UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 29, 1998
-------------------
GALEY & LORD, INC.
- -------------------------------------------------------------------------------
Exact name of registrant as specified in its charter
DELAWARE 56-1593207
- ------------------------------- --------------------------------
State or other jurisdiction of IRS Employer Identification No.
incorporation or organization
980 Avenue of the Americas, New York, New York 10018
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Address of principal executive offices Zip Code
212/465-3000
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Registrant's telephone number, including area code
Not Applicable
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Former name, former address and former fiscal year, if changed since last
report.
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
Incorporated by reference herein and attached as an exhibit hereto is the press
release of Galey & Lord, Inc. (the "Company" or "Galey & Lord") dated January
30, 1998 announcing that Galey & Lord, Inc. had completed its acquisition of
Dominion Textile's Apparel Fabrics Business.
On January 29, 1998, the Company entered into a Master Separation Agreement with
Polymer Group Inc. ("Polymer"), DT Acquisition, Inc. ("DTA"), a subsidiary of
Polymer, Dominion Textile, Inc. ("Dominion") and certain other parties thereto,
pursuant to which the Company acquired the apparel fabrics business (the
"Acquired Business") of Dominion from DTA for a cash purchase price of $464.5
million (the "Acquisition"). The total purchase price was funded with borrowings
under the Company's credit facilities (described in Item 7 below). The Acquired
Business primarily consists of several subsidiaries and operating divisions of
Dominion, which comprises Swift Denim and Klopman workwear and career wear
divisions, which manufacture and market denim fabrics and fabrics for the
commercial uniform market. The Company currently intends to operate the Acquired
Business and does not have any plans with respect to the disposition of any
material assets currently used in the continuing operations of the Acquired
Business.
ITEM 5. OTHER EVENTS.
On January 29, 1998, the Company entered into a credit agreement (the "Senior
Credit Facility") with First Union National Bank ("FUNB"), as agent and lender.
The Senior Credit Facility provides for (i) a revolving line of credit under
which the Company may borrow up to an amount (including letters of credit up to
an aggregate of $30.0 million) equal to the lesser of $225.0 million or a
borrowing base (comprised of eligible accounts receivable and eligible
inventory, as defined in the Senior Credit Facility), (ii) a term loan in the
principal amount of $155.0 million ("Term Loan B") and (iii) a term loan in the
principal amount of $110.0 million ("Term Loan C"). Under the Senior Credit
Facility borrowings were, and are required to be, used to refinance the
Company's prior senior credit facility with FUNB, to fund the Acquisition, to
pay for certain closing costs and expenses related to the Acquisition and for
general corporate and working capital purposes.
Under the Senior Credit Facility, the revolving line of credit expires on March
27, 2004 and the principal amount of (i) Term Loan B is repayable in 24
quarterly payments of $387,500 until March 27, 2004 and, thereafter, four
quarterly payments of $36,425,000 until Term Loan B's maturity on April 2, 2005
and (ii) Term Loan C is repayable in 28 quarterly payments of $275,000 until
April 2, 2005 and, thereafter, four quarterly payments of $25,575,000 until Term
Loan C's maturity on April 1, 2006. Under the Senior Credit Facility, the
interest rate on the Company's borrowings under its revolving line of credit and
term loans initially is fixed at a per annum rate, at the Company's option, of
either LIBOR plus 2.25%, LIBOR plus 2.75% and LIBOR plus 3.00%, respectively, or
the greater of the prime rate or the federal funds rate plus .50% plus a margin
of 1.00% for revolving loans, 1.5% for Term Loan B and 1.75% for Term Loan C for
at least two full fiscal quarters following the closing of the Acquisition.
Thereafter, the revolving line of credit borrowings will bear interest at a per
annum rate, at the Company's option, of either (i) (a) the greater of the prime
rate or the federal funds rate plus .50% plus (b) a margin of 0%, .25%, .50%,
.75% or 1.00%, based on the Company achieving certain leverage ratios (as
defined in the Senior Credit Facility) or (ii) LIBOR plus a margin of .75%,
1.00%, 1.25%, 1.50%, 1.75%, 2.00% or 2.25%, based on the Company achieving
certain leverage ratios. Term Loan B and Term Loan C will bear interest at a per
annum rate, at the Company's option, of (A) with respect to Term Loan B either
(i) (a) the greater of the prime rate or federal funds rate plus .50%, plus (b)
a margin of .25%, .50%, .75%, 1.00%, 1.25% or 1.50%, based on the Company
achieving certain leverage ratios or (ii) LIBOR plus a margin of 1.50%, 1.75%,
2.00%, 2.25%, 2.50% or 2.75%, based on the Company achieving certain leverage
ratios or (B) with respect to Term Loan C, either (i) (a)the greater of the
prime rate or federal funds rate plus .50%, plus (b) a margin of .50%, .75%,
1.00%, 1.25%, 1.50% or 1.75%, based on the Company achieving certain leverage
ratios, or (ii) LIBOR plus a margin of 1.75%, 2.00%, 2.25%, 2.50%, 2.75%, or
3.00%, based on the Company's achieving certain leverage ratios.
2
<PAGE>
The Company's obligations under the Senior Credit Facility are secured by all of
the assets (other than real property) of the Company and each of its domestic
subsidiaries, and a pledge by the Company and each of its subsidiaries of all
the outstanding capital stock of its respective domestic subsidiaries and a
pledge of 65% of the outstanding voting capital stock, and 100% of the
outstanding non-voting capital stock, of any of its respective foreign
subsidiaries. In addition, payment of all obligations under the Senior Credit
Facility is guaranteed by each of the Company's domestic subsidiaries. Under the
Senior Credit Facility, the Company is required to make mandatory prepayments of
principal annually in an amount equal to 50% of Excess Cash Flow (as defined in
the Senior Credit Facility), and also in the event of certain dispositions of
assets or debt or equity issuances (all subject to certain exceptions) in an
amount equal to 100% of the net proceeds received by the Company therefrom.
The Senior Credit Facility contains certain covenants, including, without
limitation, those limiting the Company's and its Subsidiaries' ability to incur
indebtedness, incur liens, sell or acquire assets or businesses, change the
nature of its business, make certain investments or pay dividends. In addition,
the Senior Credit Facility requires the Company to meet certain financial ratio
tests and limits the amount of capital expenditures which the Company and its
Subsidiaries may make in any fiscal year.
The Senior Subordinated Credit Agreement, dated December 19, 1997, as amended on
January 29, 1998, ("Bridge Financing") provides for borrowings of $275 million,
of which $145.6 million was initially borrowed on December 19, 1997 and the
remainder of which was borrowed on January 29, 1998. All borrowings under the
Bridge Financing were used to fund the Acquisition (including fees and
expenses). The outstanding principal amount of all borrowings under the Bridge
Financing will be due and payable on December 19, 2007; provided, however, that
the Company is required to make certain mandatory prepayments of principal in
the event of certain dispositions of assets, capital contributions or other debt
or equity issuances. Borrowings under the Bridge Financing bear interest, which
is payable monthly, at a per annum rate initially of LIBOR plus 4.50% and
increasing by .25% for each month that borrowings under the Bridge Financing
remain outstanding. In no event shall the interest rate on such borrowings
exceed 18% (with the maximum interest rate with respect to interest payable in
cash not to exceed 14% and the remainder to be payable in kind).
All borrowings under the Bridge Financing are unsecured and payment by the
Company of all obligations under the Bridge Financing is subordinated to the
prior payment in full of all obligations under the Senior Credit Facility. The
Bridge Financing contains certain covenants, including, without limitation,
those limiting the Company's ability to incur indebtedness, incur liens, sell or
acquire assets or businesses, change the nature of its business or make
dividends.
The Company expects to replace the Bridge Financing with 10 year senior
subordinated notes during February 1998. The Company has obtained a commitment
regarding the issuance and sale of the 10 year senior subordinated notes (the
"Note Issuance").
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following are historical financial statements of the Acquired Business and
the pro forma combined financial statements of the Company and the Acquired
Business.
Financial Statements of the Acquired Business
AUDITED COMBINED FINANCIAL STATEMENTS OF THE APPAREL FABRICS
BUSINESS OF DOMINION TEXTILE INC.:
Report of the Independent Auditors 5
Combined Statements of Income and Deficit for the Years Ended
June 30, 1995, 1996 and 1997 6
Combined Balance Sheets as of June 30, 1996 and 1997 7
Combined Statements of Cash Flows for the Years Ended
June 30, 1995, 1996 and 1997 8
Notes to Combined Financial Statements 9 - 24
UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS OF THE APPAREL FABRICS
BUSINESS OF DOMINION TEXTILE INC.:
Unaudited Condensed Combined Statements of Income and Deficit for the
Three-Month Periods Ended September 30, 1996 and 1997 25
Unaudited Condensed Combined Balance Sheets as of June 30, 1997 and
September 30, 1997 26
Unaudited Condensed Combined Statements of Cash Flows for the Three-
Month Periods Ended September 30, 1996 and 1997 27
Notes to Unaudited Condensed Combined Financial Statements 28 - 29
Pro Forma Combined Financial Statements
Unaudited Pro Forma Combined Balance Sheet as of
September 30, 1997 31
Notes to Unaudited Pro Forma Combined Balance Sheet 32 -33
Unaudited Pro Forma Combined Statement of Operations for the
Year Ended September 27, 1997 34
Notes to Unaudited Pro Forma Combined Statement of Operations 35
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Boards of Directors and Stockholders of Galey & Lord, Inc. and Polymer
Group, Inc.
We have audited the accompanying combined balance sheets of the Apparel Fabrics
Business of Dominion Textile Inc. (the "Business") as of June 30, 1996 and 1997,
and the related combined statements of income and deficit and cash flows for the
years ended June 30, 1995, 1996 and 1997. These financial statements are the
responsibility of the Business' management. Our responsibility is to express an
opinion on these combined financial statements based on our audits. We did not
audit the financial statements of Swift Textiles Europe Limited, the Business'
investment which is accounted for using the equity method. The Business' equity
of $3.2 million and $2.8 million in the Swift Textiles Europe Limited net assets
at June 30, 1996 and 1997, respectively, and of $6.3 million, $8.3 million and
$7.4 million in the net income for the years ended June 30, 1995, 1996 and 1997,
respectively are included in the accompanying combined financial statements. The
financial statements of Swift Textiles Europe Limited were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for such company, is based solely on the report
of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
combined financial statements present fairly, in all material respects, the
combined financial position of the Business as of June 30, 1996 and 1997, and
the combined results of its operations and its cash flows for the years ended
June 30, 1995, 1996 and 1997, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Business and may not necessarily be
indicative of the conditions that would have existed or the results of
operations if the Business had been operated as a separate entity for all
periods presented. Portions of certain income, expenses, assets and liabilities
represent allocations made from Dominion Textile Inc.'s headquarters, as
explained in the basis of presentation.
DELOITTE & TOUCHE
Chartered Accountants
January 29, 1998
5
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
COMBINED STATEMENTS OF INCOME AND DEFICIT
For the Years Ended
June 30, June 30, June 30,
1995 1996 1997
--------- -------- ------
<S> <C> <C> <C>
Sales......................................................... $633,690,769 $650,862,549 $610,573,010
Cost of goods sold............................................ 529,723,906 577,238,622 552,669,567
Restructuring charges (Note 1)................................ -- 3,558,000 17,816,145
------------ --------- ----------
Gross profit.................................................. 103,966,863 70,065,927 40,087,298
----------- ---------- ----------
Selling expenses.............................................. 20,267,232 23,024,674 20,265,482
Administrative expenses....................................... 32,183,500 32,745,972 32,046,918
Goodwill amortization......................................... 1,990,263 1,991,969 1,988,145
--------- --------- ---------
54,440,995 57,762,615 54,300,545
Operating income (loss)....................................... 49,525,868 12,303,312 (14,213,247)
Interest expense, net......................................... (28,732,689) (18,736,557) (17,412,760)
Share in net income of associated companies................... 6,308,424 8,325,611 7,409,584
Other expense, net (Note 2)................................... (1,497,313) (711,651) (73,495)
----------- --------- --------
Income (loss) before provision for (recovery of) income
taxes...................................................... 25,604,290 1,180,715 (24,289,918)
Provision for (recovery of) income taxes (Note 3)............. 6,577,499 (3,587,550) (10,183,601)
--------- ----------- ------------
Net income (loss) before extraordinary loss................... 19,026,791 4,768,265 (14,106,317)
Extraordinary loss on early extinguishment of debt............ -- (2,223,007) --
----------- ----------- ------------
Net income (loss)............................................. 19,026,791 2,545,258 (14,106,317)
---------- --------- ------------
Deficit, at beginning......................................... (137,499,011) (118,472,220) (115,926,962)
------------- ------------- -------------
Deficit, at end............................................... (118,472,220) (115,926,962) (130,033,279)
============= ============= =============
</TABLE>
See notes to the combined financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
COMBINED BALANCE SHEETS
June 30, June 30,
1996 1997
------- ------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents..................................................... $17,696,400 $36,797,072
Receivables
Trade, net of allowance for doubtful accounts of $2,214,213
(1996 -- $2,423,183)..................................................... 124,535,410 118,459,831
Other....................................................................... 9,763,297 17,987,082
Inventories (Note 4).......................................................... 93,141,222 84,972,495
Other current assets.......................................................... 24,487,994 11,392,840
---------- ----------
269,624,323 269,609,320
Investments and advances (Note 5)............................................... 8,136,681 6,576,251
Property, plant and equipment, net (Note 6)..................................... 273,060,797 244,025,312
Intangible assets, net (Note 7)................................................. 64,783,364 62,213,219
Other assets (Note 8)........................................................... 17,346,872 8,688,738
---------- ---------
Total assets.................................................................... 632,952,037 591,112,840
=========== ===========
Liabilities and stockholders' equity
Current liabilities
Accounts payable.............................................................. 31,580,971 32,999,742
Payroll, related taxes and other employee related liabilities................. 19,053,253 15,951,978
Other accrued liabilities..................................................... 22,544,038 37,578,824
Interest payable.............................................................. 5,933,779 5,656,732
Income taxes payable.......................................................... 4,623,042 4,320,246
Long-term debt due within one year (Note 9)................................... 916,297 1,535,908
------- ---------
84,651,380 98,043,430
Long-term debt (Note 9)......................................................... 247,897,323 197,971,915
Deferred income taxes (Note 3).................................................. 41,245,274 30,291,948
Other non-current liabilities................................................... 47,520,476 43,293,000
---------- ----------
Total liabilities............................................................... 421,314,453 369,600,293
----------- -----------
Stockholders' equity
Additional paid-in capital.................................................... 334,205,229 370,598,557
Deficit....................................................................... (115,926,962) (130,033,279)
Cumulative translation adjustment (Note 11)................................... (6,640,683) (19,052,731)
----------- ------------
Total stockholders' equity...................................................... 211,637,584 221,512,547
----------- -----------
Total liabilities and stockholders' equity...................................... 632,952,037 591,112,840
=========== ===========
</TABLE>
See notes to the combined financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended
June 30, June 30, June 30,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Operating activities
Net income (loss).............................................. $19,026,791 $2,545,258 $(14,106,317)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt....... -- 2,223,007 --
Depreciation and amortization............................ 32,142,141 34,402,833 35,471,104
Deferred income taxes.................................... (5,467,126) (457,006) (10,953,325)
Loss on disposal of property, plant and equipment........ 2,048,236 3,238,143 2,454,532
Share in net income of associated companies.............. (6,308,424) (8,325,611) (7,409,584)
Dividends received from associated companies............. 7,105,000 9,283,126 7,621,617
Changes in assets and liabilities:
Receivables, net............................................ (8,317,959) 2,258,602 (2,912,386)
Inventories................................................. 4,092,963 (15,105,401) 5,426,948
Other current assets........................................ (6,140,899) (4,117,510) 12,729,080
Other assets................................................ 1,213,408 11,101,967 8,198,519
Current liabilities......................................... (10,155,921) (4,258,069) 5,805,026
Other liabilities........................................... 2,951,519 (2,754,030) (3,284,321)
Other, net.................................................. (2,589,795) (1,675,400) 18,325
----------- ----------- ------
Net cash provided by operating activities...................... 29,599,934 28,359,909 39,059,218
---------- ---------- ----------
Investing activities
Capital expenditures........................................... (27,061,662) (52,580,250) (17,164,366)
Proceeds from sale of property, plant and equipment............ 3,728,894 2,763,172 3,328,188
Investments in associated companies and other.................. (2,948,045) 489,997 1,772,462
Other, net..................................................... (7,532,631) 1,656,072 5,944,680
----------- --------- ---------
Net cash used in investing activities.......................... (33,813,444) (47,671,009) (6,119,036)
------------ ------------ -----------
Financing activities
Repayment of short-term borrowings............................. (12,034,909) -- (12,922,743)
Repayment of long-term debt.................................... (120,238,155) (206,783,360) (49,880,066)
Issue of short-term borrowings................................. -- -- 12,922,743
Issue of long-term debt........................................ 97,915,928 220,695,364 822,389
Debt issue costs............................................... -- (3,373,158) --
Changes in additional paid-in capital.......................... 24,764,445 (3,990,150) 36,393,328
---------- ----------- ----------
Net cash (used in) provided by financing activities............ (9,592,691) 6,548,696 (12,664,349)
----------- --------- ------------
Effect of changes in exchange rates on cash and cash
equivalents................................................. 1,702,437 439,027 (1,175,161)
--------- ------- -----------
Net increase (decrease) in cash and cash equivalents........... (12,103,764) (12,323,377) 19,100,672
Cash and cash equivalents, beginning of year................... 42,123,542 30,019,778 17,696,400
---------- ---------- ----------
Cash and cash equivalents, end of year......................... 30,019,778 17,696,401 36,797,072
========== ========== ==========
Supplemental disclosure of cash flow information Net cash paid (received) during
the year for:
Interest................................................... 30,840,440 21,248,309 18,841,124
---------- ---------- ----------
Income taxes............................................... (1,464,625) 2,145,272 (2,695,072)
----------- --------- -----------
</TABLE>
See notes to the combined financial statements.
<PAGE>
APPAREL FABRICS BUSINESS
BASIS OF PRESENTATION
Years ended June 30, 1995, 1996 and 1997
GENERAL
The consolidated financial statements of Dominion Textiles Inc. (the
"Corporation"), a Canadian company, have been issued to stockholders.
All dollar amounts in the combined financial statements are stated in US
dollars.
The combined financial statements of the Apparel Fabrics Business of Dominion
Textile Inc. (the "Business") include the operations of Swift Denim, Inc.,
Klopman International S.p.A. and Swift Textiles Europe Limited which were
operated as subsidiaries or associated companies of Dominion Textile Inc. On
December 29, 1997, pursuant to a takeover offer, DT Acquisition Inc., an
affiliate of Polymer Group, Inc. ("PBI") acquired all shares tendered which
approximated 98% of the outstanding common stock of the Corporation. In
connection with the change of control, PBI entered into a preliminary agreement
with Galey & Lord, Inc., to sell it certain operations. In contemplation of the
change in control and the subsequent sale of certain operations, the operations
and the net assets of the Corporation have been essentially divided into two
groups: the Apparel Fabrics Business and the Dominion Nonwovens and Industrial
Products Business.
The combined financial statements have been prepared using the Corporation's
historical basis in the assets and liabilities and historical results of
operations related to the Business. Changes in additional paid-in capital
represent the Corporation's contribution of its net operating investment plus
net cash transfers to or from the Corporation. The combined financial statements
reflect the results of operations, financial position and cash flows of the
Business as if it had operated as a separate entity for all periods presented
and may not be indicative of actual results of operations and financial position
of the Business under different ownership.
Additionally, the combined financial statements include allocations of certain
corporate headquarters assets, liabilities (excluding deferred income taxes),
and net expenses. All significant intergroup transactions and balances have been
eliminated.
ALLOCATIONS
The liabilities of the Business include outstanding direct third-party
indebtedness and the amount of debt based on the ratio of the Business' average
net operating investment to the aggregate net operating investment of the two
groups. Interest expense shown in the combined financial statements reflects the
interest expense associated with the aggregate borrowings for each period
presented principally based on a blend of the Corporation's long-term weighted
average interest rates for the applicable period.
General corporate overhead related to the Corporation's headquarters has been
allocated to the Business based on the ratio of the Business' sales to the
aggregate sales of the Corporation. The costs of the services charged to the
Business are not necessarily indicative of the costs that would have been
incurred if the Business had performed these functions as a stand-alone entity.
Additionally, income taxes on allocated general corporate overhead are
calculated using the Corporation's statutory tax rate.
Management believes that the basis of allocation is reasonable.
9
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
BASIS OF PRESENTATION -- Continued
The following table illustrates the results of applying the allocation method
described above on various financial statement items:
For the years ended June 30,
1995 1996 1997
---- ---- ----
<S> <C> <C>
Net impact on gross profit..................................... $(656,376) $(1,053,173) $(3,453,504)
General corporate overhead, net................................ (12,101,010) (4,381,800) (7,454,020)
Recovery of income taxes....................................... 4,949,866 3,143,589 4,293,493
Extraordinary loss on early extinguishment of debt............. -- (2,223,007) --
-- ----------- --
(7,807,520) (4,514,391) (6,614,031)
=========== =========== ===========
As of June 30,
1996 1997
---- ----
Net assets excluding long-term debt............ 457,385 14,539,529
Long-term debt................................. 245,247,741 197,049,432
Cumulative translation adjustment.............. (575,472) (4,252,709)
</TABLE>
10
<PAGE>
APPAREL FABRICS BUSINESS
SIGNIFICANT ACCOUNTING POLICIES
Years Ended June 30, 1995, 1996 and 1997
The combined financial statements have been prepared in accordance with US
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. The most significant accounting policies are as follows:
The combined financial statements include the accounts of Swift Denim, Inc. and
of Klopman International S.p.A., plus certain allocations from the corporate
headquarters as explained in the basis of presentation. The investment in
associated companies is carried at the Business' equity therein. All significant
intercompany transactions are eliminated.
The business acquisitions are accounted for using the purchase method. The
assets and liabilities of the acquired entities are adjusted to appropriate
carrying values.
NATURE OF OPERATIONS
The Business produces denim and polycotton fabrics for careerwear and markets
these products on a worldwide basis.
FISCAL YEAR
The Business' fiscal year is the 52- or 53-week period ending on the last
Saturday in June. Fiscal 1995 includes operations for a 52-week period, whereas
fiscal 1996 includes operations for a 53-week period and fiscal 1997 includes
operations for a 52-week period.
TRANSLATION OF FOREIGN CURRENCIES
Unrealized translation gains and losses on assets and liabilities denominated in
foreign currencies are reflected in income of the period. Unrealized translation
gains or losses on debt designated as a hedge of foreign self-sustaining
operations are included in the cumulative translation adjustment in
stockholders' equity.
The assets and liabilities of foreign operations, all of which are
self-sustaining, are translated at exchange rates in effect at the balance sheet
dates. Revenue and expense items are translated at average exchange rates
prevailing during the period. The resulting gains and losses are accumulated in
the cumulative translation adjustment in stockholders' equity.
11
<PAGE>
APPAREL FABRICS BUSINESS
SIGNIFICANT ACCOUNTING POLICIES -- Continued
FINANCIAL INSTRUMENTS
The Business enters into a variety of financial instruments to manage its
exposure to foreign currency rates and market risk related to its cotton
purchase requirements. These instruments are used for hedging purposes and are
employed in connection with an underlying asset, liability, firm commitment or
anticipated transaction.
Gains and losses on hedges of existing assets and liabilities are included in
the carrying amounts of those assets and liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains and losses related
to qualifying hedges of firm commitments or anticipated transactions are also
deferred and recognized in income or as adjustments of carrying amounts when the
hedged transaction occurs. Gains and losses on financial instruments that do not
qualify as hedges for accounting purposes are recognized in income.
CASH EQUIVALENTS
Cash equivalents include all highly liquid short-term instruments purchased with
a maturity of three months or less.
INVENTORY VALUATION
Inventories are valued at the lower of cost (determined substantially on the
first-in, first-out method) and net realizable value or replacement value for
certain supplies. The cost of work in process and finished goods includes raw
materials, direct labor and certain manufacturing overhead expenses. Adequate
provision is made for slow moving and obsolete inventories.
DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at historical cost. Depreciation is
provided on a straight-line basis at varying rates which allocate the cost of
the assets over their estimated economic lives. Buildings are amortized
primarily over 25 years and machinery and equipment over 3 to 15 years.
Goodwill which represents, at the acquisition date, the excess of cost over the
fair value of companies acquired, is amortized on a straight-line basis over a
maximum of 40 years. The Business evaluates the carrying value of goodwill for
potential permanent impairment on an ongoing basis. In order to determine if
such a permanent impairment exists, the Business' management considers each
business unit's financial condition and expected future cash flows, using
projected financial performance. A permanent impairment in the value of goodwill
is written off against income in the year such impairment is recognized.
Other intangible assets are amortized over their respective estimated useful
lives for periods ranging from 4 to 25 years. Deferred refinancing costs are
amortized over the term of the related debt.
ADOPTION OF NEW ACCOUNTING STANDARD
During 1997, the Business adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of." SFAS 121 establishes accounting standards
for recording the impairment of long-lived assets, certain identifiable
intangibles, goodwill and assets to be disposed of. The management determined
that no impairment loss was needed to be recognized for applicable assets of its
operations. Such determination does not envisage the change of control described
in the basis of presentation.
12
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
1. RESTRUCTURING CHARGES
In the fourth quarter of 1997, the Business recorded provisions totaling $17.8
million for the restructuring of its Klopman International unit and for its
share in a company-wide cost reduction program.
The Klopman charge totaled $15.1 million and primarily covered severance
payments and the writedown of assets to net realizable value in connection with
the shutdown of a greige mill located in Tralee, Ireland and the rationalization
of manufacturing operations at a plant located in Frosinone, Italy. Cash
payments related to the Klopman charge are expected to approximate $8.6 million
with spending primarily taking place in 1998 and to be financed through working
capital.
The Business' share in the charge related to the company-wide cost reduction
program amounted to $2.7 million and provided for severance payments and
rationalization costs in the general and administrative areas to be implemented
in 1998.
In 1996, a provision of $3.6 million in connection with an earlier
rationalization program at Klopman's Tralee, Ireland plant was fully utilized
during the year.
2. OTHER EXPENSE, NET
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Loss on disposal of property, plant and equipment............. $(2,048,236) $(3,238,143) $(2,454,532)
Business' share in gain realized upon termination of
pension plan................................................. -- 2,550,648 2,797,173
Other items, net.............................................. 550,923 (24,156) (416,136)
------- -------- ---------
(1,497,313) (711,651) (73,495)
=========== ========= ========
</TABLE>
3. INCOME TAXES
The Business follows Statement of Financial Accounting Standards No. 109 in
accounting for income taxes.
Dominion Textile Inc., as a Canadian company, is subject to Canadian tax
legislation. The combined income taxes differ from the income taxes calculated
using the Canadian statutory rates for the following reasons:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes.............................. $25,604,290 $1,180,715 $(24,289,918)
----------- ---------- -------------
Statutory income tax rates in Canada........................... 38.80% 38.95% 38.83%
Income taxes based on combined basic Canadian federal
and provincial rates.......................................... 9,934,465 459,888 (9,431,775)
Increase (decrease) in income taxes resulting from:
Losses incurred in the year not tax affected.................. 1,702,709 4,979,532 4,018,342
Share in net income of associated companies................... (2,447,669) (3,242,826) (2,877,142)
Utilization of tax benefits carried forward................... (3,687,267) (3,807,516) (1,281,954)
Other......................................................... 1,075,261 (1,976,630) (611,073)
--------- ----------- ---------
6,577,499 (3,587,550) (10,183,601)
--------- ----------- ------------
Income taxes (recovery)
Current....................................................... 2,622,110 4,182,050 (5,225,610)
Deferred...................................................... 3,955,389 (7,769,600) (4,957,991)
--------- ----------- -----------
Total income taxes............................................. 6,577,499 (3,587,550) (10,183,601)
========= =========== ============
</TABLE>
13
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
3. INCOME TAXES (CONTINUED)
At June 30, 1996 and 1997, the deferred tax assets (included in other current
assets), the deferred tax liabilities and the valuation allowances are as
follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Deferred tax assets
Accounts receivable......................................... $1,092,933 $1,252,468
Non-deductible items........................................ 1,982,689 3,034,626
Revenue not currently taxable............................... (1,024,112) (711,499)
Net operating losses........................................ 11,680,972 12,277,698
---------- ----------
13,732,482 15,853,293
========== ==========
Deferred tax liabilities
Postretirement obligation................................... 4,339,684 4,339,684
Other non-deductible accruals............................... (638,043) 5,068,225
Property, plant and equipment............................... (44,946,915) (39,699,857)
------------ ------------
(41,245,274) (30,291,948)
============ ============
Valuation allowances......................................... (11,680,972) (12,277,698)
============ ============
</TABLE>
As of June 30, 1997, the Business has unused income tax losses pertaining to
1997 and prior years of approximately $33.2 million, which may be used to reduce
future years' taxable income. The benefit resulting from these income tax losses
has not been recognized in the accounts. The amount, the form and the timing of
the benefit resulting from these income tax losses could be affected by the
change in control discussed in the basis of presentation. These losses expire as
follows:
(in thousands
of dollars)
1998 $8,481
1999 15,357
2000 --
2001 9,345
-----
33,183
======
The Internal Revenue Service is examining the income tax returns of Dominion
Textile (USA) Inc., a company under common control, for the years 1987 through
1989. Management is of the opinion that it has adequately provided for any
additional income taxes that may be assessed as a result of this examination.
Foreign tax credits would offset the amount of undistributed income of
international subsidiaries and affiliates which would be subject to additional
income taxes if distributed.
14
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
4. INVENTORIES
1996 1997
---- ----
<S> <C> <C>
Finished goods....................................................................... $37,189,428 $40,863,615
Work in process, including greige fabric for further processing...................... 33,086,176 29,674,463
Raw materials and supplies........................................................... 22,865,618 14,434,417
---------- ----------
93,141,222 84,972,495
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
5. INVESTMENTS AND ADVANCES
1996 1997
---- ----
<S> <C> <C>
Investment in associated companies (a).................. $3,156,324 $2,751,447
Other investments and advances (b)...................... 4,980,357 3,824,804
---------- ----------
8,136,681 6,576,251
=========== =========
</TABLE>
<TABLE>
<CAPTION>
(a) Summarized information, derived from the latest audited financial
statements of Swift Textiles Europe Limited is presented below:
For the years ended March 31
----------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Sales................................... $68,573,890 $74,762,092 $69,570,334
Operating income........................ 5,994,852 8,430,129 7,991,862
As of March 31
--------------
1996 1997
---- ----
Current assets...................... $21,752,158 $23,481,778
Fixed assets........................ 8,715,812 7,482,574
Net assets.......................... 1,289,050 1,159,568
</TABLE>
<TABLE>
<CAPTION>
(b) Other investments and advances include secured loans to Swift Textiles
Europe Limited of $2.4 million, $3.2 million and $3.7 million in 1995,
1996 and 1997, respectively. The loans outstanding at June 30, 1997 bear
interest at 8% and are payable in installments through 2007.
6. PROPERTY, PLANT AND EQUIPMENT, NET
1996 1997
---- ----
<S> <C> <C>
Land............................................................... $1,084,818 $868,519
Buildings and leasehold improvements............................... 125,677,367 123,851,835
Less: Accumulated depreciation..................................... (52,847,179) (56,504,736)
------------ ------------
73,915,006 68,215,618
---------- ----------
Machinery and equipment............................................ 387,296,973 372,649,745
Less: Accumulated depreciation..................................... (188,151,182) (196,840,051)
------------- -------------
199,145,791 175,809,694
----------- -----------
273,060,797 244,025,312
=========== ===========
</TABLE>
Depreciation and amortization of property, plant and equipment amounts to
$30,362,520, $32,412,514 and $33,482,826 in 1995, 1996 and 1997, respectively.
15
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
7. INTANGIBLE ASSETS, NET
1996 1997
---- ----
<S> <C> <C>
Goodwill....................................................... $83,221,796 $82,492,240
Other.......................................................... 407,870 347,964
------- -------
83,629,666 82,840,204
Less: Accumulated amortization................................. (18,846,302) (20,626,985)
------------ ------------
64,783,364 62,213,219
========== ==========
Total intangible asset amortization charged to income amounts to $1,779,621, $1,990,318 and $1,988,278 in 1995, 1996 and
1997, respectively.
8. OTHER ASSETS
1996 1997
---- ----
Deferred refinancing and other costs.................................... $7,224,213 $6,777,166
Pension asset........................................................... 2,368,273 1,911,572
Note receivable(a)...................................................... 7,754,386 --
--------- ----------------
17,346,872 8,688,738
========== =========
</TABLE>
<TABLE>
<CAPTION>
(a) The $10.0 million note received on the sale of Wayn-Tex Inc., a former
subsidiary of the Corporation, and due in August 1999, was prepaid
subsequent to year-end and accordingly has been reclassified in other
current receivables at June 30, 1997. The Business was allocated a
portion of the note based on the allocation method explained in the basis
of presentation. The interest rate on the note was 11.75%.
9. LONG-TERM DEBT
The Business' long-term debt is as follows:
1996 1997
---- ----
<S> <C> <C>
Secured
Term notes (3.7 billion lira) due June 1998 at 8.65%.......................... $3,118,903 $2,458,391
Other......................................................................... 446,976 --
Unsecured
Business' share in general corporate long-term debt (a)....................... 245,247,741 197,049,432
----------- -----------
248,813,620 199,507,823
Long-term debt due within one year............................................ (916,297) (1,535,908)
--------- -----------
247,897,323 197,971,915
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
(a) As of June 30, 1997 and 1996, the general corporate long-term debt is as
follows:
1996 1997
---- ----
<S> <C> <C>
Unsecured and Guaranteed Senior Notes, Due
November 2003(i)............................................................. $150,000,000 $150,000,000
Unsecured and Guaranteed Senior Notes, Due April 2006 (ii)..................... 125,000,000 125,000,000
Unsecured Revolving Credit Facility (ii)....................................... 57,000,000 --
Other.......................................................................... 685,997 --
------------- -------------------
332,685,997 275,000,000
Long-term debt due within one year............................................. (55,866) --
--------------- -------------------
332,630,131 275,000,000
================ ====================
</TABLE>
16
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
9. LONG-TERM DEBT (CONT'D)
(i) These notes were issued by Dominion Textile (USA) Inc. and are
unconditionally guaranteed by the Corporation.
(ii) In 1996, the Corporation completed a refinancing plan which included
the issue by Dominion Textile (USA) Inc. of $125 million of Guaranteed
Senior Notes and the concurrent arrangement of the Revolving Credit
Facility. Proceeds of the senior notes and from certain simultaneous
borrowings under the Revolving Credit Facility were used to prepay secured
loans outstanding (including prepayment premiums and accrued interest).
The Revolving Credit Facility of $100 million will mature on April 1, 2001
and bears interest at a floating rate equal to, at the borrower's option (i)
the higher of the prime rate or Federal Funds Rate plus 0.5%; or (ii) LIBOR
plus a margin which is subject to change within a range of 0.5% and 2.0%
depending on the consolidated debt to cash flow ratio of the Corporation.
Interest payment dates vary in accordance with the maturity period selected
for each borrowing made under the facility. The facility also provides for
availability of letters of credit.
The credit facilities governing the long-term indebtedness of the
Corporation contain covenants which include, among others, covenants
restricting certain investments, capital expenditures, other indebtedness,
disposition of assets, mergers and acquisitions, liens and encumbrances, and
also set out certain financial covenants. These financial covenants include,
among others, requirements for the Corporation to maintain various
consolidated financial ratios and net worth levels in excess of predefined
levels.
In addition, the change of control, discussed in the basis of presentation,
will cause Dominion Textile (USA) Inc. to offer, within 30 days after the
change of control, to repurchase all outstanding senior notes at a
predefined price.
As of June 30, 1997, letters of credit aggregating $4.3 million were issued,
representing contingent liabilities of the Corporation under the Revolving
Credit Facility and $95.7 million was unutilized and available.
(b) The payments required on the long-term debt are as follows:
General
corporate
long-term Business'
debt share
1998 $ -- $1,535,908
1999 -- 922,483
2000 -- --
2001 -- --
2002 -- --
2003 and subsequent years 275,000,000 197,049,432
----------- -----------
275,000,000 199,507,823
============ ===========
(c) Interest expense related to long-term debt totaled $24.3 million, $19.4
million, and $19.5 million in 1995, 1996 and 1997, respectively.
17
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
9. LONG-TERM DEBT (CONT'D)
(d) The following table presents the interest rates as of June 30, 1997:
Canadian prime rate................ 4.75%
US prime rate...................... 8.50%
Federal Funds rate................. 5.63%
LIBOR-3 month-period............... 5.81%
(e) As of June 30, 1997, the Business maintained other available bank lines
of credit for general corporate purposes, at the bank's prime rate of
interest or equivalents, to meet normal operating requirements.
10. FINANCIAL INSTRUMENTS
RISK MANAGEMENT
The Business operates internationally and is exposed to market risks from
changes in foreign exchange rates and in the cost of cotton, its principal raw
material.
FOREIGN CURRENCY HEDGING
During the period, the Business used forward contracts to hedge certain
operating and capital cash flows. As of June 30, 1997, $20.9 million notional
amount of forward exchange contracts were outstanding.
COTTON HEDGING
For hedging purposes, the Business enters principally into futures contracts and
option positions to reduce the impact of changes in the cost of cotton used in
its manufacturing process. The option positions primarily include long-calls
that qualify for hedge accounting. As of June 30, 1997, the Business had
aggregate open futures contracts and long-call options to purchase approximately
24 million pounds of cotton.
INTEREST RATES
Substantially all long-term debt is issued at fixed interest rates.
FAIR VALUES
Fair values approximate amounts at which financial instruments could be
exchanged between willing parties, based on current markets for instruments of
the same risk, principal and remaining maturities. Fair values are based on
estimates using present value and other valuation techniques which are
significantly affected by the assumptions used concerning the amount and timing
of future cash flows and discount rates which reflect varying degrees of risk.
Therefore, due to the use of subjective judgment and uncertainties, the
aggregate fair value amount should not be interpreted as being realizable in an
immediate settlement of the instruments.
As of June 30, 1997 and 1996 the carrying value of all financial instruments
approximates fair value with the following exceptions:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C> <C> <C>
Carrying Fair Carrying Fair
Value Value Value Value
Long-term debt.................................... $248,813,620 $243,474,606 $199,507,823 $205,659,328
Derivatives, asset (liability) position
Futures and forward exchange contracts.......... -- (1,155,800) -- (606,055)
Options......................................... 4,027,400 2,114,500 637,900 402,200
</TABLE>
18
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
10. FINANCIAL INSTRUMENTS (CONT'D)
CREDIT RISK
The Business is exposed to credit-related losses in the event of non-performance
by counterparties to financial instruments, but it does not expect any
counterparties to fail to meet their obligations, given their high credit
ratings. Where appropriate, the Business obtains collateral in the form of
rights to securities or arranges master netting agreements. The credit exposure
of the financial instruments is represented by the fair value of contracts with
a positive fair value at the reporting date, reduced by the effects of master
netting agreements.
The Business is exposed to credit risk from customers. However, the Business has
a large number of diverse customers which minimizes the concentration of this
risk. Sales to two customers represented 35% in 1997 (1996 - 38% and 1995 - 33%)
of the Business' combined sales.
GUARANTEES
As of June 30, 1997, the Corporation had outstanding guarantees of $4.3 million
(1996 - nil) representing financial guarantees issued in the normal course of
business.
11. CUMULATIVE TRANSLATION ADJUSTMENT
The changes in the cumulative translation adjustment are as follows:
1996 1997
---- ----
Balance at beginning..................... $(7,130,922) $(6,640,683)
Changes during the year.................. 490,239 (12,412,048)
------- ------------
Balance at end........................... (6,640,683) (19,052,731)
=========== ============
12. EMPLOYEE BENEFITS
DEFINED BENEFIT PENSION PLANS
The Corporation maintains defined benefit pension plans that provide for
pensions for both hourly and salaried employees based on length of service and
rate of pay. The Corporation funding policy is to make contributions to its
pension funds based on various actuarial cost methods as permitted by pension
regulatory bodies. The companies are responsible to adequately fund the plans.
Plan assets at June 30, 1996 and 1997 consisted primarily of listed stocks,
mutual funds and bonds. Contributions reflect actuarial assumptions concerning
future investment returns, salary projections and future service benefits.
The cost of pensions is accrued and charged to income over employees' working
lives. Pension expense was calculated using a value of assets adjusted to market
over periods of up to five years. The weighted average discount rate was 7.75%
in 1995, 1996 and 1997, the rate of increase in future compensation levels used
in determining the actuarial present value of the accrued pension benefits was
5.0% in 1997 (1996 and 1995 - 5.0% to 6.5%), and the expected long-term rate of
return on plan assets was 8.0% in 1996 and 1997.
19
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
12. EMPLOYEE BENEFITS (CONT'D)
<TABLE>
<CAPTION>
The funded status of the Corporation's defined benefit pension plans as of the
most recent valuation dates for June 30, 1996 and 1997, is as follows:
(IN THOUSANDS OF DOLLARS)
1996 1997
---- ----
Assets Accumulated Assets Accumulated
exceed benefits exceed benefits
accumulated exceed accumulated exceed
benefits assets benefits asset
------------ ----------- ---------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation.............. $(38,794) $(29,374) $(22,174) $(30,166)
--------- --------- --------- ---------
Accumulated benefit obligation............................. (39,116) (29,905) (22,331) (30,846)
-------- -------- -------- --------
Projected benefit obligation
for service rendered to date.............................. (39,998) (31,659) (23,277) (33,828)
Plan assets at fair value.................................. 53,957 23,115 32,742 26,339
------ ------ ------ ------
Projected benefit obligation less than (in excess of)
plan assets............................................... 13,959 (8,544) 9,465 (7,489)
Unrecognized net (gain) loss............................... (13,200) 1,854 (9,210) 353
Additional minimum liability recognized.................... (105) (2,263) -- (1,912)
Prior service cost not yet recognized in net periodic
pension cost.............................................. 413 3,088 370 2,753
Unrecognized net (asset) liability at transition........... (596) 425 (263) 1,719
----- --- ----- -----
Pension asset (liability).................................. 471 (5,440) 362 (4,576)
=== ======= === =======
The Corporation's net pension cost for 1995, 1996 and 1997 includes the
following:
(IN THOUSANDS OF DOLLARS) 1995 1996 1997
---- ---- ----
Service cost - benefits earned during the year....................... $2,026 $1,665 $1,726
Interest cost on projected benefit obligation........................ 8,034 2,891 3,183
Actual return on plan assets......................................... (14,907) (7,235) (5,254)
Settlement loss...................................................... -- -- 466
Net amortization and deferral........................................ 7,560 5,492 2,752
----- ----- -----
2,713 2,813 2,873
===== ===== =====
</TABLE>
TERMINATION OF PENSION PLANS
In 1996, Dominion Textile Inc. terminated THE STAFF RETIREMENT INCOME PLAN FOR
EMPLOYEES AT LOCATIONS IN A PROVINCE OTHER THAN QUEBEC (the "Ontario Plan") and
proposed to its members to share the surplus equally between the members and the
Corporation. The proposal was approved in 1997 by the members and by the Pension
Commission of Ontario. A gain of $2.8 million representing the Business' share
of the Ontario Plan surplus has been recorded and included under the caption
"Other expense, net", in the combined statements of income.
In 1995, Dominion Textile Inc. terminated THE STAFF RETIREMENT INCOME PLAN FOR
EMPLOYEES AT LOCATIONS IN THE PROVINCE OF QUEBEC (the "Quebec Plan") and
proposed to its members to share the surplus equally between the members and the
Corporation. The proposal was approved by the members in 1996 and Dominion
Textile Inc. received $17.5 million, representing its share of the Quebec Plan
surplus. A gain of $2.6 million representing the Business' share of proceeds
received in excess of the net pension asset was recorded.
20
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
12. EMPLOYEE BENEFITS (CONT'D)
CAPITAL ACCUMULATION PLANS
The Business maintains capital accumulation plans covering approximately 1,800
employees. The Business' expense with respect to those plans amounted to $1.5
million in 1995, $3.0 million in 1996 and $2.7 million in 1997.
OTHER BENEFITS
In addition to its pension plans, the Corporation provides certain health care
and life insurance benefits for a large number of its retired employees in North
America who have met the eligibility conditions. The cost of the other benefits
is charged to income as expenditures are incurred.
The following table sets forth the status of the Corporation's plan based on the
latest actuarial valuations:
1996 1997
---- ----
(IN THOUSANDS OF DOLLARS)
Retirees........................................... $9,194 $7,626
Fully eligible active plan participants............ 2,125 1,772
Other active plan participants..................... 4,439 4,490
----- -----
15,758 13,888
Unrecognized gain.................................. 518 1,112
--- -----
Postretirement obligation.......................... 16,276 15,000
====== ======
The Corporation's net periodic postretirement benefit cost for 1995, 1996 and
1997 consisted of the following components:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Service cost - benefits earned during the period................................. $537 $407 $414
Interest cost on accumulated postretirement benefit obligation................... 1,526 1,146 983
Net gain (including $0.7 million in 1997 for settlements)........................ (306) (112) (724)
----- ----- -----
1,757 1,441 673
===== ===== ===
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 14%, 14% and 10%, gradually declining to
5% and 6% by 2003 in 1995, 1996 and 1997, respectively, after which it remains
constant. A one-percentage-point increase in the assumed health care cost trend
rate would increase the accumulated postretirement benefit obligation by
approximately 11%, 9%, and 8% and would increase the periodic service and
interest costs by approximately 17%, 16% and 9% during fiscal 1995, 1996 and
1997, respectively. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% during fiscal 1997, 1996
and 1995.
SUMMARY
The Business' share in the Corporation's employee benefit plans, based on its
proportionate number of employees, is as follows:
1995 1996 1997
---- ---- ----
(IN THOUSANDS OF DOLLARS)
Net benefit costs
Pension plans.................................. $2,119 $2,197 $2,244
Postretirement benefit other than pensions..... 1,372 1,126 526
21
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
12. EMPLOYEE BENEFITS (CONT'D)
1996 1997
---- ----
(IN THOUSANDS OF DOLLARS)
Unfunded obligation, net
Pension plans............................................... 3,959 3,291
Postretirement benefit other than pension................... 12,711 11,714
13. COMMITMENTS AND CONTINGENT LIABILITIES
LEASE COMMITMENTS
As of June 30, 1997, the future minimum payments for building and equipment
leases with initial non-cancelable lease terms in excess of one year are as
follows:
1998 $3,166,897
1999 2,768,942
2000 1,814,464
2001 1,334,072
2002 1,077,019
2003 and subsequent years 115,000
-------
10,276,394
===========
OTHER COMMITMENTS
As of June 30, 1997, the Business had outstanding purchase contracts for cotton
and other fibers of approximately $80.0 million and commitments for capital
expenditures of approximately $1.7 million.
ENVIRONMENTAL MATTERS
The Business, primarily as a result of its manufacturing operations, is subject
to numerous environmental laws and regulations and exposed to liabilities and
compliance costs arising from its past and current generation, management and
disposition of hazardous substances and wastes. Based on information presently
available, management believes that the existing accruals are sufficient to
satisfy probable and reasonably estimable environmental liabilities related to
known environmental matters.
LITIGATION
In the normal course of operations, the Business becomes involved in various
claims and legal proceedings. While the final outcome with respect to claims and
legal proceedings pending at June 30, 1997 cannot be predicted with certainty,
it is the opinion of management that their resolution will not have a material
adverse effect on the Business' combined financial position or results of
operations.
22
<PAGE>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
14. SEGMENTED INFORMATION
The Apparel Fabrics Business produces denim, polycotton fabrics for careerwear
and industrial applications and markets these products on a worldwide basis.
<TABLE>
<CAPTION>
United
Canada States International Eliminations Total
------- -------- ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
1995
Sales to customers (a).......................... $72,498 $393,603 $167,590 $ $633,691
Transfers between geographic areas (b).......... 7,644 10,559 -- (18,203) --
------- ------ -------- -------- ---------
80,142 404,162 167,590 (18,203) 633,691
Operating income................................ 422 46,723 2,381 49,526
Identifiable assets............................. 62,828 394,161 169,284 626,273
1996
Sales to customers (a).......................... 88,385 410,640 151,838 650,863
Transfers between geographic areas (b).......... 7,968 13,055 -- (21,023) --
------- ------ --------- -------- ---------
96,353 423,695 151,838 (21,023) 650,863
Operating income (loss)......................... 3,157 20,200 (11,054) 12,303
Identifiable assets............................. 71,577 407,514 153,861 632,952
------ ------- ------- -------
1997
Sales to customers(a)........................... 85,758 373,015 151,800 610,573
Transfers between geographic areas(b)........... 6,711 17,093 -- (23,804) --
------- ------ --------- -------- --------
92,469 390,108 151,800 (23,804) 610,573
Operating income (loss)......................... 968 866 (16,047) (14,213)
Identifiable assets............................. 53,009 391,869 146,235 591,113
------ ------- ------- -------
</TABLE>
(a) Canadian sales include export sales of $43.3 million (1996 - $42.5
million, 1995 - $31.9 million) made primarily to the United States.
(b) Transfers between geographic areas are accounted for at prices comparable
to open market prices for similar products and services.
23
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years Ended June 30, 1995, 1996 and 1997
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
1996
Sales........................... 152,505,770 162,755,768 148,039,142 187,561,869
Gross profit.................... 14,850,987 18,690,952 15,711,525 20,812,463
Operating income................ 628,008 3,505,390 2,494,310 5,675,604
Net income (loss)............... (175,110) 1,974,470 (3,034,944) 3,780,842
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- --------- ------- -------
<S> <C> <C> <C> <C>
1997
Sales............................ 152,521,204 152,353,791 139,890,867 165,807,148
Gross profit..................... 15,109,688 16,099,677 7,870,519 1,007,414
Operating income (loss).......... 1,770,457 2,364,174 (5,600,638) (12,747,240)
Net income (loss)................ (369,887) 1,378,119 (7,208,793) (7,905,756)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
UNAUDITED CONDENSED COMBINED STATEMENTS OF INCOME AND DEFICIT
For the Three-Month Periods Ended September 30, 1996 and 1997
1996 1997
---- ----
<S> <C> <C>
Sales.................................................................. $152,521,204 $152,169,004
Cost of goods sold..................................................... 137,411,515 132,372,886
----------- -----------
Gross profit........................................................... 15,109,689 19,796,118
---------- ----------
Operating expenses
Selling expenses..................................................... 4,979,960 4,325,021
Administrative expenses.............................................. 7,861,278 7,250,418
Goodwill amortization................................................ 497,993 497,036
------- -------
13,339,231 12,072,475
---------- ----------
Operating income....................................................... 1,770,458 7,723,643
Interest expense, net.................................................. (4,782,268) (4,423,789)
Share in net income of associated companies............................ 1,979,753 1,239,298
Other income (expense), net............................................ (472,990) 56,845
--------- ------
Income (loss) before recovery of income taxes.......................... (1,505,047) 4,595,997
Recovery of income taxes............................................... 1,135,160 177,624
--------- -------
Net income (loss)...................................................... (369,887) 4,773,621
Deficit at beginning................................................... (115,926,962) (130,033,279)
------------- -------------
Deficit at end......................................................... (116,296,849) (125,259,658)
============= =============
</TABLE>
See Notes to Unaudited Condensed Combined Financial Statements.
25
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
UNAUDITED CONDENSED COMBINED BALANCE SHEETS
June 30, September 30,
1997 1997
------ ------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents..................................................... $36,797,072 $47,139,315
Receivables
Trade, net of allowance for doubtful accounts of $2,295,033
(June 30, 1997 -- $2,214,213).............................................. 118,459,831 115,945,136
Other......................................................................... 17,987,082 11,567,953
Inventories................................................................... 84,972,495 81,406,541
Other current assets.......................................................... 11,392,840 10,907,187
---------- ----------
269,609,320 266,966,132
Investments and advances......................................................... 6,576,251 7,373,101
Property, plant and equipment, net............................................... 244,025,312 238,987,286
Intangible assets, net........................................................... 62,213,219 61,692,604
Other assets..................................................................... 8,688,738 8,557,227
--------- ---------
Total assets..................................................................... 591,112,840 583,576,350
=========== ===========
Liabilities and stockholders' equity
Current liabilities
Short-term borrowings......................................................... -- 562,809
Accounts payable.............................................................. 32,999,742 29,083,789
Payroll, related taxes and other employee related liabilities................. 15,951,978 13,218,469
Other accrued liabilities..................................................... 37,578,824 34,981,441
Interest payable.............................................................. 5,656,732 10,753,624
Income taxes payable.......................................................... 4,320,246 10,352,417
Long-term debt due within one year............................................ 1,535,908 1,573,443
--------- ---------
98,043,430 100,525,992
Long-term debt................................................................... 197,971,915 192,551,264
Deferred income taxes............................................................ 30,291,948 29,323,655
Other non-current liabilities.................................................... 43,293,000 43,102,919
---------- ----------
Total liabilities................................................................ 369,600,293 365,503,830
----------- -----------
Stockholders' equity
Additional paid-in capital.................................................... 370,598,557 362,228,316
Deficit....................................................................... (130,033,279) (125,259,658)
Cumulative translation adjustment............................................. (19,052,731) (18,896,138)
------------ ------------
Total stockholders' equity....................................................... 221,512,547 218,072,520
----------- -----------
Total liabilities and stockholders' equity....................................... 591,112,840 583,576,350
=========== ===========
</TABLE>
See Notes to Unaudited Condensed Combined Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS
For the Three-Month Periods Ended September 30, 1996 and 1997
1996 1997
---- ----
<S> <C> <C>
Operating activities
Net income (loss).............................................................. $(369,887) $4,773,621
Adjustments to reconcile net income (loss) to net cash provided by
operating activities
Depreciation and amortization................................................. 8,955,836 8,330,355
Deferred income taxes......................................................... (3,716,425) (968,293)
Gain on disposal of property, plant and equipment............................. (128,193) (290,388)
Share in net income of associated companies................................... (1,979,753) (1,239,298)
Changes in assets and liabilities
Receivables, net.............................................................. 11,707,388 9,115,274
Inventories................................................................... (7,627,079) 3,286,017
Other current assets.......................................................... 4,575,834 503,819
Other assets.................................................................. 366,695 211,138
Current liabilities........................................................... (2,135,549) 1,700,770
Other liabilities............................................................. 703,461 (129,312)
Other, net..................................................................... 4,629,256 1,621,685
--------- ---------
Net cash provided by operating activities...................................... 14,981,584 26,915,388
---------- ----------
Investing activities
Capital expenditures........................................................... (4,313,732) (3,481,214)
Proceeds from sale of property, plant and equipment............................ 754,100 399,344
Investment in associated companies and other................................... (365,100) 1,238,843
Other, net..................................................................... (478,814) (1,225,263)
--------- -----------
Net cash used in investing activities.......................................... (4,403,546) (3,068,290)
----------- -----------
Financing activities
Repayment of long-term debt.................................................... (45,481,376) (5,383,116)
Issue of short-term borrowings................................................. 1,162,401 562,809
Issue of long-term debt........................................................ 773,143 --
Additional paid-in capital..................................................... 46,391,341 (8,370,241)
---------- -----------
Net cash (used in) provided by financing activities............................ 2,845,509 (13,190,548)
--------- ------------
Effect of changes in exchange rates on cash and cash equivalents............... (160,824) (314,307)
--------- ---------
Net increase in cash and cash equivalents...................................... 13,262,723 10,342,243
Cash and cash equivalents, beginning of period................................. 17,696,400 36,797,072
---------- ----------
Cash and cash equivalents, end of period....................................... 30,959,123 47,139,315
========== ==========
Supplemental disclosure of cash flow information Net cash paid during the
period for:
Interest...................................................................... (882,533) (389,816)
--------- ---------
Income taxes.................................................................. (1,538,397) (43,988)
----------- --------
</TABLE>
See Notes to Unaudited Condensed Combined Financial Statements.
27
<PAGE>
APPAREL FABRICS BUSINESS
BASIS OF PRESENTATION
For the Three-Month Periods Ended September 30, 1996 and 1997
GENERAL
The consolidated financial statements of Dominion Textile Inc. (the
"Corporation"), a Canadian company, have been issued to the stockholders.
All dollar amounts in the combined financial statements are stated in US
dollars.
The combined financial statements of the Apparel Fabrics Business of Dominion
Textile Inc. (the "Business") include the operations of Swift Denim, Inc.,
Klopman International S.p.A. and Swift Textiles Europe Limited which were
operated as subsidiaries or associated companies of Dominion Textile Inc. On
December 19, 1997, pursuant to a takeover offer, DT Acquisition Inc., an
affiliate of Polymer Group, Inc. ("PGI") acquired all shares tendered which
approximated 98% of the outstanding common stock of the Corporation. In
connection with the change of control, PGI entered into a preliminary agreement
with Galey & Lord, Inc., to sell it certain operations. In contemplation of the
change in control and the subsequent sale of certain operations, the operations
and the net assets of the Corporation have been essentially divided into two
groups: the Apparel Fabrics Business and the Nonwovens Business.
The combined financial statements have been prepared using the Corporation's
historical basis in the assets and liabilities and historical results of
operations related to the Business. Changes in additional paid-in capital
represent the Corporation's contribution of its net operating investment plus
net cash transfers to or from the Corporation. The combined financial statements
reflect the results of operations, financial position and cash flows of the
Business as if it had operated as a separate entity for all periods presented
and may not be indicative of actual results of operations and financial position
of the Business under different ownership.
Additionally, the combined financial statements include allocations of certain
corporate headquarters' assets, liabilities (excluding deferred income taxes),
and net expenses. All significant intergroup transactions and balances have been
eliminated.
ALLOCATIONS
The liabilities of the Business include outstanding direct third-party
indebtedness and the amount of debt based on the ratio of the Business' average
net operating investment to the aggregate net operating investment of the two
groups. Interest expense shown in the combined financial statements reflects the
interest expense associated with the aggregate borrowings for each period
presented principally based on a blend of the Corporation's long-term weighted
average interest rates for the applicable period.
General corporate overhead related to the Corporation's headquarters has been
allocated to the Business based on the ratio of the Business' sales to the
aggregate sales of the Corporation. The costs of the services charged to the
Business are not necessarily indicative of the costs that would have been
incurred if the Business had performed these functions as a stand-alone entity.
Additionally, income taxes on allocated general corporate overhead are
calculated using the Corporation's statutory tax rate.
Management believes that the basis of allocation is reasonable.
28
<PAGE>
<TABLE>
<CAPTION>
APPAREL FABRICS BUSINESS
BASIS OF PRESENTATION (CONTINUED)
For the Three-Month Periods Ended September 30, 1996 and 1997
The following table illustrates the results of applying the allocation method
described above on various financial statement items:
For the three-month periods ended September 30
-----------------------------------------------
1996 1997
---- -----
<S> <C> <C>
Net impact on gross profit..................................... $846,089 $(1,121,850)
General corporate overhead, net................................ (2,644,869) (2,821,733)
Recovery of income taxes....................................... 697,927 1,530,110
------- ---------
(1,100,853) (2,413,473)
=========== ===========
<CAPTION>
June 30, September 30,
1997 1997
----- -------
<S> <C> <C>
As of:
Net assets excluding long-term debt......................... 14,539,529 6,588,661
Long-term debt.............................................. 197,049,432 192,407,033
Cumulative translation adjustment........................... (4,252,709) (2,853,072
</TABLE>
29
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements of the Galey &
Lord give effect to the Acquisition and the financing thereof (including the
Note Issuance) as if they had occurred: (i) at September 27, 1997, in the case
of the Unaudited Pro Forma Combined Balance Sheet and (ii) at September 29,
1996, the first day of the Company's 1997 fiscal year, in the case of the
Unaudited Pro Forma Combined Statement of Operations for the year ended
September 27, 1997.
The Acquisition was accounted for using the purchase method of accounting. The
total cost of the Acquisition has been preliminarily allocated to the assets
acquired and liabilities assumed based upon their respective fair values as
determined through preliminary appraisals and internal estimates that the
Company believes are reasonable. The actual allocation of purchase cost,
however, and the resulting effect on income may differ from the pro forma
amounts included herein.
The following unaudited pro forma combined financial information is presented
for illustrative purposes only, does not purport to be indicative of the
Company's financial position or results of operations as of the date hereof, or
as of or for any other future date, and is not necessarily indicative of what
the Company's actual financial position or results of operations would have been
had the foregoing transactions occurred on September 27, 1997 or September 29,
1996, nor does it give effect to (i) any transactions other than the foregoing
transactions and those described in the accompanying notes to unaudited pro
forma combined financial information of the Company or (ii) Galey & Lord's or
the Acquired Business' results of operations since September 27, 1997 and
September 30, 1997, respectively.
The following unaudited pro forma combined financial should be read in
conjunction with Galey & Lord's historical financial statements, the notes
thereto and the other information contained in the 1997 Annual Report on Form
10-K and the Acquired Business' historical financial statements, the notes
thereto and the other information contained elsewhere herein..
The Unaudited Pro Forma Combined Balance Sheet at September 27, 1997 is based
upon Galey & Lord's financial position at September 27, 1997 and upon the
Acquired Business' financial position at September 30, 1997. The Unaudited Pro
Forma Combined Statement of Operations for the year ended September 27, 1997 is
based upon Galey & Lord's results of operations for its fiscal year ended
September 27, 1997 and upon the Acquired Business' results of operations for the
twelve months ended September 30, 1997. Such financial information has been
derived from Galey & Lord's audited financial statements for its fiscal year
ended September 27, 1997 and from the Acquired Business' audited financial
statements for its fiscal year ended June 30, 1997 (eliminating the results from
the unaudited three months ended September 30, 1996) and reflecting results from
its unaudited financial statements for the three months ended September 30,
1997.
30
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 27, 1997
(IN THOUSANDS)
Historical Pro Forma
----------------------------- -------------------------------
Acquired
Galey & Lord Business
(September 27, (September 30,
1997) 1997) Adjustments Combined
----- ----- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash....................................... $2,277 $47,139 $(12,057) (1) $37,359
-- (2)
Accounts receivable........................ 80,839 127,513 6,500 (3a) 214,852
Inventories................................ 92,517 81,407 (3,030) (3b) 170,894
Income taxes receivable.................... 1,412 -- 318 1,730
Prepaid expenses and other
current assets............................ 3,894 10,907 -- 14,801
----- ------ -- ------
Total current assets.................... 180,939 266,966 (8,269) 439,636
Property, plant and equipment, net........... 129,445 238,987 26,013 (3c) 394,445
Goodwill, net................................ 37,987 61,693 136,955 (3) 174,942
(61,693) (3d)
Other assets, net............................ 820 15,930 15,600 (2) 35,600
12,627 (3e)
(8,557) (3f)
(820) (4)
Total assets............................ $349,191 $583,576 $111,856 $1,044,623
======== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings...................... $-- $563 $-- $563
Accounts payable........................... 23,488 29,084 -- 52,572
Accrued expenses........................... 13,032 58,953 28,016 (3g) 100,001
Income taxes payable....................... -- 10,353 -- 10,353
Current portion of long-term debt.......... 13,281 1,573 (9,350) (6) 5,504
Deferred income taxes...................... 633 -- -- 633
--- -- -- ---
Total current liabilities............... 50,434 100,526 18,666 169,626
Long-term debt............................. 176,755 192,551 (192,407) (1) 666,373
489,474 (6)
Deferred income taxes...................... 17,685 29,324 10,197 (3h) 57,206
Other non-current liabilities.............. -- 43,103 4,500 (3i) 47,603
--------- ------ ----- ------
Total liabilities....................... 244,874 365,504 330,430 940,808
Stockholders' equity:
Common stock............................... 121 -- -- 121
Additional paid-in capital................. 35,877 362,228 (362,228) (5) 35,877
Retained earnings.......................... 70,566 (125,260) 125,260 (5) 70,064
(502) (4)
Treasury stock............................. (2,247) -- -- (2,247)
Currency translation adjustment............ -- (18,896) 18,896 (5) --
--------- -------- ------ --
Total stockholders' equity.............. 104,317 218,072 (218,574) 103,815
------- ------- --------- -------
Total liabilities and stockholders'
equity................................. $349,191 $583,576 $111,856 $1,044,623
======== ======== ======== ==========
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) Reflects the adjustment to eliminate certain assets of the Acquired
Business not purchased and certain liabilities not assumed.
<S> <C> <C>
Net assets of Acquired Business.................................................... $218,072
Cash not purchased................................................................. (12,057)
Long-term debt not assumed......................................................... 192,407
-------
Net book value of assets acquired.................................................. $398,422
========
(2) Reflects the adjustment to record the following:
Initial borrowings under the Senior Credit Facility................................. $387,224
Gross proceeds from the issuance and sale of the Notes offered hereby .. 275,000
Cash paid for the Acquired Business................................................. (464,524)
Repayment of Galey & Lord's prior senior credit facility............................ (182,100)
Financing costs..................................................................... (15,600)
--------
Net cash adjustment................................................................. $ --
============
(3) The Purchase Price has been preliminarily allocated as follows:
Purchase Price............................................................... $464,524
Less net book value of assets acquired....................................... 398,422
-------
Excess of cost over net book value of assets acquired........................ $66,102
Adjustments to record assets and liabilities acquired at estimated fair
value:
Accounts receivable....................................................... 6,500 (a)
Inventory................................................................. (3,030)(b)
Property, plant and equipment............................................. 26,013 (c)
Intangibles............................................................... (61,693)(d)
Investments and advances.................................................. 12,627 (e)
Deferred charges.......................................................... (8,557)(f)
Accrued liabilities....................................................... (28,016) (g)
Deferred taxes............................................................ (10,197) (h)
Other non-current liabilities............................................. (4,500) (i)
70,853
Excess of cost over fair value of net assets acquired (goodwill) . $136,955
========
</TABLE>
(a) Represents a receivable from the seller of the Acquired Business for
certain shared tax benefits.
(b) Reflects the write-down of raw materials inventory to fair value.
(c) Reflects a preliminary adjustment to record the Acquired Business'
fixed assets at fair value. The preliminary adjustment is based
upon preliminary appraisals and internal estimates and is allocated
as follows:
Land............................... $10,000
Buildings.......................... 3,000
Machinery and Equipment............ 13,013
------
$26,013
========
(d) Reflects the write-off of the existing goodwill of the Acquired
Business.
(e) Reflects the adjustment to record joint venture investment at fair
value.
(f) Reflects the adjustment to write off the unamortized balance of debt
issuance costs of the Acquired Business.
32
<PAGE>
(g) Reflects the assumption of the following liabilities.
Severance and other employee benefits................ $13,300
Acquisition related tax liabilities.................. 3,300
Liability for unfavorable cotton commitments......... 7,647
Professional fees.................................... 700
Other................................................ 3,069
-----
$28,016
=======
(h) To record the deferred tax liability related to the temporary
difference between the financial statement carrying amount as
adjusted and the tax basis of the assets of the Acquired Business
at an assumed income tax rate of 38.8%.
(i) Reflects the adjustment to record the pension liability of the Acquired
Business at fair value.
(4) Reflects the adjustment to write-off the unamortized balance of debt
issuance costs related to Galey & Lord's prior senior credit facility, net
of tax.
(5) Reflects the adjustment to eliminate the Acquired Business' net equity.
(6) Reflects the adjustment to long-term debt for total debt outstanding
immediately after the Acquisition.
Initial borrowings under the Senior Credit Facilities........... $387,224
Gross proceeds from the issuance and sale of the Notes
offered hereby................................................. 275,000
Less repayment of Galey & Lord's prior senior credit facility... (182,100)
---------
Total adjustment to debt........................................ 480,124
Adjustment to current portion of long-term debt................. 9,350
Adjustment to long-term debt.................................... $(489,474)
----------
--
==========
33
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 27, 1997
(IN THOUSANDS)
Historical Pro Forma
------------------------------------------ ------------------------------
Galey & Lord Acquired Business
(Year Ended (Year Ended
September 27, 1997) September 30, 1997) Adjustments Combined
------------------- --------------------- ------------- ----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales................................. $493,362 $610,221 $ -- $1,103,583
Cost of sales............................. 439,207 547,631 (5,195) (1) 981,643
Restructuring............................. -- 17,816 -- 17,816
--------- ------ --------- ------
Gross profits........................... 54,155 44,774 5,195 104,124
Selling, general and administrative
expenses................................ 18,123 51,046 (12,661) (2) 56,508
Amortization of goodwill.................. 1,679 1,987 1,437 (1) 5,103
--------- ----- --------- -----
Operating income (loss)................. 34,353 (8,259) 16,419 42,513
Other (income) expense:
Interest expense........................ 12,326 17,055 30,457 (3) 59,838
Other expense (income), net............. -- (456) -- (456)
Share in net (income) of associated
companies.............................. -- (6,669) 631 (4) (6,038)
--------- ------- --------- -------
Income (loss) before income taxes......... 22,027 (18,189) (14,669) (10,831)
Income tax expense (benefit).............. 8,350 (9,227) (5,447) (5) (6,324)
-------- ------- ------- -------
Net income (loss)......................... $13,677 $(8,962) $(9,222) $(4,507)
======= ======== ======== ========
Net income (loss) per common share:
Average common shares outstanding 11,610 11,610
Net income (loss) per common share - basic $ 1.18 $ (.39)
======= =======
Average common shares outstanding 11,986 11,986
Net income (loss) per common share - diluted $ 1.14 $ (.39)
======= =======
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Reflects incremental depreciation and amortization expense as a result of
the preliminary adjustment to fair value of the Acquired Business'
property, plant and equipment and the excess of cost over fair market
value of the net assets acquired as follows:
Estimated Year Ended
Useful Life September 27, 1997
------------ --------------------
<S> <C> <C>
Depreciation adjustment on Acquired Business' property, plant and
equipment................................................................... 9.5 years $(5,195)
Amortization of excess of cost over fair value of net assets acquired........ 40 years $1,437
</TABLE>
(2) Reflects the elimination of duplicative corporate overhead expenses of
$10,196 and $3,365 for Swift overhead expenses less additional Galey &
Lord overhead expenses of $900.
(3) Reflects an adjustment to record additional interest expense and
amortization of debt issuance costs incurred in connection with the
additional debt. Interest expense is calculated based on an average
interest rate of 9.1%. For each 1/8% change in the assumed effective
interest rate, interest expense would change by $838 for the year ended
September 27, 1997.
(4) To reflect the amortization of the excess of the fair value of the
investment in associated companies over the portion of the historical net
equity attributable to Galey & Lord at the time of the Acquisition. Such
excess is being amortized over 20 years.
(5) Reflects the income tax benefit related to the effects of the pro forma
adjustments based upon an assumed composite income tax rate of 38.8%.
35
<PAGE>
FORWARD-LOOKING STATEMENTS
This Form 8-K contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those statements
include statements regarding the intent, belief or current expectations of the
Company and its management team. Prospective investors are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those projected in the forward-looking statements. Such risks and
uncertainties include, among other things, competitive and economic factors in
the textile, apparel and home furnishings markets, raw material and other costs,
weather-related delays, general economic conditions and other risks and
uncertainties that may be detailed herein.
Exhibits
1 Press Release of Galey & Lord, Inc., dated January 30, 1998.
2 Master Separation Agreement, dated January 29, 1998, among the Company,
Polymer, DTA, Dominion and certain other parties thereto.
3 Senior Credit Facility dated as of January 29, 1998 among the Company,
Galey & Lord Industries, Inc. ("Industries"), G&L Service Company, North
America, Inc. ("Service Company"), Swift Textiles Inc. ("Textiles"), Swift
Denim Services Inc. ("Denim") and First Union National Bank, as agent and
lender, and the other lenders' party thereto.
4 Security Agreement dated as of January 29, 1998, among the Company,
Industries, Service Company, Textiles, Denim and First Union National Bank,
as Collateral Agent.
5 Pledge Agreement dated as of January 29, 1998, among the Company,
Industries, Service Company, Textiles, Denim and First Union National Bank,
as Collateral Agent.
6 Foreign Subsidiary Pledge Agreement dated as of January 29, 1998, among the
Company, certain of its subsidiaries party thereto and First Union National
Bank, as Collateral Agent.
7 First Amendment to Senior Subordinated Credit Agreement dated as of January
29, 1998 among Industries, the Company and First Union Corporation, as
agent and lender.
8 Second Amendment to Senior Subordinated Credit Agreement dated as of
January 29, 1998 among the Company, Industries, Service Company, Textiles,
Denim and First Union Corporation, as agent and lender.
23.1 Consent of Deloitte & Touche - Auditors for Apparel Fabrics Business of
Dominion Textile Inc.
23.2 Consent of KPMG - Auditors for Swift Textiles Europe Limited
99.1 Report of KPMG - Auditors for Swift Textiles Europe Limited
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto 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
February 9, 1998
------------------
Date
37
(GALEY & LORD icon appears here.) P.O. Box 35528
Greensboro, North Carolina 27425-0528
(GNL Contact: Michael R. Harmon
Listed EVP/CFO
NYSE icon appears here.) (336) 665-3037
GALEY & LORD COMPLETES ACQUISITION OF DOMINION TEXTILE
APPAREL FABRICS BUSINESSES
GREENSBORO, NC, JANUARY 30, 1998/PRNewswire - Galey & Lord, Inc. (NYSE: GNL)
announced today that it has completed the acquisition of Dominion Textile's
apparel fabrics businesses from DT Acquisition Inc., an affiliate of Polymer
Group Inc. (NYSE: PGH). The apparel fabrics businesses consist of Swift Denim,
Klopman International, S.p.A. and Swift Europe. Swift Denim is the second
largest supplier of denim in the world, Klopman is one of the largest suppliers
of uniform fabrics in Europe and Swift Europe is a major international supplier
of denim to Europe, North Africa and Asia.
Arthur C. Wiener, Chairman and Chief Executive Officer of Galey & Lord, said,
"This combination of businesses makes Galey & Lord not only bigger, but better.
Swift is recognized as a global leader in the denim industry. Its position as
the number two worldwide producer, coupled with its leadership in value added
products makes the company a premier property.
We believe combining these businesses with Galey & Lord's corduroy and cotton
casual fabric business, as well as the Company's garment making capabilities,
creates one of the most important companies producing textiles for the apparel
and uniform trades. We look forward to the advantages of combining these two
companies."
Galey & Lord is a leading manufacturer of high-quality woven cotton and
cotton-blended apparel fabrics, sold principally to manufacturers of sportswear
and commercial uniforms. The Company also manufactures fabrics used in home
furnishings, including comforters, bedspreads and curtains. In June 1996, the
Company began offering finished garments to its branded apparel customers
through G&L Service Company, North America, Inc.
CONFORMED COPY
MASTER SEPARATION AGREEMENT
dated as of
January 29, 1998
among
POLYMER GROUP, INC.,
GALEY & LORD, INC.
and
DT ACQUISITION INC.,
DOMINION TEXTILE INC.
and the other parties named herein
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<PAGE>
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1
Definitions
Section 1.01. DEFINED TERMS 2
ARTICLE 2
The Transactions
Section 2.01. TOTAL PURCHASE PRICE 16
Section 2.02. PURCHASE AND SALE OF BUSINESSES 16
Section 2.03. ASSUMPTION OF LIABILITIES 17
Section 2.04. METHODS OF TRANSFER AND ASSUMPTION 17
Section 2.05. FINAL TAKE-UP AND WINDING UP 18
Section 2.06. TRANSFER OF CAPITAL STOCK AND ASSETS; CERTAIN OTHER TRANSACTIONS 19
Section 2.07. CONSENTS; NONASSIGNABLE CONTRACTS 21
Section 2.08. OTHER AGREEMENTS 22
Section 2.09. INTERCOMPANY BALANCE AND EXPENSE TRUE-UP. 22
ARTICLE 3
Representations and Warranties
Section 3.01. REPRESENTATIONS AND WARRANTIES OF G&L 23
Section 3.02. REPRESENTATIONS AND WARRANTIES OF PGI 24
Section 3.03. ASSETS AND CAPITAL STOCK TRANSFERRED "AS IS." 25
ARTICLE 4
Conditions
Section 4.01. CONDITIONS TO THE OBLIGATIONS OF G&L 25
Section 4.02. CONDITIONS TO THE OBLIGATIONS OF PGI 26
ARTICLE 5
Disclosure and Access to Information
Section 5.01. RESTRICTIONS ON DISCLOSURE OF INFORMATION 27
Section 5.02. LEGALLY REQUIRED DISCLOSURE OF CONFIDENTIAL INFORMATION 27
Section 5.03. ACCESS TO INFORMATION 28
Section 5.04. PRODUCTION OF WITNESSES 29
Section 5.05. REIMBURSEMENT 29
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<PAGE>
ARTICLE 6
Insurance Matters
Section 6.01. COOPERATION IN INSURANCE MATTERS 29
Section 6.02. COLLECTION OF INSURANCE PROCEEDS 30
Section 6.03. OTHER INSURANCE MATTERS 30
ARTICLE 7
Employees; Intercompany Arrangements
Section 7.01. EMPLOYEE MATTERS 30
Section 7.02. INTERCOMPANY ARRANGEMENTS 31
Section 7.03. PRODUCTS, SUPPLIES AND DOCUMENTS. 31
ARTICLE 8
Survival
Section 8.01. NO SURVIVAL OF REPRESENTATIVES AND WARRANTIES. 32
Section 8.02. SURVIVAL OF AGREEMENTS 32
ARTICLE 9
Indemnification
Section 9.01. INDEMNIFICATION BY G&L 32
Section 9.02. INDEMNIFICATION BY PGI 32
Section 9.03 INDEMNIFICATION CONCERNING PROPORTIONAL LIABILITIES AND
SPLIT LIABILITIES 33
Section 9.04. INDEMNIFICATION PROCEDURES. 33
Section 9.05. CERTAIN LIMITATIONS 34
Section 9.06. EXCLUSIVITY OF TAX INDEMNIFICATION 35
ARTICLE 10
Miscellaneous
Section 10.01. ENTIRE AGREEMENT 35
Section 10.02. GOVERNING LAW 36
Section 10.03. DESCRIPTIVE HEADINGS; CONSTRUCTION 36
Section 10.04. NOTICES 36
Section 10.05. PARTIES IN INTEREST 37
Section 10.06. COUNTERPARTS 37
Section 10.07. BINDING EFFECT; ASSIGNMENT 37
Section 10.08. DISPUTE RESOLUTION 38
Section 10.09. SEVERABILITY 38
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<PAGE>
Section 10.10. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE 39
Section 10.11. AMENDMENT 39
Section 10.12. EMPLOYMENT SOLICITATION 39
Section 10.13. EXPENSES 39
</TABLE>
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<PAGE>
EXHIBITS AND ANNEXES
Exhibit A Acquisition Agreement
Exhibit B Operating Agreement
Exhibit C Calculation of Purchase Price
Exhibit D Consent with respect to Nordlys S.A.
Annex 2.06(a) Stock Sale Agreement by and between Polymer Group, Inc. and DT
Acquisition Inc. re: 3427790 Canada Limited
Annex 2.06(c) Stock Sale Agreement by and between Galey & Lord Incorporated
and DT Acquisition Inc. re: Dominion Textile International (Asia)
Pte. Ltd.
Annex 2.06(d)(1) and (2) (1) Stock Sale Agreement by and between Albuma
S.A. and Dominion Textile International B.V. re:
Klopman International SpA (2) Stock Sale Agreement by
and between Albuma S.A. and Dominion Textile
International B.V. re: Swift Textiles France S.A.
Annex 2.06(e) Stock Sale Agreement by and between Albuma S.A. and Dominion
Textile International B.V. re: Dominion Textile France S.a.r.L.
Annex 2.06(f)(1) and (2) (1) Stock Sale Agreement by and between Chicopee
Holdings, B.V. and Dominion Textile International
B.V. re: Nordlys U.K. Ltd. (2) Stock Sale Agreement
by and between Chicopee Holdings, B.V. and Dominion
Textile International B.V. re: Geca-Tapes B.V.
Annex 2.06(j) Stock Sale Agreement by and between Galey & Lord
Incorporated and Dominion Textile (USA) Inc. re: DT
(USA) Exports Inc. and Swift Textiles Inc.
Annex 2.06(l) Stock Sale Agreement by and between Polymer Group,
Inc. and DT Acquisition Inc. re: Dominion Textile
(USA) Inc.
Annex 2.06(m) Stock Sale Agreement by and between Polymer Group,
Inc. and DT Acquisition Inc. re: Dominion Textile
Mauritius, Inc.
Annex 2.06(n) Stock Sale Agreement by and between Galey & Lord
Incorporated and DT Acquisition Inc. re: 3427803
Canada Limited
- iv -
<PAGE>
MASTER SEPARATION AGREEMENT
This Master Separation Agreement (this "Agreement"), dated as of
January 29, 1998, is made by and among Polymer Group, Inc., a Delaware
corporation ("PGI"), Galey & Lord, Inc., a Delaware corporation ("G&L"),
Dominion Textile Inc., a corporation organized under the laws of Canada
("Dominion"), DT Acquisition Inc., a corporation organized under the laws of
Canada ("DTA"), Dominion Textile International (Asia) Pte. Ltd, a corporation
organized under the laws of Singapore ("DomTex (Asia)"), Dominion Textile
International B.V., a corporation organized under the laws of the Netherlands
("DomTex B.V."), Dominion Textile (USA) Inc., a Delaware corporation ("DT
(USA)"), Albuma S.A., a corporation organized under the laws of the Republic of
France ("Albuma"), and Chicopee Holdings, B.V., a corporation organized under
the laws of the Netherlands ("Chicopee Holdings"). The parties to this Agreement
are each referred to as a "Party" and collectively as the "Parties". All amounts
in this Agreement shall be in United States dollars unless otherwise indicated.
RECITALS
WHEREAS, PGI, G&L, DTA and ZB Holdings, Inc., a South Carolina
corporation ("ZBH"), have entered into an agreement dated as of October 27,
1997, as amended (the "Acquisition Agreement"), in which it is contemplated that
DTA would commence a tender offer to acquire all of the outstanding common
shares and First Preferred shares of Dominion;
WHEREAS, on December 19, 1997, and December 29, 1997, pursuant to its
Offer to Purchase dated October 29, 1997, as amended and varied, DTA acquired
approximately 98% of the outstanding common shares and approximately 96% of the
outstanding First Preferred shares of Dominion, and in connection with the
transactions contemplated herein, will acquire all of the remaining outstanding
common shares and First Preferred shares of Dominion pursuant to a merger
consummated in accordance with Section 206 of the Canada Business Corporations
Act;
WHEREAS, following DTA's purchase of the remaining outstanding common
shares and First Preferred shares of Dominion, DTA and Dominion intend to
consummate a winding up (the "Winding Up") in which DTA shall acquire all of the
assets and assume all of the liabilities of Dominion, and all of the outstanding
common shares and First Preferred shares of Dominion shall be redeemed and
eliminated;
WHEREAS, Dominion's business primarily consists of the Apparel Fabrics
Business, the Nonwovens Business and the DIFCO Business (each as defined); and
WHEREAS, pursuant to the Acquisition Agreement and subsequent
agreements among the Parties thereto, (i) PGI intends to acquire the Nonwovens
Business and the DIFCO Business, including each of their respective liabilities,
from DTA and certain of its Subsidiaries and (ii) G&L intends to acquire the
Apparel Fabrics Business, including its respective liabilities, from DTA and
certain of its Subsidiaries (collectively, the "Break-Up");
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<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. DEFINED TERMS. The terms set forth below, as used herein,
shall have the following meanings:
"2003 Notes" means the $150.0 million aggregate principal outstanding
87/8% Guaranteed Senior Notes due 2003 of DT (USA) issued pursuant to the
Indenture dated as of November 1, 1993 among DT (USA), Dominion and First Union
National Bank (as successor trustee).
"2006 Notes" means the $125.0 million aggregate principal outstanding 9
1/4% Guaranteed Senior Notes due 2006 of DT (USA) issued pursuant to the
Indenture dated as of April 1, 1996 among DT (USA), Dominion and First Union
National Bank (as successor trustee).
"2003 Tender Offer" means the offer by DT (USA) to repurchase any and
all outstanding 2003 Notes pursuant to the Offer to Purchase and Consent
Solicitation Statement dated December 23, 1997 and accompanying Consent and
Letter of Transmittal.
"2006 Tender Offer" means the offer by DT (USA) to repurchase any and
all outstanding 2006 Notes pursuant to the Offer to Purchase and Consent
Solicitation Statement dated December 23, 1997 and accompanying Consent and
Letter of Transmittal.
"Acquisition Agreement" has the meaning set forth in the preface above,
a copy of which is attached hereto as Exhibit A.
"Acquisition Relationship" means the relationship among G&L, PGI, DTA,
Dominion and Dominion's direct and indirect Subsidiaries as a result of the
Acquisition Agreement, the Operating Agreement and the undertaking of such
parties to consummate the transactions contemplated by this Agreement.
"Affiliate" of any specified Person means any other Person directly or
indirectly Controlling, Controlled by, or under common Control with, such
specified Person.
"Albuma" has the meaning set forth in the preface above.
"Ancillary Separation Agreements" means the Employee Matters Agreement,
the Intellectual Property Agreements, the Insurance Matters Agreement, the
Shared Assets and Liabilities Agreement, the Tax Matters Agreement, the
Transition Services Agreement, and any other agreements to be entered into among
the Parties hereto with respect to the relationships of the Parties after the
Break-Up Time, as referred to in Section 2.08 herein.
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<PAGE>
"Apparel Fabrics Assets" means all right, title and interest (including
minority interests) of DTA (as determined immediately following the Winding Up),
Dominion (as determined immediately preceding the Winding Up) and any of their
Subsidiaries, in and to all Assets that are used primarily in or held primarily
for use in the operations of the Apparel Fabrics Business, including the Apparel
Fabrics Cash, the Apparel Fabrics Facilities, the Apparel Fabrics Intellectual
Property, the Apparel Fabrics Contracts, the Assets of the Apparel Fabrics
Employee Arrangements and the Apparel Fabrics Employee Benefit Plans as provided
in the Employee Matters Agreement, any capital stock of any of the Apparel
Fabrics Subsidiaries, and the rights of G&L and the Apparel Fabrics Subsidiaries
under the Transaction Agreements; provided, notwithstanding the foregoing, the
Apparel Fabrics Assets shall not include any (i) Nonwovens Assets, (ii) DIFCO
Assets, (iii) Split Assets, or (iv) Proportional Assets.
"Apparel Fabrics Business" means the apparel fabrics businesses
heretofore or currently engaged in by DTA, Dominion or its Subsidiaries (or
their predecessors) as reported in the apparel fabrics segment (or its
predecessor segment) in Dominion's most recent financial statements (but
excluding any former or discontinued operations and DIFCO), including as
conducted through:
(A) the Swift Denim division of Dominion;
(B) the Dominion Cotton Services business of Dominion;
(C) the Dominion Holdings Companies;
(D) nine indirect wholly-owned Subsidiaries of Dominion, being
(i) Swift Textiles Inc., a Delaware corporation, (ii)
Swift Denim Services, Inc., a Delaware corporation, (iii)
DT (USA) Exports Inc., a corporation organized under the
laws of Barbados, (iv) Swift Textiles (Far East) Ltd., a
company organized under the laws of Hong Kong, (v) Domtex
Industries (Far East) Ltd., a corporation organized under
the laws of Hong Kong, (vi) Klopman GmbH, a corporation
organized under the laws of Germany, (vii) Klopman A.G., a
corporation organized under the laws of Switzerland,
(viii) Klopman Espana S.A., a corporation organized under
the laws of Spain, and (ix) Klopman International Ltd., a
corporation organized under the laws of Ireland; and
(E) seven indirect Subsidiaries or Investments of Dominion,
being (i) Klopman International S.p.A., a company
organized under the laws of Italy, (ii) Swift Textiles
Europe Ltd., a company organized under the laws of the
Republic of Ireland (50%) interest, (iii) Tismade S.A., a
corporation organized under the laws of France (50%
interest), (iv) Sitex S.A., a corporation organized under
the laws of Tunisia (22% interest), (v) Swift Textiles
France S.A., a corporation organized under the laws of the
Republic of France (50% interest), (vi) Swift Textiles
S.r.1., a corporation organized under the laws of Italy
(49% interest), and (vii) Somotex International S.A., a
corporation organized under the laws of Tunisia (37%
interest).
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<PAGE>
"Apparel Fabrics Cash" means 57.4% of all Cash.
"Apparel Fabrics Contracts" means all Contracts pursuant to which DTA,
Dominion or any of their Subsidiaries (determined immediately prior to the
Break-Up) is a Party with respect to the Apparel Fabrics Business.
"Apparel Fabrics Debt" means all Debt of DTA or any Apparel Fabrics
Subsidiary, in each case directly related to the Apparel Fabrics Business,
outstanding as of the Break-Up Time.
"Apparel Fabrics Employee Arrangements" means Employee Arrangements
relating to Employees of the Apparel Fabrics Business.
"Apparel Fabrics Employee Benefit Plans" means any Employee Benefit
Plan which provides benefits exclusively for Apparel Fabrics Employees.
"Apparel Fabrics Employees" means employees of the Apparel Fabrics
Business.
"Apparel Fabrics Facilities" means the real property and facilities
currently owned by, or leased to, DTA, Dominion or any of their Subsidiaries in
connection with the operation of the Apparel Fabrics Business.
"Apparel Fabrics Intellectual Property" means all right, title and
interest of DTA, Dominion or any of their Subsidiaries in and to Intellectual
Property relating primarily to the Apparel Fabrics Business. In no event shall
Apparel Fabrics Intellectual Property include the ownership of Dual Use
Technology or any trademark, servicemark or trade or company name which contains
the name "Poly-Bond," "Nordlys," "Dominion," or any other trade name, trademark
or logo of the Nonwovens or DIFCO Businesses or derivatives thereof; provided,
however, that the Apparel Fabrics Intellectual Property shall include G&L's or
its Subsidiaries' rights under the Intellectual Property Agreements contemplated
by this Agreement.
"Apparel Fabrics Liabilities" means all Liabilities relating primarily
to, or arising primarily out of, the Apparel Fabrics Business as conducted at
any time prior to, on or after the Closing Date, including (i) all Liabilities
relating to or arising out of the Apparel Fabrics Assets, (ii) all Apparel
Fabrics Debt together with accrued but unpaid interest thereon at the Break-Up
Time; (iii) all Liabilities with respect to Apparel Fabrics Employees and
Retired Apparel Fabrics Employees, (iv) all Liabilities arising under the
Apparel Fabrics Employee Arrangements and the Apparel Fabrics Employee Benefit
Plans; and (v) all obligations of DTA, Dominion and the Dominion Holding
Companies (each with respect to the Apparel Fabrics Business only) and each of
the Apparel Fabrics Subsidiaries created pursuant to the Transaction Agreements;
provided, notwithstanding the foregoing, the Apparel Fabrics Liabilities shall
not include any (a) Nonwovens Liabilities, (b) DIFCO Liabilities, (c) Split
Liabilities or (d) Proportional Liabilities.
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<PAGE>
"Apparel Fabrics Subsidiaries" means those Subsidiaries and Investments
of DTA and Dominion comprising the Apparel Fabrics Business (including DomTex
(Asia), DomTex B.V. and those Persons identified in clauses (D) and (E) of the
definition of Apparel Fabrics Business), and SD MergerCo.
"Assets" means any and all assets, properties and rights, whether
tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including, without limitation,
the following:
(i) real property interests (including leases and subleases),
land, plants, buildings and improvements, easements,
rights-of-way and other appurtenants thereto;
(ii) machinery, equipment, vehicles, furniture and fixtures,
leasehold improvements, supplies, repair parts, tools, plant,
laboratory and office equipment and other tangible personal
property, together with any rights or claims arising out of
the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any
component part thereof;
(iii) inventories, including raw materials, work-in-process,
finished goods, parts, and accessories;
(iv) notes, loans and accounts receivable (whether current or
not current), interests as beneficiary under letters of
credit, advances and performance and surety bonds;
(v) banker's acceptances, shares of stock, bonds, debentures,
evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust
certificates, investment contracts, voting trust certificates,
puts, calls, straddles, options, swaps, collars, caps and
other securities or hedging arrangements of any kind;
(vi) financial, accounting and operating data and records
including, without limitation, books, records, electronic
data, notes, sales and sales promotional data, advertising
materials, credit information, cost and pricing information,
customer and supplier lists, reference catalogs, payroll and
personnel records, minute books, stock ledgers, stock transfer
records and other similar property, rights and information;
(vii) Intellectual Property;
(viii) Contracts and all rights therein;
(ix) prepaid expenses, deposits and retentions held by third
parties;
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<PAGE>
(x) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied
warranties, rights of recovery, rights of setoff, and rights
of subrogation;
(xi) licenses, franchises, permits, authorizations and
approvals; and
(xii) goodwill and going concern value.
"Break-Up" has the meaning set forth in the preface above.
"Break-Up Time" shall be 3:00 p.m., New York City time, on the Closing
Date, the effective time of the final step of the transactions set forth in
Sections 2.05 and 2.06.
"Businesses" means the Apparel Fabrics Business, the Nonwovens Business
and the DIFCO Business.
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions located in the State of New York are authorized or
obligated by law or executive order to close.
"Cash" means the total of all cash and cash equivalents of the Dominion
Companies, whether held in Dominion or in any of its direct or indirect
Subsidiary or Investments, as of the Closing Date (immediately preceding the
Winding Up).
"Closing Date" means January 29, 1998.
"Code" has the meaning set forth in the preface above.
"Confidential Information" means with respect to any Party hereto, (a)
any Information concerning such Party, its business or any of its Affiliates
that was obtained by another Party hereto prior to the Break-Up Time, (b) any
Information concerning such Party that is obtained by another Party under
Section 5.03, or (c) any other Information obtained by, or furnished to, another
Party hereto that (i) is marked "Confidential," "Proprietary," "Company Private"
or words of similar import by the Party owning such Information, or any
Affiliate of such Party, or (ii) the Party owning such Information has notified
such other Party in writing that such Information is confidential or secret;
provided, however, that any Information provided by DTA, Dominion (including
DIFCO) or any of the Apparel Fabrics Subsidiaries or Nonwovens Subsidiaries to
G&L or PGI regarding the Apparel Fabrics Business (in the case of G&L) or the
Nonwovens Business or the DIFCO Business (in the case of PGI), shall not be
deemed Confidential Information with respect to the use of such Information in
their respective Business(es) by G&L and PGI, as the case may be.
"Contracts" means any contract, agreement, lease, license, sales order,
purchase order, instrument or other commitment that is binding on any Person or
any part of its property under applicable law.
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<PAGE>
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management of the policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Controlling" and "Controlled" have the corollary meanings ascribed thereto.
"Corporate Debt" means the 2003 Notes and the 2006 Notes and any other
Debt that is not Apparel Business Debt, Nonwovens Debt, DIFCO Debt or Debt with
respect to discontinued operations or otherwise characterized as a Split
Liability.
"Debt" means all indebtedness of DTA, Dominion and its Subsidiaries,
including, without limitation (i) all obligations for borrowed money or
evidenced by bonds, debentures, notes, letters of credit or other similar
interests, and (ii) any interest, principal, prepayment premiums or penalties,
defeasance costs, tender payments, breakage costs or other fees or expenses in
respect of those items listed in clause (i) above.
"DIFCO" means the Dominion Industrial Fabrics Company division of
Dominion, as operated immediately prior to the Winding Up and the Break-Up.
"DIFCO Adjustment" means the adjustment to the purchase price (as set
forth in Section 2.01 and reflected in Exhibit C) paid by G&L and PGI based on
DIFCO's earnings before interest, tax, depreciation and amortization, as
described in Section 3(f) of the Acquisition Agreement, equal to an increase to
PGI of 2.6% (of the total cost to acquire Dominion) and a corresponding decrease
of 2.6% to G&L.
"DIFCO Assets" means all right, title and interest (including minority
interests) of DTA (as determined immediately following the Winding Up), Dominion
(as determined immediately preceding the Winding Up) and any of their
Subsidiaries, in and to all Assets that are used primarily in or held primarily
for use in the operations of the DIFCO Business, including the DIFCO Facilities,
the DIFCO Intellectual Property, the DIFCO Contracts, the Assets of the DIFCO
Employee Arrangements and the DIFCO Employee Benefit Plans as provided in the
Employee Matters Agreement, the capital stock of DIFCO MergerCo, and the rights
of PGI and DIFCO MergerCo under the Transaction Agreements; provided,
notwithstanding the foregoing, the DIFCO Assets shall not include any (i)
Apparel Fabrics Assets, (ii) Nonwovens Assets, (iii) Split Assets, or (iv)
Proportional Assets.
"DIFCO Business" means the businesses heretofore and immediately prior
to the Winding Up and the Break-Up engaged in by Dominion through DIFCO,
including the design and production of custom fabrics for industrial flame
resistant protective clothing, coating fabrics for abrasives, upholstery
flocking and other coating end-uses, and specialty fabrics for industrial cut
and sew and other applications.
"DIFCO Contracts" means all Contracts pursuant to which Dominion is a
Party with respect to the DIFCO Business.
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<PAGE>
"DIFCO Debt" means all Debt of DTA directly related to the DIFCO
Business and outstanding as of the Break-Up Time.
"DIFCO Employee Arrangements" means Employee Arrangements relating to
DIFCO Employees.
"DIFCO Employee Benefit Plans" means any Employee Benefit Plan which
provides benefits exclusively for DIFCO Employees.
"DIFCO Employees" means any employee of the DIFCO Business.
"DIFCO Facilities" means the real property and facilities currently
owned by, or leased to, DTA or Dominion for the benefit of DIFCO.
"DIFCO Intellectual Property" means all right, title and interest of
DTA or Dominion in and to the Intellectual Property relating primarily to the
DIFCO Business. In no event shall DIFCO Intellectual Property include the
ownership of Dual Use Technology or any trademark, servicemark or trade or
company name which contains the name "Poly-Bond," "Nordlys," "Swift," "Swift
Textiles," "Swift Denim," "Klopman" or any other trade name, trademark or logo
of the Apparel Fabrics or Nonwovens Businesses or derivatives thereof; provided,
however, that the DIFCO Intellectual Property shall include the rights of PGI,
DTA and DIFCO MergerCo under the Intellectual Property Agreements contemplated
by this Agreement.
"DIFCO Liabilities" means all Liabilities relating primarily to, or
arising primarily out of, the DIFCO Business as conducted at any time prior to,
on or after the Closing Date, including (i) all Liabilities relating to or
arising out of the DIFCO Assets, (ii) the DIFCO Debt, together with accrued and
unpaid interest thereon at the Break-Up Time, (iii) all Liabilities with respect
to DIFCO Employees and Retired DIFCO Employees (iv) all Liabilities arising
under the DIFCO Employee Arrangements and DIFCO Employee Benefit Plans, and (v)
the obligations of DTA and Dominion (with respect to the DIFCO Business) and
DIFCO MergerCo created pursuant to the Transaction Agreements; provided,
notwithstanding the foregoing, the DIFCO Liabilities shall not include any (a)
Apparel Fabrics Liabilities, (b) Nonwovens Liabilities, (c) Split Liabilities,
or (d) Proportional Liabilities.
"DIFCO MergerCo" means 3427790 Canada Limited Inc., a Canadian
corporation to which all of the DIFCO Assets and DIFCO Liabilities are being
contributed in connection with the transactions contemplated herein.
"Dominion" has the meaning set forth in the preface above.
"Dominion Companies" means Dominion and all direct or indirect wholly
owned Subsidiaries and the portion of all other Subsidiaries and Investments
owned directly or indirectly by Dominion.
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<PAGE>
"Dominion Holding Companies" means DT (USA), Domtex Industries, Inc.,
Dominion Textile Mauritius Inc., DomTex B.V., DomTex (Asia) and Albuma.
"Dominion Terminated Benefit Plan" means the Employee Benefit Plan of
Dominion Executive Retirement Income Plan presently being wound up in connection
with the transactions contemplated herein.
"DomTex (Asia)" has the meaning set forth in the preface above.
"DomTex B.V." has the meaning set forth in the preface above.
"DTA" has the meaning set forth in the preface above.
"DT (USA)" has the meaning set forth in the preface above.
"Dual Use Technology" shall mean all Intellectual Property: (i) (A)
developed by Dominion or any of its Subsidiaries for the Apparel Fabrics
Business that is useful in the Nonwovens Business or the DIFCO Business as
conducted immediately prior to the Closing Date and (B) which covers components
manufactured or processes that are to be utilized by the Nonwovens Business or
the DIFCO Business, or (ii) (A) developed by Dominion or any of its Subsidiaries
for the Nonwovens Business or the DIFCO Business that is useful in the Apparel
Fabrics Business as conducted immediately prior to the Closing Date and (B)
which covers components manufactured or processes that are to be utilized by the
Apparel Fabrics Business. For purposes of this Agreement, Dual Use Technology
shall include (w) the rights to the name "Dominion", (x) all management
information systems maintained by Dominion for joint use of or which manage
information for the Apparel Fabrics Business, the Nonwovens Business and/or the
DIFCO Business, (y) with respect to patents, patent applications and invention
disclosures, shall consist of the patents, patent applications and invention
disclosures to be identified in the Intellectual Property Agreements, and (z)
the computer internet access numbers, and G&L and PGI agree to negotiate the
terms and conditions of such Dual Use Technology in the Intellectual Property
Agreements consistent with the principles set forth herein and the allocation of
Proportional Assets.
"Employee Arrangements" means all employment or consulting agreements,
collective bargaining agreements and all bonus and other incentive compensation,
deferred compensation, disability, severance, stock award, stock option or stock
purchase agreements, policies or arrangements with respect to the employment and
termination of employment of any employee, officer, director or other Person
employed at any time by DTA, Dominion or any of its Subsidiaries.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, or (d)
Employee Welfare Benefit Plan, which DTA (as determined immediately following
the Winding Up), Dominion (as determined immediately preceding the Winding Up)
or any of their Subsidiaries maintains has
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maintained or to which DTA, Dominion or any of its Subsidiaries has an
obligation or had an obligation to make contributions.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Employee Matters Agreement" means the agreement to be entered into
pursuant to Section 2.08 among G&L, PGI and DTA (or their respective Affiliates)
with respect to, among other things, certain employee benefit and liability
issues.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Final Determination"means (i) with respect to federal income Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
federal income Taxes, any final determination of liability in respect of a Tax
that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of a
statute of limitations or a period for the filing of claims for refunds, amended
returns or appeals from adverse determinations) or (ii) the payment of Tax by
G&L, PGI or any of their Affiliates, whichever is responsible for payment of
such Tax liability under applicable law, with respect to any item disallowed or
adjusted by a taxing authority, provided that such responsible party determines
that no action should be taken to recoup such payment and G&L (if the
responsible party is PGI or any of its Affiliates) or PGI (if the responsible
party is G&L or any of its Affiliates) agrees.
"G&L" has the meaning set forth in the preface above.
"G&L Contribution Note" means the $141.0 million subordinated
promissory note issued by DTA to G&L on December 19, 1997 in connection with the
take up of Dominion common shares and First Preferred shares by DTA.
"Indemnifying Party" means a Person that is obligated to provide
indemnification pursuant to Article 9 of this Agreement.
"Indemnitee" means a Person that is entitled to seek indemnification
pursuant to Article 9 of this Agreement.
"Information" means all records, books, contracts, instruments,
computer data and other data and information of any kind whatsoever.
"Insurance Matters Agreement" means the agreement to be entered into
pursuant to Section 2.08 among G&L, PGI and DTA (or their respective Affiliates)
with respect to, among other things, certain insurance matters and issues.
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"Intellectual Property" means any and all domestic and foreign patents
and patent applications, together with any continuations, continuations-in-part
or divisional applications thereof, and all patents issuing thereon (including
reissues, renewals and re-examinations of the foregoing); invention disclosures;
mask works; net lists; copyrights, and copyright applications and registrations;
trademarks, servicemarks, service names, trade names, and trade dress, in each
case together with any applications and registrations therefor and all
appurtenant goodwill relating thereto; trade secrets, commercial and technical
information, know-how, proprietary or confidential information, including
engineering, production and other designs, notebooks, processes, drawings,
specifications, formulae, and technology; computer and electronic data
processing programs and software (object and source code), data bases and
documentation thereof; inventions (whether patented or not); and all other
intellectual property under the laws of any country throughout the world.
"Intellectual Property Agreements" means the agreements to be entered
into pursuant to Section 2.08 among G&L, PGI and DTA (or their respective
Affiliates) with respect to the treatment after the Break-Up Time of
Intellectual Property, including Dual Use Technology.
"InterTech" means The InterTech Group, Inc., a South Carolina
corporation.
"InterTech Contribution Note" means the $14,984,000 subordinated
promissory note issued by DTA to InterTech on December 19, 1997 in connection
with the take up of Dominion common shares and First Preferred shares by DTA.
"Investment" means with respect to any specified Person, any
corporation or other legal entity of which such Person owns, whether directly or
indirectly, any stock or other equity interest of more than 20% which is not a
Subsidiary.
"Liabilities" means any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
asserted or unasserted, liquidated or unliquidated, accrued or not accrued,
known or unknown, whenever or however arising (including, without limitation,
whether arising out of any Contract or tort based on negligence or strict
liability and any liability for Taxes) and whether or not the same would be
required by generally accepted accounting principles to be reflected in
financial statements or disclosed in the notes thereto.
"Nonwovens Assets" means all right, title and interest (including
minority interests) of DTA (as determined immediately following the Winding Up),
Dominion (as determined immediately preceding the Winding Up) and any of their
Subsidiaries in and to all Assets that are used primarily in or held primarily
for use in the operations of the Nonwovens Business, including the Nonwovens
Cash, the Nonwovens Facilities, the Nonwovens Intellectual Property, the
Nonwovens Contracts, the Assets of the Nonwovens Employee Arrangements and the
Nonwovens Employee Benefit Plans as provided in the Employee Matters Agreement,
the capital stock of any of the Nonwovens Subsidiaries and the rights of DTA, DT
(USA), PGI and the Nonwovens Subsidiaries under the Transaction Agreements;
provided, notwithstanding the foregoing, the Nonwovens Assets shall not include
any (i) Apparel Fabrics Assets, (ii) DIFCO Assets, (iii) Split Assets, or (iv)
Proportional Assets.
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"Nonwovens Business" means the nonwovens fabrics businesses heretofore
or currently engaged in by DTA, Dominion or its Subsidiaries (or their
predecessors) as reported in the nonwovens fabrics segment (or its predecessor
segment) in Dominion's most recent financial statements (but excluding any
former or discontinued operations), including as conducted through:
(A) the Dominion Holding Companies;
(B) five indirect wholly-owned Subsidiaries of Dominion, being
(i) Poly-Bond Inc., a Delaware corporation, (ii) Dominion Textile
France S.a.r.L., a corporation organized under the laws of the Republic
of France, (iii) Nordlys S.A., a company organized under the laws of
the Republic of France, (iv) Nordlys UK Ltd., a corporation organized
under the laws of the United Kingdom, and (v) Geca-Tapes B.V., a
corporation organized under the laws of the Netherlands; and
(C) Nonwovens Cash" means 42.6% of all Cash.
"Nonwovens Contracts" means all Contracts pursuant to which DTA,
Dominion or any of their Subsidiaries (determined immediately prior to the
Break-Up) is a Party with respect to the Nonwovens Business.
"Nonwovens Debt" means all Debt of DTA or any Nonwovens Subsidiary, in
each case, directly related to the Nonwovens Business, outstanding as of the
Break-Up Time.
"Nonwovens Employee Arrangements" means Employee Arrangements for
Nonwovens Employees.
"Nonwovens Employee Benefit Plans" means any Employee Benefit Plan
which provides benefits exclusively for Employees of the Nonwovens Business.
"Nonwovens Employees" means employees of the Nonwovens Business.
"Nonwovens Facilities" means the real property and facilities that
currently are owned by, or leased to, DTA, Dominion or any of their Subsidiaries
in connection with the operation of the Nonwovens Business.
"Nonwovens Intellectual Property" means all right, title and interest
of DTA, Dominion or any of their Subsidiaries in and to the Intellectual
Property relating primarily to the Nonwovens Business. In no event shall
Nonwovens Intellectual Property include the ownership of Dual Use Technology or
any trademark, servicemark or trade or company name which contains the name
"Swift," "Swift Textiles," "Swift Denim," "Klopman," "Dominion") or any other
trade name,
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trademark or logo of the Apparel Fabrics or DIFCO Businesses or derivatives
thereof; provided, however, that the Nonwovens Intellectual Property shall
include PGI or its Subsidiaries' rights under the Intellectual Property
Agreements contemplated by this Agreement.
"Nonwovens Liabilities" means all Liabilities relating primarily to, or
arising primarily out of, the Nonwovens Business as conducted at any time prior
to, on or after the Closing Date, including (i) all Liabilities relating to or
arising out of the Nonwovens Assets, (ii) all Nonwovens Debt, together with
accrued but unpaid interest thereon at the Break-Up Time, (iii) all Liabilities
with respect to Nonwovens Employees and Retired Nonwovens Employees, (iv) all
Liabilities under the Nonwovens Employee Arrangements and Nonwovens Employee
Benefit Plans, and (v) the obligations of DTA, Dominion and the Dominion Holding
Companies (each with respect to the Nonwovens Business only), and of each of the
Nonwovens Subsidiaries created pursuant to the Transaction Agreements; provided,
notwithstanding the foregoing, the Nonwovens Liabilities shall not include any
(a) Apparel Fabrics Liabilities, (b) DIFCO Liabilities, (c) Split Liabilities,
or (d) Proportional Liabilities.
"Nonwovens Subsidiaries" means those Subsidiaries of DTA and Dominion
comprising the Nonwovens Business, as identified in the definition thereof
(including DT (USA), DomTex Industries, Inc., Dominion Textile Mauritius Inc.
and Albuma).
"Operating Agreement" means the Operating Agreement by and among DTA,
PGI and G&L regarding Dominion, dated as of December 19, 1997, a copy of which
is attached hereto as Exhibit B.
"Other Employee Arrangements" has the meaning ascribed to such term in
the Employee Matters Agreement.
"Other Employee Benefit Plans" means any Employee Benefit Plan which
provides benefits for individuals who are Employees of Dominion or any of its
Subsidiaries, but who do not work primarily for any one of the Businesses.
"Party" or "Parties" has the meaning set forth in the preface above.
"Person" means an individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated association, any other entity,
or a government or any department or agency or other unit thereof.
"PGI" has the meaning set forth in the preface above.
"PGI Contribution Note" means the $25.0 million subordinated promissory
note issued by DTA to PGI on December 19, 1997 in connection with the take-up of
Dominion common shares and First Preferred shares by DTA.
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"Prior Relationship" means the business and ownership relationships
among DTA, Dominion and Dominion's direct and indirect Subsidiaries at any time
prior to giving effect to the Winding Up, the Break-Up, and the other
transactions described or contemplated herein.
"Proportional Assets" means Assets that are part of, or resulted from,
the Businesses as a whole on a shared basis, and Assets arising from or
associated with the transactions contemplated by this Agreement and the other
Transaction Agreements, including transaction-related Tax Assets (including any
Tax benefits arising from the deductibility of bond redemption premiums, fees,
expenses or similar payments arising out of the Break-Up), Cash and corporate
Assets. Proportional Assets are to be shared 57.4% by G&L (as purchaser of the
Apparel Fabrics Business) and 42.6% by PGI (as purchaser of the Nonwovens
Business).
"Proportional Liabilities" means Liabilities that are part of, or
resulted from, the Businesses taken as a whole on a shared basis, and
Liabilities arising from or associated with the transactions contemplated by
this Agreement and the other Transaction Agreements, including (i) the Tax
Liabilities asociated with the transactions contemplated hereby, including Taxes
imposed in connection with separating the Apparel Fabrics Business and the
Nonwovens Business and transferring such businesses to G&L and PGI,
respectively, (ii) Tax Liabilities of DomTex (Asia) related to the loss of
Overseas Headquarters status and the loss of the exemption under Section 13(10)
of the Singapore Income Tax Act on dividends from DomTex B.V. to DomTex (Asia),
(iii) any litigation costs and expenses related to the Acquisition (but not
including any litigation which is solely among the parties hereto), (iv) any
Corporate Debt, (v) any corporate overhead Liabilities, (vi) any transaction
costs incurred by or on behalf of DTA or PGI solely in connection with the
proposed Acquisition, including an amount necessary to compensate PGI and DTA
for obtaining commitments for, and utilizing, the financing provided directly to
DTA by the Chase Manhattan Bank and First Union National Bank pursuant to the
commitment letter dated October 27, 1997 (including the interest expense
incurred for the amount necessary to complete the Acquisition and related
transactions), (vii) the principal amount of outstanding corporate indebtedness
assumed by PGI, G&L, the Nonwovens Business, the DIFCO Business or the Apparel
Fabrics Business or the amount paid to retire, repay or acquire outstanding
corporate indebtedness (whether in the nature of payments of principal,
interest, premiums, defeasance costs, tender payments, overdrafts, penalties,
breakage costs, fees, litigation expenses, other expenses or indemnitees
relating thereto) and Preferred Shares of Dominion, and (viii) similar
Liabilities, but not including (x) the investment banking and merger and
acquisition advisory fees specified in the definition of "Split Liabilities" or
(y) any transaction costs, commitment fees or financing fees, payable by either
PGI or G&L in connection with providing any other financing required to complete
the Acquisition or the subsequent purchase and sale of the Apparel Fabrics
Business and the Nonwovens Business. Proportional Liabilities are to be shared
57.4% by G&L (as purchaser of the Apparel Fabrics Business) and 42.6% by PGI (as
purchaser of the Nonwovens Business).
"Representatives" means directors, officers, employees, agents,
consultants, advisors, accountants, attorneys and representatives.
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<PAGE>
"Retired Apparel Employees" has the meaning ascribed to such term in
the Employee Matters Agreement.
"Retired DIFCO Employees" has the meaning ascribed to such term in the
Employee Matters Agreement.
"Retired Nonwovens Employees" has the meaning ascribed to such term in
the Employee Matters Agreement.
"SD MergerCo" means 3427803 Canada Limited, a corporation organized
under the laws of Canada, to which all of the Apparel Fabrics Assets and Apparel
Fabrics Liabilities that previously constituted the Swift Denim division of
Dominion are being contributed in connection with the transactions contemplated
herein.
"Split Assets" shall mean (i) Assets of former or discontinued
operations (of any nature) including any Assets related to C.S. Brooks Corp.,
Dominion Textile Foundation, Dominion Yarn Corp., 159422 Canada Inc. and Pemtech
Builders Inc. and any Assets related to the Dominion Terminated Benefit Plan and
(ii) Assets not otherwise related to any of the Businesses, either individually
or as a whole on a shared basis; provided, in no event shall Split Assets
include Proportional Assets. Split Assets are to be shared 50.0% by G&L (as
purchaser of the Apparel Fabrics Business) and 40.0% by PGI (as purchaser of the
Nonwovens Business).
"Split Assets and Liabilities Agreement" means the agreement to be
entered into between G&L and PGI regarding the procedures of (a) disposition or
division of Split Assets (b) disposition or division of Proportional Assets, (c)
satisfaction or allocation of Split Liabilities and (d) satisfaction or
allocation of Proportional Liabilities, in each case pursuant to the terms and
conditions of this Agreement.
"Split Liabilities" shall mean (i) all Liabilities associated with
former or discontinued operations (of any nature) including any Liabilities
related to C.S. Brooks Corp., Dominion Textile Foundation, Dominion Yarn Corp.,
159422 Canada Inc. and Pemtech Builders Inc. and any Liabilities related to the
Dominion Terminated Benefit Plan, (ii) the Liabilities not otherwise arising
from or attributable to any of the Businesses, either individually or as a whole
on a shared basis, (iii) environmental, retiree medical, or similar Liabilities
related to former or discontinued operations, (iv) Liabilities related to
investment banking and merger and acquisition advisory fees incurred by or on
behalf of PGI or DTA in connection with the Acquisition; provided, in no event
shall Split Liabilities include Proportional Liabilities. Proportional
Liabilities are to be shared 50.0% by G&L (as purchaser of the Apparel Fabrics
Business) and 50.0% by PGI (as purchaser of the Nonwovens Business).
"Subsidiary" means with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
Subsidiaries Controls or owns, directly or indirectly, more than 50% of the
stock of other equity interest entitled to vote on the election of the members
to the board of directors or similar governing body.
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<PAGE>
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Matters Agreement" means the agreement to be entered into pursuant
to Section 2.08 among G&L, PGI and DTA (or their respective Affiliates) with
respect to certain Tax matters.
"Third-Party Claim" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than any Party hereto or their respective Affiliates
which gives rise to a right of indemnification hereunder.
"Transaction Agreements" means this Agreement, the Stock Sale
Agreements attached hereto, the Acquisition Agreement, the Operating Agreement
and the Ancillary Separation Agreements.
"Transferee" means any Person that will receive a transfer of Assets
(including capital stock) pursuant to Article 2.
"Transferor" means any Person that will make a transfer of Assets
(including capital stock) pursuant to Article 2.
"Winding Up" means the winding up of Dominion with and into DTA, as
contemplated in Section 2.05.
"ZBH" has the meaning set forth in the preface above.
"ZBH Contribution Note" means the $54.0 million subordinated promissory
note issued by DTA to ZBH on December 19, 1997 in connection with the take up of
Dominion common shares and First Preferred shares by DTA.
ARTICLE 2
THE TRANSACTIONS
Section 2.01. TOTAL PURCHASE PRICE. On and subject to the terms and
conditions of this Agreement, (a) G&L shall purchase the Apparel Fabrics
Business for a total of $464,524,157.34 (b) PGI shall purchase the Nonwovens
Business and the DIFCO Business for a total of $351,695,749.27. Such amounts,
which are calculated in accordance with the terms described in the Acquisition
Agreement, including the DIFCO Adjustment, are set forth in detail on Exhibit C
hereto.
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Section 2.02. PURCHASE AND SALE OF BUSINESSES. On the terms and
conditions set forth in this Agreement (including the manner in which each of
the transactions shall be consummated as described in Section 2.06) and in the
Stock Purchase Agreements attached hereto, the Parties agree that, on the
Closing Date, immediately following the Winding Up and related transactions
described in Section 2.05, the following shall occur:
(a) G&L (or any of its Subsidiaries) shall purchase from DTA, and DTA
shall sell, transfer, convey and deliver to G&L (or such Subsidiaries), free and
clear of all known liens or encumbrances in favor of G&L, all capital stock and
Assets which collectively comprise the Apparel Fabrics Business, including (i)
all outstanding shares of capital stock of the Apparel Fabrics Subsidiaries held
directly or indirectly by DTA, (ii) all Apparel Fabrics Assets held directly by
DTA, (iii) any Apparel Fabrics Assets not held by DTA or one of the Apparel
Fabrics Subsidiaries or otherwise not transferred pursuant to clauses (a)(i) and
(a)(ii) hereof, (iv) 50% of the Split Assets, and (vi) 57.4% of the Proportional
Assets.
(b) PGI (or any of its Subsidiaries) shall purchase from DTA, and DTA
shall sell, transfer, convey and deliver to PGI (or such Subsidiary), free and
clear of all known liens or encumbrances in favor of PGI: (1) all capital stock
and Assets which collectively comprise the Nonwovens Business, including (i) all
outstanding shares of capital stock of the Nonwovens Subsidiaries held directly
or indirectly by DTA, (ii) all Nonwovens Assets held directly by DTA, (iii) any
Nonwovens Assets not held by DTA or one of the Nonwovens Subsidiaries or
otherwise not transferred pursuant to the preceding clauses (i) and (ii), (iv)
50% of the Split Assets, and (v) 42.6% of the Proportional Assets; and (2) all
outstanding shares of capital stock of DIFCO MergerCo (which collectively
represent the DIFCO Business).
Section 2.03. ASSUMPTION OF LIABILITIES.
(a) Simultaneously with the actions referred to in Section 2.02(a), G&L
(or its chosen Subsidiaries), in partial consideration for the transfer of the
Apparel Fabrics Business, shall assume and on a timely basis pay, satisfy and
discharge (or cause its Subsidiaries to pay, satisfy and discharge) in
accordance with their terms, (i) any and all Apparel Fabrics Liabilities, (ii)
50% of all Split Liabilities, and (iii) 57.4% of all Proportional Liabilities.
(b) Simultaneously with the actions referred to in Section 2.02(b), PGI
(or its chosen Subsidiaries), in partial consideration for the transfer of the
Nonwovens and DIFCO Businesses, shall assume and on a timely basis pay, satisfy
and discharge (or cause its Subsidiaries to pay, satisfy and discharge) in
accordance with their terms, (i) any and all Nonwovens Liabilities, (ii) any and
all DIFCO Liabilities, (iii) 50% of all Split Liabilities, and (iv) 42.6% of all
Proportional Liabilities.
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Section 2.04. METHODS OF TRANSFER AND ASSUMPTION.
(a) The Parties hereto agree that (i) any Transfer shall be effected by
delivery by the Transferor to the Transferee of (A) with respect to those Assets
which are evidenced by capital stock certificates or similar instruments,
certificates duly endorsed in blank or accompanied by stock powers or other
instruments of assignment executed in blank, (B) with respect to any real
property interest and/or any improvements thereon, a grant deed or the
equivalent thereof in accordance with local practice, and (C) with respect to
all other Assets, such good and sufficient instruments of contribution,
assignment, conveyance, transfer and delivery, in form and substance reasonably
satisfactory to the appropriate Transferor and Transferee, as shall be necessary
to vest in such Transferee, all of the Transferor's right, title and interest in
and to any such Assets, (ii) the assumption of the Liabilities contemplated
pursuant to Section 2.03 hereof shall be effected by delivery by the Party
assuming such Liability to the Party which is the obligor under such Liability,
of such good and sufficient instruments of assumption, in form and substance
reasonably satisfactory to such two Parties, as shall be necessary for the
assumption of such Liabilities. Each Party hereto also agrees to deliver to each
other Party hereto such other documents, instruments, certificates and
agreements as may be reasonably requested by any such other Party hereto in
connection with the transactions contemplated hereby and to take such further
action as may be reasonably necessary to carry out the provisions hereof,
including appropriate transfer instruments if an Apparel Fabrics Asset,
Nonwovens Asset or DIFCO Asset is inadvertently transferred to the incorrect
Transferee. Notwithstanding any provision to the contrary contained in this
Agreement, in the event and to the extent that there is any conflict between the
provisions of this Agreement and the provisions of any of the instruments of
transfer or assumption referred to in this Section 2.04, the provisions of this
Agreement shall prevail and govern.
(b) To the extent that any transfers contemplated hereby are not
consummated prior to or at the Break-Up Time, the Parties hereto covenant and
agree to take all actions reasonably necessary or appropriate to complete such
transfers as promptly thereafter as shall be practicable, it nonetheless being
understood and agreed to by each of the Parties that, subject to Section 2.07,
no Party shall be liable in any manner to any Person who is not a Party to this
Agreement for any failure of any Party of the transfers contemplated by this
Article 2 to be consummated on or subsequent to the Closing Date, whether or not
all of the Assets (including capital stock) to be transferred or the Liabilities
to be assumed pursuant to this Agreement shall have been legally transferred to
or assumed by the relevant Transferee. The Parties agree that as of the Break-Up
Time (a) G&L and PGI shall have, and shall be deemed to have acquired, complete
and sole beneficial ownership over all of the Apparel Fabrics Business (in the
case of G&L) and the Nonwovens and DIFCO Businesses (in the case of PGI),
respectively (including the Apparel Fabrics Assets, the Nonwovens Assets, the
DIFCO Assets, and their respective allocations of the Split Assets and the
Proportional Assets, as applicable), together with all of the rights, powers and
privileges incident thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement and the other Transaction Agreements all of the
Apparel Fabrics Liabilities (in the case of G&L), the Nonwovens and DIFCO
Liabilities (in the case of PGI), and their respective allocations of Split
Liabilities and the Proportional Liabilities, as applicable, and all of duties,
obligations and responsibilities incident thereto.
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Section 2.05. FINAL TAKE-UP AND WINDING UP. On and subject to the terms
and conditions of this Agreement, the Parties will consummate the following
transactions on the Closing Date, in the immediate order of succession as
listed:
(a) DTA shall have acquired or acquire the remaining outstanding
566,199 common shares and 16 First Preferred shares of Dominion not owned by DTA
pursuant to a transaction in accordance with Section 206 of the Canadian
Business Corporation Act.
(b) DTA shall have made or make an election under Section 338 of the
Code with respect to the acquisition of the Dominion shares. DTA shall have
caused or cause each Subsidiary of Dominion, other than DT (USA) and each
Subsidiary directly held by DT (USA), to make a similar election under Section
338 of the Code.
(c) Pursuant to the terms of the 2003 Tender Offer and 2006 Tender
Offer, DT (USA) shall accept for purchase all 2003 Notes and 2006 Notes validly
tendered and not revoked as of the expiration date of each offer, and the
supplemental indentures (as described in the consent solicitations forming a
part of the 2003 Tender Offer and 2006 Tender Offer) shall become effective on
the terms set forth therein.
(d) PGI shall loan DTA [*] in exchange for a note from DTA; immediately
thereafter, DTA shall redeem the outstanding Second Preferred shares for [*]
(CDN [*]).
(e) DTA shall repay [*] plus accrued and unpaid interest, to The Chase
Manhattan Bank with respect to the DTA senior credit facility.
(f) DTA shall cause Dominion to, and Dominion shall, undergo a "winding
up" pursuant to which all Assets of Dominion shall be transferred to DTA and all
Liabilities of Dominion shall be assumed by DTA, and all of the outstanding
common shares and First Preferred shares of Dominion held by DTA shall be
redeemed.
(g) DTA shall contribute the DIFCO Assets as a capital contribution to
DIFCO MergerCo in exchange for 100 common shares and 100 preferred shares of
DIFCO MergerCo and the assumption by DIFCO MergerCo of the DIFCO Liabilities and
a note issued to DTA for [*].
(h) DTA shall contribute all Apparel Fabrics Assets directly owned by
DTA and immediately prior thereto used in the operation of the Swift Denim
division of Dominion as a capital contribution to SD MergerCo in exchange for
1000 common shares of SD MergerCo and the assumption by SD MergerCo of all
Apparel Fabrics Liabilities attributable to, arising out of or otherwise related
to the operation of the Swift Denim division or the Assets contributed to SD
MergerCo.
[*] Confidential Portions Omitted Where Indicated and Filed Separately with the
Commission.
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Section 2.06. TRANSFER OF CAPITAL STOCK AND ASSETS; CERTAIN OTHER
TRANSACTIONS. On and subject to the terms and conditions of this Agreement,
following the actions to be taken in Section 2.05, the Parties will consummate
the following transactions, in the immediate order of succession as listed:
(a) Pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(a), PGI shall purchase all of the outstanding shares of
capital stock of DIFCO MergerCo from DTA for total consideration of [*] cash and
the note issued by DIFCO MergerCo to DTA for an additional [*].
(b) DTA shall repay intercompany debt of [*] to DomTex (Asia) and [*]
to DomTex B.V.
(c) Pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(c), DTA shall transfer to G&L all of the outstanding shares
of capital stock of DomTex (Asia), valued at [*], in partial satisfaction of the
G&L Contribution Note.
(d) Pursuant to the Stock Sale Agreements between such Parties attached
hereto as Annexes 2.06(d)(1) and 2.06(d)(2), Albuma shall transfer to DomTex
B.V. all of its shares of capital stock of Klopman International SpA
(representing a 26% interest) for total consideration of [*], and Albuma shall
transfer to DomTex B.V. all of its shares of capital stock of Swift Textiles
France S.A. (representing a 50% interest) for total consideration of [*].
(e) PGI shall loan Albuma [*] in exchange for a note; immediately
thereafter, pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(e), DomTex B.V. shall transfer to Albuma S.A. all of its
shares of capital stock of Dominion Textile France S.a.r.L. for [*].
(f) PGI shall lend Chicopee Holdings, B.V. [*] in exchange for a note;
immediately thereafter, pursuant to the Stock Sale Agreements between such
Parties attached hereto as Annexes 2.06(f)(1) and 2.06(f)(2), Chicopee Holdings,
B.V. shall acquire all of the outstanding shares of Nordlys UK Ltd. from DomTex
B.V. for [*], and Chicopee Holdings, B.V. shall acquire all of the outstanding
shares of Geca-Tapes B.V. from DomTex B.V. for [*].
(g) PGI shall purchase from DomTex B.V. [*] of outstanding indebtedness
owed by Nordlys S.A. and Geca-Tapes B.V. to DomTex B.V. Pursuant to the Consent
attached hereto as Exhibit D, this indebtedness is being transferred in the
presence of an authorized representative of Nordlys S.A.
(h) DomTex B.V. shall lend [*] to DomTex (Asia) in exchange for a note;
immediately thereafter, DomTex (Asia) shall repay to DT (USA) a total of [*]
(representing principal and accrued interest), including [*] withholding taxes
to be forwarded to Singapore taxing authorities, with respect to the outstanding
intercompany convertible debt instruments (original aggregate principal amount
of [*]). [*] Confidential Portions Omitted Where Indicated and Filed Separately
with the Commission.
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(i) DT (USA) shall make a capital contribution of all intercompany
debts owed to it by its wholly-owned Subsidiary, Swift Textiles Inc., to the
capital of Swift Textiles Inc.
(j) Pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(j), G&L shall purchase all of the outstanding shares of
capital stock of DT (USA) Exports Inc. and all of the outstanding shares of
capital stock of Swift Textiles Inc. from DT (USA) for total consideration of
[*].
(k) Pursuant to the terms of the 2003 Tender Offer and 2006 Tender
Offer, DT (USA) shall forward [*] to the Depositary of the 2003 and 2006 Tender
Offers in respect of payment for all of the 2003 Notes and 2006 Notes previously
accepted for purchase; immediately thereafter, DT (USA) shall loan PGI [*] (in
exchange for an intercompany note).
(l) Pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(l), DTA shall transfer to PGI all of the outstanding shares
of capital stock of DT (USA), valued at [*], in full satisfaction of its note
owed to PGI issued pursuant to Section 2.05(d).
(m) Pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(m), DTA shall transfer to PGI all of the outstanding shares
of capital stock of Dominion Textile Mauritius, Inc. for total consideration of
[*].
(n) Pursuant to the Stock Sale Agreement between such Parties attached
hereto as Annex 2.06(n), DTA shall transfer to G&L all of the outstanding shares
of common stock of SD MergerCo for total consideration of [*], comprised of [*]
in cash and full satisfaction of the [*] outstanding balance of the G&L
Contribution Note.
(o) G&L shall purchase from DT (USA) the remainder of the outstanding
convertible note issued by DomTex (Asia) to DT (USA) (original aggregate
principal amount of [*]) for [*].
(p) DT (USA) shall repay [*] in indebtedness to DTA.
(q) DTA shall repay the PGI Contribution Note, the ZBH Contribution
Note and the InterTech Contribution Note, each with accrued but unpaid interest.
(r) DTA shall pay transaction related and other expenses.
(s) DTA shall redeem the 28 common shares of DTA held by InterTech for
total consideration of [*] (CDN [*]).
Section 2.07. CONSENTS; NONASSIGNABLE CONTRACTS. Notwithstanding
anything herein to the contrary, this Agreement shall not constitute an
agreement to assign any Contract or Asset if an assignment or attempted
assignment of the same without the consent or approval of another Person
[*] Confidential Portions Omitted Where Indicated and Filed Separtely with the
Commission.
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would constitute a breach thereof or in any way impair the rights of a Party
thereunder. Each Party hereby agrees to use commercially reasonable efforts to
obtain (or cause its Subsidiaries to obtain) any consent or approval required to
assign any Contract or Asset pursuant to this Agreement; provided, however, that
the transferring Party shall not be obligated to pay any consideration therefor
(except for filing fees and other administrative charges) to the third party
from whom such consent or approval is requested. If any such consent is not
obtained or if an attempted assignment would be ineffective or would impair such
Party's rights under any such Contract or Asset so that the Party entitled to
the benefits of such purported transfer (the "Intended Transferee") would not
receive all such rights, then (x) the Party purporting to make such transfer
(the "Intended Transferor") shall use commercially reasonable efforts to provide
or cause to be provided to the Intended Transferee, to the extent permitted by
law, the benefits of any such Contract or Asset and the Intended Transferor
shall promptly pay or cause to be paid to the Intended Transferee when received
all moneys received by the Intended Transferor with respect to any such Contract
or Asset and (y) in consideration thereof the Intended Transferee shall pay,
perform and discharge on behalf of the Intended Transferor all of the Intended
Transferor's Liabilities thereunder in a timely manner and in accordance with
the terms thereof. In addition, the Intended Transferor shall take such other
actions as may reasonably be requested by the Intended Transferee in order to
place the Intended Transferee, insofar as reasonably possible, in the same
position as if such Contract or Asset had been transferred as contemplated
hereby and so all the benefits and burdens relating thereto, including
possession, use, risk of loss, potential for gain and dominion, control and
command, shall inure to the Intended Transferee. If and when such consents and
approvals are obtained, the transfer of the applicable Contract or Asset shall
be effected in accordance with the terms of this Agreement.
Section 2.08. OTHER AGREEMENTS.
(a) Within 90 days after the execution of this Agreement (and the
related Stock Sale Agreements attached hereto), the Parties hereto shall enter
into agreements, effective as of the BreakUp Time, embodying certain
relationships among such Parties after the Closing Date with respect to the
Apparel Fabrics Business, the Nonwovens Business and the DIFCO Business,
including the Tax Matters Agreement, the Employee Matters Agreement, the
Intellectual Property Agreements, the Insurance Matters Agreement, the
Transition Services Agreement and the Split Assets and Liabilities Agreement
(such agreements collectively referred to as the "Ancillary Separation
Agreements"). Each Party agrees to work in good faith to negotiate and execute
the Ancillary Separation Agreements, as soon as practicable following the
Closing Date, on terms consistent with those set forth and contemplated by this
Agreement and the Acquisition Agreement.
(b) Prior to the time at which the pertinent agreement described in
subsection (a) of this Section 2.08 has been executed, neither G&L nor PGI shall
take any material action (including the disposition of any such Assets or the
resolution, defense or settlement of any such Liabilities) with respect to any
Split Assets or Split Liabilities, Proportional Assets or Proportional
Liabilities, any Tax matters, Employee Benefit Plan matters, Intellectual
Property matters or intercompany transitional services without the express
written consent of G&L (in the case of PGI) or PGI (in the case of G&L). With
respect to any third party claims arising out of or relating to any Split
Assets, Split Liabilities, Proportional Assets, or Proportional Liabilities, PGI
and G&L agree to cooperate in good
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faith with respect to the resolution, defense and/or settlement of such claims,
on terms and conditions consistent with Section 9.03 hereof.
Section 2.09. INTERCOMPANY BALANCE AND EXPENSE TRUE-UP.
(a) PGI and G&L each acknowledge that certain intercompany account
balances incorporated into the calculations of certain dollar amounts in this
Agreement (including the calculation of the Purchase Price herein) are based on
estimated balances as of December 31, 1997. Within 90 days from the Closing
Date, each of PGI and G&L shall ascertain the actual intercompany account
balances as of the Closing Date for each of their respective Subsidiaries as
they relate to the acquired Businesses, and shall work in good faith to settle
amounts owed between such Parties as a result of any differences in such
accounts. For the avoidance of doubt, no settlement of such balances shall
affect the agreement of the parties that after giving effect to Section 2.09(b),
57.4% of the Cash shall be the Assets of G&L (or its Subsidiaries and
Investments) and 42.6% of the Cash shall be the Assets of PGI (or its
Subsidiaries).
(b) Within 45 days of the Closing Date, (i) PGI and G&L shall calculate
and submit to each other final determinations of all fees and expenses
associated with the transactions contemplated herein and (ii) PGI and G&L shall
make a joint determination of Cash. To the extent that either (x) G&L (together
with its Subsidiaries and Investments) shall have received in excess of 57.4% of
Cash or (y) PGI (together with its Subsidiaries and Investments) shall have
received in excess of 42.6% of Cash, the party receiving such excess amount
shall make a cash payment to the other party so that following such payment G&L
(together with its Subsidiaries and Investments) shall have received 57.4% of
Cash and PGI (together with its Subsidiaries and Investments) shall have
received 42.6% of Cash. To the extent that such expenses constitute Split
Liabilities or Proportional Liabilities or otherwise affect the relative
purchase price to be paid by each Party (as contemplated herein and in the
Acquisition Agreement), PGI and G&L shall work in good faith to settle the net
difference resulting between the parties by virtue of such expenses pursuant to
the terms and conditions of this Agreement.
(c) In the event that any dispute arises with respect to payments to be
made pursuant to Section 2.09(a) or (b), the Parties shall resolve such dispute
in accordance with Section 10.08.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.01. REPRESENTATIONS AND WARRANTIES OF G&L. G&L represents and
warrants to PGI that the statements contained in this Section 3.01 are true and
correct as of the date hereof.
(a) Organization. G&L is a corporation organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation.
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(b) Authorization of Transaction. G&L and its Subsidiaries have full
power and authority pursuant to their corporate charters to execute and deliver
this Agreement and the other Transaction Agreements, as applicable, and to
perform their obligations thereunder. Each of this Agreement and the other
Transaction Agreements constitutes or will constitute the valid and legally
binding obligation of G&L (or any Subsidiary a party thereto), enforceable in
accordance with its respective terms and conditions. G&L need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by the Transaction Agreements, except such as have
been given, made or obtained.
(c) Sufficient Funds. G&L and its Subsidiaries have cash available,
and/or has obtained binding commitments from one or more financial institutions,
in amounts sufficient to pay on the Closing Date the purchase price for the
Apparel Fabrics Business as provided in Article 2.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which G&L (or any of its Subsidiaries) is subject or any provision of
their charter or bylaws or (B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any Party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
G&L (or any of its Subsidiaries) is a Party or by which it is bound or to which
any of its assets is subject, in each case except as would not have a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(e) Investment. Neither G&L nor its Subsidiaries are acquiring the
shares of capital stock of any of the Apparel Fabrics Subsidiaries with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
Section 3.02. REPRESENTATIONS AND WARRANTIES OF PGI. PGI represents and
warrants to G&L that the statements contained in this Section 3.02 are true and
correct as of the date hereof.
(a) Organization. PGI and DTA are corporations organized, validly
existing and in good standing under the laws of the jurisdiction of their
incorporation.
(b) Authorization of Transaction. PGI and its Subsidiaries have full
power and authority pursuant to their corporate charters to execute and deliver
this Agreement and the other Agreements and to perform their obligations
thereunder. Each of this Agreement and the other Transaction Agreements
constitutes or will constitute the valid and legally binding obligation of PGI
and DTA (and any other Subsidiaries a party thereto), enforceable in accordance
with its respective terms and conditions. Neither PGI nor DTA need give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by the Transaction Agreements, except such as have
been given, made or obtained.
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(c) Sufficient Funds. PGI and its Subsidiaries have cash available,
and/or have obtained binding commitments from one or more financial
institutions, in amounts sufficient to pay on the Closing Date the purchase
price for the Nonwovens Business as provided in Article 2.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which PGI (or any of its Subsidiaries) is subject or any provision of
their charter or bylaws or (B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any Party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
PGI (or any of its Subsidiaries) is a Party or by which it is bound or to which
any of its assets is subject, in each case except as would not have a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(e) Investment. Neither PGI nor any of its Subsidiaries are acquiring
the shares of capital stock of any of the Nonwovens Subsidiaries with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
Section 3.03. ASSETS AND CAPITAL STOCK TRANSFERRED "AS IS."
(a) The Parties understand and agree that the Parties are not in this
Agreement or in any other agreement or document contemplated by this Agreement
(including the other Transaction Agreements) representing or warranting in any
way (a) as to the value or freedom from encumbrance of, or any other matter
concerning, any Assets or (b) as to the legal sufficiency to convey title to any
of the Assets by the execution and delivery of this Agreement and the Stock Sale
Agreements attached hereto, IT BEING AGREED AND UNDERSTOOD THAT ALL SUCH ASSETS
ARE BEING TRANSFERRED "AS IS," "WHERE IS," AND "WITH ALL FAULTS" and that each
Party shall bear the economic and legal risk that any conveyances of such assets
shall prove to be insufficient or that a Party's title to any such assets shall
be other than good and marketable and free from encumbrances. Similarly, the
Parties understand and agree that the Parties are not in this Agreement or in
any other agreement or document contemplated by this Agreement, representing or
warranting in any way that the obtaining of the consents or approvals, the
execution and delivery of any amendatory agreements and the making of the
filings and applications contemplated by this Agreement shall satisfy the
provisions of all applicable agreements or the requirements of all applicable
laws or judgments, it being understood and agree that, subject to Section 2.07
hereof, each Party shall bear the economic and legal risk that any necessary
consents or approvals are not obtained or that any requirements of law or
judgments are not complied with.
(b) Each Party acknowledges that it has had sufficient opportunity to
make whatever investigation it has deemed necessary and advisable for purposes
of determining whether or not to enter into the Transaction Agreements and
acknowledges and agrees that, EXCEPT TO THE EXTENT OF THE EXPRESS
REPRESENTATIONS, WARRANTIES, AGREEMENTS AND
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COVENANTS CONTAINED IN THIS AGREEMENT, SUCH PARTY IS ACQUIRING THE APPAREL
FABRICS BUSINESS OR THE NONWOVENS AND DIFCO BUSINESSES, AS APPLICABLE, IN
RELIANCE UPON ITS OWN INVESTIGATION AND WITHOUT ANY REPRESENTATION OR WARRANTY
OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR ANY OTHER IMPLIED
WARRANTIES WHATSOEVER BY ANY OTHER PARTY TO THIS AGREEMENT.
ARTICLE 4
CONDITIONS
Section 4.01. CONDITIONS TO THE OBLIGATIONS OF G&L. The obligations of
G&L (and its Subsidiaries) to consummate the transactions contemplated hereby
shall be subject to the condition that each of the conditions set forth below
shall have been satisfied or waived by the Parties for whose benefit such
condition exists.
(a) the representations and warranties set forth in Section 3.02 shall
be true and correct in all material respects at and as of the Closing Date;
(b) provisions shall have been made for the G&L Contribution Note to be
repaid in full by DTA on the Closing Date;
(c) there shall not be any injunction, judgment, order, decree, ruling,
or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement or the other Transaction Agreements;
(d) all applicable waiting periods (and any extensions thereof) under
the HSR Act and any applicable European or national merger regulations shall
have expired or otherwise been terminated;
(e) provisions shall have been made for the purchase by DT (USA) on the
Closing Date of all 2003 Notes and 2006 Notes validly tendered in the 2003
Tender Offer and the 2006 Tender Offer; and
(f) provisions shall have been made for the full repayment of all
senior indebtedness of Dominion and its Subsidiaries, and for the redemption of
all Second Preferred shares of Dominion by DTA on the Closing Date.
Section 4.02. CONDITIONS TO THE OBLIGATIONS OF PGI. The obligations of
PGI (and its Subsidiaries) to consummate the transactions contemplated hereby
shall be subject to the condition that each of the conditions set forth below
shall have been satisfied or waived by the Party for whose benefit such
condition exists.
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(a) the representations and warranties set forth in Section 3.01 shall
be true and correct in all material respects at and as of the Closing Date;
(b) provisions shall have been made for the PGI Contribution Note, the
ZBH Contribution Note and the InterTech Contribution Note to be repaid in full
by DTA on the Closing Date;
(c) there shall not be any injunction, judgment, order, decree, ruling,
or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement or the other Transaction Agreements;
(d) all applicable waiting periods (and any extensions thereof) under
the HSR Act and any applicable European or national merger regulations shall
have expired or otherwise been terminated;
(e) provisions shall have been made for the purchase by DT (USA) on the
Closing Date of all 2003 Notes and 2006 Notes validly tendered in the 2003
Tender Offer and the 2006 Tender Offer; and
(f) provisions shall have been made for the full repayment of all
senior indebtedness of Dominion and its Subsidiaries, and for the redemption of
all Second Preferred shares of Dominion by DTA on the Closing Date.
ARTICLE 5
DISCLOSURE AND ACCESS TO INFORMATION
Section 5.01. RESTRICTIONS ON DISCLOSURE OF INFORMATION.
(a) Without limiting its obligations under any other agreement between
or among the Parties hereto and/or any of their respective Affiliates relating
to confidentiality, subject to Section 5.02, each of the Parties hereto agrees
that it shall not, and shall not permit any of its Affiliates or Representatives
to, disclose any Confidential Information to any Person, other than to such
Affiliates, Representatives or lenders and other financing parties on a
need-to-know basis in connection with the purpose for which the Confidential
Information was originally disclosed. Notwithstanding the foregoing, each of the
Parties hereto and its respective Affiliates and Representatives may disclose
such Confidential Information, and such Information shall no longer be deemed
Confidential Information, to the extent that such Party can demonstrate that
such Confidential Information is or was (i) available to such Party (A) not as a
result of the Acquisition Relationship, and (B) outside the context of the Prior
Relationship, on a nonconfidential basis prior to its disclosure by the other
Party, (ii) in the public domain other than by the breach of this Agreement or
by breach of any other agreement between or among the Parties hereto and/or any
of their respective Affiliates relating to confidentiality, or (iii) lawfully
acquired outside the context of the Acquisition Relationship and the Prior
Relationship on a nonconfidential basis or independently developed by, or on
behalf of, such Party by Persons who do not have access to, or descriptions of,
any such Confidential Information.
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(b) Each of the Parties hereto shall maintain, and shall cause their
respective Affiliates to maintain, policies and procedures, and develop such
further policies and procedures as shall from time to time become necessary or
appropriate, to ensure compliance with this Section 5.01.
(c) Notwithstanding any provision in this Agreement to the contrary,
this Section 5.01 shall not preclude the parties hereto from including any
Confidential Information in (i) any filings to be made pursuant to the
Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934,
as amended, or (ii) any filings, correspondence or other information to be
provided to any Tax authority; provided, that (i) only such portion as is
reasonably necessary to be disclosed shall be disclosed, and (ii) the disclosing
party shall give the other Party five business days prior notice of any
disclosure, providing the Owning Party with a copy of the Confidential
Information to be disclosed at such time.
Section 5.02. LEGALLY REQUIRED DISCLOSURE OF CONFIDENTIAL INFORMATION.
If any of the Parties to this Agreement or any of their respective Affiliates or
Representatives becomes legally required to disclose any Confidential
Information, such disclosing Party shall promptly notify the Party owning the
Confidential Information (the "Owning Party") and shall use all commercially
reasonable efforts to cooperate with the Owning Party so that the Owning Party
may seek a protective order or other appropriate remedy and/or waive compliance
with this Section 5.02. All expenses incurred by the disclosing Party in seeking
a protective order or other remedy shall reasonably be borne by the Owning
Party. If such protective order or other remedy is not obtained, or if the
Owning Party waives compliance with this Section 5.02, the disclosing Party or
its Affiliate or Representative, as applicable, shall (a) disclose only that
portion of the Confidential Information which its legal counsel advises it is
compelled to disclose or else stand liable for contempt or suffer other similar
significant corporate censure or penalty, (b) use all commercially reasonable
efforts to obtain reliable assurance requested by the Owning Party that
confidential treatment will be accorded such Confidential Information, and (c)
promptly provide the Owning Party with a copy of the Confidential Information so
disclosed, in the same form and format so disclosed, together with a description
of all Persons to whom such Confidential Information was disclosed.
Section 5.03. ACCESS TO INFORMATION.
(a) Until the ten-year anniversary of the Closing Date, each of the
Parties hereto shall cooperate with and afford, and shall cause their respective
Affiliates and Representatives to cooperate with and afford, to the other Party
reasonable access upon reasonable advance written request to all Information
(other than Information protected from disclosure by the attorney client
privilege or work product doctrine) created prior to the Break-Up within such
Party's (or its Affiliates' or Representatives') possession. Access to the
requested information shall be provided so long as it relates to the requesting
Party's (the "Requestor") business, assets or liabilities, and access is
reasonably required by the Requestor as a result of the Parties' Prior
Relationship for purposes of auditing, accounting, claims or litigation (except
for claims or litigation between the Parties hereto), employee benefits,
regulatory or tax purposes or fulfilling disclosure or reporting obligations
including, without limitation, Information reasonably necessary for the
preparation of reports required
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by or filed under the Securities Exchange Act of 1934, as amended, with respect
to any period entirely or partially prior to the Closing Date.
(b) Access as used in this Section 5.03 shall mean the obligation of a
Party in possession of Information (the "Possessor") requested by the Requestor
to exert its reasonable best efforts to locate all requested Information that is
owned and possessed by Possessor, its Affiliates or Representatives. The
Possessor, at its own expense, shall conduct a diligent search designed to
identify all requested Information and shall collect all such Information for
inspection by the Requestor during normal business hours at the Possessor's
place of business. Subject to confidentiality and/or security provisions as the
Possessor may reasonably deem necessary, the Requestor may have all requested
Information duplicated at Requestor's expense. Alternatively, the Possessor may
choose to deliver, at its own expense, all requested Information to the
Requestor in its original form. If so, the Possessor shall notify the Requestor
in writing at the time of delivery if such Information is to be returned to the
Possessor. In such case, the Requestor shall return such Information when no
longer needed to the Possessor at the Possessor's expense.
(c) In connection with providing Information pursuant to this Section
5.03, each of the Parties hereto shall upon the request of the other Party make
available its respective employees (and those of their respective Affiliates and
Representatives) to the extent that they are reasonably necessary to discuss and
explain all requested Information with and to the requesting Party.
(d) During the ten-year period described herein, the Parties shall
maintain Information in their possession at the Closing Date in accordance with
their respective corporate records retention policies; provided, however, that
prior to disposing of any Information in accordance with such policies, the
Parties hereto shall provide written notice to the other Party of its intent to
dispose of such Information and shall provide such other Party the opportunity
to take ownership and possession of such Information (at such other Party's sole
expense) within 90 days after such notice is delivered. If such other Party does
not confirm its intention in writing to take ownership and possession of such
Information within such 90-day period, the Party who possesses the Information
may proceed with the disposition of such Information. Written notice of intent
to dispose of Information shall include a description of the Information in
detail sufficient to allow the other Party to reasonably assess its potential
need to retain such Information.
Section 5.04. PRODUCTION OF WITNESSES. Until the six-year anniversary
of the Closing Date, each of the Parties hereto shall use all commercially
reasonable efforts, and shall cause each of their respective Affiliates to use
all commercially reasonable efforts, to make available to each other, upon
written request, its directors, officers, employees and other Representatives as
witnesses to the extent that any such Person may reasonably be required (giving
consideration to the business demands upon such Persons) in connection with any
legal, administrative or other proceedings in which the requesting Party may
from time to time be involved; provided, however, that with respect to any legal
or administrative proceedings relating to the tax liability of any of the
Parties hereto or any of their respective Affiliates, each of the Parties hereto
shall, and shall cause each of their respective Affiliates to, make their
directors, officers, employees and other Representatives available as witnesses
until
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such time as the statute of limitations for all tax years prior to and including
the year in which the Break-Up is consummated have expired.
Section 5.05. REIMBURSEMENT. Each Party to this Agreement providing
access, information or witnesses to another Party pursuant to Sections 5.03 or
5.04 shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payment for all reasonable out-of-pocket costs and expenses
(excluding allocated compensation, salary and overhead expense) as may be
reasonably incurred in providing such information or witnesses.
ARTICLE 6
INSURANCE MATTERS
Section 6.01. COOPERATION IN INSURANCE MATTERS. Prior to the Break-Up,
Dominion has maintained insurance programs which provide certain coverages for a
number of entities, including Dominion and certain or all of the Apparel Fabrics
Subsidiaries and Nonwovens Subsidiaries, their respective Affiliates, their
officers and directors, and other insured Parties. From and after the Break-Up
Time, except as provided herein, G&L and PGI shall be responsible for obtaining
and maintaining their own insurance programs with respect to the Businesses
acquired pursuant to this Agreement. Notwithstanding the foregoing, (1) each
Party, upon the request of any other Party, shall use commercially reasonable
efforts to assist such Party in the transition to its own separate insurance
coverage from and after the Break-Up Time, and shall provide such Party with any
information that is in its possession and is reasonably available and necessary
to either obtain such insurance coverage or to assist such Party in preventing
gaps in its insurance coverages, (2) each Party on the request of any other
Party shall cooperate with and use commercially reasonable efforts to assist
such Party in the collection of proceeds from insurance claims made under any
insurance policy for the benefit of any insured Party, and (3) neither G&L nor
PGI, nor any of their Affiliates, shall take any action that would jeopardize or
otherwise interfere with any Party's ability to collect any proceeds payable
pursuant to any insurance policy.
Section 6.02. COLLECTION OF INSURANCE PROCEEDS. In the event that
either G&L or PGI (or any of their respective Subsidiaries) collects insurance
proceeds with respect to a claim relating to Assets other than those acquired
with such Party's purchase of its respective Business or Businesses pursuant to
this Agreement, such Party shall promptly forward the portion of the proceeds of
the claim that relate to such nonacquired assets to the other Party. If the
claim results in proceeds with respect to any Proportional Assets or any
Proportional Liability, the proceeds shall be allocated 57.4% in favor of G&L
and 42.6% in favor of PGI. If the claim results in proceeds with respect to any
Split Assets or Split Liability, the proceeds shall be split 50/50 between G&L
and PGI.
Section 6.03. OTHER INSURANCE MATTERS. In addition to the provisions
set forth in this Agreement, the rights and obligations of each of the Parties
with respect to insurance matters, and the procedures for submitting claims with
respect to events, acts or omissions first occurring prior to the Break-Up Time,
shall be governed by the Insurance Matters Agreement.
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ARTICLE 7
EMPLOYEES; INTERCOMPANY ARRANGEMENTS
Section 7.01. EMPLOYEE MATTERS.
(a) Effective as of the Break-Up Time, (i) those Apparel Fabrics
Employees who are employed by DTA or any of its Subsidiaries in the Apparel
Fabrics Business immediately after the Winding Up and prior to the Break-Up
Time, shall become employed by G&L or any of its Subsidiaries and (ii) those
Nonwovens Employees and DIFCO Employees who are employed by DTA or any of its
Subsidiaries in the Nonwovens and DIFCO Businesses immediately after the Winding
Up and prior to the Break-Up Time shall become employed by PGI or its
Subsidiaries.
(b) In addition to the provisions set forth in this Agreement, the
rights and obligations of the Parties with respect to (i) Employee Benefit Plans
for the benefit of employees and former employees (and their beneficiaries) of
Dominion and its Subsidiaries (including the Apparel Fabric Subsidiaries, the
Nonwovens Subsidiaries and DIFCO), (ii) all Contracts relating to medical,
dental and other services entered into by Dominion or any of such Subsidiaries
existing for the benefit of their employees, and (iii) any other employee
matters, shall be set forth in the Employee Matters Agreement.
(c) The parties hereby acknowledge that on January 27, 1998, G&L made a
payment of $3 million to the Pension Benefit Guaranty Corporation in connection
with Liabilities of certain Employee Benefits Plans that are specifically
identifiable with the Apparel Fabrics Business. In the event that any portion of
the Liability in respect of which such $3 million payment was made to the PBGC
is hereafter determined to be a Split Liability or Proportional Liability, then
such payment shall be taken into account in the calculation of Split Liabilities
and/or Proportional Liabilities, as the case may be.
Section 7.02. INTERCOMPANY ARRANGEMENTS.
(a) Except as specifically provided by this Agreement or the other
Transaction Agreements, to the extent that DTA, Dominion, any Apparel Fabric
Subsidiary, any Nonwovens Subsidiary or DIFCO are providing or selling, as of
the Closing Date, to each other, or charging each other for, any services or
products pursuant to any written agreement or arrangement, then such agreement
or arrangement shall not be deemed altered, amended or terminated as a result of
this Agreement or the consummation of the transactions contemplated hereby;
provided; however, that following the Closing Date, any services and products to
be provided which were not subject to a written agreement or arrangement shall
be provided only on an arm's length basis. Nothing in this Section 7.02 shall
require or authorize any Party to provide and charge each other for any services
other than on the terms and conditions specified herein or in the Ancillary
Separation Agreements.
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(b) If not fully settled pursuant to the actions set forth in this
Article 2, the Parties hereto agree to take all action as may be necessary in
order to eliminate (whether through repayment, forgiveness or otherwise) all
intercompany balances outstanding as of the Break-Up Time between any of the
Parties within 60 days of the Closing Date.
Section 7.03. PRODUCTS, SUPPLIES AND DOCUMENTS. Each Party shall have
the right to use, for a period not to exceed six months following the Closing
Date, existing products, supplies and documents (including purchase orders,
forms, labels, shipping materials, catalogues, sales brochures, operating
manuals, instructional documents and similar materials, and advertising
material) being transferred to it pursuant to this Agreement which have
imprinted thereon any Intellectual Property not transferred to such Party as
part of such Party's respective acquired Business; provided, that each Party
agrees (i) to use only those such supplies and documents existing in inventory
as of the Closing Date, (ii) to conspicuously state on such supplies and
documents when used that they are no longer documents of the Party to whom such
Intellectual Property refers (or otherwise identifies), and (iii) to not order
or utilize in any manner any additional supplies or documents containing any
such Intellectual Property owned by another Party to this Agreement.
ARTICLE 8
SURVIVAL
Section 8.01. NO SURVIVAL OF REPRESENTATIVES AND WARRANTIES. None of
the representations and warranties of this Agreement shall survive the Closing
Date.
Section 8.02. SURVIVAL OF AGREEMENTS.
(a) Except as otherwise contemplated by this Agreement, all covenants
and agreements of the Parties contained in this Agreement shall survive the
Closing Date.
(b) The obligations of the Parties under this Agreement shall survive
the sale or other transfer by any of them of any Assets or businesses or the
assignment by any of them of any Liabilities. To the extent any Party transfers
to another Party other than a Subsidiary of such Party any of Apparel Fabric
Liabilities (in the case of G&L) or the Nonwovens or DIFCO Liabilities (in the
case of PGI), except for amounts of such Liabilities which are not material
individually or in the aggregate, such Party will cause the transferee of such
Liabilities to assume specifically its obligations with respect thereto under
this Agreement and will cause such transferee to fulfill its obligations related
to such Liabilities. In the event the transferee of the such Liabilities does
not fulfill its obligations with respect thereto, the relevant Party previously
transferring such Liabilities shall fulfill their obligations with respect
thereto.
ARTICLE 9
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INDEMNIFICATION
Section 9.01. INDEMNIFICATION BY G&L. G&L shall indemnify, defend and
hold harmless PGI and its Subsidiaries, their respective successors-in-interest,
and each of their respective past and present Representatives (collectively, the
"PGI Indemnitees") against any losses, claims, damages, liabilities or actions,
arising, whether prior to or following the Break-Up, out of or in connection
with the Apparel Fabrics Liabilities (including in connection with any breach by
G&L or any of its Subsidiaries (including the Apparel Fabrics Subsidiaries) of
any terms of the Transaction Agreements), the Apparel Fabrics Assets or the
Apparel Fabrics Business, and G&L shall reimburse the PGI Indemnitees for any
legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action.
Section 9.02. INDEMNIFICATION BY PGI. PGI shall indemnify, defend and
hold harmless G&L and its Subsidiaries, their respective successors-in-interest,
and each of their respective past and present Representatives (collectively, the
"G&L Indemnitees") against any losses, claims, damages, liabilities or actions,
arising, whether prior to or following the Break-Up, out of or in connection
with the Nonwovens Liabilities or the DIFCO Liabilities (including in connection
with any breach by PGI or any of its Subsidiaries (including the Nonwovens
Subsidiaries and DIFCO MergerCo) of any terms of the Transaction Agreements),
the Nonwovens or DIFCO Assets, or the Nonwovens or DIFCO Businesses, and PGI
shall reimburse the G&L Indemnitees for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action.
Section 9.03. INDEMNIFICATION CONCERNING PROPORTIONAL LIABILITIES AND
SPLIT LIABILITIES.
(a) PGI shall indemnify, defend and hold harmless the G&L Indemnitees
against any losses (including reasonable legal fees and expenses), claims,
damages, liabilities or actions which may be incurred by the G&L Indemnitees,
whether prior to or following the Break-Up, which would be characterized as
Split Liabilities or Proportional Liabilities, in excess of (i) 50% of the
Aggregate Net Split Liabilities or (ii) 57.4% of the Aggregate Net Proportional
Liabilities, as the case may be.
(b) G&L shall indemnify, defend and hold harmless the PGI Indemnitees
against any losses, claims, damages, liabilities or actions which may be
incurred by the PGI Indemnitees, whether prior to or following the Break-Up,
which would be characterized as Split Liabilities or Proportional Liabilities,
in excess of (i) 50% of the Aggregate Net Split Liabilities or (ii) 42.6% of the
Aggregate Net Proportional Liabilities, as the case may be.
(c) For purposes of this Section 9.03 "Aggregate Net Split Liabilities"
means the aggregate net Split Liabilities after reducing such amount by the
aggregate amount of all Split Assets, and "Aggregate Net Proportional
Liabilities" means the aggregate net Proportional Liabilities after reducing
such amount by the aggregate amount of all Proportional Assets.
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Section 9.04. INDEMNIFICATION PROCEDURES.
(a) If any Indemnitee receives notice of the assertion of any
Third-Party Claim with respect to which an Indemnifying Party is obligated under
this Agreement to provide indemnification, such Indemnitee shall give such
Indemnifying Party notice thereof (together with a copy of such Third-Party
Claim, process or other legal pleading) promptly after becoming aware of such
Third- Party Claim; provided, however, that the failure of any Indemnitee to
give notice as provided in this Section 9.04 shall not relieve any Indemnifying
Party of its obligations under this Section 9.04, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third-Party Claim in reasonable detail.
(b) An Indemnifying Party, at such Indemnifying Party's own expense and
through counsel chosen by such Indemnifying Party (which counsel shall be
reasonably acceptable to the Indemnitee), may elect to defend any Third-Party
Claim. If an Indemnifying Party elects to defend a Third-Party Claim, then,
within ten Business Days after receiving notice of such Third-Party Claim (or
sooner, if the nature of such Third Party claim so requires), such Indemnifying
Party shall notify the Indemnitee of its intent to do so, and such Indemnitee
shall cooperate in the defense of such Third- Party Claim. Such Indemnifying
Party shall pay such Indemnitee's reasonable out-of-pocket expenses incurred in
connection with such cooperation. Such Indemnifying Party shall keep the
Indemnitee reasonably informed as to the status of the defense of such Third
Party Claim, and shall provide copies of documentation reasonably requested with
respect to such proceedings. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this Section
9.04 for any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof other than those expenses referred to in the
preceding sentence; provided, however, that such Indemnitee shall have the right
to employ one law firm as counsel, together with a separate local law firm in
each applicable jurisdiction ("Separate Counsel"), to represent such Indemnitee
in any action or group of related actions (which firm or firms shall be
reasonably acceptable to the Indemnifying Party) if, in such Indemnitee's
reasonable judgment at any time, either a conflict of interest between such
Indemnitee and such Indemnifying Party exists in respect of such claim, or there
may be defenses available to such Indemnitee which are different from or in
addition to those available to such Indemnifying Party and the representation of
both Parties by the same counsel would be inappropriate, and in that event (i)
the reasonable fees and expenses of such Separate Counsel shall be paid by such
Indemnifying Party (it being understood, however, that the Indemnifying Party
shall not be liable for the expenses of more than one Separate Counsel
(excluding local counsel) with respect to any Third-Party Claim and (ii) each of
such Indemnifying Party and such Indemnitee shall have the right to conduct its
own defense in respect of such claim. If an Indemnifying Party elects not to
defend against a Third-Party Claim, or fails to notify an Indemnitee of its
election as provided in this Section 9.04 within the period of ten Business Days
described above, the Indemnitee may defend, compromise, and settle such
Third-Party Claim and shall be entitled to indemnification hereunder (to the
extent permitted hereunder); provided, however, that no such Indemnitee may
compromise or settle any such Third-Party Claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, the Indemnifying Party shall
not, without the prior written consent of the Indemnitee,
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(i) settle or compromise any Third-Party Claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the delivery by
the claimant or plaintiff to the Indemnitee of a written release from all
liability in respect of such Third-Party Claim or (ii) settle or compromise any
Third-Party Claim in any manner that would be reasonably likely to have a
material adverse effect on the Indemnitee.
Section 9.05. CERTAIN LIMITATIONS.
(a) The amount of any indemnifiable losses or other liability for which
indemnification is provided under this Agreement shall be net of any amounts
actually recovered by the Indemnitee from third parties (including amounts
actually recovered under insurance policies) with respect to such indemnifiable
losses or other liability. Any Indemnifying Party hereunder shall be subrogated
to the rights of the Indemnitee upon payment in full of the amount of the
relevant indemnifiable loss. An insurer who would otherwise be obligated to pay
any claim shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provision hereof, have any subrogation
rights with respect thereto. If any Indemnitee recovers an amount from a third
party in respect of an indemnifiable loss for which indemnification is provided
in this Agreement after the full amount of such indemnifiable loss has been paid
by an Indemnifying Party or after an Indemnifying Party has made a partial
payment of such indemnifiable loss and the amount received from the third party
exceeds the remaining unpaid balance of such indemnifiable loss, then the
Indemnitee shall promptly remit to the Indemnifying Party the excess (if any) of
(A) the sum of the amount theretofore paid by such Indemnifying Party in respect
of such indemnifiable loss plus the amount received from the third party in
respect thereof, less (B) the full amount of such indemnifiable loss or other
liability.
(b) The amount of any loss or other liability for which indemnification
is provided under this Agreement shall be (i) increased to take account of any
net Tax cost incurred by the Indemnitee arising from the receipt or accrual of
an indemnification payment hereunder (i.e., grossed up for such increase) and
(ii) reduced to take account of any net Tax benefit realized by the Indemnitee
arising from incurring or paying such loss or other liability. In computing the
amount of any such Tax cost or Tax benefit, the Indemnitee shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt or accrual of any indemnification
payment hereunder or incurring or paying any indemnified loss. Any
indemnification payment hereunder shall initially be made without regard to this
Section 9.05(b) and shall be increased or reduced to reflect any such net Tax
cost (including gross-up) or net Tax benefit only after the Indemnitee has
actually realized such cost or benefit. For purposes of this Agreement, an
Indemnitee shall be deemed to have "actually realized" a net Tax cost or a net
Tax benefit to the extent that, and at such time as, the amount of Taxes payable
by such Indemnitee is increased above or reduced below, as the case may be, the
amount of Taxes that such Indemnitee would be required to pay but for the
receipt or accrual of the indemnification payment or the incurrence or payment
of such loss, as the case may be. The amount of any increase or reduction
hereunder shall be adjusted to reflect any Final Determination with respect to
the Indemnitee's liability for Taxes, and payments between such indemnified
Parties to reflect such adjustment shall be made if necessary.
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(c) Any indemnification payment made under this Agreement shall be
characterized for Tax purposes as if such payment were made immediately prior to
the Break-Up.
Section 9.06. EXCLUSIVITY OF TAX INDEMNIFICATION. Notwithstanding
anything in this Agreement to the contrary, the terms of the Tax Matters
Agreement shall govern the rights and obligations among the Parties with respect
to indemnification relating to Taxes.
ARTICLE 10
MISCELLANEOUS
Section 10.01. ENTIRE AGREEMENT. This Agreement, the Acquisition
Agreement, and the other Transaction Agreements collectively constitute the
entire agreement among the Parties with respect to the subject matter hereof and
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof. For the avoidance of
doubt, any references in the Acquisition Agreement to any proportional split of
Assets or Liabilities that was to be made 60% to the Apparel Fabrics Business
and 40% to the Nonwovens Business is hereby agreed to be 57.4% to the Apparel
Fabrics Business and 42.6% to the Nonwovens Business as a result of the DIFCO
Adjustment.
Section 10.02. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to any choice of law provision or rule (whether of the State of New York
or any other jurisdiction) that would cause the application of any jurisdiction
other than the State of New York.
Section 10.03. DESCRIPTIVE HEADINGS; CONSTRUCTION. The descriptive
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. The Parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation.
Section 10.04. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by telecopy with telephonic confirmation to the receiving party
followed by delivery by overnight courier, by express or overnight mail
delivered by a nationally recognized air courier (delivery charges prepaid), or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective Parties as follows:
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if to PGI:
c/o Polymer Group, Inc.
4838 Jenkins Avenue
N. Charleston, SC 29405
Attention: Jerry Zucker
Telecopy: (803) 747-4092
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: H. Kurt von Moltke
Telecopy: (312) 861-2200
if to G&L:
c/o Galey & Lord, Inc.
980 Avenue of the Americas
4th Floor
New York, New York 10018
Attention: Arthur C. Wiener
Telecopy: (212) 465-3080
with a copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Attention: Kirk A. Radke
Telecopy: (212) 446-4900
or to such other address as the Party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first Business Day at the place at which such notice
or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth Business Day at the place
from which such notice or communication was mailed following the day on which
such notice or communication was mailed.
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<PAGE>
Section 10.05. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each Party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement, except for Article 9 (which is intended to be for the benefit of the
Persons provided for therein and may be enforced by such Persons).
Section 10.06. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 10.07. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure
to the benefit of and be binding upon the Parties hereto and their respective
legal representatives and successors. This Agreement may not be assigned by any
Party hereto; provided, PGI and G&L may each assign their rights under this
Agreement for collateral security purposes to the lenders providing financing
for the transactions contemplated hereby and all extensions, renewals,
replacements, refinancings and refundings thereof in whole or in part. The
Exhibits and Annexes attached hereto are an integral part of this Agreement and
are incorporated into this Agreement and made a part hereof.
Section 10.08. DISPUTE RESOLUTION. Except as otherwise set forth in the
Related Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 10.08. The Parties hereto shall
use all commercially reasonable efforts to settle all Disputes without resorting
to mediation, arbitration or otherwise. If any Dispute remains unsettled, a
Party hereto may commence proceedings hereunder by delivering a written notice
from a Senior Vice President or comparable executive officer of such Party (the
"Demand") to the other Parties providing reasonable description of the Dispute
to the others and expressly requesting mediation hereunder. The Parties hereby
agree to submit all Disputes to non- binding mediation before a mediator
reasonably acceptable to all Parties involved in such Dispute. If, after such
mediation, the Parties subject to such mediation disagree regarding the
mediator's recommendation, such Dispute shall be submitted to arbitration under
the terms hereof, which arbitration shall be final, conclusive and binding upon
the Parties, their successors and assigns. The arbitration shall be conducted in
Chicago, Illinois or New York, New York by three arbitrators, each of whom has
at least eight years of transactional and mergers and acquisitions experience,
acting by majority vote (the "Panel") selected by agreement of the Parties not
later than ten (10) days after delivery of the Demand or, failing such
agreement, appointed pursuant to the commercial arbitration rules of the
American Arbitration Association, as amended from time to time (the "AAA
Rules"). If an arbitrator so selected becomes unable to serve, his or her
successors shall be similarly selected or appointed. The arbitration shall be
conducted pursuant to the Federal Arbitration Act and such procedures as the
Parties subject to such arbitration (each, a "Party") may agree, or, in the
absence of or failing such agreement, pursuant to the AAA Rules. The arbitrators
shall be instructed to make their determination pursuant to the terms and
conditions of this Agreement and the other Transactions Agreements.
Notwithstanding the foregoing: (i) each Party shall have the right to audit the
books and records of the other Party that are reasonably related to the Dispute;
(ii) each Party shall provide to the other, reasonably in advance of any
hearing, copies of all documents which a Party intends to present in such
hearing; and (iii) each Party shall be allowed to conduct reasonable discovery
through
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written requests for information, document requests, requests for stipulation of
fact and depositions, the nature and extent of which discovery shall be
determined by the Parties; provided that if the Parties cannot agree on the
terms of such discovery, the nature and extent thereof shall be determined by
the Panel which shall take into account the needs of the Parties and the
desirability of making discovery expeditious and cost effective. The award shall
be in writing and shall specify the factual and legal basis for the award. The
Panel shall apportion all costs and expenses of arbitration, including the
Panel's fees and expenses and fees and expenses of experts, between the
prevailing and nonprevailing Party as the Panel deems fair and reasonable. The
Parties hereto agree that monetary damages may be inadequate and that any Party
by whom this Agreement is enforceable shall be entitled to seek specific
performance of the arbitrators' decision from a court of competent jurisdiction,
in addition to any other appropriate relief or remedy. Notwithstanding the
foregoing, in no event may the Panel award consequential, special, exemplary or
punitive damages. Any arbitration award shall be binding and enforceable against
the Parties hereto and judgment may be entered thereon in any court of competent
jurisdiction.
Section 10.09. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
Section 10.10. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of any Party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 10.11. AMENDMENT. No change or amendment will be made to this
Agreement or the other Transaction Agreements except by an instrument in writing
signed on behalf of each of the Parties hereto.
Section 10.12. EMPLOYMENT SOLICITATION. For a period of 24 months
following the Closing Date no Party may, and will not permit any of its
Subsidiaries or agents to, directly or indirectly, solicit or recruit for its
employment any then-current employee of the other Parties, or their
Subsidiaries, without the prior written consent of the relevant other Party;
provided, however that nothing in this Section 10.12 shall (i) prohibit the
employment by any Party or its Subsidiaries of any employee of the other who
seeks employment on his or her own initiative without prior contact with him or
her initiated by any employee or agent of such Party, (ii) restrict the
operation of the Employee Matters Agreement, or (iii) prohibit the employment of
any person who applied for employment with any Party solely in response to any
public medium advertising.
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Section 10.13. EXPENSES. Except as otherwise provided in this Agreement
or the other Transaction Agreements, all costs and expenses of G&L, PGI and
their respective Subsidiaries, incurred in connection with this Agreement
(whether or not payable as of the Closing Date) and with the consummation of the
transactions contemplated by this Agreement shall be paid by the Party incurring
such cost and expenses. Such costs and expenses shall include, without
limitation, investment banking, legal, accounting and printing costs and
expenses and transfer taxes; provided that any of such costs and expenses which
constitute Split Liabilities or Proportional Liabilities shall be paid in
accordance with Section 2.09.
* * *
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
GALEY & LORD, INC.
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
POLYMER GROUP, INC.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Chairman, President & CEO
DT ACQUISITION INC.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Authorized Signatory
DOMINION TEXTILE INC.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Authorized Signatory
S-1
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
DOMINION TEXTILE INTERNATIONAL
(ASIA) PTE. LTD
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Authorized Signatory
DOMINION TEXTILE INTERNATIONAL B.V.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Authorized Signatory
DOMINION TEXTILE (USA) INC.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Authorized Signatory
ALBUMA S.A.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Authorized Signatory
CHICOPEE HOLDINGS, B.V.
By: /s/ Jerry Zucker
Name: Jerry Zucker
Title: Chairman, President & CEO
S-2
<PAGE>
- --------------------------------------------------------------------------------
$490,000,000
CREDIT AGREEMENT
among
GALEY & LORD, INC.,
as Borrower,
ITS DOMESTIC SUBSIDIARIES
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTIES HERETO
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
Dated as of January 29, 1998
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS............................................................................................1
Section 1.1 Defined Terms................................................................................1
Section 1.2 Other Definitional Provisions...............................................................29
Section 1.3 Accounting Terms............................................................................29
ARTICLE II THE LOANS; AMOUNT AND TERMS..........................................................................30
Section 2.1 Revolving Loans.............................................................................30
Section 2.2 Tranche B Term Loan.........................................................................32
Section 2.2A Tranche C Term Loan........................................................................33
Section 2.3 Swingline Loan Subfacility..................................................................34
Section 2.4 Letter of Credit Subfacility................................................................36
Section 2.5 Fees........................................................................................39
Section 2.6 Commitment Reductions.......................................................................40
Section 2.7 Prepayments.................................................................................41
Section 2.8 Minimum Principal Amount of Tranches........................................................43
Section 2.9 Default Rate and Payment Dates..............................................................43
Section 2.10 Conversion Options.........................................................................44
Section 2.11 Computation of Interest and Fees...........................................................44
Section 2.12 Pro Rata Treatment and Payments............................................................45
Section 2.13 Non-Receipt of Funds by the Agent..........................................................45
Section 2.14 Inability to Determine Interest Rate.......................................................46
Section 2.15 Illegality.................................................................................47
Section 2.16 Requirements of Law........................................................................47
Section 2.17 Indemnity..................................................................................49
Section 2.18 Taxes......................................................................................49
Section 2.19 Indemnification; Nature of Issuing Lender's Duties.........................................51
Section 2.20 Pre-Syndication Loans......................................................................53
ARTICLE III REPRESENTATIONS AND WARRANTIES......................................................................53
Section 3.1 Financial Condition.........................................................................53
Section 3.2 No Change...................................................................................54
Section 3.3 Corporate Existence; Compliance with Law....................................................54
Section 3.4 Corporate Power; Authorization; Enforceable Obligations.....................................54
Section 3.5 No Legal Bar; No Default....................................................................54
Section 3.6 No Material Litigation......................................................................55
Section 3.7 Investment Company Act......................................................................55
Section 3.8 Margin Regulations..........................................................................55
Section 3.9 ERISA.......................................................................................55
Section 3.10 Environmental Matters......................................................................56
Section 3.11 Purpose of Loans...........................................................................57
Section 3.12 Subsidiaries...............................................................................57
Section 3.13 Ownership..................................................................................57
Section 3.14 Indebtedness...............................................................................57
Section 3.15 Taxes......................................................................................57
Section 3.16 Intellectual Property......................................................................58
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Section 3.17 Solvency...................................................................................58
Section 3.18 Investments................................................................................58
Section 3.19 Location of Collateral.....................................................................58
Section 3.20 No Burdensome Restrictions.................................................................59
Section 3.21 Brokers' Fees..............................................................................59
Section 3.22 Labor Matters..............................................................................59
Section 3.23 Accuracy and Completeness of Information...................................................59
Section 3.24 Printed Apparel Fabrics Business...........................................................59
Section 3.25 Year 2000 Issue............................................................................60
ARTICLE IV CONDITIONS PRECEDENT.................................................................................60
Section 4.1 Conditions to Closing Date and Initial Revolving Loans and Term Loans made in connection
with the G&L Acquisition................................................................................60
Section 4.2 Conditions to All Extensions of Credit......................................................64
ARTICLE V AFFIRMATIVE COVENANTS.................................................................................65
Section 5.1 Financial Statements........................................................................66
Section 5.2 Certificates; Other Information.............................................................67
Section 5.3 Payment of Obligations......................................................................68
Section 5.4 Conduct of Business and Maintenance of Existence............................................68
Section 5.5 Maintenance of Property; Insurance..........................................................69
Section 5.6 Inspection of Property; Books and Records; Discussions......................................69
Section 5.7 Notices.....................................................................................69
Section 5.8 Environmental Laws..........................................................................70
Section 5.9 Financial Covenants.........................................................................71
Section 5.10 Additional Subsidiary Guarantors...........................................................72
Section 5.11 Compliance with Law........................................................................73
Section 5.12 Pledged Assets.............................................................................73
Section 5.13 Post Closing Matters.......................................................................73
ARTICLE VI NEGATIVE COVENANTS...................................................................................74
Section 6.1 Indebtedness................................................................................74
Section 6.2 Liens.......................................................................................75
Section 6.3 Guaranty Obligations........................................................................76
Section 6.4 Nature of Business..........................................................................76
Section 6.5 Consolidation, Merger, Sale or Purchase of Assets, etc......................................76
Section 6.6 Advances, Investments and Loans.............................................................77
Section 6.7 Transactions with Affiliates................................................................77
Section 6.8 Ownership of Subsidiaries; Restrictions.....................................................77
Section 6.9 Fiscal Year; Organizational Documents.......................................................78
Section 6.10 Limitation on Restricted Actions...........................................................78
Section 6.11 Restricted Payments........................................................................79
Section 6.12 Prepayments of Indebtedness, etc...........................................................79
Section 6.13 Sale Leasebacks............................................................................79
Section 6.14 No Further Negative Pledges................................................................80
ARTICLE VII EVENTS OF DEFAULT...................................................................................80
Section 7.1 Events of Default...........................................................................80
Section 7.2 Acceleration; Remedies......................................................................83
ARTICLE VIII THE AGENT..........................................................................................83
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Section 8.1 Appointment.................................................................................83
Section 8.2 Delegation of Duties........................................................................84
Section 8.3 Exculpatory Provisions......................................................................84
Section 8.4 Reliance by Agent...........................................................................84
Section 8.5 Notice of Default...........................................................................85
Section 8.6 Non-Reliance on Agent and Other Lenders.....................................................85
Section 8.7 Indemnification.............................................................................86
Section 8.8 Agent in Its Individual Capacity............................................................86
Section 8.9 Successor Agent.............................................................................86
ARTICLE IX MISCELLANEOUS........................................................................................87
Section 9.1 Amendments, Waivers and Release of Collateral...............................................87
Section 9.2 Notices.....................................................................................88
Section 9.3 No Waiver; Cumulative Remedies..............................................................89
Section 9.4 Survival of Representations and Warranties..................................................89
Section 9.5 Payment of Expenses and Taxes...............................................................89
Section 9.6 Successors and Assigns; Participations; Purchasing Lenders..................................90
Section 9.7 Adjustments; Set-off........................................................................93
Section 9.8 Table of Contents and Section Headings......................................................94
Section 9.9 Counterparts................................................................................94
Section 9.10 Effectiveness..............................................................................94
Section 9.11 Severability...............................................................................94
Section 9.12 Integration................................................................................94
Section 9.13 Governing Law..............................................................................94
Section 9.14 Consent to Jurisdiction and Service of Process.............................................95
Section 9.15 Arbitration................................................................................95
Section 9.16 Confidentiality............................................................................96
Section 9.17 Acknowledgments............................................................................97
Section 9.18 Waivers of Jury Trial......................................................................97
ARTICLE X GUARANTY..............................................................................................98
Section 10.1 The Guaranty...............................................................................98
Section 10.2 Bankruptcy.................................................................................98
Section 10.3 Nature of Liability........................................................................99
Section 10.4 Independent Obligation.....................................................................99
Section 10.5 Authorization..............................................................................99
Section 10.6 Reliance...................................................................................99
Section 10.7 Waiver....................................................................................100
Section 10.8 Limitation on Enforcement.................................................................101
Section 10.9 Confirmation of Payment...................................................................101
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SCHEDULES
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Schedule 1.1(a) Account Designation Letter
Schedule 1.1(b) Separation Agreement
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(d) Form of Tranche B Term Note
Schedule 2.2A(d) Form of Tranche C Term Note
Schedule 2.3(d) Form of Swingline Note
Schedule 2.4(a) Letters of Credit Outstanding
Schedule 2.10 Form of Notice of Conversion/Extension
Schedule 2.18 Section 2.18 Certificate
Schedule 3.6 Litigation
Schedule 3.9 ERISA
Schedule 3.12 Subsidiaries
Schedule 3.16 Material Intellectual Property
Schedule 3.19(a) Location of Real Property
Schedule 3.19(b) Location of Collateral
Schedule 3.19(c) Chief Executive Offices
Schedule 3.22 Labor Matters
Schedule 4.1(b) Form of Secretary's Certificate
Schedule 4.1(h) Form of Solvency Certificate
Schedule 4.1(u) Existing Indebtedness of Acquired Companies
Schedule 5.2(d) Form of Borrowing Base Certificate
Schedule 5.10 Form of Joinder Agreement
Schedule 6.1(b) Indebtedness
Schedule 9.2 Schedule of Lenders' Lending Offices
Schedule 9.6(c) Form of Commitment Transfer Supplement
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CREDIT AGREEMENT, dated as of January 29, 1998, among GALEY & LORD,
INC., a Delaware corporation (the "Borrower"), those Domestic Subsidiaries of
the Borrower identified as a "Guarantor" on the signature pages hereto,
including GALEY & LORD INDUSTRIES, INC., a Delaware corporation ("G&L
Industries") and such other Domestic Subsidiaries of the Borrower as may from
time to time become a party hereto (together with G&L Industries, the
"Guarantors"), the several banks and other financial institutions from time to
time parties to this Agreement (collectively, the "Lenders"; and individually, a
"Lender"), and FIRST UNION NATIONAL BANK, a national banking association, as
agent for the Lenders hereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make loans and
other financial accommodations to the Borrower in the amount of up to
$490,000,000, as more particularly described herein;
WHEREAS, the Lenders have agreed to make such loans and other financial
accommodations to the Borrower 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 as follows:
ARTICLE I
DEFINITIONS
SECTION 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:
"Account Designation Letter" shall mean the Notice of Account
Designation Letter dated the Closing Date from the Borrower to the Agent
substantially in the form attached hereto as Schedule 1.1(a).
"Acquired Companies" shall mean the Apparel Fabrics Business to be
acquired by the Borrower pursuant to the Acquisition Documents.
"Acquisition Agreement" shall mean the agreement dated as of October
27, 1997 entered into among Polymer, DTA, ZBH Holdings, Inc. and the Borrower in
connection with the acquisition of the Acquired Companies and the Nonwovens
Business following the
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consummation of the Tender Offer and the Merger, as amended, modified, or
otherwise supplemented.
"Acquisition Documents" shall mean the Acquisition Agreement and the
Separation Agreement, including the exhibits and schedules thereto, and all
agreements, documents and instruments executed and delivered pursuant thereto or
in connection therewith.
"Acquisition Funding Termination Date" shall mean the date which is the
earlier of (i) 364 days following the consummation of the Tender Offer and (ii)
180 days following the Merger.
"Acquisition Transactions" shall mean, collectively, the Merger, the
G&L Acquisition and the Polymer Acquisition.
"Additional Credit Party" shall mean each Person that becomes a
Guarantor by execution of a Joinder Agreement in accordance with Section 5.10.
"Adjusted Fixed Charge Coverage Ratio" shall mean the ratio of
Consolidated EBITDA, including any Permitted G&L Acquisition Cost Savings, to
Consolidated Fixed Charges.
"Adjusted Leverage Ratio" shall mean the ratio of Consolidated Funded
Debt to Consolidated EBITDA, including any Permitted G&L Acquisition Cost
Savings.
"Affiliate" shall mean 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 (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" shall have the meaning set forth in the first paragraph of this
Agreement and any successors in such capacity.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time in accordance with its terms.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal
to the greater 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
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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" shall mean Loans that bear interest at an
interest rate based on the Alternate Base Rate.
"Apparel Fabrics Business" shall have the meaning set forth in the
Separation Agreement.
"Applicable Percentage" shall mean, for any day, the rate per annum set
forth below opposite the applicable Level then in effect, it being understood
that the Applicable Percentage for (i) Revolving Loans which are Alternate Base
Rate Loans shall be the percentage set forth under the column "Alternate Base
Rate Margin for Revolving Loans", (ii) Revolving Loans which are LIBOR Rate
Loans shall be the percentage set forth under the column "LIBOR Rate Margin for
Revolving Loans and Letter of Credit Fee", (iii) the Commitment Fee shall be the
percentage set forth under the column "Commitment Fee", (iv) Tranche B Term
Loans which are Alternate Base Rate Loans shall be the percentage set forth
under the column "Alternate Base Rate Margin for Tranche B Term Loans", (v)
Tranche B Term Loans which are LIBOR Rate Loans shall be the percentage set
forth under the column "LIBOR Rate Margin for Tranche B Term Loans", (vi)
Tranche C Term Loans which are Alternate Base Rate Loans shall be the percentage
set forth under the column "Alternate Base Rate Margin for Tranche C Term
Loans", (vii) Tranche C Term Loans which are LIBOR Rate Loans shall be the
percentage set forth under the column "LIBOR Rate Margin for Tranche C Term
Loans" and (viii) the Letter of Credit Fee shall be the percentage set forth
under the column "LIBOR Rate Margin for Revolving Loans and Letter of Credit
Fee":
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LIBOR Rate Alternate Alternate LIBOR Rate
Alternate Margin for Base Rate LIBOR Rate Base Rate LIBOR Rate
Adjusted Base Rate Revolving Loans Margin for Margin for Margin for Margin for
Leverage Margin for and Letter of Commitment Tranche B Tranche B Tranche C Tranche C
Level Ratio Revolving Loans Credit Fee Fee Term Loans Term Loans Term Loans Term Loans
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
I (greater than)
5.5 to 1.0 1.00% 2.25% 0.50% 1.50% 2.75% 1.75% 3.00%
II (greater than)
but
5.0 to 1.0 0.75% 2.00% 0.50% 1.25% 2.50% 1.50% 2.75%
III (greater than)
4.5 to 1.0 0.50% 1.75% 0.375% 1.00% 2.25% 1.25% 2.50%
but
5.0 to 1.0
IV (greater than)
4.0 to 1.0 0.25% 1.50% 0.375% 0.75% 2.00% 1.00% 2.25%
but
4.5 to 1.0
V (greater than)
3.5 to 1.0 0% 1.25% 0.25% 0.50% 1.75% 0.75% 2.00%
but
4.0 to 1.0
VI (greater than)
3.0 to 1.0 0% 1.00% 0.25% 0.25% 1.50% 0.50% 1.75%
but
3.5 to 1.0
VII 3.0 to 1.0 0% 0.75% 0.25% 0.25% 1.50% 0.50% 1.75%
</TABLE>
The Applicable Percentage shall, in each case, be determined and
adjusted quarterly on the date five (5) Business Days after the date on which
the Agent has received from the Borrower the quarterly financial information and
certifications required to be delivered to the Agent and the Lenders in
accordance with the provisions of Sections 5.1(b) and 5.2(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 I until the first
Interest Determination Date occurring after October 3, 1998. After the Closing
Date, if the Borrower shall fail to provide the quarterly financial information
and certifications in accordance with the provisions of Sections 5.1(b) and
5.2(b), the Applicable Percentage from such Interest Determination Date shall,
on the date five (5) Business Days after the date by which the Borrower was so
required to provide such financial information and certifications to the Agent
and the Lenders, be based on Level I until such time as such information and
certifications are provided, whereupon the Level shall be determined by the then
current Adjusted Leverage Ratio.
"Asset Disposition" shall mean the disposition of any or all of the
assets (including, without limitation, the Capital Stock of a Subsidiary or any
ownership interest in a joint venture) of the Borrower or any Subsidiary whether
by sale, lease, transfer or otherwise. The term "Asset Disposition" shall not
include (a) Specified Sales, (b) the sale, lease or transfer of assets permitted
by Section 6.5(a)(iii), (iv) or (v) hereof, or (c) any Equity Issuance.
"Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time to
time.
"Bill and Hold Receivables" shall mean Receivables generated from sales
on a bill-and-hold basis.
"Borrower" shall have the meaning set forth in the first paragraph of
this Agreement.
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"Borrowing Base" shall mean, as of any day, an amount equal to the sum
of (i) 85% of Eligible Receivables (excluding Bill and Hold Receivables), (ii)
55% of Eligible Inventory not to exceed 60% of the aggregate availability under
the Borrowing Base and (iii) 60% of Bill and Hold Receivables which are Eligible
Receivables, in each case, as set forth in the most recent Borrowing Base
Certificate delivered to the Agent and the Lenders in accordance with the terms
of Section 5.2(d) and subject to reserves imposed by the Agent in its sole
discretion.
"Borrowing Date" shall mean, in respect of any Loan, the date such Loan
is made.
"Bridge Agreement" shall have the meaning set forth in the definition
of Subordinated Debt.
"Bridge Notes" shall have the meaning set forth in the definition of
Subordinated Debt.
"Business" shall have the meaning set forth in Section 3.10.
"Business Day" shall mean 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 are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Expenditures" shall mean all expenditures which in accordance
with GAAP would be classified as capital expenditures, including without
limitation, Capital Lease Obligations.
"Capital Lease" shall mean 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" shall mean the capitalized lease
obligations relating to a Capital Lease determined in accordance with GAAP.
"Capital Stock" shall mean (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
company, membership interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" shall mean (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
5
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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" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean a collective reference to the collateral which
is identified in, and at any time will be covered by, the Security Documents.
"Commitment" shall mean the Revolving Commitment, the LOC Commitment,
the Swingline Commitment, the Tranche B Term Loan Commitment and the Tranche C
Term Loan Commitment, individually or collectively, as appropriate.
"Commitment Fee" shall have the meaning set forth in Section 2.5(a).
"Commitment Percentage" shall mean the Revolving Commitment Percentage,
the LOC Commitment Percentage, the Tranche B Term Loan Commitment Percentage
and/or the Tranche C Term Loan Commitment Percentage, as appropriate.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Revolving Commitment Termination Date.
"Commitment Transfer Supplement" shall mean a Commitment Transfer
Supplement, substantially in the form of Schedule 9.6(c).
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is
6
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part of a group which includes the Borrower and which is treated as a single
employer under Section 414 of the Code.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net
Income plus the sum of (i) Consolidated Interest Expense for such period, plus,
to the extent the following items are deducted in calculating Consolidated Net
Income, (ii) all provisions for any Federal, state or other income taxes for
such period, plus (iii) depreciation, amortization and other non-cash charges
for such period, 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, plus the sum of (a) distributions paid in cash
from the Existing Joint Ventures to the Borrower or any of its wholly-owned
Subsidiaries; provided that any such distributions made to Foreign Subsidiaries
shall be decreased by the amount that would have been deducted from such
distributions by the local taxing authorities of the jurisdiction of
organization of any such Foreign Subsidiaries had such distributions been
repatriated to the United States, for such period and (b) adjustments to EBITDA
reasonably acceptable to the Agent for such period, of the Borrower 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" shall mean, for any period, the sum of (i)
Consolidated Interest Expense for such period plus (ii) Consolidated Scheduled
Funded Debt Payments for the next four fiscal quarters following the end of such
period plus (iii) consolidated Capital Expenditures for such period (without
duplication of items in clause (ii)) of the Borrower 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" shall mean, on any date of calculation,
Funded Debt of the Borrower and its Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" shall mean, for any period, all
interest expense, excluding amortization of debt discount and premium but
including the interest component under Capital Leases for such period of the
Borrower and its Subsidiaries on a consolidated basis 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 computation; provided,
however, that, for the purpose of calculating the Fixed Charge Coverage Ratio,
Consolidated Interest Expense for the fiscal quarter ending on June 27, 1998
shall be calculated as Consolidated Interest Expense for such quarter multiplied
by four (4); Consolidated Interest Expense for the fiscal quarter ending on
October 3, 1998 shall be calculated as Consolidated Interest Expense for the two
fiscal quarters immediately preceding such date multiplied by two (2); and
Consolidated Interest Expense for the fiscal quarter ending on January 2, 1999
shall be calculated as Consolidated Interest Expense for the three fiscal
quarters immediately preceding such date multiplied by one and one-third (1 and
1/3).
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"Consolidated Net Income" shall mean, for any period, the net income
(excluding extraordinary losses, but including extraordinary gains) of the
Borrower and its Subsidiaries on a consolidated basis determined in accordance
with GAAP applied on a consistent basis for such period. Except as otherwise
specified, the applicable period shall be for the four consecutive quarters
ending as of the date of computation.
"Consolidated Net Worth" shall mean total stockholders' equity for the
Borrower and its Subsidiaries on a consolidated basis as determined at a
particular date in accordance with GAAP applied on a consistent basis.
"Consolidated Scheduled Funded Debt Payments" shall mean, as of the end
of each fiscal quarter of the Borrower and its Subsidiaries on a consolidated
basis, the sum of all scheduled payments of principal on Consolidated Funded
Debt for the applicable period ending on such date (including the principal
component of payments due on Capital Leases during the applicable period ending
on such date); it being understood that scheduled payments on Consolidated
Funded Debt shall not include optional prepayments or the mandatory prepayments
required pursuant to Section 2.7.
"Continuing Director" shall have the meaning set forth in Section
7.1(h).
"Contractual Obligation" shall mean, 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" shall mean this Agreement, each of the Notes, any
Joinder Agreement, the Letters of Credit, LOC Documents, the Security Documents
and the Wachovia JEDA Reimbursement Agreement.
"Credit Party" shall mean any of the Borrower, the Guarantors or the
Foreign Credit Parties.
"Credit Party Obligations" shall mean, without duplication, (i) all of
the obligations of the Credit Parties to the Lenders (including the Issuing
Lender) and the Agent, whenever arising, under this Agreement, the Notes or any
of the other Credit Documents (including, but not limited to, any interest
accruing after the occurrence of a filing of a petition of bankruptcy under the
Bankruptcy Code with respect to any Credit Party, regardless of whether such
interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities
and obligations, whenever arising, owing from the Borrower or any of its
Subsidiaries to any Lender, or any Affiliate of a Lender, arising under any
Hedging Agreement.
"Debt Issuance" shall mean the issuance of any Indebtedness for
borrowed money by the Borrower or any of its Subsidiaries (excluding any Equity
Issuance or any Indebtedness of the Borrower and its Subsidiaries permitted to
be incurred pursuant to Section 6.1 hereof).
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"Default" shall mean any of the events specified in Section 7.1,
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" shall mean, 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.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Credit Party" shall mean 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" shall mean, initially, the office of each
Lender designated as such Lender's Domestic 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 Alternate Base Rate Loans of such Lender are to be made.
"Domestic Subsidiary" shall mean 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.
"DTA (USA)" shall mean Dominion Textile (USA) Inc., a Delaware
corporation.
"DTA" shall mean DT Acquisition, Inc., a corporation incorporated under
the Canada Business Corporations Act.
"DTA Credit Facility" shall mean the Credit Agreement dated as of
December 17, 1997 by and among DTA, the lenders party thereto, The Chase
Manhattan Bank, as administrative agent and First Union, as documentation agent,
as amended, modified or supplemented from time to time in accordance with its
terms.
"Eligible Inventory" shall mean, as of any date of determination and
without duplication, the lower of the aggregate book value (based on a FIFO or a
moving average cost valuation, consistently applied) or fair market value of all
raw materials and finished goods inventory and yarn and weaving in process owned
by the Borrower or any of its wholly-owned Subsidiaries less appropriate
reserves determined in accordance with GAAP but excluding in any event (i)
inventory which is (a) not subject to a perfected, first priority Lien in favor
of the Agent to secure the Credit Party Obligations, except that (x) up to
$25,000,000 of the inventory of the Klopman Entities may be included as Eligible
Inventory regardless of perfection or priority in
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favor of the Agent and (y) inventory located in Canada may be included as
Eligible Inventory regardless of perfection or priority in favor of the Agent or
(b) subject to any other Lien that is not a Permitted Lien, (ii) inventory which
is not in good condition or fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having regulatory authority over
such goods, (iii) inventory which is not useable or salable at prices
approximating their cost in the ordinary course of the business (including
without duplication the amount of any reserves for obsolescence, unsalability or
decline in value), (iv) inventory located outside of the United States or
Canada, except that up to $25,000,000 of the inventory of the Klopman Entities,
regardless of the location of such inventory, may be included as Eligible
Inventory, (v) inventory located at a leased location with respect to which the
Agent shall not have received a landlord's waiver satisfactory to the Agent
within 90 days of the Closing Date, (vi) inventory which is leased or on
consignment or held at third-party vendors, suppliers or contractors and (vii)
inventory which fails to meet such other specifications and requirements as may
from time to time be established by the Agent in its reasonable discretion.
"Eligible Receivables" shall mean, as of any date of determination and
without duplication, the aggregate book value of all accounts receivable,
receivables, and obligations for payment created or arising from the sale of
inventory or the rendering of services in the ordinary course of business
(collectively, the "Receivables"), owned by or owing to the Borrower or any of
its wholly-owned Subsidiaries, net of allowances and reserves for doubtful or
uncollectible accounts and sales adjustments consistent with such Person's
internal policies and in any event in accordance with GAAP, but excluding in any
event (i) any Receivable which is (a) not subject to a perfected, first priority
Lien in favor for the Agent to secure the Credit Party Obligations, except that
(x) up to $35,000,000 of the Receivables of the Klopman Entities may be included
as Eligible Receivables regardless of perfection or priority in favor of the
Agent and (y) Receivables of wholly-owned Subsidiaries domiciled in Canada may
be included as Eligible Receivables regardless of perfection or priority in
favor of the Agent or (b) subject to any other Lien that is not a Permitted
Lien, (ii) Receivables which are more than 60 days past due or 120 days past
invoice date (net of reserves for bad debts in connection with any such
Receivables), (iii) 50% of the book value of any Receivable not otherwise
excluded by clause (ii) above but owing from an account debtor which is the
account debtor on any existing Receivable then excluded by such clause (ii),
unless the exclusion by such clause (ii) is a result of a legitimate dispute by
the account debtor and the applicable Receivable is no more than 90 days past
due, (iv) Receivables evidenced by notes, chattel paper or other instruments,
unless such notes, chattel paper or instruments have been delivered to and are
in the possession of the Agent, (v) Receivables owing by an account debtor which
is not solvent or is subject to any bankruptcy or insolvency proceeding of any
kind, (vi) Receivables owing by an account debtor located outside of the United
States or Canada (unless payment for the goods shipped is secured by an
irrevocable letter of credit in a form and from an institution acceptable to the
Agent), except that up to $35,000,000 of the Receivables of the Klopman Entities
and all Receivables of wholly-owned Subsidiaries domiciled in Canada, regardless
of the location of the account debtor, may be included as Eligible Receivables,
(vii) Receivables which are contingent or subject to offset, deduction,
counterclaim, dispute or other defense to payment, in each case to the extent of
such offset, deduction, counterclaim, dispute or other defense, (viii)
Receivables for which any direct or indirect Subsidiary or any Affiliate is the
account debtor, (ix) Receivables representing a sale
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to the government of the United States of America or any subdivision thereof
unless the Federal Assignment of Claims Act has been complied with to the
satisfaction of the Agent with respect to the granting of a security interest in
such Receivable, with or other similar applicable law and (x) Receivables which
fail to meet such other specifications and requirements as may from time to time
be established by the Agent in its reasonable discretion.
"Environmental Laws" shall mean 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.
"Equity Issuance" shall mean any issuance by the Borrower or any
Subsidiary to any Person which is not a Credit Party of (a) shares of its
Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to the
conversion of any debt securities to equity. The term "Equity Issuance" shall
not include any Asset Disposition, any Debt Issuance, any issuance of Permitted
Preferred Stock or the issuance of common stock of the Borrower or its
Subsidiaries to its officers, directors or employees in connection with stock
offering plans and other benefit plans of the Borrower or its Subsidiaries.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurodollar Reserve Percentage" shall mean 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" shall mean any of the events specified in Section
7.1; provided, however, that any requirement for the giving of notice or the
lapse of time, or both, or any other condition, has been satisfied.
"Excess Cash Flow" shall mean, with respect to any fiscal year period
of the Borrower and its Subsidiaries on a consolidated basis, an amount equal to
(a) Consolidated EBITDA for such period minus (b) consolidated Capital
Expenditures for such period actually paid in cash minus (c) Consolidated
Interest Expense for such period minus (d) Federal, state and other income taxes
actually paid in cash by the Borrower and its Subsidiaries on a consolidated
basis during such period minus (e) Consolidated Scheduled Funded Debt Payments
made during such period.
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"Existing Credit Agreement" means that credit agreement dated as of
December 19, 1997 among G&L Industries, as borrower, the guarantors party
thereto, the lenders party thereto and First Union, as agent.
"Existing Joint Ventures" shall mean Swift Textiles Europe Ltd., Swift
Textiles France S.A., Sitex S.A., Tismade S.A., Somotex International S.A., and
C.S. Brooks Corp.
"Existing Letters of Credit" shall mean those Letters of Credit
outstanding on the Closing Date and identified on Schedule 2.4(a).
"Extension of Credit" shall mean, 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.
"Federal Funds Effective Rate" shall have the meaning set forth in the
definition of "Alternate Base Rate".
"Fee Letter" shall mean the letter agreement dated November 17, 1997
addressed to the Borrower from the Agent, as amended, modified or otherwise
supplemented.
"First Union" shall mean First Union National Bank, a national banking
association.
"Fixed Charge Coverage Ratio" shall mean the ratio of Consolidated
EBITDA to Consolidated Fixed Charges.
"Foreign Credit Party" shall mean any Foreign Subsidiary party to the
Foreign Subsidiary Pledge Agreement.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"Foreign Subsidiary Pledge Agreement" shall mean the Pledge Agreement
dated as of the Closing Date given by the Foreign Subsidiaries party thereto to
the Agent, as amended, modified or supplemented from time to time in accordance
with its terms.
"Funded Debt" shall mean, for any Person, (i) all Indebtedness of the
types described in subsections (a), (b), (c), (k), (l) and (m) of the definition
of "Indebtedness" and (ii) all Guarantee Obligations of Indebtedness of the
types described in subsections (a), (b), (c), (k), (l) and (m) of the definition
of "Indebtedness."
"GAAP" shall mean 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.
"G&L Acquisition" shall mean the acquisition by the Borrower of the
Acquired Companies pursuant to the Acquisition Documents for a purchase price of
up to $490,000,000.
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"G&L Industries" shall have the meaning set forth in the first
paragraph of this Agreement.
"G&L Loan" shall mean the subordinated, unsecured loan of up to
$141,000,000 from G&L Industries to DTA evidenced by that certain promissory
note of DTA dated December 19, 1997.
"Government Acts" shall have the meaning set forth in Section 2.19.
"Governmental Authority" shall mean 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" shall mean, 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
obligation 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 Borrower in good
faith.
"Guarantor" shall mean any of the Domestic 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" shall mean the guaranty of the Guarantors set forth in
Article X.
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"Hedging Agreements" shall mean, with respect to any Person, any
agreement entered into to protect such Person against fluctuations in interest
rates, or currency or raw materials values, including, without limitation, any
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more counterparties, any foreign currency exchange agreement,
currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate or commodity price hedging agreements.
"Indebtedness" shall mean, 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 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, (e) 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), (f) all obligations of such Person under take-or-pay or similar
arrangements or under commodities agreements, (g) all Guarantee Obligations of
such Person, (h) all obligations of such Person in respect of Hedging
Agreements, (i) the maximum amount of all letters of credit issued or bankers'
acceptances created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent not theretofore reimbursed), (j) all
preferred stock which by its terms requires or permits redemption, mandatory
sinking fund payments or the like, by a fixed date prior to the Maturity Date
for the Tranche C Term Loans, (k) 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,
(l) 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,
(m) the Indebtedness of any partnership or unincorporated joint venture in which
such Person is a general partner or a joint venturer other than Non-Recourse
Indebtedness of such partnership or unincorporated joint venture and (n) amounts
owing to federal or state governmental agencies or authorities in connection
with unpaid statutory liabilities, including, without limitation, the
indebtedness of the Borrower owed any Plan in accordance with the Pension
Funding Agreement.
"Insolvency" shall mean, 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" shall mean being in a condition of Insolvency.
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate
Loan or Swingline Loan, the last day of each March, June, September and December
and on the applicable Maturity Date, (b) as to any LIBOR Rate Loan having an
Interest Period of three months or less, the last
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day of such Interest Period, and (c) 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" shall mean, 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 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 applicable Maturity Date and, further
with regard to the Term Loans, no Interest Period shall extend beyond
any principal amortization payment date unless the portion of such Term
Loan consisting of Alternate Base Rate Loans together with the portion
of such 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 ten (10) LIBOR Rate Loans may be in
effect at any time. For purposes hereof, LIBOR Rate Loans with
different Interest Periods shall be
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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.
"Issuing Lender" shall mean, as to the Existing Letters of Credit, each
of the Persons issuing such letters of credit identified on Schedule 2.4(a), and
as to Letters of Credit issued, extended or renewed after the Closing Date,
First Union.
"Issuing Lender Fees" shall have the meaning set forth in Section
2.5(c)
"JEDA Bonds" shall mean 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" shall mean 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" shall mean 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.
"Klopman Entities" shall mean Klopman International Ltd., Klopman GmbH,
Klopman AG, Klopman Espana S.A. (formerly Schappe Espanola S.A.), Klopman
International S.p.A. (formerly Klopman International S.r.L.).
"Lender" shall have the meaning set forth in the first paragraph of
this Agreement.
"Letters of Credit" shall mean 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" shall have the meaning set forth in Section
2.5(b).
"Leverage Ratio" shall mean the ratio of Consolidated Funded Debt to
Consolidated EBITDA.
"LIBOR" shall mean 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 an amount comparable to the Loans then
requested are being offered to leading
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<PAGE>
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" shall mean, 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" shall mean 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
LIBOR Rate = -------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" shall mean Loans the rate of interest applicable to
which is based on the LIBOR Rate.
"Lien" shall mean 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" shall mean a Revolving Loan, a Swingline Loan and/or the Term
Loans, as appropriate.
"LOC Commitment" shall mean 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 amount
may be reduced from time to time in accordance with the provisions hereof.
"LOC Commitment Percentage" shall mean, 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" shall mean, 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" shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application
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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" shall mean, 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.
"Mandatory Borrowing" shall have the meaning set forth in Section
2.3(b)(ii) or Section 2.4(e).
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole, (b) the ability
of the Borrower to perform its obligations, when such obligations are required
to be performed, under this Agreement, any of the Notes or any other Credit
Document 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" shall mean 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.
"Maturity Date" shall mean (i) with respect to the Tranche B Term Loan,
the last scheduled quarterly payment date for the Tranche B Term Loan set forth
in Section 2.2(b), (ii) with respect to the Tranche C Term Loan, the last
scheduled quarterly payment date for the Tranche C Term Loan set forth in
Section 2.2A(b) and (iii) with respect to the Revolving Loans, the Revolving
Commitment Termination Date.
"Merger" shall mean the acquisition by DTA, following the consummation
of the Tender Offer, of the remaining outstanding common shares and First
Preferred Shares of Target in accordance with Section 206 of the Canada Business
Corporations Act.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean the aggregate cash proceeds received by
the Borrower or any Subsidiary in respect of any Asset Disposition, Equity
Issuance or Debt Issuance, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and (b) taxes paid or payable as a result thereof; it being
understood that
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"Net Cash Proceeds" shall include, without limitation, any cash received upon
the sale or other disposition of any non-cash consideration received by the
Borrower or any Subsidiary in any Asset Disposition, Equity Issuance or Debt
Issuance.
"Non-Recourse Indebtedness" shall mean Indebtedness with respect to
which recourse for payment is limited to specific assets encumbered by a Lien
securing such Indebtedness; provided, however, that personal recourse of a
holder of Indebtedness against any obligor with respect thereto for fraud,
misrepresentation, misapplication of cash, waste and other circumstances
customarily excluded from non-recourse provisions in non-recourse financing of
real estate shall not, by itself, prevent any Indebtedness from being
characterized as Non-Recourse Indebtedness.
"Nonwovens Business" shall have the meaning set forth in the Separation
Agreement.
"Note" or "Notes" shall mean the Revolving Notes, the Swingline Note
and/or the Term Notes, collectively, separately or individually, as appropriate.
"Notice of Borrowing" shall mean 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" shall mean the written notice of extension or
conversion as referenced and defined in Section 2.10.
"Obligations" shall mean, collectively, Loans and LOC Obligations.
"Offer to Purchase" shall mean the offers to purchase for cash all of
the outstanding common shares of Target at Cdn. $11.75 per share, and all of the
outstanding First Preferred Shares of Target at Cdn. $109.50 per share, dated
October 29, 1997, made by DTA to all of the holders of such Common Shares and
First Preferred Shares, as extended and varied pursuant to a Notice of Extension
and Variation dated November 18, 1997, pursuant to which such offer prices were
increased to Cdn. $14.50 per share and Cdn. $112.00 per share, respectively, and
as the same shall be further modified and supplemented and in effect from time
to time.
"Participant" shall have the meaning set forth in Section 9.6(b).
"Participation Interest" shall mean 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" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Pension Funding Agreement" shall mean the agreement between the
Borrower and the PBGC providing for the funding by the Borrower of certain
unfunded pension liabilities of the Acquired Companies up to an amount of
$15,000,000.
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"Permanent Subordinated Debt" shall have the meaning set forth in the
definition of Subordinated Debt.
"Permitted G&L Acquisition Cost Savings" shall mean certain cost
savings adjustments reasonably anticipated by the Borrower to be achieved in
connection with the G&L Acquisition and upon the Agent's request shall be (a)
made in accordance with Regulation S-X promulgated under the Securities Act of
1933 or as otherwise agreed to by the Agent; (b) reviewed by Ernst & Young LLP,
or another nationally recognized accounting firm or as otherwise agreed to by
the Agent; and (c) not in excess of $25,000,000 in the aggregate; provided,
however, that all such Permitted G&L Acquisition Cost Savings shall be estimated
on a good faith basis by the Borrower and shall be reduced by (i) one-half, on
October 3, 1998, (ii) an additional one-quarter, on January 2, 1999 and (iii) an
additional one-quarter, on April 3, 1999, or as otherwise agreed to by the
Agent.
"Permitted Investments" shall mean:
(i) cash and Cash Equivalents;
(ii) receivables owing to the Borrower 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 accordance with customary trade terms;
(iii) (A) investments in and loans to any Domestic Credit
Parties; (B) investments made by any Domestic Credit Party in any
Foreign Subsidiaries or foreign joint ventures not to exceed $3,000,000
in the aggregate at any time outstanding (excluding from such dollar
limitation the initial investment in Foreign Subsidiaries acquired
pursuant to the G&L Acquisition and investments in Foreign Subsidiaries
existing on or prior to the Closing Date); (C) loans between Foreign
Subsidiaries; and (D) loans from any Domestic Credit Party to any
Foreign Subsidiaries not to exceed $25,000,000 in the aggregate at any
time outstanding;
(iv) loans and advances to officers, directors, employees and
Affiliates in an aggregate amount not to exceed $2,000,000 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); and
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(vii) 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 (vii)
shall not exceed an aggregate amount of $6,000,000.
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" shall mean:
(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 in connection with
Hedging Agreements, but only (A) to the extent such Liens secure
obligations under Hedging Agreements permitted under Section 6.1, (B)
to the extent such Liens are on the same collateral as to which the
Agent on behalf of the Lenders also has 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 Borrower or its Subsidiaries, as the case may be, in conformity
with GAAP (or, in the case of Subsidiaries with 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;
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(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);
(ix) Liens created by or otherwise existing in connection with
the Indebtedness set forth on Schedule 4.1(u);
(x) the Liens in favor of the PBGC on the Columbus facilities
located in Columbus, Georgia securing the Borrower's obligations under
the Pension Funding Agreement; and
(xi) Liens on assets of Foreign Subsidiaries located outside
of the United States securing Indebtedness (and refinancings thereof)
to the extent permitted under Section 6.1(g).
"Permitted Preferred Stock" shall mean any preferred stock issued by
the Borrower in an aggregate amount of up to $30,000,000 which by its terms
prohibits or does not permit (i) redemption, liquidation, mandatory sinking fund
payments or the like by a fixed date on or prior to the Maturity Date for the
Tranche C Term Loan and (ii) the payment of cash dividends on or prior to the
Maturity Date for the Tranche C Term Loan at a rate in excess of eight percent
(8%).
"Person" shall mean 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" shall mean, 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.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the
Closing Date given by the Borrower and the other Domestic Credit Parties to the
Agent, as amended, modified or supplemented from time to time in accordance with
its terms.
"Polymer" shall mean Polymer Group, Inc., a Delaware corporation.
"Polymer Acquisition" shall mean the acquisition by Polymer of the
Nonwovens Business effected pursuant to the Acquisition Documents.
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"Prime Rate" shall have the meaning set forth in the definition of
Alternate Base Rate.
"Pro Forma Basis" shall mean, 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 Section 5.1. As used
herein, "transaction" means any merger or consolidation or acquisition as
referenced in Section 6.5(b).
"Projections" shall have the meaning set forth in Section 3.1.
"Properties" shall have the meaning set forth in Section 3.10(a).
"Purchase Price" shall mean the purchase price to be paid by the
Borrower for the Acquired Companies (which shall include all related fees and
expenses and the refinancing of the existing indebtedness of such Acquired
Companies).
"Purchasing Lenders" shall have the meaning set forth in Section
9.6(c).
"Receivables" shall mean 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 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" shall mean the receipt by the Borrower or any of its
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" shall have the meaning set forth in Section 9.6(d).
"Receivables" shall have the meaning set forth in the definition of
Eligible Receivables.
"Reorganization" shall mean, 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" shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty-day notice
period is waived under PBGC Reg. ss.4043.
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"Required Lenders" shall mean (i) Lenders holding in the aggregate not
less than 51% of all Revolving Loans and LOC Obligations then outstanding at
such time plus the aggregate unused Revolving 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), (ii) Lenders holding
in the aggregate not less than 51% of all Tranche B Term Loans then outstanding
at such time and (iii) Lenders holding in the aggregate not less than 51% of all
Tranche C Term Loans then outstanding at such time; provided, however, that if
any Lender shall be a Defaulting Lender at such time, then there shall be
excluded from the determination of Required 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.
"Requirement of Law" shall mean, 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" shall mean, as to (a) the Borrower, the President
and Chief Executive Officer or the Chief Financial Officer or (b) any other
Credit Party, any duly authorized officer thereof.
"Restricted Payment" shall mean (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
the Borrower or any of its Subsidiaries, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding,
(c) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding,
or (d) any payment or prepayment of principal of, premium, if any, or interest
on, redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, the Subordinated Debt.
"Revolving Commitment" shall mean, 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" shall mean, for each Lender, the
percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a),
as such percentage may
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be modified in connection with any assignment made in accordance with the
provisions of Section 9.6(c).
"Revolving Commitment Termination Date" shall mean March 27, 2004.
"Revolving Committed Amount" shall mean, collectively, the aggregate
amount of all Revolving Commitments as referenced in Section 2.1(a), as such
amount may be reduced from time to time in accordance with the provisions
hereof, and, individually, the amount of each Lender's Revolving Commitment as
specified on Schedule 2.1(a).
"Revolving Loans" shall have the meaning set forth in Section 2.1.
"Revolving Note" or "Revolving Notes" shall mean 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" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"Security Agreement" shall mean the Security Agreement dated as of the
Closing Date given by the Borrower and the other Domestic Credit Parties to the
Agent, as amended, modified or supplemented from time to time in accordance with
its terms.
"Security Documents" shall mean the Security Agreement, the Pledge
Agreement, the Foreign Subsidiary Pledge Agreement, any mortgage instrument and
such other documents executed and delivered in connection with the attachment
and perfection of the Agent's security interests and liens arising thereunder,
including, without limitation, UCC financing statements and patent and trademark
filings.
"Separation Agreement" shall mean the Master Separation Agreement dated
as of January 29, 1998 by and among Polymer, the Borrower, the Target, DTA,
Dominion Textile International (Asia) Pte. Ltd, Dominion Textile International
B.V. and DT (USA), attached hereto as Schedule 1.1(b).
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
Plan.
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"Specified Sales" shall mean (a) the sale, transfer, lease or other
disposition of inventory and materials in the ordinary course of business, (b)
the sale, transfer, lease or other disposition of machinery, parts and
equipment, no longer useful in the conduct of the business of the Borrower or
any of its Subsidiaries, as appropriate, in its reasonable discretion, up to
$3,000,000 in any one or series of related sales, transfers, leases or other
dispositions but not to exceed $10,000,000 in the aggregate, (c) the sale,
transfer, lease or other disposition of the Klopman International facility
located in Tralee, County Kerry, Ireland provided that the net proceeds
therefrom are used to acquire new assets or property to be used in the
operations of the Borrower and its Subsidiaries, and (d) the sale, transfer or
other disposition of Permitted Investments described in clauses (i), (iii)(B),
(v) and (vii) of the definition thereof.
"Stock Repurchase Plan" shall mean the stock repurchase plan of the
Borrower implemented in April 1997 providing for the repurchase by the Borrower
from time to time of up to 900,000 shares of its common stock.
"Subordinated Debt" shall mean (a) the Senior Subordinated Increasing
Rate Notes (the "Bridge Notes") up to $275,000,000 issued by G&L Industries
pursuant to the Senior Subordinated Credit Agreement among G&L Industries, the
other guarantors party thereto, the Borrower and First Union Corporation (the
"Bridge Agreement"), as amended by Amendment No. 1 thereto dated as of the
Closing Date and as assumed by the Borrower on the Closing Date pursuant to the
terms thereof and (b) the permanent senior subordinated notes up to $275,000,000
issued by the Borrower to refinance the Bridge Notes (the "Permanent
Subordinated Debt").
"Subsidiary" shall mean, 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 Borrower.
"Swingline Commitment" shall mean 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" shall mean the amount of the Swingline
Lender's Swingline Commitment as specified in Section 2.3(a).
"Swingline Lender" shall mean First Union, in its capacity as such.
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"Swingline Loan" or "Swingline Loans" shall have the meaning set forth
in Section 2.3(a).
"Swingline Note" shall mean 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.
"Target" shall mean Dominion Textile Inc., a corporation incorporated
under the Canada Business Corporations Act.
"Taxes" shall have the meaning set forth in Section 2.18.
"Tender Offer" shall mean the cash tender offer by DTA for all of the
issued and outstanding Common Shares and associated rights and First Preferred
Shares of Target as described in the Offer to Purchase.
"Term Loans" shall mean the Tranche B Term Loan and the Tranche C Term
Loan.
"Term Loan Commitment Fee" shall have the meaning set forth in Section
2.5(d).
"Term Notes" shall mean the Tranche B Term Notes and the Tranche C Term
Notes.
"Tranche" shall mean 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".
"Tranche B Term Loan" shall have the meaning set forth in Section
2.2(a).
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"Tranche B Term Loan Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make its portion of the Tranche B Term
Loan in a principal amount equal to such Lender's Tranche B Term Loan Commitment
Percentage of the Tranche B Term Loan Committed Amount (and for purposes of
making determinations of Required Lenders hereunder after the Closing Date, the
principal amount outstanding on the Tranche B Term Loan).
"Tranche B Term Loan Commitment Percentage" shall mean, for any Lender,
the percentage identified as its Tranche B Term Loan 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.
"Tranche B Term Loan Committed Amount" shall have the meaning set forth
in Section 2.2(a).
"Tranche B Term Note" or "Tranche B Term Notes" shall mean the
promissory notes of the Borrower in favor of each of the Lenders evidencing the
portion of the Tranche B Term Loan provided pursuant to Section 2.2(d),
individually or collectively, as appropriate, as such promissory notes may be
amended, modified, restated, supplemented, extended, renewed or replaced from
time to time.
"Tranche C Term Loan" shall have the meaning set forth in Section
2.2A(a).
"Tranche C Term Loan Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make its portion of the Tranche C Term
Loan in a principal amount equal to such Lender's Tranche C Term Loan Commitment
Percentage of the Tranche C Term Loan Committed Amount (and for purposes of
making determinations of Required Lenders hereunder after the Closing Date, the
principal amount outstanding on the Tranche C Term Loan).
"Tranche C Term Loan Commitment Percentage" shall mean, for any Lender,
the percentage identified as its Tranche C Term Loan 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.
"Tranche C Term Loan Committed Amount" shall have the meaning set forth
in Section 2.2A(a).
"Tranche C Term Note" or "Tranche C Term Notes" shall mean the
promissory notes of the Borrower in favor of each of the Lenders evidencing the
portion of the Tranche C Term Loan provided pursuant to Section 2.2A(d),
individually or collectively, as appropriate, as such promissory notes may be
amended, modified, restated, supplemented, extended, renewed or replaced from
time to time.
"Transfer Effective Date" shall have the meaning set forth in each
Commitment Transfer Supplement.
"2.18 Certificate" shall have the meaning set forth in Section 2.18.
"Type" shall mean, as to any Loan, its nature as an Alternate Base Rate
Loan, LIBOR Rate Loan or Swingline Loan, as the case may be.
"Wachovia JEDA Letter of Credit" shall mean 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 G&L Industries 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.
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"Wachovia JEDA Reimbursement Agreement" shall mean the Amended and
Restated Reimbursement and Security Agreement dated as of June 4, 1996 between
G&L Industries 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.
SECTION 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.
SECTION 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 with the most recent audited
consolidated financial statements of the Borrower delivered to the Lenders;
provided that, if 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 Borrower that the
Required Lenders wish to amend Section 5.9 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.
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.
Notwithstanding the above, the parties hereto acknowledge and agree
that, for purposes of all calculations made in determining compliance for any
applicable period with the financial covenants set forth in Section 5.9(a) and
(d) hereof (including without limitation for purposes of
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the definition of "Applicable Percentage" set forth in Section 1.1) for all
calculation periods ending on and prior to April 3, 1999, income statement items
(whether positive or negative) attributable to the Acquired Companies shall be
included in such calculations to the extent relating to such applicable period.
ARTICLE II
THE LOANS; AMOUNT AND TERMS
SECTION 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
LOC Obligations shall not exceed the lesser of the aggregate Revolving Committed
Amount then in effect and the Borrowing Base. For purposes hereof, the aggregate
amount available hereunder shall be TWO HUNDRED TWENTY-FIVE MILLION DOLLARS
($225,000,000) (as such aggregate maximum amount may be reduced from time to
time as provided in Section 2.6, the "Revolving Committed Amount"). 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 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
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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 Committed Amount, 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 Revolving Commitment
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 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
promissory note of the Borrower to such Lender in substantially the
form of Schedule 2.1(e).
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SECTION 2.2 TRANCHE B TERM LOAN.
(a) Tranche B Term Loan. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make available to the
Borrower on the Closing Date such Lender's Tranche B Term Loan
Commitment Percentage of a term loan in Dollars (the "Tranche B Term
Loan") in the aggregate principal amount of ONE HUNDRED FIFTY-FIVE
MILLION DOLLARS ($155,000,000) (the "Tranche B Term Loan Committed
Amount") for the purposes hereinafter set forth. The Tranche B Term
Loan may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a
combination thereof, as the Borrower may request. The Borrower shall
request the initial Tranche B Term 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 on the third
Business Day prior to the date of the requested borrowing in the case
of LIBOR Rate Loans. Amounts repaid on the Tranche B 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 Tranche B Term Loan. The principal amount of
the Tranche B Term Loan shall be repaid in twenty-eight (28)
consecutive fiscal quarterly installments, unless accelerated sooner
pursuant to Section 7.2, commencing on June 27, 1998 and ending on
April 2, 2005. Installments one (1) through twenty-four (24),
inclusive, shall each be in the amount of $387,500 and installments
twenty-five (25) through twenty-eight (28), inclusive, shall each be in
the amount of $36,425,000.
(c) Interest on the Tranche B Term Loan. Subject to the
provisions of Section 2.9, the Tranche B Term Loan shall bear interest
as follows:
(i) Alternate Base Rate Loans. During such periods as the
Tranche B 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
(ii) LIBOR Rate Loans. During such periods as the Tranche B
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 Tranche B Term Loan shall be payable in arrears on each
Interest Payment Date.
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(d) Tranche B Term Notes. Each Lender's Tranche B Term Loan
Commitment Percentage of the Tranche B Term Loan outstanding as of the
Closing Date shall be evidenced by a duly executed promissory note of
the Borrower to such Lender in substantially the form of Schedule
2.2(d).
SECTION 2.2A TRANCHE C TERM LOAN.
(a) Tranche C Term Loan. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make available to the
Borrower on the Closing Date such Lender's Tranche C Term Loan
Commitment Percentage of a term loan in Dollars (the "Tranche C Term
Loan") in the aggregate principal amount of ONE HUNDRED TEN MILLION
DOLLARS ($110,000,000) (the "Tranche C Term Loan Committed Amount") for
the purposes hereinafter set forth. The Tranche C Term Loan may consist
of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination
thereof, as the Borrower may request. The Borrower shall request the
initial Tranche C Term 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 on the third Business Day prior
to the date of the requested borrowing in the case of LIBOR Rate Loans.
Amounts repaid on the Tranche C 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 Tranche C Term Loan. The principal amount of
the Tranche C Term Loan shall be repaid in thirty-two (32) consecutive
fiscal quarterly installments, unless accelerated sooner pursuant to
Section 7.2, commencing on June 27, 1998 and ending on April 1, 2006.
Installments one (1) through twenty-eight (28), inclusive, shall each
be in the amount of $275,000 and installments twenty-nine (29) through
thirty-two (32), inclusive, shall each be in the amount of $25,575,000.
(c) Interest on the Tranche C Term Loan. Subject to the
provisions of Section 2.9, the Tranche C Term Loan shall bear interest
as follows:
(i) Alternate Base Rate Loans. During such periods as the
Tranche C 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
(ii) LIBOR Rate Loans. During such periods as the Tranche C
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.
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Interest on the Tranche C Term Loan shall be payable in arrears on each
Interest Payment Date.
(d) Tranche C Term Notes. Each Lender's Tranche C Term Loan
Commitment Percentage of the Tranche C Term Loan outstanding as of the
Closing Date shall be evidenced by a duly executed promissory note of
the Borrower to such Lender in substantially the form of Schedule
2.2A(d).
SECTION 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 FIFTEEN MILLION DOLLARS ($15,000,000) (the
"Swingline Committed Amount"), and (ii) the sum of the aggregate amount
of outstanding Revolving Loans plus Swingline Loans plus LOC
Obligations shall not exceed the lesser of the aggregate Revolving
Committed Amount then in effect and the Borrowing Base. 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 on any Business Day upon request made by the Borrower
not later than 12:00 Noon (Charlotte, North Carolina time) on
such Business Day. A notice of request for Swingline Loan
borrowing shall be made in the form of Schedule 2.1(b)(i) with
appropriate modifications. Swingline Loan borrowings hereunder
shall be made in minimum amounts of $100,000 and in integral
amounts of $100,000 in excess thereof.
(ii) Repayment of Swingline Loans. Each Swingline
Loan borrowing shall be due and payable on the Revolving
Commitment Termination Date. The Swingline Lender may, at any
time, in its sole discretion, by written notice to the
Borrower and the Agent, demand repayment of its 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 Revolving Commitment Termination Date, (ii) the
occurrence of any Event of Default described in Section
7.1(e), (iii) upon acceleration of the Credit Party
Obligations hereunder, whether on account of an Event of
Default described in Section 7.1(e) or any other Event of
Default, and (iv) the exercise of remedies in accordance with
the
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provisions of Section 7.2 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 Revolving Commitments immediately prior to
such Mandatory Borrowing or contemporaneously 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 7.2), 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 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 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 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).
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SECTION 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 THIRTY MILLION DOLLARS ($30,000,000) (the "LOC
Committed Amount"), (ii) the sum of the aggregate amount of Revolving
Loans plus Swingline Loans plus LOC Obligations shall not at any time
exceed the lesser of the aggregate Revolving Committed Amount and the
Borrowing Base, (iii) all Letters of Credit shall be denominated in
U.S. Dollars and (iv) Letters of Credit shall be issued for the purpose
of supporting tax-advantaged variable rate demand note financing and
for other lawful corporate purposes and may be issued as standby
letters of credit, including in connection with workers' compensation
and other insurance programs, and trade letters of credit. Except as
otherwise expressly agreed upon by all the Lenders, no Letter of Credit
(other than the JEDA Letter of Credit which has an original expiry date
of fourteen (14) months) shall have an original expiry date more than
twelve (12) 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 G&L Industries and the
Trustee for the JEDA Bonds of a Notice of Non-Extension from the
Issuing Lender thereof (but not to a date later than the "Revolving
Commitment 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 twelve (12) months
(fourteen (14) months for the JEDA Letter of Credit) 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
Revolving Commitment Termination Date except that prior to the
Revolving Commitment Termination Date a Letter of Credit may be issued
or extended with an expiry date extending beyond the Revolving
Commitment Termination Date if, and to the extent that, unless the
Issuing Lender and the Required Lenders shall otherwise object, 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 fifteen (15) Letters of
Credit outstanding at any time. First Union shall be the Issuing Lender
on all Letters of Credit issued after the Closing Date and shall become
the Issuing Lender on all Existing Letters of Credit on the
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date such Letters of Credit are extended or renewed in accordance with
the terms hereof and thereof.
(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 promptly 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 any 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 promptly 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
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
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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 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 Credit Party 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 7.2) pro rata
based on each Lender's respective Revolving Commitment Percentage
(determined before giving effect to any termination of the Commitments
pursuant to Section 7.2) and in the case of both clauses (i) and (ii)
the proceeds thereof shall be paid directly to the Issuing Lender for
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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 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), 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.
SECTION 2.5 FEES.
(a) Commitment Fee. In consideration of the Revolving
Commitment, 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
be considered usage under the aggregate Revolving Committed Amount. The
Commitment
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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 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 for the prior
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").
(d) Term Loan Commitment Fee. In consideration of the Tranche
B Term Loan Commitment and the Tranche C Term Loan Commitment, the
Borrower agrees to pay to the Agent the commitment fee as described in
the Fee Letter.
(e) Administrative Fee. The Borrower agrees to pay to the
Agent the annual administrative fee as described in the Fee Letter.
SECTION 2.6 COMMITMENT REDUCTIONS.
(a) Voluntary Reductions. The Borrower shall have the right to
terminate or permanently reduce the unused portion of the Revolving
Committed Amount 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 shall be in a minimum amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof and
shall be irrevocable and effective 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 Swingline Loans
plus LOC Obligations would exceed the lesser of the aggregate Revolving
Committed Amount then in effect and the Borrowing Base.
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(b) Mandatory Reductions. On any date that the Revolving Loans
are required to be prepaid pursuant to the terms of Section 2.7(b)
(ii), (iii), (iv), (v), (vi), (vii), and (viii), the Revolving
Committed Amount shall be automatically permanently reduced by the
amount of such required prepayment and/or reduction.
(c) Revolving Commitment Termination Date. The Revolving
Commitment, the LOC Commitment and the Swingline Commitment shall
automatically terminate on the Revolving Commitment Termination Date.
SECTION 2.7 PREPAYMENTS.
(a) Optional Prepayments. The Borrower shall have the right to
prepay Loans in whole or in part from time to time; provided, however,
that each partial prepayment of Revolving Loans and Term Loans shall be
in a minimum principal amount of $5,000,000 and integral multiples of
$1,000,000 in excess thereof and each prepayment of Swingline Loans
shall be in a minimum principal amount of $100,000 and integral
multiples of $100,000 in excess thereof. The Borrower shall give three
Business Days' irrevocable notice in the case of LIBOR Rate Loans and
one Business Day's irrevocable notice in the case of Alternate Base
Rate Loans, to the Agent (which shall notify the Lenders thereof as
soon as practicable). Subject to the foregoing terms, amounts prepaid
under this Section 2.7(a) shall be applied as the Borrower may elect;
provided that if the Borrower fails to specify the application of an
optional prepayment then such prepayment shall be applied first to
Revolving Loans and then pro rata to the remaining principal
installments of the Term Loans, in each case first to Alternate Base
Rate Loans and then to LIBOR Rate Loans in direct order of Interest
Period maturities. All prepayments under this Section 2.7(a) shall be
subject to Section 2.17, but otherwise without premium or penalty.
Interest on the principal amount prepaid shall be payable on the next
occurring Interest Payment Date that would have occurred had such loan
not been prepaid or, at the request of the Agent, interest on the
principal amount prepaid shall be payable on any date that a prepayment
is made hereunder through the date of prepayment. Amounts prepaid on
the Swingline Loan and the Revolving Loans may be reborrowed in
accordance with the terms hereof. Amounts prepaid on the Term Loans may
not be reborrowed.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time after
the Closing Date, the sum of the aggregate principal amount of
outstanding Revolving Loans plus Swingline Loans plus LOC
Obligations shall exceed the lesser of the aggregate Revolving
Committed Amount then in effect and the Borrowing Base, the
Borrower immediately shall prepay the Revolving Loans and
(after all Revolving Loans have been repaid) cash
collateralize the LOC Obligations, in an amount sufficient to
eliminate such excess.
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(ii) Excess Cash Flow. Within ninety (90)
days after the end of each fiscal year (commencing with the
fiscal year ending October 3, 1998), the Borrower shall prepay
the Term Loans in an amount equal to (x) fifty percent (50%)
of the Excess Cash Flow earned during such prior fiscal year
less (y) the amount of any optional prepayments of the Term
Loans or (to the extent accompanied by a reduction in the
Revolving Committed Amount) the Revolving Loans during such
prior fiscal year. Any payments of Excess Cash Flow shall be
applied as set forth in clause (ix) below. Notwithstanding the
foregoing to the contrary, the prepayment of Loans from Excess
Cash Flow shall not be required for any prior fiscal year if
the Leverage Ratio for the four fiscal quarters ending on the
last day of such fiscal year shall be less than or equal to
3.75 to 1.0.
(iii) Asset Dispositions. Promptly following any
Asset Disposition, the Borrower shall prepay the Loans in an
aggregate amount equal to the Net Cash Proceeds derived from
such Asset Disposition (such prepayment to be applied as set
forth in clause (ix) below).
(iv) Debt Issuances. Immediately upon receipt by any
Credit Party of proceeds from any Debt Issuance, the Borrower
shall prepay the Loans in an aggregate amount equal to
one-hundred percent (100%) of the Net Cash Proceeds of such
Debt Issuance to the Lenders (such prepayment to be applied as
set forth in clause (ix) below).
(v) Issuances of Equity. Immediately upon receipt by
a Credit Party of proceeds from any Equity Issuance, the
Borrower shall prepay the Loans in an aggregate amount equal
to one-hundred percent (100%) of the Net Cash Proceeds of such
Equity Issuance to the Lenders (such prepayment to be applied
as set forth in clause (ix) below).
(vi) Recovery Event. To the extent of cash proceeds
received in connection with a Recovery Event which are not
applied in accordance with Section 6.5(a)(ii), immediately
following the 180th day occurring after the receipt by a
Credit Party of such cash proceeds, the Borrower shall prepay
the Loans in an aggregate amount equal to one-hundred percent
(100%) of such cash proceeds to the Lenders (such prepayment
to be applied as set forth in clause (ix) below).
(vii) [Reserved]
(viii) Adjustments to Purchase Price. Immediately
upon receipt by the Borrower of any payment or refund arising
from an adjustment to the Purchase Price paid by the Borrower
for the Acquired Companies which, when aggregated with any
other such payments or refunds, exceeds $25,000,000, the
Borrower shall prepay the Loans in an aggregate amount equal
to one-hundred percent (100%) of any such excess to the
Lenders (such prepayment to be applied as set forth in clause
(ix) below).
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(ix) Application of Mandatory Prepayments. All
amounts required to be paid pursuant to this Section 2.7(b)
shall be applied as follows: (A) with respect to all amounts
prepaid pursuant to Section 2.7(b)(i), to Revolving Loans and
(after all Revolving Loans have been repaid) to a cash
collateral account in respect of LOC Obligations and (B) with
respect to all amounts prepaid pursuant to Sections 2.7(b)(ii)
through (viii), (1) first pro rata to the Term Loans (ratably
to the remaining principal installments thereof) and (2)
second to the Revolving Loans and (after all Revolving Loans
have been repaid) to a cash collateral account in respect of
LOC Obligations. Within the parameters of the applications set
forth above, prepayments shall be applied first to Alternate
Base Rate Loans and then to LIBOR Rate Loans in direct order
of Interest Period maturities. All prepayments under this
Section 2.7(b) shall be subject to Section 2.17 and be
accompanied by interest on the principal amount prepaid
through the date of prepayment.
SECTION 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 Term Loans comprising any Tranche shall not be less than
$5,000,000 or a whole multiple of $1,000,000 in excess thereof.
SECTION 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
assuming Level I interest rate margins were then in effect, 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 (after as well as before
judgment). Upon the occurrence, and during the continuance, of any
other Event of Default hereunder, the principal of and, to the extent
permitted by law, interest on the Loans and any other amounts owing
hereunder or under the other Credit Documents shall bear interest,
payable on demand, at a per annum rate which is (A) in the case of
principal, the rate that would otherwise be applicable thereto assuming
Level I interest rate margins were then
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in effect, plus 2% or (B) in the case of interest, fees or other
amounts, the Alternate Base Rate, plus 2% (after as well 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 Section 2.9 shall be payable from time to time on
demand.
SECTION 2.10 CONVERSION OPTIONS.
(a) The Borrower may, in the case of Revolving Loans and the
Term Loans, 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/ 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 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 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 Borrower with the notice provisions contained in Section 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. If the Borrower shall fail to give timely notice of an
election to continue a LIBOR Rate Loan, or the 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.
SECTION 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 days (or
366 days, as applicable) 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 Borrower 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
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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 Borrower, deliver to the
Borrower a statement showing the computations used by the Agent in
determining any interest rate.
SECTION 2.12 PRO RATA TREATMENT AND PAYMENTS.
Each borrowing of Revolving Loans and any reduction of the Revolving
Commitments 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
Section 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 Section
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 Loans shall be made pro rata according to the respective amounts due
and owing in accordance with Section 2.7 hereof. Each optional prepayment on
account of principal of the Loans shall be applied, to such of the Loans as the
Borrower may designate (to be applied pro rata among the Lenders); provided,
that prepayments made pursuant to Section 2.15 shall be applied in accordance
with such section. Each mandatory prepayment on account of principal of the
Loans shall be applied in accordance with Section 2.7(b). 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 Section 2.18(b)) and shall be made to the Agent for the account
of the Lenders at the Agent's office specified on Schedule 9.2 in Dollars and in
immediately available funds not later than 1:00 P.M. (Charlotte, North Carolina
time) on the date when due. 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.
SECTION 2.13 NON-RECEIPT OF FUNDS BY THE AGENT.
(a) Unless the Agent shall have been notified in writing by a
Lender prior to the date a Loan is to be made by such Lender (which
notice shall be effective upon
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receipt) that such Lender does not intend to make the proceeds of such
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 Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent, the
Agent shall be able to recover such corresponding amount from such
Lender. If such Lender does not pay such corresponding amount forthwith
upon the Agent's demand therefor, the Agent will promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding
amount to the Agent. The Agent shall also be entitled to recover from
the Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent at a per
annum rate equal to (i) from the Borrower at the applicable rate for
the applicable borrowing pursuant to the Notice of Borrowing and (ii)
from a Lender at the Federal Effective Funds Rate.
(b) Unless the Agent shall have been notified in writing 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 interest on such amount in
respect of each day from the date such amount was made available by the
Agent to such Lender to the date such amount is recovered by the Agent
at a per annum rate equal to the Federal Funds Effective Rate.
(c) A certificate of the Agent submitted to the Borrower or
any Lender with respect to any amount owing under this Section 2.13
shall be conclusive in the absence of manifest error.
SECTION 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 Required 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
telephone notice of such determination, confirmed in writing, to the Borrower,
and the Lenders at least two Business
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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.
SECTION 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 Section 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 Section 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 Section; 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.
SECTION 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 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
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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 LIBOR Rate Loans or the Letters of
Credit 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 or Letters of Credit. A
certificate as to any additional amounts payable pursuant to this
Section 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 Section; 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 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 fifteen (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 Section 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 Section
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2.16 for any period which is more than ninety (90) days prior to the
date upon which the request for payment therefor is delivered to the
Borrower.
(d) The agreements in this Section 2.16 shall survive the
termination of this Agreement and payment of the Notes and all other
amounts payable hereunder.
SECTION 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
Section 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 Section shall survive termination of this
Agreement and payment of the Notes and all other amounts payable hereunder.
SECTION 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 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
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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 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
Borrower 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 Borrower
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
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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 Section; 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 Section 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 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
Section 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 Section 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
Section 2.18 to the Borrower or any other party.
(e) The agreements in this Section 2.18 shall survive the
termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
SECTION 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 (i) the issuance of
any Letter of Credit or (ii) 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
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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 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 Government Authority.
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.
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SECTION 2.20 PRE-SYNDICATION LOANS.
Notwithstanding any provision herein to the contrary, all LIBOR Rate
Loans under this Agreement, prior to the closing of the initial syndication of
the Commitments and the Loans to the Lenders, shall be made or continued as
LIBOR Rate Loans having an Interest Period of fourteen (14) days. All LIBOR Rate
Loans having an Interest Period of fourteen (14) days shall bear interest at the
same rate as LIBOR Rate Loans having an Interest Period of one month.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit herein provided for, the Borrower hereby represents and
warrants to the Agent and to each Lender that:
SECTION 3.1 FINANCIAL CONDITION.
The consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at September 27, 1997 and the related consolidated statements of
income and of cash flows for the fiscal year 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 Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the fiscal year then ended. 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 Borrower 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. The revised eight-year financial and operational
projections for the Borrower and its Subsidiaries (including the Apparel Fabrics
Business) for the fiscal years of 1998 through 2005 delivered to the Agent prior
to the Closing Date (the "Projections"), constitute a reasonable basis as of the
Closing Date for the assessment of the future performance of the Borrower and
its Subsidiaries (including the Apparel Fabrics Business) during the periods
indicated therein, it being understood that any projected financial information
represents projections, based on various assumptions, of future results of
operations which may or may not in fact occur and no assurance can be given that
such results will be achieved.
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SECTION 3.2 NO CHANGE.
Since September 27, 1997 (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 or could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Each of The Borrower and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the requisite 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 to conduct business 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.
SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of 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 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 Borrower or the other Credit
Parties (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 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 Borrower or the
other Credit Parties, as the case may be, enforceable against 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).
SECTION 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 Borrower or its
Subsidiaries (except those as to which waivers
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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 Borrower nor any of its Subsidiaries is in default under
or with respect to any of its Contractual 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.
SECTION 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 Borrower, threatened by or against the Borrower 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.
SECTION 3.7 INVESTMENT COMPANY ACT.
Neither the Borrower nor any Credit Party is an "investment company",
or a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 3.8 MARGIN 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
Borrower 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 Borrower and its Subsidiaries
taken as a group does not exceed 25% of the value of their assets.
SECTION 3.9 ERISA.
Except as set forth in Schedule 3.9, 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 (other
than a Permitted Lien) 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
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(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
Borrower 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.
SECTION 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 Borrower, the facilities and
properties owned, leased or operated by the Borrower 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 Borrower, the Properties and
all operations of the Borrower and/or its Subsidiaries 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 Borrower or any of its Subsidiaries (the
"Business").
(c) Neither the Borrower nor any of its Subsidiaries has
received any written or actual 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 Borrower or any
of its Subsidiaries have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) To the best knowledge of the Borrower, 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 Borrower, threatened,
under any Environmental Law to which the Borrower 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
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requirements outstanding under any Environmental Law with respect to
the Properties or the Business.
(f) To the best knowledge of the Borrower, 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 Borrower or any Subsidiary in connection with the Properties or
otherwise in connection with the Business, in violation of or in
amounts or in a manner that could give rise to liability under
Environmental Laws.
SECTION 3.11 PURPOSE OF LOANS.
The proceeds of the Revolving Loans will be used to refinance existing
indebtedness of the Borrower and its Subsidiaries, to finance the G&L
Acquisition in part and for general corporate and working capital purposes. The
proceeds of the Term Loans will be used to refinance existing indebtedness of
the Borrower and to finance the G&L Acquisition and the closing costs and
expenses related thereto.
SECTION 3.12 SUBSIDIARIES.
Set forth on Schedule 3.12 is a complete and accurate list of all
Subsidiaries of 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 3.13 OWNERSHIP.
Each of the Borrower and its Subsidiaries is the owner of, and has good
and marketable title to, all of its respective assets, except as may be
permitted pursuant Section 6.13 hereof, and none of such assets is subject to
any Lien other than Permitted Liens.
SECTION 3.14 INDEBTEDNESS.
Except as otherwise permitted under Section 6.1, the Borrower and its
Subsidiaries have no Indebtedness.
SECTION 3.15 TAXES.
Each of the Borrower and its Subsidiaries has filed, or caused to be
filed, all tax returns (federal, state, local and foreign) required to be filed
and paid (a) all amounts of taxes shown thereon to be due (including interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
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intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. Neither the Borrower nor any of its Subsidiaries is aware
as of the Closing Date of any proposed tax assessments against it or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.16 INTELLECTUAL PROPERTY.
Each of the Borrower and its Subsidiaries owns, or has the legal right
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes necessary for each of them to conduct its business as currently
conducted except for those the failure to own or have such legal right to use
could not have a Material Adverse Effect (the "Material Intellectual Property").
Set forth on Schedule 3.16 is a list of all Material Intellectual Property owned
by each of the Borrower and its Subsidiaries or that the Borrower or any of its
Subsidiaries has the right to use. Except as provided on Schedule 3.16, no claim
has been asserted and is pending by any Person challenging or questioning the
use of any such Material Intellectual Property or the validity or effectiveness
of any such Material Intellectual Property, nor does the Borrower or any of its
Subsidiaries know of any such claim, and, to the knowledge of the Borrower or
any of its Subsidiaries, the use of such Material Intellectual Property by the
Borrower or any of its Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate, could
not have a Material Adverse Effect. Schedule 3.16 may be updated from time to
time by the Borrower by giving written notice thereof to the Agent.
SECTION 3.17 SOLVENCY.
The fair saleable value of each Credit Party's assets, measured on a
going concern basis, exceeds all probable liabilities, including those to be
incurred pursuant to this Credit Agreement. None of the Credit Parties (a) has
unreasonably small capital in relation to the business in which it is or
proposes to be engaged or (b) has incurred, or believes that it will incur after
giving effect to the transactions contemplated by this Credit Agreement, debts
beyond its ability to pay such debts as they become due.
SECTION 3.18 INVESTMENTS.
All Investments of each of the Borrower and its Subsidiaries are
Permitted Investments.
SECTION 3.19 LOCATION OF COLLATERAL.
Set forth on Schedule 3.19(a) is a list of the Properties of the
Borrower and its Subsidiaries with street address, county and state where
located. Set forth on Schedule 3.19(b) is a list of all locations where any
tangible personal property of the Borrower and its Subsidiaries is located,
including county and state where located. Set forth on Schedule 3.19(c) is the
chief executive office and principal place of business of each of the Borrower
and its Subsidiaries. Schedule 3.19(a), 3.19(b) and 3.19(c) may be updated from
time to time by the Borrower giving written notice thereof to the Agent.
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SECTION 3.20 NO BURDENSOME RESTRICTIONS.
None of the Borrower or any of its Subsidiaries is a party to any
agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which, individually or in the aggregate, could have a Material Adverse Effect.
SECTION 3.21 BROKERS' FEES.
None of the Borrower or any of its Subsidiaries has any obligation to
any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents other than the closing and other fees payable pursuant to this
Credit Agreement or payable in connection with the Tender Offer or the G&L
Acquisition, which fees, together with expenses incurred in connection with this
Credit Agreement, the Tender Offer and the G&L Acquisition, shall not exceed
$60,000,000.
SECTION 3.22 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any of its Subsidiaries as of the
Closing Date, other than as set forth in Schedule 3.22 hereto, and none of the
Borrower or any of its Subsidiaries has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years, other
than as set forth in Schedule 3.22 hereto.
SECTION 3.23 ACCURACY AND COMPLETENESS OF INFORMATION.
All factual information (excluding the Projections) heretofore,
contemporaneously or hereafter furnished by or on behalf of the Borrower or any
of its Subsidiaries to the Agent or any Lender for purposes of or in connection
with this Agreement or any other Credit Document, or any transaction
contemplated hereby or thereby, is or will be true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any material fact necessary to make such
information not misleading at such time. There is no fact now known to the
Borrower or any of its Subsidiaries which has, or would have, a Material Adverse
Effect which fact has not been set forth herein, in the financial statements of
the Borrower and its Subsidiaries furnished to the Agent and/or the Lenders, or
in any certificate, opinion or other written statement made or furnished by the
Borrower to the Agent and/or the Lenders.
SECTION 3.24 PRINTED APPAREL FABRICS BUSINESS.
Neither the Borrower nor any of its Subsidiaries owes any material
payments or has any other material obligations with respect to the closure in
September, 1995, of the printed apparel fabrics business of G&L Industries.
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SECTION 3.25 YEAR 2000 ISSUE.
Any reprogramming and related testing required to permit the proper
functioning of the Domestic Credit Parties' or, to our knowledge, the Foreign
Credit Parties' computer systems in and following the year 2000 will be
completed in all material respects prior to September 1, 1999, and the cost to
the Credit Parties of such reprogramming and testing will not result in a
Default or Event of Default or a Material Adverse Effect. Except for such
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Credit Parties and their
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, adequate for the conduct of its
business.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL REVOLVING LOANS AND
TERM LOANS MADE IN CONNECTION WITH THE G&L ACQUISITION.
This Agreement shall become effective upon, and the obligation of each
Lender to make the initial Revolving Loans and Term Loans on the Closing Date is
subject to, 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 Revolving Notes, Tranche B Term Notes and Tranche C Term
Notes and for the account of the Swingline Lender, a Swingline Note and
(iii) multiple counterparts of the Security Agreement, the Pledge
Agreement and the Foreign Subsidiary Pledge Agreement for each Lender,
in each case conforming to the requirements of this Agreement and
executed by a duly authorized officer of the Borrower or other Credit
Party, as applicable.
(b) Corporate Documents. The Agent shall have received the
following:
(i) Articles of Incorporation. Copies of the
articles of incorporation or charter documents of the Borrower
and the other Domestic Credit Parties 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 Borrower and the other Domestic
Credit Parties 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 Closing Date to be true and
correct and in force and effect as of such date.
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(iii) Bylaws. A copy of the bylaws of the
Borrower and the other Domestic Credit Parties certified by a
secretary or assistant secretary as of the Closing 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 Borrower and the other Domestic Credit
Parties 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 Borrower and its 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.
(v) Incumbency. An incumbency certificate of
each Domestic Credit Party certified by a secretary or
assistant secretary to be true and correct as of the Closing
Date.
(c) Legal Opinions of Counsel.
(i) The Agent shall have received, with a copy for
each Lender, an opinion of Rosenman & Colin LLP, counsel for
the Borrower and the other Domestic Credit Parties, dated the
Closing Date and addressed to the Agent and the Lenders, in
form and substance acceptable to the Agent.
(ii) The Agent shall have received each opinion,
report and other document required to be delivered pursuant to
the Acquisition Documents in connection with the Acquisition
Transactions, with a letter from each person delivering such
opinion, report and other document authorizing reliance
thereon by the Agent and the Lenders, all in form and
substance acceptable to the Agent.
(d) Personal Property Collateral. The Agent shall have
received:
(i) searches of Uniform Commercial Code
filings in the jurisdiction of the chief executive office of
each Domestic Credit Party and each jurisdiction where any
Collateral is located or where a filing would need to be made
in order to perfect the Agent's security interest in the
Collateral, copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly executed UCC financing statements
for each appropriate jurisdiction as is necessary, in the
Agent's sole discretion, to perfect the Agent's security
interest in the Collateral;
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(iii) searches of ownership of Material
Intellectual Property in the appropriate governmental offices
and such patent/trademark/copyright filings as requested by
the Agent in order to perfect the Agent's security interest in
the Collateral;
(iv) all stock certificates evidencing the
Capital Stock pledged to the Agent pursuant to the Pledge
Agreement, together with duly executed in blank undated stock
powers attached thereto (unless, with respect to the pledged
Capital Stock of any Foreign Subsidiary, such stock powers are
deemed unnecessary by the Agent in its reasonable discretion
under the law of the jurisdiction of incorporation of such
Person);
(v) such patent/trademark/copyright filings
as requested by the Agent in order to perfect the Agent's
security interest in the Material Intellectual Property;
(vi) all instruments and chattel paper in
the possession of any of the Credit Parties, together with
allonges or assignments as may be necessary or appropriate to
perfect the Agent's security interest in the Collateral;
(vii) duly executed consents as are
necessary, in the Agent's sole discretion, to perfect the
Lenders' security interest in the Collateral; and
(viii) in the case of any personal property
Collateral located at premises leased by a Credit Party, such
estoppel letters, consents and waivers from the landlords on
such real property as may be required by the Agent.
(e) Liability and Casualty Insurance. The Agent shall have
received copies of insurance policies or certificates of insurance
evidencing liability and casualty insurance meeting the requirements
set forth herein or in the Security Documents. The Agent shall be named
as loss payee and additional insured on all such insurance policies for
the benefit of the Lenders.
(f) Fees. The Agent shall have received all fees, if any,
owing pursuant to the Fee Letter and Section 2.5.
(g) Litigation. There shall not exist any pending litigation
or investigation affecting or relating to the Bridge Notes, this
Agreement and the other Credit Documents, the Merger or the Acquisition
Transactions that in the reasonable judgment of the Agent could
materially adversely affect the Bridge Notes, this Agreement and the
other Credit Documents, the Merger or the Acquisition Transactions,
that has not been settled, dismissed, vacated, discharged or terminated
prior to the Closing Date.
(h) Solvency Certificate. The Agent shall have received, with
a copy for each Lender, an officer's certificate for each Domestic
Credit Party prepared by the chief
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financial officer of each such Domestic Credit Party as to the
financial condition, solvency and related matters of each such Domestic
Credit Party, in each case after giving effect to the initial
borrowings under the Credit Documents, in substantially the form of
Schedule 4.1(h) hereto.
(i) Account Designation Letter. The Agent shall have received
the executed Account Designation Letter in the form of Schedule 1.1(a)
hereto.
(j) Acquisition Documents. The Acquisition Documents shall
have been completed to the satisfaction of the Agent, the Acquisition
Transactions shall have been consummated substantially in accordance
with the terms of the Acquisition Documents and the purchase price
(including fees and expenses) for the Acquired Companies (which shall
include the refinancing of the existing senior bank indebtedness and
the publicly issued senior indebtedness of such Acquired Companies
other than the Indebtedness set forth on Schedule 4.1(u) hereto) shall
not exceed $490,000,000.
(k) Closing Date. The Closing Date shall have occurred on or
before the Acquisition Funding Termination Date.
(l) Corporate Structure. The corporate capital and ownership
structure of the Borrower and its Subsidiaries shall be as described in
Schedule 3.12.
(m) Subordinated Debt. The Borrower shall have received
proceeds from the issuance of the Subordinated Debt in an aggregate
principal amount of $275,000,000. The terms and conditions governing
the Subordinated Debt shall be acceptable to the Agent.
(n) Government Consent. The Agent shall have received evidence
that all U.S. and Canadian governmental, shareholder and material third
party consents and approvals necessary in connection with the
Acquisition Transactions and the related financings and other
transactions contemplated hereby have been obtained and all applicable
waiting periods have expired without any action being taken by any
authority that could restrain, prevent or impose any material adverse
conditions on the Acquisition Transactions or such other transactions
or that could seek or threaten any of the foregoing.
(o) Compliance with Laws. The Acquisition Transactions and the
related financings and other transactions contemplated hereby shall be
in compliance with all applicable U.S. and Canadian laws and
regulations (including all applicable U.S. and Canadian securities and
banking laws, rules and regulations).
(p) Bankruptcy. There shall be no bankruptcy or insolvency
proceedings with respect to the Acquired Companies or any pending
injunction with respect to the Acquisition Transactions.
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(q) Legal Aspects. The Agent and its counsel shall be
reasonably satisfied with all legal aspects regarding the G&L
Acquisition.
(r) Consolidated Funded Debt. The aggregate Consolidated
Funded Debt on the Closing Date shall not be in excess of $695,000,000.
(s) Availability of Revolving Loans. After giving effect to
the making of the Revolving Loans and the Term Loans on the Closing
Date, there shall be availability under the Revolving Commitments of at
least $25,000,000.
(t) Fees and Expenses. The aggregate fees and expenses
incurred by the Borrower and its Subsidiaries in connection with the
Tender Offer and the Acquisition Transactions shall not exceed
$60,000,000.
(u) Existing Indebtedness of Acquired Companies. All of the
existing senior bank indebtedness and publicly issued senior
indebtedness of the Acquired Companies shall be repaid in full on the
Closing Date except for the Indebtedness set forth on Schedule 4.1(u)
hereto.
(v) Existing Credit Agreement. All loans and other extensions
of credit under the Existing Credit Agreement shall have been repaid
and the commitments thereunder shall have been terminated.
(w) DTA Credit Agreement. All loans and other extensions of
credit under the DTA Credit Agreement shall have been repaid and the
commitments thereunder shall have been terminated.
(x) Borrowing Base Certificate. The Agent shall have received
a Borrowing Base Certificate dated the Closing Date for the month of
December, 1997, giving effect to the G&L Acquisition, substantially in
the form of Schedule 5.2(d) and certified by the Chief Financial
Officer of the Borrower to be true and correct as of such date.
(y) 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.
SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligation of each Lender to make any Extension of Credit hereunder
(excluding the initial Loans to be made hereunder on the Closing Date to finance
the Acquisition Transactions) 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 Documents
or which are contained in any
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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) Compliance with Commitments. Immediately after giving
effect to the making of any such Extension of Credit (and the
application of the proceeds thereof), (i) the sum of the aggregate
principal amount of outstanding Revolving Loans plus Swingline Loans
plus LOC Obligations shall not exceed the lesser of the Revolving
Committed Amount then in effect and the Borrowing Base, (ii) the LOC
Obligations shall not exceed the LOC Committed Amount and (iii) the
Swingline Loans shall not exceed the Swingline Commitment.
(d) Additional Conditions to Revolving Loans. If such Loan is
made pursuant to Section 2.1, all conditions set forth in such Section
shall have been satisfied.
(e) Additional Conditions to Term Loans. If such Loan is made
pursuant to Section 2.2 or 2.2A, all conditions set forth in such
Section shall have been satisfied.
(f) Additional Conditions to Swingline Loan. If such Loan is
made pursuant to Section 2.3, all conditions set forth in such Section
shall have been satisfied.
(g) Additional Conditions to Letters of Credit. If such
Extension of Credit is made pursuant to Section 2.4, all conditions set
fort in such Section shall have been satisfied.
Each request for an Extension of Credit (excluding the initial Loans to
be made hereunder on the Closing Date to finance the Acquisition Transactions)
and each acceptance by the Borrower of any such 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 (d), (e), (f) or (g) of this Section have been satisfied.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing 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 Credit Party
Obligations, together with interest, Commitment Fees and all other amounts owing
to the Agent or any Lender hereunder, are paid
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in full, the Borrower shall, and shall cause each of its Subsidiaries (other
than in the case of Sections 5.1, 5.2 or 5.7 hereof), to:
SECTION 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 ninety (90) days after the end of each fiscal year of
the Borrower, a copy of the consolidated balance sheet of the Borrower
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 Borrower 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 Required 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;
(b) Quarterly Financial Statements. As soon as available and
in any event within forty-five (45) days after the end of each of the
first three fiscal quarters of the Borrower, a company-prepared
consolidated balance sheet of the Borrower 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
Borrower 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 forty-five (45) days after the end of each fiscal year, a
copy of the detailed annual budget or plan of the Borrower for the next
fiscal year, in form and detail reasonably acceptable to the Agent and
the Required Lenders, together with a summary of the material
assumptions made in the preparation of such annual budget or plan; and
(d) Audited Financials for Apparel Fabrics Business; Pro Forma
Financials. As soon as available, but in any event no more than five
days following the Closing Date, the audited consolidated balance sheet
of the Apparel Fabrics Business as at June 30, 1997 and the related
consolidated statements of income and of cash flows for the fiscal year
ended on such date (the "Apparel Audited Financials"), the unaudited
interim consolidated balance sheet of the Apparel Fabrics Business as
at October 3, 1997 and the related consolidated statements of income
and of cash flows for the fiscal quarter ended on such date (the
"Apparel Interim Financials"), and the unaudited pro forma balance
sheet of the Borrower and its consolidated Subsidiaries (including the
Apparel Fabrics Business) as at September 27, 1997 and the related
statement of income for the fiscal
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year ended on such date (the "Pro Forma Financials"), certified by the
Chief Financial Officer of the Borrower (i) with respect to the Apparel
Audited Financials and the Apparel Interim Financials, as complete and
correct and fairly presenting the consolidated financial condition of
the Apparel Fabrics Business, as at such dates, and (ii) with respect
to the Pro Forma Financials as having been prepared on a basis
consistent with the historical financial statements of the Borrower
(and its consolidated Subsidiaries) and the Apparel Fabrics Business
(except for the pro forma adjustments specified therein), giving effect
to the assumptions used in the preparation thereof on a reasonable
basis and in good faith, and presenting fairly the historical and
proposed transactions contemplated thereby,
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) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change, if any, in the application of accounting principles as
provided in Section 1.3.
SECTION 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 Section 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, each of the Credit Parties during such period
observed or performed in all material respects all of its covenants and
other agreements, and satisfied in all material respects every
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 calculations
required to indicate compliance with Section 5.9;
(c) within thirty (30) days after the same are sent, copies of
all reports (other than those otherwise provided pursuant to Section
5.1 and those which are of a promotional nature) and other financial
information which the Borrower sends to its stockholders, and within
thirty days after the same are filed, copies of all financial
statements and non-confidential reports which the Borrower may make to,
or file with,
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the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(d) within fifteen (15) days after the end of each fiscal
month, a Borrowing Base Certificate as of the end of the immediately
preceding fiscal month, substantially in the form of Schedule 5.2(d)
and certified by the chief financial officer of the Borrower to be true
and correct as of the date thereof;
(e) within ninety (90) days after the end of each fiscal year
of the Borrower, a certificate containing information regarding (i) the
calculation of Excess Cash Flow and (ii) the amount of all Asset
Dispositions, Debt Issuances, Equity Issuances, amounts received in
connection with any Recovery Event, any repayments or prepayments of
the G&L Loan and any adjustments to the purchase price of the Acquired
Companies that were made during the prior fiscal year;
(f) promptly upon receipt thereof, a copy of any other report
or "management letter" submitted by independent accountants to the
Borrower or any of its Subsidiaries in connection with any annual,
interim or special audit of the books of such Person; and
(g) promptly, such additional financial and other information
as the Agent, on behalf of any Lender, may from time to time reasonably
request.
SECTION 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 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 Borrower or its Subsidiaries, as the case may be.
SECTION 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 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.
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SECTION 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
Collateral) 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 Borrower
and its Subsidiaries may maintain self insurance plans to the extent companies
of similar size and in similar businesses do so.
SECTION 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 Borrower 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
Borrower and its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public accountants.
SECTION 5.7 NOTICES.
Give notice in writing to the Agent (which shall promptly transmit such
notice to each Lender) of:
(a) within five Business Days after the Borrower knows or has
reason to know thereof, the occurrence of any Default or Event of
Default;
(b) promptly, any default or event of default under any
Contractual Obligation of the Borrower or any of its Subsidiaries which
would reasonably be expected to have a Material Adverse Effect;
(c) promptly, any litigation, or any investigation or
proceeding known to the Borrower, affecting the Borrower or any of its
Subsidiaries which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect;
(d) as soon as possible and in any event within thirty (30)
days after the Borrower 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 (other than a Permitted Lien)
or a Plan or any withdrawal from, or the termination, Reorganization
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or Insolvency of, any Multiemployer Plan or (ii) the institution of
proceedings or the taking of any other action by the PBGC or the
Borrower 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 Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto. In
the case of any notice of a Default or Event of Default, the Borrower shall
specify that such notice is a Default or Event of Default notice on the face
thereof.
SECTION 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 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 Borrower 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.
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SECTION 5.9 FINANCIAL COVENANTS.
Commencing on the day immediately following the Closing Date, the
Borrower shall, and shall cause each of its Subsidiaries to, comply with the
following financial covenants:
(a) Adjusted Leverage Ratio. As of the end of each fiscal
quarter set forth in the table below, there shall be maintained an
Adjusted Leverage Ratio of not greater than the corresponding ratio
appearing in such table. The applicable period for purposes of
determining compliance herewith shall be for the period of four (4)
fiscal quarters ending on the applicable date set forth below.
Period Ratio
-------- ------
June 27, 1998 5.50
October 3, 1998 5.50
January 2, 1999 5.25
April 3, 1999 5.25
July 3, 1999 5.00
October 2, 1999 5.00
January 1, 2000 4.75
April 1, 2000 4.75
July 1, 2000 4.75
September 30, 2000 4.50
December 30, 2000 4.50
March 31, 2001 4.25
June 30, 2001 4.25
September 29, 2001 4.00
December 29, 2001 4.00
March 30, 2002 3.75
June 29, 2002 3.75
September 28, 2002
and thereafter 3.50
(b) Consolidated Net Worth. As of the end of any fiscal
quarter, commencing with the fiscal quarter ending June 27, 1998,
Consolidated Net Worth of the Borrower and its Subsidiaries shall be
greater than or equal to the sum of (i) 95% of the Consolidated Net
Worth of the Borrower and its Subsidiaries as of March 28, 1998, but in
no event less than $75,000,000, plus (ii) 50% of cumulative
Consolidated Net Income (to the extent positive), commencing on March
28, 1998 (without deduction for any quarterly losses), plus (iii) 75%
of the Net Cash Proceeds of any Equity Issuance or any issuance of
Permitted Preferred Stock (excluding equity issued pursuant to employee
stock options) by the Borrower or any of its Subsidiaries after the
Closing Date.
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(c) Capital Expenditures. The Borrower and its Subsidiaries
shall not, as a group, make or incur Capital Expenditures in any fiscal
year in excess of the amount shown below:
Fiscal year 1998 $45,000,000
Fiscal year 1999 $45,000,000
Fiscal year 2000
and each fiscal
year thereafter $55,000,000
provided, that up to $10,000,000 of any such amount, if not expended in
the fiscal year for which it is permitted above may be carried over for
expenditure in the next following fiscal year.
(d) Adjusted Fixed Charge Coverage Ratio. As of the end of
each fiscal quarter set forth in the table below, there shall be
maintained an Adjusted Fixed Charge Coverage Ratio of not less than the
corresponding ratio appearing in such table. The applicable period for
such purposes of determining compliance herewith shall be for the
period of four (4) fiscal quarters then ended.
Period Ratio
------- ------
June 27, 1998 1.10
October 3, 1998 1.10
January 2, 1999 1.20
April 3, 1999 1.20
July 3, 1999 and thereafter 1.25
SECTION 5.10 ADDITIONAL SUBSIDIARY GUARANTORS.
The Credit Parties will cause each of their Domestic Subsidiaries,
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, the Collateral 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 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.
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SECTION 5.11 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could have a Material Adverse Effect.
SECTION 5.12 PLEDGED ASSETS.
(a) Each Credit Party will, and will cause each of its
Subsidiaries to, cause 100% of the Capital Stock in the Borrower and
each other direct or indirect Domestic Subsidiaries of the Borrower and
65% of the Capital Stock in each of the Foreign Subsidiaries of the
Borrower and its Domestic Subsidiaries to be subject at all times to a
first priority, perfected Lien in favor of the Agent pursuant to the
terms and conditions of the Security Documents or such other security
documents as the Agent shall reasonably request.
(b) If, subsequent to the Closing Date, a Credit Party shall
(a) acquire any Material Intellectual Property, securities,
instruments, chattel paper or other personal property required to be
delivered to the Agent as Collateral hereunder or under any of the
Security Documents or (b) acquire or lease any real property, the
Borrower shall promptly (and in any event within three (3) Business
Days) after any Responsible Officer of a Credit Party acquires
knowledge of same notify the Agent of same. Each Credit Party shall,
and shall cause each of its Subsidiaries to, take such action at its
own expense as requested by the Agent (including, without limitation,
any of the actions described in Section 4.1(d) hereof) to ensure that
the Agent has a first priority perfected Lien to secure the Credit
Party Obligations in (i) all personal property of the Credit Parties
located in the United States and (ii) to the extent deemed to be
material by the Agent or the Required Lenders in its or their sole
reasonable discretion, all other personal property of the Credit
Parties, subject in each case only to Permitted Liens. Each Credit
Party shall, and shall cause each of its Subsidiaries to, adhere to the
covenants regarding the location of personal property as set forth in
the Security Documents.
SECTION 5.13 POST CLOSING MATTERS.
(a) The Borrower shall use reasonable commercial efforts to
deliver or cause to be delivered to the Agent satisfactory estoppel
letters, consents and/or waivers from the landlords and other property
owners with respect to each of its leased locations, warehouse or
processing locations within 90 days following the Closing Date and
within 45 days following the acquisition or leasing of additional
locations by the Borrower or any of its Subsidiaries.
(b) The Borrower shall (i) on or before the 45th day following
the Closing Date, cause each of its Foreign Subsidiaries to enter into
the Foreign Subsidiary Pledge Agreement and deliver or cause to be
delivered to the Agent all stock certificates
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evidencing the Capital Stock of the Foreign Subsidiaries not otherwise
delivered by the Closing Date and (ii) on or before the 90th day
following the Closing Date, provide satisfactory evidence to the Agent
that the security interests of the Agent in all such Capital Stock of
each of the Foreign Subsidiaries have been perfected under the laws of
the foreign jurisdiction applicable to each such Foreign Subsidiary.
(c) The Borrower shall deliver, or cause to be delivered, to
the Agent, all agreements and documents executed and/or delivered
pursuant to Section 2.08(a) of the Separation Agreement.
(d) On or before the 30th day following the Closing Date, the
Borrower shall deliver, or cause to be delivered, to the Agent, a
revised opinion of counsel to the Borrower and each Guarantor covering
such matters as the Agent and its counsel shall reasonably request.
(e) Promptly, following the Closing Date, upon the reasonable
request of the Agent, the Borrower agrees to make all such changes and
corrections to the Credit Documents and the related closing documents,
certificates and schedules delivered in connection therewith so as to
reflect accurately and in good faith the intention of the parties upon
entering into this Agreement.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing 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 Credit Party
Obligations, together with interest, Commitment Fees and all other amounts owing
to the Agent or any Lender hereunder, are paid in full, the Borrower shall, and
shall cause each of its Subsidiaries, to:
SECTION 6.1 INDEBTEDNESS.
The Borrower 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 and the Subordinated Debt;
(b) Indebtedness existing as of the Closing Date as referenced
in the financial statements referenced in Section 3.1 (and set out more
specifically in Schedule 6.1(b)) and Indebtedness set forth on Schedule
4.1(u) hereto 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;
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(c) Indebtedness incurred after the Closing 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 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 $20,000,000 at
any time outstanding;
(d) Unsecured intercompany Indebtedness among the Borrower and
its Subsidiaries, provided that any such Indebtedness shall be fully
subordinated to the Credit Party Obligations hereunder on terms
reasonably satisfactory to the Agent; and provided, further, that
intercompany Indebtedness of Foreign Subsidiaries owed to Domestic
Credit Parties shall not exceed $25,000,000 in the aggregate at any one
time;
(e) Indebtedness and obligations owing under Hedging
Agreements relating to the Loans hereunder and other Hedging 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 for the purchase of goods or
other merchandise (but not under standby, direct pay or other letters
of credit except for the Letters of Credit hereunder) generally;
(g) Indebtedness of Foreign Subsidiaries (excluding any
intercompany Indebtedness permitted to be incurred hereunder), which
Indebtedness may be secured by the assets of such Foreign Subsidiaries
located outside of the United States, in an amount not to exceed
$15,000,000 in the aggregate at any one time outstanding; provided,
however, that with respect to any such Indebtedness incurred by any
Klopman Entity or 3427803 Canada Limited or any of its Subsidiaries,
the amount of such Indebtedness shall be reserved against the Borrowing
Base; and provided, further that the terms and provisions of any such
Indebtedness shall be reasonably acceptable to the Agent; and
(h) other unsecured Indebtedness of Domestic Credit Parties
which does not exceed $10,000,000 in the aggregate at any time
outstanding.
SECTION 6.2 LIENS.
The Borrower 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.
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SECTION 6.3 GUARANTY OBLIGATIONS.
The Borrower 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 Borrower 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).
SECTION 6.4 NATURE OF BUSINESS.
The Borrower 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
Closing Date except as a result of the G&L Acquisition.
SECTION 6.5 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
The Borrower will not, nor will it permit any Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell,
transfer, lease or otherwise dispose of its property or assets 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 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 consummated within 180 days of such receipt;
(iii) the sale, lease or transfer of property or
assets (at fair value) between the Borrower and any Guarantor;
(iv) the sale, lease or transfer of property or
assets from a Domestic Credit Party other than the Borrower or
any Guarantor to another Domestic Credit Party;
(v) the sale and lease of G&L Industries' property
permitted pursuant to Section 6.13 hereof; and
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(vi) the sale, lease or transfer of property or
assets not to exceed $15,000,000 in the aggregate;
provided, that in each case at least 75% of the consideration received
therefor by the Borrower or any such Subsidiary is in the form of cash
or Cash Equivalents; or
(b) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) the property or assets
of any Person (other than purchases or other acquisitions of inventory,
leases, materials, property and equipment in the ordinary 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) the
G&L Acquisition, (iii) the merger or consolidation of a Domestic Credit
Party with and into another Domestic Credit Party, provided that if the
Borrower is a party thereto, the Borrower will be the surviving
corporation, and (iv) 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.
SECTION 6.6 ADVANCES, INVESTMENTS AND LOANS.
The Borrower 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 (a) Permitted Investments and (b)
repurchases of the Borrower's common stock by the Borrower permitted pursuant to
Section 6.11 hereof.
SECTION 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 Required
Lenders in their discretion, the Borrower 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.
SECTION 6.8 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS.
(a) The Borrower 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, (ii) Foreign Subsidiaries acquired
pursuant to the G&L Acquisition and (iii) other Foreign Subsidiaries,
provided that any investment in, capitalization of or organizational
costs and expenses incurred in the formation and start-up of, any such
other Foreign Subsidiaries shall not, together with
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other Permitted Investments in Foreign Subsidiaries, exceed $3,000,000
in the aggregate at any one time. The Borrower will not sell, transfer,
pledge or otherwise dispose of any Capital Stock or other equity
interests in any of its Subsidiaries, nor will it permit any of its
Subsidiaries to issue, sell, transfer, pledge or otherwise dispose of
any of their Capital Stock or other equity interests, except in a
transaction permitted by Section 6.5.
(b) The Borrower will not (i) hold any assets other than the
Capital Stock of G&L Industries, DT (USA) Exports Inc., Swift Textiles
Inc., 3427803 Canada Limited, Dominion Textiles International B.V. and
Dominion Textiles International (Asia) Pte. Ltd. (the "First Tier
Subsidiaries"), (ii) have any liabilities other than (A) the
liabilities under the Credit Documents, (B) tax liabilities in the
ordinary course of business, (C) loans and advances permitted under
this Agreement and (D) corporate, administrative and operating expenses
in the ordinary course of business and (iii) engage in any business
other than (A) owning the Capital Stock of the First Tier Subsidiaries
and activities incidental or related thereto and (B) acting as the
Borrower hereunder and pledging its assets to the Agent, for the
benefit of the Lenders, pursuant to the Security Documents to which it
is a party.
SECTION 6.9 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
The Borrower will not, nor will it permit any of its Subsidiaries to,
change its fiscal year. The Borrower will not, nor will it permit any Subsidiary
to, amend, modify or change its articles of incorporation (or corporate charter
or other similar organizational document) or bylaws (or other similar document)
without the prior written consent of the Required Lenders.
SECTION 6.10 LIMITATION ON RESTRICTED ACTIONS.
The Borrower will not, nor will it permit any Subsidiary to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Agreement
and the other Credit Documents, (ii) the Subordinated Debt, (iii) applicable
law, (iv) any document or instrument governing Indebtedness incurred pursuant to
Section 6.1(c), provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith or
(v) any Permitted Lien or any document or instrument governing any Permitted
Lien, provided that any such restriction contained therein relates only to the
asset or assets subject to such Permitted Lien.
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SECTION 6.11 RESTRICTED PAYMENTS.
The Borrower will not, nor will it permit any Subsidiary to, directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (a) to make dividends payable solely in the same
class of Capital Stock of such Person, (b) to make dividends or other
distributions payable to any Credit Party (directly or indirectly through
Subsidiaries), (c) to make dividends payable on Permitted Preferred Stock, (d)
to make repurchases of the Borrower's common stock pursuant to the Stock
Repurchase Plan in an amount up to $5,000,000 in the aggregate and (e) as
permitted by Section 6.12.
SECTION 6.12 PREPAYMENTS OF INDEBTEDNESS, ETC.
The Borrower will not, nor will it permit any Subsidiary to, (a) after
the issuance thereof, amend or modify (or permit the amendment or modification
of) any of the terms of any Indebtedness if such amendment or modification would
add or change any terms in a manner adverse to the issuer of such Indebtedness,
or shorten the final maturity or average life to maturity or require any payment
to be made sooner than originally scheduled or increase the interest rate
applicable thereto or change any subordination provision thereof, or (b) make
(or give any notice with respect thereto) any voluntary or optional payment or
prepayment, redemption, acquisition for value or defeasance of (including
without limitation, by way of depositing money or securities with the trustee
with respect thereto before due for the purpose of paying when due), refund,
refinance or exchange of any Subordinated Debt, except that so long as there is
no Default or Event of Default then in existence and subject to the terms and
provisions of the indenture or other document evidencing the Subordinated Debt,
the Borrower shall be entitled to pay interest and scheduled principal payments
thereon in accordance with the terms of the Subordinated Debt.
SECTION 6.13 SALE LEASEBACKS.
The Borrower will not, nor will it permit any Subsidiary to, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which the Borrower or any Subsidiary has sold or transferred or is
to sell or transfer to a Person which is not the Borrower or any Subsidiary or
(b) which the Borrower or any Subsidiary intends to use for substantially the
same purpose as any other property which has been sold or is to be sold or
transferred by the Borrower or any Subsidiary to another Person which is not the
Borrower or any Subsidiary in connection with such lease; provided, however,
that G&L Industries shall be permitted to enter into that certain Inducement and
Millage Rate Agreement and that certain Lease Purchase Agreement, in each case,
with Darlington County, South Carolina and dated as of December 1, 1997 relating
to the sale and lease of the expansion of G&L Industries' textile manufacturing
facility located in Darlington County, South Carolina, and such other related
documents necessary to effect such sale and lease.
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SECTION 6.14 NO FURTHER NEGATIVE PLEDGES.
The Borrower will not, nor will it permit any Subsidiary to, enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some other obligation,
except (a) pursuant to this Agreement and the other Credit Documents, (b)
pursuant to the terms of the Subordinated Debt, (c) pursuant to any document or
instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided
that any such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith and (d) in connection with any
Permitted Lien or any document or instrument governing any Permitted Lien,
provided that any such restriction contained therein relates only to the asset
or assets subject to such Permitted Lien.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(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 any Guarantor 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 Documents 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) (i) Any Credit Party shall fail to perform, comply with or
observe any term, covenant or agreement applicable to it contained in
Section 5.1(d), Section 5.7(a), Section 5.9 or Article VI hereof ; or
(ii) any Credit Party shall fail to comply with any other covenant,
contained in this Credit Agreement or the other Credit Documents or any
other agreement, document or instrument among any Credit Party, the
Agent and the
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Lenders or executed by any Credit Party in favor of the Agent or the
Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i)
above), and in the event such breach or failure to comply is capable of
cure, is not cured within thirty (30) days of its occurrence; or
(d) The Borrower or any of its Subsidiaries shall (i) default
in any payment of principal of or interest on (A) the Subordinated Debt
or (B) any Indebtedness (other than the Notes) in a principal amount
outstanding of at least $5,000,000 in the aggregate for the Borrower
and any of its Subsidiaries beyond the period of grace (not to exceed
30 days), if any, provided in the instrument or agreement under which
such Indebtedness was created; or (ii) default in the observance or
performance of any other agreement or condition relating to (A) the
Subordinated Debt or (B) any Indebtedness in a principal amount
outstanding of at least $5,000,000 in the aggregate for the Borrower
and its Subsidiaries 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 Indebtedness (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
(e) (i) The Borrower or any of its Subsidiaries 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 Borrower or
any Subsidiary shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any
Subsidiary 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 Borrower or any Subsidiary any
case, proceeding or 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 Borrower or any Subsidiary 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 Borrower or any Subsidiary 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 Borrower or any of its Subsidiaries involving in the aggregate a
liability (to the extent not paid when due or covered by insurance) of
$5,000,000 or more and all such judgments or
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decrees shall not have been paid 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
(other than a Permitted Lien) shall arise on the assets of the Borrower
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 Required 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 Borrower, any of its Subsidiaries or any Commonly Controlled
Entity shall, or in the reasonable opinion of the Required 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 Ltd. or any of its Affiliates
("CVC") or members of senior management of 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 45% or more of the then
outstanding voting stock of the Borrower (other than as a result of CVC
converting its shares in the Borrower from voting stock to non-voting
stock) or (ii) a majority of the Board of Directors of the Borrower
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 Borrower's Board of Directors and (ii) any new
Director whose nomination for election by the Borrower'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
(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
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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) There shall occur and be continuing any Event of Default
under and as defined in the indenture or other document evidencing the
Subordinated Debt or any of the Credit Party Obligations for any reason
shall cease to be designated as senior indebtedness thereunder.
SECTION 7.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, then, and in any such
event, (a) if such event is an Event of Default specified in Section 7.1(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 Required
Lenders, the Agent may, or upon the written request of the Required Lenders, the
Agent shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the written consent of the Required Lenders, the Agent may, or upon the written
request of the Required Lenders, the Agent shall, by notice of default to the
Borrower, 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 7.2, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
ARTICLE VIII
THE AGENT
SECTION 8.1 APPOINTMENT.
Each Lender hereby irrevocably designates and appoints First Union
National Bank as the Agent of such Lender under this Agreement, and each such
Lender irrevocably authorizes First Union National Bank, 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
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covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Agent.
SECTION 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 on of its affiliates as its agent to perform the functions of the
Agent hereunder relating to the advancing of funds to the Borrower 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.
SECTION 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 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 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 Borrower of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Borrower.
SECTION 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 believed by it in good faith
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 Borrower), 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 Required 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
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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 Required Lenders or
all of the Lenders, as may be required under this Agreement, 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.
SECTION 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 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 Required 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 except to the extent that this Credit Agreement
expressly requires that such action be taken, or not taken, only with the
consent or upon the authorization of the Required Lenders, or all of the
Lenders, as the case may be.
SECTION 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 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 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
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 Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
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SECTION 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
Section, 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 Section 8.7 shall
survive the termination of this Agreement and payment of the Notes and all other
amounts payable hereunder.
SECTION 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 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.
SECTION 8.9 SUCCESSOR AGENT.
The Agent may resign as Agent upon 30 days' prior notice to the
Borrower and the Lenders. If the Agent shall resign as Agent under this
Agreement and the Notes, then the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, 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 Section 8.9 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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ARTICLE IX
MISCELLANEOUS
SECTION 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 Section nor may be released except as specifically provided herein or in
the Security Documents or in accordance with the provisions of this Section 9.1.
The Required Lenders may, or, with the written consent of the Required Lenders,
the Agent may, from time to time, (a) enter into with 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 Borrower hereunder or thereunder or (b) waive, on such terms and conditions
as the Required 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 any Security Document or on such other terms and conditions
as the Required 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 Section 9.1 or reduce the percentage specified in the
definition of Required Lenders, without the written consent of all the Lenders,
or (iii) amend, modify or waive any provision of Article VIII 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, without the
written consent of all of the Lenders, or (vi) amend, modify or waive any
provision of the Credit Documents requiring consent, approval or request of the
Required Lenders or all Lenders, without the written consent of all of the
Lenders and, provided, further, that no amendment, waiver or consent affecting
the rights or duties of the Agent or the Issuing Lender under any Credit
Document shall in any event be effective, unless in writing and signed by the
Agent and/or the Issuing Lender, as applicable, in addition to the Lenders
required hereinabove to take such action. 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 Borrower, the other Credit Parties,
the Lenders, the Agent and all future holders of the Notes. In the case of any
waiver, 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.
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Notwithstanding any of the foregoing to the contrary, the consent of
the Borrower shall not be required for any amendment, modification or waiver of
the provisions of Article VIII (other than the provisions of Section 8.9);
provided, however, that the Agent will provide written notice to the Borrower of
any such amendment, modification or waiver. In addition, the Borrower and the
Lenders hereby authorize the Agent to modify this Credit Agreement by
unilaterally amending or supplementing Schedule 2.1(a) from time to time in the
manner requested by the Borrower, the Agent or any Lender in order to reflect
any assignments or transfers of the Loans as provided for hereunder; provided,
however, that the Agent shall promptly deliver a copy of any such modification
to the Borrower and each Lender.
SECTION 9.2 NOTICES.
Except as otherwise provided in Article II, 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 (a) when delivered by
hand, (b) when transmitted via telecopy (or other facsimile device) to the
number set out herein, (c) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (d)
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 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, 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
The Agent: First Union National Bank
One First Union Center, TW10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopier: (704) 383-0288
Telephone: (704) 374-2698
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with a copy to:
First Union National Bank
One First Union Center, DC-5
Charlotte, North Carolina 28288-0737
Attention: Jorge A. Gonzalez
Sr. Vice President
Telecopier: (704) 374-3300
Telephone: (704) 383-8461
SECTION 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.
SECTION 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.
SECTION 9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrower agrees (a) to pay or reimburse the Agent for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation, negotiation, printing and execution of, and any
amendment, supplement or modification to, this Agreement and the other Credit
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and 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
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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 of
the foregoing, collectively, the "indemnified liabilities"); provided, however,
that the Borrower shall not have any obligation hereunder to the Agent or any
Lender with respect to indemnified liabilities arising from the gross negligence
or willful misconduct of the Agent or any such Lender. The agreements in this
Section 9.5 shall survive repayment of the Loans, Notes and all other amounts
payable hereunder.
SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agent, all future holders of
the Notes and their respective successors and assigns, except that the
Borrower may not 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 Lender hereunder. 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 any of the Guarantors from their
obligations under the Guaranty, (iii) release all or substantially all
of the collateral, or (iv) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement. In
the case of any such participation, the
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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 Sections
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 Sections 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.
(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 with the
consent of the Agent and, so long as no Event of Default has occurred
and is continuing, the Borrower (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
$5,000,000 with respect to its Revolving Commitment and its Revolving
Loans and $2,000,000 with respect to its Term Loans (or, if less, the
entire amount of such Lender's obligations), pursuant to a Commitment
Transfer Supplement, executed by such Purchasing Lender and such
transferor Lender (and, in the case of a Purchasing Lender that is not
then a Lender or an affiliate thereof, the Agent and, so long as no
Event of Default has occurred and is continuing, the Borrower), and
delivered to the Agent for its acceptance and recording in the
Register; provided, however, that any sale or assignment to an existing
Lender shall not require the consent of the Agent or the Borrower nor
shall any such sale or assignment be subject to the minimum assignment
amounts specified herein. 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 Notes delivered to
the Agent pursuant to such Commitment Transfer Supplement new Notes to
the order of such Purchasing Lender in an amount
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equal to the Commitment assumed by it pursuant to such Commitment
Transfer Supplement and, unless the transferor Lender has not retained
a Commitment hereunder, new Notes to the order of the transferor Lender
in an amount equal to the Commitment retained by it hereunder. Such new
Notes shall be dated the Closing Date and shall otherwise be in the
form of the Notes replaced thereby. The Notes surrendered by the
transferor Lender shall be returned by the Agent to the Borrower marked
"canceled".
(d) The Agent shall maintain at its address referred to in
Section 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 duly executed Commitment Transfer
Supplement, 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 $2,000 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 Borrower 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 Borrower and its Affiliates which
has been delivered to such Lender by or on behalf of the Borrower
pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party
to this Agreement, in each case subject to Section 9.16.
(g) At the time of each assignment pursuant to this Section
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 Section 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 principal and interest under any
Note) to any Federal Reserve Bank in accordance with applicable laws.
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SECTION 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 Section 7.1(e), 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 Borrower agrees 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
Borrower, any such notice being expressly waived by 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 Borrower, or any part thereof in such amounts as such
Lender may elect, against and on account of the obligations and
liabilities of the Borrower to such Lender hereunder and claims of
every nature and description of such Lender against 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 Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or execution, judgment or attachment creditor of
the Borrower, or against anyone else claiming through or against 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 Borrower and the Agent after any
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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.
SECTION 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.
SECTION 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 Borrower and the Agent.
SECTION 9.10 EFFECTIVENESS.
This Credit Agreement shall become effective on the date on which all
of the parties have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Agent pursuant to Section 9.2 or, in
the case of the Lenders, shall have given to the Agent written, telecopied or
telex notice (actually received) at such office that the same has been signed
and mailed to it.
SECTION 9.11 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.
SECTION 9.12 INTEGRATION.
This Agreement and the Notes represent the agreement of 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
Borrower or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the Notes.
SECTION 9.13 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.
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SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
All judicial proceedings brought against the Borrower and/or any other
Credit Party 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 Borrower and the other Credit Parties 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 Borrower and
the other Credit Parties irrevocably agrees that all service of 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 Section 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 Borrower and the other
Credit Parties to be effective and binding service in every respect. Each of the
Borrower, the other Credit Parties, 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 Borrower or the other Credit Parties in the court of any
other jurisdiction.
SECTION 9.15 ARBITRATION.
(a) Notwithstanding the provisions of Section 9.14 to the
contrary, upon demand of any party hereto, whether made before or
within three (3) months after institution of any judicial proceeding,
any dispute, claim or controversy arising out of, connected with or
relating to this Agreement and other Credit Documents ("Disputes")
between or among parties to this Agreement shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from
Credit Documents executed in the future, or claims arising out of or
connected with the transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association (the "AAA") and Title 9
of the U.S. Code. All arbitration hearings shall be conducted in
Charlotte, North Carolina. A hearing shall begin within 90 days of
demand for arbitration and all hearings shall be concluded within 120
days of demand for arbitration. These time limitations may not be
extended unless a party shows cause for extension and then no more than
a total extension of 60 days. The expedited procedures set forth in
Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall
apply to any Dispute. A judgment upon the award may be entered in any
court having jurisdiction. The panel
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from which all arbitrators are selected shall be comprised of licensed
attorneys selected from the Commercial Financial Dispute Arbitration
Panel of the AAA. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted or if such person is not available to serve, the single
arbitrator may be a licensed attorney. The parties hereto do not waive
applicable Federal or state substantive law except as provided herein.
Notwithstanding the foregoing, this arbitration provision does not
apply to disputes under or related to Hedging Agreements or the
Wachovia JEDA Letter of Credit.
(b) Notwithstanding the preceding binding arbitration
provisions, the Agent, the Lenders, the Borrower and the other Credit
Parties agree to preserve, without diminution, certain remedies that
the Agent on behalf of the Lenders may employ or exercise freely,
independently or in connection with an arbitration proceeding or after
an arbitration action is brought. The Agent on behalf of the Lenders
shall have the right to proceed in any court of proper jurisdiction or
by self-help to exercise or prosecute the following remedies, as
applicable (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale granted under
Credit Documents or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of
self-help including peaceful occupation of real property and collection
of rents, set-off, and peaceful possession of personal property; (iii)
obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver
and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
(c) The parties hereto agree that they shall not have a remedy
of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they
have now or which may arise in the future in connection with any
Dispute whether the Dispute is resolved by arbitration or judicially.
(d) By execution and delivery of this Agreement, each of the
parties hereto accepts, for itself and in connection with its
properties, generally and unconditionally, the non-exclusive
jurisdiction relating to any arbitration proceedings conducted under
the Arbitration Rules in Charlotte, North Carolina 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.
SECTION 9.16 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 Borrower (other than to
its employees, affiliates, auditors or counsel or to another Lender) any
information with respect to the Borrower and its Subsidiaries which is furnished
pursuant to this Agreement, any other Credit Document or any documents
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contemplated by or referred to herein or therein and which is designated by the
Borrower 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 Section 9.16, (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, (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 9.16 and shall have agreed to be bound by its provisions as if it were a
party to this Agreement or (e) to Gold Sheets and other similar bank trade
publications; such information to consist of deal terms and other information
regarding the credit facilities evidenced by this Credit Agreement customarily
found in such publications.
SECTION 9.17 ACKNOWLEDGMENTS.
The Borrower and the other Credit Parties each hereby acknowledges
that:
(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 Borrower or any other Credit Party
arising out of or in connection with this Agreement and the
relationship between Agent and Lenders, on one hand, and the Borrower
and the other Credit Parties, 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
Borrower or the other Credit Parties and the Lenders.
SECTION 9.18 WAIVERS OF JURY TRIAL.
The Borrower, the other Credit Parties, 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.
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ARTICLE X
GUARANTY
SECTION 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 Article X 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 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
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).
SECTION 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 Section 7.1(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
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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.
SECTION 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.
SECTION 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.
SECTION 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.
SECTION 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
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behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
SECTION 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 Article X, each of the Guarantors
hereby specifically waives the benefits of N.C. Gen. Stat. ss. 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 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
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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.
SECTION 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 Required 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.
SECTION 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.
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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, INC.
By: /s/ Michael R. Harmon
----------------------------
Title: Executive Vice-President
GUARANTORS: GALEY & LORD INDUSTRIES, INC.,
By: /s/ Michael R. Harmon
---------------------------------
Title: Executive Vice-President
G&L SERVICE COMPANY, NORTH
AMERICA, INC., a Delaware corporation
By: /s/ Michael R. Harmon
----------------------------------
Title: Vice-President
SWIFT TEXTILES INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
-----------------------
Title: Executive Vice-President
SWIFT DENIM SERVICES INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
------------------------
Title: Executive Vice-President
<PAGE>
AGENT AND LENDERS: FIRST UNION NATIONAL BANK,
as Administrative Agent and as a Lender
By: /s/ Braxton B. Comer
------------------------
Title: Senior Vice-President
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of January 29, 1998 among Galey & Lord, Inc., a Delaware corporation (the
"Borrower"), the Domestic Subsidiaries of the Borrower listed on the signature
pages attached hereto (the "Guarantors") and such other subsidiaries of the
Borrower as may from time to time become party hereto (hereinafter, the Borrower
and the Guarantors are collectively referred to as the "Obligors" and,
individually, as an "Obligor") and FIRST UNION NATIONAL BANK, in its capacity as
agent (in such capacity, the "Agent") for the financial institutions from time
to time party to the Credit Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders
and the Agent, the Lenders have agreed to make Loans and issue Letters of Credit
upon the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligors shall
have executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of North Carolina on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Deposit
Accounts, Documents, Equipment, Farm Products, Fixtures, General
Intangibles, Instruments, Inventory, Investment Property and Proceeds.
For purposes of this Security Agreement, the term "Lender" shall
include any affiliate of any Lender which has entered into any Hedging
Agreement permitted to be entered into pursuant to Section 6.1 of the
Credit Agreement.
(b) In addition, the following terms shall have the following
meanings:
"Contracts": (a) the Acquistion Agreement, (b) the Separation
Agreement and (c) all other contracts and agreements to which an
Obligor is a party, as each may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (i) all
rights of such Obligor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Obligor
to damages arising out of or for breach
<PAGE>
or default in respect thereof and (iii) all rights of such Obligor to
exercise all remedies thereunder.
"Copyright Licenses": any written agreement, naming any
Obligor as licensor, granting any right under any Copyright including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Copyrights": (a) all registered United States copyrights in
all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule 1(b)
hereto, and (b) all renewals thereof including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Material Copyright Licenses": all Copyright Licenses
constituting Material Intellectual Property.
"Material Copyrights": all Copyrights constituting Material
Intellectual Property.
"Material Intellectual Property": all Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses
in which the failure by an Obligor to own or have the legal right to
use such Copyright, Copyright License, Patent, Patent License,
Trademark or Trademark License could have a Material Adverse Effect.
"Material Patent Licenses": all Patent Licenses constituting
Material Intellectual Property.
"Material Patents": all Patents constituting Material
Intellectual Property.
"Material Trademark Licenses": all Trademark Licenses
constituting Material Intellectual Property.
"Material Trademarks": all Trademarks constituting Material
Intellectual Property.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 1(b) hereto,
and (b) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Secured Obligations": (a) all Credit Party Obligations and
(b) all expenses and charges, legal and otherwise, reasonably incurred
by the Agent and/or the Lenders in collecting
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or enforcing any Credit Party Obligations or in realizing on or
protecting any security therefor, including without limitation the
security afforded hereunder.
"Trademark License": means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
"Work": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles, including, without limitation, all
rights under the Contracts;
(j) all Instruments;
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(k) all Inventory;
(l) all Investment Property;
(m) all Patents;
(n) all Patent Licenses;
(o) all Trademarks;
(p) all Trademark Licenses;
(q) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks, and related data processing
software (owned by such Obligor or in which it has an
interest) that at any time evidence or contain information
relating to any Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon;
and
(r) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks or Trademark Licenses.
3. Representations and Warranties. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is (and, except for
any Obligor acquired pursuant to the G&L Acquisition, for the prior
four months have been) located at the locations set forth on Schedule
3(a) hereto, and each Obligor keeps its books and records at such
locations.
(b) Location of Collateral. The location of all Collateral
owned by each Obligor is as shown on Schedule 3(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner
of its Collateral and has the right to pledge, sell, assign or transfer
the same. Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename except as
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set forth in Schedule 3(c) attached hereto. Schedule 3(c) may be
updated by the Borrower to reflect changes resulting from the G&L
Acquisition.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of such Obligor and, when
properly perfected by filing, shall constitute a valid perfected
security interest in such Collateral, to the extent such security can
be perfected by filing under the UCC, free and clear of all Liens
except for Permitted Liens.
(e) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(f) Accounts. (i) Each Account of the Obligors and the papers
and documents relating thereto are genuine and in all material respects
what they purport to be, (ii) each Account arises out of (A) a bona
fide sale of goods sold and delivered by such Obligor (or is in the
process of being delivered) or (B) services theretofore actually
rendered by such Obligor to, the account debtor named therein, (iii) no
Account of an Obligor is evidenced by any Instrument or Chattel Paper
unless such Instrument or Chattel Paper has been theretofore endorsed
over and delivered to the Agent and (iv) no surety bond was required or
given in connection with any Account of an Obligor or the contracts or
purchase orders out of which they arose.
(g) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(h) Copyrights, Patents and Trademarks.
(i) Schedule 1(b) hereto includes all Material
Copyrights, Material Copyright Licenses, Material Patents,
Material Patent Licenses, Material Trademarks and Material
Trademark Licenses owned by the Obligors in their own names as
of the date hereof.
(ii) To the best of each Obligor's knowledge, each
Material Copyright, Material Patent and Material Trademark of
such Obligor is valid, subsisting, unexpired, enforceable and
has not been abandoned.
(iii) Except as set forth in Schedule 1(b) hereto,
none of such Material Copyrights, Material Patents and
Material Trademarks is the subject of any licensing or
franchise agreement.
(iv) No holding, decision or judgment has been
rendered which would limit, cancel or question the validity of
any Material Copyright, Material Patent or Material Trademark.
(v) No action or proceeding is pending seeking to
limit, cancel or question the validity of any Material
Copyright, Material Patent or Material Trademark, or
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which, if adversely determined, would have a material adverse
effect on the value of any Material Copyright, Material Patent
or Material Trademark.
(vi) All applications pertaining to the Material
Copyrights, Material Patents and Material Trademarks of each
Obligor have been duly and properly filed, and all
registrations or letters pertaining to such Material
Copyrights, Material Patents and Material Trademarks have been
duly and properly filed and issued, and all of such Material
Copyrights, Material Patents and Material Trademarks are valid
and enforceable.
(vii) No Obligor has made any assignment or agreement
in conflict with the security interest in the Copyrights,
Patents or Trademarks of each Obligor hereunder except for any
such assignment or agreement that would not have a Material
Adverse Effect.
4. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect or
any Letter of Credit shall remain outstanding, and until all of the Commitments
shall have been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the
Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or any
applicable statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Chattel Paper. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, immediately deliver such Instrument
or Chattel Paper to the Agent, duly indorsed in a manner satisfactory
to the Agent, to be held as Collateral pursuant to this Security
Agreement.
(d) Change in Location. Not, without providing 30 days prior
written notice to the Agent and without filing such amendments to any
previously filed financing statements as the Agent may require, (a)
change the location of its chief executive office and chief place of
business (as well as its books and records) from the locations set
forth on Schedule 3(a) hereto, (b) change the location of its
Collateral from the locations set forth for such Obligor on Schedule
3(b) hereto, or (c) change its name, be party to a merger,
consolidation or other change in structure or use any tradename other
than as set forth on Schedule 3(c) attached hereto.
(e) Inspection. Upon reasonable notice, at such reasonable
times during normal business hours and as often as may be reasonably
desired, allow the Agent, any Lender or
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their respective representatives free access to and right of inspection
of the tangible Collateral.
(f) Perfection of Security Interest. Execute and deliver to
the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder
in accordance with the UCC, (B) with regard to Material Copyrights, a
Notice of Grant of Security Interest in Copyrights in the form of
Schedule 4(f)(i), (C) with regard to Material Patents, a Notice of
Grant of Security Interest in Patents for filing with the United States
Patent and Trademark Office in the form of Schedule 4(f)(ii) attached
hereto and (D) with regard to Material Trademarks, a Notice of Grant of
Security Interest in Trademarks for filing with the United States
Patent and Trademark Office in the form of Schedule 4(f)(iii) attached
hereto, (ii) to consummate the transactions contemplated hereby and
(iii) to otherwise protect and assure the Agent of its rights and
interests hereunder. To that end, each Obligor agrees that the Agent
may file one or more financing statements disclosing the Agent's
security interest in any or all of the Collateral of such Obligor
without, to the extent permitted by law, such Obligor's signature
thereon, and further each Obligor also hereby irrevocably makes,
constitutes and appoints the Agent, its nominee or any other person
whom the Agent may designate, as such Obligor's attorney in fact with
full power and for the limited purpose to sign in the name of such
Obligor any such financing statements, or amendments and supplements to
financing statements, renewal financing statements, notices or any
similar documents which in the Agent's reasonable discretion would be
necessary, appropriate or convenient in order to perfect and maintain
perfection of the security interests granted hereunder, such power,
being coupled with an interest, being and remaining irrevocable so long
as the Credit Agreement is in effect or any amounts payable thereunder
or under any other Credit Document or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Each Obligor hereby agrees that a carbon, photographic or
other reproduction of this Security Agreement or any such financing
statement is sufficient for filing as a financing statement by the
Agent without notice thereof to such Obligor wherever the Agent may in
its sole discretion desire to file the same. In the event for any
reason the law of any jurisdiction other than North Carolina becomes or
is applicable to the Collateral of any Obligor or any part thereof, or
to any of the Secured Obligations, such Obligor agrees to execute and
deliver all such instruments and to do all such other things as the
Agent in its sole discretion reasonably deems necessary or appropriate
to preserve, protect and enforce the security interests of the Agent
under the law of such other jurisdiction (and, if an Obligor shall fail
to do so promptly upon the request of the Agent, then the Agent may
execute any and all such requested documents on behalf of such Obligor
pursuant to the power of attorney granted hereinabove). If any
Collateral is in the possession or control of an Obligor's agents and
the Agent so requests, such Obligor agrees to notify such agents in
writing of the Agent's security interest therein and, upon the Agent's
request, instruct them to hold all such Collateral for the Lenders'
account and subject to
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the Agent's instructions. Each Obligor agrees to mark its books and
records to reflect the security interest of the Agent in the
Collateral.
(g) Covenants Relating to Accounts.
(i) Comply with all reporting requirements set forth
in the Credit Agreement with respect to Accounts.
(ii) Upon the occurrence of any Event of Default and
during the continuation thereof, set aside and hold as trustee
for the Agent any merchandise which is returned by a customer
or account debtor or otherwise recovered. Unless and until an
Event of Default occurs and is continuing, each Obligor may
settle and adjust disputes and claims with its customers and
account debtors, handle returns and recoveries and grant
discounts, credits and allowances in the ordinary course of
its business as presently conducted and otherwise for amounts
and on terms which such Obligor in good faith considers
advisable. However, upon the occurrence of any Event of
Default and during the continuation thereof, if so instructed
by the Agent, such Obligor shall settle and adjust disputes
and claims at no expense to the Agent, but no discount, credit
or allowance other than on normal trade terms in the ordinary
course of business shall be granted to any customer or account
debtor and no returns of merchandise shall be accepted by such
Obligor without the Agent's consent. The Agent may (but shall
not be required to), at all times upon the occurrence of any
Event of Default and during the continuance thereof, settle or
adjust disputes and claims directly with customers or account
debtors for amounts and upon terms which the Agent considers
advisable.
(h) Covenants Relating to Inventory.
(i) Maintain, keep and preserve the Inventory in good
salable condition at its own cost and expense.
(ii) Comply with all reporting requirements set forth
in the Credit Agreement with respect to Inventory.
(iii) If any of the Inventory is at any time
evidenced by a document of title, immediately upon request by
the Agent, deliver such document of title to the Agent.
(i) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with such
notice of copyright as may be required by law to secure
copyright protection except to the extent the failure to so
employ the Copyright would not have a Material Adverse Effect.
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(ii) Not do any act or knowingly omit to do any act
whereby any Material Copyright may become invalidated and (A)
not do any act, or knowingly omit to do any act, whereby any
Material Copyright may become injected into the public domain;
(B) notify the Agent immediately if it knows, or has reason to
know, that any Material Copyright may become injected into the
public domain or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any court or tribunal in
the United States or any other country) regarding an Obligor's
ownership of any such Material Copyright or its validity; (C)
take all necessary steps as it shall deem appropriate under
the circumstances, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of each Material Copyright owned by an Obligor
including, without limitation, filing of applications for
renewal where necessary; and (D) promptly notify the Agent of
any material infringement of any Material Copyright of an
Obligor of which it becomes aware and take such actions as it
shall reasonably deem appropriate under the circumstances to
protect such Material Copyright, including, where appropriate,
the bringing of suit for infringement, seeking injunctive
relief and seeking to recover any and all damages for such
infringement.
(iii) Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each
Obligor hereunder except for any such assignment or agreement
that would not have a Material Adverse Effect.
(j) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Material Trademark on
each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures
and price lists in order to maintain such Material Trademark
in full force free from any claim of abandonment for non-use,
(B) maintain as in the past the quality of products and
services offered under such Material Trademark, (C) employ
such Material Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Material
Trademark unless the Agent, for the ratable benefit of the
Lenders, shall obtain a perfected security interest in such
mark pursuant to this Security Agreement, and (E) not (and not
permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any such Material
Trademark may become invalidated.
(ii) Not do any act, or omit to do any act, whereby
any Material Patent may become abandoned or dedicated.
(iii) Notify the Agent and the Lenders immediately if
it knows, or has reason to know, that any application or
registration relating to any Material Patent or Material
Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark
Office or any court or tribunal in any country) regarding an
Obligor's
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ownership of any Material Patent or Material Trademark or its
right to register the same or to keep and maintain the same.
(iv) Whenever an Obligor, either by itself or through
an agent, employee, licensee or designee, shall file an
application for the registration of any Material Patent or
Material Trademark with the United States Patent and Trademark
Office or any similar office or agency in any other country or
any political subdivision thereof, an Obligor shall report
such filing to the Agent and the Lenders within five Business
Days after the last day of the fiscal quarter in which such
filing occurs. Upon request of the Agent, an Obligor shall
execute and deliver any and all agreements, instruments,
documents and papers as the Agent may reasonably request to
evidence the Agent's and the Lenders' security interest in any
Material Patent or Material Trademark and the goodwill and
general intangibles of an Obligor relating thereto or
represented thereby.
(v) Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar
office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of the Material Patents and Material Trademarks,
including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.
(vi) Promptly notify the Agent and the Lenders after
it learns that any Material Patent or Material Trademark
included in the Collateral is infringed, misappropriated or
diluted by a third party and promptly sue for infringement,
misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other
actions as it shall reasonably deem appropriate under the
circumstances to protect such Material Patent or Material
Trademark.
(vii) Not make any assignment or agreement in
conflict with the security interest in the Patents or
Trademarks of each Obligor hereunder except for any such
assignment or agreement that would not have a Material Adverse
Effect.
(k) New Material Patents, Material Copyrights and Material
Trademarks. Promptly provide the Agent with (i) a listing of all
applications, if any, for new Material Copyrights, Material Patents or
Material Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new
applications and issued registrations or letters shall be subject to
the terms and conditions hereunder, and (ii) (A) with respect to
Material Copyrights, a duly executed Notice of Security Interest in
Copyrights, (B) with respect to Material Patents, a duly executed
Notice of Security Interest in Patents, (C) with respect to Material
Trademarks, a duly executed Notice of Security Interest in Trademarks
or (D) such other duly executed documents as the Agent may reasonably
request in a form acceptable to counsel for the Agent and suitable for
recording to evidence the security interest in the Material Copyright,
Material Patent or Material Trademark which is the subject of such new
application.
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(l) Insurance. Have and maintain at all times with respect to
the Collateral the same types and amounts of insurance as the Obligors
are required to maintain pursuant to the Credit Agreement. All
insurance proceeds shall be subject to the Lien of the Agent hereunder;
provided that any such insurance proceeds may be retained by the
Obligors to the extent permitted under the Credit Agreement.
(m) [Intentionally Omitted]
5. Special Provisions Relating to Accounts. Anything herein to the
contrary notwithstanding, each of the Obligors shall remain liable under each of
the Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Agent nor any Lender
shall have any obligation or liability under any Account (or any agreement
giving rise thereto) by reason of or arising out of this Security Agreement or
the receipt by the Agent or any Lender of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Lender be obligated in any manner to
perform any of the obligations of an Obligor under or pursuant to any Account
(or any agreement giving rise thereto), to make any payment, to make any inquiry
as to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
6. Special Provisions Regarding Inventory.
(a) Notwithstanding anything to the contrary contained in this
Security Agreement, each Obligor may, unless and until an Event of
Default occurs and is continuing and the Agent instructs such Obligor
otherwise, without further consent or approval of the Agent, use,
consume, sell, lease and exchange the Inventory in the ordinary course
of its business as presently conducted (and as will be conducted after
giving effect to the G&L Acquisition), whereupon, in the case of such a
sale or exchange, the security interest created hereby in the Inventory
so sold or exchanged (but not in any proceeds arising from such sale or
exchange) shall cease immediately without any further action on the
part of the Agent.
(b) Upon the Lenders' making any Loan pursuant to the Credit
Agreement or the Issuing Bank issuing any Letter of Credit pursuant to
the Credit Agreement, each Obligor shall be deemed to have warranted
that all warranties of such Obligor set forth in this Security
Agreement with respect to its Inventory are true and correct in all
material respects with respect to such Inventory, including without
limitation that such Inventory is located at a location permitted by
Section 3(b) or 4(d) hereof.
7. Advances by Lenders. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the
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payment of any taxes, a payment to obtain a release of a Lien or potential Lien
(other than a Permitted Lien), expenditures made in defending against any
adverse claim (other than a Permitted Lien) and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in Section 2.9 of the Credit
Agreement for Loans that are not LIBOR Rate Loans. No such performance of any
covenant or agreement by the Agent or the Lenders on behalf of any Obligor, and
no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement or the other Credit
Documents. The Lenders may make any payment hereby authorized in accordance with
any bill, statement or estimate procured from the appropriate public office or
holder of the claim to be discharged without inquiry into the accuracy of such
bill, statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by an Obligor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
8. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during continuation thereof (unless and until such Event of
Default has been waived or cured in accordance with the terms of the
Credit Agreement), the Lenders shall have, in addition to the rights
and remedies provided herein, in the Credit Documents or by law
(including, but not limited to, the rights and remedies set forth in
the Uniform Commercial Code of the jurisdiction applicable to the
affected Collateral), the rights and remedies of a secured party under
the UCC (regardless of whether the UCC is the law of the jurisdiction
where the rights and remedies are asserted and regardless of whether
the UCC applies to the affected Collateral), and further, the Agent
may, with or without judicial process or the aid and assistance of
others, (i) enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any
such premises, (iii) require the Obligors to assemble and make
available to the Agent at the expense of the Obligors any Collateral at
any place and time designated by the Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such
premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice,
hearing or process of law, all of which each of the Obligors hereby
waives to the fullest extent permitted by law, at any place and time or
times, sell and deliver any or all Collateral held by or for it at
public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In addition to
all other sums due the Agent and the Lenders with respect to the
Secured Obligations, the Obligors shall pay the Agent and each of the
Lenders all reasonable
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documented costs and expenses incurred by the Agent or any such Lender,
including, but not limited to, reasonable attorneys' fees and court
costs, in obtaining or liquidating the Collateral, in enforcing payment
of the Secured Obligations, or in the prosecution or defense of any
action or proceeding by or against the Agent or the Lenders or the
Obligors concerning any matter arising out of or connected with this
Security Agreement, any Collateral or the Secured Obligations,
including, without limitation, any of the foregoing arising in, arising
under or related to a case under any bankruptcy, insolvency or similar
law. To the extent the rights of notice cannot be legally waived
hereunder, each Obligor agrees that any requirement of reasonable
notice shall be met if such notice is personally served on or mailed,
postage prepaid, to the Obligors in accordance with the notice
provisions of Section 9.2 of the Credit Agreement at least 10 days
before the time of sale or other event giving rise to the requirement
of such notice. The Agent and the Lenders shall not be obligated to
make any sale or other disposition of the Collateral regardless of
notice having been given. To the extent permitted by law, any Lender
may be a purchaser at any such sale. To the extent permitted by
applicable law, each of the Obligors hereby waives all of its rights of
redemption with respect to any such sale. Subject to the provisions of
applicable law, the Agent and the Lenders may postpone or cause the
postponement of the sale of all or any portion of the Collateral by
announcement at the time and place of such sale, and such sale may,
without further notice, to the extent permitted by law, be made at the
time and place to which the sale was postponed, or the Agent and the
Lenders may further postpone such sale by announcement made at such
time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
Event of Default and during the continuation thereof (unless and until
such Event of Default has been waived or cured in accordance with the
terms of the Credit Agreement), whether or not the Agent has exercised
any or all of its rights and remedies hereunder, the Agent or its
designee may notify any Obligor's customers and account debtors that
the Accounts of such Obligor have been assigned to the Agent or of the
Agent's security interest therein, and may (either in its own name or
in the name of an Obligor or both) demand, collect, receive, take
receipt for, sell, sue for, compound, settle, compromise and give
acquittance for any and all amounts due or to become due on any
Account, and, in the Agent's discretion, file any claim or take any
other action or proceeding to protect and realize upon the security
interest of the Lenders in the Accounts. Each Obligor acknowledges and
agrees that the Proceeds of its Accounts remitted to or on behalf of
the Agent in accordance with the provisions hereof shall be solely for
the Agent's own convenience and that such Obligor shall not have any
right, title or interest in such Accounts or in any such other amounts
except as expressly provided herein. The Agent may apply all or any
part of any Proceeds of Accounts or other Collateral received by it
from any source to the payment of the Secured Obligations (whether or
not then due and payable). The Agent shall have no obligation to apply
or give credit for any item included in proceeds of Accounts or other
Collateral until it has received final payment therefor at its offices
in cash. However, if the Agent does permit credit to be given for any
item prior to receiving final payment therefor and the Agent fails to
receive such final payment or an item is charged back to the Agent for
any reason, the Agent may at its election in either instance charge the
amount of such item back against the Obligors, together with interest
thereon at a rate per annum equal to the Alternate Base Rate, plus two
percent (2.0%). Each Obligor hereby indemnifies the Agent from and
against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys' fees (except
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such as result from the Agent's gross negligence or willful misconduct)
suffered or incurred by the Agent because of the maintenance of the
foregoing arrangements. The Agent shall have no liability or
responsibility to any Obligor for accepting any check, draft or other
order for payment of money bearing the legend "payment in full" or
words of similar import or any other restrictive legend or endorsement
whatsoever or be responsible for determining the correctness of any
remittance.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuance
thereof (unless and until such Event of Default has been waived or
cured in accordance with the terms of the Credit Agreement), the Agent
shall have the right to take physical possession of any and all of the
Collateral and anything found therein, the right for that purpose to
enter without legal process and without breach of the peace any
premises where the Collateral may be found (provided such entry be done
lawfully), and the right to maintain such possession on any Obligor's
premises (each Obligor hereby agreeing to lease warehouses and storage
facilities to the Agent or its designee if the Agent so requests) or to
remove the Collateral or any part thereof to such other places as the
Agent may desire. Upon the occurrence of any Event of Default and at
any time thereafter, unless and until such Event of Default has been
waived by the Lenders or cured to the satisfaction of the Lenders, each
Obligor shall, upon the Agent's demand, assemble the Collateral and
make it available to the Agent at a place reasonably designated by the
Agent. If the Agent exercises its right to take possession of the
Collateral, each Obligor shall also at its expense perform any and all
other steps reasonably requested by the Agent to preserve and protect
the security interest hereby granted in the Collateral, such as placing
and maintaining signs indicating the security interest of the Agent,
appointing overseers for the Collateral and maintaining inventory
records.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or
the Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document or as provided by law, or any
delay by the Agent or the Lenders in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only
to the extent specifically stated, which in the case of the Agent or
the Lenders shall only be granted as provided herein. To the extent
permitted by law, neither the Agent, the Lenders, nor any party acting
as attorney for the Agent or the Lenders, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct
hereunder. The rights and remedies of the Agents and the Lenders under
this Security Agreement shall be cumulative and not exclusive of any
other right or remedy which the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC or otherwise
complying with the requirements of applicable law of the relevant
jurisdiction, to the extent the Agent is in possession of any of the
Collateral, retain the Collateral in satisfaction of the Secured
Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
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(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Obligors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 2.9 of the Credit
Agreement for Revolving Loans that are Base Rate Loans, together with
the costs of collection and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Secured Obligations
shall be returned to the Obligors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents,
as attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default (unless and until such Event of Default has been waived or
cured in accordance with the terms of the Credit Agreement):
(i) to demand, collect or settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to
an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the
Agent were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance
policy relating thereto;
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(vii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may reasonably determine to be necessary in order to perfect
and maintain the security interests and liens granted in this
Security Agreement and in order to fully consummate all of the
transactions contemplated therein;
(viii) institute any foreclosure proceedings that the
Agent may deem appropriate; and
(ix) do and perform all such other acts and things as
the Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding or any Credit Document is in effect or any Letter of Credit
shall remain outstanding and (ii) until all of the Commitments shall
have been terminated. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Security
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several basis
pursuant to Section 25 hereof.
(c) Assignment by the Agent. Subject to Section 9.6 of the
Credit Agreement, the Agent may from time to time assign the Secured
Obligations and any portion thereof and/or the Collateral and any
portion thereof, and the assignee shall be entitled to all of the
rights and remedies of the Agent under this Security Agreement in
relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being
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understood that the Agent shall not have responsibility for taking any
necessary steps to preserve rights against any parties with respect to
any of the Collateral.
11. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, the Proceeds and avails of the Collateral
at any time received by the Agent shall, when received by the Agent in cash or
its equivalent, be applied as follows: first, to all reasonable costs and
expenses of the Agent (including without limitation reasonable attorneys' fees
and expenses) incurred in connection with the implementation and/or enforcement
of this Security Agreement and/or any of the other Credit Documents; second, to
all costs and expenses of the Lenders (including without limitation reasonable
attorneys' fees and expenses) incurred in connection with the implementation
and/or enforcement of this Security Agreement and/or any of the other Credit
Documents; third, to the principal amount of the Secured Obligations; fourth, to
such of the Secured Obligations consisting of accrued but unpaid interest and
fees; fifth, to all other amounts payable with respect to the Secured
Obligations; and sixth, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus. The Obligors shall remain liable to
the Agent and the Lenders for any deficiency.
12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Lenders, all of which costs
and expenses shall constitute Secured Obligations hereunder.
13. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as the
Credit Agreement is in effect or any amounts payable thereunder or
under any other Credit Document or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated (other than any obligations with respect to the indemnities
and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement
shall be automatically terminated and the Lenders shall, upon the
request and at the expense of the Obligors, forthwith release all of
its liens and security interests hereunder and shall execute and
deliver all UCC termination statements and/or other documents
reasonably requested by the Obligors evidencing such termination.
Notwithstanding the foregoing all releases and indemnities provided
hereunder shall survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all
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<PAGE>
reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
14. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 9.1 of the Credit Agreement.
15. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; provided, however,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of the Agent. To the fullest extent permitted
by law, each Obligor hereby releases the Agent and each Lender, and its
successors and permitted assigns, from any liability for any act or omission
relating to this Security Agreement or the Collateral, except for any liability
arising from the gross negligence or willful misconduct of the Agent, or such
Lender, or its officers, employees or agents.
16. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 9.2 of the Credit
Agreement.
17. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
19. Governing Law; Submission to Jurisdiction; Venue. THIS SECURITY
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NORTH CAROLINA. THE PROVISIONS OF THE CREDIT AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY
REFERENCE HEREIN, MUTATIS MUTANDIS.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OBLIGOR AND THE AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS SECURITY AGREEMENT, THE CREDIT
DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
21. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions
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<PAGE>
shall remain in full force and effect and shall be construed without giving
effect to the illegal, invalid or unenforceable provisions.
22. Entirety. This Security Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
24. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence and during the continuance of any Event of
Default (unless waived or cured in accordance with the Credit Agreement), and
the Agent and the Lenders have the right, in their sole discretion, to determine
which rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Secured Obligations under this
Security Agreement, under any other of the Credit Documents.
25. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement or the other
Credit Documents, it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each of
the Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor 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 Guarantor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, any
bankruptcy, insolvency or similar law).
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26. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
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<PAGE>
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
OBLIGORS: GALEY & LORD, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
GALEY & LORD INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
G & L SERVICE COMPANY, NORTH AMERICA, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Vice-President
SWIFT TEXTILES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
SWIFT DENIM SERVICES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
<PAGE>
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
FIRST UNION NATIONAL BANK,
as Agent
By: /s/ Braxton B. Comer
Name: Braxton B. Comer
Title: Senior Vice-President
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of
January 29, 1998 among Galey & Lord, Inc. a Delaware corporation (the
"Borrower"), the Domestic Subsidiaries of the Borrower listed on the signature
pages attached hereto (the "Guarantors") and such other domestic subsidiaries of
the Borrower as may from time to time become party hereto (hereinafter, the
Borrower and the Guarantors are collectively referred to as the "Pledgors" and,
individually, as a "Pledgor") and FIRST UNION NATIONAL BANK, in its capacity as
agent (in such capacity, the "Agent") for the financial institutions from time
to time party to the Credit Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders
and the Agent, the Lenders have agreed to make Loans and issue Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Pledgors shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement.
(b) In addition, the following terms shall have the following
meanings:
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State of the United States or the District of Columbia.
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is not a Domestic Subsidiary of such
Person.
2. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing
<PAGE>
security interest in any and all right, title and interest of such Pledgor in
and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Pledged Collateral"):
(a) Pledged Shares. (i) 100% (or, if less, the full amount
owned by such Pledgor) of the issued and outstanding shares of capital
stock owned by such Pledgor of each Domestic Subsidiary set forth on
Schedule 2(a) attached hereto and (ii) 65% (or, if less, the full
amount owned by such Pledgor) of the issued and outstanding shares of
each class of capital stock or other ownership interests entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Voting
Equity") and 100% (or, if less, the full amount owned by such Pledgor)
of the issued and outstanding shares of each class of capital stock or
other ownership interests not entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) ("Non-Voting Equity") owned by such
Pledgor of each Foreign Subsidiary set forth on Schedule 2(a) attached
hereto, in each case together with the certificates (or other
agreements or instruments), if any, representing such shares, and all
options and other rights, contractual or otherwise, with respect
thereto (collectively, together with the shares of capital stock
described in Section 2(b) and 2(c) below, the "Pledged Shares"),
including, but not limited to, the following:
(y) all shares or securities representing a dividend
on any of the Pledged Shares, or representing a distribution
or return of capital upon or in respect of the Pledged Shares,
or resulting from a stock split, revision, reclassification or
other exchange therefor, and any subscriptions, warrants,
rights or options issued to the holder of, or otherwise in
respect of, the Pledged Shares; and
(z) without affecting the obligations of such Pledgor
under any provision prohibiting such action hereunder, in the
event of any consolidation or merger in which a Pledgor is not
the surviving corporation, all shares of each class of the
capital stock of the successor corporation formed by or
resulting from such consolidation or merger.
(b) Additional Shares. 100% (or, if less, the full amount
owned by such Pledgor) of the issued and outstanding shares of capital
stock owned by such Pledgor of any Person which hereafter becomes a
Domestic Subsidiary and 65% (or, if less, the full amount owned by such
Pledgor) of the Voting Equity and 100% (or, if less, the full amount
owned by such Pledgor) of the Non-Voting Equity owned by such Pledgor
of any Person which hereafter becomes a Foreign Subsidiary, including,
without limitation, the certificates representing such shares.
(c) Other Equity Interests. Any and all other equity interests
of each Pledgor in any Domestic Subsidiary or any Foreign Subsidiary.
(d) Proceeds. All proceeds and products of the foregoing,
however and whenever acquired and in whatever form.
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<PAGE>
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional shares of stock to the Agent as collateral security
for the Pledgor Obligations. Upon delivery to the Agent, such additional shares
of stock shall be deemed to be part of the Pledged Collateral of such Pledgor
and shall be subject to the terms of this Pledge Agreement whether or not
Schedule 2(a) is amended to refer to such additional shares.
3. Security for Pledgor Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the following, whether now existing or hereafter
incurred (the "Pledgor Obligations"):
(a) all Credit Party Obligations; and
(b) all expenses and charges, legal and otherwise, reasonably
incurred by the Agent and/or the Lenders in collecting or enforcing any
Credit Party Obligations or in realizing on or protecting any security
therefor, including without limitation the security afforded hereunder.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously
with or prior to the execution and delivery of this Pledge Agreement,
all certificates representing the Pledged Shares of such Pledgor and
(ii) promptly upon the receipt thereof by or on behalf of a Pledgor,
all other certificates and instruments constituting Pledged Collateral
of a Pledgor. Prior to delivery to the Agent, all such certificates and
instruments constituting Pledged Collateral of a Pledgor shall be held
in trust by such Pledgor for the benefit of the Agent pursuant hereto.
All such certificates shall be delivered in suitable form for transfer
by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, substantially in the form provided in
Schedule 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by
virtue of its being or having been the owner of any Pledged Collateral,
any (i) stock certificate, including without limitation, any
certificate representing a stock dividend or distribution in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock splits,
spin-off or split-off, promissory notes or other instrument; (ii)
option or right, whether as an addition to, substitution for, or an
exchange for, any Pledged Collateral or otherwise; (iii) dividends
payable in securities; or (iv) distributions of securities in
connection with a partial or total liquidation, dissolution or
reduction of capital, capital surplus or paid-in surplus, then such
Pledgor shall receive such stock certificate, instrument, option, right
or distribution in trust for the benefit of the Agent, shall segregate
it from such Pledgor's other property and shall deliver it forthwith to
the Agent in the exact form received together with any necessary
endorsement and/or appropriate stock power duly executed in blank,
substantially in the form provided in Schedule 4(a), to be held by the
Agent as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
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<PAGE>
(c) Financing Statements. Each Pledgor shall execute and
deliver to the Agent such UCC or other applicable financing statements
as may be reasonably requested by the Agent in order to perfect and
protect the security interest created hereby in the Pledged Collateral
of such Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are
duly authorized and validly issued, are fully paid and nonassessable
and are not subject to the preemptive rights of any Person. All other
shares of stock constituting Pledged Collateral will be duly authorized
and validly issued, fully paid and nonassessable and not subject to the
preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal
and beneficial owner of such Pledged Collateral free and clear of any
Lien, other than Permitted Liens. There exists no "adverse claim"
within the meaning of Section 8-302 of the Uniform Commercial Code as
in effect in the State of North Carolina (the "UCC") with respect to
the Pledged Shares of such Pledgor.
(c) Exercising of Rights. The exercise by the Agent of its
rights and remedies hereunder will not violate any law or governmental
regulation or any material contractual restriction binding on or
affecting a Pledgor or any of its property.
(d) Pledgor's Authority. No authorization, approval or action
by, and no notice or filing with any governmental authority or with the
issuer of any Pledged Stock is required either (i) for the pledge made
by a Pledgor or for the granting of the security interest by a Pledgor
pursuant to this Pledge Agreement or (ii) for the exercise by the Agent
or the Lenders of their rights and remedies hereunder (except as may be
required by laws affecting the offering and sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates
a valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral. The taking possession by the Agent
of the certificates representing the Pledged Shares and all other
certificates and instruments constituting Pledged Collateral will
perfect and establish the first priority of the Agent's security
interest in the Pledged Shares and, when properly perfected by filing
or registration, in all other Pledged Collateral represented by such
Pledged Shares and instruments securing the Pledgor Obligations. Except
as set forth in this Section 5(e), no action is necessary to perfect or
otherwise protect such security interest.
(f) No Other Shares. No Pledgor owns any shares of stock other
than as set forth on Schedule 2(a) attached hereto.
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<PAGE>
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document is in effect or
any Letter of Credit shall remain outstanding, and until all of the Commitments
shall have been terminated, such Pledgor shall:
(a) Books and Records. Mark its books and records (and shall
cause the issuer of the Pledged Shares of such Pledgor to mark its
books and records) to reflect the security interest granted to the
Agent, for the benefit of the Lenders, pursuant to this Pledge
Agreement.
(b) Defense of Title. Warrant and defend title to and
ownership of the Pledged Collateral of such Pledgor at its own expense
against the claims and demands of all other parties claiming an
interest therein, keep the Pledged Collateral free from all Liens,
except for Permitted Liens, and not sell, exchange, transfer, assign,
lease or otherwise dispose of Pledged Collateral of such Pledgor or any
interest therein, except as permitted under the Credit Agreement and
the other Credit Documents.
(c) Further Assurances. Promptly execute and deliver at its
expense all further instruments and documents and take all further
action that may be reasonably necessary and desirable or that the Agent
may reasonably request in order to (i) perfect and protect the security
interest created hereby in the Pledged Collateral of such Pledgor
(including without limitation any and all action necessary to satisfy
the Agent that the Agent has obtained a first priority perfected
security interest in any capital stock); (ii) enable the Agent to
exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral of such Pledgor; and (iii) otherwise effect the
purposes of this Pledge Agreement, including, without limitation and if
requested by the Agent, delivering to the Agent irrevocable proxies in
respect of the Pledged Collateral of such Pledgor.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any
restriction with respect to any of the Pledged Collateral of such
Pledgor other than pursuant hereto or as may be permitted under the
Credit Agreement.
(e) Compliance with Securities Laws. File all reports and
other information now or hereafter required to be filed by such Pledgor
with the United States Securities and Exchange Commission and any other
state, federal or foreign agency in connection with the ownership of
the Pledged Collateral of such Pledgor.
7. Advances by Lenders. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien (other than a
Permitted Lien), expenditures made in defending against any adverse claim (other
than a Permitted Lien) and all other expenditures which the Agent or the Lenders
may make for the protection of the security hereof
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<PAGE>
or which may be compelled to make by operation of law. All such sums and amounts
so expended shall be repayable by the Pledgors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Pledgor Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in Section 2.9 of the Credit
Agreement for Loans that are not LIBOR Rate Loans. No such performance of any
covenant or agreement by the Agent or the Lenders on behalf of any Pledgor, and
no such advance or expenditure therefor, shall relieve the Pledgors of any
default under the terms of this Pledge Agreement or the other Credit Documents.
The Lenders may make any payment hereby authorized in accordance with any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by a Pledgor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the Credit
Agreement would constitute an Event of Default shall be an Event of Default
hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during the continuation thereof (unless and until such
Event of Default has been waived or cured in accordance with the terms
of the Credit Agreement), the Agent and the Lenders shall have, in
respect of the Pledged Collateral of any Pledgor, in addition to the
rights and remedies provided herein, in the Credit Documents or by law,
the rights and remedies of a secured party under the UCC or any other
applicable law.
(b) Sale of Pledged Collateral. Upon the occurrence of an
Event of Default and during the continuation thereof (unless and until
such Event of Default has been waived or cured in accordance with the
terms of the Credit Agreement), without limiting the generality of this
Section and without notice, the Agent may, in its sole discretion, sell
or otherwise dispose of or realize upon the Pledged Collateral, or any
part thereof, in one or more parcels, at public or private sale, at any
exchange or broker's board or elsewhere, at such price or prices and on
such other terms as the Agent may deem commercially reasonable, for
cash, credit or for future delivery or otherwise in accordance with
applicable law. To the extent permitted by law, any Lender may in such
event, bid for the purchase of such securities. Each Pledgor agrees
that, to the extent notice of sale shall be required by law and has not
been waived by such Pledgor, any requirement of reasonable notice shall
be met if notice, specifying the place of any public sale or the time
after which any private sale is to be made, is personally served on or
mailed, postage prepaid, to such Pledgor, in accordance with the notice
provisions of Section 9.2 of the Credit Agreement at least 10 days
before the time of such sale. The Agent shall not be obligated to make
any sale of Pledged Collateral of such Pledgor regardless of notice of
sale having been given. The Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
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<PAGE>
(c) Private Sale. Upon the occurrence of an Event of Default
and during the continuation thereof (unless and until such Event of
Default has been waived or cured in accordance with the terms of the
Credit Agreement), the Pledgors recognize that the Agent may deem it
impracticable to effect a public sale of all or any part of the Pledged
Shares or any of the securities constituting Pledged Collateral and
that the Agent may, therefore, determine to make one or more private
sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Pledgor acknowledges that any
such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained
at a public sale and, notwithstanding the foregoing, agrees that such
private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to delay
sale of any such securities for the period of time necessary to permit
the issuer of such securities to register such securities for public
sale under the Securities Act of 1933. Each Pledgor further
acknowledges and agrees that any offer to sell such securities which
has been (i) publicly advertised on a bona fide basis in a newspaper or
other publication of general circulation in the financial community of
New York, New York (to the extent that such offer may be advertised
without prior registration under the Securities Act of 1933), or (ii)
made privately in the manner described above shall be deemed to involve
a "public sale" under the UCC, notwithstanding that such sale may not
constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
(d) Retention of Pledged Collateral. In addition to the rights
and remedies hereunder, upon the occurrence and during the continuance
of an Event of Default (unless and until such Event of Default has been
waived or cured in accordance with the terms of the Credit Agreement),
the Agent may, after providing the notices required by Section 9-505(2)
of the UCC or otherwise complying with the requirements of applicable
law of the relevant jurisdiction, retain all or any portion of the
Pledged Collateral in satisfaction of the Pledgor Obligations. Unless
and until the Agent shall have provided such notices, however, the
Agent shall not be deemed to have retained any Pledged Collateral in
satisfaction of any Pledgor Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Pledgors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 2.9 of the Credit
Agreement for Revolving Loans that are Base Rate Loans, together with
the costs of collection and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Pledgor Obligations
shall be returned to the Pledgors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
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<PAGE>
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default (unless and until such Event of Default has been waived or
cured in accordance with the terms of the Credit Agreement):
(i) to demand, collect or settle, compromise, adjust
and give discharges and releases concerning the Pledged
Collateral of such Pledgor, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any of the Pledged
Collateral of such Pledgor and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or
threatened against the Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment
under any of the Pledged Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Agent or as the Agent shall direct;
(vi) to receive payment of and receipt for any and
all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Pledged
Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other
documents relating to the Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Agent
may deem reasonably appropriate;
(ix) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, pledge agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens
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<PAGE>
granted in this Pledge Agreement and in order to fully
consummate all of the transactions contemplated therein;
(x) to exchange any of the Pledged Collateral of such
Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the
issuer thereof and, in connection therewith, deposit any of
the Pledged Collateral of such Pledgor with any committee,
depository, transfer agent, registrar or other designated
agency upon such terms as the Agent may determine;
(xi) to vote for a shareholder resolution, or to sign
an instrument in writing, sanctioning the transfer of any or
all of the Pledged Shares of such Pledgor into the name of the
Agent or one or more of the Lenders or into the name of any
transferee to whom the Pledged Shares of such Pledgor or any
part thereof may be sold pursuant to Section 10 hereof; and
(xii) to do and perform all such other acts and
things as the Agent may reasonably deem to be necessary,
proper or convenient in connection with the Pledged Collateral
of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document is in effect or any Letter of Credit
shall remain outstanding and (ii) until all of the Commitments shall
have been terminated. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Pledge
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in Pledged Collateral.
(b) Performance by the Agent of Pledgor's Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein,
the Agent itself may perform, or cause performance of, such agreement
or obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Pledgors on a joint and several basis
pursuant to Section 25 hereof.
(c) Assignment by the Agent. Subject to Section 9.6 of the
Credit Agreement, the Agent may from time to time assign the Pledgor
Obligations and any portion thereof and/or the Pledged Collateral and
any portion thereof, and the assignee shall be entitled to all of the
rights and remedies of the Agent under this Pledge Agreement in
relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Pledged Collateral
while being held by the Agent hereunder, the Agent shall have no duty
or liability to preserve rights pertaining thereto, it being
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<PAGE>
understood and agreed that Pledgors shall be responsible for
preservation of all rights in the Pledged Collateral of such Pledgor,
and the Agent shall be relieved of all responsibility for Pledged
Collateral upon surrendering it or tendering the surrender of it to the
Pledgors. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its
possession if such Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to
any Pledged Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have
occurred and be continuing, to the extent permitted by law,
each Pledgor may exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral of such
Pledgor or any part thereof for any purpose not inconsistent
with the terms of this Pledge Agreement or the Credit
Agreement; and
(ii) Upon the occurrence and during the continuance
of an Event of Default (unless and until such Event of Default
has been waived or cured in accordance with the terms of the
Credit Agreement), all rights of a Pledgor to exercise the
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to clause (i) of this paragraph
(e) shall cease and all such rights shall thereupon become
vested in the Agent which shall then have the sole right to
exercise such voting and other consensual rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have
occurred and be continuing and subject to Section 4(b) hereof,
each Pledgor may receive and retain any and all dividends
(other than stock dividends and other dividends constituting
Pledged Collateral which are addressed hereinabove) or
interest paid in respect of the Pledged Collateral to the
extent they are allowed under the Credit Agreement.
(ii) Upon the occurrence and during the continuance
of an Event of Default (unless and until such Event of Default
has been waived or cured in accordance with the terms of the
Credit Agreement):
(A) all rights of a Pledgor to receive the
dividends and interest payments which it would
otherwise be authorized to receive and retain
pursuant to paragraph (i) of this Section shall cease
and all such rights shall thereupon be vested in the
Agent which shall then have the sole right to
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<PAGE>
receive and hold as Pledged Collateral such dividends
and interest payments; and
(B) all dividends and interest payments
which are received by a Pledgor contrary to the
provisions of paragraph (A) of this Section shall be
received in trust for the benefit of the Agent, shall
be segregated from other property or funds of such
Pledgor, and shall be forthwith paid over to the
Agent as Pledged Collateral in the exact form
received, to be held by the Agent as Pledged
Collateral and as further collateral security for the
Pledgor Obligations.
(g) Release of Pledged Collateral. The Agent may release any
of the Pledged Collateral from this Pledge Agreement or may substitute
any of the Pledged Collateral for other Pledged Collateral without
altering, varying or diminishing in any way the force, effect, lien,
pledge or security interest of this Pledge Agreement as to any Pledged
Collateral not expressly released or substituted, and this Pledge
Agreement shall continue as a first priority lien on all Pledged
Collateral not expressly released or substituted.
11. Application of Proceeds. Upon the occurrence of and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied as
follows: first, to all reasonable costs and expenses of the Agent (including
without limitation reasonable attorneys' fees and expenses) incurred in
connection with the implementation and/or enforcement of this Pledge Agreement
and/or any of the other Credit Documents; second, to all costs and expenses of
the Lenders (including without limitation reasonable attorneys' fees and
expenses) incurred in connection with the implementation and/or enforcement of
this Pledge Agreement and/or any of the other Credit Documents; third, to the
principal amount of the Pledgor Obligations; fourth, to such of the Pledgor
Obligations consisting of accrued but unpaid interest and fees; fifth, to all
other amounts payable with respect to the Pledgor Obligations; and sixth, to the
payment of the surplus, if any, to whoever may be lawfully entitled to receive
such surplus. The Pledgors shall remain liable to the Agent and the Lenders for
any deficiency.
12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Pledge
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Pledge Agreement or relating to the
Pledged Collateral, or to protect the Pledged Collateral or exercise any rights
or remedies under this Pledge Agreement or with respect to the Pledged
Collateral, then the Pledgors agree to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Agent or the Lenders, all of
which costs and expenses shall constitute Pledgor Obligations hereunder.
13. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long the
Credit Agreement is in effect or any
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<PAGE>
amounts payable thereunder or under any other Credit Document or any
Letter of Credit shall remain outstanding, and until all of the
Commitments thereunder shall have terminated (other than any
obligations with respect to the indemnities and the representations and
warranties set forth in the Credit Documents). Upon such payment and
termination, this Pledge Agreement shall be automatically terminated
and the Lenders shall, upon the request and at the expense of the
Pledgors, forthwith release all of its liens and security interests
hereunder and shall executed and deliver all UCC termination statements
and/or other documents reasonably requested by the Pledgors evidencing
such termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this Pledge
Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment,
in whole or in part, of any of the Pledgor Obligations is rescinded or
must otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the
Pledgor Obligations is rescinded or must be restored or returned, all
reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Pledgor Obligations.
14. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 9.1 of the Credit Agreement.
15. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Pledged Collateral and shall be binding upon
each Pledgor, its successors and assigns and shall inure, together with the
rights and remedies of the Agent and the Lenders hereunder, to the benefit of
the Agent and the Lenders and their successors and permitted assigns; provided,
however, that none of the Pledgors may assign its rights or delegate its duties
hereunder without the prior written consent of the Agent. To the fullest extent
permitted by law, each Pledgor hereby releases the Agent and each Lender, and
its successors and permitted assigns, from any liability for any act or omission
relating to this Pledge Agreement or the Pledged Collateral, except for any
liability arising from the gross negligence or willful misconduct of the Agent,
or such Lender, or its officers, employees or agents.
16. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 9.2 of the Credit
Agreement.
17. Counterparts. This Pledge Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
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<PAGE>
18. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
19. Governing Law; Submission to Jurisdiction; Venue. THIS PLEDGE
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NORTH CAROLINA. THE PROVISIONS OF THE CREDIT AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY
REFERENCE HEREIN, MUTATIS MUTANDIS.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH PLEDGOR AND THE AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS PLEDGE AGREEMENT, THE CREDIT DOCUMENTS
OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
21. Severability. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Pledge Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement and
the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
24. Other Security. To the extent that any of the Pledgor Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence and during the
continuance of any Event of Default (unless and until such Event of Default has
been waived or cured in accordance with the terms of the Credit Agreement), and
the Agent and the Lenders have the right, in their sole discretion, to determine
which rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Pledgor Obligations under this Pledge
Agreement or under any other of the Credit Documents.
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<PAGE>
25. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Pledgors and in
consideration of the undertakings of each of the Pledgors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Pledgors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Pledgors with respect to the payment and performance of all of the
Pledgor Obligations arising under this Pledge Agreement and the other
Credit Documents, it being the intention of the parties hereto that all
the Pledgor Obligations shall be the joint and several obligations of
each of the Pledgors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor 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 Guarantor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, any
bankruptcy, insolvency or similar law).
26. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
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<PAGE>
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
PLEDGORS: GALEY & LORD, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
GALEY & LORD INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
G & L SERVICE COMPANY, NORTH AMERICA, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
SWIFT TEXTILES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
SWIFT DENIM SERVICES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
<PAGE>
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
FIRST UNION NATIONAL BANK,
as Agent
By: /s/ Braxton B. Comer
Name: Braxton B. Comer
Title: Senior Vice-President
FOREIGN SUBSIDIARY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of
January 29, 1998 among Galey & Lord, Inc. a Delaware corporation (the
"Borrower"), the Foreign Subsidiaries of the Borrower listed on the signature
pages attached hereto and such other Foreign Subsidiaries of the Borrower as may
from time to time become party hereto (hereinafter, the Foreign Subsidiaries are
collectively referred to as the "Pledgors" and, individually, as a "Pledgor")
and FIRST UNION NATIONAL BANK, in its capacity as agent (in such capacity, the
"Agent") for the financial institutions from time to time party to the Credit
Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders
and the Agent, the Lenders have agreed to make Loans and issue Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Pledgors shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement.
(b) In addition, the following terms shall have the following
meanings:
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State of the United States or the District of Columbia.
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is not a Domestic Subsidiary of such
Person.
2. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of such Pledgor in and to the following,
<PAGE>
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Pledged Collateral"):
(a) Pledged Shares. 65% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of each class of
capital stock or other ownership interests entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Voting Equity") and
100% (or, if less, the full amount owned by such Pledgor) of the issued
and outstanding shares of each class of capital stock or other
ownership interests not entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) ("Non-Voting Equity") owned by such Pledgor
of each Foreign Subsidiary set forth on Schedule 2(a) attached hereto,
in each case together with the certificates (or other agreements or
instruments), if any, representing such shares, and all options and
other rights, contractual or otherwise, with respect thereto
(collectively, together with the shares of capital stock described in
Section 2(b) and 2(c) below, the "Pledged Shares"), including, but not
limited to, the following:
(i) all shares or securities representing a dividend
on any of the Pledged Shares, or representing a distribution
or return of capital upon or in respect of the Pledged Shares,
or resulting from a stock split, revision, reclassification or
other exchange therefor, and any subscriptions, warrants,
rights or options issued to the holder of, or otherwise in
respect of, the Pledged Shares; and
(ii) without affecting the obligations of such
Pledgor under any provision prohibiting such action hereunder,
in the event of any consolidation or merger in which a Pledgor
is not the surviving corporation, all shares of each class of
the capital stock of the successor corporation formed by or
resulting from such consolidation or merger.
(b) Additional Shares. 65% (or, if less, the full amount owned
by such Pledgor) of the Voting Equity and 100% (or, if less, the full
amount owned by such Pledgor) of the Non-Voting Equity owned by such
Pledgor of any Person which hereafter becomes a Foreign Subsidiary,
including, without limitation, the certificates representing such
shares.
(c) Other Equity Interests. Any and all other equity interests
of each Pledgor in any Foreign Subsidiary.
(d) Proceeds. All proceeds and products of the foregoing,
however and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional shares of stock to the Agent as collateral security
for the Pledgor Obligations. Upon delivery to the Agent, such additional shares
of stock shall be deemed to be part of the Pledged Collateral of such Pledgor
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<PAGE>
and shall be subject to the terms of this Pledge Agreement whether or not
Schedule 2(a) is amended to refer to such additional shares.
3. Security for Pledgor Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the following, whether now existing or hereafter
incurred (the "Pledgor Obligations"):
(a) all Credit Party Obligations; and
(b) all expenses and charges, legal and otherwise, reasonably
incurred by the Agent and/or the Lenders in collecting or enforcing any
Credit Party Obligations or in realizing on or protecting any security
therefor, including without limitation the security afforded hereunder.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously
with or prior to the execution and delivery of this Pledge Agreement,
all certificates representing the Pledged Shares of such Pledgor and
(ii) promptly upon the receipt thereof by or on behalf of a Pledgor,
all other certificates and instruments constituting Pledged Collateral
of a Pledgor. Prior to delivery to the Agent, all such certificates and
instruments constituting Pledged Collateral of a Pledgor shall be held
in trust by such Pledgor for the benefit of the Agent pursuant hereto.
All such certificates shall be delivered in suitable form for transfer
by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, substantially in the form provided in
Schedule 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by
virtue of its being or having been the owner of any Pledged Collateral,
any (i) stock certificate, including without limitation, any
certificate representing a stock dividend or distribution in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock splits,
spin-off or split-off, promissory notes or other instrument; (ii)
option or right, whether as an addition to, substitution for, or an
exchange for, any Pledged Collateral or otherwise; (iii) dividends
payable in securities; or (iv) distributions of securities in
connection with a partial or total liquidation, dissolution or
reduction of capital, capital surplus or paid-in surplus, then such
Pledgor shall receive such stock certificate, instrument, option, right
or distribution in trust for the benefit of the Agent, shall segregate
it from such Pledgor's other property and shall deliver it forthwith to
the Agent in the exact form received together with any necessary
endorsement and/or appropriate stock power duly executed in blank,
substantially in the form provided in Schedule 4(a), to be held by the
Agent as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(c) Financing Statements. Each Pledgor shall execute and
deliver to the Agent such UCC or other applicable financing statements
as may be reasonably requested by the Agent in order to perfect and
protect the security interest created hereby in the Pledged Collateral
of such Pledgor.
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<PAGE>
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are
duly authorized and validly issued, are fully paid and nonassessable
and are not subject to the preemptive rights of any Person. All other
shares of stock constituting Pledged Collateral will be duly authorized
and validly issued, fully paid and nonassessable and not subject to the
preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal
and beneficial owner of such Pledged Collateral free and clear of any
Lien, other than Permitted Liens. There exists no "adverse claim"
within the meaning of Section 8-302 of the Uniform Commercial Code as
in effect in the State of North Carolina (the "UCC") with respect to
the Pledged Shares of such Pledgor.
(c) Exercising of Rights. The exercise by the Agent of its
rights and remedies hereunder will not violate any law or governmental
regulation or any material contractual restriction binding on or
affecting a Pledgor or any of its property.
(d) Pledgor's Authority. No authorization, approval or action
by, and no notice or filing with any governmental authority or with the
issuer of any Pledged Stock is required either (i) for the pledge made
by a Pledgor or for the granting of the security interest by a Pledgor
pursuant to this Pledge Agreement or (ii) for the exercise by the Agent
or the Lenders of their rights and remedies hereunder (except as may be
required by laws affecting the offering and sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates
a valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral. The taking possession by the Agent
of the certificates representing the Pledged Shares and all other
certificates and instruments constituting Pledged Collateral will
perfect and establish the first priority of the Agent's security
interest in the Pledged Shares and, when properly perfected by filing
or registration, in all other Pledged Collateral represented by such
Pledged Shares and instruments securing the Pledgor Obligations. Except
as set forth in this Section 5(e), no action is necessary to perfect or
otherwise protect such security interest.
(f) No Other Shares. No Pledgor owns any shares of stock other
than as set forth on Schedule 2(a) attached hereto.
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document is in effect or
any Letter of Credit shall remain outstanding, and until all of the Commitments
shall have been terminated, such Pledgor shall:
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(a) Books and Records. Mark its books and records (and shall
cause the issuer of the Pledged Shares of such Pledgor to mark its
books and records) to reflect the security interest granted to the
Agent, for the benefit of the Lenders, pursuant to this Pledge
Agreement.
(b) Defense of Title. Warrant and defend title to and
ownership of the Pledged Collateral of such Pledgor at its own expense
against the claims and demands of all other parties claiming an
interest therein, keep the Pledged Collateral free from all Liens,
except for Permitted Liens, and not sell, exchange, transfer, assign,
lease or otherwise dispose of Pledged Collateral of such Pledgor or any
interest therein, except as permitted under the Credit Agreement and
the other Credit Documents.
(c) Further Assurances. Promptly execute and deliver at its
expense all further instruments and documents and take all further
action that may be reasonably necessary and desirable or that the Agent
may reasonably request in order to (i) perfect and protect the security
interest created hereby in the Pledged Collateral of such Pledgor
(including without limitation any and all action necessary to satisfy
the Agent that the Agent has obtained a first priority perfected
security interest in any capital stock); (ii) enable the Agent to
exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral of such Pledgor; and (iii) otherwise effect the
purposes of this Pledge Agreement, including, without limitation and if
requested by the Agent, delivering to the Agent irrevocable proxies in
respect of the Pledged Collateral of such Pledgor.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any
restriction with respect to any of the Pledged Collateral of such
Pledgor other than pursuant hereto or as may be permitted under the
Credit Agreement.
(e) Compliance with Securities Laws. File all reports and
other information now or hereafter required to be filed by such Pledgor
with the United States Securities and Exchange Commission and any other
state, federal or foreign agency in connection with the ownership of
the Pledged Collateral of such Pledgor.
7. Advances by Lenders. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien (other than a
Permitted Lien), expenditures made in defending against any adverse claim (other
than a Permitted Lien) and all other expenditures which the Agent or the Lenders
may make for the protection of the security hereof or which may be compelled to
make by operation of law. All such sums and amounts so expended shall be
repayable by the Pledgors on a joint and several basis promptly upon timely
notice thereof and demand therefor, shall constitute additional Pledgor
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 2.9 of the Credit Agreement for Loans that
are not LIBOR Rate Loans. No such performance of any covenant or agreement by
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the Agent or the Lenders on behalf of any Pledgor, and no such advance or
expenditure therefor, shall relieve the Pledgors of any default under the terms
of this Pledge Agreement or the other Credit Documents. The Lenders may make any
payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Pledgor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the Credit
Agreement would constitute an Event of Default shall be an Event of Default
hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during the continuation thereof (unless and until such
Event of Default has been waived or cured in accordance with the terms
of the Credit Agreement), the Agent and the Lenders shall have, in
respect of the Pledged Collateral of any Pledgor, in addition to the
rights and remedies provided herein, in the Credit Documents or by law,
the rights and remedies of a secured party under the UCC or any other
applicable law.
(b) Sale of Pledged Collateral. Upon the occurrence of an
Event of Default and during the continuation thereof (unless and until
such Event of Default has been waived or cured in accordance with the
terms of the Credit Agreement), without limiting the generality of this
Section and without notice, the Agent may, in its sole discretion, sell
or otherwise dispose of or realize upon the Pledged Collateral, or any
part thereof, in one or more parcels, at public or private sale, at any
exchange or broker's board or elsewhere, at such price or prices and on
such other terms as the Agent may deem commercially reasonable, for
cash, credit or for future delivery or otherwise in accordance with
applicable law. To the extent permitted by law, any Lender may in such
event, bid for the purchase of such securities. Each Pledgor agrees
that, to the extent notice of sale shall be required by law and has not
been waived by such Pledgor, any requirement of reasonable notice shall
be met if notice, specifying the place of any public sale or the time
after which any private sale is to be made, is personally served on or
mailed, postage prepaid, to such Pledgor, in accordance with the notice
provisions of Section 9.2 of the Credit Agreement at least 10 days
before the time of such sale. The Agent shall not be obligated to make
any sale of Pledged Collateral of such Pledgor regardless of notice of
sale having been given. The Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(c) Private Sale. Upon the occurrence of an Event of Default
and during the continuation thereof (unless and until such Event of
Default has been waived or cured in accordance with the terms of the
Credit Agreement), the Pledgors recognize that the Agent may deem it
impracticable to effect a public sale of all or any part of the Pledged
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Shares or any of the securities constituting Pledged Collateral and
that the Agent may, therefore, determine to make one or more private
sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Pledgor acknowledges that any
such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained
at a public sale and, notwithstanding the foregoing, agrees that such
private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to delay
sale of any such securities for the period of time necessary to permit
the issuer of such securities to register such securities for public
sale under the Securities Act of 1933. Each Pledgor further
acknowledges and agrees that any offer to sell such securities which
has been (i) publicly advertised on a bona fide basis in a newspaper or
other publication of general circulation in the financial community of
New York, New York (to the extent that such offer may be advertised
without prior registration under the Securities Act of 1933), or (ii)
made privately in the manner described above shall be deemed to involve
a "public sale" under the UCC, notwithstanding that such sale may not
constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
(d) Retention of Pledged Collateral. In addition to the rights
and remedies hereunder, upon the occurrence and during the continuance
of an Event of Default (unless and until such Event of Default has been
waived or cured in accordance with the terms of the Credit Agreement),
the Agent may, after providing the notices required by Section 9-505(2)
of the UCC or otherwise complying with the requirements of applicable
law of the relevant jurisdiction, retain all or any portion of the
Pledged Collateral in satisfaction of the Pledgor Obligations. Unless
and until the Agent shall have provided such notices, however, the
Agent shall not be deemed to have retained any Pledged Collateral in
satisfaction of any Pledgor Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Pledgors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 2.9 of the Credit
Agreement for Revolving Loans that are Base Rate Loans, together with
the costs of collection and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Pledgor Obligations
shall be returned to the Pledgors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default (unless and until such
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Event of Default has been waived or cured in accordance with the terms
of the Credit Agreement):
(i) to demand, collect or settle, compromise, adjust
and give discharges and releases concerning the Pledged
Collateral of such Pledgor, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any of the Pledged
Collateral of such Pledgor and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or
threatened against the Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment
under any of the Pledged Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Agent or as the Agent shall direct;
(vi) to receive payment of and receipt for any and
all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Pledged
Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other
documents relating to the Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Agent
may deem reasonably appropriate;
(ix) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, pledge agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens granted in this Pledge Agreement
and in order to fully consummate all of the transactions
contemplated therein;
(x) to exchange any of the Pledged Collateral of such
Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the
issuer thereof and, in connection therewith, deposit any of
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the Pledged Collateral of such Pledgor with any committee,
depository, transfer agent, registrar or other designated
agency upon such terms as the Agent may determine;
(xi) to vote for a shareholder resolution, or to sign
an instrument in writing, sanctioning the transfer of any or
all of the Pledged Shares of such Pledgor into the name of the
Agent or one or more of the Lenders or into the name of any
transferee to whom the Pledged Shares of such Pledgor or any
part thereof may be sold pursuant to Section 10 hereof; and
(xii) to do and perform all such other acts and
things as the Agent may reasonably deem to be necessary,
proper or convenient in connection with the Pledged Collateral
of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document is in effect or any Letter of Credit
shall remain outstanding and (ii) until all of the Commitments shall
have been terminated. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Pledge
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in Pledged Collateral.
(b) Performance by the Agent of Pledgor's Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein,
the Agent itself may perform, or cause performance of, such agreement
or obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Pledgors on a joint and several basis
pursuant to Section 25 hereof.
(c) Assignment by the Agent. Subject to Section 9.6 of the
Credit Agreement, the Agent may from time to time assign the Pledgor
Obligations and any portion thereof and/or the Pledged Collateral and
any portion thereof, and the assignee shall be entitled to all of the
rights and remedies of the Agent under this Pledge Agreement in
relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Pledged Collateral
while being held by the Agent hereunder, the Agent shall have no duty
or liability to preserve rights pertaining thereto, it being understood
and agreed that Pledgors shall be responsible for preservation of all
rights in the Pledged Collateral of such Pledgor, and the Agent shall
be relieved of all responsibility for Pledged Collateral upon
surrendering it or tendering the surrender of it to the Pledgors. The
Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that
which the Agent accords its own property,
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which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to
any Pledged Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have
occurred and be continuing, to the extent permitted by law,
each Pledgor may exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral of such
Pledgor or any part thereof for any purpose not inconsistent
with the terms of this Pledge Agreement or the Credit
Agreement; and
(ii) Upon the occurrence and during the continuance
of an Event of Default (unless and until such Event of Default
has been waived or cured in accordance with the terms of the
Credit Agreement), all rights of a Pledgor to exercise the
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to clause (i) of this paragraph
(e) shall cease and all such rights shall thereupon become
vested in the Agent which shall then have the sole right to
exercise such voting and other consensual rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have
occurred and be continuing and subject to Section 4(b) hereof,
each Pledgor may receive and retain any and all dividends
(other than stock dividends and other dividends constituting
Pledged Collateral which are addressed hereinabove) or
interest paid in respect of the Pledged Collateral to the
extent they are allowed under the Credit Agreement.
(ii) Upon the occurrence and during the continuance
of an Event of Default (unless and until such Event of Default
has been waived or cured in accordance with the terms of the
Credit Agreement):
(A) all rights of a Pledgor to receive the
dividends and interest payments which it would
otherwise be authorized to receive and retain
pursuant to paragraph (i) of this Section shall cease
and all such rights shall thereupon be vested in the
Agent which shall then have the sole right to receive
and hold as Pledged Collateral such dividends and
interest payments; and
(B) all dividends and interest payments
which are received by a Pledgor contrary to the
provisions of paragraph (A) of this Section shall be
received in trust for the benefit of the Agent, shall
be segregated from other property or funds of such
Pledgor, and shall be forthwith paid over to the
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Agent as Pledged Collateral in the exact form
received, to be held by the Agent as Pledged
Collateral and as further collateral security for the
Pledgor Obligations.
(g) Release of Pledged Collateral. The Agent may release any
of the Pledged Collateral from this Pledge Agreement or may substitute
any of the Pledged Collateral for other Pledged Collateral without
altering, varying or diminishing in any way the force, effect, lien,
pledge or security interest of this Pledge Agreement as to any Pledged
Collateral not expressly released or substituted, and this Pledge
Agreement shall continue as a first priority lien on all Pledged
Collateral not expressly released or substituted.
11. Application of Proceeds. Upon the occurrence of and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied as
follows: first, to all reasonable costs and expenses of the Agent (including
without limitation reasonable attorneys' fees and expenses) incurred in
connection with the implementation and/or enforcement of this Pledge Agreement
and/or any of the other Credit Documents; second, to all costs and expenses of
the Lenders (including without limitation reasonable attorneys' fees and
expenses) incurred in connection with the implementation and/or enforcement of
this Pledge Agreement and/or any of the other Credit Documents; third, to the
principal amount of the Pledgor Obligations; fourth, to such of the Pledgor
Obligations consisting of accrued but unpaid interest and fees; fifth, to all
other amounts payable with respect to the Pledgor Obligations; and sixth, to the
payment of the surplus, if any, to whoever may be lawfully entitled to receive
such surplus. The Pledgors shall remain liable to the Agent and the Lenders for
any deficiency.
12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Pledge
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Pledge Agreement or relating to the
Pledged Collateral, or to protect the Pledged Collateral or exercise any rights
or remedies under this Pledge Agreement or with respect to the Pledged
Collateral, then the Pledgors agree to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Agent or the Lenders, all of
which costs and expenses shall constitute Pledgor Obligations hereunder.
13. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long the
Credit Agreement is in effect or any amounts payable thereunder or
under any other Credit Document or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated (other than any obligations with respect to the indemnities
and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Pledge Agreement
shall be automatically terminated and the Lenders shall, upon the
request and at the expense of the Pledgors, forthwith release all of
its liens and security interests hereunder and shall executed and
deliver all UCC termination statements and/or
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other documents reasonably requested by the Pledgors evidencing such
termination. Notwithstanding the foregoing all releases and indemnities
provided hereunder shall survive termination of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment,
in whole or in part, of any of the Pledgor Obligations is rescinded or
must otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the
Pledgor Obligations is rescinded or must be restored or returned, all
reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Pledgor Obligations.
14. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 9.1 of the Credit Agreement.
15. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Pledged Collateral and shall be binding upon
each Pledgor, its successors and assigns and shall inure, together with the
rights and remedies of the Agent and the Lenders hereunder, to the benefit of
the Agent and the Lenders and their successors and permitted assigns; provided,
however, that none of the Pledgors may assign its rights or delegate its duties
hereunder without the prior written consent of the Agent. To the fullest extent
permitted by law, each Pledgor hereby releases the Agent and each Lender, and
its successors and permitted assigns, from any liability for any act or omission
relating to this Pledge Agreement or the Pledged Collateral, except for any
liability arising from the gross negligence or willful misconduct of the Agent,
or such Lender, or its officers, employees or agents.
16. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 9.2 of the Credit
Agreement.
17. Counterparts. This Pledge Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
19. Governing Law; Submission to Jurisdiction; Venue. THIS PLEDGE
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NORTH CAROLINA. THE PROVISIONS OF THE CREDIT
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AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE
HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH PLEDGOR AND THE AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS PLEDGE AGREEMENT, THE CREDIT DOCUMENTS
OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
21. Severability. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Pledge Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement and
the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
24. Other Security. To the extent that any of the Pledgor Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence and during the
continuance of any Event of Default (unless and until such Event of Default has
been waived or cured in accordance with the terms of the Credit Agreement), and
the Agent and the Lenders have the right, in their sole discretion, to determine
which rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Pledgor Obligations under this Pledge
Agreement or under any other of the Credit Documents.
25. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Pledgors and in
consideration of the undertakings of each of the Pledgors to accept
joint and several liability for the obligations of each of them.
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(b) Each of the Pledgors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Pledgors with respect to the payment and performance of all of the
Pledgor Obligations arising under this Pledge Agreement and the other
Credit Documents, it being the intention of the parties hereto that all
the Pledgor Obligations shall be the joint and several obligations of
each of the Pledgors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor 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 Guarantor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, any
bankruptcy, insolvency or similar law).
26. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
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Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: GALEY & LORD, INC.
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
PLEDGORS: 3427803 CANADA LIMITED
a Canada corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
FIRST UNION NATIONAL BANK,
as Agent
By: /s/ Braxton B. Comer
Name: Braxton B. Comer
Title: Senior Vice-President
AMENDMENT NO. 1
AMENDMENT NO. 1 ("this Amendment"), dated as of January 29,
1998, among Galey & Lord Industries, Inc., a Delaware corporation
("Industries"), Galey & Lord, Inc., a Delaware corporation ("Galey"), G&L
Service Company, North America, Inc. ("Service Co.") and First Union Corporation
("First Union"), as a Lender and as agent for the Lenders (in such capacity, the
"Agent") to the Senior Subordinated Credit Agreement, dated as of December 19,
1997 among Industries, Galey, Service Co., the lenders named therein and First
Union (the "Credit Agreement").
WHEREAS, under the Credit Agreement, Industries borrowed
$145,617,902.25 from First Union evidenced by a promissory note; and
WHEREAS, following the loan referred to above, the remaining
aggregate principal amount available to be borrowed by Industries pursuant to
the Credit Agreement is $104,382,007.75; and
WHEREAS, the parties hereto desire to increase the aggregate
principal amount to be borrowed under the Credit Agreement and for Galey to
assume the rights and obligations of Industries, and for Industries to become a
Guarantor under, the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereby agree
as follows:
Section 1. Ratification of the Credit Agreement. Galey,
Industries, Service Co. and First Union hereby ratify the Credit Agreement, as
amended and, to the extent of any inconsistencies, superseded pursuant to
Section 5 herein.
Section 2. Defined Terms. Unless otherwise defined herein,
terms defined in the Credit Agreement shall have such defined meanings when used
herein.
Section 3. Guarantees. Industries hereby agrees, by its
execution hereof, to become a Guarantor under the terms of Credit Agreement and
to execute a Notation of Guarantee substantially in the form of Exhibit VII to
the Credit Agreement to evidence its Guarantee.
Section 4. Continuing Guarantee of Service Co.. Service Co.
hereby acknowledges, by its execution hereof, that its Guarantee under the
Credit Agreement continues in full force and effect and without interruption.
Section 5. Amendments to the Credit Agreement: The Credit
Agreement is hereby amended and restated as follows:
(A) New Definitions: The following definitions are added to
the Credit Agreement:
<PAGE>
"Borrower" or "Company" means Galey & Lord, Inc., a Delaware
corporation.
"Industries" means Galey & Lord Industries, Inc., a Delaware
corporation.
(B) Section 1.1. The following definitions in the Credit
Agreement are amended and restated as follows:
"Change of Control" means the occurrence of one or
more of the following events: (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company to any Person or
group of related Persons for purposes of Section 13(d) of the Exchange
Act (a "Group"), together with any Affiliates thereof; (ii) the
approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company; (iii) any
Person or Group (other than the Permitted Holders) shall become the
owner, directly or indirectly, beneficially or of record, of shares
representing more than 45% of the Voting Stock of the Company; (iv) the
Company shall cease to own beneficially all of the Voting Stock of
Industries , free and clear of all Liens other than Liens granted to
secure the Senior Credit Facility or (v) the replacement of a majority
of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at
the beginning of such period, and such replacement shall not have been
approved by a vote of at least a majority of the Board of Directors of
the Company then still in office who either were members of such Board
of Directors at the beginning of such period or whose election as a
member of such Board of Directors was previously so approved.
"Commitment Letter" means the (i) letter agreement
dated November 17, 1997, between Industries and First Union pursuant to
which First Union committed to provide the Bridge Loan to Industries,
subject to the terms and conditions thereof, (ii) the letter agreement
dated November 17, 1997 between Industries and First Union (and the
supplement thereto dated as of December 16, 1997) pursuant to which
Industries committed to pay First Union certain fees and to satisfy
certain other obligations to First Union in respect of the commitment
set forth in (i) above.
"Company Junior Capital Contribution" means the
unsecured subordinated loan to be made by the Company to DT Acquisition
on or prior to the Initial Takedown Closing Date as contemplated by the
Purchase Agreement.
"Darlington Sale and Leaseback Transaction" means the
transaction involving the sale and leaseback of Industries' textile
manufacturing facility located in Darlington County, South Carolina
pursuant to an Inducement and Millage Rate Agreement and a Lease
Purchase Agreement, in each case between Industries and Darlington
County, South Carolina and dated as of December 1, 1997.
"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder
with respect to any Pension Plan
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<PAGE>
(excluding those for which the provision for 30-day notice to the PBGC
has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived) or the failure to
make any required contribution within 30 days of its due date with
respect to any Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041 (a) (2) of
ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal
by the Company or any of its Subsidiaries or any of their respective
ERISA Affiliates from any Multiple Employer Plan or the termination of
any such Multiple Employer Plan resulting in liability pursuant to
Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any
event or condition which might reasonably be expected to constitute
grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of
liability on the Company or any of its Subsidiaries or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA;
(vii) the withdrawal by the Company or any of its Subsidiaries or any
of their respective ERISA Affiliates in a complete or partial
withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or
the receipt by the Company or any of its Subsidiaries or any of their
respective ERISA Affiliates of notice from any Multiemployer Plan that
it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA, or that it intends to terminate or has terminated under
Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could reasonably be expected to give rise to the
imposition on the Company or any of its Subsidiaries or any of their
respective ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section
406, 409 or 502(i) or (1) of ERISA in respect of any Employee Benefit
Pension Plan; (ix) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Pension
Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension
Plan or Employee Pension Benefit Plan to qualify for exemption from
taxation under Section 501(a) of the Internal Revenue Code; or (x) the
imposition of a Lien pursuant to Section 401(a) (29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan. Notwithstanding anything to the contrary contained herein, the
imposition of the Lien arising under the Pension Funding Agreement
shall not be deemed an ERISA Event.
"Existing Senior Credit Facility" means the Amended
and Restated Credit Agreement dated as of June 4, 1996 among
Industries, the lenders named therein and First Union National Bank of
North Carolina, as agent pursuant to which Industries may borrow up to
$218,000,000 in the aggregate at any one time outstanding, together
with the documents related thereto (including, without limitation, the
Wachovia Letter of Credit, any guarantee agreements and security
documents), as such agreements have been or may be amended (including
any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the
maturity of,
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<PAGE>
refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement
or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"First Union Currency Agreement" means the currency
agreement number 144A207 dated as of November 19, 1997 between
Industries and First Union National Bank.
"Guarantors" means Industries, Service Co. and each
future Wholly-Owned Subsidiary of the Company that is organized under
the laws of the United States or any state or commonwealth thereof or
under the laws of the District of Columbia.
"New Senior Credit Facility" means the Loan Agreement
to be entered into on or before the Final Takedown Closing Date between
the Company, the lenders listed therein, the guarantors listed therein
and First Union National Bank, as agent, pursuant to which the Company
may borrow up to $490,000,000 in the aggregate at any one time
outstanding together with the documents related thereto (including,
without limitation, the Wachovia Letter of Credit, any guarantee
agreements and security documents), as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending
the maturity of, refinancing, replacing or otherwise restructuring
(including adding Subsidiaries of the Company as additional borrowers
or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"PBGC" means the Pension benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Pension Funding Agreement" means the agreement dated
January 29, 1998 between the PBGC and the Company providing for
additional funding by the Company to certain pension plans and the
creation of a Lien in favor of the PBGC on certain land and assets of
the Company.
"Permitted Preferred Stock" means any Preferred Stock
issued by the Company or Industries in an aggregate amount not to
exceed $30,000,000 at any one time outstanding and which by its terms
does not permit (i) redemption, liquidation, mandatory sinking fund
payments or the like by a fixed date on or prior to the Maturity Date
and (ii) the payment of cash dividends on or prior to the Maturity Date
at a rate in excess of 8.0%.
"Recovery Event" means the receipt by the Company or
any of its 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
properties or assets.
4
<PAGE>
"Senior Credit Facility" means the Existing Senior
Credit Facility until the execution and delivery of the New Senior
Credit Facility and the repayment of all obligations under the Existing
Senior Credit Facility and thereafter means the New Senior Credit
Facility.
"Senior Indebtedness" means for any Person the
principal of, premium, if any, and interest on, and all amounts payable
in respect of, all obligations of every nature of the Company from time
to time owed to the lenders under the Senior Credit Facility;
including, without limitation, all obligations in respect of letters of
credit and principal of and interest on and all fees, indemnities, and
expenses payable under the Senior Credit Facility and all obligations
under Interest Rate Agreements entered into with lenders under the
Senior Credit Facility and their respective Affiliates and any
guarantees thereof including any agreement refinancing all or any
portion of the Indebtedness under such Senior Credit Facility. Without
limiting the generality of the foregoing "Senior Indebtedness" shall
include interest accruing thereon subsequent to the occurrence of any
Event of Default specified in Sections 7.6 and 7.7 relating to the
Company, whether or not the claim for such interest is allowed under
any applicable Bankruptcy Law. Notwithstanding the foregoing, "Senior
Indebtedness" of any Person shall not include that portion of any
Indebtedness which is incurred by such Person in violation of this
Agreement.
"Subsequent Transactions" means, collectively, (i)
the closing of the New Senior Credit Facility and the incurrence of the
revolving loans drawn down on the Final Takedown Closing Date
thereunder, (ii) the incurrence of the Final Bridge Loan hereunder on
the Final Takedown Closing Date, (iii) the consummation of the Merger,
(iv) the Acquisition, (v) any other transaction on the Final Takedown
Closing Date contemplated in relation to the foregoing and (vi) the
payment of fees and expenses in connection with the foregoing.
"Transaction Costs" means the fees, costs and
expenses payable by the Company pursuant hereto and other fees, costs
and expenses payable by the Company or a Subsidiary of the Company in
connection with the Transactions.
"Wachovia Letter of Credit" means 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 Industries in the original
maximum amount of $7,830,000, as such letter of credit may be modified,
supplemented, extended and replaced from time to time.
(C) Section 2.1A. Section 2.1A shall be amended and restated
as follows:
A. Bridge Loan Commitment; Assignment and Assumption.
(a) Subject to the terms and conditions of this Agreement and in
reliance upon the
5
<PAGE>
representations and warranties of the Company and Industries herein set
forth, the Lenders hereby agree to lend to Industries on the Initial
Takedown Closing Date $145,617,902.25 in the aggregate (the "Initial
Bridge Loan") and to the Borrower on the Final Takedown Closing Date
$129,382,097.75 in the aggregate (the "Final Bridge Loan," and together
with the Initial Bridge Loan, the "Bridge Loan"), each such Lender
committing to lend the aggregate amount set forth next to such Lender's
name on the signature pages hereto. The Lenders' commitments to make
the Initial Bridge Loan to Industries and the Final Bridge Loan to the
Borrower pursuant to this Section 2.1 A are herein called individually,
the "Bridge Loan Commitment" and collectively, the "Bridge Loan
Commitments."
(b) Without prejudice to its obligations as a
Guarantor, Industries hereby assigns to the Borrower and is thereby
released from, and the Borrower hereby assumes, all of Industries'
rights and obligations as a borrower under this Agreement, including,
without limitation, the rights and obligations of Industries with
respect to the Initial Bridge Loan.
(c) In connection with the assignment and assumption
described in subparagraph (b) of this Section 2.1A, the Original Bridge
Note issued on the Initial Takedown Closing Date by Industries to
evidence the Initial Bridge Loan shall be canceled and, as a
replacement therefor, the Borrower shall execute and deliver to the
Lenders on the date hereof an Original Bridge Note substantially in the
form of Exhibit I in the principal amount of $145,617,902.25.
(D) Section 2.5. Section 2.5 shall be amended and restated as
follows:
2.5 Use of Proceeds
The proceeds of the Initial Bridge Loan will be used
to make the Company Junior Capital Contribution. The proceeds of the
Final Bridge Loan shall be applied by the Borrower, together with
borrowings under the Senior Credit Facility, to finance the Acquisition
and pay the Transaction Costs.
(E) Section 3.1. Section 3.1 (5) shall be amended and restated
as follows:
(5) The Company shall have delivered to the Agent
Officers' Certificates from the Company in form and substance
satisfactory to the Agent to the effect that (i) the representations
and warranties in Section 4 hereof are true, correct and complete in
all material respects on and as of the Initial Takedown Closing Date or
Final Takedown Closing Date, as the case may be, to the same extent as
though made on and as of that date, (ii) the Company, has performed and
complied with in all material respects all covenants and conditions to
be performed and observed by the Company and (iii) all conditions to
the consummation of the Initial Transactions or Subsequent
Transactions, as the case may be, have been satisfied substantially on
the terms set forth therein and have not been waived or amended without
the Agent's prior written consent which consent shall not be
unreasonably withheld.
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<PAGE>
(F) Section 3.3. Section 3.3 (1) shall be amended and restated
as follows:
(1) The Agent shall have received, on behalf of the
Lenders the following items, each of which shall be in form and
substance satisfactory to the Agent and, unless otherwise noted, dated
the Final Takedown Closing Date:
(a) bring-down certificates or similar certificates
of status or compliance with respect to the items furnished pursuant to
Section 3.1 (1) (a), in each case covering the period from the Initial
Takedown Closing Date to the Final Takedown Closing Date; and
(b) executed or conformed copies of the Merger
Agreement and a copy of each legal opinion delivered in connection
therewith, and all documents and instruments relating thereto; and
(c) (i) executed or conformed copies of the
Definitive Purchase Agreement and a copy of each legal opinion
delivered in connection with the Definitive Purchase Agreement, and all
documents and instruments related thereto, (ii) an Officers'
Certificate from the Company certifying that the Definitive Purchase
Agreement is in full force and effect on the Final Takedown Closing
Date and no material term or condition thereof has been amended,
modified or waived from the form delivered to the Agent prior to the
execution thereof except with the prior written consent of the Agent
(which consent shall not be unreasonably withheld or delayed) and (iii)
an Officers' Certificate from the Company to the effect that each party
to the Definitive Purchase Agreement has performed or complied with all
agreements and conditions contained therein and any agreements or
documents related thereto to be performed or complied with on or before
the Final Takedown Closing Date, and no party is in default in the
performance or compliance with any of the terms or provisions thereof;
and
(d) (i) executed or conformed copies of the New
Senior Credit Facility and all documents and instruments related
thereto, (ii) an Officers' Certificate from the Borrower certifying
that the New Senior Credit Facility is in full force and effect on the
Initial Takedown Closing Date and no material term or condition thereof
has been amended, modified or waived from the form delivered to the
Agent a reasonable time prior to the execution thereof except with the
prior written consent of the Agent (which consent shall not be
unreasonably withheld or delayed) and (iii) Officers' Certificates from
the Borrower to the effect that the Borrower has performed or complied
with all agreements and conditions contained in the New Senior Credit
Facility and any agreements or documents related thereto to be
performed or complied with on or before the Initial Takedown Closing
Date, and the Borrower is not in default in the performance or
compliance with any of the terms or provisions thereof.
(G) Section 4. The introductory paragraph to Section 4 shall
be amended and restated as follows::
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<PAGE>
In order to induce the Lenders to enter into this
Agreement and to make the Bridge Loan, the Company represents and
warrants to the Lenders that the following statements are true and
correct; it being understood that representations and warranties made
pursuant to this Section 4, insofar as relating to the Acquired Assets
and insofar as made on or before the Initial Takedown Closing Date, are
being made only to the best knowledge of the Company based on publicly
available sources of information.
(H) Section 4.1. Section 4.1(c) shall be amended and restated
as follows:
(c) All of the Voting Stock of Industries is
beneficially owned by the Company free and clear of all Liens other
than Liens granted to secure the Senior Credit Facility.
(I) Section 4.13. Section 4.13A shall be amended and restated
as follows:
Except as described in Schedule G hereto, no ERISA
Events have occurred or are reasonably expected to occur which
individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of the Company or any of its
Subsidiaries or any of their respective ERISA Affiliates which would
reasonably be expected to have a Material Adverse Effect.
(J) Section 6.1. Section 6.1(ii) shall be amended and restated
as follows:
Indebtedness (A) of up to $218,000,000 incurred
pursuant to the Existing Senior Credit Facility or (B) upon termination
of, and repayment in full of all amounts due under the Existing Senior
Credit Facility, Indebtedness of up to $490,000,000 in the aggregate at
any one time outstanding under the New Senior Credit Facility, in each
case, reduced by any required permanent repayments (which are
accompanied by a corresponding permanent commitment reduction)
thereunder;
(K) Section 6.2. Section 6.2 shall be amended and restated by
inserting the following immediately after clause (xiv) therein:
(xv) Liens in favor of the PBGC granted pursuant to
the Pension Funding Agreement.
(L) Section 6.7. Section 6.7 shall be amended and restated as
follows:
Subject to Section 5.2 and other than the sale of
100% of a Subsidiary of the Company in accordance with Section 2.4A(ii)
(a) and Section 6.15, the Company shall not, and shall not cause or
permit any of the Subsidiaries to, directly or indirectly, enter into
any transaction, or series of related transactions, of merger,
amalgamation, consolidation or combination, or consolidate, or
liquidate, windup or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, sublease, transfer or otherwise
dispose of, in one transaction or in a series of transactions, all or
substantially all of its business, property or assets, whether now
owned or hereafter acquired, except that any Subsidiary of the Company
may be merged, amalgamated, consolidated or combined with
8
<PAGE>
or into the Company or any Guarantor or be liquidated, wound up or
dissolved, or all or substantially all of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or in a series of transactions, to the Company
or to any Guarantor; provided that (A) no Potential Event of Default or
Event of Default shall have occurred and be continuing or would result
therefrom, (B) in the case of such a merger, amalgamation,
consolidation or combination of the Company or a Guarantor and a
Subsidiary of the Company, the Company or the Guarantor shall be the
continuing or surviving corporation, and (C) the surviving entity (I)
continues to be bound as such under this Agreement or the Guarantee of
such Guarantor, as the case may be, and (II) executes and delivers to
the Agent immediately upon consummation of such transaction a written
confirmation or acknowledgment to such effect, in form and substance
satisfactory to the Agent, together with evidence of appropriate
corporate power, authority and action and a written legal opinion in
form and substance satisfactory to the Agent to the effect that this
Agreement and such Guarantee continue to be a legal, valid and binding
obligation of such entity, enforceable against such entity in
accordance with its terms (subject to customary exceptions in respect
of bankruptcy, insolvency and other equitable remedies) and with
respect to such other matters as the Agent may reasonably request.
(M) Section 6.10. Section 6.10 shall be amended and restated
as follows:
(a) Except for any sale of 100% of the Capital Stock
or other equity securities of any of the Company's Subsidiaries in
compliance with the provisions of Section 6.7, the Company will not and
will not permit any of the Subsidiaries to directly or indirectly sell,
assign, pledge or otherwise encumber or dispose of any shares of
Capital Stock or other equity securities of any of the Subsidiaries,
except (i) Permitted Preferred Stock issued by Industries, (ii) to
qualify directors if required by applicable law, (iii) to the Company
or to a Wholly-Owned Subsidiary of the Company, (iv) Asset Sales made
in compliance with this Agreement and (v) Liens in favor of the lenders
under the Senior Credit Facility.
(b) The Company will not (i) hold any assets other
than the Capital Stock of its Subsidiaries, (ii) have any liabilities
other than (A) the liabilities under the Loan Documents and the Senior
Credit Facility, (B) tax liabilities in the ordinary course of
business, (C) loans and advances permitted under this Agreement, (D)
corporate, administrative and operating expenses in the ordinary course
of business and (iii) engage in any business other than (A) owning the
Capital Stock of its Subsidiaries and activities incidental or related
thereto and (B) acting as a borrower hereunder and under the Senior
Credit Facility.
(N) Section 7.13. The last paragraph of Section 7.13 shall be
amended and restated as follows:
THEN (i) upon the occurrence of any Event of Default
described in the foregoing Sections 7.6 or 7.7, all of the unpaid
principal amount of and accrued interest on the Bridge Loan and all
other outstanding Obligations shall automatically become
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<PAGE>
immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly
waived by the Company, and the commitments of the Lenders hereunder
shall, thereupon terminate and (ii) upon the occurrence of any other
Event of Default, the Agent shall upon written notice of the holder or
holders of a majority in aggregate principal amount of the Bridge Loan
then outstanding, by written notice to the Company and the agent under
the Senior Credit Facility, declare all of the unpaid principal amount
of and accrued interest on the Bridge Loan and all other outstanding
obligations to be, and the same shall forthwith become, due and
payable, and the obligations of the Lenders hereunder shall thereupon
terminate; provided that if any declaration of acceleration under this
Agreement occurs solely because an Event of Default set forth in
Section 7.2 has occurred and is continuing, such declaration of
acceleration shall be automatically annulled if the holders of the
Indebtedness which is the subject of such Event of Default have
rescinded their declaration of acceleration in respect of such
Indebtedness within thirty days of such acceleration of such
Indebtedness and the Agent has received written notice thereof within
such time and if no other Event of Default has occurred during such
thirty-day period which has not been cured or waived in accordance with
this Agreement. Nevertheless, if at any time after acceleration of the
maturity of the Bridge Loan, the Borrower shall pay all arrears of
interest and all payments on account of the principal thereof which
shall have become due otherwise than by acceleration (with interest on
principal and, to the extent permitted by law, on overdue interest, at
the rates specified in this Agreement or the Bridge Notes) and all
Events of Default and Potential Events of Default (other than
non-payment of principal of and accrued interest on the Bridge Notes
due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to Section 12.6, then the Agent shall, upon written
notice of the holders of a majority in aggregate principal amount of
the Bridge Loan then outstanding, by written notice to the Company
rescind and annul the acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential
Event of Default or impair any right consequent thereon.
(O) Section 12.5. Section 12.5 shall be amended and restated
as follows:
Subject to Section 8, in addition to any rights now
or hereafter granted under applicable law and not by way of limitation
of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Lender, the Agent and each subsequent holder
of any Bridge Note is hereby authorized by the Borrower at any time or
from time to time, without notice to the Borrower, or to any other
Person, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special,
including, but not limited to, Indebtedness evidenced by certificates
of deposit, whether matured or unmatured but not including trust
accounts or any other accounts held for the benefit of another Person)
and any other Indebtedness at any time held or owing by such Person or
any such subsequent holder to or for the credit or the account of the
Borrower against and on account of the obligations and liabilities of
the Borrower to such Person or such subsequent holder under this
Agreement and the Bridge Notes, including, but not limited to, all
claims of any nature or description arising out of or connected with
this Agreement or the Bridge Notes, irrespective of whether or not (a)
such Person or such subsequent holder shall have made any demand
hereunder or
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<PAGE>
(b) such Person or such subsequent holder shall have declared the
principal of or the interest on its portion of the Bridge Loan and its
Bridge Notes and other amounts due hereunder to be due and payable as
permitted by Section 7 and although said obligations and liabilities,
or any of them, may be contingent or unmatured.
Section 6. Counterparts. This Amendment and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Amendment shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto, and delivery thereof to the Agent or, in the case of the
Lenders, written telex or facsimile notice or telephonic notification (confirmed
in writing) of such execution and delivery. The Agent will give the Company and
each Lender prompt notice of the effectiveness of this Agreement.
Section 7. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed and delivered as of the day and year first written above.
BORROWER
GALEY & LORD, INC.
By: /s/ Michael R.Harmon
Name: Name: Michael R. Harmon
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
GUARANTORS:
GALEY & LORD INDUSTRIES, INC.
By: /s/ Michael R.Harmon
Name: Michael R. Harmon
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
<PAGE>
G&L SERVICE COMPANY, NORTH AMERICA, INC.
By: /s/ Michael R.Harmon
Name: Michael R. Harmon
Title: President, Treasurer and Secretary
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
<PAGE>
AGENT:
FIRST UNION CORPORATION
as agent
By: /s/ Steve Taylor
Name: Steve Taylor
Title:
Notice Address:
301 South College Street
Charlotte, NC 28288
Attention: Kevin Smith
Telephone: (704) 374-4702
Telecopy: (704) 383-9527
LENDERS:
FIRST UNION CORPORATION
By: /s/ Steve Taylor
Name: Steve Taylor
Title:
Notice Address:
301 South College Street
Charlotte, NC 28288
Attention: Kevin Smith
Telephone: (704) 374-4702
Telecopy: (704) 383-9527
AMENDMENT NO. 2
AMENDMENT NO. 2 ("this Amendment"), dated as of January 29,
1998, among Galey & Lord, Inc., a Delaware corporation ("Galey"), Galey & Lord
Industries, Inc., a Delaware corporation ("Industries"), G&L Service Company,
North America, Inc. ("Service Co."), Swift Textiles Inc., a Delaware corporation
("Textiles"), Swift Denim Services, Inc., a Delaware corporation ("Denim") and
First Union Corporation ("First Union"), as a Lender and as agent for the
Lenders (in such capacity, the "Agent") to the Senior Subordinated Credit
Agreement, dated as of December 19, 1997 among Industries, Galey, Service Co.,
the lenders named therein and First Union, as amended by Amendment No. 1, dated
January 29, 1998 among Galey, Industries, Service Co., and First Union (the
"Credit Agreement").
WHEREAS, Textiles and Denim have become domestic wholly-owned
subsidiaries of Galey pursuant to the Acquisition; and
WHEREAS, pursuant to the terms of the Credit Agreement,
Textiles and Denim are required to become Guarantors thereunder;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereby agree
as follows:
Section 1. Ratification of the Credit Agreement. Galey,
Industries, Service Co. Textiles, Denim and First Union hereby ratify the Credit
Agreement, as amended and, to the extent of any inconsistencies, superseded
pursuant to Section 5 hereof.
Section 2. Defined Terms. Unless otherwise defined herein,
terms defined in the Credit Agreement shall have such defined meanings when used
herein.
Section 3. Guarantees. Each of Textiles and Denim hereby
agrees, by its execution hereof, to become a Guarantor under, and to be bound
by, the terms of the Credit Agreement and to execute a Notation of Guarantee
substantially in the form of Exhibit VII to the Credit Agreement to evidence its
Guarantee.
Section 4. Continuing Guarantee of Service Co. and Industries.
Service Co. and Industries hereby acknowledge, by their execution hereof, that
their Guarantees under the Credit Agreement continue without interruption.
Section 5. Amendments to the Credit Agreement: The Credit
Agreement is hereby amended and restated as follows:
(A) New Definitions: The following definitions are added to
the Credit Agreement:
"Denim" means Swift Denim Services, Inc., a Delaware
corporation.
<PAGE>
"Textiles" means Swift Textiles Inc., a Delaware
corporation.
(B) Section 1.1. The following definition in the Credit
Agreement is amended and restated as follows:
"Guarantors" means Industries, Service Co., Textiles
and Denim and each future Wholly-Owned Subsidiary of the Company that
is organized under the laws of the United States or any state or
commonwealth thereof or under the laws of the District of Columbia.
Section 6. Counterparts. This Amendment and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Amendment shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto, and delivery thereof to the Agent or, in the case of the
Lenders, written telex or facsimile notice or telephonic notification (confirmed
in writing) of such execution and delivery. The Agent will give the Company and
each Lender prompt notice of the effectiveness of this Agreement.
Section 7. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed and delivered as of the day and year first written above.
BORROWER
GALEY & LORD, INC.
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
GUARANTORS:
GALEY & LORD INDUSTRIES, INC.
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
<PAGE>
G&L SERVICE COMPANY, NORTH AMERICA, INC.
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: President, Treasurer and Secretary
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
SWIFT TEXTILES INC.
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
SWIFT DENIM SERVICES, INC.
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice-President
Notice Address:
7736 McCloud Road
One Triad Center, Suite 300
Greensboro, NC 27409
Attention: Michael R. Harmon
Telephone: (910) 665-3037
Telecopy (910) 665-3113
<PAGE>
AGENT:
FIRST UNION CORPORATION
as agent
By: /s/ Steve Taylor
Name: Steve Taylor
Title:
Notice Address:
301 South College Street
Charlotte, NC 28288
Attention: Kevin Smith
Telephone: (704) 374-4702
Telecopy: (704) 383-9527
LENDERS:
FIRST UNION CORPORATION
By: /s/ Steve Taylor
Name: Steve Taylor
Title:
Notice Address:
301 South College Street
Charlotte, NC 28288
Attention: Kevin Smith
Telephone: (704) 374-4702
Telecopy: (704) 383-9527
[LETTERHEAD OF DELOITTE & TOUCHE]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-26981) pertaining to the Amended and Restated 1989 Stock Option Plan
of Galey & Lord, Inc. of our report dated 21 May, 1997, with respect to the
financial statements of Swift Textiles Europe Limited for the year ended 31
March 1997 (not included separately herein) in the Current Report on Form 8-K
of Galey & Lord, Inc., filed with the Securities and Exchange Commission.
/s/ Deloitte & Touche
Chartered Accountants
Montreal, Quebec
February 9, 1998
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-26981) pertaining to the Amended and Restated 1989 Stock Option Plan
of Galey & Lord, Inc. of our report dated 21 May, 1997, with respect to the
financial statements of Swift Textiles Europe Limited for the year ended 31
March 1997 (not included separately herein) in the Current Report on Form 8-K
for Galey & Lord, Inc.
/s/ KPMG
- ------------------------------
KPMG
Dublin, Ireland
9 February, 1998
Auditors' report to the members of Swift Textiles Europe Limited
We have audited the financial statements on pages 5 to 15 (NOT INCLUDED
SEPARATELY HEREIN)*.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS IN RELATION TO THE
FINANCIAL STATEMENTS
As described on page 3 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Audit Standards issued by the Auditing
Practices Board, WHICH DO NOT DIFFER IN ANY MATERIAL RESPECTS FROM GENERALLY
ACCEPTED AUDITING STANDARDS IN THE UNITED STATES OF AMERICA*. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion, the financial statements give a true and fair view of the state
of affairs of the company at March 31, 1997 and of the profit for the year then
ended and have been properly prepared in accordance with the Companies Acts,
1963 to 1990 and all Regulations to be construed as one with those Acts.
We have obtained all the information and explanations we considered necessary
for the purposes of our audit. In our opinion, proper books of account have been
kept by the company. The financial statements are in agreement with the books of
account.
In our opinion, the information given in the directors' report on page 2 is
consistent with the financial statements.
The net assets of the company, as stated at the balance sheet on page 7, are
more than half of the amount of its called up share capital and, in our opinion,
on that basis, there did not exist at 31 March 1997, a financial situation which
under, Section 40(l) of the Companies (Amendment) Act, 1983, would require the
convening of an extraordinary general meeting of the company.
/s/ KPMG
CHARTERED ACCOUNTANTS
REGISTERED AUDITORS 21 May 1997
* The wording in italics does not form part of the original audit report and
is included herein for the purposes of the US filing.
