<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended June 29, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to ____________ to ____________
Commission File Number 0-20080
GALEY & LORD, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1593207
------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) (Identification No.)
980 Avenue of the Americas
New York, New York 10018
- ---------------------------------------- --------------------
(Address of principal executive offices) Zip Code
212/465-3000
------------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 periods 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value -- 11,574,841 shares as of August 6, 1996.
Exhibit Index at page 21
1
<PAGE>
INDEX
GALEY & LORD, INC.
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- 3
June 29, 1996, July 1, 1995
and September 30, 1995
Consolidated Statements of Income -- 4
Three and nine months ended June 29, 1996
and July 1, 1995
Consolidated Statements of Cash Flows -- 5
Nine months ended June 29, 1996
and July 1, 1995
Notes to Consolidated Financial Statements -- 6-12
June 29, 1996
Item 2. Management's Discussion and Analysis of 13-18
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security 19
Holders
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALEY & LORD, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
JUNE 29, JULY 1, SEPTEMBER 30,
1996 1995 1995
(Unaudited) (Unaudited) *
----------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 602 $ 4,988 $ 4,437
Trade accounts receivable 87,388 91,296 87,083
Sundry notes and accounts receivable 116 742 158
Inventories 78,729 91,309 86,232
Income taxes receivable - 418 1,489
Deferred income taxes 1,769 - 1,835
Prepaid expenses and other current assets 733 1,737 575
-------- -------- --------
Total current assets 169,337 190,490 181,809
Property, plant and equipment, at cost 158,950 144,162 142,614
Less accumulated depreciation and
amortization (52,642) (47,707) (49,784)
-------- -------- --------
106,308 96,455 92,830
Deferred charges 1,173 856 873
Intangibles 39,558 29,859 29,527
-------- -------- --------
$316,376 $317,660 $305,039
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 13,620 $ 13,651 $ 13,675
Trade accounts payable 20,837 23,616 18,415
Accrued salaries and employee benefits 8,820 8,947 8,678
Accrued liabilities 4,289 3,797 6,030
Deferred income taxes - 1,002 -
Income taxes payable 2,121 - -
-------- -------- --------
Total current liabilities 49,687 51,013 46,798
Commitments
Long-term debt 164,009 164,736 162,084
Other long-term liabilities 162 228 212
Deferred income taxes 15,467 14,173 14,066
Stockholders' equity:
Common stock 120 119 119
Contributed capital in excess of par
value 34,429 34,553 34,416
Retained earnings 53,321 52,905 47,411
Treasury stock, at cost (819) (67) (67)
-------- -------- --------
Total stockholders' equity 87,051 87,510 81,879
-------- -------- --------
$316,376 $317,660 $305,039
======== ======== ========
</TABLE>
*Condensed from audited financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE>
GALEY & LORD, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- --------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 115,437 $127,205 $300,965 $387,787
Cost of sales 102,042 116,158 270,265 346,686
--------- -------- -------- --------
Gross profit 13,395 11,047 30,700 41,101
Selling, general and administrative
expenses 3,616 4,175 10,102 12,646
Amortization of goodwill 321 284 879 840
--------- -------- -------- --------
Operating income 9,458 6,588 19,719 27,615
Interest expense
2,819 3,300 8,509 9,993
Write-off of merger costs
- - 1,600 -
--------- -------- -------- --------
Income before income taxes and
extraordinary loss 6,639 3,288 9,610 17,622
Income tax expense:
Current 1,616 537 2,233 3,799
Deferred 972 745 1,467 2,977
--------- -------- -------- --------
Income before extraordinary loss 4,051 2,006 5,910 10,846
Extraordinary loss from debt
refinancing, net of taxes of $770 - (1,342) - (1,342)
--------- -------- -------- --------
Net income $ 4,051 $ 664 $ 5,910 $ 9,504
========= ======== ======== ========
Net income per common share:
Primary:
Average common shares outstanding 11,889 12,001 11,942 12,035
Income per share before
extraordinary loss $ .34 $ .17 $ .49 $ .90
Extraordinary loss from debt
refinancing - (.11) - (.11)
--------- -------- -------- --------
Net income per common share -
primary $ .34 $ .06 $ .49 $ .79
========= ======== ======== ========
Fully diluted:
Average common shares outstanding 11,889 12,034 11,949 12,043
Income per share before
extraordinary loss $ .34 $ .17 $ .49 $ .90
Extraordinary loss from debt
refinancing - (.11) - (.11)
--------- -------- -------- --------
Net income per common share -
fully diluted $ .34 $ .06 $ .49 $ .79
========= ========= =========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GALEY & LORD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
June 29, July 1,
1996 1995
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,910 $ 9,504
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 7,557 7,731
Amortization of intangible assets 879 840
Amortization of deferred charges 146 391
Deferred income taxes 1,467 2,977
(Gain)/loss on disposals of property, plant
and equipment (2) 139
Extraordinary loss from debt refinancing - 1,342
Changes in assets and liabilities (net of acquisition):
(Increase)/decrease in accounts receivable - net (305) (4,524)
(Increase)/decrease in sundry notes & accounts
receivable 53 (572)
(Increase)/decrease in inventories 7,503 (13,563)
(Increase)/decrease in prepaid expenses and other
current assets (70) (412)
(Decrease)/increase in accounts payable - trade 2,272 2,633
(Decrease)/increase in accrued liabilities (2,634) (2,021)
(Decrease)/increase in income taxes payable 3,596 (717)
-------- -------
Net cash provided by (used in) operating activities 26,372 3,748
Cash flows from investing activities:
Acquisition of business - net of cash acquired (22,371) -
Property, plant and equipment expenditures (9,484) (10,977)
Proceeds from sale of property, plant and equipment 1,088 53
Other (57) -
-------- -------
Net cash provided by (used in) investing activities (30,824) (10,924)
Cash flows from financing activities:
Increase in revolving line of credit 12,800 23,258
Issuance of long-term debt - 166,000
Principal payments on long-term debt (10,930) (182,251)
Increase in common stock 14 287
Purchase of treasury stock (752) -
Payment of bank fees and loan costs (465) (1,116)
Other (50) (67)
--------- -------
Net cash provided by (used in) financing activities 617 6,111
-------- -------
Net increase/(decrease) in cash and cash equivalents (3,835) (1,065)
Cash and cash equivalents at beginning of period 4,437 6,053
-------- -------
Cash and cash equivalents at end of period $ 602 $ 4,988
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE A - Basis of Presentation
The consolidated financial statements include the accounts of Galey & Lord, Inc.
(the "Company") and its wholly-owned subsidiaries, Galey & Lord Industries,
Inc., G&L Service Company, North America, Inc. and Dimmit Industries, S.A. de
C.V. Intercompany items have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to present fairly
the financial position as of June 29, 1996 and the results of operations and
cash flows for the periods ended June 29, 1996 and July 1, 1995. Such
adjustments consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year. These financial statements
should be read in conjunction with the financial statements and footnotes
included in the Company's annual report on Form 10-K for the fiscal year ended
September 30, 1995.
NOTE B - Business Acquisitions
On June 7, 1996, the Company, through its newly formed subsidiary, G&L Service
Company, North America, Inc. ("G&L Service Company") acquired the capital stock
of Dimmit Industries, S.A. de C.V. ("Dimmit") and certain related assets from
Farah Incorporated for approximately $22.4 million in cash including certain
costs related to the acquisition (the "Acquisition"). Dimmit is composed of six
manufacturing facilities in Piedras Negras, Mexico and sews and finishes pants
and shorts for the men's casual wear market. Funding for the Acquisition was
provided through funds generated by operations, working capital reductions and
by the Company's current bank group through amendments to the Company's term
loan and revolving credit facility. These amendments increased the Company's
borrowing capacity by $20 million. In connection with the Acquisition, which has
been accounted for as a purchase transaction, the Company acquired assets with
an estimated fair value of approximately $12.8 million and assumed liabilities
of approximately $1.2 million. The Company has made a preliminary allocation of
the purchase price and has recorded goodwill of approximately $10.8 million for
the excess of the purchase price over the fair value of the assets acquired. The
goodwill amount is being amortized over a 20-year period. The results of
operations of G&L Service Company and Dimmit have been included in the
consolidated financial statements from the date of acquisition.
6
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE B - Business Acquisitions (continued)
On January 25, 1996, the Company and Triarc Companies, Inc. ("Triarc") mutually
agreed not to go forward with their previously announced merger of the Company
and the Graniteville Company, a subsidiary of Triarc, due to current economic
conditions in the retail, textile and apparel sectors. The Company incurred fees
and expenses related to the proposed merger of $1.6 million and took a charge
during the December quarter 1995 for the write-off of those costs.
NOTE C - Closure of Printed Apparel Fabrics Businesses
On September 19, 1995, the Company closed its printed apparel fabrics
businesses, made up of Galey & Lord Prints and Galey & Lord Group II, due to
declining business conditions that the printed apparel fabrics businesses had
experienced since 1992. As a result of the closing, the Company ceased
operations at its Specialty Plant on that date and laid off approximately 450
employees located primarily in Society Hill, South Carolina and New York City.
In connection with this closing, the Company incurred in the September quarter
1995 a $12.1 million business closing charge ($7.4 million or $.62 per share
after tax), consisting primarily of $3.2 million of severance and other employee
related costs associated with employee layoffs, substantially all of which had
been paid as of June 29, 1996, $5.4 million of losses on the disposal of
machinery and equipment and $2.9 million of losses on the disposal of raw
material and supply inventory. The Company anticipates that the sale of the
businesses' inventory will be completed during fiscal year 1996 and the sale of
the remaining fixed assets will be completed during the December quarter 1996
(the first quarter of fiscal 1997). The printed apparel fabrics businesses
represented $7.3 million or 5.8% and $27.9 million or 7.2% of the Company's net
sales for the three and nine months ended July 1, 1995, respectively, and had
operating losses of $3.9 million and $9.7 million during the same periods.
NOTE D - Long-Term Debt
On June 4, 1996, the Company amended its term loan and revolving credit facility
with its bank group led by First Union National Bank of North America, as agent
and lender. The amendment increased the Company's maximum allowable borrowings
under the revolving credit facility, which expires March 31, 2000, from $150
million to $170 million. The term
7
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE D - Long-Term Debt (continued)
loan was restated to the outstanding balance of $48 million and continues to
require equal quarterly principal payments of $3 million through the term loan's
expiration on April 30, 2000. The amended term loan and revolving credit
facility bear interest at a per annum rate, at the Company's option, of either
(i) the greater of the prime rate or federal funds rate or (ii) LIBOR plus .5%,
LIBOR plus .75%, LIBOR plus 1.0%, LIBOR plus 1.25% or LIBOR 1.5%, in accordance
with a pricing grid based on certain financial ratios. During the June quarter
1996, the Company paid interest on its bank debt at LIBOR plus 1.0%. The average
interest rate paid by the Company during the third quarter of fiscal 1996 was
6.6%.
The Company's obligations under the credit facility are secured by all of the
Company's inventory, equipment, accounts receivable and general intangibles, and
a pledge by the Company of all the outstanding capital stock of its wholly-owned
domestic subsidiaries, Galey & Lord Industries, Inc. and G&L Service Company,
North America, Inc., and a pledge of 65% of the outstanding capital stock of its
foreign subsidiary, Dimmit Industries, S.A. de C.V.
On April 28, 1995, the Company refinanced its term loan and revolving credit
facility resulting in a one-time extraordinary charge of $1.3 million or $.11
per share (net of taxes of $.8 million) in the June quarter 1995 to write off
fees associated with the previous loan agreements and pre-payment penalties.
During January 1996, the Company entered into interest rate swaps on $50 million
of its outstanding bank debt to fix the LIBOR interest rate on which those
borrowings are based. The interest rate swaps assure that the Company under its
current credit agreement will pay a maximum rate of 6.77% (LIBOR of 5.27% plus
maximum spread of 1.5%) on $25 million of bank debt for a two-year period and
7.03% (LIBOR of 5.53% plus maximum spread of 1.5%) on the other $25 million of
debt for a five-year period.
8
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE E - Inventories
The components of inventory at June 29, 1996, July 1, 1995 and September 30,
1995 consisted of the following (in thousands):
June 29, July 1, September 30,
1996 1995 1995
-------- ------- -------------
Raw Materials $ 2,173 $ 4,347 $ 1,931
Stock in process 14,985 13,257 14,345
Produced goods 64,996 74,223 75,283
Dyes, chemicals and supplies 4,922 5,605 4,661
------- ------- -------
87,076 97,432 96,220
Less LIFO and other reserves (8,347) (6,123) (9,988)
------- ------- -------
$78,729 $91,309 $86,232
======= ======= =======
NOTE F - Net Income Per Common Share
Net income per common share data is computed based on the average number of
shares of Common Stock and Common Stock equivalents outstanding during the
period.
9
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE G - Stockholders' Equity
Activity in Stockholders' Equity is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Common Contributed Retained Treasury
Stock Capital Earnings Stock Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
September 30, 1995 $ 119 $ 34,416 $ 47,411 $ (67) $ 81,879
Net income (loss) for
December 30, 1995 - - (753) - (753)
------ -------- -------- ------ --------
Balance at
December 30, 1995 $ 119 $ 34,416 $ 46,658 $ (67) $ 81,126
Issuance of 10,000
shares of Common
Stock for exercise
of options 1 8 - - 9
Purchase of 80,500
shares of Common
Stock for treasury - - - (752) (752)
Net income for
March 30, 1996 - - 2,612 - 2,612
------ ------- -------- ------ --------
Balance at
March 30,1996 $ 120 $ 34,424 $ 49,270 $ (819) $ 82,995
Tax benefit from
exercise of stock
options - 5 - - 5
Net income for
June 29,1996 - - 4,051 - 4,051
------ -------- -------- ------ --------
Balance at
June 29, 1996 $ 120 $ 34,429 $ 53,321 $ (819) $ 87,051
====== ======== ======== ====== ========
</TABLE>
10
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE H - Income Taxes
At June 29, 1996 and July 1, 1995, the Company had $4.1 million and $2.3
million, respectively, of deferred income tax assets and $17.8 million and $17.5
million, respectively, of deferred income tax liabilities which have been netted
for presentation purposes. The significant components of these amounts as shown
on the balance sheet are as follows (in thousands):
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995
--------------------------- -----------------------------
Current Noncurrent Current Noncurrent
Liability Liability Liability Liability
(Asset) (Asset) (Asset) (Asset)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Inventory valuation $ 2,382 $ - $ 3,108 $ -
Property, plant & equipment - 14,379 - 12,447
Alternative minimum tax credit
carryforward (1,586) - - -
Accruals and allowances (2,565) - (1,902) -
Goodwill - 1,000 - 1,909
Other - 88 (204) (183)
------- ------- ------- -------
$(1,769) $15,467 $ 1,002 $14,173
======= ======= ======= =======
</TABLE>
Significant components of the income tax provision for the three and nine months
ended June 29, 1996 and July 1, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -----------------------------
June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Domestic:
Current
Federal $1,331 $482 $1,974 $3,201
State 270 55 244 598
------ ------ ------ ------
1,601 537 2,218 3,799
Deferred
Federal 868 650 1,228 2,518
State 104 95 239 459
------ ------ ------ ------
972 745 1,467 2,977
------ ------ ------ ------
Total Domestic 2,573 1,282 3,685 6,776
Foreign 15 - 15 -
------ ------ ------ ------
$2,588 $1,282 $3,700 $6,776
====== ====== ====== ======
</TABLE>
11
<PAGE>
GALEY & LORD, INC.
Notes to Consolidated Financial Statements
June 29, 1996
(Unaudited)
NOTE H - Income Taxes (continued)
The reconciliation to the federal statutory income tax rate to the Company's
effective tax rate for the three and nine months ended June 29, 1996 and July 1,
1995 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------ -----------------------------------
June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Federal statutory
tax rate 35.0% 35.0% 35.0% 35.0%
State tax, net of
federal benefit 3.6% 4.2% 3.0% 3.9%
Foreign tax 0.2% - 0.2% -
Other 0.2% (0.2)% 0.3% (0.4)%
---- ---- --- ----
39.0% 39.0% 38.5% 38.5%
==== ==== ==== ====
</TABLE>
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Significant Events
On June 7, 1996, Galey & Lord, Inc. (the "Company"), through its newly formed
subsidiary, G&L Service Company, North America, Inc. ("G&L Service Company")
acquired the capital stock of Dimmit Industries, S.A. de C.V. ("Dimmit") and
certain related assets from Farah Incorporated for approximately $22.4 million
in cash (the "Acquisition"). Dimmit is composed of six manufacturing facilities
in Piedras Negras, Mexico and sews and finishes pants and shorts for the men's
casual wear market. Funding for the Acquisition was provided through funds
generated by operations, working capital reductions and by the Company's current
bank group through amendments to the Company's term loan and revolving credit
facility. These amendments increased the Company's borrowing capacity by $20
million.
On January 25, 1996, the Company and Triarc Companies, Inc. ("Triarc") mutually
agreed not to go forward with their previously announced merger of the Company
and the Graniteville Company, a subsidiary of Triarc due to current economic
conditions in the retail, textile and apparel sectors. The Company incurred fees
and expenses related to the merger of $1.6 million and took a charge during the
December quarter 1995 for the write-off of those costs.
On January 16, 1996, the Company's Board of Directors authorized the Company's
Management to buy back up to 1.2 million shares or 10.2% of the Company's
outstanding common stock over the next twelve months. Shares purchased will be
at prevailing prices in open-market transactions. As of August 1996, the Company
has acquired 197,003 shares of the Company's outstanding common stock at an
average price of $10.07 per common share.
On September 19, 1995, the Company closed its printed apparel fabrics businesses
due to declining business conditions that the printed apparel fabrics businesses
had experienced since 1992. As a result of the closing, the Company ceased
operations at its Specialty Plant on that date and laid off approximately 450
employees located primarily in Society Hill, South Carolina and New York City.
During the September quarter 1995, the Company incurred a $12.1 million business
closing charge ($7.4 million or $.62 per share after tax), consisting primarily
of $3.2 million of severance and other employee related costs associated with
employee layoffs, substantially all of which has been paid, $5.4 million of
losses on the disposal of machinery and equipment and $2.9 million of losses on
the disposal of raw material and supply inventory. The Company anticipates that
the sale of the printed apparel fabrics businesses' inventory will be completed
during fiscal year 1996 and the sale of the remaining fixed assets will be
completed during the December quarter 1996.
Printed apparel fabrics, made up of Galey & Lord Prints and Galey & Lord Group
II, represented $7.3 million or 5.8% and $27.9 million or 7.2% of the Company's
net sales for the three and nine months ended
13
<PAGE>
July 1, 1995, respectively, and had operating losses of $3.9 million and $27.9
million during the same periods.
Results of Operations
Net sales and earnings continued their improvement in the June quarter 1996 (the
third quarter of fiscal 1996) from their low point in the December quarter 1995
when the Company's business was adversely impacted by customers adjusting their
inventories due to a slow retail environment. The Company's core apparel fabrics
businesses began to improve in the March quarter and continued to improve in the
June quarter as sales and orders returned to more normal levels. The Company's
order backlog at June 29, 1996 was $92.2 million as compared to $99.1 million at
July 1, 1995. The order backlog for the apparel fabrics business was essentially
flat and home fabrics backlog was down 23%. The Company has reduced its forward
order position in Home Fashion Fabrics due to its reluctance to be sold too far
ahead in a period of rising raw material costs.
14
<PAGE>
The Company's operations are classified into two business segments, apparel
fabrics and home fabrics. Results for the three and nine month periods ended
June 29, 1996 and July 1, 1995 for each segment are shown below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
6/29/96 7/1/95 6/29/96 7/1/95
------- ------ ------- ------
(dollar amounts in millions)
<S> <C> <C> <C> <C>
Net Sales Per Segment
Apparel fabrics $102.4 $114.5* $266.6 $343.4*
Home fabrics 13.0 12.7 34.4 44.4
------ ------ ------ ------
Total sales $115.4 $127.2 $301.0 $387.8
====== ====== ====== ======
Operating Income (Loss) Per Segment
Apparel fabrics $ 10.5 $ 6.1* $20.4 $ 23.6*
% of Net Sales 10.2% 5.3%* 7.6% 6.9%*
Home fabrics $ (1.0) $ .5 $ (.7) $ 4.0
% of Net Sales (7.7)% 4.1% (1.9)% 9.0%
------ ------ ------ ------
Total $ 9.5 $ 6.6 $ 19.7 $ 27.6
% of Net Sales 8.2% 5.2% 6.5% 7.1%
</TABLE>
* Net sales and operating income for the apparel fabrics segment for the three
and nine month periods ending July 1, 1995 include the results for the
printed apparel fabrics businesses, which were closed on September 19, 1995.
Net sales for the June quarter 1996 were $115.4 million as compared to $127.2
million for the June quarter 1995 (the third quarter of fiscal 1995) and net
sales for the nine months ended June 29, 1995 were $301.0 million as compared to
$387.8 million for the nine months ended July 1, 1995. The $11.8 million decline
in net sales for the third quarter was primarily due to the elimination of $7.3
million of net sales from the printed apparel fabrics operations which were
closed in September 1995 and a $4.8 million decline in other apparel fabrics
sales. The $86.8 million decrease in net sales for the first nine months of
fiscal 1996 was due to the elimination of $27.9 million of sales from the
printed apparel fabrics operations, a $48.9 million decline in the other apparel
fabrics business sales and a $10.0 million decline in Home Fashion Fabrics
sales. The lower net sales for both periods were a result of the Company's
customers continuing to adjust their inventory levels due to a slow retail
environment.
Operating income was $9.5 million or 8.2% of net sales for the third quarter of
fiscal 1996 as compared to $6.6 million or 5.2% of net sales for the third
quarter of fiscal 1995. For the nine months, operating income was $19.7 million
or 6.5% of net sales for 1996 versus $27.6 million or 7.1% of net sales for
1995. The improvement in operating income for the June quarter was primarily due
to the elimination of $3.9 million of operating losses incurred by the printed
apparel fabrics businesses in the June quarter 1995. The decline in operating
income for the nine month period was primarily due to lower gross margins
resulting from the lower sales volume and the impact of lower volume on
manufacturing costs, partially offset by the elimination of $9.7 million of
operating losses incurred by the printed apparel fabrics businesses in the prior
year nine month period.
15
<PAGE>
Interest expense was $2.8 million for the June quarter 1996 and $8.5 million for
the first nine months of fiscal 1996 as compared to $3.3 million for the June
quarter 1995 and $10.0 million for the first nine months of fiscal 1995. The
decrease in interest expense for the third quarter of fiscal 1996 was due to
lower average debt levels during the period and decreases in LIBOR and prime
market interest rates on which the Company's bank loans are based. The decrease
for the nine-month period also resulted from the lower spread over LIBOR
achieved in the refinancing of the Company's bank debt completed in April 1995.
The average interest rate paid by the Company during the third quarter of fiscal
1996 was 6.6% as compared to 7.3% for the third quarter of fiscal 1995. For the
first nine months of fiscal 1996, the average interest rate paid was 6.6% as
compared to 7.4% for the first nine months of fiscal 1995.
Net income for the third quarter of fiscal 1996 was $4.1 million or $.34 per
common share on a fully-diluted basis as compared to income before the
extraordinary loss for the third quarter of fiscal 1995 of $2.0 million or $.17
per common share. During the June quarter 1995, the Company recorded a one-time
extraordinary loss of $1.3 million or $.11 per common share (net of taxes) to
write off fees associated with the Company's old bank loan agreements and to pay
prepayment penalties incurred in connection with the refinancing of its bank
loans. This charge reduced net income for the third quarter of fiscal 1995 to
$664,000 or $.06 per common share. For the first nine months of fiscal 1996, net
income was $5.9 million or $.49 per common share which included the pre-tax
charge of $1.6 million or $.08 per common share for the write-off of fees and
expenses related to the proposed Graniteville merger. Excluding this charge, net
income for the first nine months of fiscal 1996 would have been $6.9 million or
$.57 per common share. Net income for the first nine months of fiscal 1995 was
$9.5 million or $.79 per common share which included the one-time extraordinary
loss of $1.3 million or $.11 per common share (net of taxes). Excluding this
charge, net income for the first nine months of fiscal 1995 would have been
$10.8 million or $.90 per common share.
16
<PAGE>
Liquidity and Capital Resources
On June 4, 1996, the Company amended its term loan and revolving credit facility
with its bank group led by First Union National Bank of North America, as agent
and lender. The amendment increased the Company's maximum allowable borrowings
under the revolving credit, which expires March 31, 2000, from $150 million to
$170 million. The term loan was restated to the outstanding balance of $48
million and continues to require equal quarterly principal payments of $3
million through the term loan's expiration on April 30, 2000. At June 29, 1996,
the term loan balance and revolving credit facility balance, including the
swingline facility, were $45 million and $122.4 million, respectively. The
amended term loan and revolving credit facility bear interest at a per annum
rate, at the Company's option, of either (i) the greater of the prime rate or
federal funds rate or (ii) LIBOR plus .5%, LIBOR plus .75%, LIBOR plus 1.0%,
LIBOR plus 1.25% or LIBOR 1.5%, in accordance with a pricing grid based on
certain financial ratios. During the June quarter 1996, the Company paid
interest on its bank debt at LIBOR plus 1.0%. The Company's obligations under
the credit facility are secured by all of the Company's inventory, equipment,
accounts receivable and general intangibles, and a pledge by the Company of all
the outstanding capital stock of its wholly-owned domestic subsidiaries, Galey &
Lord Industries, Inc. and G&L Service Company, North America, Inc., and a pledge
of 65% of the outstanding capital stock of its foreign subsidiary, Dimmit
Industries, S.A. de C.V.
During January 1996, the Company entered into interest rate swaps on $50 million
of its outstanding bank debt to fix the LIBOR interest rate on which those
borrowings are based. The interest rate swaps assure that the Company under its
current credit agreement will pay a maximum rate of 6.77% (LIBOR of 5.27% plus
maximum spread of 1.5%) on $25 million of bank debt for a two-year period and
7.03% (LIBOR of 5.53% plus maximum spread of 1.5%) on the other $25 million of
debt for a five-year period.
For the first nine months of fiscal 1996, the Company spent approximately $9.5
million for capital expenditures. In fiscal 1996, the Company expects to spend a
total of approximately $15 million on capital expenditures. These expenditures
will be used primarily for the modernization of the Company's dyeing and
finishing operations. The Company expects to fund these expenditures through
funds from operations and borrowings under its revolving credit facility. In
addition, the Company plans to fund some modernization through operating leases.
Working capital decreased approximately $19.8 million to $119.7 million at June
29, 1996 as compared to $139.5 million at July 1, 1995. The decrease in working
capital was attributable to a $12.6 million decrease in inventories, a $4.4
million decrease in cash, a $3.9 million decrease in accounts receivable,
partially offset by a $2.8 million decrease in accounts payable. Approximately
$9.3 million of the decrease in inventories was due to the closure of the
printed apparel fabrics businesses and sell off of the related inventory. The
remaining decrease was a result of the Company's continued effort to
17
<PAGE>
reduce its inventory levels. The $4.4 million decrease in cash was a result of
the Company's effort to keep cash balances as low as possible to minimize
interest expense on its revolving credit facility. The reduction in accounts
receivable was primarily the result of the closure of the printed apparel
fabrics businesses which resulted in the elimination of $5.0 million of accounts
receivable. Accounts payable decreased due to lower outside cloth purchases as a
result of the Company's inventory reduction effort as well as the elimination of
the printed apparel fabrics accounts payable balance.
The Company anticipates that cash requirements including working capital and
capital expenditure needs will be met through funds generated from operations
and through borrowings under the revolving credit facility. In addition, from
time to time, the Company uses borrowings under secured and unsecured bank loans
or through capital and operating leases for various equipment purchases.
18
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (not applicable)
Item 2. Changes in Securities (not applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The exhibits to this Form 10-Q are listed in the
accompanying Exhibit Index.
(b) Reports on Form 8-K - The Registrant filed a Form 8-K on May 20, 1996
to report its press release announcing that the Company had signed a
definitive agreement to purchase the outstanding capital stock of
Dimmit Industries, S.A. de C.V. ("Dimmit") and certain related assets
from Farah Incorporated ("Farah").
The Registrant filed a Form 8-K on June 7, 1996 to report its press
release announcing that the Company's newly formed subsidiary, G&L
Service Company, North America, Inc. had completed the purchase of
Dimmit from Farah.
19
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Galey & Lord, Inc.
-------------------------
(Registrant)
/s/ Michael R. Harmon
-------------------------
Michael R. Harmon
Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting
Officer), Treasurer and Secretary
August 9, 1996
- --------------
Date
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description Page No.
- ------ ----------- --------
10.33 Amended and Restated Credit Agreement
dated as of June 4, 1996 between
Galey & Lord Industries, Inc.,
Galey & Lord, Inc. and certain
subsidiaries and First Union National
Bank of North Carolina, as agent and
lender, and the other lender's party
thereto.
11 Statement Regarding Computation
of Per Share Earnings
27 Financial Data Schedule
21
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
$218,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
among
GALEY & LORD INDUSTRIES, INC.,
as Borrower,
GALEY & LORD, INC.
AND
CERTAIN SUBSIDIARIES
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTIES HERETO
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
Dated as of June 4, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.........................................................1
1.1 Defined Terms.......................................................1
1.2 Other Definitional Provisions......................................25
1.3 Accounting Terms...................................................25
SECTION 2. THE LOANS; AMOUNT AND TERMS........................................26
2.1 Revolving Loans....................................................26
2.2 Term Loan..........................................................28
2.3 Swingline Loan Subfacility.........................................29
2.4 Letter of Credit Subfacility.......................................31
2.5 Fees...............................................................35
2.6 Changes of Commitments.............................................36
2.7 Prepayments........................................................37
2.8 Minimum Principal Amount of Tranches...............................38
2.9 Default Rate and Payment Dates.....................................38
2.10 Conversion Options.................................................38
2.11 Computation of Interest and Fees...................................39
2.12 Pro Rata Treatment and Payments....................................39
2.13 Non-Receipt of Funds by the Agent..................................40
2.14 Inability to Determine Interest Rate...............................41
2.15 Illegality.........................................................42
2.16 Requirements of Law................................................42
2.17 Indemnity..........................................................44
2.18 Taxes..............................................................44
2.19 Indemnification; Nature of Issuing Lender's Duties.................47
2.20 Release of Collateral..............................................48
SECTION 3. REPRESENTATIONS AND WARRANTIES.....................................49
3.1 Financial Condition................................................49
3.2 No Change..........................................................49
3.3 Corporate Existence; Compliance with Law...........................49
3.4 Corporate Power; Authorization; Enforceable Obligations............50
3.5 No Legal Bar; No Default...........................................50
3.6 No Material Litigation.............................................51
3.7 Investment Company Act.............................................51
3.8 Federal Regulations................................................51
3.9 ERISA..............................................................51
3.10 Environmental Matters..............................................52
3.11 Purpose of Loan....................................................53
3.12 Subsidiaries.......................................................53
SECTION 4. CONDITIONS PRECEDENT...............................................53
4.1 Conditions to Restatement Date.....................................53
4.2 Conditions to All Extensions of Credit.............................55
4.3 Conditions Subsequent to Restatement Date..........................56
SECTION 5. AFFIRMATIVE COVENANTS..............................................56
5.1 Financial Statements...............................................57
5.2 Certificates; Other Information....................................58
5.3 Payment of Obligations.............................................58
(i)
<PAGE>
5.4 Conduct of Business and Maintenance of Existence...................59
5.5 Maintenance of Property; Insurance.................................59
5.6 Inspection of Property; Books and Records;
Discussions........................................................59
5.7 Notices............................................................59
5.8 Environmental Laws.................................................60
5.9 Financial Covenants................................................61
5.10 Additional Subsidiary Guarantors...................................63
SECTION 6. NEGATIVE COVENANTS.................................................63
6.1 Indebtedness.......................................................63
6.2 Liens..............................................................64
6.3 Guaranty Obligations...............................................64
6.4 Nature of Business.................................................64
6.5 Consolidation, Merger, Sale or Purchase of Assets,
etc................................................................64
6.6 Advances, Investments and Loans....................................66
6.7 Transactions with Affiliates.......................................66
6.8 Ownership of Subsidiaries..........................................66
6.9 Fiscal Year........................................................67
SECTION 7. EVENTS OF DEFAULT..................................................67
SECTION 8. THE AGENT..........................................................70
8.1 Appointment........................................................70
8.2 Delegation of Duties...............................................71
8.3 Exculpatory Provisions.............................................71
8.4 Reliance by Agent..................................................71
8.5 Notice of Default..................................................72
8.6 Non-Reliance on Agent and Other Lenders............................72
8.7 Indemnification....................................................73
8.8 Agent in Its Individual Capacity...................................73
8.9 Successor Agent....................................................73
SECTION 9. MISCELLANEOUS......................................................74
9.1 Amendments, Waivers and Release of Collateral......................74
9.2 Notices............................................................75
9.3 No Waiver; Cumulative Remedies.....................................76
9.4 Survival of Representations and Warranties.........................76
9.5 Payment of Expenses and Taxes......................................76
9.6 Successors and Assigns; Participations; Purchasing
Lenders............................................................77
9.7 Adjustments; Set-off...............................................81
9.8 Table of Contents and Section Headings.............................82
9.9 Counterparts.......................................................82
9.10 Severability.......................................................82
9.11 Integration........................................................82
9.12 Governing Law......................................................82
9.13 Consent to Jurisdiction and Service of Process.....................82
9.14 Confidentiality....................................................83
9.15 Acknowledgements...................................................83
9.16 Waivers of Jury Trial..............................................84
9.17 Surrender of Existing Notes........................................84
(ii)
<PAGE>
SECTION 10. GUARANTY..........................................................84
10.1 The Guaranty......................................................84
10.2 Bankruptcy........................................................85
10.3 Nature of Liability...............................................85
10.4 Independent Obligation............................................86
10.5 Authorization.....................................................86
10.6 Reliance..........................................................86
10.7 Waiver............................................................86
10.8 Limitation on Enforcement.........................................87
(iii)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 4, 1996, among
GALEY & LORD INDUSTRIES, INC., a Delaware corporation (the "Borrower"), GALEY &
LORD, INC., a Delaware corporation (the "Company"), those Subsidiaries
identified as a "Guarantor" on the signature pages hereto and such other
Subsidiaries as may from time to time become a party hereto (together with the
Company, the "Guarantors"), the several banks and other financial institutions
from time to time parties to this Agreement (collectively, the "Lenders";
individually, a "Lender") and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association, as agent for the Lenders hereunder (in such
capacity, the "Agent").
W I T N E S E T H:
WHEREAS, the Borrower requested the Lenders to make loans and other
financial accommodations to the Borrower or for its benefit in an amount up to
$210,000,000 pursuant to the terms of that certain credit agreement dated as of
April 28, 1995, as amended, among the Borrower, the Lenders and the Agent (the
"Existing Agreement");
WHEREAS, the Borrower has requested certain modifications to various
provisions contained therein; and
WHEREAS, the Lenders have agreed to the requested changes on the terms and
conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree that the Existing Agreement is
amended and restated, effective as of the Restatement Date to read in full as
follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined in the preamble
to this Agreement have the meanings therein indicated, and the following terms
have the following meanings:
"Additional Credit Party": each Person that becomes a Guarantor by
execution of a Joinder Agreement in accordance with Section 5.10.
"Affiliate": as to any Person, any other Person (excluding any
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, a Person shall be deemed to be "controlled by" a Person if such
Person possesses, directly or indirectly, power either
-1-
<PAGE>
(a) to vote 10% or more of the securities having ordinary voting power for
the election of directors of such Person or (b) to direct or cause the
direction of the management and policies of such Person whether by contract
or otherwise.
"Agent": as defined in the first paragraph of this Agreement and any
successors in such capacity.
"Agreement": this Amended and Restated Credit Agreement, as amended,
supplemented or modified from time to time in accordance with its terms.
"Alternate Base Rate": for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof: "Prime Rate" shall mean, at any time, the rate of interest per
annum publicly announced from time to time by First Union at its principal
office in Charlotte, North Carolina as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the
rate announced publicly by First Union as its Prime Rate is an index or
base rate and shall not necessarily be its lowest or best rate charged to
its customers or other banks; and "Federal Funds Effective Rate" shall
mean, for any day, the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published
on the next succeeding Business Day, the average of the quotations for the
day of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the Agent
shall have determined (which determination shall be conclusive in the
absence of manifest error) that it is unable to ascertain the Federal Funds
Effective Rate, for any reason, including the inability or failure of the
Agent to obtain sufficient quotations in accordance with the terms thereof,
the Alternate Base Rate shall be determined without regard to clause (b) of
the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective on the opening of business on the
date of such change.
"Alternate Base Rate Loans": Loans that bear interest
at an interest rate based on the Alternate Base Rate.
"Applicable Percentage": for any day, the rate per annum set forth
below opposite the applicable Level Period then in effect, it being
understood that the Applicable Percentage for (i) Alternate Base Rate Loans
shall be the
-2-
<PAGE>
percentage set forth under the column "Alternate Base Rate Margin", (ii)
LIBOR Rate Loans shall be the percentage set forth under the column "LIBOR
Rate Margin and Letter of Credit Fee", (iii) the Commitment Fee shall be
the percentage set forth under the column "Commitment Fee" and (iv) the
Letter of Credit Fee shall be the percentage set forth under the column
"LIBOR Rate Margin and Letter of Credit Fee":
LIBOR
Rate
Margin
and
Alternate Letter of
Level Base Rate Credit Commitment
Period Margin Fee Fee
----------------------------------------------------------------------
Level I Period 0% .50% .20%
Level II Period 0% .75% .25%
Level III Period 0% 1.00% .25%
Level IV Period 0% 1.25% .25%
Level V Period 0% 1.50% .375%
The Applicable Percentage shall, in each case, be determined and adjusted
quarterly on the date 5 Business Days after the date by which the Borrower
is required to provide quarterly financial information in accordance with
the provisions of Section 5.1(b) (each an "Interest Determination Date").
Such Applicable Percentage shall be effective from such Interest
Determination Date until the next such Interest Determination Date. The
initial Applicable Percentages shall be based on Level IV Period until the
first Interest Determination Date occurring after the Restatement Date.
"Bankruptcy Code": the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Borrower": as defined in the first paragraph of this Agreement.
"Borrowing Date": in respect of any Loan, the date such Loan is made.
"Business": as defined in subsection 3.10.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in Charlotte, North Carolina or New York, New York
are authorized or required by law to close; provided, however, that when
used in connection with a rate determination, borrowing or payment in
respect of a LIBOR Rate Loan, the term "Business Day" shall also exclude
any day on which banks in London, England
-3-
<PAGE>
are not open for dealings in Dollar deposits in the London interbank
market.
"Capital Expenditures": all expenditures which in accordance with GAAP
would be classified as capital expenditures, including without limitation,
Capital Lease Obligations.
"Capital Lease": any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a
balance sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations": the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"Cash Equivalents": (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition ("Government
Obligations"), (ii) U.S. dollar denominated (or foreign currency fully
hedged) time deposits, certificates of deposit, Eurodollar time deposits
and Eurodollar certificates of deposit of (y) any domestic commercial bank
of recognized standing having capital and surplus in excess of $250,000,000
or (z) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Bank"), in each case
with maturities of not more than 364 days from the date of acquisition,
(iii) commercial paper and variable or fixed rate notes issued by any
Approved Bank (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within six months of the date of
acquisition, (iv) repurchase agreements with a bank or trust company
(including a Lender) or a recognized securities dealer having capital and
surplus in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America, (v) obligations of any state of
the United States or any political subdivision thereof for the payment of
the principal and redemption price of and interest on which there shall
have been irrevocably deposited Government Obligations maturing as to
principal and interest at times and in amounts sufficient to provide such
payment, and (vi) auction preferred stock rated in the highest short-term
credit rating category by S&P or Moody's.
"Closing Date": the date of the Existing Agreement.
-4-
<PAGE>
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment": the Revolving Commitment, the LOC Commitment, the
Swingline Commitment and the Term Loan Commitment, individually or
collectively, as appropriate.
"Commitment Fee: such term as defined in Section 2.5(a).
"Commitment Percentage": the Revolving Commitment Percentage, the LOC
Commitment Percentage and/or the Term Loan Commitment Percentage, as
appropriate.
"Commitment Period": the period from and including the Closing Date to
but not including the Termination Date.
"Commitment Transfer Supplement": a Commitment Transfer Supplement,
substantially in the form of Schedule 9.6(c).
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Company within the meaning of
Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company": as defined in the first paragraph of this Agreement.
"Consolidated Current Assets": as of the date of determination, the
total amount of current assets of the Company and its Subsidiaries on a
consolidated basis determined in accordance with GAAP applied on a
consistent basis.
"Consolidated Current Liabilities": as of the date of determination,
the total amount of current liabilities (excluding current maturities of
long term debt) of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis.
"Consolidated Debt Service": for any period, the sum of Consolidated
Interest Expense plus current maturities of Funded Debt and current
maturities under Capital Leases as of the date of determination, for the
Company and its Subsidiaries on a consolidated basis as determined in
accordance with GAAP applied on a consistent basis. The applicable period
shall be for the eight (8) consecutive quarters ending as of the date of
determination, except that determination of current maturities of Funded
Debt and current maturities under Capital Leases shall be for the eight (8)
consecutive quarters beginning as of the date of determination.
-5-
<PAGE>
"Consolidated EBIT": for any period, Consolidated Net Income plus the
sum of (i) Consolidated Interest Expense, and (ii) all provisions for any
Federal, state or other income taxes, in each case for the Company and its
Subsidiaries on a consolidated basis as determined in accordance with GAAP
applied on a consistent basis. The applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated EBITDA": for any period, the sum of Consolidated EBIT
plus depreciation, amortization and other non-cash charges, including
without limitation any accrual necessary for purposes of conforming with
Financial Accounting Standards Board Statement Number 106 (as defined by
GAAP) to the extent that the accrued portion thereof constitutes a non-cash
charge, for the Company and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP applied on a consistent basis. The
applicable period shall be for the four consecutive quarters ending as of
the date of determination.
"Consolidated Fixed Charges": for any period, the sum of Consolidated
Interest Expense plus rent expense for the Company and its Subsidiaries on
a consolidated basis determined in accordance with GAAP applied on a
consistent basis. Except as otherwise specified, the applicable period
shall be for the four consecutive quarters ending as of the date of
computation.
"Consolidated Funded Debt": Funded Debt of the Company and its
Subsidiaries on a consolidated basis.
"Consolidated Interest Expense": for any period, (i) all interest
expense, including amortization of debt discount and premium and the
interest component under Capital Leases, and (ii) all imputed interest,
whether in the form of "yield", "discount" or other similar item, that
accrues in respect of Qualified Securitization Transactions permitted
hereunder, in each case of the Company and its Subsidiaries on a
consolidated basis determined in accordance with GAAP applied on a
consistent basis. Except as otherwise specified, the applicable period
shall be for the four consecutive quarters ending as of the date of
computation.
"Consolidated Net Income": for any period, the net income of the
Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP applied on a consistent basis (excluding for the
purposes hereof a one-time non-recurring charge of up to $15,000,000.00 in
the fourth quarter of fiscal year 1995 in connection with the closing of
the apparel prints business and operating losses from the apparel prints
business for the four fiscal quarters of fiscal year 1995). For purposes of
determining the Debt Service Coverage Ratio, the Fixed Charge Coverage
-6-
<PAGE>
Ratio, the Interest Coverage Ratio and the ratio of Consolidated Funded
Debt to Consolidated EBITDA referenced in the definition of "Level
Periods", there shall be excluded, (i) any extraordinary gains or losses
(including without limitation the non-recurring charge referenced above),
any taxes on such excluded gains and any tax deductions or credits on
account of any such excluded losses and (ii) operating losses associated
with the apparel prints business. Except as otherwise specified, the
applicable period shall be for the four consecutive quarters ending as of
the date of computation.
"Consolidated Net Income Available for Debt Service": for the
applicable period ending as of the date of determination, the sum of
Consolidated EBITDA minus cash taxes paid minus Capital Expenditures made
or incurred plus $5,000,000 minus Dividends, in each case for the Company
and its Subsidiaries on a consolidated basis determined in accordance with
GAAP applied on a consistent basis. Except as otherwise specified, the
applicable period shall be for the eight (8) consecutive quarters ending as
of the date of computation.
"Consolidated Net Income Available for Fixed Charges": for the
applicable period ending as of the date of determination, the sum of
Consolidated EBIT plus rent expense for the Company and its Subsidiaries on
a consolidated basis determined in accordance with GAAP applied on a
consistent basis. Except as otherwise specified, the applicable period
shall be for the four consecutive quarters ending as of the date of
computation.
"Consolidated Net Worth": total stockholders' equity for the Company
and its Subsidiaries on a consolidated basis as determined at a particular
date in accordance with GAAP applied on a consistent basis.
"Consolidated Tangible Net Worth": total stockholders' equity minus
goodwill, patents, trade names, trade marks, copyrights, franchises,
organizational expense, deferred expenses and other assets in each case as
are shown as "intangible assets" on a balance sheet of the Company and its
Subsidiaries on a consolidated basis as determined at a particular date in
accordance with GAAP applied on a consistent basis.
"Consolidated Total Capitalization": the sum of (i) Consolidated
Funded Debt plus (ii) Consolidated Net Worth.
"Consolidated Working Capital": Consolidated Current Assets minus
Consolidated Current Liabilities.
"Continuing Director": as defined in Section 7(h).
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<PAGE>
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Documents": this Agreement, each of the Notes, any Joinder
Agreement, the Letters of Credit, LOC Documents, the Security Agreement,
financing statements relating hereto or thereto and the Wachovia JEDA
Reimbursement Agreement.
"Credit Party": any of the Borrower and the Guarantors.
"Debt Service Coverage Ratio": the ratio of Consolidated Net Income
Available for Debt Service to Consolidated Debt Service.
"Default": any of the events specified in Section 7, whether or not
any requirement for the giving of notice or the lapse of time, or both, or
any other condition, has been satisfied.
"Defaulting Lender": at any time, any Lender that, at such time (a)
has failed to make a Loan required pursuant to the term of this Credit
Agreement, including the funding of a Participation Interest in accordance
with the terms hereof, (b) has failed to pay to the Agent or any Lender an
amount owed by such Lender pursuant to the terms of this Credit Agreement,
or (c) has been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or to a receiver, trustee or similar official.
"Dimmit Industries": Dimmit Industries, S.A. de C.V., a Mexican
corporation.
"Dividends": any payment by the Company or any of its Subsidiaries of
a payment, distribution or dividend (other than a dividend or distribution
payable solely in stock of the Person making such payment, distribution or
dividend) on, or any payment on account of the purchase, redemption or
retirement of, or any other distribution, any shares of any class of stock
or other ownership interest in the Company or any of its Subsidiaries
(including any such payment or distribution in cash or in property or
obligations of the Company or any of its Subsidiaries).
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Credit Party": any Credit Party that is organized and
existing under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
"Domestic Lending Office": initially, the office of each Lender
designated as such Lender's Domestic Lending
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Office shown on Schedule 9.2; and thereafter, such other office of such
Lender as such Lender may from time to time specify to the Agent and the
Borrower as the office of such Lender at which Alternate Base Rate Loans of
such Lender are to be made.
"Domestic Subsidiary": any Subsidiary that is organized and existing
under the laws of the United States or any state or commonwealth thereof or
under the laws of the District of Columbia.
"Eligible Transferee": shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in
Regulation D of the Securities Act of 1933, as amended).
"Environmental Laws": any and all applicable foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of human
health or the environment, as now or may at any time be in effect during
the term of this Agreement.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Reserve Percentage": for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next
higher 1/100th of 1%) which is in effect for such day as prescribed by the
Federal Reserve Board (or any successor) for determining the maximum
reserve requirement (including without limitation any basic, supplemental
or emergency reserves) in respect of Eurocurrency liabilities, as defined
in Regulation D of such Board as in effect from time to time, or any
similar category of liabilities for a member bank of the Federal Reserve
System in New York City.
"Event of Default": any of the events specified in Section 7;
provided, however, that any requirement for the giving of notice or the
lapse of time, or both, or any other condition, has been satisfied.
"Existing Letters of Credit": those Letters of Credit outstanding on
the Closing Date and identified on Schedule 2.4(a).
"Extension of Credit": as to any Lender, the making of a Loan by such
Lender or the issuance of, or participation in, a Letter of Credit by such
Lender.
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<PAGE>
"Federal Funds Effective Rate": as defined in the definition of
"Alternate Base Rate".
"First Union": First Union National Bank of North Carolina, a national
banking association.
"Fixed Charge Coverage Ratio": the ratio of Consolidated Net Income
Available for Fixed Charges to Consolidated Fixed Charges.
"Foreign Subsidiary": any Subsidiary that is not a Domestic
Subsidiary.
"Funded Debt": for any Person, (i) all Indebtedness of the types
described in subsections (a), (b), (c), (l) and (m) of the definition of
"Indebtedness" and (ii) all Guarantee Obligations of Indebtedness of the
types described in subsections (a), (b), (c), (l) and (m) of the definition
of "Indebtedness".
"GAAP": generally accepted accounting principles in effect in the
United States of America applied on a consistent basis, subject, however,
in the case of determination of compliance with the financial covenants set
out in Section 5.9 to the provisions of Section 1.3.
"Government Acts": as defined in Section 2.19.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obliga-
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tion or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that
the term Guarantee Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of
any Guarantee Obligation of any guaranteeing person shall be deemed to be
the lower of (a) an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Guarantee Obligation is
made and (b) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or determinable, in
which case the amount of such Guarantee Obligation shall be such
guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by the Company in good faith.
"Guarantor": any of the Company, the Subsidiaries identified as a
"Guarantor" on the signature pages hereto and the Additional Credit Parties
which execute a Joinder Agreement, together with their successors and
permitted assigns.
"Guaranty": the guaranty of the Guarantors set forth in Section 10.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations of such
Person under Capital Leases, (d) all obligations of such Person in respect
of acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof, (f) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of business),
(g) all obligations of such Person under take-or-pay or similar
arrangements or under commodities agreements, (h) all Guarantee Obligations
of such Person, (i) all obligations of such Person in respect of interest
rate protection agreements, foreign currency exchange agreements, commodity
purchase or option agreements or other interest or exchange rate or
commodity price hedging agreements, (j) the maximum amount of all letters
of credit issued or bankers' acceptances created for the
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account of such Person and, without duplication, all drafts drawn
thereunder (to the extent not theretofore reimbursed), (k) all preferred
stock which by its terms requires redemption, mandatory sinking fund
payments or the like, by a fixed date prior to the Termination Date, (l)
the aggregate net amount of indebtedness or obligations relating to the
sale, contribution or other conveyance of accounts receivable pursuant to
any securitization transaction (or similar transaction) regardless of
whether such transaction is effected without recourse or in a manner which
would not be reflected on a balance sheet in accordance with GAAP, and (m)
the principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product, where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease in
accordance with GAAP.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Coverage Ratio": the ratio of Consolidated EBITDA to
Consolidated Interest Expense, as determined at the end of each fiscal
quarter.
"Interest Payment Date": (a) as to any Alternate Base Rate Loan, the
last day of each March, June, September and December to occur while such
Loan is outstanding, (b) as to any Swingline Loan, such day as may be
mutually agreed upon by the Borrower and the Swingline Lender, but not less
frequently than once a quarter, (c) as to any LIBOR Rate Loan having an
Interest Period of three months or less, the last day of such Interest
Period, and (d) as to any LIBOR Rate Loan having an Interest Period longer
than three months, each day which is three months after the first day of
such Interest Period and the last day of such Interest Period.
"Interest Period": with respect to any LIBOR Rate Loan,
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such LIBOR Rate
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in the notice of borrowing or notice of conversion
given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such LIBOR Rate
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower by irrevocable notice to the Agent not less
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than three Business Days prior to the last day of the then current
Interest Period with respect thereto;
provided that the foregoing provisions are subject to the following:
(A) if any Interest Period pertaining to a LIBOR Rate Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(B) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the relevant calendar month;
(C) if the Borrower shall fail to give notice as provided above,
the Borrower shall be deemed to have selected an Alternate Base Rate
Loan to replace the affected LIBOR Rate Loan;
(D) any Interest Period in respect of any Loan that would
otherwise extend beyond the Termination Date shall end on the
Termination Date and further with regard to the Term Loan, no Interest
Period shall extend beyond any principal amortization payment date
unless the portion of the Term Loan consisting of Alternate Base Rate
Loans together with the portion of the Term Loan consisting of LIBOR
Rate Loans with Interest Periods expiring prior to or concurrently
with the date such principal amortization payment date is due, is at
least equal to the amount of such principal amortization payment due
on such date; and
(E) no more than 8 LIBOR Rate Loans may be in effect at any time.
For purposes hereof, LIBOR Rate Loans with different Interest Periods
shall be considered as separate LIBOR Rate Loans, even if they shall
begin on the same date and have the same duration, although
borrowings, extensions and conversions may, in accordance with the
provisions hereof, be combined at the end of existing Interest Periods
to constitute a new LIBOR Rate Loan with a single Interest Period.
"Investment Grade Rating": as defined in Section 2.20.
"Issuing Lender": as to the Existing Letters of Credit, the Issuing
Lenders identified on Schedule 2.4(a), and as to
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Letters of Credit issued after the Closing Date, First Union. "Issuing
Lender Fees": as defined in Section 2.5(c)
"JEDA Bonds": those $7,200,000 South Carolina Jobs-Economic
Development Authority Tax-Exempt Adjustable Mode Economic Development
Revenue Bonds (Galey & Lord Industries, Inc. Project) Series 1994.
"JEDA Indenture": the Indenture of Trust dated as of May 1, 1994
between First-Citizens Bank & Trust Company, as Trustee, and South Carolina
Jobs-Economic Development Authority pursuant to which the JEDA Bonds were
issued, as amended, modified, supplemented and replaced from time to time.
"Joinder Agreement": a Joinder Agreement substantially in the form of
Schedule 5.10, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 5.10.
"Lender": as defined in the first paragraph of this Agreement.
"Letters of Credit": the Existing Letters of Credit and any letter of
credit issued by the Issuing Lender pursuant to the terms hereof, as such
Letters of Credit may be amended, modified, extended, renewed or replaced
from time to time.
"Letter of Credit Fee": as defined in Section 2.5(b).
"Level I Period": at any time that both (i) the ratio of Consolidated
Funded Debt to Consolidated EBITDA is less than 2.25:1.0, and (ii) the
Interest Coverage Ratio is greater than 4.0:1.0.
"Level II Period": at any time that both (i) the ratio of Consolidated
Funded Debt to Consolidated EBITDA is less than (or equal to) 3.25:1.0, and
(ii) the Interest Coverage Ratio is greater than 3.0:1.0, and a Level I
Period does not exist.
"Level III Period": at any time that both (i) the ratio of
Consolidated Funded Debt to Consolidated EBITDA is less than (or equal to)
3.75:1.0, and (ii) the Interest Coverage Ratio is greater than 3.0:1.0, and
neither a Level I Period nor Level II Period exists.
"Level IV Period": at any time that both (i) the ratio of Consolidated
Funded Debt to Consolidated EBITDA is less than (or equal to) 4.25:1.0, and
(ii) the Interest Coverage Ratio is greater than 3.0:1.0, and neither a
Level I Period, Level II Period nor Level III Period exists.
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<PAGE>
"Level V Period": at any time that either (i) the ratio of
Consolidated Funded Debt to Consolidated EBITDA is greater than 4.25:1.0,
or (ii) the Interest Coverage Ratio is less than (or equal to) 3.0:1.0.
"LIBOR": the arithmetic mean (rounded to the nearest 1/100th of 1%) of
the offered rates for deposits in Dollars for a period equal to the
Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 A.M. London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such
rate is not available, then "LIBOR" shall mean the rate per annum at which,
as determined by the Agent, Dollars in the amount of $5,000,000 are being
offered to leading banks at approximately 11:00 A.M. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period
for settlement in immediately available funds by leading banks in the
London interbank market for a period equal to the Interest Period selected.
"LIBOR Lending Office": initially, the office of each Lender
designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; and
thereafter, such other office of such Lender as such Lender may from time
to time specify to the Agent and the Borrower as the office of such Lender
at which the LIBOR Rate Loans of such Lender are to be made.
"LIBOR Rate": a rate per annum (rounded upwards, if necessary, to the
next higher 1/100th of 1%) determined by the Agent pursuant to the
following formula:
LIBOR Rate = LIBOR
-----
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan": Loans the rate of interest applicable to which is
based on the LIBOR Rate.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Capital Lease having substantially the same economic effect as any
of the foregoing).
"Loan": a Revolving Loan, a Swingline Loan and/or the Term Loan, as
appropriate.
"LOC Commitment": the commitment of the Issuing Lender to issue
Letters of Credit and with respect to each Lender, the commitment of such
Lender to purchase participation interests in the Letters of Credit up to
such Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such
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amount may be reduced from time to time in accordance with the provisions
hereof.
"LOC Commitment Percentage": for each Lender, the percentage
identified as its LOC Commitment Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 9.6(c).
"LOC Committed Amount": collectively, the aggregate amount of all of
the LOC Commitments of the Lenders to issue and participate in Letters of
Credit as referenced in Section 2.4 and, individually, the amount of each
Lender's LOC Commitment as specified in Schedule 2.1(a).
"LOC Documents": with respect to any Letter of Credit, such Letter of
Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments,
guarantees or other documents (whether general in application or applicable
only to such Letter of Credit) governing or providing for (i) the rights
and obligations of the parties concerned or (ii) any collateral security
for such obligations.
"LOC Obligations": at any time, the sum of (i) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (ii)
the aggregate amount of all drawings under Letters of Credit honored by the
Issuing Lender but not theretofore reimbursed.
"Majority Lenders": Lenders holding in the aggregate not less than
66-2/3% of the sum of (i) all Obligations then outstanding at such time and
(ii) the aggregate unused Commitments at such time (treating for purposes
hereof in the case of Swingline Loans and LOC Obligations, in the case of
the Swingline Lender and the Issuing Lender, only the portion of the
Swingline Loans and the LOC Obligations of the Swingline Lender and the
Issuing Lender, respectively, which is not subject to the Participation
Interests of the other Lenders and, in the case of the Lenders other than
the Swingline Lender and the Issuing Lender, the Participation Interests of
such Lenders in Swingline Loans and LOC Obligations hereunder as direct
Obligations); provided, however, that if any Lender shall be a Defaulting
Lender at such time, then there shall be excluded from the determination of
Majority Lenders Obligations (including Participation Interests) owing to
such Defaulting Lender and such Defaulting Lender's Commitments, or after
termination of the Commitments, the principal balance of the Obligations
owing to such Defaulting Lender.
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"Mandatory Borrowing": such term as defined in Section 2.3(b)(ii) or
Section 2.4(e).
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, (b) the ability of the
Company to perform its obligations, when such obligations are required to
be performed, under this Agreement or any of the Notes or (c) the validity
or enforceability of this Agreement, any of the Notes or any of the other
Credit Documents or the rights or remedies of the Agent or the Lenders
hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Note" or "Notes": the Revolving Notes, the Swingline Note and/or the
Term Notes, collectively, separately or individually, as appropriate.
"Notice of Borrowing": the written notice of borrowing as referenced
and defined in Section 2.1(b)(i) or 2.3(b)(i), as appropriate.
"Notice of Conversion": the written notice of extension or conversion
as referenced and defined in Section 2.10.
"Obligations": collectively, Loans and LOC Obligations.
"Participant": as defined in subsection 9.6(b).
"Participation Interest": the purchase by a Lender of a participation
interest in Swingline Loans as provided in Section 2.3(b)(ii) or in Letters
of Credit as provided in Section 2.4.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Permitted Investments": (i) cash and Cash Equivalents, (ii)
receivables owing to the Company or any of its Subsidiaries or any
receivables and advances to suppliers, in each case if created, acquired or
made in the ordinary course of business and payable or dischargeable in
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accordance with customary trade terms, (iii) investments in and to a
Domestic Credit Party, (iv) loans and advances to officers, directors,
employees and Affiliates in an aggregate amount not to exceed $500,000 at
any time outstanding, (v) investments (including debt obligations) received
in connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary course of
business, (vi) investments, acquisitions or transactions permitted under
Section 6.5(b), (vii) loan advances to and investments in Dimmit Industries
in connection with the acquisition of Dimmit Industries and additional loan
advances to and investments in Dimmit Industries not to exceed $3,000,000
in the aggregate at any time outstanding, and (viii) additional loan
advances and/or investments of a nature not contemplated by the foregoing
clauses hereof, provided that such loans, advances and/or investments made
pursuant to this clause (viii) shall not exceed an aggregate amount of
$4,000,000. As used herein, "investment" means all investments, in cash or
by delivery of property made, directly or indirectly in, to or from any
Person, whether by acquisition of shares of capital stock, property,
assets, indebtedness or other obligations or securities or by loan advance,
capital contribution or otherwise.
"Permitted Liens":
(i) Liens created by or otherwise existing, under or in connection
with this Agreement or the other Credit Documents in favor of the Lenders
(including those Liens securing the Wachovia JEDA Letter of Credit and the
bonds which are supported by the Wachovia JEDA Letter of Credit);
(ii) Liens in favor of a Lender hereunder as the provider of interest
rate protection relating to the Loans hereunder, but only (A) to the extent
such Liens secure obligations under such interest rate protection
agreements permitted under Section 6.1, (B) to the extent such Liens are on
the same collateral as to which the Lenders also have a Lien and (C) if
such provider and the Lenders shall share pari passu in the collateral
subject to such Liens;
(iii) purchase money Liens securing purchase money indebtedness (and
refinancings thereof) to the extent permitted under Section 6.1(c);
(iv) Liens for taxes, assessments, charges or other governmental
levies not yet due or as to which the period of grace (not to exceed 60
days), if any, related thereto has not expired or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Company or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of Subsidiaries with
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significant operations outside of the United States of America, generally
accepted accounting principles in effect from time to time in their
respective jurisdictions of incorporation);
(v) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(vi) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(vii) deposits to secure the performance of bids, trade contracts,
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(viii) any extension, renewal or replacement (or successive
extensions, renewals or replacements) , in whole or in part, of any Lien
referred to in the foregoing clauses; provided that such extension, renewal
or replacement Lien shall be limited to all or a part of the property which
secured the Lien so extended, renewed or replaced (plus improvements on
such property); and
(ix) Liens on Receivables which are the subject of a Qualified
Securitization Transaction permitted hereunder.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at any particular time, any employee benefit plan which is
covered by Title IV of ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Prime Rate": as defined in the definition of Alternate Base Rate.
"Pro Forma Basis": with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the
four-fiscal quarter period ending as of the end of the fiscal quarter most
recently ended prior to the date of such transaction with respect to which
the Agent has received the financial information required under
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Section 5.1. As used herein, "transaction" means any merger or
consolidation or acquisition as referenced in Section 6.5(b).
"Properties": as defined in subsection 3.10(a).
"Purchasing Lenders": as defined in subsection 9.6(c).
"Qualified Securitization Transaction": any transaction or series of
transactions that has been or may be entered into by the Borrower or any of
its Subsidiaries in connection with which the Borrower or any of its
Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization
Subsidiary or (ii) any other Person, or may grant a security interest in,
any Receivables or interests therein (whether such Receivables are then
existing or arising in the future) of the Borrower or any of its
Subsidiaries, and any assets related thereto including, without limitation,
all security interests in merchandise or services financed thereby, the
proceeds of such Receivables, and other assets which are customarily sold
or in respect of which security interests are customarily granted in
connection with securitization transactions involving such assets; provided
that (A) in connection therewith, there shall be no recourse to the
Borrower or any Subsidiary (other than the Securitization Subsidiary and
other than a guaranty of servicing obligations typical in transactions of
such kind) other than for repurchases of ineligible accounts receivable
under the agreement relating to the Qualified Securitization Transaction or
for indemnification of losses other than credit losses relating to the
Qualified Securitization Transaction, (B) such Qualified Securitization
Transaction shall not be supported by Guarantee Obligations of the Borrower
or any of its Subsidiaries (other than the Securitization Subsidiary), (C)
the Agent and the Majority Lenders shall be reasonably satisfied with the
structure, terms and tenor thereof and documentation therefor, including
the discount at which such accounts receivable are sold or the advance rate
against which borrowings are advanced and the applicable termination events
which shall, in any event, be consistent with those prevailing in the
market for similar transactions, and (D) the accounts receivable purchase
agreement or other similar agreements relating thereto shall not be amended
or modified in a manner reasonably adverse to the Lenders and their
interests hereunder except with the prior written consent of the Agent and
the Majority Lenders.
"Receivables": any right of payment from or on behalf of any obligor,
whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the sale or financing by the Borrower
or any Subsidiary of the Borrower of merchandise or services, and monies
due thereunder, security in the merchandise and services financed thereby,
records related thereto, and the right to
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payment of any interest or finance charges and other obligations with
respect thereto, proceeds from claims on insurance policies related
thereto, any other proceeds related thereto, and any other related rights.
"Recovery Event" means the receipt by the Company, the Borrower or any
of their respective Subsidiaries of any cash insurance proceeds or
condemnation award payable by reason of theft, loss, physical destruction
or damage, taking or similar event with respect to any of their respective
property or assets.
"Register": as defined in subsection 9.6(d).
"Reorganization": with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty-day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
ss.2615.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of
such Person, and each law, treaty, rule or regulation or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer": as to (a) the Company, the President and Chief
Executive Officer, any Executive Vice President, the Treasurer or any
Assistant Treasurer, the Secretary or any Assistant Secretary of the
Company or (b) the Borrower, any duly authorized officer thereof.
"Restatement Date": the closing date of this Amended and Restated
Credit Agreement.
"Revolving Commitment": with respect to each Lender, the commitment of
such Lender to make Revolving Loans in an aggregate principal amount at any
time outstanding up to such Lender's Revolving Committed Amount as
specified in Schedule 2.1(a), as such amount may be reduced from time to
time in accordance with the provisions hereof.
"Revolving Commitment Percentage": for each Lender, the percentage
identified as its Revolving Commitment Percentage on Schedule 2.1(a), as
such percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 9.6(c).
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"Revolving Committed Amount": collectively, the aggregate amount of
all of the Revolving Commitments as referenced in Section 2.1(a) and,
individually, the amount of each Lender's Revolving Commitment as specified
in Schedule 2.1(a).
"Revolving Loans": as defined in Section 2.1.
"Revolving Note" or "Revolving Notes": the promissory notes of the
Borrower in favor of each of the Lenders evidencing the Revolving Loans
provided pursuant to Section 2.1(e), individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"S&P": Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
"Securitization Subsidiary": any wholly owned Subsidiary of the
Borrower which engages in no activities other than those reasonably related
to or in connection with the entering into of securitization transactions
and which is designated by the Board of Directors of the Borrower (as
provided below) as a Securitization Subsidiary (a) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which
(i) is guaranteed by the Borrower or any other Subsidiary of the Borrower,
(ii) has recourse to or obligates the Borrower or any other Subsidiary of
the Borrower in any way other than pursuant to representations or
warranties made and covenants (including those related to servicing)
entered into in the ordinary course of business in connection with a
Qualified Securitization Transaction or (iii) subjects any property or
asset of the Borrower or any other Subsidiary of the Borrower, directly or
indirectly, contingently or otherwise, to any Lien or to the satisfaction
thereof, other than pursuant to representations or warranties made and
covenants (including those related to servicing) entered into in the
ordinary course of business in connection with a Qualified Securitization
Transaction, (b) to or with which neither the Borrower nor any other
Subsidiary of the Borrower (i) provides any guaranty or other credit
support or (ii) has any contract, agreement, arrangement or understanding
other than on terms that are fair and reasonable and that are no less
favorable to the Borrower or such Subsidiary than could be obtained from an
unrelated Person (other than, in the case of subclauses (i) and (ii) of
this clause (b), representations and warranties made and covenants
(including those relating to servicing) entered into in the ordinary course
of business in connection with a Qualified Securitization Transaction and
intercompany notes relating to the sale of Receivables to such
Securitization Subsidiary) and (c) to which neither the Borrower nor any
Subsidiary of the Borrower has any obligation to maintain or
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preserve such Subsidiary's financial condition or to cause such Subsidiary
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Borrower shall be evidenced to the Agent by
filing with the Agent a certified copy of the resolutions of the Board of
Directors of the Borrower giving effect to such designation.
"Security Agreement": that Amended and Restated Security and Pledge
Agreement dated as of the Restatement Date given by the Company, the
Borrower and the other Credit Parties to the Agent, as amended and modified
from time to time.
"Single Employer Plan": any Plan which is not a Multi-Employer Plan.
"Specified Sales": (i) the sale, transfer, lease or other disposition
of inventory and materials in the ordinary course of business, (ii) the
sale, transfer, lease or other disposition of machinery, parts and
equipment no longer useful in the conduct of the business of the Company in
its reasonable discretion, the Borrower or any of their respective
Subsidiaries, as appropriate, and (iii) the sale, transfer or other
disposition of Permitted Investments.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
"Swingline Commitment": the commitment of the Swingline Lender to make
Swingline Loans in an aggregate principal amount at any time outstanding up
to the Swingline Committed Amount, and the commitment of the Lenders to
purchase participation interests in the Swingline Loans as provided in
Section 2.3(b)(ii), as such amounts may be reduced from time to time in
accordance with the provisions hereof.
"Swingline Committed Amount": the amount of the Swingline Lender's
Swingline Commitment as specified in Section 2.3(a).
"Swingline Lender": First Union, in its capacity as such.
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"Swingline Loan" or "Swingline Loans": as defined in Section 2.3(a).
"Swingline Note": the promissory note of the Borrower in favor of the
Swingline Lender evidencing the Swingline Loans provided pursuant to
Section 2.3(d), as such promissory note may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"Taxes": as defined in subsection 2.18.
"Term Loan": as defined in Section 2.2(a).
"Term Loan Commitment": with respect to each Lender, the commitment of
such Lender to make its portion of the Term Loan as specified in Schedule
2.1(a) (and for purposes of making determinations of Majority Lenders
hereunder after the Closing Date, the principal amount outstanding on the
Term Loan).
"Term Loan Commitment Percentage": for each Lender, its Term Loan
Commitment Percentage on Schedule 2.1(a), as such percentage may be
modified in accordance with the provisions of Section 9.6.
"Term Loan Committed Amount": collectively, the aggregate amount of
all of the Term Loan Commitments as referenced in Section 2.2(a) and,
individually, the amount of each Lender's Term Loan Commitment as specified
in Schedule 2.1(a).
"Term Note" or "Term Notes": the promissory notes of the Borrower in
favor of each of the Lenders evidencing the Term Loan provided pursuant to
Section 2.2(d), individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended, renewed
or replaced from time to time.
"Termination Date": the earlier of (a) April 28, 2000 or (b) the date
on which the Commitments shall terminate in accordance with the provisions
of this Agreement.
"Tranche": the collective reference to LIBOR Rate Loans whose Interest
Periods begin and end on the same day. A Tranche may sometimes be referred
to as a "Eurodollar Tranche".
"Transfer Effective Date": as defined in each Commitment Transfer
Supplement.
"2.18 Certificate": as defined in Section 2.18.
"Type": as to any Loan, its nature as an Alternate Base Rate Loan,
LIBOR Rate Loan or Swingline Loan, as the case may be.
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"Wachovia JEDA Letter of Credit": that irrevocable letter of credit
no. LC 968-044594 dated May 17, 1994 issued by Wachovia Bank of North
Carolina, National Association in favor of First Citizens Bank & Trust
Company, as Trustee under those $7,200,000 South Carolina Jobs-Economic
Development Authority Tax-Exempt Adjustable Mode Economic Development
Revenue Bonds (Galey & Lord Industries, Inc. Project) Series 1994, for the
account of the Borrower in the original maximum amount of $7,830,000, being
an Existing Letter of Credit identified on Schedule 2.4(a), as such letter
of credit may be modified, supplemented, extended and replaced from time to
time.
"Wachovia JEDA Reimbursement Agreement": the Reimbursement and
Security Agreement dated as of May 1, 1994 between the Borrower and
Wachovia Bank of North Carolina, N.A. pursuant to which the Wachovia JEDA
Letter of Credit was issued, as amended, modified, supplemented and
replaced from time to time.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or other
Credit Documents or any certificate or other document made or delivered
pursuant hereto.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP applied on a basis consistent (except
for changes concurred in by the Company's independent public accountants) with
the most recent audited consolidated financial statements of the Company and the
Borrower delivered to the Lenders; provided that, if the Company or the Borrower
notifies the Agent that it wishes to amend any covenant in Section 5.9 to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if the Agent notifies the Company and the Borrower that the Majority Lenders
wish to amend Section 5.9 for such purpose), then the Company's and the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP
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became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Company, the Borrower and the Majority
Lenders.
The Company and the Borrower shall deliver to the Agent and each Lender at
the same time as the delivery of any annual or quarterly financial statements
given in accordance with the provisions of Section 5.1, (i) a description in
reasonable detail of any material change in the application of accounting
principles employed in the preparation of such financial statements from those
applied in the most recently preceding quarterly or annual financial statements
as to which no objection shall have been made in accordance with the provisions
above and (ii) a reasonable estimate of the effect on the financial statements
on account of such changes in application.
SECTION 2. THE LOANS; AMOUNT AND TERMS
2.1 Revolving Loans.
(a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans ("Revolving Loans") to the Borrower from time to time for the
purposes hereinafter set forth; provided, however, that (i) with regard to
each Lender individually, the sum of such Lender's share of outstanding
Revolving Loans plus such Lender's Revolving Commitment Percentage of
Swingline Loans plus such Lender's LOC Commitment Percentage of LOC
Obligations shall not exceed such Lender's Revolving Commitment Percentage
of the aggregate Revolving Committed Amount, and (ii) with regard to the
Lenders collectively, the sum of the aggregate amount of outstanding
Revolving Loans plus Swingline Loans plus the aggregate amount of LOC
Obligations shall not exceed the aggregate Revolving Committed Amount. For
purposes hereof, the aggregate Revolving Committed Amount available
hereunder shall be ONE HUNDRED SEVENTY MILLION DOLLARS ($170,000,000).
Revolving Loans may consist of Alternate Base Rate Loans or LIBOR Rate
Loans, or a combination thereof, as the Borrower may request, and may be
repaid and reborrowed in accordance with the provisions hereof. LIBOR Rate
Loans shall be made by each Lender at its LIBOR Lending Office and
Alternate Base Rate Loans at its Domestic Lending Office.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a Revolving
Loan borrowing by written notice (or telephone notice promptly
confirmed in writing which confirmation may be by fax) to the Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day prior to the date of requested borrowing in the case of
Alternate Base Rate Loans, and
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on the third Business Day prior to the date of the requested borrowing
in the case of LIBOR Rate Loans. Each such request for borrowing shall
be irrevocable and shall specify (A) that a Revolving Loan is
requested, (B) the date of the requested borrowing (which shall be a
Business Day), (C) the aggregate principal amount to be borrowed, and
(D) whether the borrowing shall be comprised of Alternate Base Rate
Loans, LIBOR Rate Loans or a combination thereof, and if LIBOR Rate
Loans are requested, the Interest Period(s) therefor. A form of Notice
of Borrowing (a "Notice of Borrowing") is attached as Schedule
2.1(b)(i). If the Borrower shall fail to specify in any such Notice of
Borrowing (I) an applicable Interest Period in the case of a LIBOR
Rate Loan, then such notice shall be deemed to be a request for an
Interest Period of one month, or (II) the type of Revolving Loan
requested, then such notice shall be deemed to be a request for an
Alternate Base Rate Loan hereunder. The Agent shall give notice to
each Lender promptly upon receipt of each Notice of Borrowing, the
contents thereof and each such Lender's share thereof.
(ii) Minimum Amounts. Each Revolving Loan borrowing shall be in a
minimum aggregate amount of $5,000,000 and integral multiples of
$1,000,000 in excess thereof (or the remaining amount of the Revolving
Commitment, if less).
(iii) Advances. Each Lender will make its Revolving Commitment
Percentage of each Revolving Loan borrowing available to the Agent for
the account of the Borrower at the office of the Agent specified in
Schedule 9.2, or at such other office as the Agent may designate in
writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrower by the Agent by crediting the account
of the Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds
as received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be
due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 2.9, Revolving
Loans shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as Revolving
Loans shall be comprised of Alternate Base Rate Loans, each such
Alternate Base Rate Loan shall bear interest at a per annum rate equal
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to the sum of the Alternate Base Rate plus the Applicable Percentage;
and
(ii) LIBOR Rate Loans. During such periods as Revolving Loans
shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan
shall bear interest at a per annum rate equal to the sum of the LIBOR
Rate plus the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each Interest
Payment Date.
(e) Revolving Notes. Each Lender's Revolving Commitment Percentage of
the Revolving Loans shall be evidenced by a duly executed amended, restated
and substituted promissory note of the Borrower to such Lender in
substantially the form of Schedule 2.1(e).
2.2 Term Loan.
(a) Term Loan. The Lenders made a term loan (the "Term Loan") to the
Borrower on the Closing Date in an aggregate principal amount of SIXTY
MILLION DOLLARS ($60,000,000) for the purposes hereinafter set forth, and
of which FORTY-EIGHT MILLION DOLLARS ($48,000,000) remains outstanding and
unpaid on the Restatement Date. The Term Loan may consist of Alternate Base
Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower
may request. Amounts repaid on the Term Loan may not be reborrowed. LIBOR
Rate Loans shall be made by each Lender at its LIBOR Lending Office and
Alternate Base Rate Loans at its Domestic Lending Office.
(b) Repayment of Term Loan. The remaining principal amount of the Term
Loan referred to in Section 2.2(a) shall be repaid in sixteen (16)
consecutive quarterly installments on the last day of each March, June,
September and December, beginning with the first such date to occur after
the Restatement Date. Installments one (1) through fifteen (15), inclusive,
shall each be in the amount of $3,000,000 and the sixteenth (16th) and
final installment shall be in the amount of the remaining principal balance
plus all accrued interest thereon.
(c) Interest on the Term Loan. Subject to the provisions of Section
2.9, the Term Loan shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as the Term
Loan shall be comprised of Alternate Base Rate Loans, each such
Alternate Base Rate Loan shall bear interest at a per annum rate equal
to the sum of the Alternate Base Rate plus the Applicable Percentage;
and
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(ii) LIBOR Rate Loans. During such periods as the Term Loan shall
be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear
interest at a per annum rate equal to the sum of the LIBOR Rate plus
the Applicable Percentage.
Interest on the Term Loan shall be payable in arrears on each Interest
Payment Date.
(d) Term Notes. Each Lender's Term Loan Commitment Percentage of the
Term Loan outstanding as of the Restatement Date shall be evidenced by a
duly executed amended, restated and substituted promissory note of the
Borrower to such Lender in substantially the form of Schedule 2.2(d).
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. During the Commitment Period, subject to the
terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans to the Borrower
(each a "Swingline Loan" and, collectively, the "Swingline Loans") for the
purposes hereinafter set forth; provided, however, (i) the aggregate amount
of Swingline Loans outstanding at any time shall not exceed TEN MILLION
DOLLARS ($10,000,000) (the "Swingline Committed Amount"), and (ii) the sum
of the aggregate amount of outstanding Revolving Loans plus Swingline Loans
plus the aggregate amount of LOC Obligations shall not exceed the aggregate
Revolving Committed Amount. Swingline Loans hereunder may be repaid and
reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Borrowings.
(i) Notice of Borrowing and Disbursement. The Swingline Lender
will make Swingline Loans available to the Borrower upon request or on
the basis of such other arrangements as may be agreed upon between the
Swingline Lender and the Borrower. A notice of request for Swingline
Loan borrowing may, but need not, be in the form of Schedule
2.1(b)(i). There shall be no minimum amount for Swingline Loan
borrowings hereunder.
(ii) Repayment of Swingline Loans. Each Swingline Loan borrowing
shall be due and payable on the earlier of (A) the date of the next
Revolving Loan borrowing, or (B) the Termination Date. If, and to the
extent, any Swingline Loans shall be outstanding on the date of any
Revolving Loan borrowing, such Swingline Loans shall first be repaid
from the proceeds of such Revolving Loan borrowing prior to
disbursement to the Borrower. In addition, the Swingline Lender may,
at any time, in its sole discretion, by written notice to the
Borrower and the Agent, demand repayment of its
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Swingline Loans by way of a Revolving Loan borrowing, in which case
the Borrower shall be deemed to have requested a Revolving Loan
borrowing comprised entirely of Alternate Base Rate Loans in the
amount of such Swingline Loans; provided, however, that, in the
following circumstances, any such demand shall also be deemed to have
been given one Business Day prior to each of (i) the Termination Date
(ii) the occurrence of any Event of Default described in Section
7(e), (iii) upon acceleration of the Obligations hereunder, whether
on account of an Event of Default described in Section 7(e) or any
other Event of Default, and (iv) the exercise of remedies in
accordance with the provisions of Section 7 hereof (each such
Revolving Loan borrowing made on account of any such deemed request
therefor as provided herein being hereinafter referred to as a
"Mandatory Borrowing"). Each Lender hereby irrevocably agrees
to make such Revolving Loans promptly upon any such request or deemed
request on account of each Mandatory Borrowing in the amount and in
the manner specified in the preceding sentence and on the same such
date notwithstanding (I) the amount of Mandatory Borrowing may not
comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (II) whether any conditions specified in
Section 4.2 are then satisfied, (III) whether a Default or an Event of
Default then exists, (IV) failure of any such request or deemed
request for Revolving Loans to be made by the time otherwise required
in Section 2.1(b)(i), (V) the date of such Mandatory Borrowing, or
(VI) any reduction in the Revolving Committed Amount or termination of
the Commitments relating thereto immediately prior to such Mandatory
Borrowing or contemporaneous therewith. In the event that any
Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result
of the commencement of a proceeding under the Bankruptcy Code with
respect to the Borrower), then each Lender hereby agrees that it shall
forthwith purchase (as of the date the Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) from
the Swingline Lender such participations in the outstanding Swingline
Loans as shall be necessary to cause each such Lender to share in such
Swingline Loans ratably based upon its respective Revolving Commitment
Percentage (determined before giving effect to any termination of the
Commitments pursuant to Section 7), provided that (A) all interest
payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date as of which the respective
participation is purchased, and (B) at the time any purchase of
participations pursuant to this sentence is actually made, the
purchasing Lender shall
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be required to pay to the Swingline Lender interest on the principal
amount of such participation purchased for each day from and including
the day upon which the Mandatory Borrowing would otherwise have
occurred to but excluding the date of payment for such participation,
at the rate equal to, if paid within two (2) Business Days of the date
of the Mandatory Borrowing, the Federal Funds Effective Rate, and
thereafter at a rate equal to the Alternate Base Rate.
(c) Interest on Swingline Loans. Subject to the provisions of Section
2.9, Swingline Loans shall bear interest at such rate or rates as may be
agreed upon by Swingline Lender and the Borrower, or if the Swingline
Lender and the Borrower are unable to reach an agreement, at a per annum
rate equal to the Alternate Base Rate plus the Applicable Percentage.
Interest on Swingline Loans shall be payable in arrears on each Interest
Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by a duly
executed amended, restated and substituted promissory note of the Borrower
to the Swingline Lender in the original amount of the Swingline Committed
Amount and substantially in the form of Schedule 2.3(d).
2.4 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and of the
LOC Documents, if any, and any other terms and conditions which the Issuing
Lender may reasonably require, during the Commitment Period the Issuing
Lender shall issue, and the Lenders shall participate in, Letters of Credit
for the account of the Borrower from time to time upon request in a form
acceptable to the Issuing Lender; provided, however, that (i) the aggregate
amount of LOC Obligations shall not at any time exceed TWENTY MILLION
DOLLARS ($20,000,000) (the "LOC Committed Amount"), (ii) the sum of the
aggregate amount of Revolving Loans plus Swingline Loans plus the aggregate
amount of LOC Obligations shall not at any time exceed the aggregate
Revolving Committed Amount and (iii) Letters of Credit shall be issued
solely for the purpose of supporting tax-advantaged variable rate demand
note financing or workers' compensation and other insurance programs.
Except as otherwise expressly agreed upon by all the Lenders, no Letter of
Credit shall have an original expiry date more than fourteen (14) months
from the date of issuance; provided, however, so long as no Default or
Event of Default has occurred and is continuing and subject to the other
terms and conditions to the issuance of Letters of Credit hereunder, and
other than the Wachovia JEDA Letter of Credit which by its terms is, and
shall continue to be, automatically extended each month as to which no
Notice of Non-Extension (as defined in the Wachovia JEDA Reimbursement
Agreement) is given until the 5th day of the 13th month following receipt
by the Borrower
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and the Trustee for the JEDA Bonds of a Notice of NonExtension from the
Issuing Lender thereof (but not to a date later than the "Termination Date"
as defined therein),the expiry dates of Letters of Credit may be extended
annually or periodically from time to time on the request of the Borrower
or by operation of the terms of the applicable Letter of Credit to a date
not more than fourteen (14) months from the date of extension; provided,
further, that no Letter of Credit, as originally issued or as extended,
shall have an expiry date extending beyond the Termination Date except that
prior to the Termination Date a Letter of Credit may be issued or extended
with an expiry date extending beyond the Termination Date if, and to the
extent that, unless the Issuing Lender and the Majority Lenders shall
otherwise agree, the Borrower shall provide cash collateral to the Issuing
Lender on the date of issuance or extension in an amount equal to the
maximum amount available to be drawn under such Letter of Credit. Each
Letter of Credit shall comply with the related LOC Documents. The issuance
and expiry date of each Letter of Credit shall be a Business Day. Any
Letters of Credit issued hereunder shall be in a minimum original face
amount of $250,000. There will be no more than 20 Letters of Credit
outstanding at any time.
(b) Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted to the Issuing Lender at least five (5) Business
Days prior to the requested date of issuance. The Issuing Lender will, at
least quarterly and more frequently upon request, provide to the Agent for
dissemination to the Lenders a detailed report specifying the Letters of
Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the account party, the beneficiary,
the face amount, expiry date as well as any payments or expirations which
may have occurred. The Issuing Lender will further provide to the Agent
promptly upon request copies of the Letters of Credit. The Issuing Lender
will provide to the Agent at least weekly, and more frequently upon
request, a summary report of the nature and extent of LOC Obligations then
outstanding.
(c) Participations. Each Lender, with respect to the Existing Letters
of Credit, hereby purchases a participation interest in such Existing
Letters of Credit and with respect to Letters of Credit issued on or after
the Closing Date, upon issuance of a Letter of Credit, shall be deemed to
have purchased without recourse a risk participation from the Issuing
Lender in such Letter of Credit and the obligations arising thereunder and
any collateral relating thereto, in each case in an amount equal to its LOC
Commitment Percentage of the obligations under such Letter of Credit and
shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and be
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obligated to pay to the Issuing Lender therefor and discharge when due, its
LOC Commitment Percentage of the obligations arising under such Letter of
Credit. Without limiting the scope and nature of each Lender's
participation in any Letter of Credit, to the extent that the Issuing
Lender has not been reimbursed as required hereunder or under any LOC
Document, each such Lender shall pay to the Issuing Lender its LOC
Commitment Percentage of such unreimbursed drawing in same day funds on the
day of notification by the Issuing Lender of an unreimbursed drawing
pursuant to the provisions of subsection (d) hereof. The obligation of each
Lender to so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement
shall not relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Lender under any Letter of Credit, together with
interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower and the Agent.
The Borrower shall reimburse the Issuing Lender on the day of drawing under
any Letter of Credit (either with the proceeds of a Swingline Loan or
Revolving Loan obtained hereunder or otherwise) in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided herein, the unreimbursed amount of
such drawing shall bear interest at a per annum rate equal to the Alternate
Base Rate plus two percent (2%). Unless the Borrower shall immediately
notify the Issuing Lender and the Agent of its intent to otherwise
reimburse the Issuing Lender, the Borrower shall be deemed to have
requested a Swingline Loan, or if and to the extent Swingline Loans shall
not be available, a Revolving Loan in the amount of the drawing as provided
in subsection (e) hereof, the proceeds of which will be used to satisfy the
reimbursement obligations. The Borrower's reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of any rights of set-off, counterclaim or defense to payment
the Borrower may claim or have against the Issuing Lender, the Agent, the
Lenders, the beneficiary of the Letter of Credit drawn upon or any other
Person, including without limitation any defense based on any failure of
the Borrower to receive consideration or the legality, validity, regularity
or unenforceability of the Letter of Credit. The Issuing Lender will
promptly notify the other Lenders of the amount of any unreimbursed drawing
and each Lender shall promptly pay to the Agent for the account of the
Issuing Lender in Dollars and in immediately available funds, the amount of
such Lender's LOC Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender
from the Issuing Lender if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time), otherwise
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such payment shall be made at or before 12:00 Noon (Charlotte, North
Carolina time) on the Business Day next succeeding the day such notice is
received. If such Lender does not pay such amount to the Issuing Lender in
full upon such request, such Lender shall, on demand, pay to the Agent for
the account of the Issuing Lender interest on the unpaid amount during the
period from the date of such drawing until such Lender pays such amount to
the Issuing Lender in full at a rate per annum equal to, if paid within two
(2) Business Days of the date of drawing, the Federal Funds Effective Rate
and thereafter at a rate equal to the Alternate Base Rate. Each Lender's
obligation to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and unconditional,
shall not be affected by any circumstance whatsoever and without regard to
the termination of this Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the
Obligations hereunder and shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, (i) a Swingline
Loan borrowing to reimburse a drawing under a Letter of Credit, the
Swingline Lender shall make the Swingline Loan advance pursuant to the
terms of the request or deemed request in accordance with the provisions
for Swingline Loan advances hereunder, or (ii) a Revolving Loan to
reimburse a drawing under a Letter of Credit, the Agent shall give notice
to the Lenders that a Revolving Loan has been requested or deemed requested
in connection with a drawing under a Letter of Credit, in which case a
Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans
(each such borrowing, a "Mandatory Borrowing") shall be immediately made
(without giving effect to any termination of the Commitments pursuant to
Section 7) pro rata based on each Lender's respective Revolving Commitment
Percentage (determined before giving effect to any termination of the
Commitments pursuant to Section 7) and in the case of both clauses (i) and
(ii) the proceeds thereof shall be paid directly to the Issuing Lender for
application to the respective LOC Obligations. Each Lender hereby
irrevocably agrees to make such Revolving Loans immediately upon any such
request or deemed request on account of each Mandatory Borrowing in the
amount and in the manner specified in the preceding sentence and on the
same such date notwithstanding (i) the amount of Mandatory Borrowing may
not comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 4.2 are then satisfied, (iii) whether a Default or an Event of
Default then exists, (iv) failure for any such request or deemed request
for Revolving Loan to be made by the time otherwise required in Section
2.1(b), (v) the date of such Mandatory Borrowing, or (vi) any reduction in
the Revolving
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Committed Amount after any such Letter of Credit may have been drawn upon;
provided, however, that in the event any such Mandatory Borrowing should be
less than the minimum amount for borrowings of Revolving Loans otherwise
provided in Section 2.1(b)(ii), the Borrower shall pay to the Agent for its
own account an administrative fee of $500. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or the
Company), then each such Lender hereby agrees that it shall forthwith fund
(as of the date the Mandatory Borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date
and prior to such purchase) its Participation Interests in the outstanding
LOC Obligations; provided, further, that in the event any Lender shall fail
to fund its Participation Interest on the day the Mandatory Borrowing would
otherwise have occurred, then the amount of such Lender's unfunded
Participation Interest therein shall bear interest payable to the Issuing
Lender upon demand, at the rate equal to, if paid within two (2) Business
Days of such date, the Federal Funds Effective Rate, and thereafter at a
rate equal to the Alternate Base Rate.
(f) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender shall have the
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP may be
incorporated therein and deemed in all respects to be a part thereof.
2.5 Fees.
(a) Commitment Fee. In consideration of the Commitments, the Borrower
agrees to pay to the Agent for the ratable benefit of the Lenders a
commitment fee (the "Commitment Fee") in an amount equal to the Applicable
Percentage per annum on the average daily unused amount of the aggregate
Revolving Committed Amount. For purposes of computing the Commitment
hereunder, Swingline Loans shall not be considered usage under the
aggregate Revolving Committed Amount. The Commitment Fee shall be payable
quarterly in arrears on the 15th day following the last day of each
calendar quarter for the prior calendar quarter.
(b) Letter of Credit Fees. In consideration of the LOC Commitments,
the Borrower agrees to pay to the Issuing
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Lender a fee (the "Letter of Credit Fee") equal to the Applicable
Percentage per annum on the average daily maximum amount available to be
drawn under each Letter of Credit from the date of issuance to the date of
expiration. In addition to such Letter of Credit Fee, the Issuing Lender
may charge, and retain for its own account without sharing by the other
Lenders, an additional facing fee of one-eighth of one percent (1/8%) per
annum on the average daily maximum amount available to be drawn under each
such Letter of Credit issued by it. The Issuing Lender shall promptly pay
over to the Agent for the ratable benefit of the Lenders (including the
Issuing Lender) the Letter of Credit Fee. The Letter of Credit Fee shall be
payable quarterly in arrears on the 15th day following the last day of each
calendar quarter.
(c) Issuing Lender Fees. In addition to the Letter of Credit Fees
payable pursuant to subsection (b) hereof, the Borrower shall pay to the
Issuing Lender for its own account without sharing by the other Lenders the
reasonable and customary charges from time to time of the Issuing Lender
with respect to the amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit (collectively,
the "Issuing Lender Fees").
2.6 Changes of Commitments.
(a) Voluntary Reductions. The Company shall have the right to
terminate or reduce the unused portion of the Commitments at any time or
from time to time upon not less than three Business Days' prior notice to
the Agent (which shall notify the Lenders thereof as soon as practicable)
of each such termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction (which in the
case of Revolving Loans shall be in a minimum amount of $5,000,000 or a
whole multiple of $1,000,000 in excess thereof and in the case of Swingline
Loans and Letters of Credit shall be in a minimum amount of $500,000 or a
whole multiple of $100,000 in excess thereof) and shall be irrevocable and
effective only upon receipt by the Agent, provided that no such reduction
or termination shall be permitted if after giving effect thereto, and to
any prepayments of the Revolving Loans made on the effective date thereof,
the sum of the then outstanding aggregate principal amount of the Revolving
Loans plus the outstanding principal amount of Swingline Loans plus the
outstanding amount of LOC Obligations would exceed the amount of the
aggregate Revolving Commitments then in effect.
(b) Mandatory Reductions. The aggregate Revolving Committed Amount
shall be immediately and permanently reduced upon consummation of any
Qualified Securitization Transaction in an amount equal to 100% of the
aggregate maximum net amount of Indebtedness relating to such Qualified
Securitization Transaction.
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2.7 Prepayments.
(a) Optional Prepayments. The Borrower, may, upon three Business Days'
irrevocable notice from the Company, on behalf of such Borrower, to the
Agent (which shall notify the Lenders thereof as soon as practicable),
prepay Loans. If any Loan shall be prepaid on any day other than the last
day of the Interest Period applicable thereto, the respective Borrower
shall, on the date of such payment, also pay all interest accrued on such
Loan to the date of such payment and all amounts payable pursuant to
subsection 2.17 in connection therewith. Amounts prepaid on the Revolving
Loan shall be applied first to Alternate Base Rate Loans and then to LIBOR
Rate Loans in direct order of Interest Period maturity. Amounts prepaid on
the Term Loan shall be applied to the principal amortization payments in
inverse order of installment maturity, and first to Alternate Base Rate
Loans and then to LIBOR Rate Loans in direct order of Interest Period
maturity. Amounts prepaid on the Swingline Loan and the Revolving Loans may
be reborrowed in accordance with the terms hereof. Amounts prepaid on the
Term Loan may not be reborrowed.
(b) Mandatory Prepayments. If at any time (i) the sum of the aggregate
amount of outstanding Revolving Loans plus the aggregate amount of
Swingline Loans plus the aggregate amount of LOC Obligations shall exceed
the aggregate Revolving Committed Amount, (ii) the aggregate amount of LOC
Obligations shall exceed the aggregate LOC Committed Amount, or (iii) the
aggregate amount of Swingline Loans shall exceed the Swingline Committed
Amount, the Borrower shall immediately make payment on the Loans or provide
cash collateral in respect of the LOC Obligations in an amount sufficient
to eliminate the difference. In the case of a mandatory prepayment required
on account of subsection (ii) or (iii), the amount required to be prepaid
hereunder shall serve to temporarily reduce the aggregate Revolving
Committed Amount (for purposes of borrowing availability hereunder, but not
for purposes of computation of fees) by the amount of the payment required
until such time as the situation described in subsection (ii) or (iii)
shall no longer exist. Payments required to be made hereunder shall be
applied first to Revolving Loans or Swingline Loans, as appropriate, and
then to a cash collateral account in respect of the LOC Obligations, and
with respect to the types of Loans, first to Alternate Base Rate Loans and
Swingline Loans and then to LIBOR Rate Loans in direct order of their
Interest Period maturities.
(c) Apparel Prints Division. The Lenders have, pursuant to the First
Amendment to Credit Agreement dated as of October 19, 1995, consented to
the closure of the Borrower's apparel prints business and the liquidation,
dissolution, sale, transfer and other disposition of the fixed assets and
properties relating thereto as the Borrower
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may see fit in its discretion; provided that the Borrower agrees to
promptly apply the net cash proceeds(after taking into account reasonable
transaction costs, estimated taxes payable in respect thereof and
indebtedness which is secured by or otherwise directly related to such
assets and properties), if any, therefrom in prepayment on the Term Loan in
inverse order of installment maturity as provided in subsection (a) hereof.
2.8 Minimum Principal Amount of Tranches. All borrowings, payments and
prepayments in respect of Revolving Loans and Term Loans shall be in such
amounts and be made pursuant to such elections so that after giving effect
thereto the aggregate principal amount of the Revolving Loans and Loans
comprising any Tranche shall not be less than $5,000,000 or a whole multiple of
$1,000,000 in excess thereof.
2.9 Default Rate and Payment Dates.
(a) If all or a portion of the principal amount of any Loan which is a
LIBOR Rate Loan shall not be paid when due or continued as a LIBOR Rate
Loan in accordance with the provisions of Section 2.10 (whether at the
stated maturity, by acceleration or otherwise), such overdue principal
amount of such Loan shall be converted to an Alternate Base Rate Loan at
the end of the Interest Period applicable thereto.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a
rate per annum which is (x) in the case of overdue principal, the rate that
would otherwise be applicable thereto plus 2% or (y) in the case of overdue
interest, fees or other amounts, the Alternate Base Rate plus 2%, in each
case from the date of such non-payment until such amount is paid in full
(as well after as before judgment).
(c) Interest on each Loan shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (b) of
this subsection shall be payable from time to time on demand.
2.10 Conversion Options.
(a) The Company, on behalf of the Borrower, may, in the case of
Revolving Loans and the Term Loan, elect from time to time to convert
Alternate Base Rate Loans to LIBOR Rate Loans, by giving the Agent at least
three Business Days' prior irrevocable written notice of such election. A
form of Notice of Conversion or Extension is attached as Schedule 2.10. If
the date upon which an Alternate Base Rate Loan is to be converted to a
LIBOR Rate Loan is not a Business Day, then such conversion shall be made
on the next
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succeeding Business Day and during the period from such last day of an
Interest Period to such succeeding Business Day such Loan shall bear
interest as if it were an Alternate Base Rate Loan. All or any part of
outstanding LIBOR Rate Loans and Alternate Base Rate Loans may be converted
as provided herein, provided that (i) no Loan may be converted into, a
LIBOR Rate Loan when any Default or Event of Default has occurred and is
continuing and (ii) partial conversions shall be in an aggregate principal
amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
(b) Any LIBOR Rate Loans may be continued as such upon the expiration
of an Interest Period with respect thereto by compliance by the Company, on
behalf of the Borrower, with the notice provisions contained in subsection
2.10(a); provided, that no LIBOR Rate Loan may be continued as such when
any Default or Event of Default has occurred and is continuing, in which
case such Loan shall be automatically converted to an Alternate Base Rate
Loan at the end of the applicable Interest Period with respect thereto.
Where the Company shall fail to give timely notice of an election to
continue a LIBOR Rate Loan, or where continuation of LIBOR Rate Loans is
not permitted hereunder, such LIBOR Rate Loans shall be automatically
converted to Alternate Base Rate Loans at the end of the applicable
Interest Period with respect thereto.
2.11 Computation of Interest and Fees.
(a) Interest payable hereunder with respect to Alternate Base Rate
Loans shall be calculated on the basis of a year of 365/6 days for the
actual days elapsed. All other fees, interest and all other amounts payable
hereunder shall be calculated on the basis of a 360 day year for the actual
days elapsed. The Agent shall as soon as practicable notify the Company and
the Lenders of each determination of a LIBOR Rate on the Business Day of
the determination thereof. Any change in the interest rate on a Loan
resulting from a change in the Alternate Base Rate shall become effective
as of the opening of business on the day on which such change in the
Alternate Base Rate shall become effective. The Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and
the amount of each such change.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Company, deliver to the Borrower a statement showing
the computations used by the Agent in determining any interest rate.
2.12 Pro Rata Treatment and Payments. Each borrowing of Revolving Loans and
any reduction of the Revolving Commitments
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shall be made pro rata according to the respective Commitment Percentages of the
Lenders. Each payment under this Agreement or any Note shall be applied, first,
to any fees then due and owing by the Borrower pursuant to subsection 2.5,
second, to interest then due and owing in respect of the Notes of the Borrower
and, third, to principal then due and owing hereunder and under the Notes of the
Borrower. Each payment on account of any fees pursuant to subsection 2.5 shall
be made pro rata in accordance with the respective amounts due and owing (except
as to the portion of the Letter of Credit retained by the Issuing Lender and the
Issuing Lender Fees). Each payment (other than prepayments) by the Borrower on
account of principal of and interest on the Revolving Loans and on the Term Loan
shall be made pro rata according to the respective amounts due and owing. Each
prepayment on account of principal of the Loans shall be applied, to such of the
Loans as the Company, on behalf of the Borrower, may designate (to be applied
pro rata among the Lenders); provided, that prepayments made pursuant to
subsection 2.15 shall be applied in accordance with such subsection. All
payments (including prepayments) to be made by the Borrower on account of
principal, interest and fees shall be made without defense, set-off or
counterclaim (except as provided in subsection 2.18(b)) and shall be made to the
Agent for the account of the Lenders at the Agent's office specified in Schedule
9.2 in Dollars and in immediately available funds. The Agent shall distribute
such payments to the Lenders entitled thereto promptly upon receipt in like
funds as received. If any payment hereunder (other than payments on the LIBOR
Rate Loans) becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a LIBOR Rate Loan
becomes due and payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day.
2.13 Non-Receipt of Funds by the Agent.
(a) Unless the Agent shall have been notified by a Lender prior to the
date a Revolving Loan is to be made by such Lender (which notice shall be
effective upon receipt) that such Lender does not intend to make the
proceeds of such Revolving Loan available to the Agent, the Agent may
assume that such Lender has made such proceeds available to the Agent on
such date, and the Agent may in reliance upon such assumption (but shall
not be required to) make available to the respective Borrower a
corresponding amount. If such amount is made available to the Agent on a
date after such Borrowing Date, such Lender shall pay to the Agent on
demand an amount equal to the product of (i) the daily average Federal
Funds Effective Rate during such period, times (ii) the amount of such
Lender's Commitment
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Percentage of such borrowing, times (iii) a fraction, the numerator of
which is the number of days that elapse from and including such Borrowing
Date to the date on which such Lender's Commitment Percentage of such
borrowing shall have become immediately available to the Agent and the
denominator of which is 360. If such Lender's Revolving Commitment
Percentage is not in fact made available to the Agent by such Lender within
two (2) Business Days of such Borrowing Date, the Agent shall be entitled
to recover such amount with interest thereon at the rate per annum
applicable to Alternate Base Rate Loans hereunder, on demand, from the
Borrower.
(b) Unless the Agent shall have been notified by the Borrower, prior
to the date on which any payment is due from it hereunder (which notice
shall be effective upon receipt) that the Borrower does not intend to make
such payment, the Agent may assume that such Borrower has made such payment
when due, and the Agent may in reliance upon such assumption (but shall not
be required to) make available to each Lender on such payment date an
amount equal to the portion of such assumed payment to which such Lender is
entitled hereunder, and if the Borrower has not in fact made such payment
to the Agent, such Lender shall, on demand, repay to the Agent the amount
made available to such Lender. If such amount is repaid to the Agent on a
date after the date such amount was made available to such Lender, such
Lender shall pay to the Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Effective Rate during such period,
times (ii) the amount made available to such Lender by the Agent pursuant
to this paragraph (b), times (iii) a fraction, the numerator of which is
the number of days that elapse from and including the date on which such
amount was made available to such Lender to the date on which such amount
shall have been repaid to the Agent by such Lender and become immediately
available to the Agent and the denominator of which is 360.
(c) A certificate of the Agent submitted to the Company, on behalf of
the Borrower, or any Lender with respect to any amount owing under this
subsection shall be conclusive in the absence of manifest error.
2.14 Inability to Determine Interest Rate. Notwithstanding any other
provision of this Agreement, if (i) the Agent shall reasonably determine (which
determination shall be conclusive and binding absent manifest error) that, by
reason of circumstances affecting the relevant market, reasonable and adequate
means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the
Majority Lenders shall reasonably determine (which determination shall be
conclusive and binding absent manifest error) that the LIBOR Rate does not
adequately and fairly reflect the cost to such Lenders of funding LIBOR Rate
Loans that the Borrower has requested be outstanding as a Eurodollar Tranche
during such Interest Period, the Agent shall forthwith give
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telephone notice of such determination, confirmed in writing, to the Borrower,
and the Lenders at least two Business Days prior to the first day of such
Interest Period. Unless the Borrower shall have notified the Agent upon receipt
of such telephone notice that it wishes to rescind or modify its request
regarding such LIBOR Rate Loans, any Loans that were requested to be made as
LIBOR Rate Loans shall be made as Alternate Base Rate Loans and any Loans that
were requested to be converted into or continued as LIBOR Rate Loans shall be
converted into Alternate Base Rate Loans. Until any such notice has been
withdrawn by the Agent, no further Loans shall be made as, continued as, or
converted into, LIBOR Rate Loans for the Interest Periods so affected.
2.15 Illegality. Notwithstanding any other provision of this Agreement, if
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof by the relevant Governmental Authority to any Lender
shall make it unlawful for such Lender or its LIBOR Lending Office to make or
maintain LIBOR Rate Loans as contemplated by this Agreement or to obtain in the
interbank eurodollar market through its LIBOR Lending Office the funds with
which to make such Loans, (a) such Lender shall promptly notify the Agent and
the Borrower thereof, (b) the commitment of such Lender hereunder to make LIBOR
Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended
until the Agent shall give notice that the condition or situation which gave
rise to the suspension shall no longer exist, and (c) such Lender's Loans then
outstanding as LIBOR Rate Loans, if any, shall be converted on the last day of
the Interest Period for such Loans or within such earlier period as required by
law as Alternate Base Rate Loans. The Borrower hereby agrees promptly to pay any
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for actual and direct costs (but not including anticipated profits)
reasonably incurred by such Lender in making any repayment in accordance with
this subsection including, but not limited to, any interest or fees payable by
such Lender to lenders of funds obtained by it in order to make or maintain its
LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender, through the Agent, to the
Borrower shall be conclusive in the absence of manifest error. Each Lender
agrees to use reasonable efforts (including reasonable efforts to change its
LIBOR Lending Office) to avoid or to minimize any amounts which may otherwise be
payable pursuant to this subsection; provided, however, that such efforts shall
not cause the imposition on such Lender of any additional costs or legal or
regulatory burdens deemed by such Lender to be material.
2.16 Requirements of Law.
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
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central bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall subject such Lender to any tax of any kind whatsoever
with respect to any Letter of Credit or any application relating
thereto, any LIBOR Rate Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of
funds by, any office of such Lender which is not otherwise included in
the determination of the LIBOR Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining Loans or to reduce any amount receivable
hereunder or under any Note, then, in any such case, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary
to compensate such Lender for such additional cost or reduced amount
receivable which such Lender reasonably deems to be material as determined
by such Lender with respect to its LIBOR Rate Loans. A certificate as to
any additional amounts payable pursuant to this subsection submitted by
such Lender, through the Agent, to the Borrower shall be conclusive in the
absence of manifest error. Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its Domestic Lending Office or
LIBOR Lending Office, as the case may be) to avoid or to minimize any
amounts which might otherwise be payable pursuant to this paragraph of this
subsection; provided, however, that such efforts shall not cause the
imposition on such Lender of any additional costs or legal or regulatory
burdens deemed by such Lender to be material.
(b) If any Lender shall have reasonably determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or in
the interpretation or application thereof or compliance by such Lender or
any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from
any central bank or Governmental Authority made subsequent to the date
hereof does or shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of
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its obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies
with respect to capital adequacy) by an amount reasonably deemed by such
Lender to be material, then from time to time, within 15 days after demand
by such Lender, the Borrower shall pay to such Lender such additional
amount as shall be certified by such Lender as being required to compensate
it for such reduction. Such a certificate as to any additional amounts
payable under this subsection submitted by a Lender (which certificate
shall include a description of the basis for the computation), through the
Agent, to the Borrower shall be conclusive absent manifest error.
(c) Notwithstanding anything to the contrary contained herein, the
Borrower shall not have any obligation to pay to any Lender amounts owing
under this subsection 2.16 for any period which is more than 90 days prior
to the date upon which the request for payment therefor is delivered to the
Company.
(d) The agreements in this subsection shall survive the termination of
this Agreement and payment of the Notes and all other amounts payable
hereunder.
2.17 Indemnity. The Borrower hereby agrees to indemnify each Lender and to
hold such Lender harmless from any funding loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in payment of
the principal amount of or interest on any Loan by such Lender in accordance
with the terms hereof, (b) default by the Borrower in accepting a borrowing
after the Borrower has given a notice in accordance with the terms hereof, (c)
default by the Borrower in making any prepayment after the Borrower has given a
notice in accordance with the terms hereof, and/or (d) the making by the
Borrower of a prepayment of a Loan, or the conversion thereof, on a day which is
not the last day of the Interest Period with respect thereto, in each case
including, but not limited to, any such loss or expense arising from interest or
fees payable by such Lender to lenders of funds obtained by it in order to
maintain its Loans hereunder. A certificate as to any additional amounts payable
pursuant to this subsection submitted by any Lender, through the Agent, to the
Borrower (which certificate must be delivered to the Agent within thirty days
following such default, prepayment or conversion) shall be conclusive in the
absence of manifest error. The agreements in this subsection shall survive
termination of this Agreement and payment of the Notes and all other amounts
payable hereunder.
2.18 Taxes.
(a) All payments made by the Borrower hereunder or under any Note will
be, except as provided in Section 2.18(b), made free and clear of, and
without deduction or
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withholding for, any present or future taxes, levies, imposts, duties,
fees, assessments or other charges of whatever nature now or hereafter
imposed by any Governmental Authority or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding any tax imposed on or measured by the net income or profits of a
Lender pursuant to the laws of the jurisdiction in which it is organized or
the jurisdiction in which the principal office or applicable lending office
of such Lender is located or any subdivision thereof or therein) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such
Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. The Borrower will
furnish to the Agent as soon as practicable after the date the payment of
any Taxes is due pursuant to applicable law certified copies (to the extent
reasonably available and required by law) of tax receipts evidencing such
payment by the Borrower. The Borrower agrees to indemnify and hold harmless
each Lender, and reimburse such Lender upon its written request, for the
amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Agent on or prior to the Closing Date, or in the case of a
Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 9.6(d) (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Lender, (i)
if the Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or
(ii) if the Lender is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, either Internal Revenue Service Form 1001 or 4224
as set forth in clause (i) above, or (x) a certificate substantially in the
form of Schedule 2.18 (any such certificate, a "2.18 Certificate") and (y)
two accurate and complete original signed copies of Internal Revenue
Service Form W-8 (or successor form) certifying such Lender's entitlement
to an exemption from United States withholding tax with respect to payments
of interest to be made under this Agreement and under any Note. In
addition, each Lender agrees that it will deliver upon the Borrower's
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request updated versions of the foregoing, as applicable, whenever the
previous certification has become obsolete or inaccurate in any material
respect, together with such other forms as may be required in order to
confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in United States withholding tax with respect
to payments under this Agreement and any Note. Notwithstanding anything to
the contrary contained in Section 2.18(a), but subject to the immediately
succeeding sentence, (x) each Borrower shall be entitled, to the extent it
is required to do so by law, to deduct or withhold Taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable hereunder for the
account of any Lender which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes to the extent that such Lender has not provided to the Company
U.S. Internal Revenue Service Forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 2.18(a) hereof to gross-up payments to be
made to a Lender in respect of Taxes imposed by the United States if (I)
such Lender has not provided to the Borrower the Internal Revenue Service
Forms required to be provided to the Company pursuant to this Section
2.18(b) or (II) in the case of a payment, other than interest, to a Lender
described in clause (ii) above, to the extent that such Forms do not
establish a complete exemption from withholding of such Taxes.
Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 2.18, the Borrower agrees to pay
additional amounts and to indemnify each Lender in the manner set forth in
Section 2.18(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted
or withheld by it as described in the immediately preceding sentence as a
result of any changes after the Closing Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of Taxes.
(c) Each Lender agrees to use reasonable efforts (including reasonable
efforts to change its Domestic Lending Office or LIBOR Lending Office, as
the case may be) to avoid or to minimize any amounts which might otherwise
be payable pursuant to this subsection; provided, however, that such
efforts shall not cause the imposition on such Lender of any additional
costs or legal or regulatory burdens deemed by such Lender to be material.
(d) If the Borrower pays any additional amount pursuant to this
subsection 2.18 with respect to a Lender, such Lender shall use reasonable
efforts to obtain a refund of tax or credit against its tax liabilities on
account of such payment; provided that such Lender shall have no
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obligation to use such reasonable efforts if either (i) it is in an excess
foreign tax credit position or (ii) it believes in good faith, in its sole
discretion, that claiming a refund or credit would cause adverse tax
consequences to it. In the event that such Lender receives such a refund or
credit, such Lender shall pay to the Borrower an amount that such Lender
reasonably determines is equal to the net tax benefit obtained by such
Lender as a result of such payment by the Borrower. In the event that no
refund or credit is obtained with respect to the Borrower's payments to
such Lender pursuant to this subsection 2.18, then such Lender shall upon
request provide a certification that such Lender has not received a refund
or credit for such payments. Nothing contained in this subsection 2.18
shall require a Lender to disclose or detail the basis of its calculation
of the amount of any tax benefit or any other amount or the basis of its
determination referred to in the proviso to the first sentence of this
subsection 2.18 to the Borrower or any other party.
(e) The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
2.19 Indemnification; Nature of Issuing Lender's Duties.
(a) In addition to its other obligations under Section 2.4, the
Borrower hereby agrees to protect, indemnify, pay and save each Issuing
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of
Credit or (B) the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called
"Government Acts").
(b) As between the Borrower and the Issuing Lender, the Borrower shall
assume all risks of the acts, omissions or misuse of any Letter of Credit
by the beneficiary thereof. The Issuing Lender shall not be responsible:
(i) for the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or ineffective
for any
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reason; (iii) for failure of the beneficiary of a Letter of Credit to
comply fully with conditions required in order to draw upon a Letter of
Credit; (iv) for errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) for errors in interpretation of
technical terms; (vi) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under a
Letter of Credit or of the proceeds thereof; and (vii) for any consequences
arising from causes beyond the control of the Issuing Lender, including,
without limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of the Issuing Lender's rights or powers
hereunder.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the
Issuing Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith, shall not put such
Issuing Lender under any resulting liability to the Borrower. It is the
intention of the parties that this Agreement shall be construed and applied
to protect and indemnify the Issuing Lender against any and all risks
involved in the issuance of the Letters of Credit, all of which risks are
hereby assumed by the Borrower, including, without limitation, any and all
risks of the acts or omissions, whether rightful or wrongful, of any
present or future Government Acts. The Issuing Lender shall not, in any
way, be liable for any failure by the Issuing Lender or anyone else to pay
any drawing under any Letter of Credit as a result of any Government Acts
or any other cause beyond the control of the Issuing Lender.
(d) Nothing in this Section 2.19 is intended to limit the
reimbursement obligation of the Borrower contained in Section 2.4(d)
hereof. The obligations of the Borrower under this Section 2.19 shall
survive the termination of this Agreement. No act or omissions of any
current or prior beneficiary of a Letter of Credit shall in any way affect
or impair the rights of the Issuing Lender to enforce any right, power or
benefit under this Agreement.
(e) Notwithstanding anything to the contrary contained in this Section
2.19, the Borrower shall have no obligation to indemnify any Issuing Lender
in respect of any liability incurred by such Issuing Lender arising out of
the gross negligence or willful misconduct of the Issuing Lender (including
action not taken by an Issuing Lender), as determined by a court of
competent jurisdiction.
2.20 Release of Collateral. At any such time as the Company shall have
achieved either (i) an Investment Grade Rating or (ii) a ratio of Consolidated
Funded Debt to Consolidated EBITDA of less than 2.25:1.0, and so long as no
Default or Event of Default
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shall then exist, the Agent, for and on behalf of the Lenders, will promptly
upon request release the security interests granted in favor of the Lenders by
the Security Agreement, terminate the Liens given in connection therewith and
return stock certificates, stock powers and other collateral held in connection
therewith. The costs and expenses associated with such release shall be paid by
the Borrower. As used herein, "Investment Grade Rating" means a rating for the
Company's senior unsecured long-term debt (which is not supported through
defeasance, guarantees, letters of credit or other forms of credit enhancement)
of "BBB-" or better by S&P or "Baa3" or better by Moody's.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit herein provided for, each of the Company and the Borrower
hereby represents and warrants to the Agent and to each Lender that:
3.1 Financial Condition. The consolidated balance sheet of the Company and
its consolidated Subsidiaries as at September 30, 1995 and as at March 30, 1996
and the related consolidated statements of income and of cash flows for the
fiscal year or three month period ended on such date, reported on (only in the
case of such annual statements) by Ernst & Young LLP, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year or three month period then
ended, subject in the case of the March 30, 1996 statements to normal year end
adjustments. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as disclosed therein). Neither the
Company nor any of its consolidated Subsidiaries had, at the date of the balance
sheets referred to above, any material Guarantee Obligation, contingent
liabilities or liability for taxes, long-term lease or unusual forward or
long-term commitment, including, without limitation, any material interest rate
or foreign currency swap or exchange transaction, which is not reflected in the
foregoing statements or in the notes thereto.
3.2 No Change. Since September 30, 1995 (and after delivery of annual
audited financial statements in accordance Section 5.1(a), from the date of the
most recently delivered annual audited financial statements) there has been no
development or event which has had a Material Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of the Company, its
Subsidiaries and the Borrower (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate or
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partnership power and authority and the legal right to own and operate all its
material property, to lease the material property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation or partnership and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification except to the extent that the
failure to so qualify or be in good standing would not, in the aggregate, have a
Material Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations. Each of the
Company, the Borrower and the other Credit Parties has full power and authority
and the legal right to make, deliver and perform the Credit Documents to which
it is party and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of the Credit Documents to which it is
party. No consent or authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery or
performance of any Credit Document by the Company, the Borrower or the other
Credit Parties (other than those which have been obtained) or with the validity
or enforceability of any Credit Document against the Company or the Borrower
(except such filings as are necessary in connection with the perfection of the
Liens created by such Credit Documents). Each Credit Document to which it is a
party has been duly executed and delivered on behalf of the Company, the
Borrower or the other Credit Parties, as the case may be. Each Credit Document
to which it is a party constitutes a legal, valid and binding obligation of the
Company, the Borrower or the other Credit Parties, as the case may be,
enforceable against the Company, the Borrower or such other Credit Party, as the
case may be, in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
3.5 No Legal Bar; No Default. The execution, delivery and performance of
the Credit Documents, the borrowings thereunder and the use of the proceeds of
the Loans will not violate any Requirement of Law or any Contractual Obligation
of the Company, its Subsidiaries or the Borrower (except those as to which
waivers or consents have been obtained), and will not result in, or require, the
creation or imposition of any Lien on any of its or their respective properties
or revenues pursuant to any Requirement of Law or Contractual Obligation other
than the Liens arising under or contemplated in connection with the Credit
Documents. Neither the Company nor any of its Subsidiaries is in default under
or with respect to any of its Contractual
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Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
3.6 No Material Litigation. Except as set forth in Schedule 3.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of the Company,
threatened by or against the Company or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to the Credit
Documents or any Loan or any of the transactions contemplated hereby, or (b)
which, if adversely determined, would reasonably be expected to have a Material
Adverse Effect.
3.7 Investment Company Act. Neither the Company nor the Borrower is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
3.8 Federal Regulations. No part of the proceeds of any Loan hereunder will
be used directly or indirectly for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. The Company and its Subsidiaries taken as a group do not own "margin
stock" except as identified in the financial statements referred to in Section
3.1 and the aggregate value of all "margin stock" owned by the Company and its
Subsidiaries taken as a group does not exceed 25% of the value of their assets.
3.9 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code, except to the extent that any such occurrence or failure to comply
would not reasonably be expected to have a Material Adverse Effect. No
termination of a Single Employer Plan has occurred resulting in any liability
that has remained underfunded, and no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period which would reasonably be expected to have
a Material Adverse Effect. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by an amount which, as determined in
accordance with GAAP, would reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Commonly Controlled Entity is currently
subject to any liability for a complete or partial withdrawal from a
Multiemployer Plan which would reasonably be expected to have a Material Adverse
Effect.
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3.10 Environmental Matters. Except to the extent that all of the following,
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect:
(a) To the best knowledge of the Company, the facilities and
properties owned, leased or operated by the Company or any of its
Subsidiaries (the "Properties") do not contain any Materials of
Environmental Concern in amounts or concentrations which (i) constitute a
violation of, or (ii) could give rise to liability under, any Environmental
Law.
(b) To the best knowledge of the Company, the Properties and all
operations at the Properties are in compliance, and have in the last five
years been in compliance, in all material respects with all applicable
Environmental Laws, and there is no contamination at, under or about the
Properties or violation of any Environmental Law with respect to the
Properties or the business operated by the Company or any of its
Subsidiaries (the "Business").
(c) Neither the Company nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business,
nor does the Company have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) To the best knowledge of the Company, Materials of Environmental
Concern have not been transported or disposed of from the Properties in
violation of, or in a manner or to a location which could give rise to
liability under any Environmental Law, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of at, on
or under any of the Properties in violation of, or in a manner that could
give rise to liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Company, threatened, under any
Environmental Law to which the Company or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or
the Business.
(f) To the best knowledge of the Company, there has been no release or
threat of release of Materials of Environmental concern at or from the
Properties, or arising from or related to the operations of the Company or
any subsidiary in connection with the Properties or otherwise in connection
with the Business, in violation of or in amounts
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or in a manner that could give rise to liability under Environmental Laws.
3.11 Purpose of Loan. The proceeds of the Loans will be used to refinance
existing indebtedness and for general corporate and working capital purposes,
including use of up to $25,000,000 hereunder for the acquisition of the capital
stock of Dimmit Industries and related assets of Farah U.S.A., Inc.
3.12 Subsidiaries. Set forth on Schedule 3.12 is a complete and accurate
list of all Subsidiaries of the Company and the Borrower. Information on the
attached Schedule includes state of incorporation; the number of shares of each
class of capital stock or other equity interests outstanding; the number and
percentage of outstanding shares of each class of stock; and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and similar rights. The outstanding capital stock and other equity
interests of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned, free and clear of all Liens (other than those
arising under or contemplated in connection with the Credit Documents).
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Restatement Date. This Agreement shall become effective
upon the satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Agent shall have received (i) multiple
counterparts of this Agreement for each Lender, executed by a duly
authorized officer of each party hereto, (ii) for the account of each
Lender an amended, restated and substituted Revolving Note and an amended,
restated and substituted Term Note and for the account of the Swingline
Lender an amended restated and substituted Swingline Note and (iii)
multiple counterparts of the Security Agreement for each Lender and
additional UCC financing statements, if any, relating thereto executed by a
duly authorized officer of each party thereto, in each case conforming to
the requirements of this Agreement and executed by a duly authorized
officer of the Borrower or Company, as applicable.
(b) Stock Certificates. Original stock certificates evidencing the
Company's ownership interests in the Borrower and G&L Service Company,
North America, Inc. pledged pursuant to the Security Agreement, together
with original undated stock powers executed in blank.
(c) Liability and Casualty Insurance. Copies of insurance policies or
certificates of insurance evidencing liability and casualty insurance
meeting the requirements set forth herein or in the Security Agreement.
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(d) Corporate Documents. Receipt by the Agent of the following:
(i) Articles of Incorporation. Copies of the articles of
incorporation or charter documents of the Company, the Borrower and
their respective Subsidiaries certified to be true and complete as of
a recent date by the appropriate governmental authority of the state
of its incorporation.
(ii) Resolutions. Copies of resolutions of the Board of Directors
of the Company, the Borrower and their respective Subsidiaries
approving and adopting the Credit Documents, the transactions
contemplated therein and authorizing execution and delivery thereof,
certified by a secretary or assistant secretary as of the Restatement
Date to be true and correct and in force and effect as of such date.
(iii) Bylaws. A copy of the bylaws of the Company, the Borrower
and their respective Subsidiaries certified by a secretary or
assistant secretary as of the Restatement Date to be true and correct
and in force and effect as of such date.
(iv) Good Standing. Copies of (i) certificates of good standing,
existence or its equivalent with respect to the Company, the Borrower
and their respective Subsidiaries certified as of a recent date by the
appropriate governmental authorities of the state of incorporation and
each other state in which the failure to so qualify and be in good
standing would have a material adverse effect on the business or
operations of the Company, the Borrower and their respective
Subsidiaries in such state and (ii) a certificate indicating payment
of all corporate franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(e) Officer's Certificate. The Agent shall have received, with a
counterpart for each Lender, confirmation of the accuracy of the
representations and warranties set forth herein by execution hereof or by
separate certificate of a duly authorized officer of each of the Company,
the Borrower and their Subsidiaries dated the Restatement Date,
substantially in the form of Schedule 4.1(d) with appropriate insertions
and attachments.
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(f) Legal Opinion of Counsel. The Agent shall have received, with a
copy for each Lender, an opinion of Rosenman & Colin LLP, counsel for the
Company and the Borrower, dated the Restatement Date and addressed to the
Agent and the Lenders, in the form and substance acceptable to the Agent
and the Majority Lenders.
(g) Fees. The Agent shall have received all fees, if any, owing
pursuant to the commitment letter and Section 2.5.
(h) Subsection 4.2 Conditions. The conditions specified in subsections
4.2(a) and (b) shall be satisfied on the Restatement Date as if Loans were
to be made on such date.
(i) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Agent and its counsel.
4.2 Conditions to All Extensions of Credit. The obligation of each Lender
to make any Extension of Credit hereunder (including the initial Loans to be
made hereunder) is subject to the satisfaction of the following conditions
precedent on the date of making such Extension of Credit:
(a) Representations and Warranties. The representations and warranties
made by the Credit Parties herein, in the Security Agreement or which are
contained in any certificate furnished at any time under or in connection
herewith shall be true and correct in all material respects on and as of
the date of such Extension of Credit as if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect
to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Agreement.
(c) Additional Conditions to Revolving Loans. If such Loan is made
pursuant to subsection 2.1, all conditions set forth in such subsection
shall have been satisfied.
(d) Additional Conditions to Term Loan. If such Loan is made pursuant
to subsection 2.2 all conditions set forth in such subsection shall have
been satisfied.
(e) Additional Conditions to Swingline Loan. If such Loan is made
pursuant to subsection 2.3 all conditions set forth in such subsection
shall have been satisfied.
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(f) Additional Conditions to Letters of Credit. If such Extension of
Credit is made pursuant to subsection 2.4 all conditions set fort in such
subsection shall have been satisfied.
Each request for Extension of Credit and each acceptance by the Borrower of
an Extension of Credit shall be deemed to constitute a representation and
warranty by the Borrower as of the date of such Extension of Credit that the
applicable conditions in paragraphs (a) and (b), and in (c), (d), (e) or (f) of
this subsection have been satisfied.
4.3 Conditions Subsequent to Restatement Date. The Borrower agrees to
provide the following after the Restatement Date:
(a) Acquisition of Dimmit Industries. Promptly upon consummation
thereof, evidence of consummation of the acquisition of Dimmit Industries
substantially in accordance with the terms of the acquisition agreement
provided to the Lenders.
(b) Pledge of Dimmit Industries Stock. Promptly upon acquisition
thereof, original stock certificates evidencing 65% of the equity interests
in Dimmit Industries together with original undated stock powers executed
in blank.
(c) Liability and Casualty Insurance. Promptly upon consummation of
the acquisition of Dimmit Industries, copies of insurance policies or
certificates of insurance evidencing liability and casualty insurance for
G&L Service Company, North America, Inc. and Dimmit Industries.
(d) Corporate Documents of Dimmit Industries. Within 45 days after
acquisition thereof, certified copies of articles of incorporation or other
charter documents, bylaws or other governing documents and good standing
certificates or the equivalent, for Dimmit Industries.
(e) Mexican Legal Opinion. Within 45 days after acquisition of Dimmit
Industries, a legal opinion of Mexican counsel for G&L Service Company,
North America, Inc. regarding perfection of liens in property located in
Mexico, in form and substance acceptable to the Agent and the Majority
Lenders.
Failure by the Borrower to satisfy any of the conditions of this Section 4.3
shall constitute an "Event of Default" hereunder entitling the Agent and the
Lenders to all rights and remedies provided in Section 7 hereof.
SECTION 5. AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that on the Restatement Date, and
thereafter for so long as this Agreement is
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in effect and until the Commitments have terminated, no Note remains outstanding
and unpaid and the Obligations, together with interest, Commitment Fees and all
other amounts owing to the Agent or any Lender hereunder, are paid in full, the
Company shall, and in the case of subsections 5.3, 5.4, 5.5, 5.6, 5.7 and 5.8
shall cause each of its Subsidiaries and the Borrower, to:
5.1 Financial Statements. Furnish to the Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year of the Company, a
copy of the consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows of the Company
and its consolidated Subsidiaries for such year, audited by Ernst & Young
LLP or other firm of independent certified public accountants of nationally
recognized standing reasonably acceptable to the Majority Lenders, setting
forth in each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or exception,
or qualification indicating that the scope of the audit was inadequate to
permit such independent certified public accountants to certify such
financial statements without such qualification; and
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal
quarters of the Company, a company-prepared consolidated balance sheet of
the Company and its consolidated Subsidiaries as at the end of such period
and related company-prepared statements of income and retained earnings and
of cash flows for the Company and its consolidated Subsidiaries for such
quarterly period and for the portion of the fiscal year ending with such
period, in each case setting forth in comparative form consolidated figures
for the corresponding period or periods of the preceding fiscal year
(subject to normal recurring year-end audit adjustments);
(c) Annual Budget Plan. As soon as available, but in any event no more
than 45 days after the end of each fiscal year, a copy of the detailed
annual budget or plan for the next fiscal year, in form and detail
reasonably acceptable to the Agent and the Majority Lenders, together with
a summary of the material assumptions made in the preparation of the budget
or plan.
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and, in the
case of the annual and quarterly financial statements provided in accordance
with subsections (a)
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and (b) above, in accordance with GAAP applied consistently throughout the
periods reflected therein (except as approved by such accountants or Responsible
Officer, as the case may be, and disclosed therein) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change in the application of accounting principles as provided in
Section 1.3.
5.2 Certificates; Other Information. Furnish to the Agent and each of the
Lenders:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a) above, a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(b) above, a certificate of a
Responsible Officer stating that, to the best of such Responsible Officer's
knowledge, the Company during such period observed or performed in all
material respects all of its covenants and other agreements, and satisfied
in all material respects every material condition, contained in this
Agreement to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and such certificate shall
include the calculation required to indicate compliance with Section 5.9;
(c) within thirty days after the same are sent, copies of all reports
(other than those otherwise provided pursuant to subsection 5.1 and those
which are of a promotional nature) and other financial information which
the Company sends to its stockholders, and within thirty days after the
same are filed, copies of all financial statements and nonconfidential
reports which the Company may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
(d) promptly, such additional financial and other information as the
Agent, on behalf of any Lender, may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, in
accordance with industry practice (subject, where applicable, to specified grace
periods) all its material obligations of whatever nature and any additional
costs that are imposed as a result of any failure to so pay, discharge or
otherwise satisfy such obligations, except when the amount or validity of such
obligations and costs is currently being
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contested in good faith by appropriate proceedings and reserves, if applicable,
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence. Continue to engage in
business of the same general type as now conducted by it on the date hereof
(including for purposes hereof, the business and operations of G&L Services,
North America, Inc. and Dimmit Industries after giving effect to the acquisition
of Dimmit Industries and the assets used in its operations) and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; comply with all Contractual
Obligations and Requirements of Law applicable to it except to the extent that
failure to comply therewith would not, in the aggregate, have a Material Adverse
Effect.
5.5 Maintenance of Property; Insurance. Keep all material property useful
and necessary in its business in good working order and condition (ordinary wear
and tear excepted); maintain with financially sound and reputable insurance
companies insurance on all its material property (including without limitation
its material tangible General Collateral referenced and defined in the Security
Agreement) in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Agent, upon written request, full
information as to the insurance carried; provided, however, that the Company and
its Subsidiaries may maintain self insurance plans to the extent companies of
similar size and in similar businesses do so.
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its businesses and activities; and permit,
during regular business hours and upon reasonable notice by the Agent, the Agent
to visit and inspect any of its properties and examine and make abstracts from
any of its books and records (other than materials protected by the
attorney-client privilege and materials which the Company may not disclose
without violation of a confidentiality obligation binding upon it) at any
reasonable time and as often as may reasonably be desired, and to discuss the
business, operations, properties and financial and other condition of the
Company and its Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants.
5.7 Notices. Give notice to the Agent (which shall promptly transmit such
notice to each Lender) of:
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(a) within five Business Days after the Company knows or has reason to
know thereof, the occurrence of any material Default or Event of Default;
(b) promptly, any default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or the Borrower which
would reasonably be expected to have a Material Adverse Effect;
(c) promptly, any litigation, or any investigation or proceeding known
to the Company, affecting the Company or any of its Subsidiaries or the
Borrower which, if adversely determined, would reasonably be expected to
have a Material Adverse Effect;
(d) as soon as possible and in any event within 30 days after the
Company knows or has reason to know thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or
the Company or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the terminating, Reorganization or
Insolvency of, any Plan; and
(e) promptly, any other development or event which would reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
5.8 Environmental Laws.
(a) Comply in all material respects with, and ensure compliance in all
material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so
would not reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
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Environmental Laws except to the extent that the same are being contested
in good faith by appropriate proceedings and the pendency of such
proceedings would not reasonably be expected to have a Material Adverse
Effect; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known
or unknown, contingent or otherwise, arising out of, or in any way relating
to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Company, any of its
Subsidiaries or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney's and consultant's fees, investigation and laboratory
fees, response costs, court costs and litigation expenses, except to the
extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. The
agreements in this paragraph shall survive repayment of the Notes and all
other amounts payable hereunder.
5.9 Financial Covenants.
(a) Debt Service Coverage Ratio. As of the end of each fiscal quarter,
there shall be maintained a Debt Service Coverage Ratio of at least
1.0:1.0. The applicable period for purposes of determining compliance
herewith shall be for the period of eight (8) fiscal quarters then ended.
(b) Consolidated Funded Debt to Consolidated Total Capitalization.
There shall be maintained at all times a ratio of Consolidated Funded Debt
to Consolidated Total Capitalization of not greater than:
Period
------
Closing Date through
the next-to-last day
of fiscal year 1997 .70:1.0
Last day of fiscal year
1997 and thereafter .65:1.0
(c) Consolidated Tangible Net Worth. There shall be maintained at all
times a Consolidated Tangible Net Worth of at least:
Period
------
Last day of fiscal year 1995
through September 27, 1996
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(being the next to last day
of fiscal year 1996) $44,000,000
Last day of fiscal year
1996 through the next-
to-last day of fiscal
year 1997 $48,000,000
Last day of fiscal year
1997 through the next-
to-last day of fiscal
year 1998 $62,000,000
Last day of fiscal year
1998 through the next-
to-last day of fiscal
year 1999 $76,000,000
Last day of fiscal year
1999 through the next-to-
last day of fiscal year
2000 $87,000,000
Last day of fiscal year
2000 and thereafter $99,000,000
(d) Capital Expenditures. The Company and its subsidiaries shall not,
as a group, make or incur Capital Expenditures in any fiscal year in excess
of the amount shown below, on a non-cumulative basis:
Fiscal year 1995 $20,000,000
Fiscal year 1996 $22,000,000
Fiscal year 1997 $24,000,000
Fiscal year 1998 $26,000,000
Fiscal year 1999
and each fiscal
year thereafter $28,000,000
(e) Consolidated Working Capital. Consolidated Working Capital shall
not at any time be less than $108,000,000.
(f) Fixed Charge Coverage Ratio. As of the end of each fiscal quarter
for the period identified below, there shall be maintained a Fixed Charge
Coverage Ratio of at least 2.0:1.0. The applicable period for purposes of
determining compliance herewith shall be as shown below:
Applicable Period
-----------------
Fiscal Quarter ended June 29, 1996 6 months then ended
Fiscal Quarter ended
September 28, 1996 9 months then ended
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The end of each Fiscal Quarter
thereafter 12 months then ended
5.10 Additional Subsidiary Guarantors. The Credit Parties will cause each
of their Domestic Subsidiaries (other than any Securitization Subsidiary),
whether newly formed, after acquired or otherwise existing, to promptly become a
"Subsidiary Guarantor" hereunder by way of execution of a Joinder Agreement. The
guaranty obligations of any such Additional Credit Party shall be secured by,
among other things, General Collateral (as such term is defined in the Security
Agreement) of the Additional Credit Party and a pledge of 100% of the capital
stock or other equity interest of its Domestic Subsidiaries and 65% of the
capital stock or other equity interest of its Foreign Subsidiaries to the extent
that such pledge is permissible under applicable law, and a pledge by the
Company, the Borrower or other Credit Party which is the owner of the capital
stock or other equity interest in such Subsidiary of 100% of the capital stock
if it is a Domestic Subsidiary and 65% of its capital stock or other equity
interest if it is a Foreign Subsidiary.
SECTION 6. NEGATIVE COVENANTS
The Company hereby covenants and agrees that on the Restatement Date, and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated, no Note remains outstanding and unpaid and the Obligations,
together with interest, Commitment Fees and all other amounts owing to the Agent
or any Lender hereunder, are paid in full, the Company shall, and shall cause
each of its Subsidiaries and the Borrower, to:
6.1 Indebtedness. The Company will not, nor will it permit any Subsidiary
to, contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising or existing under this Agreement and the
other Credit Documents;
(b) Indebtedness existing as of the Restatement Date as referenced in
the financial statements referenced in Section 3.1 (and set out more
specifically in Schedule 6.1(b)) and renewals, refinancings or extensions
thereof in a principal amount not in excess of that outstanding as of the
date of such renewal, refinancing or extension;
(c) Indebtedness incurred after the Restatement Date consisting of
Capital Leases or Indebtedness incurred to provide all or a portion of the
purchase price or cost of construction of an asset provided that (i) such
Indebtedness when incurred shall not exceed the purchase price or
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cost of construction of such asset; (ii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing; and (iii) the total
amount of all such Indebtedness shall not exceed $10,000,000 at any time
outstanding;
(d) Unsecured intercompany Indebtedness between the Domestic Credit
Parties;
(e) Indebtedness and obligations owing under interest rate protection
agreements relating to the Loans hereunder and currency protection
agreements and commodity purchase or option agreements entered into in
order to manage existing or anticipated interest rate, exchange rate or
commodity price risks and not for speculative purposes;
(f) Indebtedness and obligations of Domestic Credit Parties owing
under documentary letters of credit (but not under standby, direct pay or
other letters of credit except for the Letters of Credit hereunder)
generally;
(g) Indebtedness of the Borrower relating to a Qualified
Securitization Transaction in an aggregate net principal amount not to
exceed $65,000,000 at any time outstanding; and
(h) other Indebtedness of Domestic Credit Parties which does not
exceed $2,000,000 in the aggregate at any time outstanding.
6.2 Liens. The Company will not, nor will it permit any Subsidiary to,
contract, create, incur, assume or permit to exist any Lien with respect to any
of its property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for Permitted
Liens.
6.3 Guaranty Obligations. The Company will not, nor will it permit any
Subsidiary to, enter into or otherwise become or be liable in respect of any
Guaranty Obligations (excluding specifically therefrom endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
other than (i) those in favor of the Lenders in connection herewith and (ii)
Guaranty Obligations by the Company or its Subsidiaries of Indebtedness
permitted under Section 6.1 (except, as regards Indebtedness under subsection
(b) thereof, only if and to the extent such Indebtedness was guaranteed on the
Closing Date).
6.4 Nature of Business. The Company will not, nor will it permit any
Subsidiary to, alter the character of its business in any material respect from
that conducted as of the Restatement Date (after giving effect to the
acquisition of Dimmit Industries and related assets of Farah U.S.A., Inc.).
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6.5 Consolidation, Merger, Sale or Purchase of Assets, etc. The Company
will not, nor will it permit any Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell, transfer, lease
or otherwise dispose of all or any substantial part of its property or
assets outside of the ordinary course of business or agree to do so at a
future time except the following, without duplication, shall be expressly
permitted:
(i) Specified Sales;
(ii) the sale, transfer, lease or other disposition of property
or assets to an unrelated party not in the ordinary course of business
(other than Specified Sales), where and to the extent that they are
the result of a Recovery Event or otherwise and the net proceeds
therefrom are used to repair or replace damaged property or to
purchase or otherwise acquire new assets or property provided that
such purchase or acquisition is committed to within 180 days of
receipt of the net proceeds and such purchase or acquisition is
consummated within 270 days of such receipt;
(iii) the sale, lease or transfer of property or assets (at fair
value) between the Company and the Borrower;
(iv) the sale, lease or transfer of property or assets from a
Domestic Credit Party other than the Company or the Borrower to
another Domestic Credit Party; and
(v) the liquidation, dissolution, sale, transfer and other
disposition of the fixed assets and properties relating to the
Borrower's apparel prints business as the Borrower may see fit in its
discretion (and a release of liens securing the obligations hereunder
in connection therewith).
As used herein, "substantial part" shall mean property and assets, the book
value of which, when added to the book value of all other assets sold,
leased or otherwise disposed of by the Company and its Subsidiaries (other
than in the ordinary course of business), during the 12-month period ending
with the date of such sale, lease or other disposition exceeds 10% of
Consolidated Tangible Net Worth, determined as of the end of the
immediately preceding fiscal year; or
(b) purchase, lease or otherwise acquire (in a single transaction or a
series of related transactions) all or any substantial part of the property
or assets of any Person (other than purchases or other acquisitions of
inventory, leases, materials, property and equipment in the ordinary
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course of business, except as otherwise limited or prohibited herein), or
enter into any transaction of merger or consolidation, except for (i)
investments or acquisitions permitted pursuant to Section 6.6, (ii) other
investments and acquisitions where no Default or Event of Default would
exist after giving effect thereto on a Pro Forma Basis, such other
acquisitions and investments, (iii) the merger or consolidation of the
Company into the Borrower or the Borrower into the Company, or a sale,
transfer or lease of all or a substantial part of its properties (at fair
value) to, the Company or the Borrower and (iv) the merger or consolidation
of the Company with and into the Borrower or of the Borrower with and into
the Company, (v) the merger or consolidation of a Domestic Credit Party
with and into another Domestic Credit Party, provided that if the Company
or the Borrower is a party thereto, either the Company or the Borrower will
be the surviving corporation, and (vi) the merger or consolidation of any
other Person with and into a Credit Party, provided that in any such case a
Credit Party shall be the surviving corporation and no Default or Event of
Default would exist after giving effect thereto on a Pro Forma Basis.
6.6 Advances, Investments and Loans. The Company will not, nor will it
permit any Subsidiary to, lend money or extend credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to, any Person except for
Permitted Investments.
6.7 Transactions with Affiliates. Except as permitted in subsection (iv) of
the definition of Permitted Investments and otherwise to an extent not judged
material by the Majority Lenders in their discretion, the Company will not, nor
will it permit any Subsidiary to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder or Affiliate other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm's-length
transaction with a Person other than an officer, director, shareholder or
Affiliate.
6.8 Ownership of Subsidiaries. The Company will not, nor will it permit any
Subsidiary to, create, form or acquire any Subsidiaries, except for
(i) Domestic Subsidiaries which are joined as Additional Credit
Parties in accordance with the terms hereof; and
(ii) Dimmit Industries.
The Company will not sell, transfer, pledge or otherwise dispose of any capital
stock or other equity interests in any of its Subsidiaries (including the
Borrower), nor will it permit any of its Subsidiaries to issue, sell, transfer,
pledge or otherwise
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dispose of any of their capital stock or other equity interests, except in a
transaction permitted by Section 6.5.
6.9 Fiscal Year. The Company will not, nor will it permit any Subsidiary
to, change its fiscal year.
SECTION 7. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Borrower shall fail to pay any principal on any Note when due
in accordance with the terms thereof or hereof; or the Borrower shall fail
to reimburse the Issuing Lender for any LOC Obligations when due in
accordance with the terms hereof and such failure shall continue unremedied
for three (3) Business Days; or the Borrower shall fail to pay any interest
on any Note or any fee or other amount payable hereunder when due in
accordance with the terms thereof or hereof and such failure shall continue
unremedied for five (5) Business Days (or the Guarantors shall fail to pay
on the Guaranty in respect of any of the foregoing or in respect of any
other Guaranty Obligations thereunder); or
(b) Any representation or warranty made or deemed made herein, in the
Security Agreement or in any of the other Credit Documents or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall
prove to have been incorrect, false or misleading in any material respect
on or as of the date made or deemed made; or
(c) The Company shall (i) default in the due performance or observance
of Section 5.9, or (ii) default in any material respect in the observance
or performance of any other term, covenant or agreement contained in this
Agreement (other than as described in subsections 7(a) or 7(c)(i) above),
and such default shall continue unremedied for a period of 30 days or more;
or
(d) The Company, any of its Subsidiaries or the Borrower shall (i)
default in any payment of principal of or interest on any Indebtedness
(other than the Notes) in a principal amount outstanding of at least
$3,000,000 in the aggregate for the Company, its Subsidiaries and the
Borrower or in the payment of any matured Guarantee Obligation in a
principal amount outstanding of at least $3,000,000 in the aggregate for
the Company, its Subsidiaries and the Borrower beyond the period of grace
(not to exceed 30 days), if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness in a principal amount
outstanding of at least $3,000,000 in the aggregate for the Company, its
Subsidiaries and the Borrower
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or Guarantee Obligation in a principal amount outstanding of at least
$3,000,000 in the aggregate for the Company, its Subsidiaries and the
Borrower or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due prior to
its stated maturity or such Guarantee Obligation to become payable; or
(e) (i) The Company, any of its Subsidiaries or the Borrower shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the Company,
any Subsidiary or the Borrower shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the
Company, any Subsidiary or the Borrower any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Company, any Subsidiary or the
Borrower any case, proceeding other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Company, any Subsidiary or the Borrower shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Company, any Subsidiary or the Borrower shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(f) One or more judgments or decrees shall be entered against the
Company, any of its Subsidiaries or the Borrower involving in the aggregate
a liability (to the extent not paid when due or covered by insurance) of
$3,000,000 or more and all such judgments or decrees shall not have been
paid
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and satisfied, vacated, discharged, stayed or bonded pending appeal within
45 days from the entry thereof; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Company or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a Trustee is, in the reasonable opinion of
the Majority Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company, any of its
Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Majority Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
any Multiemployer Plan or (vi) any other similar event or condition shall
occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such
events or conditions, if any, could have a Material Adverse Effect; or
(h) Either (i) a "person" or a "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934 other than
Citicorp Venture Capital Inc. or any of its Affiliates or members of
management of the Company or the Borrower as of the Closing Date) becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of more than 50% of the then outstanding voting stock
of the Company or (ii) a majority of the Board of Directors of the Company
shall consist of individuals who are not Continuing Directors; "Continuing
Director" means, as of any date of determination, (i) an individual who on
the date two years prior to such determination date was a member of the
Company's Board of Directors and (ii) any new Director whose nomination for
election by the Company's shareholders was approved by a vote of at least
75% of the Directors then still in office who either were Directors on the
date two years prior to such determination date or whose nomination for
election was previously so approved; or
(i) The Guaranty or any provision thereof shall cease to be in full
force and effect or any Guarantor or any Person acting by or on behalf of
any Guarantor shall deny or disaffirm any Guarantor's obligations under the
Guaranty; or
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(j) Any other Credit Document shall fail to be in full force and
effect or to give the Agent and/or the Lenders the security interests,
liens, rights, powers and privileges purported to be created thereby
(except as such documents may be terminated or no longer in force and
effect in accordance with the terms thereof, other than those indemnities
and provisions which by their terms shall survive); or
(k) Failure by the Borrower to satisfy any of the requirements of
Section 4.3 hereof; or
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (e) above, automatically the Commitments shall immediately
terminate and the Loans (with accrued interest thereon), and all other amounts
under the Credit Documents (including without limitation the maximum amount of
all contingent liabilities under Letters of Credit) shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the written consent of the
Majority Lenders, the Agent may, or upon the written request of the Majority
Lenders, the Agent shall, by notice to the Company declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately terminate; and
(ii) with the written consent of the Majority Lenders, the Agent may, or upon
the written request of the Majority Lenders, the Agent shall, by notice of
default to the Company, declare the Loans (with accrued interest thereon) and
all other amounts owing under this Agreement and the Notes to be due and payable
forthwith and direct the Borrower to pay to the Agent cash collateral as
security for the LOC Obligations for subsequent drawings under then outstanding
Letters of Credit an amount equal to the maximum amount of which may be drawn
under Letters of Credit then outstanding, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Section 7,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
SECTION 8. THE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
First Union National Bank of North Carolina as the Agent of such Lender under
this Agreement, and each such Lender irrevocably authorizes First Union National
Bank of North Carolina, as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
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shall be read into this Agreement or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care. Without limiting the
foregoing, the Agent may appoint an Affiliate as its agent to perform the
functions of the Agent hereunder relating to the advancing of funds to the
Borrowers and distribution of funds to the Lenders and to perform such other
related functions of the Agent hereunder as are reasonably incidental to such
functions.
8.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement (except for its or such Person's own
gross negligence or willful misconduct) or (ii) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by the Company or the Borrower or any officer thereof contained in this
Agreement or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of any of the Credit Documents or for any failure of the Company
or the Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance by the Company or the Borrower of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Company or the Borrower.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent accountants
and other experts selected by the Agent. The Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless (a) a written notice of
assignment, negotiation or transfer thereof shall have been filed with the Agent
and (b) the Agent shall have received the written agreement of such assignee to
be bound hereby as fully and to the same extent as if such assignee were an
original Lender party hereto, in each case in form satisfactory to the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first receive such advice or concurrence of
the
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Majority Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under any of the Credit Documents in accordance with a request of the
Majority Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Notes.
8.5 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has received notice from a Lender, the Company or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Majority Lenders; provided, however, that unless
and until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representation
or warranty to it and that no act by the Agent hereinafter taken, including any
review of the affairs of the Company and/or the Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Company and the Borrower and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Company and the Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the Company
and the Borrower which may come into the
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possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
8.7 Indemnification. The Lenders agree to indemnify the Agent in its
capacity hereunder (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this subsection, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of any Credit Document or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by the Agent under or in connection with any of
the foregoing; provided, however, that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the termination of this Agreement
and payment of the Notes and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. The Agent and its Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Company and the Borrower as though the Agent were not the Agent hereunder.
With respect to its Loans made or renewed by it and any Note issued to it, the
Agent shall have the same rights and powers under this Agreement as any Lender
and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent upon 30 days' prior
notice to the Company, the Borrower and the Lenders. If the Agent shall resign
as Agent under this Agreement and the Notes, then the Majority Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be approved by the Company, whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent effective upon such appointment and
approval, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holders of the Notes. After
any retiring Agent's resignation as Agent, the provisions of this subsection
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
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SECTION 9. MISCELLANEOUS
9.1 Amendments, Waivers and Release of Collateral. Neither this Agreement,
nor any of the Notes, nor any of the other Credit Documents (including the
Wachovia JEDA Letter of Credit and the Wachovia JEDA Reimbursement Agreement),
nor any terms hereof or thereof may be amended, supplemented, waived or modified
except in accordance with the provisions of this subsection nor may collateral
be released except (i) as specifically provided herein or in the Security
Agreement or in accordance with the provisions of this subsection, and (ii)
release of assets and property of the apparel prints business which is being
closed from liens securing obligations hereunder as provided in the First
Amendment to the Existing Agreement dated as of October 19, 1995. The Majority
Lenders may, or, with the written consent of the Majority Lenders, the Agent
may, from time to time, (a) enter into with the Company and the Borrower written
amendments, supplements or modifications hereto and to the other Credit
Documents for the purpose of adding any provisions to this Agreement or the
other Credit Documents or changing in any manner the rights of the Lenders or of
the Company and the Borrower hereunder or thereunder or (b) waive, on such terms
and conditions as the Majority Lenders may specify in such instrument, any of
the requirements of this Agreement or the other Credit Documents or any Default
or Event of Default and its consequences or (c) release collateral in accordance
with the terms hereof or of the Security Agreement or on such other terms and
conditions as the Majority Lenders may agree; provided, however, that no such
waiver and no such amendment, waiver, supplement, modification or release shall
(i) reduce the amount or extend the scheduled date of maturity of any Loan or
Note or any installment thereon, or reduce the stated rate of any interest or
fee payable hereunder (other than interest at the increased post-default rate)
or extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Commitment, in each case without the
written consent of each Lender directly affected thereby, or (ii) amend, modify
or waive any provision of this subsection or reduce the percentage specified in
the definition of Majority Lenders, or consent to the assignment or transfer by
the Company or, except as expressly provided in Section 9.6(a), the Borrower of
any of its rights and obligations under this Agreement, in each case without the
written consent of all the Lenders, or (iii) amend, modify or waive any
provision of Section 8 without the written consent of the then Agent, or (iv)
release any of the Guarantors from their obligations under the Guaranty, without
the written consent of all of the Lenders, or (v) release all or substantially
all of the collateral (except collateral subject to a Qualified Securitization
Transaction permitted pursuant to Section 6.1(g)) other than as provided in
Section 2.20 without the written consent of all of the Lenders. Any such waiver,
any such amendment, supplement or modification and any such release shall apply
equally to each of the Lenders and shall be binding upon the Company, the
Borrower, the other Credit Parties, the Lenders, the Agent and all future
holders of the Notes. In the
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case of any waiver, the Company, the Borrower, the other Credit Parties, the
Lenders and the Agent shall be restored to their former position and rights
hereunder and under the outstanding Loans and Notes and other Credit Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
9.2 Notices. Except as otherwise provided in Section 2, all notices,
requests and demands to or upon the respective parties hereto to be effective
shall be in writing (including by telecopy), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (i) when
delivered by hand, (ii) when transmitted via telecopy (or other facsimile
device) to the number set out herein, (iii) the day following the day on which
the same has been delivered prepaid to a reputable national overnight air
courier service, or (iv) the third Business Day following the day on which the
same is sent by certified or registered mail, postage prepaid, in each case,
addressed as follows in the case of the Company, the Borrower, the other Credit
Parties and the Agent, and as set forth on Schedule 9.2 in the case of the
Lenders, or to such other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
The Borrower: Galey & Lord Industries, Inc.
7736 McCloud Road
One Triad Center
Suite 300
Greensboro, North Carolina 27409
Attn: Michael R. Harmon
Telecopier: (910) 665-3113
Telephone: (910) 665-3037
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attn: Howard S. Jacobs, Esq.
Telecopier: (212) 940-8776
Telephone: (212) 940-8505
The Company Galey & Lord, Inc.
and the other 7736 McCloud Road
Credit One Triad Center
Parties: Suite 300
Greensboro, North Carolina 27409
Attn: Michael R. Harmon
Telecopier: (910) 665-3113
Telephone: (910) 665-3037
with a copy to:
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Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attn: Howard S. Jacobs, Esq.
Telecopier: (212) 940-8776
Telephone: (212) 940-8505
The Agent: First Union National Bank
of North Carolina
One First Union Center, TW10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopier: (704) 383-0281
Telephone: (704) 383-0288
with a copy to:
First Union National Bank
of North Carolina
Charlotte Plaza, CP-13
201 South College Street
NC0656
Charlotte, North Carolina 28288
Attention: Portfolio Management
Telecopier: (704) 374-4820
Telephone: (704) 374-6017
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agent or any Lender, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes and the making of the Loans,
provided that all such representations and warranties shall terminate on the
date upon which the Commitments have been terminated and all amounts owing
hereunder and under any Notes have been paid in full.
9.5 Payment of Expenses and Taxes. The Company and the Borrower agree (a)
to pay or reimburse the Agent for all its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation, printing and
execution of, and any amendment, supplement or modification to, the Credit
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and
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administration of the transactions contemplated hereby and thereby, together
with the reasonable fees and disbursements of counsel to the Agent, (b) to pay
or reimburse each Lender and the Agent for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Agent and to
the Lenders (including reasonable allocated costs of in-house legal counsel),
and (c) on demand, to pay, indemnify, and hold each Lender and the Agent
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation or administration
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, the Credit
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender and the Agent and their Affiliates harmless from and against, any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of the Credit Documents and any such other Documents and the use, or proposed
use, of proceeds of the Loans (all the foregoing, collectively, the "indemnified
liabilities"); provided, however, that neither the Company nor the Borrower
shall have any obligation hereunder to the Agent or any Lender with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Agent or any such Lender, (ii) legal proceedings commenced
against the Agent or any such Lender by any security holder or creditor thereof
arising out of and based upon rights afforded such security holder or creditor
solely in its capacity as such or (iii) legal proceedings commenced against the
Agent or any Lender by any other Lender or the Agent or its participants. The
agreements in this subsection shall survive repayment of the Loans, Notes and
all other amounts payable hereunder.
9.6 Successors and Assigns; Participations; Purchasing Lenders. (a) This
Agreement shall be binding upon and inure to the benefit of the Company, the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that neither the Company nor the
Borrower, may assign or transfer any of its rights or obligations under this
Agreement or the other Credit Documents without the prior written consent of
each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating interests in
any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender, or any other interest of such
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Lender hereunder in a minimum amount of $5,000,000. In the event of any
such sale by a Lender of participating interests to a Participant, such
Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement, and 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. No Lender shall transfer or grant any participation under which
the Participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the scheduled maturity of any Loan or
Note or any installment thereon in which such Participant is participating,
or reduce the stated rate or extend the time of payment of interest or Fees
thereon (except in connection with a waiver of interest at the increased
post-default rate) or reduce the principal amount thereof, or increase the
amount of the Participant's participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of
Default shall not constitute a change in the terms of such participation,
and that an increase in any Commitment or Loan shall be permitted without
consent of any participant if the Participant's participation is not
increased as a result thereof), (ii) release the Company from its
obligations under the Guaranty, or release any of the Guarantors from their
obligations under the Guaranty, (iii) release all or substantially all of
the collateral (except collateral subject to a Qualified Securitization
Transaction permitted pursuant to Section 6.1(g)) other than as provided in
Section 2.20, or (iv) consent to the assignment or transfer by the Company
or the Borrower, of any of its rights and obligations under this Agreement.
In the case of any such participation, the Participant shall not have any
rights under this Agreement or any of the other Credit Documents (the
Participant's rights against such Lender in respect of such participation
to be those set forth in the agreement executed by such Lender in favor of
the Participant relating thereto) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation, provided that each Participant shall be entitled to the
benefits of subsections 2.16, 2.17, 2.18 and 9.5 with respect to its
participation in the Commitments and the Loans outstanding from time to
time; provided, that no Participant shall be entitled to receive any
greater amount pursuant to such subsections than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had
no such transfer occurred.
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(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell or assign
to any Lender or any affiliate thereof and, so long as no Event of Default
has occurred and is continuing with the consent of the Company, the
Borrower and the Agent (in each case, which consent shall not be
unreasonably withheld), to one or more additional banks or financial
institutions ("Purchasing Lenders"), all or any part of its rights and
obligations under this Agreement and the Notes in minimum amounts of
$10,000,000 (or, if less, the entire amount of such Lender's obligations),
pursuant to a Commitment Transfer Supplement, executed by such Purchasing
Lender, such transferor Lender (and, in the case of a Purchasing Lender
that is not then a Lender or an affiliate thereof so long as no Event of
Default has occurred and is continuing, by the Company, the Borrower and
the Agent), and delivered to the Agent for its acceptance and recording in
the Register. Upon such execution, delivery, acceptance and recording, from
and after the Transfer Effective Date specified in such Commitment Transfer
Supplement, (x) the Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have
the rights and obligations of a Lender hereunder with a Commitment as set
forth therein, and (y) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be released from
its obligations under this Agreement (and, in the case of a Commitment
Transfer Supplement covering all or the remaining portion of a transferor
Lender's rights and obligations under this Agreement, such transferor
Lender shall cease to be a party hereto). Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only
to the extent, necessary to reflect the addition of such Purchasing Lender
and the resulting adjustment of Commitment Percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Notes.
On or prior to the Transfer Effective Date specified in such Commitment
Transfer Supplement, the Borrower, at its own expense, shall execute and
deliver to the Agent in exchange for the Note delivered to the Agent
pursuant to such Commitment Transfer Supplement a new Note to the order of
such Purchasing Lender in an amount equal to the Commitment assumed by it
pursuant to such Commitment Transfer Supplement and, unless the transferor
Lender has not retained a Commitment hereunder, a new Note to the order of
the transferor Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note shall be dated the Closing Date and shall
otherwise be in the form of the Note replaced thereby. The Note surrendered
by the transferor Lender shall be returned by the Agent to the Borrower
marked "canceled".
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(d) The Agent shall maintain at its address referred to in subsection
9.2 a copy of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by a
transferor Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an affiliate thereof, by the Borrower
and the Agent) together with payment to the Agent (by the transferor Lender
or the Purchasing Lender, as agreed between them) of a registration and
processing fee of $2,500 for each Purchasing Lender listed in such
Commitment Transfer Supplement, and the Notes subject to such Commitment
Transfer Supplement, the Agent shall (i) accept such Commitment Transfer
Supplement, (ii) record the information contained therein in the Register
and (iii) give prompt notice of such acceptance and recordation to the
Lenders and the Borrower.
(f) The Company and the Borrower each authorizes each Lender to
disclose to any Participant or Purchasing Lender (each, a "Transferee") and
any prospective Transferee any and all financial information in such
Lender's possession concerning the Company and its Affiliates which has
been delivered to such Lender by or on behalf of the Company or the
Borrower pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Company or the Borrower in connection with
such Lender's credit evaluation of the Company and its Affiliates prior to
becoming a party to this Agreement; in each case subject to subsection
9.14.
(g) At the time of each assignment pursuant to this subsection 9.6 to
a Person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
for Federal income tax purposes, the respective assignee Lender shall
provide to the Borrower and the Agent the appropriate Internal Revenue
Service Forms (and, if applicable, a 2.18 Certificate) described in
subsection 2.18.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any of its rights under this Agreement (including, without
limitation, any right to payment of
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principal and interest under any Note) to any Federal Reserve Bank in
accordance with applicable laws.
9.7 Adjustments; Set-off. (a) Each Lender agrees that if any Lender (a
"benefitted Lender") shall at any time receive any payment of all or part of its
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in clause (e) of Section 7, or otherwise)
in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's Loans, or interest
thereon, such benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The Company and the
Borrower agree that each Lender so purchasing a portion of another Lender's
Loans may exercise all rights of payment (including, without limitation, rights
of set-off) with respect to such portion as fully as if such Lender were the
direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law (including, without limitation, other rights of set-off), each Lender
shall have the right, without prior notice to the Company or the Borrower,
any such notice being expressly waived by the Company and the Borrower to
the extent permitted by applicable law, upon the occurrence of any Event of
Default, to setoff and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Lender or any branch or agency thereof to
or for the credit or the account of the Company and/or the Borrower, or any
part thereof in such amounts as such Lender may elect, against and on
account of the obligations and liabilities of the Company and/or the
Borrower to such Lender hereunder and claims of every nature and
description of such Lender against the Company and/or the Borrower, in any
currency, whether arising hereunder, under the Notes or under any documents
contemplated by or referred to herein or therein, as such Lender may elect,
whether or not such Lender has made any demand for payment and although
such obligations, liabilities and claims may be contingent or unmatured.
The aforesaid right of set-off may be exercised by such Lender against the
Company and/or the Borrower or
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against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or execution, judgment or attachment
creditor of the Company and/or the Borrower, or against anyone else
claiming through or against the Company and/or the Borrower or any such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the occurrence of any Event of Default.
Each Lender agrees promptly to notify the Company, the Borrower and the
Agent after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity
of such set-off and application.
9.8 Table of Contents and Section Headings. The table of contents and the
Section and subsection headings herein are intended for convenience only and
shall be ignored in construing this Agreement.
9.9 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Agent.
9.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.11 Integration. This Agreement and the Notes represent the agreement of
the Company, the Borrower, the Agent and the Lenders with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Agent, the Company, the Borrower or any Lender relative to the
subject matter hereof not expressly set forth or referred to herein or in the
Notes.
9.12 Governing Law. This Agreement and the Notes and the rights and
obligations of the parties under this Agreement and the Notes shall be governed
by, and construed and interpreted in accordance with, the law of the State of
North Carolina.
9.13 Consent to Jurisdiction and Service of Process. All judicial
proceedings brought against the Company and/or the Borrower with respect to this
Agreement, any Note or any of the other Credit Documents may be brought in any
state or federal court of competent jurisdiction in the State of North Carolina,
and, by execution and delivery of this Agreement, each of the
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Company and the Borrower accepts, for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement from which no appeal has been
taken or is available. Each of the Company and the Borrower irrevocably agrees
that all process in any such proceedings in any such court may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to it at its address set forth in
subsection 9.2 or at such other address of which the Agent shall have been
notified pursuant thereto, such service being hereby acknowledged by the each of
the Company and the Borrower to be effective and binding service in every
respect. Each of the Company, the Borrower, the Agent and the Lenders
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which it
may now or hereafter have to the bringing of any such action or proceeding in
any such jurisdiction. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of any Lender to
bring proceedings against the Company, or the Borrower in the court of any other
jurisdiction.
9.14 Confidentiality. The Agent and each of the Lenders agrees that it will
use its best efforts not to disclose without the prior consent of the Company
(other than to its employees, Affiliates, auditors or counsel or to another
Lender) any information with respect to the Company and its Subsidiaries which
is furnished pursuant to this Agreement, any other Credit Document or any
documents contemplated by or referred to herein or therein and which is
designated by the Company to the Lenders in writing as confidential or as to
which it is otherwise reasonably clear such information is not public, except
that any Lender may disclose any such information (a) as has become generally
available to the public other than by a breach of this subsection 9.14, (b) as
may be required or appropriate in any report, statement or testimony submitted
to any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or the OCC or similar organizations (whether in
the United States or elsewhere) or their successors, (c) as may be required or
appropriate in response to any summons or subpoena or any law, order, regulation
or ruling applicable to such Lender, or (d) to any prospective Participant or
assignee in connection with any contemplated transfer pursuant to Section 9.6,
provided that such prospective transferee shall have been made aware of this
Section 9.14 and shall have agreed to be bound by its provisions as if it were a
party to this Agreement.
9.15 Acknowledgements. The Company and the Borrower each hereby
acknowledges that:
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(a) it has been advised by counsel in the negotiation, execution and
delivery of each Credit Document;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Company or the Borrower arising out of or in connection
with this Agreement and the relationship between Agent and Lenders, on one
hand, and the Company and the Borrower, on the other hand, in connection
herewith is solely that of debtor and creditor; and
(c) no joint venture exists among the Lenders or among the Company
and/or the Borrower and the Lenders.
9.16 Waivers of Jury Trial. The Company, the Borrower, the Agent and the
Lenders hereby irrevocably and unconditionally waive, to the extent permitted by
applicable law, trial by jury in any legal action or proceeding relating to this
Agreement or any other Credit Document and for any counterclaim therein.
9.17 Surrender of Existing Notes. By execution of this Amended and Restated
Credit Agreement, each of the Lenders agrees to promptly surrender to the
Borrower the Notes under the Existing Credit Agreement in exchange for the
amended, restated and substituted Notes hereunder.
SECTION 10. GUARANTY.
10.1 The Guaranty. In order to induce the Lenders to enter into this
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by the Guarantors from the Extensions of Credit
hereunder, each of the Guarantors hereby agrees with the Agent and the Lenders
as follows: the Guarantor hereby unconditionally and irrevocably jointly and
severally guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all indebtedness of the Borrower to the Agent and the Lenders. If any or
all of the indebtedness of the Borrower to the Agent and the Lenders becomes due
and payable hereunder, each Guarantor unconditionally promises to pay such
indebtedness to the Agent and the Lenders, or order, on demand, together with
any and all reasonable expenses which may be incurred by the Agent or the
Lenders in collecting any of the indebtedness. The word "indebtedness" is used
in this Section 10 in its most comprehensive sense and includes any and all
advances, debts, obligations and liabilities of the Borrower arising in
connection with this Agreement, in each case, heretofore, now, or hereafter
made, incurred or created, whether voluntarily or involuntarily, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether or
not such indebtedness is from time to time reduced, or extinguished and
thereafter increased or incurred, whether the Borrower may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of
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<PAGE>
limitations, and whether or not such indebtedness may be or hereafter become
otherwise unenforceable.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of a Guarantor
other than the Company shall be adjudicated to be invalid or unenforceable for
any reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of each such Guarantor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
10.2 Bankruptcy. Additionally, each of the Guarantors unconditionally and
irrevocably guarantees jointly and severally the payment of any and all
indebtedness of the Borrower to the Lenders whether or not due or payable by the
Borrower upon the occurrence of any of the events specified in subsection 7(e),
and unconditionally promises to pay such indebtedness to the Agent for the
account of the Lenders, or order, on demand, in lawful money of the United
States. Each of the Guarantors further agrees that to the extent that the
Borrower or a Guarantor shall make a payment or a transfer of an interest in any
property to the Agent or any Lender, which payment or transfer or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
or otherwise is avoided, and/or required to be repaid to the Borrower or a
Guarantor, the estate of the Borrower or a Guarantor, a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such avoidance or repayment, the
obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made.
10.3 Nature of Liability. The liability of each Guarantor hereunder is
exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrower whether executed by any such Guarantor, any other
guarantor or by any other party, and no Guarantor's liability hereunder shall be
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
indebtedness of the Borrower, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower, or (e) any payment made to the
Agent or the Lenders on the indebtedness which the Agent or such Lenders repay
the Borrower pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each of the
Guarantors waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
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<PAGE>
10.4 Independent Obligation. The obligations of each Guarantor hereunder
are independent of the obligations of any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against each Guarantor
whether or not action is brought against any other guarantor or the Borrower and
whether or not any other guarantor or the Borrower is joined in any such action
or actions.
10.5 Authorization. Each of the Guarantors authorizes the Agent and each
Lender without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
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 indebtedness or any part thereof in accordance with this Agreement,
including any increase or decrease of the rate of interest thereon, (b) take and
hold security from any guarantor or any other party for the payment of this
Guaranty or the indebtedness and exchange, enforce waive and release any such
security, (c) apply such security and direct the order or manner of sale thereof
as the Agent and the Lenders in their discretion may determine and (d) release
or substitute any one or more endorsers, guarantors, the Borrower or other
obligors.
10.6 Reliance. It is not necessary for the Agent or the Lenders to inquire
into the capacity or powers of the Borrower or the officers, directors, partners
or agents acting or purporting to act on its behalf, and any indebtedness made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
10.7 Waiver. (a) Each of the Guarantors waives any right (except as shall
be required by applicable statute and cannot be waived) to require the Agent or
any Lender to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party, or (iii) pursue any other remedy in the
Agent's or any Lender's power whatsoever. Each of the Guarantors waives any
defense based on or arising out of any defense of the Borrower, any other
guarantor or any other party other than payment in full of the indebtedness,
including without limitation any defense based on or arising out of the
disability of the Borrower, any other guarantor or any other party, or the
unenforceability of the indebtedness or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment in
full of the indebtedness. Without limiting the generality of the provisions of
this Section 10, each of the Guarantors hereby specifically waives the benefits
of N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive. The Agent or any of
the Lenders may, at their election, foreclose on any security held by the Agent
or a Lender by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the Agent
and any Lender may have against the Borrower or any other
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<PAGE>
party, or any security, without affecting or impairing in any way the liability
of any Guarantor hereunder except to the extent the indebtedness has been paid.
Each of the Guarantors waives any defense arising out of any such election by
the Agent and each of the Lenders, even though such election operates to impair
or extinguish any right of reimbursement or subrogation or other right or remedy
of the Guarantors against the Borrower or any other party or any security.
(b) Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notice of protest, notices of dishonor, notices of acceptance of
this Guaranty, and notices of the existence, creation or incurring of new or
additional indebtedness. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the indebtedness
and the nature, scope and extent of the risks which such Guarantor assumes and
incurs hereunder, and agrees that neither the Agent nor any Lender shall have
any duty to advise such Guarantor of information known to it regarding such
circumstances or risks.
(c) Each of the Guarantors hereby agrees it will not exercise any rights of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under section 509 of the U.S. Bankruptcy Code, or
otherwise) to the claims of the Lenders against the Borrower or any other
guarantor of the indebtedness of the Borrower owing to the Lenders
(collectively, the "Other Parties") and all contractual, statutory or common law
rights of reimbursement, contribution or indemnity from any Other Party which it
may at any time otherwise have as a result of this Guaranty until such time as
the Loans hereunder shall have been paid and the Commitments have been
terminated. Each of the Guarantors hereby further agrees not to exercise any
right to enforce any other remedy which the Agent and the Lenders now have or
may hereafter have against any Other Party, any endorser or any other guarantor
of all or any part of the indebtedness of the Borrower and any benefit of, and
any right to participate in, any security or collateral given to or for the
benefit of the Lenders to secure payment of the indebtedness of the Borrower
until such time as the Loans hereunder shall have been paid and the Commitments
have been terminated.
10.8 Limitation on Enforcement. The Lenders agree that this Guaranty may be
enforced only by the action of the Agent acting upon the instructions of the
Majority Lenders and that no Lender shall have any right individually to seek to
enforce or to enforce this Guaranty, it being understood and agreed that such
rights and remedies may be exercised by the Agent for the benefit of the Lenders
upon the terms of this Agreement. The Lenders further agree that this Guaranty
may not be enforced against any director, officer, employee or stockholder of
the Guarantors.
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10.9 Confirmation of Payment. The Agent and the Lenders will, upon request
after payment of the indebtedness and obligations which are the subject of this
Guaranty and termination of the commitments relating thereto, confirm to the
Borrower, the Guarantors or any other Person that the such indebtedness and
obligations have been paid and the commitments relating thereto terminated,
subject to the provisions of Section 10.2.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Charlotte, North Carolina by its proper and duly
authorized officers as of the day and year first above written.
BORROWER: GALEY & LORD INDUSTRIES, INC.
By:/s/ Michael R. Harmon
---------------------
Title: Executive Vice-President
COMPANY: GALEY & LORD, INC.
By:/s/ Michael R. Harmon
---------------------
Title: Executive Vice-President
GUARANTORS:
G&L SERVICE COMPANY, NORTH
AMERICA, INC.,
a Delaware corporation
By:/s/ Michael R. Harmon
---------------------
Title: Vice-President
<PAGE>
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Agent and as a Lender
By:/s/ Shannon S. Townsend
---------------------
Title: Vice-President
THE FIRST NATIONAL BANK OF CHICAGO
By:/s/ Courtenay Wood
---------------------
Title: Vice-President
NATIONSBANK, N.A.,
By:/s/ Joseph R. Netzel
---------------------
Title: Vice-President
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:/s/ W. Stanton Laight
---------------------
Title: Senior Vice-President
BANK OF AMERICA ILLINOIS
By:/s/ Mike McKenney
---------------------
Title: Vice-President
CORESTATES BANK, N.A.
By:/s/ James Richards
---------------------
Title: Vice-President
<PAGE>
CIBC INC.
By:/s/ Jack Mackmull
---------------------
Title: Managing Director
THE FIRST NATIONAL BANK OF CHICAGO
By:________________________________
Title:
FLEET BANK, N.A. (formerly known as
NatWest Bank N.A.)
By:/s/ George Commander
---------------------
Title: Vice-President
THE BANK OF TOKYO - MITSUBISHI, LTD.,
ATLANTA AGENCY
By:/s/ Joel Peterson
---------------------
Title: Vice-President
BANK OF SCOTLAND
By:/s/ Catherine Oniffrey
---------------------
Title:
SUNTRUST BANK, ATLANTA
By:/s/ Raymond King
---------------------
Title: Vice-President
<PAGE>
GALEY & LORD, INC.
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
COMPUTATION OF AVERAGE SHARES OUTSTANDING (IN THOUSANDS):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
JUNE 29, 1996 JULY 1, 1995 JUNE 29, 1996 JULY 1, 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
AVERAGE COMMON SHARES
OUTSTANDING 11,691 11,750 11,732 11,740
ADD DILUTIVE OPTIONS 198 251 210 295
------ ------ ------ ------
PRIMARY AVERAGE SHARES 11,889 12,001 11,942 12,035
INCREMENTAL SHARES ARISING
FROM FULL DILUTION
ASSUMPTION - 33 7 8
------ ------ ------ ------
AVERAGE SHARES ASSUMING
FULL DILUTION 11,889 12,034 11,949 12,043
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-29-1996
<CASH> 602
<SECURITIES> 0
<RECEIVABLES> 87,388
<ALLOWANCES> 0
<INVENTORY> 78,729
<CURRENT-ASSETS> 169,337
<PP&E> 158,950
<DEPRECIATION> 52,642
<TOTAL-ASSETS> 316,376
<CURRENT-LIABILITIES> 49,687
<BONDS> 164,009
0
0
<COMMON> 120
<OTHER-SE> 86,931
<TOTAL-LIABILITY-AND-EQUITY> 316,376
<SALES> 300,965
<TOTAL-REVENUES> 300,965
<CGS> 270,265
<TOTAL-COSTS> 270,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,509
<INCOME-PRETAX> 9,610
<INCOME-TAX> 3,700
<INCOME-CONTINUING> 5,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,910
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
