
including the right to payment of any interest, sales taxes, finance
charges, returned checks, late charges, other fees and charges and all
other obligations with respect thereto, and all rights in and to all
security agreements and other contracts securing or otherwise relating
to any such accounts, contract rights, chattel paper, instruments,
general intangibles or obligations and all proceeds thereof
(collectively, the "Receivables");
(b) (i) all merchandise (including returned merchandise), if
any, relating to the sale which gave rise to any Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time purporting to secure payment of any
Receivable, whether pursuant to the contract related to such Receivable
or otherwise, together with all financing statements signed by any
Person describing any collateral securing such Receivable; and
(iii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of any Receivable whether pursuant to the contract
related to such Receivable or otherwise (the Collateral described in
clause (b) being referred to herein as the "Related Security");
(c) all equipment in all its forms, wherever located, now or
hereafter existing (including all software, data bases, materials,
books, records, magnetic tapes, disks and cassettes relating to the
Receivables and all other equipment in which information concerning the
Receivables and all other equipment in which information concerning the
Receivables is stored), and all parts thereof and accessions thereto
(any and all such equipment, parts and accessions being the
"Equipment");
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(d) the Purchase Agreement and the Subordination Agreement,
Consent and Acknowledgment, as the same may be amended or otherwise
modified from time to time, including (i) all rights of the Grantor to
receive moneys due and to become due under or pursuant to such
agreements, whether payable as fees, expenses, costs or otherwise, (ii)
all rights of the Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to such agreements, (iii)
claims of the Grantor for damages arising out of or for breach of or
default under such agreements, (iv) the right of the Grantor to amend,
waive or terminate such agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (v) all
other rights, remedies, powers, privileges and claims of the Grantor
under or in connection with such agreements (whether arising pursuant
to such agreements or otherwise available to the Grantor at law or in
equity), including the rights of the Grantor to enforce such agreements
and to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or in connection
therewith (the Collateral described in this clause (d) being referred
to herein as the "Agreements Collateral");
(e) all the following (the "Account Collateral"):
(i) each Lockbox Account, all funds and other
evidences of payment held therein and all certificates and
instruments, if any, from time to time representing or
evidencing any of the Lockbox Accounts or any funds and other
evidences of payment held therein;
(ii) the Concentration Account, all funds and other
evidences of payment held therein and all certificates and
instruments, if any, from time to time representing or
evidencing the Concentration Account or any funds and other
evidences of payment held therein;
(iii) all interest of the Grantor in each Collection
Account, all funds and other evidences of payment held therein
and all certificates and instruments, if any, from time to
time representing or evidencing any of the Collection Accounts
or any funds and other evidences of payment held therein;
(iv) any operating account or other accounts of the
Grantor, all funds held therein and all certificates and
instruments, if any, from time to time representing or
evidencing any such operating account or any funds held
therein;
(v) all Permitted Investments and all certificates
and instruments from time to time representing or evidencing
the Permitted Investments;
(vi) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to, or
otherwise possessed by, the Collateral Agent for and on behalf
of the Grantor in substitution for or in addition to any of
the then-existing Account Collateral; and
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(vii) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any and
all of the then-existing Account Collateral;
(f)(i) all Collections and all other payments and proceeds
received by the Grantor in respect of the Receivables and the Related
Security in the form of cash, checks, wire transfers or other forms of
payment in effect from time to time or otherwise accepted by the
Grantor, including all payments recovered by the Grantor from the
Sellers as indemnity payments pursuant to the terms of the Purchase
Agreement and including amounts recovered from other persons (including
amounts recovered from other persons in connection with Receivables
previously written off as uncollectible) in connection with any of the
above, (ii) all earnings received by the Collateral Agent in respect of
Permitted Investments made with amounts on deposit in the Escrow
Account, the Collection Deposit Account and the Collection Account "B",
and (iii) all other earnings on Permitted Investments; and
(g) all proceeds of or payments in respect of any and all of
the foregoing Collateral (including proceeds that constitute property
of the types described in clauses (a) through (f) above and, to the
extent not otherwise included, all payments under insurance (whether or
not the Collateral Agent is the loss payee in respect thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the Collateral.
provided, that upon the payment of cash constituting the Collateral or proceeds
thereof in accordance with the provisions of the Facility Agreement to any
Person other than the Collateral Agent, the Agent or any Secured Party, the
amounts so paid shall be released from the lien of the Collateral Agent under
this Security Agreement and shall no longer constitute Collateral hereunder.
SECTION 3. Security for Obligation; Release of Certain Defaulted
Receivables. (a) This Security Agreement secures the payment in full of all
obligations of the Grantor now or hereafter existing under each Transaction
Document to which a Secured Party is a party and the Notes, in each case,
whether for principal, interest, fees, expenses or otherwise (all such
obligations of the Grantor being the "Secured Obligations").
(b) Promptly following the Grantor's request, the Collateral Agent
shall promptly take all actions reasonably necessary to release from the
Collateral one or more Specified Defaulted Receivables if, at the time of such
release, all of the following conditions are satisfied: (i) neither the
Scheduled Maturity Date nor the Amortization Commencement Date shall have
occurred, (ii) after giving effect to such release, no Borrowing Base Deficiency
will exist and no other Amortization Event or Unmatured Amortization Event will
exist, (iii) the Servicer shall have provided the documentation for such release
to the Collateral Agent, and such documentation shall be in form and substance
reasonably satisfactory to the Collateral Agent, (iv) no payments in respect of
any Receivable so released shall be deposited in the Collection
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Accounts, and information regarding any Receivable so released shall be excluded
from all reports subsequently delivered to the Agent or the Liquidity Lenders
pursuant to the Transaction Documents, and (v) such release shall be without
recourse to the Collateral Agent or warranty of any kind by the Collateral
Agent.
SECTION 4. Delivery of Collateral. All certificates or instruments, if
any, representing or evidencing the Collateral shall be delivered to, and held
by or on behalf of, the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent; provided, however, that prior to the
Amortization Period with respect to Notes Receivable in an aggregate amount not
in excess of $2,000,000 such Notes Receivable have not been delivered to the
Collateral Agent, but shall be delivered to the Collateral Agent at any time
upon request therefor. The Collateral Agent shall have the right, at any time
after the occurrence of an Amortization Event in its discretion and without
notice to the Grantor, to transfer to or to register in the name of the
Collateral Agent or any of its nominees any or all of the Collateral. In
addition, the Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 5. Servicing of Receivables. The Collateral Agent consents to
the appointment of BII as Servicer of the Receivables pursuant to, and in
accordance with the terms of, the Facility Agreement. Upon the occurrence and
during the continuance of any event referred to in Section 2.11 of the Facility
Agreement, the Collateral Agent shall, without any further action by any party,
have the rights granted to the Agent specified in Sections 2.12 and 2.13 of the
Facility Agreement and the rights granted to the Grantor specified in Sections
5.01(r) and 6.02 of the Purchase Agreement.
SECTION 6. Collection Procedures. (a) As provided in the Purchase
Agreement, the Facility Agreement and the Lockbox Bank Letters, each Collection
shall be deposited into a Lockbox Account and shall be transferred from such
Lockbox Account to the Concentration Account with the Requisite Frequency in
same day funds; provided, however, that Collections may, at the option of the
applicable Obligor, be deposited directly into the Concentration Account by wire
transfer from an account of such Obligor.
(b) As provided in the Purchase Agreement, the Facility Agreement and
the Concentration Bank Letter, amounts deposited in or transferred to the
Concentration Account shall be transferred with the Requisite Frequency along
with all other evidences of payment. The Grantor acknowledges and agrees that it
shall not have any right to withdraw any funds or other evidences of payment on
deposit in any Collection Account, the Concentration Account or any Lockbox
Account except as otherwise expressly provided in this Security Agreement or the
Lockbox Bank Letters.
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(c) As provided in the Purchase Agreement, all Collections otherwise
received by the Servicer or the Grantor shall be deposited by it into the
Concentration Account as soon as possible after receipt thereof, but in no event
later than the Business Day after such receipt.
(d) The Grantor represents, warrants, covenants and agrees that all
Collections shall be collected, processed and deposited pursuant to, and in
accordance with the terms of this Security Agreement and Sections 2.06 and 3.01
of the Facility Agreement.
(e) The Grantor represents, warrants, covenants and agrees that the
Grantor will not make or maintain any deposits in any bank account, deposit
account or trust account with any financial institution other than the Lockbox
Accounts, Concentration Account and Collection Accounts as provided for by this
Security Agreement and other than one operating account funded solely with
amounts disbursed as operating expenses pursuant to Section 3.01 of the Facility
Agreement. The Grantor shall provide the Collateral Agent with the account
number and location of such account, and any other information as the Collateral
Agent may reasonably request with respect thereto, and such account shall
constitute Collateral hereunder. The Grantor represents, warrants, covenants and
agrees that it will have no bank accounts, deposit accounts or trust accounts
other than the Lockbox Accounts and the Concentration Account and such operating
account. The Grantor represents, warrants, covenants and agrees that no new bank
accounts or deposit accounts will be established unless and until the Grantor
has received the prior written consent of the Collateral Agent.
(f) The Grantor represents, warrants, covenants and agrees that no
location other than the Lockbox Accounts and, with respect to wire transfers,
the Concentration Account has been established for the deposit of Collections.
The Grantor represents, warrants, covenants and agrees that no new location for
the deposit of Collections will be established unless and until the Grantor has
received the prior written consent of the Collateral Agent.
(g) The Grantor agrees to instruct, or cause the Servicer to instruct,
all Persons to make payments in respect of Receivables pursuant to, and in
accordance with the terms of, this Security Agreement and Section 2.06 of the
Facility Agreement.
(h) The Grantor agrees to pay all fees for the services of the Lockbox
Banks, Concentration Bank and Collection Bank.
SECTION 7. Lockbox Accounts. (a) The Grantor has established or caused
to be established with the Lockbox Banks the Lockbox Accounts into which
Collections (except as provided in Sections 6 and 10 of this Security Agreement)
will be deposited from time to time.
(b) The Grantor has heretofore delivered to the Collateral Agent fully
executed letter agreements in the form of Annex A hereto (the "Lockbox Bank
Letters") from each Lockbox Bank.
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(c) The Grantor shall instruct, or cause the Servicer to instruct, each
Lockbox Bank to transfer with the Requisite Frequency (in same day funds) all
available funds on deposit in any Lockbox Account on such day to the
Concentration Account along with any evidences of payment on deposit therein;
provided, however, that to the extent any Lockbox Account is also the
Concentration Account, such transfer shall be deemed made upon deposit therein.
(d) In the event the Grantor (with the consent of the Collateral Agent,
such consent not to be unreasonably withheld) or any Lockbox Bank shall, after
the date hereof, terminate the Lockbox Bank Letter with respect to the
maintenance of any Lockbox Account with any Lockbox Bank for any reason, or, in
the event (i) an Amortization Event or Potential Amortization Event shall occur
and be continuing or (ii) there has been a failure by the Lockbox Bank to
perform any of its obligations under the applicable Lockbox Bank Letter and such
failure could adversely affect the Collateral Agent's interest in any Account
Collateral or the Collateral Agent's rights, or ability to exercise any
remedies, under this Security Agreement or any other Transaction Document, if
the Collateral Agent shall demand such termination, the Grantor agrees to notify
(and, if the Grantor fails to so notify, the Grantor irrevocably grants the
Collateral Agent the authority to notify) all Persons that were depositing
Collections into such terminated Lockbox Account or Lockbox Bank to make all
future deposits to another Lockbox Bank with which the Grantor has a Lockbox
Bank Letter that has not been terminated by the Grantor, by such Lockbox Bank or
by demand from the Collateral Agent; provided, however, that, if the Collateral
Agent shall demand termination of all Lockbox Accounts of the Grantor with all
Lockbox Banks, the Grantor agrees to notify (and, if the Grantor fails to so
notify, the Grantor irrevocably grants the Collateral Agent the authority to
notify) all Persons to make all future payments directly to the Collection
Deposit Account or any other account designated by the Collateral Agent.
(e) The Grantor represents, warrants, covenants and agrees that (i) the
Collateral Agent is authorized to receive mail delivered to any Lockbox Bank
with respect to any Lockbox Account and (ii) a form of standing delivery order
has been filed by the Grantor with the United States Postal Service authorizing
the Collateral Agent to receive mail delivered to Lockbox Banks with respect to
any Lockbox Account.
(f) The Collateral Agent shall have sole and exclusive dominion over
and control of each Lockbox Account and the Grantor and the Servicer shall not
have any dominion over or control of any Lockbox Account, other than the right
to authorize transfers to the Concentration Account as set forth herein and
pursuant to the terms hereof.
(g) The Grantor agrees that the Collateral Agent shall have the
unconditional right at any time, whether or not an Amortization Event or
Potential Amortization Event has occurred, (i) to instruct any Lockbox Bank to
transfer, in same day funds, all available funds on deposit in any Lockbox
Account to the Concentration Account or to any Collection Account or (ii) to
instruct any Lockbox Bank to thereafter transfer automatically at least as often
as once each day that is a Business Day for such Lockbox Bank and for the
Concentration Bank or Collection Bank, as the case may be, and in any event at
the open of business on the Business Day
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following each such day of deposit, in same day funds, all available funds on
deposit in any Lockbox Account to the Concentration Account or to any Collection
Account along with any evidences of payment on deposit therein. Any such
instructions may be revoked only upon the written direction of the Collateral
Agent.
SECTION 8. Concentration Account. (a) The Grantor has established or
caused to be established with the Concentration Bank the Concentration Account
into which all Collections deposited into each Lockbox Account will be
transferred and into which Collections will be deposited by wire transfer
directly from Persons from time to time.
(b) The Grantor has heretofore delivered to the Collateral Agent a
fully executed letter agreement in the form of Annex B (the "Concentration Bank
Letter") from the Concentration Bank.
(c) The Grantor shall instruct, or cause the Servicer to instruct, the
Concentration Bank to transfer with the Requisite Frequency (in same day funds)
all available funds on deposit in the Concentration Account on such day
(including all funds transferred from any Lockbox Account pursuant to clause (a)
of Section 6 on such day) to the Collection Deposit Account along with any other
evidences of payment on deposit therein; provided, however, that during any
Amortization Period such funds and other evidences of payment shall be
transferred at such times to the Collection Account "B".
(d) In the event the Grantor (with the consent of the Collateral Agent,
such consent not to be unreasonably withheld) or the Concentration Bank shall,
after the date hereof, terminate the Concentration Bank Letter for any reason,
or if in the event (i) an Amortization Event or Potential Amortization Event
shall have occurred and be continuing or (ii) there has been a failure by the
Concentration Bank to perform its obligations hereunder and such failure could
adversely affect the Collateral Agent's interest in any Account Collateral or
the Collateral Agent's rights, or ability to exercise any remedies, under this
Security Agreement or any other Transaction Document, if the Collateral Agent
shall demand such termination, the Grantor agrees to notify (and, if the grantor
fails to so notify, the Grantor irrevocably grants the Collateral Agent the
authority to notify) all Persons that were depositing Collections into such
terminated Concentration Account or Concentration Bank to make all future
deposits directly to the Collection Deposit Account or any other account
designated by the Collateral Agent.
(e) The Grantor represents, warrants, covenants and agrees that (i) the
Collateral Agent is authorized to receive mail delivered to the Concentration
Bank with respect to the Concentration Account and (ii) a form of standing
delivery order will be filed within 30 days of the Effective Date by the Grantor
with the United States Postal Service authorizing the Collateral Agent to
receive mail delivered to the Concentration Bank with respect to the
Concentration Account.
(f) The Collateral Agent shall have sole and exclusive dominion over
and control of the Concentration Account and the Grantor and the Servicer shall
not have any dominion over or
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control of the Concentration Account, other than the right to authorize
transfers to the Collection Deposit Account or the Collection Account "B" as set
forth herein and pursuant to the terms of this Agreement and the applicable
Lockbox Letter Agreements.
(g) The Grantor agrees that the Collateral Agent shall have the
unconditional right at any time, whether or not an Amortization Event or
Potential Amortization Event has occurred, (i) to instruct the Concentration
Bank to transfer, in same day funds, all available funds on deposit in the
Concentration Account to any Collection Account or (ii) to instruct the
Concentration Bank to thereafter transfer automatically at least as often as
once each day that is a Business Day for the Concentration Bank and the
Collection Bank, and in any event at the open of business on the Business Day
following each such day of transfer or deposit into the Concentration Account,
in same day funds, all available funds on deposit in the Concentration Account
to any Collection Account along with any evidences of payment on deposit
therein. Any such instructions may be revoked only upon the written direction of
the Collateral Agent.
SECTION 9. Collection Accounts. (a) The Collateral Agent has
established or caused to be established with the Collection Bank the Collection
Deposit Account into which all Collections will be transferred (i) prior to the
commencement of any Amortization Period, from the Concentration Account and (ii)
during any Amortization Period, from the Collection Account "B", and into which
Collections will be otherwise deposited as provided hereunder and under the
other Transaction Documents.
(b) The Collateral Agent has established or caused to be established
with the Collection Bank the Collection Account "B" into which (i) prior to the
commencement of any Amortization Period, Collections that are not with respect
to any Receivable purchased pursuant to the Purchase Agreement will be
transferred from the Collection Deposit Account and (ii) during any Amortization
Period, Collections will be transferred from the Concentration Account, and into
which Collections will be otherwise deposited as provided hereunder and under
each other Transaction Document.
(c) Each Collection Account shall be designated with the title
"Wachovia Bank, N.A." ("Wachovia"), as Collateral Agent for the Secured Parties
pursuant to the Security Agreement, dated as of December 10, 1997, between B.I.
Funding, Inc. and Wachovia, as Collateral Agent for the Secured Parties".
(d) The Collateral Agent shall have sole and exclusive dominion over
and control of each Collection Account and the Grantor and the Servicer shall
not have any dominion over or control of any Collection Account.
(e) In the event the Collection Bank shall, after the date hereof,
terminate any Collection Account for any reason, or if the Collateral Agent
shall terminate any Collection Account, the Grantor agrees to notify (and, if
the Grantor fails to so notify, the Grantor irrevocably grants the Collateral
Agent the authority to notify) all Persons that were depositing
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Collections into such terminated Collection Account or Collection Bank to make
all future deposits directly to any account designated by the Collateral Agent.
(f) In the event that the short-term ratings of the Collection Bank are
reduced below A-1 by S&P and P-1 by Moody's, the Collateral Agent will establish
segregated trust accounts with the Collection Bank with respect to the
Collection Deposit Account and Collection Account "B".
SECTION 10. Permitted Investments. (a) Monies held in the Collection
Accounts will be invested and the proceeds of investments shall be reinvested by
the Collateral Agent in Permitted Investments pursuant to the written direction
of the Grantor or its designee and all earnings will be deposited in the
Collection Deposit Account and shall constitute Collections. The Collateral
Agent will not be responsible or liable for any loss resulting from the
investment performance of any investment or reinvestment of monies held in any
Collection Account in Permitted Investments or from the sale or liquidation of
any Permitted Investments in accordance with this Security Agreement.
(b) The Collateral Agent may liquidate any Permitted Investment when
required to make an application pursuant to Section 11 or 19. The Grantor agrees
to use its best efforts to schedule the maturity of such Permitted Investments
so as to avoid the necessity of liquidating any Permitted Investment. All such
Permitted Investments shall be made in the name of, and shall be payable to, the
Collateral Agent.
SECTION 11. Application of Collections. (a) The Grantor acknowledges
and agrees that all Collections shall be paid directly to the Collateral Agent
at such times as the Servicer shall be obligated to remit such amounts to the
Grantor pursuant to, and in accordance with the terms of, the Facility
Agreement.
(b) All Collections transferred or otherwise deposited into the
Collection Deposit Account or into the Collection Account "B" shall be
transferred to another Collection Account or provided by the Collateral Agent
for application or payment as provided in Section 3.01 of the Facility
Agreement.
SECTION 12. Grantor Remains Liable. Notwithstanding anything herein or
in any other document to the contrary, (i) the Grantor shall remain liable under
the Agreements Collateral to the extent set forth therein to perform all of its
duties and obligations thereunder to the same extent as if this Security
Agreement had not been executed, (ii) the exercise by the Collateral Agent of
any of the rights hereunder shall not release the Grantor from any of its duties
or obligations under the Agreements Collateral and (iii) neither the Collateral
Agent nor any holder of Secured Obligations shall have any duty, obligation or
liability under the Agreements Collateral by reason of this Security Agreement,
nor shall the Collateral Agent or any holder of Secured Obligations be obligated
to perform any of the duties or obligations of the Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
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SECTION 13. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section 13:
(a) Location of Collateral, etc. As of the Closing Date, (i) the chief
place of business and chief executive offices of the Grantor are located at 2775
Highway 40, Suite 522, Verdi, Nevada 89439-1449, (ii) the offices where the
Grantor keeps all of the documents, agreements, books and records relating to
the Receivables are located at the locations specified on Schedule V to the
Purchase Agreement and (iii) the Equipment of the Borrower is located at the
locations specified in Schedule I hereto.
(b) Ownership, No Liens, etc. The Grantor is the sole legal and
beneficial owner of the Collateral, free and clear of any Liens except for the
security interest created pursuant to this Security Agreement in favor of the
Collateral Agent and for Prior Liens. The Collateral will at all times remain
free and clear of any Liens except for the security interest created pursuant to
this Security Agreement in favor of the Collateral Agent. Except for financing
statements as to which releases have been provided to the Agent pursuant to the
Loan Agreement, no effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed (i) in favor of the Collateral Agent
relating to this Security Agreement or (ii) with respect to the Receivables, in
favor of the Grantor. The Grantor has no trade names and, within the last five
years, the Grantor has not been known by any legal name different from the one
set forth on the signature page hereto and has not been the subject of any
merger or other corporate reorganization. Other than the Notes Receivable or
chattel paper, none of the Receivables is evidenced by a promissory note or
other instrument which has not been delivered to the Collateral Agent.
(c) Validity. The pledge of the Collateral pursuant to this Security
Agreement creates a valid and perfected first priority security interest in the
Collateral (except (i) prior to the Amortization Period, with respect to Notes
Receivables in an aggregate amount not in excess of $2,000,000, which have not
been delivered to the Collateral Agent as provided in Section 4, for so long as
and to the extent such Notes Receivable have not been so delivered and (ii) with
respect to the perfection and priority of the security interest in the Related
Security), securing the payment of the Secured Obligations as provided in
Section 3. All filings and other actions requested by the Collateral Agent to
perfect or protect such security interest have been duly taken.
(d) Authorization, Approval, etc. No authorization, consent, approval
or other action by, and no notice to or filing with, any Governmental Authority
is required (i) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery or performance of this Security Agreement
by the Grantor, (ii) for the perfection of, or the exercise by the Collateral
Agent of, the Collateral Agent's rights and remedies provided for in this
Security Agreement or (iii) to ensure the legality, validity, enforceability or
admissibility in evidence of this Security Agreement in any jurisdiction in
which any of the Collateral is located other than financing statements referred
to in Article III of the Purchase Agreement, which financing statements have
been filed in all applicable jurisdictions.
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(e) Chattel Paper. (i) Except as contemplated by clauses (ii) and (iii)
below, the Grantor will ensure that the original copies of chattel paper
evidencing all Receivables, including any purchase agreements, are kept at the
locations specified for such purpose on Schedule V to the Purchase Agreement.
(ii) Except as contemplated by clause (iii) below, if (A) there has
occurred following the date of this Agreement, a change in applicable law,
regulation or judicial interpretation of, or any other event, and (B) as a
result of such change in law or event, the Agent or the Collateral Agent inform
the Grantor in writing that in its opinion the keeping of the original copies of
chattel paper in a single location is necessary in order to ensure the validity,
enforceability and priority of the Liens created by the Purchase Agreement and
this Security Agreement, the Grantor will direct the Sellers, pursuant to
Section 5.01(n) of the Purchase Agreement, to move the original copies of all
chattel paper evidencing all Receivables (including any purchase agreements) to
a single location satisfactory to the Agent and the Collateral Agent and
thereafter ensure that all such original copies are kept at such location.
(iii) Immediately upon the request of the Collateral Agent at any time
after the occurrence of an Amortization Event, the Grantor will take possession
of all chattel paper evidencing Receivables (including any purchase agreements)
pursuant to Section 5.01(n) of the Purchase Agreement and deliver all such
chattel paper to the Collateral Agent.
(iv) The Grantor will take any action, and cause any action to be taken
by the Sellers, at its or their expense, reasonably requested by the Collateral
Agent or the Agent, that may be necessary or desirable to protect or more fully
evidence the security interest of the Collateral Agent for the benefit of the
Secured Parties in any chattel paper.
(f) Possession and Control. The Grantor, or the Servicer on behalf of
the Grantor, has sole and exclusive dominion over and control of the Equipment
and the Collateral Agent has sole dominion over and exclusive control of each
Lockbox Account and the Concentration Account.
SECTION 14. Further Assurances. (a) The Grantor agrees that at any time
and from time to time, at the expense of the Grantor, the Grantor will promptly
execute and deliver all further instruments and documents, and take all further
action that may be necessary or desirable in the Grantor's reasonable judgment
or that the Collateral Agent may request, to perfect and protect the assignment
and security interest granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generability of the foregoing,
the Grantor will (i) whether or not so requested by the Collateral Agent if any
Collateral shall be evidenced by a promissory note or other instrument, deliver
and pledge to the Collateral Agent hereunder such note or instrument duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent (other than Notes
Receivable and chattel paper, which shall be pledged but not delivered unless
requested by the
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Collateral Agent) and (ii) execute and file such financial or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable in the Grantor's reasonable judgment or that the
Collateral Agent may request, to protect and preserve the assignment and
security interest granted or purported to be granted hereby.
(b) The Grantor hereby authorizes the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of the Grantor. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by applicable law. The
Collateral Agent will promptly send the Grantor any financing or continuation
statements thereto that it files without the signature of the Grantor except
that, in the case of filings of copies of this Security Agreement as financing
statements, the Collateral Agent will promptly send the Grantor the filing or
recordation information with respect thereto.
(c) The Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
SECTION 15. Additional Covenants. (a) The Grantor agrees that it will
not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of,
or grant any option with respect to, any of the Collateral, except in accordance
with the Policies, or (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral, except for the security interest created under
this Security Agreement in favor of the Collateral Agent.
(b) The Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Collateral at the locations therefor specified in clause (a) of Section 13 or,
upon 30 days' prior written notice to the Collateral Agent, at such other
location in a jurisdiction where all action required by Section 14 shall have
been taken with respect to the Collateral and completed and be in full force and
effect and, if such jurisdiction (or any political subdivision or taxing
authority thereof or therein) would, or there is a reasonable possibility that
it would, impose any taxes on the Grantor or any of the Secured Parties, any of
their respective assets (including the Receivables), operations or activities
(any such tax, a "State or Local Tax") (other than any State or Local Tax that
would have been imposed on the Grantor or a Secured Party, as the case may be,
even if such relocation had not occurred) the Agent, on behalf of the Lenders,
shall be satisfied in its sole discretion with the State or Local Tax
consequences to the Grantor and the Secured Parties of such relocation. The
Grantor will hold and preserve such records and will permit representatives of
the Collateral Agent at any time during normal business hours to inspect and
make copies of and abstracts from such records.
(c) Upon the occurrence and during the continuance of an Amortization
Event, the Grantor agrees that the Collateral Agent shall have the right at any
time and from time to time to notify Obligors with respect to any Receivables or
Obligors under the Agreements Collateral of the assignment of such Receivables
or Agreements Collateral, as the case may be, to the
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Collateral Agent and to direct that payments of all amounts due or to become due
to the Grantor thereunder be made directly to the Collateral Agent and, upon
such notification, and at the expense of the Grantor, the Collateral Agent may
enforce collection of any such Receivables or the Agreements Collateral and
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as the Grantor might have done.
(d) Any proceeds of Collateral when first received by the Grantor shall
be deposited, or caused to be deposited, by the Grantor in precisely the form
received (with all necessary endorsements) (i) prior to the commencement of any
Amortization Period, in the Collection Deposit Account and (ii) during any
Amortization Period, in the Collection Account "B". All Collateral in the
possession of the Grantor, the Sellers or the Servicer shall be held in trust by
the Grantor, the Sellers and the Servicer for the Collateral Agent and shall not
be commingled with the Grantor's, the Sellers' or the Servicer's other funds or
properties.
(e) The Grantor will not, and will not permit the Servicer to, without
the Collateral Agent's prior written consent, grant any extension of the time of
payment of any of the Collateral, compromise, compound or settle the same for
less than the full amount thereof or release, wholly or partly, any Person
liable for the payment thereof, except in accordance with the Policies.
(f) The Grantor will, at its own cost and expense, maintain, or cause
to be maintained, satisfactory and complete records of the Collateral, including
a record of all payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. The Grantor will mark, or
cause to be marked, conspicuously with a legend, in form and substance
satisfactory to the Collateral Agent, (i) all books, records, computer tapes or
disks, and credit files pertaining to the Collateral and (ii) all file cabinets
or other storage facilities where information is maintained pertaining to the
Collateral, to evidence this Security Agreement and the security interest
granted hereby. The amount represented by the Grantor to the Collateral Agent
from time to time as owing by Persons in respect of the Receivables will at such
time be, in all material respects, the correct amount actually owing by such
Persons thereunder.
(g) The Grantor will comply in all material respects with all
applicable statutes, rules and regulations with respect to the Collateral or any
part thereof.
(h) The Grantor will pay promptly when due all material taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom and all claims of any kind (including
claims for labor, materials and supplies), except that no such amount need be
paid, if (i) such nonpayment does not involve any danger of the sale, forfeiture
or loss of any of the Collateral or any interest therein, (ii) the charge or
levy is being contested in good faith by appropriate proceedings and (iii) the
Grantor shall have set aside on its books adequate reserves in accordance with
GAAP with respect thereto.
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(i) The Grantor will (i) perform and observe all the terms and
provisions of the Agreements Collateral to be performed or observed by it,
maintain the Agreements Collateral in full force and effect, enforce the
Agreements Collateral in accordance with its terms and take all such action to
such end as may be from time to time requested by the Collateral Agent, provided
that compliance with such request is not likely to have an adverse effect on the
amount of the Collections or the timing of the receipt thereof, and (ii) furnish
to the Collateral Agent promptly upon receipt thereof copies of all notices,
requests and other documents received by the Grantor under or pursuant to the
Agreements Collateral, and from time to time (A) furnish to the Collateral Agent
such information and reports regarding the Collateral as the Collateral Agent
may reasonably request and (B) upon request of the Collateral Agent, make to any
counterparty to the Agreements Collateral such demands and requests for
information and reports or for action as the Grantor is entitled to make under
the Agreements Collateral.
(j) The Grantor will not (i) cancel or terminate the Agreements
Collateral or consent to or accept any cancellation or termination thereof, (ii)
supplement, amend or otherwise modify the Agreements Collateral or give any
consent, waiver or approval thereunder, (iii) waive any default under, breach of
or timely performance of observance of any covenant or agreement in the
Agreements Collateral or (iv) take any other action not required by the terms of
the Agreements Collateral, in each case if such action would impair the value of
the interest or rights of the Grantor thereunder or would impair the interest or
rights of the Collateral Agent.
(k) The Grantor will advise the Collateral Agent promptly, in
reasonable detail, (i) of any Lien made or asserted against any of the
Collateral and (ii) of the occurrence of any event that is reasonably likely to
have a material adverse effect on the aggregate value of the Collateral or on
the security interest granted hereby.
(l) The Collateral Agent will at all times have sole and exclusive
dominion over and control of each Collection Account and the Grantor will not
have any and will at no time assert any dominion over or control of any
Collection Account.
SECTION 16. Collateral Agent Appointed Attorney-in-Fact. The Grantor
irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact, with
full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement,
including to ask, demand, collect, sue for, recover, compromise, receive and
give acquittances and receipts for moneys due and to become due under or in
connection with the Collateral; to receive, endorse and collect all drafts or
other instruments and documents made payable to the Grantor in connection
therewith or representing any payment, dividend or other distribution in respect
of the Collateral or any part thereof; and to give full discharge for the same,
and if, in the Collateral Agent's judgment, there exists any event or
circumstance that may have a material adverse effect on the value of the
Collateral or any part thereof, the Collateral Agent may, as such
attorney-in-fact, file any claims or take any action or institute any
proceedings that the Collateral Agent may deem to be necessary or desirable for
the collection thereon or to enforce
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compliance with the terms and conditions of the Agreements Collateral. The
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest
until all of the Secured Obligations have been paid in full and all Liquidity
Commitments have been terminated.
SECTION 17. Collateral Agent May Perform. The Collateral Agent may at
any time itself perform, or cause performance of, any Agreements Collateral.
SECTION 18. Collateral Agent Has No Duty; Reasonable Care. (a) Neither
the Collateral Agent nor any of its respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Security Agreement, except for its or
their own gross negligence or willful misconduct.
(b) The powers conferred on the Collateral Agent hereunder are solely
to protect the Collateral Agent's interest in the Collateral for the benefit of
the holders of Secured Obligations and shall not impose any duty upon the
Collateral Agent to exercise any such powers. Except for the exercise of
reasonable care in the custody and preservation of any Collateral in its
possession and accounting for moneys actually received by it hereunder, the
Collateral Agent shall not have any duty as to any Collateral.
(c) The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, it being understood that the Collateral Agent shall not have
any responsibility for (i) taking any necessary steps to preserve rights against
any parties with respect to any Collateral or (ii) the collection of any
proceeds of any Collateral or by reason of any invalidity, lack of value or
uncollectability of any of the payments received by it from Obligors or
otherwise.
SECTION 19. Remedies upon Default. If any Amortization Event shall have
occurred and be continuing:
(a) The Collateral Agent may, without notice to the Grantor except as
required by law and at any time or from time to time, charge, set off and
otherwise apply all or any part of the Secured Obligations against any Lockbox
Account, the Concentration Account or any Collection Account.
(b) The Collateral Agent may exercise in respect of the Collateral, in
addition to any and all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party upon
default under the UCC, including, without limitation, the right to (i) identify
and engage a successor Servicer to act as servicer for the Receivables, (ii)
engage consultants to advise on the Policies and other matters in respect of the
Receivables and (iii) without notice except as specified below, solicit and
accept bids for and sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at any of
the Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery,
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and upon such other terms as the Collateral Agent may deem commercially
reasonable. The Grantor agrees that, to the extent notice of sale shall be
required by law, at least 10 Business Days' notice to the Grantor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(c) The Collateral Agent may exercise, at the Grantor's expense, any
and all rights and remedies of the Grantor under or in connection with the
Agreements Collateral or otherwise in respect of the Collateral, including any
and all rights of the Grantor to demand or otherwise require payment of any
amount under, or performance of any provision of, the Agreements Collateral. The
Collateral Agent agrees that prior to the occurrence of an Amortization Event,
it will not exercise the rights provided to the Grantor pursuant to Section
5.01(r)(iv) of the Purchase Agreement.
(d) All payments received by the Grantor under or in connection with
the Agreements Collateral shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other funds of the Grantor and shall
be forthwith paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement).
(e) Any cash held by the Collateral Agent as Collateral and all cash
proceeds received by the Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral will be
provided by the Collateral Agent to the Agent for application as provided in
Article III of the Facility Agreement.
SECTION 20. Indemnity and Expense. (a) Whether or not the transactions
contemplated hereby shall be consummated, the Grantor hereby agrees to
indemnify, pay and hold the Collateral Agent, the Agent, each Lender, and each
other holder of the Secured Obligations, and the officers, directors, employees,
agents and affiliates of such Person (collectively, the "Indemnitees") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses or disbursements
of any kind and nature whatsoever (including the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) which may be
imposed on, incurred by or asserted against that Indemnitee in any way relating
to or arising out of this Security Agreement, the other Transaction Documents,
or any other documents contemplated by or referred to therein or the
transactions contemplated thereby or the enforcement of any of the terms hereof
or of any such other documents or otherwise arising or relating in any manner to
the transactions contemplated hereunder and thereunder (the "Indemnified
Liabilities"); provided, however, that the Grantor shall not be liable for any
of the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Indemnitee. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in
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this Section may be unenforceable because it is violative of any law or public
policy, the Grantor shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them. The
provisions of this Section 20 shall survive and remain operative and in full
force and effect regardless of whether or not the transactions contemplated
hereby are consummated or such consummation is delayed, and regardless of the
repayment of the Advances and the termination of this Security Agreement or any
other Transaction Document, the invalidity or unenforceability of any term or
provision of this Security Agreement or any other Transaction Document or any
agreement referred to therein, or any investigation made by or on behalf of the
Secured Parties. All amounts due under this Section 20 shall be additional
Obligations under the Loan Agreement and shall be payable on written demand
therefor. The indemnity set forth in this Section 20 shall in no event include
any indemnification for any taxes (except to the extent that indemnification for
taxes would be required under the provisions of any other Transaction Document).
(b) The Grantor will, upon demand, pay to the Collateral Agent the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Collateral Agent
may incur in connection with (i) the administration of this Security Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent hereunder, (iv) the failure by the
Grantor to perform or observe any of the provisions hereof or (v) any action
taken by the Collateral Agent pursuant to Section 14 or 17.
(c) The provisions of this Section 20 are in furtherance and not in
limitation of the Grantor's obligations under Sections 11.3 and 11.4 of the Loan
Agreement.
SECTION 21. Further Indemnification. Without limiting the obligations
of the Grantor under Section 20, the Grantor shall pay any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Security Agreement or any other Transaction Document.
SECTION 22. Continuing Security Interest. This Security Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until, but only until, the payment in full (after the
termination of the Liquidity Commitments) of the Secured Obligations, (ii) be
binding upon the Grantor and its successors and assigns and (iii) inure,
together with the rights and remedies of the Collateral Agent hereunder, to the
benefit of the Collateral Agent, each holder of Secured Obligations and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (iii), each holder of Secured Obligations may assign or
otherwise transfer all or any portion of its rights and obligations under the
applicable Transaction Documents to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such
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transferor herein or otherwise, in each case, in accordance with the terms of
such Transaction Document.
SECTION 23. Transaction Document. This Security Agreement is a
Transaction Document executed pursuant to the Loan Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
SECTION 24. Notices. All notices and other communications provided to
any party hereto under this Security Agreement shall be in writing and
addressed, delivered or transmitted to such party at its address or facsimile
number set forth below its signature hereto or at such other address or
facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by prepaid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted upon receipt of electronic confirmation of transmission.
SECTION 25. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Security Agreement shall be considered to have been relied upon
by the Secured Parties and shall survive the execution and delivery of the
Transaction Documents, regardless of any investigation made by the Secured
Parties or on their behalf.
SECTION 26. Binding Effect. This Security Agreement shall become
effective when it shall have been executed by the Grantor and the Collateral
Agent, and thereafter shall be binding upon and inure to the benefit of the
Grantor, the Collateral Agent and each holder of Secured Obligations and their
respective successors and assigns, except that the Grantor shall not have the
right to assign or delegate its rights or duties hereunder.
SECTION 27. Waivers; Amendment. (a) No failure or delay on the part of
the Collateral Agent or any Secured Party in exercising any power or right under
this Security Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Grantor in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Collateral Agent or
any Secured Party under this Security Agreement shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
(b) Neither this Security Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Grantor and the Collateral Agent. Each Secured Party
shall be bound by any waiver, amendment or modification authorized by this
Section.
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SECTION 28. Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Security Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 29. Headings. The various headings of this Security Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Security Agreement or any provisions hereof or thereof.
SECTION 30. Execution in Counterparts, Effectiveness, etc. This
Security Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Security
Agreement shall become effective when counterparts hereof executed on behalf of
each party hereto (or notice thereof satisfactory to the Collateral Agent) shall
have been received by the Collateral Agent and notice thereof shall have been
given by the Collateral Agent to the Grantor and each Lender.
SECTION 31. Governing Law; Entire Agreement. THIS SECURITY AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK. This Security Agreement constitutes the entire understanding among the
parties hereto with respect to the subject matter hereof and supersedes any
prior agreements, written or oral, with respect thereto.
SECTION 32. Jurisdiction; Consent to Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE BORROWER WITH RESPECT TO THIS
AGREEMENT OR ANY NOTE MAY BE BROUGHT IN ANY STATE OR (TO THE
EXTENT PERMITTED BY LAW) FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE BORROWER ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE
BORROWER DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK,
NEW YORK 10019, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
BORROWER IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON
ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE BORROWER
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TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE BORROWER SO SERVED AT ITS
ADDRESS PROVIDED IN THE APPLICABLE SIGNATURE PAGE HERETO, EXCEPT THAT, UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE
BORROWER REFUSES TO ACCEPT SERVICE, THE BORROWER HEREBY AGREES THAT SERVICE UPON
IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY LENDER, THE
AGENT OR THE COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION.
SECTION 33. Waiver of Jury Trial. THE COLLATERAL AGENT, THE GRANTOR AND
EACH OTHER PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS SECURITY AGREEMENT
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, THE GRANTOR AND EACH OTHER PARTY
HERETO. THE GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT AND EACH OTHER PARTY HERETO (OTHER
THAN THE GRANTOR) ENTERING INTO THIS SECURITY AGREEMENT.
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IN WITNESS WHEREOF, the parties have caused this Security Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
B.I. FUNDING, INC.
By: /s/Mary Ellen Ramsayer
Name: Mary Ellen Ramsayer
Title: Assistant Secretary
Address: 2775 Highway 40
Suite 522
P.O. Box 1449
Verdi, Nevada 89439-1449
Facsimile No: 702-345-6166
Telephone No: 702-345-6100
Attention: General Counsel
WACHOVIA BANK, N.A., as Collateral Agent and Agent
By: William E. Covington
Title: Senior Vice President
Address: 191 Peachtree Street, GA-423
Atlanta, GA 30303
Facsimile No: (404) 332-4005
Telephone No: (404) 332-4363
Attention: Deborah Williams
Asset Backed Finance
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Annex A
[Lockbox Bank Letters]
<PAGE>
Schedule I
Location of Equipment of the Borrower
2775 Highway 40, Suite 522
Verdi, Nevada 89439-1449
Exhibit 10.26
AMENDED AND RESTATED SUBORDINATION AGREEMENT,
CONSENT AND ACKNOWLEDGMENT
AMENDED AND RESTATED SUBORDINATION AGREEMENT, CONSENT AND
ACKNOWLEDGMENT dated as of December 10, 1997, among BURLINGTON INDUSTRIES, INC.,
a Delaware corporation ("BII"), BURLINGTON FABRICS INC., a Delaware corporation
("BFI"), B.I. TRANSPORTATION, INC., a Delaware corporation ("BTI"), BURLINGTON
APPAREL SERVICES COMPANY, a Delaware corporation ("BASC"), BURLINGTON
INTERNATIONAL SERVICES COMPANY, a Delaware corporation ("BISC"), THE BACOVA
GUILD, LTD., a Delaware corporation ("Bacova"); (BII, BFI, BTI, BASC, BISC and
Bacova are herein referred to collectively as the "Sellers"), B.I. FUNDING,
INC., a Delaware corporation (the "Company"), and WACHOVIA BANK, N.A., as agent
(in such capacity, the "Agent") under the Loan Agreement (as such term, as well
as all other capitalized terms, are defined or referenced below), and as
Collateral Agent.
Whereas, the Company, certain financial institutions (the "Liquidity
Lenders"), Blue Ridge Asset Funding Corporation, as the commercial paper lender
(the "Conduit Lender"; and together with the Liquidity Lenders, the "Lenders"),
and Wachovia Bank, N.A., as Agent, have entered into that certain Loan Agreement
dated as of December 10, 1997; and
Whereas, this agreement shall supersede the Amended and Restated
Subordination Agreement, Consent and Acknowledgment dated as of December 18,
1992, as amended by Amendment No. 1 dated as of August 17, 1994, (the "Old
Subordination Agreement") among BFI, BII, BTI, BASC, the Company and The Bank of
Nova Scotia;
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1. Definitions; Construction. (a) Capitalized terms used herein and
not defined or referenced herein shall have the meanings assigned to such terms
in Annex Z of the Loan Agreement. Unless otherwise defined herein or in Annex Z,
terms used in Article 9 of the UCC are used herein as defined therein. For all
purposes of this Agreement, the following terms shall have the following
meanings:
"this Agreement" shall mean this Amended and Restated Subordination
Agreement, Consent and Acknowledgment as it may from time to time be amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
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"Senior Obligations" shall mean the Obligations (other than Obligations
of the Company to any Seller or to any Affiliate of the Company or of any
Seller) and the Servicing Fee.
"Senior Parties" shall mean the Agent, the Servicer in its capacity as
Servicer, the Collateral Agent and the Lenders.
"Subordinated Debt" shall mean any obligation payable from time to time
by the Company to any of the Sellers under the Subordinated Note or any
Transaction Document (and any extensions, renewals, financing, refundings and
replacements of all or any part of such obligations), other than the Servicing
Fee.
(b) The definitions referred to or set forth in this Article I 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 and Sections shall be deemed references to
Articles and Sections of this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP.
ARTICLE II
SUBORDINATION
2.1. Subordination. (a) Each of the Sellers hereby agrees that all
rights of such Seller to payments of principal and interest and any other
amounts in respect of the Subordinated Debt are hereby expressly subordinated,
to the extent and in the manner set forth in this Article II, to the prior
payment in full in cash of all Senior Obligations in accordance with the terms
thereof.
(b) Except as set forth in Article III of the Facility Agreement, no
payment (whether directly or indirectly, by exercise of any right of set-off or
otherwise) in respect of the Subordinated Debt, including the Subordinated Note,
whether as principal, interest or otherwise, shall be made by the Company or
received or accepted, directly or indirectly, by or on behalf of any Seller or
any of its Affiliates unless and until all amounts (including interest accruing
after the commencement of any proceeding under any bankruptcy, insolvency,
receivership or similar law, regardless of whether allowed as a claim in such
proceeding), however denominated, payable to the Senior Parties in respect of
the Senior Obligations have been indefeasibly paid in full and received by the
Senior Parties in cash and the Liquidity Commitments have terminated.
2.2. Dissolution or Insolvency. Upon any distribution of all or any of
the assets of the Company or upon any dissolution, winding up, total or partial
liquidation, reorganization, adjustment, protection, relief or composition of
the Company or its debts, whether in bankruptcy, insolvency, reorganization,
arrangement or receivership proceedings or otherwise, or upon any
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assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Company, or otherwise:
(a) the Senior Parties shall first be entitled to receive payment in
full in cash of the Senior Obligations in accordance with the terms of the
Senior Obligations (whenever arising) before any Seller shall be entitled to
receive any payment on account of any Subordinated Debt, whether of principal,
interest or otherwise; and
(b) any payment or distribution of any kind (including cash, property,
securities and any payment or distribution which may be payable or deliverable
by reason of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Subordinated Debt) in respect of the
Subordinated Debt that otherwise would be payable or deliverable upon or with
respect to the Subordinated Debt, directly or indirectly, by set-off or in any
other manner, including from or by way of collateral, shall be paid or delivered
by the Person making such payment or delivery (whether a trustee in bankruptcy,
a receiver, custodian or liquidating trustee or otherwise) directly to the
Collateral Agent on behalf of the Senior Parties for application (in the case of
cash) to or as collateral (in the case of noncash property or securities) for
the payment of, the Senior Obligations in accordance with Article III of the
Facility Agreement, until the Senior Obligations shall have been paid in full in
cash.
2.3. Certain Amortization Events. Upon the occurrence and during the
continuance of any Amortization Event under Section 9.1.7 of the Loan Agreement
arising in respect of the Company:
(a) the Collateral Agent is hereby irrevocably authorized and empowered
(in its own name or in the name of the Sellers or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution of any kind (including cash, property or securities) made in
respect of the Subordinated Debt and in connection with any Amortization Event
referred to in this Section 2.3, and give acquittance therefor and to file
claims and proofs of claim and take such other action (including enforcing any
security interest or other lien securing payment of the Subordinated Debt) as
the Collateral Agent (on behalf of the Senior Parties) may deem necessary or
advisable for the exercise or enforcement of any of the rights or interests of
holders of the Senior Parties hereunder, provided that in the event the
Collateral Agent takes such action, it shall apply all proceeds in accordance
with Article III of the Facility Agreement; and
(b) each Seller shall duly and promptly take such action as the
Collateral Agent (on behalf of the Senior Parties) may request (i) to file
appropriate claims or proofs of claim in respect of the Subordinated Debt, (ii)
to execute and deliver to the Collateral Agent (on behalf of the Senior Parties)
such powers of attorney, assignments, or other instruments as the Collateral
Agent (on behalf of the Senior Parties) may request in order to enable it to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinated Debt, and (iii) to collect and
receive any and all payments or distributions which
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<PAGE>
may be payable or deliverable upon or with respect to the Subordinated Debt for
the account of the Collateral Agent (on behalf of the Senior Parties).
2.4. Certain Payments Held in Trust. All payments or distributions upon
or with respect to the Subordinated Debt that are received by any Seller or any
of its Affiliates, directly or indirectly, by set-off or in any other manner,
including, without limitation, from or by way of collateral, contrary to the
provisions of this Agreement, the Loan Agreement, the Facility Agreement, the
Security Agreement or the Subordinated Note shall be received in trust for the
benefit of the Senior Parties, shall be segregated from other funds and property
held by each Seller and shall be forthwith paid over to the Collateral Agent in
the form received (with any necessary endorsement or assignment) to be applied
(in the case of cash) to, or held as collateral (in the case of noncash property
or securities) for the payment of, the Senior Obligations until the Senior
Obligations shall have been paid in full in cash. In the event that any Seller
fails to make any endorsement or assignment required hereby, the Collateral
Agent is hereby irrevocably authorized to make such endorsement or assignment as
such Seller's attorney-in-fact.
2.5. Subrogation. Each Seller agrees that no payment or distribution to
any Senior Party pursuant to the provisions of this Agreement shall entitle any
Seller to exercise any rights of subrogation in respect thereof until the Senior
Obligations shall have been paid in full in cash. Each Seller agrees that the
subordination provisions contained herein shall not be affected by any action,
or failure to act, by any holder of Senior Obligations which results, or may
result, in affecting, impairing or extinguishing any right of reimbursement or
subrogation or other right or remedy of any Seller.
2.6. Waiver of Notices, Etc. Each Seller and the Company hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Senior Obligations and the Subordinated Debt and any requirement that
any Senior Party protect, secure, perfect or insure any security interest or
lien on any property subject thereto or exhaust any right or take any action
against the Company or any other Person or any Collateral.
2.7 No Security. (a) Without the prior written consent of the
Collateral Agent, the Company will not give to any Person, and neither any of
the Sellers nor any of their Affiliates will receive or accept, any security of
any nature whatsoever in respect of the Subordinated Debt on any property or
assets, whether now existing or hereafter acquired, of the Company.
(b) BII agrees and confirms that its right to payment under the
Subordinated Note is limited to the funds available therefor pursuant to the
Facility Agreement and the Security Agreement, that each such payment may be
made only to the extent, in the manner and at the times set forth in the
Facility Agreement and the Security Agreement, and that the Subordinated Note
does not represent a security or other interest in the Receivables or their
proceeds.
2.8 Subordination Legend; Further Assurances. BII will cause each
instrument evidencing the Subordinated Note to be endorsed with the following
legend:
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"The indebtedness evidenced by this instrument is subordinated
to the prior payment in full of the Senior Obligations (as
defined in the Subordination Agreement hereinafter referred
to) pursuant to, and to the extent provided in, the
Subordination Agreement, Consent and Acknowledgment dated as
of December 10, 1997, as amended, supplemented or otherwise
modified from time to time (the "Subordination Agreement")
among the maker hereof, the payee named herein and certain
other parties."
Each of the Sellers will further mark its books of account in such a manner as
shall be effective to give proper notice of the effect of this Agreement and
will cause all Subordinated Debt to be evidenced by an appropriate instrument or
instruments endorsed with the above legend. Each of the Sellers will, at its
expense and at any time and from time to time, promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable or that the Collateral Agent, on behalf of the Senior
Parties, may, at any time, request, in order to protect any right or interest
granted or purported to be granted hereby or to enable the Collateral Agent, on
behalf of the Senior Parties, to exercise and enforce its rights and remedies
hereunder.
2.9. Representations and Warranties. Each Seller hereby represents and
warrants that this Agreement constitutes such Seller's legal, valid and binding
obligation, enforceable against such Seller in accordance with its terms.
ARTICLE III
OTHER MATTERS REGARDING THE SUBORDINATED DEBT
3.1. No Waiver. No right of the Senior Parties to enforce this
Agreement shall at any time or in any way be prejudiced or impaired by any act
or failure to act on the part of any of the Senior Parties, the Collateral
Agent, the Company or any Seller, or by any noncompliance by the Company or any
Seller with the terms, provisions and covenants herein, and the Senior Parties
are hereby expressly authorized to extend, renew, increase, decrease, modify or
amend the terms of the Senior Obligations or any security therefor, and to
release, sell or exchange any such security and otherwise deal freely with the
Company, all without notice to or consent of any Seller or any of its Affiliates
hereunder and without affecting the liabilities and obligations of the parties
hereto.
3.2. Payment on Subordinated Debt and Remedies. Each of the Sellers
agrees that, except upon request of the Collateral Agent, it will not ask,
demand, accelerate, sue or take or receive from the Company, directly or
indirectly (including from or by way of collateral), any payment of or security
for all or any part of the Subordinated Debt or exercise any remedies or take
any action or proceeding to enforce the same until the Senior Obligations have
been paid in full in cash, and the Liquidity Commitments have terminated, and
each Seller further agrees not to institute or join with any other creditors of
the Company in instituting any petition commencing any bankruptcy, insolvency,
reorganization, arrangement, receivership or similar
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<PAGE>
proceeding or any assignment for the benefit of creditors against or in respect
of the Company or any other marshalling of the assets and liabilities of the
Company.
3.3. No Transfer of or Change in Subordinated Debt. Each Seller agrees
that it will (a) not sell, assign, transfer, hypothecate or otherwise dispose of
all or any part of the Subordinated Debt to any Person, including any of such
Seller's Affiliates, (b) permit the terms of any of the Subordinated Debt to be
changed in such a manner as to have an adverse effect upon the rights or
interests of any Senior Party, the Agent, the Collateral Agent or the Company or
(c) subordinate any Subordinated Debt for the benefit of any other Person, in
each case without the prior written consent of the Collateral Agent.
3.4. Obligations Hereunder Not Affected. All rights and interests of
the Senior Parties hereunder, and all agreements and obligations of the Sellers
and the Company hereunder, shall remain in full force and effect irrespective
of:
(a) any lack of validity or enforceability of any of the Transaction
Documents;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, or any other amendment or
waiver of or consent to departure from the Facility Agreement or any other
Transaction Document;
(c) any exchange, release or nonperfection of any security interest in
any collateral, or any release or amendment or waiver of or consent to departure
from any Transaction Document, in respect of all or any of the Senior
Obligations; or
(d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Company in respect of the Senior
Obligations or of any Seller or the Company in respect of this Agreement.
This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of the Senior Obligations or any part
thereof is rescinded or must otherwise be returned by any Senior Party upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, all as
though such payment had not been made.
Each Seller hereby authorizes the Senior Parties, without notice or
demand hereunder and without affecting or impairing any of the obligations of
any Seller hereunder, from time to time to (a) renew, compromise, extend,
increase, accelerate or otherwise change the time for payment of, or otherwise
change the terms of, the Senior Obligations or any part thereof or any security
therefor; (b) take or hold security for the payment of the Senior Obligations
and exchange, enforce, foreclose upon, waive or release any such security; (c)
apply such security and direct the order or manner of sale thereof as the Senior
Parties, in their sole discretion, may determine; (d) release and substitute one
or more endorsers, warrantors, borrowers or other obligors; and (e) exercise or
refrain from exercising any rights against any Seller, the Company or any other
Person and otherwise deal freely with the Company.
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3.5. Reaffirmation of Representations and Warranties. Each Seller
reaffirms and repeats, on and as of the Effective Date, its respective
representations and warranties contained in any of the Purchase Documents (as in
effect on the Effective Date after giving effect to all transactions
contemplated by the Transaction Documents to occur on the Effective Date), and
agrees that the Senior Parties may rely on such representations and warranties
as though set forth herein in full.
3.6. Covenants. (a) Each Seller agrees for the benefit of the Senior
Parties to perform punctually and comply fully with its respective obligations
under the Purchase Documents and agrees that the covenants and indemnities made
in favor of the Company in the Transaction Documents shall be deemed made in
favor of each of the Senior Parties.
(b) Each Seller shall comply with all requests, demands or directions
of the Collateral Agent given in accordance with the pursuant to the Facility
Agreement, the Security Agreement, the Loan Agreement and any Purchase Documents
to the same extent as such Seller would have been obligated to comply with such
requests, demands or directions if they had been given by the Company.
(c) BII covenants and agrees that it will not permit the Company's
existence to be terminated or permit the Company to be dissolved, wound-up or
liquidated at any time prior to the fifth anniversary of the first date,
following the Amortization Commencement Date on which (a) no Senior Obligations
are due and payable and (b) the Liquidity Commitments have been terminated. The
Sellers covenant and agree that the indemnification obligation of the Sellers to
the Company contained in Section 7.01(k) of the Purchase Agreement shall not be
terminated by the Sellers or the Company and shall survive until such fifth
anniversary.
ARTICLE IV
CONSENT AND ACKNOWLEDGMENT
4.1. Collateral. Each Seller acknowledges, consents to and approves the
assignment of, and the grant of a security interest in, the Collateral in the
manner and for the purposes contemplated by the Security Agreement including,
without limitation, the assignment to the Collateral Agent by the Company of all
rights, remedies, powers, privileges and claims of the Company against such
Seller, as the case may be, under or with respect to, and all of the Company's
right, title and interest in, to and under, the Purchase Documents. Each Seller
acknowledges, consents to and approves the terms and conditions and procedures
specified in the Facility Agreement and the Security Agreement with respect to
the deposit and application of the Collections and of funds in the Lockbox
Accounts, the Concentration Account, the Collection Deposit Account and the
Collection Account "B".
4.2. Application of Assigned Monies. Each Seller acknowledges and
agrees that, until the Security Agreement is terminated, all monies and other
cash proceeds due and to become due
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to the Company under or in connection with the Purchase Documents shall be paid
directly to the Collateral Agent at such times as such Seller shall be obligated
to remit such amounts to the Company pursuant to any such document.
ARTICLE V
MISCELLANEOUS
5.1. Notices. Unless otherwise provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied or sent by United States mail and shall be
deemed to have been given when delivered in Person, receipt of telecopy or four
Business Days after depositing it in the United States mail, registered or
certified, with postage prepaid and properly addressed; provided that notices to
the Agent or the Collateral Agent shall not be effective until received by such
Agent or the Collateral Agent. For the purposes hereof, the addresses of the
parties hereto (until notice of a change thereof is delivered as provided in
this Section) shall be:
(a) if to the Company, to it at 2775 Highway 40, Suite 522, P.O. Box
1449, Verdi, Nevada 89439-1449, Attention of General Counsel;
(b) if to a Seller, to it at its address set forth in Schedule VI to
the Purchase Agreement; and
(c) if to the Agent or the Collateral Agent, to it at 191 Peachtree
Street, GA-423, Atlanta, Georgia 30303, Attention: Deborah Williams, Asset
Backed Finance.
5.2. Survival of Agreement. All covenants, agreements, representations
and warranties made by the Company and each Seller herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by each
of the Senior Parties and shall survive the execution and delivery of the
Transaction Documents, regardless of any investigation made by the Senior
Parties or on their behalf, and shall continue in full force and effect as long
as any Senior Obligation is outstanding and unpaid and so long as the Liquidity
Commitments have not been terminated; provided that the covenants contained in
Section 3.6(c) hereof shall survive until the fifth anniversary after the first
date, following the Amortization Commencement Date, on which (a) no Senior
Obligations are due and payable and (b) the Liquidity Commitments have been
terminated.
5.3. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Company, each Seller, the Agent and the
Collateral Agent and thereafter shall be binding upon and inure to the benefit
of the Company, each Seller, the Agent, the Collateral Agent and the Lenders and
their respective successors and assigns, except that neither the Company nor any
Seller shall have the right to assign or delegate its rights or duties
hereunder.
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5.4. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
5.5. Waivers; Amendment. (a) No failure or delay of the Agent or the
Collateral Agent 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 discontinuation 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 Agent and the Collateral
Agent hereunder are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Company or any Seller therefrom shall in any
event be effective unless the same shall be in writing and signed by the Agent
and the Collateral Agent, 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 Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances. No failure to
exercise nor any delay in exercising on the part of the Agent or the Collateral
Agent, any right, power or privilege under this Agreement, shall operate as a
waiver thereof; further, no single or partial exercise of any right, power or
privilege under this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(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 Company, the Sellers, the Agent and the Collateral Agent.
Each Senior Party shall be bound by any waiver, amendment or modification
authorized by this Section.
5.6. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRAIL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT.
Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this Section.
5.7. Specific Performance. The Agent and the Collateral Agent are
hereby authorized to demand specific performance of this Agreement, whether or
not the Company shall have complied with any of the provisions hereof applicable
to it, at any time when any Seller shall have failed to comply with any of the
provisions of this Agreement applicable to it. Each Seller hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
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5.8. Severability. In the event any one or more of the provisions
contained in this Agreement 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.
5.9. Headings. Section headings, included herein for convenience of
reference only, shall not constitute a part of this Agreement for any purpose or
be given any substantive effect.
5.10. Jurisdiction; Consent to Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE COMPANY OR ANY SELLER WITH RESPECT TO THIS
AGREEMENT OR ANY SENIOR OBLIGATION MAY BE BROUGHT IN ANY STATE OR (TO THE EXTENT
PERMITTED BY LAW) FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW
YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE COMPANY AND EACH SELLER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE COMPANY AND EACH SELLER DESIGNATES AND APPOINTS CT
CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY IRREVOCABLY AGREEING IN
WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY AND EACH SELLER TO BE EFFECTIVE AND BINDING SERVICE
IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO THE COMPANY AND EACH SELLER SO SERVED AT ITS ADDRESS PROVIDED IN THE
APPLICABLE SIGNATURE PAGE HERETO, EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE COMPANY OR ANY SELLER REFUSES
TO ACCEPT SERVICE, THE COMPANY AND EACH SELLER HEREBY AGREES THAT SERVICE UPON
IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF ANY PARTICIPANT TO BRING PROCEEDINGS AGAINST THE COMPANY OR ANY SELLER
IN THE COURTS OF ANY OTHER JURISDICTION.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the date first above
written.
B.I. FUNDING, INC.
By: /s/Mary Ellen Ramsayer
Name: Mary Ellen Ramsayer
Title: Assistant Secretary
BURLINGTON INDUSTRIES, INC.
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President, Treasurer
and Investment Relations
BURLINGTON FABRICS INC.
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
B.I. TRANSPORTATION, INC.
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
BURLINGTON APPAREL SERVICES
COMPANY
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
11
<PAGE>
BURLINGTON INTERNATIONAL
SERVICES COMPANY
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
THE BACOVA GUILD, LTD.
By: /s/Lynn L. Lane
Name: Lynn L. Lane
Title: Vice President and Treasurer
Acknowledged and Agreed to as of this 10th day of December:
The Bank of Nova Scotia,
as Liquidity Agent, Managing Agent
and Collateral Agent as described
in the Old Subordination Agreement
By: /s/W.E. Zarrett
Name: William E. Zarrett
Title: Senior Relationship Manager
12
Exhibit 12
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Computation of Ratio of Earnings
to Fixed Charges
(Amounts in thousands)
Fiscal Year Ended
----------------------------------------
September 27, September 28, September 30,
1997 1996 1995
------------ ------------ ------------
Income before income taxes ........... $ 96,371 $ 75,350 $ 120,101
Interest expense ..................... 60,062 65,936 56,294
Imputed interest on rent expense ..... 4,938 5,006 4,636
--------- --------- ---------
Total earnings ............... $ 161,371 $ 146,292 $ 181,031
--------- --------- ---------
Interest expense ..................... $ 60,062 $ 65,936 $ 56,294
Imputed interest on rent expense ..... 4,938 5,006 4,636
--------- --------- ---------
Total fixed charges .......... $ 65,000 $ 70,942 $ 60,930
--------- --------- ---------
Ratio of earnings to fixed charges ... 2.5 2.1 3.0
========= ========= =========
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Burlington Industries, Inc. and Subsidiary Companies
Overview
The Company's operating earnings for fiscal year 1997 were slightly higher than
the year before. Sales were approximately 4 percent lower, primarily as a result
of closing or selling certain businesses for strategic reasons. During the year,
the Company accomplished several objectives as part of its basic strategy of
focusing on core businesses, investing in growth and building financial
strength.
Sedgefield Specialties (a chemical subsidiary) and Advanced Textiles,
Inc. (a small fiberglass business) were sold. The Lees division discontinued its
residential carpet line to concentrate exclusively on its successful commercial
carpets business. Certain yarn manufacturing facilities were restructured and
consolidated for better asset management. In addition, costs were reduced
throughout the Company during 1997 by reducing overhead. The net result of these
streamlining activities, including reducing staff, consolidation of yarn
facilities and exiting the residential carpet product line, was a net charge of
$0.12 per share.
During the year, operating results generated $166.3 million in cash and
asset sales provided an additional $20.7 million. This cash was primarily used
to invest $99.3 million in capital expenditures and a joint venture, repurchase
4.5 million shares of stock for $53.4 million and reduce debt by $32.7 million.
The Company's operating performance in the 1997 fiscal year was
restrained by an oversupply in denim markets.
PERFORMANCE BY SEGMENT: The Company conducts its operations in two
principal industry segments: products for apparel markets and products for
interior furnishings markets. The following table sets forth certain information
about the segment results for the fiscal years ended September 27, 1997,
September 28, 1996 and September 30, 1995.
Fiscal Fiscal Fiscal
(dollar amounts in millions) 1997 1996 1995
------ ------ -----
Net sales
Apparel products $ 1,253.2 $ 1,328.3 $ 1,347.1
Interior furnishings products 837.5 854.0 862.1
-------- -------- --------
Total $ 2,090.7 $ 2,182.3 $ 2,209.2
======== ======== ========
Operating income before interest and taxes
Apparel products $ 112.1 $ 121.7 $ 107.1
As a percentage of net sales 8.9% 9.2% 8.0%
Interior furnishings products $ 43.6 $ 55.6 $ 67.4
As a percentage of net sales 5.2% 6.5% 7.8%
Operating income before interest,
taxes, provision for restructuring
and loss on closing of division $ 155.7 $ 177.3 $ 174.5
Loss on closing of division $ - $ (29.9) $ -
Provision for restructuring $ (12.1) $ - $ -
-------- ------- --------
Total $ 143.6 $ 147.4 $ 174.5
As a percentage of net sales 6.9% 6.8% 7.9%
======= ======= ========
<PAGE>
Results of Operations
Comparison of Fiscal Years ended September 27, 1997 and September 28, 1996
NET SALES: Net sales for the 1997 fiscal year were $2,090.7 million, a
decrease of 4.2% from the $2,182.3 million recorded in the 1996 fiscal year.
Exports totaled $239 million and $213 million in the 1997 and 1996 fiscal years,
respectively (an increase of 12.2%).
Products for Apparel Markets: Net sales of products for apparel markets
for the 1997 fiscal year were $1,253.2 million, 5.7% lower than net sales of
$1,328.3 million for the 1996 fiscal year. This reduction was primarily due to
the elimination of the volume produced and marketed by the Knitted Fabrics
division, which was closed in June, 1996, and lower volume and selling prices in
the Denim division, partially offset by higher volume and improvement in selling
prices and product mix in the Klopman division.
Products for Interior Furnishings Markets: Net sales of products for
interior furnishings markets for the 1997 fiscal year were $837.5 million, a
decrease of 1.9% from the $854.0 million recorded in the 1996 fiscal year. The
change in sales of the interior furnishings segment was mainly attributable to
the sale of J.G. Furniture in April 1996 and Advanced Textiles in October 1996
and lower volume and selling prices in the Burlington House and Area Rugs
divisions, partially offset by higher activity in the Lees division.
OPERATING INCOME BEFORE INTEREST AND TAXES: Operating income before
interest and taxes for the 1997 fiscal year was $143.6 million. Before the 1997
provision for restructuring, the 1997 charge for exiting the residential carpet
product line, the 1997 charge for closing a yarn spinning plant in the
Burlington House Area Rugs division and the 1996 loss on closing the Knitted
Fabrics division, operating income before interest and taxes for the 1997 fiscal
year was $164.4 million in comparison with $181.0 million recorded in the 1996
fiscal year. Amortization of goodwill was $18.2 million in both the 1997 and
1996 fiscal years.
Products for Apparel Markets: Operating income before interest and
taxes for the apparel products segment for the 1997 fiscal year was $112.1
million compared to $125.4 million recorded for the 1996 fiscal year before the
charges for closing the Knitted Fabrics division. The principal factors
affecting this change were lower profits of the Denim division partially offset
by the absence of Knitted Fabrics division operating losses in the 1997 period.
Products for Interior Furnishings Markets: Operating income before
interest and taxes for the interior furnishings products segment for the 1997
fiscal year was $52.3 million before the charges for restructuring activities,
compared to $55.6 million recorded in the 1996 fiscal year. This decrease was
mainly attributable to the reduced level of operations in the Burlington House
and Area Rugs divisions partially offset by improved results in the Lees
division.
Selling, administrative and general expenses totaled $154.6 million, or
7.4% of net sales, in the 1997 fiscal year, compared with $166.3 million, or
7.6% of net sales, in the 1996 fiscal year. The decrease was mainly attributable
to sold/closed operations and benefits resulting from cost reduction actions.
The Company recorded provisions for doubtful accounts of $3.5 million
and $6.5 million in the 1997 and 1996 fiscal years, respectively.
INTEREST EXPENSE: Interest expense for the 1997 fiscal year was $60.1
million, or 2.9% of net sales, compared with $65.9 million, or 3.0% of net sales
in the 1996 fiscal year. The decrease in interest expense was due primarily to
the lower average debt outstanding.
OTHER EXPENSE (INCOME): Other income for the 1997 fiscal year was $12.8
million consisting principally of $9.5 million in gains on the disposal of
certain non-core operating assets and interest income. Other expense for the
1996 fiscal year was $6.1 million consisting principally of $4.0 million for
legal contingencies, $2.3 million loss on sale of a non-operating asset and $1.3
million loss on sale of J.G. Furniture partially offset by interest income.
INCOME TAX EXPENSE AND EXTRAORDINARY ITEMS: Income tax expense of $37.7
million was recorded for the 1997 fiscal year in comparison with $33.7 million
<PAGE>
for fiscal year 1996. The extraordinary loss of $0.7 million for the 1996 fiscal
year resulted from the early extinguishment of debt net of income tax benefit of
$0.5 million.
NET INCOME AND NET INCOME PER SHARE: Net income for the 1997 fiscal
year was $58.7 million, or $0.96 per share, in comparison with $40.9 million, or
$0.65 per share, for the 1996 fiscal year. Net income for the 1997 fiscal year
included a net charge of $0.12 per share for one-time costs associated with
various streamlining actions, including reducing staff, consolidation of yarn
facilities and exiting the residential carpet product line, offset by gains on
sales of Sedgefield Specialties and Advanced Textiles, Inc. Net income for the
1996 fiscal year included $25.0 million ($0.40 per share) of non-recurring
expenses, consisting of an after-tax charge of $20.3 million ($0.33 per share)
for the closing of the Knitted Fabrics division and an after-tax provision of
$4.7 million ($0.07 per share) for legal contingencies, the sale of the J.G.
Furniture division and the sale of a non-operating asset. In addition, there was
an extraordinary loss of $0.01 per share in 1996 for the early extinguishment of
debt.
Comparison of Fiscal Years ended September 28, 1996 and September 30, 1995
NET SALES: Net sales for the 1996 fiscal year were $2,182.3 million, a
decrease of 1.2% from the $2,209.2 million recorded in the 1995 fiscal year.
Exports totaled $213 million and $161 million in the 1996 and 1995 fiscal years,
respectively (an increase of 32.3%).
Products for Apparel Markets: Net sales of products for apparel markets
for the 1996 fiscal year were $1,328.3 million, 1.4% lower than net sales of
$1,347.1 million for the 1995 fiscal year. Lower unit volumes from the Menswear
and Knitted Fabrics divisions were only partially offset by improvements in
selling price and product mix.
Products for Interior Furnishings Markets: Net sales of products for
interior furnishings markets for the 1996 fiscal year were $854.0 million, a
decrease of 0.9% from the $862.1 million recorded in the 1995 fiscal year. Lower
unit volumes resulting from a carpets division strategy to streamline its
residential product line, the difficult business environment faced by the rugs
divisions and the sale of a non-core business were only partially offset by
enhancements to product mix and higher selling prices.
OPERATING INCOME BEFORE INTEREST AND TAXES: Operating income before
interest and taxes for the 1996 fiscal year was $147.4 million. Before the
charges for closing the Knitted Fabrics division, operating income before
interest and taxes for the 1996 fiscal year was $181.0 million in comparison
with $174.5 million recorded in the 1995 fiscal year. Amortization of goodwill
was $18.2 million and $18.1 million in the 1996 and 1995 fiscal years,
respectively.
Products for Apparel Markets: Operating income before interest and
taxes for the apparel products segment before the charges for closing the
Knitted Fabrics division for the 1996 fiscal year was $125.4 million, up 17.1%
from the $107.1 million recorded for the 1995 fiscal year. The principal factors
leading to this increase were improvements in selling price and product mix and
lower bad debts, offset by lower unit volume, operating capacity inefficiencies
and wage increases. Better operating earnings were achieved by the Denim,
Klopman and Menswear divisions.
Products for Interior Furnishings Markets: Operating income before
interest and taxes for the interior furnishings products segment for the 1996
fiscal year was $55.6 million, down 17.5% from the $67.4 million recorded in the
1995 fiscal year. Manufacturing inefficiencies resulting from lower unit volume,
wage increases and severance costs associated with manpower reductions more than
offset the benefit of better product mix and higher selling prices. Good results
in the Burlington House and Lees divisions were offset by slower business
activity in the area rugs divisions.
Selling, administrative and general expenses totaled $166.3 million, or
7.6% of net sales, in the 1996 fiscal year, compared with $162.5 million, or
<PAGE>
7.4% of net sales, in the 1995 fiscal year. The increase was mainly attributable
to the new Bacova operation which was acquired during fiscal year 1995.
The Company recorded provisions for doubtful accounts of $6.5 million
and $10.4 million in the 1996 and 1995 fiscal years, respectively, resulting
primarily from bankruptcies which occurred in those periods.
INTEREST EXPENSE: Interest expense for the 1996 fiscal year was $65.9
million, or 3.0% of net sales, compared with $56.3 million, or 2.5% of net sales
in the 1995 fiscal year. The increase in interest expense was primarily the
result of lengthening maturities and higher rates partially offset by lower
average debt.
OTHER EXPENSE (INCOME): Other expense for the 1996 fiscal year was $6.1
million consisting principally of $4.0 million for legal contingencies, $2.3
million loss on sale of a non-operating asset and $1.3 million loss on sale of
J.G. Furniture, partially offset by interest income. Other income of $1.9
million for fiscal year 1995 consisted primarily of interest income.
INCOME TAX EXPENSE AND EXTRAORDINARY ITEMS: Income tax expense of $33.7
million was recorded for the 1996 fiscal year in comparison with $51.7 million
for fiscal year 1995. The extraordinary loss of $0.7 million for the 1996 fiscal
year resulted from the early extinguishment of debt net of income tax benefit of
$0.5 million (principally the write-off of unamortized bank financing costs).
NET INCOME AND NET INCOME PER SHARE: Net income for the 1996 fiscal
year was $40.9 million, or $0.65 per share, in comparison with $68.4 million, or
$1.05 per share, for the 1995 fiscal year. Net income for the 1996 fiscal year
included $25.0 million ($0.40 per share) of non-recurring expenses, consisting
of an after-tax charge of $20.3 million ($0.33 per share) for the closing of the
Knitted Fabrics division and an after-tax provision of $4.7 million ($0.07 per
share) for legal contingencies, the sale of the J.G. Furniture division and the
sale of a non-operating asset. In addition, there was an extraordinary loss of
$0.01 per share for the early extinguishment of debt.
Legal and Environmental Contingencies
The Company and its subsidiaries have sundry claims and other lawsuits
pending against them and also have certain guarantees which were made in the
ordinary course of business. The Company has made provisions in its financial
statements for litigation based on the Company's assessment of the possible
outcome of such litigation, including the possibility of settlement, and related
legal fees and costs.
The Company and certain of its current and former direct and indirect
corporate predecessors, subsidiaries and divisions have been identified by the
United States Environmental Protection Agency, by the environmental agencies in
several states and by private parties as potentially responsible parties at a
number of hazardous waste disposal sites under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("Superfund") and comparable
state laws and, as such, may be liable for the cost of cleanup and other
remedial activities at these sites. The Company may also have liability for such
matters pursuant to contractual obligations relating to divested property or
with respect to sites which may be identified in the future. With respect to
certain of these sites, other persons have also been identified as potentially
responsible parties, and in such circumstances the responsibility for cleanup
and other remedial activities is typically shared among such parties based on an
allocation formula. The Company is also involved in remedial responses and
voluntary environmental cleanups at other sites which are not currently the
subject of proceedings of any kind under Superfund or comparable state laws. The
Company has established reserves in its financial statements for such
environmental liabilities, including related legal fees and other transaction
costs, in the aggregate amount of approximately $5.7 million. The provision for
environmental liabilities is based on the Company's estimate of allocations of
liability among potentially responsible parties (and the likelihood of
contribution by such parties), information concerning the scope of
contamination, estimated remediation costs, estimated transaction costs and
other factors. The Company has also recorded $1.1 million for estimated
<PAGE>
recoveries under insurance policies to the extent that coverage for such claims
has been acknowledged by the relevant insurer and for estimated recoveries from
third parties. No provision has been made for liabilities that may be incurred
with respect to sites which may be identified in the future because insufficient
basis exists for making informed estimates in such cases.
Like most owners of computer software, the Company will be required to
modify significant portions of its software so that it will function properly in
the year 2000. The Company has initiated a company-wide program to prepare its
computer systems and applications to recognize the year 2000 and beyond and
expects to complete this project during 1998. The Company also is dependent upon
the successful efforts of its customers and suppliers to modify their software
and could be impacted by the failure of one or more of these efforts.
It is not possible with certainty to determine the ultimate liability
of the Company with respect to the matters described in the preceding
paragraphs, but in the opinion of management their outcome should have no
material adverse effect on the financial condition or results of operations of
the Company.
Liquidity and Capital Resources
During the 1995-97 fiscal years, the Company took steps to strengthen
its capital structure and enhance the flexibility of its financial resources
going forward. During the last quarter of the 1995 fiscal year, a $400 million
senior debt shelf registration statement was filed and became effective, and the
Company has used $300 million of its capacity in two public offerings of
fixed-rate senior notes. The proceeds of these offerings were used to repay
variable-rate bank loans. The notes received investment grade ratings from each
of the two major credit rating agencies, which underscored the continued
improvement in the Company's credit standing. In November 1995, the Company
entered into a $750 million bank credit facility which reduces borrowing costs
compared to the previous bank credit facility, and further enhances the
Company's financial flexibility. At September 27, 1997, total debt of the
Company (consisting of current and non-current portions of long-term debt and
short-term borrowings) was $806.9 million compared with $838.9 million at
September 28, 1996. The ratio of debt to total capital declined from 57.7% at
the beginning of fiscal year 1997 to 56.1% at fiscal year end.
The Company's principal uses of funds during the next several years
will be for capital investments (including the funding of acquisitions and
participations in joint ventures), repayment and servicing of indebtedness,
working capital needs and the repurchase of shares of Company common stock. The
Company intends to fund such needs principally from net cash provided by
operating activities and, to the extent necessary, from funds provided by the
credit facilities described in this section. The Company believes that these
sources of funds will be adequate to meet the Company's foregoing needs.
The net cash generated by the Company from operating activities during
the 1997 fiscal year amounted to $166.3 million; additionally $20.7 million was
provided from sales of assets and $3.7 million from the exercise of stock
options. Cash generated in this manner was primarily used for: $99.3 million of
capital expenditures and investment in a joint venture, $53.4 million for the
repurchase of Company common stock and $32.7 million for net repayments of
long-term debt. Shares of Company common stock purchased during the 1997 fiscal
year are expected to be used during the next several years in part to satisfy
Company obligations to contribute stock under its employee incentive plans and
will, accordingly, minimize further future cash outlays for these purposes.
During the 1997 fiscal year, investment in capital expenditures and a
joint venture totaled $99.3 million, compared to $81.4 million in the 1996
fiscal year. The Company anticipates that the level of capital expenditures for
fiscal year 1998 could total approximately $185 million, principally for growth
and modernization of U.S. and Mexican plants.
In August 1997, the Company issued $150.0 million principal amount of
7.25% notes due August 1, 2027 ("Notes Due 2027") at a price of 99.402% plus
accrued interest. Proceeds from the sale were used to prepay Revolving Loans
under its 1995 Bank Credit Agreement on the same date. The Notes Due 2027 will
<PAGE>
be redeemable as a whole or in part at the option of the Company at any time on
or after August 2, 2007, and will also be redeemable at the option of the
holders thereof on August 1, 2007 in amounts at 100% of their principal amount.
On September 26, 1995, the Company issued $150.0 million principal amount of
7.25% notes due September 15, 2005 ("Notes Due 2005") at a price of 99.926% plus
accrued interest. The Notes Due 2005 are not redeemable prior to maturity.
Proceeds from the sale of the Notes Due 2005 were used to prepay outstanding
term loans under the Company's bank credit facility. The Notes Due 2027 and the
Notes Due 2005 are unsecured and rank equally with all other unsecured and
unsubordinated indebtedness of the Company.
The Company has a $750.0 million unsecured Revolving Credit Facility ("1995
Bank Credit Agreement") which expires in March, 2001. At November 7, 1997, the
Company had approximately $432.0 million in unused capacity under this facility.
The Company also maintains $42.0 million in additional overnight borrowing
availability under bank lines of credit.
Loans under the 1995 Bank Credit Agreement bear interest at either (i)
floating rates generally payable quarterly based on the Adjusted Eurodollar Rate
plus 0.275% or (ii) Eurodollar rates or fixed rates which may be offered from
time to time by a Lender pursuant to a competitive bid request submitted by the
Company, payable up to 360 days. In addition, the Company pays an annual
facility fee of 0.15%. The interest rate and the facility fee are based on the
Company's current implied senior unsecured debt ratings of BBB minus and Baa3.
In the event that the Company's debt ratings improve, the interest rate and
facility fees would be reduced. Conversely, a deterioration in the Company's
debt ratings would increase the interest rate and facility fees.
The 1995 Bank Credit Agreement imposes various limitations on the
liquidity of the Company. The Agreement requires the Company to maintain minimum
interest coverage and maximum leverage ratios and a specified level of net
worth. In addition, the Agreement limits dividend payments, stock repurchases,
leases, the incurrence of additional indebtedness by consolidated subsidiaries,
the creation of additional liens and the making of investments in non-U.S.
persons, and restricts the Company's ability to enter into certain merger,
liquidation or asset sale or purchase transactions.
On December 22, 1992, the Company, established a $225.0 million A-1/D-1
rated commercial paper facility ("CP Facility") backed by a $225.0 million
Receivables-Backed Liquidity Facility ("Liquidity Facility") established with a
group of banks. On November 7, 1997, $173.9 million of commercial paper maturing
on or before December 10, 1997 was outstanding. The Company has received a
commitment from a bank to replace the CP Facility and Liquidity Facility with a
five-year, $225.0 million Trade Receivables Financing Agreement ("Receivables
Facility") which is scheduled to close on or about December 5, 1997. The amount
of borrowings allowable under the Receivables Facility at any time is a function
of the amount of then outstanding eligible trade accounts receivable up to
$225.0 million. Loans under the Receivables Facility bear interest, with terms
up to 270 days, at the bank's commercial paper dealer rate plus 0.1875%. A
commitment fee of 0.125% is charged on the unused portion of the Receivables
Facility.
Because the Company's obligations under the 1995 Bank Credit Agreement
and the receivables-backed financing programs bear interest at floating rates,
the Company is sensitive to changes in prevailing interest rates. The Company
uses derivative instruments to manage its interest rate exposure, rather than
for trading purposes.
Forward-Looking Statements
With the exception of historical information, the statements contained in
Management's Discussion and Analysis of Results of Operations and Financial
Condition and in other parts of this report include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
represent management's current expectations or beliefs as to the future and are
subject to risks and uncertainties which could affect the Company's actual
<PAGE>
future results and which could cause those results to differ materially from the
expectations or beliefs expressed in the forward-looking statements. Such risks
and uncertainties include, but are not limited to: the outlook for global
economic activity and its impact upon the Company's businesses; the demand for
textile products, including the acceptance by customers and consumers of the
Company's products and the possible imbalances between consumer demand and
inventories of the Company's customers; the success of the Company's
value-added, fashion-driven product strategy; the Company's relationships with
its principal customers and suppliers; cost and availability of raw materials
and labor; the success of the Company's strategic plans to expand in the United
States, India and Mexico; the Company's ability to finance its capital expansion
and modernization programs, and the level of the Company's indebtedness and the
exposure to interest rate fluctuations; governmental legislation and regulatory
changes which impose higher costs, or greater restrictions, on the Company's
operations and which alter the existing regulation of international trade; and
the long-term implications of the current development of regional trade blocs
and the effect of the anticipated elimination of quotas and lowering of tariffs
under the GATT trade regime by 2005. Other risks and uncertainties may also be
described from time to time in the Company's other reports and filings with the
Securities and Exchange Commission.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations
For the fiscal years ended September 27, 1997,
September 28, 1996 and September 30, 1995
(amounts in thousands, except for per share amounts)
1997 1996 1995
---------- ---------- ----------
Net sales............................. $2,090,683 $2,182,347 $2,209,191
Cost of sales......................... 1,758,698 1,814,160 1,843,752
---------- ---------- ----------
Gross profit.......................... 331,985 368,187 365,439
Selling, administrative and
general expenses.................... 154,648 166,283 162,504
Provision for doubtful accounts....... 3,478 6,457 10,382
Amortization of goodwill.............. 18,158 18,201 18,055
Loss on closing of division........... - 29,856 -
Provision for restructuring........... 12,058 - -
---------- ---------- ----------
Operating income before
interest and taxes.................. 143,643 147,390 174,498
Interest expense...................... 60,062 65,936 56,294
Other expense (income) - net.......... (12,790) 6,104 (1,897)
---------- ---------- ----------
Income before income taxes............ 96,371 75,350 120,101
Income tax expense:
Current............................. (33,048) (36,822) (31,706)
Deferred............................ (4,625) 3,075 (20,001)
---------- ---------- ----------
Total income tax expense.......... (37,673) (33,747) (51,707)
---------- ---------- ----------
Income before
extraordinary item.................. 58,698 41,603 68,394
Extraordinary item:
Loss from early extinguishment
of debt, net of income tax
benefit of $454 in 1996............ - (697) -
---------- ---------- ----------
Net income............................ $ 58,698 $ 40,906 $ 68,394
========== ========== ==========
Average common shares
outstanding......................... 61,289 63,231 65,273
Net income per common share:
Income before
extraordinary item................. $ 0.96 $ 0.66 $ 1.05
Extraordinary item.................. - (0.01) -
---------- ---------- ----------
$ 0.96 $ 0.65 $ 1.05
========== ========== ==========
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(amounts in thousands)
September 27, September 28,
1997 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents....................... $ 17,863 $ 15,392
Short-term investments.......................... 23,832 22,755
Customer accounts receivable after deductions
of $20,688 and $21,466 for the respective
dates for doubtful accounts, discounts,
returns and allowances........................ 331,457 342,390
Sundry notes and accounts receivable............ 6,762 6,608
Inventories..................................... 314,994 329,386
Prepaid expenses................................ 2,719 2,839
----------- -----------
Total current assets....................... 697,627 719,370
Fixed assets, at cost:
Land and land improvements...................... 36,677 35,869
Buildings....................................... 400,212 384,153
Machinery, fixtures and equipment............... 607,502 585,587
----------- -----------
1,044,391 1,005,609
Less accumulated depreciation and amortization.. 459,744 436,069
----------- -----------
Fixed assets - net......................... 584,647 569,540
Other assets:
Investments and receivables..................... 22,670 14,032
Intangibles and deferred charges................ 29,781 25,875
Excess of purchase cost over
net assets acquired............................ 538,967 557,125
----------- -----------
Total other assets......................... 591,418 597,032
----------- -----------
$ 1,873,692 $ 1,885,942
=========== ===========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due currently.................... $ 470 $ 1,720
Accounts payable - trade........................ 102,898 93,688
Sundry payables and accrued expenses............ 100,039 102,895
Income taxes payable............................ 16,406 20,674
Deferred income taxes........................... 43,782 46,375
----------- -----------
Total current liabilities.................. 263,595 265,352
Long-term liabilities:
Long-term debt.................................. 806,413 837,136
Other........................................... 58,595 57,360
----------- -----------
Total long-term liabilities................ 865,008 894,496
Deferred income taxes........................... 114,363 110,174
Shareholders' equity:
Common stock issued (Note G).................... 684 684
Capital in excess of par value.................. 882,837 885,185
Accumulated deficit............................. (134,301) (192,999)
Currency translation adjustments................ (10,211) (9,263)
----------- -----------
739,009 683,607
Less cost of common stock held in treasury...... (108,283) (67,687)
----------- -----------
Total shareholders' equity................. 630,726 615,920
----------- -----------
$ 1,873,692 $ 1,885,942
=========== ===========
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
For the fiscal years ended September 27, 1997,
September 28, 1996 and September 30, 1995
(amounts in thousands)
1997 1996 1995
-------- --------- ---------
Cash flows from operating activities:
Net income..................................... $ 58,698 $ 40,906 $ 68,394
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
fixed assets.............................. 66,742 66,942 66,646
Provision for doubtful accounts............ 3,478 6,457 10,382
Amortization of intangibles
and deferred debt expense................. 18,600 22,053 20,733
Deferred income taxes...................... 4,625 (3,075) 20,001
(Gain) loss on disposal of assets
and other expense......................... (11,821) 7,641 -
Loss from early extinguishment of debt..... - 1,151 -
Restructuring/loss on closing of division.. 12,058 29,856 -
Changes in assets and liabilities:
Customer accounts receivable - net..... 6,400 (16,165) 8,331
Sundry notes and accounts receivable... (154) 10,203 (7,511)
Inventories............................ 11,478 9,561 (12,645)
Prepaid expenses....................... 120 (627) 51
Accounts payable and accrued expenses.. (2,428) 3,694 (15,910)
(Payment) receipt of financing fees........ 80 (444) (3,848)
Change in interest payable................. 64 3,257 (1,222)
Change in income taxes payable............. 1,821 11,273 (7,252)
Other...................................... (3,481) 442 6,414
-------- -------- ---------
Total adjustments..................... 107,582 152,219 84,170
-------- -------- ---------
Net cash provided by operating activities...... 166,280 193,125 152,564
-------- -------- ---------
Cash flows from investing activities:
Capital expenditures........................... (96,500) (79,174) (101,876)
Payment for purchase of business, net
of cash acquired.............................. - - (12,022)
Proceeds from sales of assets.................. 20,672 8,785 6,472
Investment in joint venture.................... (2,750) (2,200) -
Change in investments.......................... (2,817) (957) (3,073)
-------- -------- ---------
Net cash used by investing activities.......... (81,395) (73,546) (110,499)
-------- -------- ---------
Cash flows from financing activities:
Net change in short-term borrowings............ - (274) (1,136)
Repayments of long-term debt................... (200,472) (600,708) (211,966)
Proceeds from issuance of long-term debt....... 167,768 527,478 197,818
Proceeds from exercise of stock options........ 3,709 3,848 73
Purchase of treasury stock..................... (53,419) (45,038) (37,858)
-------- -------- ---------
Net cash used by financing activities.......... (82,414) (114,694) (53,069)
-------- -------- ---------
Net change in cash and cash equivalents........ 2,471 4,885 (11,004)
Cash and cash equivalents at beginning
of period..................................... 15,392 10,507 21,511
-------- -------- ---------
Cash and cash equivalents at end of period..... $ 17,863 $ 15,392 $ 10,507
======== ======== =========
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Burlington Industries, Inc. and Subsidiary Companies
Note A - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements include the accounts of the
Company and all its subsidiaries. The accounts of foreign subsidiaries have been
included on the basis of fiscal periods ended no more than three months prior to
the dates of the consolidated balance sheets. Investments in affiliates in which
the Company owns 20 to 50 percent of the voting stock are accounted for using
the equity method. All significant intercompany accounts and transactions have
been eliminated.
Cash equivalents: Cash and cash equivalents include time deposits and other
short-term investments with an original maturity of three months or less.
Inventories: Inventories are valued at the lower of cost or market. Cost of
substantially all components of textile inventories in the United States is
determined using the dollar value Last-in, First-out (LIFO) method. All other
inventories are valued principally at average cost.
Fixed assets: Depreciation and amortization of fixed assets is calculated over
the estimated useful lives of the related assets principally using the
straight-line method.
Excess of purchase cost over net assets acquired: The excess of purchase cost
over net assets acquired is amortized as goodwill using the straight-line method
over not more than 40 years. The accumulated amortization of goodwill was
$181,744,000 and $163,586,000 at September 27, 1997 and September 28, 1996,
respectively.
Impairment of long-lived assets: When circumstances indicate, the Company
evaluates the recoverability of its long-lived assets by comparing estimated
future undiscounted cash flows with the asset's carrying amount to determine if
a write-down to market value or discounted cash flow is required.
Deferred debt expense: Deferred debt expense is amortized over the lives of the
related debt as an adjustment to interest expense.
Revenue recognition: In general, the Company recognizes revenues from product
sales when units are shipped.
Research expenditures: Expenditures for research and development are expensed as
incurred. Total expenditures for research and development aggregated
$11,841,000, $13,482,000 and $17,082,000 in the 1997, 1996 and 1995 fiscal
years, respectively.
Income per common share: Income per common share is computed based on the
weighted average number of common shares outstanding during each period.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification: Certain prior period amounts have been reclassified to conform
to current presentations.
Fiscal year: The Company uses a 52 - 53 week fiscal year.
<PAGE>
Other: In 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share", which
the Company is required to adopt in the first quarter of the 1998 fiscal year.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. The impact of
SFAS No. 128 on the calculation of earnings per share for these periods is not
expected to be material. Also in 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and No. 131, "Disclosures About Segments of an Enterprise
and Related Information", both of which the Company will adopt in its 1999
fiscal year. The Company will be required to report comprehensive income which
is the total of net income and all other nonowner changes in shareholders'
equity, such as foreign currency translation adjustments. The effect of SFAS No.
131 on the Company's financial statement disclosures has not yet been
determined, but adoption will not affect the accounting for the Company's
consolidated results of operations, financial position or cash flows.
Note B - Restructuring Activities
During the June 1997 quarter, the Company recorded a $12.1 million pre-tax
provision for restructuring associated with reducing staff, consolidation of
certain yarn facilities and exiting the residential carpet product line. The
staff reduction included severance costs of $5.2 million related to 215
employees. The components of the yarn manufacturing restructuring charge
included costs of $1.3 million for severance related to 286 employees, $2.2
million for divestitures of machinery and equipment, and $1.4 million for
divestitures of real estate. Costs related to exiting the residential carpet
product line included primarily $1.2 million for severance related to 70
employees. Production capacity of the residential carpet product line will be
utilized by the commercial carpet product line within existing facilities. In
addition, exiting the residential carpet product line resulted in an inventory
write-down and other claims of $4.9 million included in cost of sales. Combining
these charges, the restructuring activities resulted in a pre-tax charge of
$17.0 million, $10.3 million after income taxes, or $0.17 per share. Costs of
these restructuring activities paid or incurred through September 27, 1997 were
$3.2 million.
In June 1996, the Company announced its plan to close the Knitted Fabrics
division which resulted in a $29.9 million pre-tax charge in the 1996 fiscal
year. In addition, the closing resulted in an inventory write-down of $3.7
million included in cost of sales. Combining these charges, the closing of the
division resulted in a pre-tax charge of $33.6 million, $20.3 million after
income taxes, or $0.33 per share. Production of the Knitted Fabrics division was
phased out during September and October, 1996, and it is anticipated that sales
of the majority of the division's assets will be completed within a two-year
period. The components of the 1996 charge include costs of $12.7 million for
severance and other benefits related to approximately 1,150 employees, $8.3
million for divestitures of machinery and equipment, $8.0 million for
divestitures of real estate, and $0.8 million for cancellation of leases. Costs
of closing the division paid or incurred through September 27, 1997 were $23.2
million. Operating results of the Knitted Fabrics division before any charges
related to the restructuring were as follows (in millions):
1996 1995
-------- --------
Net sales ........................... $ 108.2 $ 134.1
Net operating loss before
interest and taxes ................ $ (17.2) $ (17.9)
<PAGE>
Note C - Inventories
Inventories are summarized as follows (in thousands):
1997 1996
--------- ---------
Inventories at average cost:
Raw materials................................ $ 46,722 $ 49,481
Stock in process............................. 97,973 96,836
Produced goods............................... 190,326 200,679
Dyes, chemicals and supplies................. 21,859 23,100
--------- ---------
356,880 370,096
Less excess of average cost over LIFO........ 41,886 40,710
--------- ---------
Total.................................... $ 314,994 $ 329,386
========= =========
Inventories valued using the LIFO method comprised approximately 91% and 90% of
consolidated inventories at September 27, 1997 and September 28, 1996,
respectively.
Note D - Sundry Payables and Accrued Expenses
Sundry payables and accrued expenses consisted of the following (in thousands):
1997 1996
--------- ---------
Sundry accounts payable......................... $ 1,386 $ 2,156
Accrued expenses:
Payroll and employee benefits............... 57,558 58,555
Taxes, other than income taxes.............. 9,960 9,597
Interest.................................... 9,156 12,464
Other....................................... 21,979 20,123
--------- ---------
Total................................... $ 100,039 $ 102,895
========= =========
Note E - Long-term Debt
Long-term debt consisted of the following (in thousands):
1997 1996
---------- ---------
1995 Bank Credit Agreement........................... $ 335,000 $ 525,000
Commercial Paper..................................... 163,592 144,221
Senior Debentures due 2005........................... 149,911 149,900
Senior Debentures due 2027........................... 149,117 -
Other indebtedness with various rates and maturities. 9,263 19,735
---------- ---------
806,883 838,856
Less long-term debt due currently.................... 470 1,720
---------- ---------
Total.............................................. $ 806,413 $ 837,136
========== =========
Bank Financing: On November 8, 1995, the Company entered into an unsecured
credit agreement ("1995 Bank Credit Agreement"), consisting of a $750.0 million
Revolving Credit Facility with a final maturity on March 31, 2001. The Agreement
provides for the issuance of letters of credit by the fronting bank in an
outstanding aggregate face amount not to exceed $75.0 million, provided that at
no time shall the aggregate principal amount of Revolving Loans, together with
the aggregate face amount of such letters of credit issued, exceed $750.0
million. At September 27, 1997, there were no letters of credit outstanding
issued by the fronting bank, and the unused portion of the revolving facility
commitment was $415.0 million. Additional overnight borrowings up to $42.0
million are also available under bank lines of credit.
Loans under the 1995 Bank Credit Agreement bear interest at either (i) floating
rates generally payable quarterly based on the Adjusted Eurodollar Rate plus
0.275% or (ii) Eurodollar rates or fixed rates which may be offered from time to
time by a Lender pursuant to a competitive bid request submitted by the Company,
payable up to 360 days. In addition, the Company pays an annual facility fee of
0.15%. The interest rate and the facility fee are based on the Company's current
senior unsecured debt ratings of BBB minus and Baa3. In the event that the
Company's debt ratings improve, the interest rate and facility fees would be
<PAGE>
reduced. Conversely, a deterioration in the Company's debt ratings would
increase the interest rate and facility fees. At September 27, 1997, the average
bank financing interest rate was 6.29%. See Note P for information on financial
instruments utilized to manage interest rate exposure.
The 1995 Bank Credit Agreement imposes various limitations on the liquidity of
the Company. The Agreement requires the Company to maintain minimum interest
coverage and maximum leverage ratios and a specified level of net worth. In
addition, the Agreement limits dividend payments (equal to 50% of the previous
fiscal year's domestic net income less any after-tax gain or loss on asset sales
outside the ordinary course of business), stock repurchases, leases, the
incurrence of additional indebtedness by domestic subsidiaries, the creation of
additional liens and the making of investments in foreign entities and restricts
the Company's ability to enter into certain merger, liquidation or asset sale or
purchase transactions.
On November 20, 1995, the Company borrowed $510.0 million under the 1995 Bank
Credit Agreement to repay all $505.0 million principal amount of outstanding
indebtedness under its 1994 Bank Credit Agreement and recorded a related charge
from early extinguishment of debt of $0.7 million (net of income taxes) during
the 1996 fiscal year.
Receivables-Backed Financing: On December 22, 1992, the Company established a
$225.0 million A-1/D-1 rated commercial paper facility ("CP Facility") backed by
a $225.0 million Receivables-Backed Liquidity Facility ("Liquidity Facility")
with a group of banks. There were no borrowings outstanding at September 27,
1997 or September 28, 1996 under the Liquidity Facility. The Company has
received a commitment from a bank to replace the CP Facility and Liquidity
Facility with a five-year, $225.0 million Trade Receivables Financing Agreement
("Receivables Facility") which is scheduled to close on or about December 5,
1997; accordingly, commercial paper borrowings were classified as long-term debt
at September 27, 1997. The amount of borrowings allowable under the Receivables
Facility at any time is a function of the amount of then outstanding eligible
trade accounts receivable up to $225.0 million. Loans under the Receivables
Facility bear interest, with terms up to 270 days, at the bank's commercial
paper dealer rate plus 0.1875%. A commitment fee of 0.125% is charged on the
unused portion of the Receivables Facility.
Senior Debentures: On August 12, 1997, the Company issued, through a public
offering, $150.0 million principal amount of 7.25% unsecured senior debentures
due August 1, 2027 ("Senior Debentures Due 2027"). The securities were issued
under an indenture (the "Indenture") dated as of September 1, 1995 pursuant to a
shelf registration filed with the Securities and Exchange Commission, under
which $100.0 million of debt securities may still be issued. The Indenture
contains covenants limiting certain liens and sale and leaseback transactions.
The Senior Debentures Due 2027 were issued at a discount to yield 7.335% and the
net proceeds from the sale were the principal source of funds used to prepay
$150.0 million of Revolving Loans under its 1995 Bank Credit Agreement on the
same date. Interest on the Senior Debentures Due 2027 is payable semiannually on
February 1 and August 1. The Senior Debentures Due 2027 will be redeemable as a
whole or in part at the option of the Company at any time on or after August 2,
2007 at a price equal to the greater of 100% of the principal amount redeemed or
the sum of the present values of the remaining scheduled payments of principal
and interest thereon. The Senior Debentures Due 2027 will also be redeemable at
the option of the holders thereof on August 1, 2007 in amounts at 100% of their
principal amount.
On September 26, 1995, the Company issued through a public offering $150.0
million principal amount of 7.25% unsecured senior debentures due September 15,
2005 ("Senior Debentures Due 2005") under the Indenture. The Senior Debentures
Due 2005 were issued at a discount to yield 7.26% and the net proceeds from the
sale were the principal source of funds used to prepay $150.0 million of term
loans under its 1994 Bank Credit Agreement on the same date. Interest on the
Senior Debentures Due 2005 is payable semiannually on March 15 and September 15,
and the
<PAGE>
debentures are not redeemable prior to maturity and are not entitled to any
sinking fund.
Maturities: As of September 27, 1997, aggregate annual maturities of long-term
debt for the next five years are $0.5 million in 1998, $0.7 million in 1999,
$1.2 million in 2000, $335.5 million in 2001 and $0.1 million in 2002.
Note F - Leases
Minimum commitments for rental expenditures under noncancellable operating
leases are as follows (in thousands):
1998............................................. $ 16,359
1999............................................. 14,373
2000............................................. 10,418
2001............................................. 7,974
2002............................................. 5,873
Later years...................................... 23,252
--------
78,249
Less sublease income............................. 102
--------
Total minimum lease payments................ $ 78,147
========
Approximately 37% of the operating leases pertain to real estate. The remainder
covers a variety of machinery and equipment. Certain operating leases,
principally for office facilities, contain escalation clauses for increases in
operating costs, property taxes and insurance. For the 1997, 1996 and 1995
fiscal years, rental expense for all operating leases was $19,751,000,
$20,023,000 and $18,542,000, respectively. Sublease income was not material in
any of these years.
Note G - Shareholders' Equity
Shares of the Company's voting and nonvoting common stock, par value $.01 per
share, authorized, issued and outstanding at September 27, 1997 and September
28, 1996, respectively, were as follows:
Shares Shares Shares
September 27, 1997 Authorized Issued Outstanding
------------------ ----------- ---------- -----------
Common Stock.................. 200,000,000 65,344,561 56,356,728
Nonvoting Common Stock........ 15,000,000 3,048,888 3,048,888
----------- ---------- ----------
215,000,000 68,393,449 59,405,616
=========== ========== ==========
Shares Shares Shares
September 28, 1996 Authorized Issued Outstanding
------------------ ----------- ---------- -----------
Common Stock.................. 200,000,000 61,366,741 55,852,652
Nonvoting Common Stock........ 15,000,000 7,026,708 7,026,708
----------- ---------- ----------
215,000,000 68,393,449 62,879,360
=========== ========== ==========
All shares have similar rights and privileges except for voting rights. Holders
of Nonvoting Common Stock are entitled, subject to certain limitations, to
exchange such shares for Common Stock.
On September 27, 1997 and September 28, 1996, the Company had 30,000,000 shares
of preferred stock authorized, par value $.01 per share, none of which were
issued and outstanding.
<PAGE>
During the 1997 fiscal year, the Company purchased 1,750,000 shares of Nonvoting
Common Stock from a shareholder group in a privately-negotiated transaction.
Immediately thereafter, these shares were converted to voting Common Stock held
as treasury stock. Additionally, the Company exchanged 2,227,820 shares of
Nonvoting Common Stock for voting Common Stock. During the 1997 fiscal year,
outstanding shares also changed due to (i) the purchase of 2,794,120 additional
shares of treasury stock; (ii) the issuance of 488,280 shares of treasury stock
to the ESOP Plan (see Note M); (iii) the issuance of 250,101 shares of treasury
stock to settle Performance Unit awards (see Note Q); (iv) the issuance of
322,995 shares of treasury stock for exercise of stock options (see Note Q); and
(v) the issuance of 9,000 shares for other transactions.
Changes in shareholders' equity of the Company for fiscal 1995, 1996 and 1997
were (dollar amounts in thousands):
<TABLE>
<CAPTION>
Capital
in Currency Treasury
Common excess of Accumulated translation shares,
Stock par value deficit adjustment at cost Total
------ --------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance October 1, 1994........... $ 683 $883,838 $ (302,299) $ 3,955 $ (11,813) $574,364
Purchase of treasury stock........ (37,858) (37,858)
Issuance of treasury stock........ (1,163) 13,333 12,170
Awards issued under
Equity Incentive Plans........... 1 5,818 5,819
Amortization of unearned
compensation..................... 2,255 2,255
Exercise of stock options......... 73 73
Forfeiture of restricted shares... 126 (126) -
Net income for the period......... 68,394 68,394
Translation adjustment............ (9,777) (9,777)
------ -------- --------- ------- --------- --------
Balance September 30, 1995........ 684 890,947 (233,905) (5,822) (36,464) 615,440
Purchase of treasury stock........ (45,038) (45,038)
Issuance of treasury stock........ (10,978) 9,730 (1,248)
Awards issued under
Equity Incentive Plans........... 3,205 3,205
Amortization of unearned
compensation..................... 2,248 2,248
Exercise of stock options......... (297) 4,145 3,848
Forfeiture of restricted shares... 60 (60) -
Net income for the period......... 40,906 40,906
Translation adjustment............ (3,441) (3,441)
------- -------- ---------- -------- --------- --------
Balance September 28, 1996........ 684 885,185 (192,999) (9,263) (67,687) 615,920
Purchase of treasury stock........ (53,419) (53,419)
Issuance of treasury stock........ (4,613) 8,890 4,277
Awards issued under
Equity Incentive Plans........... 2,082 2,082
Amortization of unearned
compensation..................... 176 176
Exercise of stock options......... (224) 3,933 3,709
Tax benefit on stock options...... 231 231
Net income for the period......... 58,698 58,698
Translation adjustment............ (948) (948)
------- --------- ----------- -------- --------- --------
Balance September 27, 1997........ $ 684 $ 882,837 $ (134,301) $(10,211) $(108,283) $630,726
======= ========= =========== ======== ========= ========
</TABLE>
Note H - Other Expense (Income) - Net
Other expense (income) - net consisted of the following (in thousands):
1997 1996 1995
-------- -------- --------
Loss (gain) on sale of assets - net.. (9,487) $ 3,651 $ -
Provision for legal contingencies.... - 3,990 -
Interest income...................... (2,991) (2,583) (2,133)
Other................................ (312) 1,046 236
-------- -------- --------
Total........................... $(12,790) $ 6,104 $ (1,897)
======== ======== ========
During the 1997 fiscal year, the Company sold Advanced Textiles, Inc. (a small
fiberglass business) for $4.6 million in cash and $4.1 million in securities and
recognized a pre-tax gain of $4.8 million from the sale. Also during the 1997
fiscal year, the Company sold its Sedgefield chemical business for cash and
recognized a pre-tax gain of $4.3 million from the sale. These businesses had
<PAGE>
combined sales of $5.3 million and $16.9 million during the 1997 and 1996 fiscal
years, respectively. On April 27, 1996, the Company sold its J.G. Furniture
operation for $1.1 million in cash and $3.6 million in securities. J.G.
Furniture had sales of $17.4 million during the 1995 fiscal year. Additionally,
the Company recorded a charge for $2.3 million in 1996 on the sale of a
non-operating asset. The Company recorded a charge of $4.0 million in the 1996
fiscal year for legal contingencies.
Note I - Income Taxes
The sources of income before income taxes were as follows (in thousands):
1997 1996 1995
-------- -------- --------
United States............................... $ 89,233 $ 70,598 $118,012
Foreign..................................... 7,138 4,752 2,089
-------- -------- --------
Total $ 96,371 $ 75,350 $120,101
======== ======== ========
Income tax expense consisted of (in thousands):
1997 1996 1995
-------- -------- --------
Current:
United States.......................... $ 32,799 $ 36,375 $ 31,418
Foreign................................ 249 447 288
-------- -------- --------
Total current 33,048 36,822 31,706
Deferred:
United States.......................... 4,048 (3,716) 18,582
Foreign................................ 577 641 1,419
-------- -------- --------
Total deferred.................... 4,625 (3,075) 20,001
-------- -------- --------
$ 37,673 $ 33,747 $ 51,707
======== ======== ========
Income tax expense is different from the amount computed by applying the U.S.
federal income tax rate of 35% to income before income taxes as follows (in
thousands):
1997 1996 1995
-------- -------- --------
U.S. tax at statutory rate.................. $ 33,730 $ 26,373 $ 42,035
Goodwill amortization with no tax benefit... 6,140 6,212 6,166
State income taxes, net of federal benefit.. 1,712 1,465 3,622
Foreign Sales Corporation................... (2,865) (913) (867)
Other....................................... (1,044) 610 751
-------- -------- --------
$ 37,673 $ 33,747 $ 51,707
======== ======== ========
At September 27, 1997, the Company had $44.3 million of deferred tax assets and
$202.4 million of deferred tax liabilities which have been netted for
presentation purposes. At September 28, 1996, the Company had $40.4 million of
deferred tax assets and $196.9 million of deferred tax liabilities which have
been netted for presentation purposes. Operating loss and tax credit
carryforwards with related tax benefits of $2.1 million (net of $2.9 million
valuation allowance) at September 27, 1997, and $2.7 million (net of $2.9
million valuation allowance) at September 28, 1996, expire from 1998 to 2008.
Net deferred tax liabilities at September 27, 1997 and September 28, 1996
consisted of the following (in thousands):
1997 1996
--------------------- ---------------------
Current Noncurrent Current Noncurrent
Fixed assets.............. $ - $ 105,178 $ - $ 104,187
Inventory valuation....... 60,142 - 60,142 -
Accruals, allowances
and other............... (15,794) 10,763 (13,188) 8,142
Operating loss and tax
credit carryforwards.... (566) (1,578) (579) (2,155)
-------- --------- -------- ---------
Total................ $ 43,782 $ 114,363 $ 46,375 $ 110,174
======== ========= ======== =========
<PAGE>
Note J - Supplemental Disclosures of Cash Flow Information
(in thousands) 1997 1996 1995
-------- -------- --------
Interest paid - net................... $ 56,565 $ 56,244 $ 52,705
======== ======== ========
Income taxes paid - net............... $ 37,086 $ 25,089 $ 38,973
======== ======== ========
The Company's noncash investing and financing activities not disclosed elsewhere
included the issuance of convertible notes in the amount of $12.2 million
related to the acquisition of The Bacova Guild, Ltd. during the 1995 fiscal year
and exchange of equipment for notes receivable in the amount of $2.9 million
during the 1995 fiscal year.
Note K - Retirement Benefits
The Company's U.S. defined benefit pension plan provides benefits to most of its
U.S. employees and certain employees in foreign countries, based on their
compensation over their working careers. The funding policy for this plan is to
contribute annually an amount based on the recommendation of the plan's actuary.
Employees also contribute a percentage of their compensation. Participants
become fully vested at the end of five years of service.
The following sets forth the funded status of the plan (in thousands):
1997 1996
--------- ---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $(281,212) in 1997 and
$(260,261) in 1996................................... $(299,800) $(273,994)
--------- ---------
Projected benefit obligation for service rendered
to date.............................................. (337,730) (310,992)
Less plan assets at fair value, primarily listed
stocks and bonds, short-term investment funds
and insurance company contracts...................... 349,069 298,346
--------- ---------
Plan assets in excess of (less than) projected
benefit obligation................................... 11,339 (12,646)
Unrecognized prior service cost....................... 469 625
Unrecognized net loss................................. 15,280 34,652
--------- ---------
Pension asset recognized in the balance sheet......... $ 27,088 $ 22,631
========= =========
During the 1996 fiscal year, the plan made cash lump sum payments to the former
member employees of a divested division. Curtailment and settlement losses of
$3.7 million in 1996 were recognized and offset against reserves established at
the time of the divestiture.
Net pension cost included the following components for the 1997, 1996 and 1995
fiscal years (in thousands):
1997 1996 1995
-------- -------- --------
Service cost - benefits earned during the
period...................................... $ 7,354 $ 7,991 $ 4,385
Interest cost on projected benefit
obligation.................................. 25,128 24,093 24,148
Return on assets, net of deferred gain
of $37,690 in 1997, $19,579 in 1996,
and $20,361 in 1995......................... (24,077) (22,686) (20,270)
Amortization:
Unrecognized prior service cost............. 156 163 541
Unrecognized losses......................... 1,982 2,928 3,892
-------- -------- --------
Net pension cost............................. $ 10,543 $ 12,489 $ 12,696
======== ======== ========
<PAGE>
The following assumptions were used at each measurement date:
1997 1996 1995
-------- -------- -------
Discount rate.................................. 7.75% 8.0% 7.75%
Long-term rate of return on plan assets........ 8.5% 8.5% 8.5%
Long-term rate of increase in compensation..... 3.75% 3.75% 3.75%
Pension cost for all plans, including those of foreign subsidiaries, was
$10,842,000, $12,940,000 and $13,112,000 for the 1997, 1996 and 1995 fiscal
years, respectively.
Note L - Other Postretirement Benefit Plans
In addition to the Company's pension plan, the Company has two defined benefit
postretirement medical plans available to most of its U.S. employees who elect
participation and one life insurance defined benefit postretirement plan
covering only certain employees. The medical plans include a health care plan
for employees electing early retirement between the ages of 55 and 65 and a
Medicare supplement plan for retired employees age 65 and older. The medical
plans are contributory, with retiree contributions adjusted annually, and
contain other cost-sharing features such as deductibles and coinsurance. The
life insurance plan is non-contributory and was closed to new members in 1973.
The Company's policy is to fund the cost of the medical plans and the life
insurance plan as expenses are incurred. The Company accounts for the plans
under SFAS NO. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", which requires that the cost of such benefits be accrued over
the employees' service lives. The Company's annual postretirement benefit costs
are not significant.
The following table shows the three plans' combined funded status reconciled
with the amounts recognized in the Company's balance sheets as of September 27,
1997 and September 28, 1996 (in thousands) and assumptions:
1997 1996
------------------ ------------------
Life Life
Medical Insurance Medical Insurance
Plans Plan Plans Plan
------- ------- ------- -------
Accumulated postretirement benefit
obligation:
Retirees............................. $(1,764) $(4,858) $ (955) $(5,028)
Fully eligible active plan
participants........................ (3,098) - (2,241) -
Other active plan participants....... (3,521) - (2,530) -
------- ------- ------- -------
(8,383) (4,858) (5,726) (5,028)
Plan assets at fair value, primarily
bonds................................ 86 2,279 249 2,399
------ ------- ------- -------
Accumulated postretirement benefit
obligation in excess of plan assets.. (8,297) (2,579) (5,477) (2,629)
Unrecognized net (gain) loss.......... 5,947 (531) 3,266 (551)
------ ------- ------- -------
Accrued postretirement benefit cost... $(2,350) $(3,110) $(2,211) $(3,180)
======= ======= ======= =======
Discount rate......................... 7.75% 7.75% 8.0% 8.0%
Long-term rate of return on plan
assets............................... 8.5% 8.5% 8.5% 8.5%
The annual rate of increase in health care expenses was 7% in the 1997 and 1996
fiscal years. This rate was assumed to be 7% for the 1998 fiscal year and to
decrease gradually to 6% in 2004 and remain at that level thereafter.
<PAGE>
Note M - Employee Stock Ownership Plan
The Company's Employee Stock Ownership Plan ("ESOP") is an individual account,
defined contribution plan designed to be qualified under the relevant provisions
of the Internal Revenue Code of 1986, as amended (the "Code"). The ESOP is
designed to invest primarily in the Company's stock. The Internal Revenue
Service has issued a favorable determination letter stating that the ESOP
qualifies under the Code and that the ESOP Trust is exempt from tax.
Substantially all U.S. salaried and hourly employees who complete a minimum
period of service are eligible to participate in the ESOP. The ESOP Plan also
provides for 100% vesting after one year of participating service and for
distributions of shares allocated to participant accounts at the time of
termination of employment with the Company.
Pursuant to a Board-established formula linked to the Company's annual operating
results, a contribution of 483,076 shares of Common Stock valued at $5.7 million
was made to the ESOP for fiscal year 1995, a contribution of 488,280 shares of
Common Stock valued at $5.2 million was made to the ESOP for fiscal year 1996,
and a cash contribution of $3.1 million will be made to the ESOP for fiscal year
1997. Such amounts have been charged to operations in the 1995, 1996 and 1997
fiscal years, respectively.
Note N - Contingencies
The Company and certain of its current and former direct and indirect corporate
predecessors, subsidiaries and divisions have been identified by the United
States Environmental Protection Agency, by the environmental agencies in several
states and by private parties as potentially responsible parties at a number of
hazardous waste disposal sites under the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("Superfund") and comparable state laws
and, as such, may be liable for the cost of cleanup and other remedial
activities at these sites. The Company may also have liability for such matters
pursuant to contractual obligations relating to divested property or with
respect to sites which may be identified in the future. With respect to certain
of these sites, other persons have also been identified as potentially
responsible parties, and in such circumstances the responsibility for cleanup
and other remedial activities is typically shared among such parties based on an
allocation formula. The Company is also involved in remedial responses and
voluntary environmental cleanups at other sites which are not currently the
subject of proceedings of any kind under Superfund or comparable state laws. The
Company has established reserves in its financial statements for such
environmental liabilities, including related legal fees and other transaction
costs, in the aggregate amount of $5.7 million. The provision for environmental
liabilities is based on the Company's estimate of allocations of liability among
potentially responsible parties (and the likelihood of contribution by such
parties), information concerning the scope of contamination, estimated
remediation costs, estimated transaction costs and other factors. The Company
has also recorded $1.1 million for estimated recoveries under insurance policies
to the extent that coverage for such claims has been acknowledged by the
relevant insurer and for estimated recoveries from third parties.
The Company and its subsidiaries also have sundry claims and other lawsuits
pending against them and also have certain guarantees which were made in the
ordinary course of business. It is not possible to determine with certainty the
ultimate liability of the Company in these matters, if any, but in the opinion
of management, their outcome should have no material adverse effect upon the
financial condition or results of operations of the Company.
Note O - Segment and Other Information
The Company is one of the largest and most diversified manufacturers of textile
products in the world. It is a leading developer, marketer and manufacturer of
fabrics and other textile products utilized in a wide variety of apparel and
<PAGE>
interior furnishings end uses. The Company operates in two areas: products for
apparel markets and products for interior furnishings markets. Sales, operating
income, identifiable assets, depreciation and amortization and capital
expenditures for these segments were as follows (dollars in millions):
1997 1996 1995
-------- -------- ---------
Net sales
Apparel................................ $1,253.2 $1,328.3 $1,347.1
Interior furnishings................... 837.5 854.0 862.1
-------- -------- --------
Total........................... $2,090.7 $2,182.3 $2,209.2
======== ======== ========
Operating income
Apparel................................ $ 112.1 $ 121.7 $ 107.1
Interior furnishings................... 43.6 55.6 67.4
Loss on closing of division............ - (29.9) -
Provision for restructuring............ (12.1) - -
-------- -------- --------
Total........................... 143.6 147.4 174.5
Interest expense......................... 60.0 65.9 56.3
Other expense (income) - net............. (12.8) 6.1 (1.9)
-------- -------- --------
Income before income taxes............... $ 96.4 $ 75.4 $ 120.1
======== ======== ========
Operating margin
Apparel................................ 8.9% 9.2% 8.0%
Interior furnishings................... 5.2 6.5 7.8
---- ---- ----
Total........................... 6.9% 6.8% 7.9%
==== ==== ====
Identifiable assets
Apparel................................ $1,088.7 $1,091.8 $1,130.4
Interior furnishings................... 707.3 734.2 748.8
Corporate.............................. 77.7 59.9 52.5
-------- -------- --------
Total........................... $1,873.7 $1,885.9 $1,931.7
======== ======== ========
Depreciation and amortization
Apparel................................ $ 50.9 $ 52.3 $ 53.4
Interior furnishings................... 34.2 35.0 33.6
-------- -------- --------
Total........................... $ 85.1 $ 87.3 $ 87.0
======== ======== ========
Capital expenditures
Apparel................................ $ 72.0 $ 48.6 $ 55.4
Interior furnishings................... 24.5 30.6 46.5
-------- -------- --------
Total........................... $ 96.5 $ 79.2 $ 101.9
======== ======== ========
The Company primarily markets its products to approximately 12,000 customers in
the United States. The Company also markets its products to customers in Canada,
Mexico, Latin America, Europe and Asian countries. For the 1997 fiscal year, no
single customer represented more than 10% of the Company's net sales, and the
Company's 10 largest customers accounted for approximately 28% of net sales.
Export sales from the Company's United States operations to unaffiliated
customers were as follows (in millions):
1997 1996 1995
------- -------- --------
Asia..................................... $ 38.6 $ 51.5 $ 32.0
Europe................................... 78.3 61.5 41.5
North and South America.................. 108.2 91.5 78.5
Other.................................... 14.2 9.0 9.2
------ ------ ------
Total........................... $239.3 $213.5 $161.2
====== ====== ======
Note P - Financial Instruments
The Company utilizes interest rate agreements and foreign exchange contracts to
manage interest rate and foreign currency exposures. The principal objective of
such contracts is to minimize the risks and/or costs associated with financial
and global operating activities. The Company does not utilize financial
instruments for trading or other speculative purposes. The counterparties to
these contractual
<PAGE>
arrangements are a diverse group of major financial institutions with which the
Company also has other financial relationships. The Company is exposed to credit
loss in the event of nonperformance by these counterparties. However, the
Company does not anticipate nonperformance by the other parties, and no material
loss would be expected from their nonperformance.
INTEREST RATE INSTRUMENTS: The Company enters into interest rate swap, cap,
floor and collar agreements to reduce the impact of changes in interest rates on
all or a portion of its floating rate debt. The swap agreements are contracts to
exchange floating rate for fixed interest payments periodically over the life of
the agreements without the exchange of the underlying notional amounts. The
notional amounts of interest rate agreements are used to measure interest to be
paid or received and do not represent the amount of exposure to credit loss. The
net cash paid for interest rate cap, floor and collar agreements is recorded in
intangibles and deferred charges in the consolidated balance sheet and charged
to interest expense over the life of the agreement. The net cash amounts paid or
received on swap agreements are accrued and recognized as an adjustment to
interest expense. If an arrangement is replaced by another instrument and no
longer qualifies as a hedge instrument, then it is marked to market and carried
on the balance sheet at fair value.
As of September 27, 1997 and September 28, 1996, the Company had the
following interest rate instruments in effect (notional amounts in millions; the
cap, swap, floor and collar rates are based on 3-month LIBOR):
1997
------------------------------------------
Notional Strike
Amount Rate Period
-------- ------ -----------
Interest rate swaps $200 7.37% 10/95-10/00
1996
------------------------------------------
Notional Strike
Amount Rate Period
-------- ------ -----------
Interest rate caps $100 9.50% 04/96-04/97
300 7.00 10/96-10/97
300 9.50 10/96-10/97
200 10.00 10/96-10/97
Interest rate swaps $200 7.37% 10/95-10/00
Interest rate collars $ 50 4.75% 10/96-10/97
7.00
50 5.03 10/96-10/97
7.00
Interest rate floors $100 5.50% 01/96-10/96
250 5.25 01/96-10/96
300(a) 5.60 10/96-10/97
(a) Entered into on October 3, 1996.
FOREIGN EXCHANGE INSTRUMENTS: The Company enters into forward currency exchange
contracts in the regular course of business to manage its exposure against
foreign currency fluctuations on sales, raw material and fixed asset purchase
transactions denominated in foreign currencies. Foreign currency receivables
which have forward exchange contracts are recorded in U.S. dollars at the
applicable forward rate. The foreign exchange contracts on receivables ($27.1
million and $19.8 million at September 27, 1997 and September 28, 1996,
respectively) require the Company to exchange British pounds, German marks,
French francs, Canadian dollars and Italian lira for U.S. dollars and mature in
one to eight months. Forward exchange contracts related to raw material and
fixed asset purchase transactions are recognized as adjustments to the bases of
the underlying assets. At September 27, 1997, the Company had $10.6 million of
forward currency exchange contracts maturing in one to eleven months which
related to purchases of wool and machinery denominated in
<PAGE>
Australian dollars, German marks and Swiss francs, compared to $4.8 million at
September 28, 1996. At September 27, 1997 and September 28, 1996, deferred gains
and losses on foreign exchange contracts are not material to the consolidated
financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were
used in estimating the indicated fair values of financial instruments:
Cash and Cash Equivalents: The carrying amount approximates fair value because
of the short maturity of those instruments.
Short-term Investments: The fair values are estimated based on quoted market
prices for these or similar instruments.
Long-term Investments and Receivables: The fair values are estimated based on
one of the following methods: (i) quoted market prices; (ii) current rates for
similar issues; (iii) recent transactions for similar issues; or (iv) present
value of expected cash flows.
Short-term and Long-term Debt: The fair value is estimated based on current
rates offered for similar debt. At September 27, 1997, long-term debt with a
carrying value of $806.9 million had an estimated fair value of $809.2 million.
At September 28, 1996, long-term debt with a carrying value of $838.9 million
had an estimated fair value of $834.9 million.
Interest Rate Instruments: The fair values are the estimated amounts that the
Company would receive or pay to terminate the agreements at the reporting date,
taking into account current interest rates and the current creditworthiness of
the counterparties. At September 27, 1997 and September 28, 1996, the carrying
amounts of these instruments were a $0.6 million liability and a $0.2 million
liability, respectively. At September 27, 1997, the Company estimates it would
have paid $8.4 million and at September 28, 1996 would have paid $7.2 million to
terminate the agreements.
Foreign Currency Contracts: The fair values of foreign currency contracts (used
for hedging purposes) are estimated by obtaining quotes from brokers. At
September 27, 1997 and September 28, 1996, there were no carrying amounts
related to foreign currency contracts in the consolidated balance sheets.
It is estimated that the carrying value of the Company's other financial
instruments approximated fair value at September 27, 1997 and September 28,
1996.
Note Q - Stock-Based Compensation
Under the Company's various Equity Incentive Plans, the Company is authorized to
award restricted shares of the Company's common stock, options to purchase
common stock, or Performance Units which are dependent upon achievement of
specified performance goals and are payable in common stock. Awards presently
outstanding are subject to vesting schedules ranging from three to five years
depending on whether performance goals are achieved. Stock options granted
generally have a maximum term of ten years. Under these plans, 739,507 shares of
common stock are reserved to settle Performance Unit awards currently
outstanding and 1,127,622 shares to settle additional future awards remain
available.
<PAGE>
A summary of the Company's stock option activity and related information for the
1997, 1996 and 1995 fiscal years follows:
1997 1996 1995
----------------- ---------------- ---------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Options Exercise Options Exercise
(000) Price (000) Price (000) Price
------- --------- -------- -------- ------- -------
Outstanding at
beginning of year..... 6,203 $11.57 4,202 $11.55 4,130 $11.61
Granted................ 27 11.70 2,411 11.59 140 10.13
Exercised.............. (323) 11.41 (338) 11.39 (6) 11.63
Forfeited.............. (153) 11.68 (72) 11.99 (62) 12.20
------ ------ ------
Outstanding at
end of year........... 5,754 $11.58 6,203 $11.57 4,202 $11.55
======= ====== ======
Exercisable at end
of year............... 3,483 $11.57 3,807 $11.55 3,472 $11.55
Per share weighted-average
fair value of options
granted during the year.. $5.24 $5.12 $4.86
The following table summarizes information about stock options outstanding at
September 27, 1997:
Options Outstanding Options Exercisable
----------------------------------------- ------------------------
Range of Weighted-Average Weighted- Weighted-
Exercise Number Remaining Average Number Average
Prices (000) Contractual Life Exercise Price (000) Exercise Price
- ------------ -------- ---------------- -------------- -------- --------------
$ 8.40 to 10.40 646 5.1 $ 9.71 647 $ 9.71
$10.70 to 14.90 5,040 6.3 $11.68 2,768 $11.76
$15.60 to 21.93 68 4.5 $21.47 68 $21.47
------ ------
5,754 6.1 $11.58 3,483 $11.57
====== ======
The Company has elected to follow Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees". Under APB 25, no compensation
expense is recognized for the Company's employee stock options because the
exercise price of the options equals the market price of the underlying stock on
the date of grant. Total compensation cost charged against income related to
restricted share and Performance Unit awards was $4.3 million, $7.9 million and
$7.9 million for the 1997, 1996 and 1995 fiscal years, respectively.
The following pro forma information regarding net income and net income per
share is required when APB 25 accounting is elected, and was determined as if
the Company had accounted for its employee stock options under the fair value
method of SFAS No. 123, "Accounting for Stock-Based Compensation." The fair
values for these options were estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 6.12% and 5.81% for fiscal year 1997
and 1996, respectively; volatility factors of the expected market price of the
Company's common stock of 0.34; dividend yields of 0%; and a weighted-average
expected life of the options of six years. For purposes of pro forma
disclosures, the estimated fair values of the options are amortized to expense
over the option's vesting periods (in thousands except for per share
information):
1997 1996
--------- ---------
Net income as reported................ $ 58,698 $ 40,906
Pro forma net income.................. $ 56,266 $ 38,794
Net income per share as reported...... $ 0.96 $ 0.65
Pro forma net income per share........ $ 0.92 $ 0.61
<PAGE>
During the initial phase-in period, as required by SFAS No. 123, the pro forma
amounts were determined based on stock option grants in the 1996 and 1997 fiscal
years only. Therefore, the pro forma amounts for compensation cost may not be
indicative of the effects on pro forma net income and pro forma net income per
share for future years.
Note R - Quarterly Results of Operations (unaudited)
The Company's unaudited quarterly results of operations are presented below (in
thousands, except for per share data).
Fiscal 1997 Quarters
December March June September
-------- -------- -------- ---------
Net sales.............................. $476,490 $537,161 $553,590 $523,442
Cost of sales.......................... 403,910 450,196 463,975 440,617
Income tax expense..................... (7,247) (14,088) (7,235) (9,103)
Net income (a)......................... $ 9,385 $ 21,115 $ 13,491 $ 14,707
NET INCOME PER SHARE (a)............... $ 0.15 $ 0.34 $ 0.22 $ 0.25
COMMON STOCK PRICES
High................................. 12 13 5/8 12 3/8 14 11/16
Low.................................. 9 3/4 10 3/4 10 1/8 11 5/16
Fiscal 1996 Quarters
December March June September
-------- -------- -------- ---------
Net sales.............................. $512,694 $572,081 $574,571 $523,001
Cost of sales.......................... 434,689 471,760 471,697 436,014
Income tax expense..................... (7,438) (14,884) (2,256) (9,169)
Income before extraordinary item (b)... 8,473 20,701 570 11,859
Extraordinary item..................... (697) - - -
Net income............................. $ 7,776 $ 20,701 $ 570 $ 11,859
PER SHARE DATA
Income before extraordinary item (b)... $ 0.13 $ 0.33 $ 0.01 $ 0.19
Extraordinary item..................... (0.01) - - -
--------- -------- -------- -------
Net income............................. $ 0.12 $ 0.33 $ 0.01 $ 0.19
COMMON STOCK PRICES
High................................. 14 1/4 13 1/4 14 7/8 14 1/2
Low.................................. 11 11 3/8 11 1/4 9 7/8
(a) June quarter 1997 includes a $7.3 million charge for restructuring
associated with reducing staff, consolidation of certain yarn facilities
and exiting the residential carpet line, as well as $3.0 million for
certain other non-recurring charges, each net of income taxes.
(b) June quarter 1996 includes a $20.3 million loss on closing the Knitted
Fabrics division and $4.7 million for certain other non-recurring
charges, each net of income taxes.
<PAGE>
STATISTICAL REVIEW
Burlington Industries, Inc. and Subsidiary Companies
(dollar amounts in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales.................... $2,090,683 $2,182,347 $2,209,191 $2,127,067 $2,057,943
Operating income before
interest and taxes.......... 143,643 147,390 174,498 204,242 214,141
Interest expense............. 60,062 65,936 56,294 49,841 93,389
Income tax expense........... 37,673 33,747 51,707 69,982 58,514
Income from continuing
operations.................. 58,698 41,603 68,394 99,299 68,445
Income per common share
from continuing operations.. 0.96 0.66 1.05 1.46 1.00
Dividends per common share... - - - - -
FINANCIAL POSITION AT YEAR END
Current assets............... $ 697,627 $ 719,370 $ 732,837 $ 733,538 $ 664,552
Fixed assets - net........... 584,647 569,540 575,080 549,942 537,088
Total assets................. 1,873,692 1,885,942 1,931,731 1,907,148 1,854,320
Current liabilities.......... 263,595 265,352 272,397 315,468 314,265
Long-term liabilities........ 865,008 894,496 932,227 915,884 948,960
Shareholders' equity......... 630,726 615,920 615,440 574,364 484,215
Current ratio................ 2.6 2.7 2.7 2.3 2.1
Total debt as % of
capitalization.............. 56.1% 57.7% 59.7% 61.3% 67.5%
OTHER DATA
Capital expenditures......... $ 96,500 $ 79,174 $ 101,876 $ 98,869 $ 80,590
Number of employees at
year end.................... 20,100 21,000 22,500 23,800 23,600
Cash interest coverage
ratio....................... 4.0 4.3 4.9 6.1 4.0
</TABLE>
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Burlington Industries, Inc.
We have audited the accompanying consolidated balance sheets of Burlington
Industries, Inc. and Subsidiary Companies as of September 27, 1997 and September
28, 1996, and the related consolidated statements of operations and cash flows
for each of the three years in the period ended September 27, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Burlington Industries, Inc. and Subsidiary Companies at September 27, 1997 and
September 28, 1996, and the consolidated results of their operations and their
cash flows, for each of the three years in the period ended September 27, 1997,
in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Greensboro, North Carolina
October 30, 1997
Exhibit 22
SUBSIDIARIES
Set forth below is a list of all subsidiaries of Burlington Industries, Inc.
(the "Corporation")* and, as to each person named, the percentage of voting
securities owned, or other bases of control, by its immediate parent.
Percentage of Voting
State or Power Represented by
Jurisdiction Securities Owned by
of the Corporation on
Name Incorporation September 27, 1997
- ----------------------- ------------- ---------------------
Burlington Fabrics Inc. Delaware 100%
B.I. Funding, Inc. Delaware 100%
- ----------------------------
* The names of 19 domestic subsidiaries (5 of which are inactive) and 15
foreign subsidiaries (one of which is inactive) have been omitted
because, considered in the aggregate, they would not constitute a
significant subsidiary. All of the foregoing subsidiaries are included
in the consolidated financial statements of the Corporation.
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Burlington Industries, Inc. of our report dated October 30, 1997, included in
the 1997 Annual Report to Shareholders of Burlington Industries, Inc.
Our audits also included the financial statement schedule of Burlington
Industries, Inc. listed in the accompanying index to financial statements. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-95350) of Burlington Industries, Inc. and in the related
Prospectus of our report dated October 30, 1997, with respect to the
consolidated financial statements incorporated herein by reference and our
report included in the above paragraph with respect to the financial statement
schedule included in this Annual Report (Form 10-K) of Burlington Industries,
Inc.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-49894) pertaining to the Burlington Industries, Inc. 1992
Equity Incentive Plan and the Burlington Industries, Inc. Equity Incentive Plan
and (Form S-8 No. 333-09501) pertaining to the Burlington Industries, Inc. 1995
Equity Incentive Plan of Burlington Industries, Inc. of our report dated October
30, 1997, with respect to the consolidated financial statements incorporated
herein by reference and our report included in the above paragraph with respect
to the financial statement schedule included in this Annual Report (Form 10-K)
of Burlington Industries, Inc.
/s/Ernst & Young LLP
Greensboro, North Carolina
December 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
