SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Danskin, Inc.
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(Exact name of registrant as specified in its charter)
October 8, 1997
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Date of Report (Date of earliest event reported)
Delaware 0-20382 62-1284179
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
111 West 40th Street, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
212-764-4630
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(Registrant's telephone number, including area code)
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Item 5. Other Events
Effective October 8, 1997 (the "Closing Date"), the Company replaced its former
financing arrangements with a new loan and security agreement (the "Loan and
Security Agreement") with Century Business Credit Corporation ("CBCC" or the
"Lender") which matures on October 8, 2002. Proceeds of the Loan and Security
Agreement were used to pay all of the Company's indebtedness to First Union
National Bank ("First Union"), the Company's former principal lender, and to
establish working capital lines of credit.
Pursuant to and in accordance with its terms, the Loan and Security Agreement
provides the Company with a term loan facility in the aggregate principal amount
of $10 million (the "Term Loan Facility") and a revolving credit facility,
including a provision for the issuance of letters of credit (the "Revolving
Credit Facility") generally in an amount not to exceed the lesser of (a) $45
million less the aggregate outstanding principal balance under the Term Loan
Facility, or (b) a formula amount based upon the Company's available inventory
and accounts receivable levels, minus certain discretionary reserves. The
Company's obligations to CBCC under the Loan and Security Agreement are
generally secured by a first priority security interest in all present and
future assets of the Company. The Loan and Security Agreement contains certain
affirmative and negative covenants including, maintenance of tangible net worth
and a limitation on capital expenditures, respectively. In connection with the
closing on the Loan and Security Agreement, the Company paid CBCC a facility fee
equal to $300,000.
On the Closing Date, two term loans were advanced to the Company in accordance
with the terms of the Term Loan Facility. A term loan in the original principal
amount of $5 million was advanced to the Company and is, with respect to
principal, payable in thirty (30) consecutive monthly installments commencing on
the first day of the first month following the first anniversary of the Closing
Date. A second term loan in the original principal amount of $5 million was
advanced to the Company and is, with respect to principal, payable in eighteen
(18) consecutive monthly installments commencing on the first day of the
forty-third (43) month following the Closing Date. At the Closing Date, and
after the satisfaction in full of the Company's obligations to First Union,
availability under the Revolving Credit Facility was approximately $15 million.
Interest on the Company's obligations under the Loan and Security Agreement
generally accrues at a rate per annum equal to the sum of the Prime Rate plus
one half of one (1/2%) percent and is payable monthly. Interest may also accrue
at a rate per annum equal to the sum of the Eurodollar Rate, as defined in the
Loan and Security Agreement, plus two and three quarters percent (2-3/4%).
The description of the terms of the Loan and Security Agreement set forth in
this Item 5 is qualified in its entirety by reference to the copy of the Loan
and Security Agreement which is attached to this Form 8-K as an Exhibit.
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In accordance with the terms of the Securities Purchase Agreement, dated
September 22, 1997, entered into by the Company and Danskin Investors, LLC (the
"Investor"), upon the Closing Date, $500,000 in stated value of Series C
Cumulative Convertible Preferred Stock (the "Series C Stock") and $15 million
aggregate principal amount of subordinated debt of the Company , previously
issued to the Investor in exchange for a capital contribution to the Company,
were, by their terms, automatically exchanged for (a) $12 million stated value
of Series D Cumulative Convertible Preferred Stock (the "Series D Stock") of the
Company, (b) a seven year warrant to purchase 10 million shares of common stock,
par value $.01 per share, of the Company (the "Common Stock") at a per share
price of $0.30, and (c) a $3 million aggregate principal amount subordinated
note of the Company (the "Subordinated Debt").
The Series D Stock is convertible, at the option of the holder and, in certain
circumstances, mandatorily, at a per share conversion price of $0.30. Holders of
the Series D Stock are entitled to designate a majority of the directors to the
Board of Directors of the Company. The Series D Stock has an 8% annual dividend
rate, payment of which is deferred through December 31,1999, and a seven year
maturity. If for any fiscal year beginning with the fiscal year ended December
31, 1999, the Company meets certain agreed upon financial targets, all accrued
dividends for such fiscal year will be forgiven and the Series D Stock will
automatically convert into 40 million shares of Common Stock at a conversion
price of $0.30 per share. The Subordinated Debt bears interest, commencing on
December 22, 1997, at the rate of 8% per annum.
Item 7(c) Exhibits.
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10.32 Revolving Credit, Term Loan and Security Agreement, dated
October 8, 1997, among Danskin, Inc., the financial
institutions which are now or which become a party thereto,
and Century Business Credit Corporation, as agent for the
Lenders.
99.1 Press Release dated October 9, 1997.
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Signature
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DANSKIN, INC.
(Registrant)
Dated: October 23, 1997 By: /s/ Beverly Eichel
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Name: Beverly Eichel
Title: Executive Vice President
Chief Financial Officer
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
CENTURY BUSINESS CREDIT CORPORATION
(AS LENDER AND AS AGENT)
WITH
DANSKIN, INC.
(BORROWER)
October 8, 1997
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TABLE OF CONTENTS
I. DEFINITIONS............................................................1
1.1. Accounting Terms.................................................1
1.2. General Terms....................................................1
1.3. Uniform Commercial Code Terms...................................15
1.4. Certain Matters of Construction.................................15
II. ADVANCES, PAYMENTS....................................................15
2.1. (a) Revolving Advances.........................................15
(b) (i) Discretionary Rights..................................15
(ii) Inventory Advances........................................16
2.2. Procedure for Borrowing Revolving Advances......................16
2.3. Disbursement of Advance Proceeds................................18
2.4. Term Loans......................................................18
(a) Term Loan A...............................................18
(b) Term Loan B...............................................18
2.5. Maximum Advances................................................19
2.6. Repayment of Advances...........................................19
2.7. Repayment of Excess Advances....................................19
2.8. Statement of Account............................................19
2.9. Letters of Credit...............................................20
2.10. Issuance of Letters of Credit...................................20
2.11. Requirements For Issuance of Letters of Credit..................20
2.12. Additional Payments.............................................21
2.13. Manner of Borrowing and Payment.................................21
2.14. Mandatory Prepayments...........................................23
2.15. Use of Proceeds.................................................23
2.16. Defaulting Lender...............................................23
III. INTEREST AND FEES.....................................................24
3.1. Interest........................................................24
3.2. Letter of Credit Fees...........................................24
3.3. (a) Closing Fee.................................................25
(b) Unused Line Fee...........................................25
3.4. (a) Service Fee.................................................25
(b) Collateral Monitoring Fee.................................25
3.5. Computation of Interest and Fees................................25
3.6. Maximum Charges.................................................25
3.7. Increased Costs.................................................25
3.8. Basis For Determining Interest Rate Inadequate or Unfair........26
3.9. Capital Adequacy................................................27
IV. COLLATERAL: GENERAL TERMS............................................27
4.1. Security Interest in the Collateral.............................27
4.2. Perfection of Security Interest.................................27
4.3. Disposition of Collateral.......................................28
4.4. Preservation of Collateral......................................28
4.5. Ownership of Collateral.........................................28
4.6. Defense of Agent's and Lenders' Interests.......................29
4.7. Books and Records...............................................29
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4.8. Financial Disclosure............................................29
4.9. Compliance with Laws............................................29
4.10. Inspection of Premises..........................................30
4.11. Insurance.......................................................30
4.12. Failure to Pay Insurance........................................31
4.13. Payment of Taxes................................................31
4.14. Payment of Leasehold Obligations................................31
4.15. Receivables.....................................................31
(a) Nature of Receivables.....................................32
(b) Solvency of Customers.....................................32
(c) Locations of Borrower.....................................32
(d) Collection of Receivables.................................32
(e) Notification of Assignment of Receivables.................32
(f) Power of Agent to Act on Borrower's Behalf................32
(g) No Liability..............................................33
(h) Establishment of a Lockbox Account, Dominion Account......33
(i) Adjustments...............................................33
4.16. Inventory.......................................................34
4.17. Maintenance of Equipment........................................34
4.18. Exculpation of Liability........................................34
4.19. Environmental Matters...........................................34
4.20. Financing Statements............................................36
V. REPRESENTATIONS AND WARRANTIES........................................36
5.1. Authority.......................................................36
5.2. Formation and Qualification.....................................37
5.3. Survival of Representations and Warranties......................37
5.4. Tax Returns.....................................................37
5.5. Financial Statements............................................37
5.6. Corporate Name..................................................38
5.7. O.S.H.A. and Environmental Compliance...........................38
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.....38
5.9. Patents, Trademarks, Copyrights and Licenses....................39
5.10. Licenses and Permits............................................40
5.11. Default of Indebtedness.........................................40
5.12. No Default......................................................40
5.13. No Burdensome Restrictions......................................40
5.14. No Labor Disputes...............................................40
5.15. Margin Regulations..............................................40
5.16. Investment Company Act..........................................41
5.17. Disclosure......................................................41
5.18. Delivery of Recapitalization Documents..........................41
5.19. Swaps...........................................................41
5.20. Conflicting Agreements..........................................41
5.21. Application of Certain Laws and Regulations.....................41
5.22. Business and Property of Borrower...............................41
VI. AFFIRMATIVE COVENANTS.................................................41
6.1. Payment of Fees.................................................42
6.2. Conduct of Business and Maintenance of Existence and Assets.....42
6.3. Violations......................................................42
6.4. Government Receivables..........................................42
6.5. Tangible Net Worth..............................................42
6.6. Execution of Supplemental Instruments...........................42
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6.7. Payment of Indebtedness.........................................42
6.8. Standards of Financial Statements...............................43
6.9. Exercise of Rights..............................................43
6.9. Environmental Report............................................43
6.9. Environmental Report............................................43
VII. NEGATIVE COVENANTS....................................................43
7.1. Merger, Consolidation, Acquisition and Sale of Assets...........43
7.2. Creation of Liens...............................................44
7.3. Guarantees......................................................44
7.4. Investments.....................................................44
7.5. Loans...........................................................44
7.6. Capital Expenditures............................................44
7.7. Dividends.......................................................44
7.8. Indebtedness....................................................44
7.9. Nature of Business..............................................45
7.10. Transactions with Affiliates....................................45
7.12. Subsidiaries....................................................45
7.13. Fiscal Year and Accounting Changes..............................45
7.14. Pledge of Credit................................................45
7.15. Amendment of Articles of Incorporation, By-Laws.................45
7.16. Compliance with ERISA...........................................45
7.17. Prepayment of Indebtedness......................................46
7.18. Subordinated Obligations........................................46
VIII. CONDITIONS PRECEDENT..................................................46
8.1. Conditions to Initial Advances..................................46
(a) Notes.....................................................46
(b) Filings, Registrations and Recordings.....................46
(c) Corporate Proceedings of Borrower.........................46
(d) Incumbency Certificates of Borrower.......................47
(e) Certificates..............................................47
(f) Good Standing Certificates................................47
(g) Legal Opinion.............................................47
(h) No Litigation.............................................47
(i) Financial Condition Certificates..........................47
(j) Collateral Examination....................................47
(k) Fees......................................................47
(l) Pro Forma Financial Statements............................47
(m) Recapitalization Documents................................48
(n) Subordination Agreements..................................48
(o) Other Documents...........................................48
(p) Insurance.................................................48
(q) Title Insurance...........................................48
(s) Payment Instructions......................................48
(t) Blocked Accounts..........................................48
(u) Consents..................................................48
(v) No Adverse Material Change................................48
(w) Third Party Agreements....................................49
(x) Mortgages.................................................49
(y) Contract Review...........................................49
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(z) Closing Certificate.......................................49
(aa) Borrowing Base............................................49
(cc) Appraisals................................................49
(dd) Other.....................................................49
8.2. Conditions to Each Advance......................................49
(a) Representations and Warranties............................49
(b) No Default................................................50
(c) Maximum Advances..........................................50
IX. INFORMATION AS TO BORROWER............................................50
9.1. Disclosure of Material Matters..................................50
9.2. Schedules.......................................................50
9.3. Environmental Reports...........................................50
9.4. Litigation......................................................51
9.5. Material Occurrences............................................51
9.6. Government Receivables..........................................51
9.7. Annual Financial Statements.....................................51
9.8. Quarterly Financial Statements..................................51
9.9. Monthly Financial Statements....................................52
9.10. Other Reports...................................................52
9.11. Additional Information..........................................52
9.12. Projected Operating Budget......................................52
9.13. Variances From Operating Budget.................................52
9.14. Notice of Suits, Adverse Events.................................53
9.15. ERISA Notices and Requests......................................53
9.16. Additional Documents............................................53
X. EVENTS OF DEFAULT.....................................................53
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT............................56
11.1. Rights and Remedies.............................................56
11.2. Agent's Discretion..............................................57
11.3. Setoff..........................................................57
11.4. Rights and Remedies not Exclusive...............................57
XII. WAIVERS AND JUDICIAL PROCEEDINGS......................................57
12.1. Waiver of Notice................................................57
12.2. Delay...........................................................57
12.3. Jury Waiver.....................................................57
XIII. EFFECTIVE DATE AND TERMINATION........................................58
13.1. Term............................................................58
13.2. Termination.....................................................58
XIV. REGARDING AGENT.......................................................58
14.1. Appointment.....................................................58
14.2. Nature of Duties................................................59
14.3. Lack of Reliance on Agent and Resignation.......................59
14.4. Certain Rights of Agent.........................................60
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14.5. Reliance........................................................60
14.6. Notice of Default...............................................60
14.7. Indemnification.................................................60
14.8. Agent in its Individual Capacity................................60
14.9. Delivery of Documents...........................................61
14.10. Borrower's Undertaking to Agent.................................61
XIV. MISCELLANEOUS..........................................................61
15.1. Governing Law...................................................61
15.2. Entire Understanding............................................62
15.3. Successors and Assigns; Participations; New Lenders.............63
15.4. Application of Payments.........................................64
15.5. Indemnity.......................................................64
15.6. Notice..........................................................64
15.7. Survival........................................................65
15.8. Severability....................................................65
15.9. Expenses........................................................65
15.10. Injunctive Relief...............................................66
15.11. Consequential Damages...........................................66
15.12. Captions........................................................66
15.14. Construction....................................................66
15.15. Confidentiality.................................................66
15.16. Publicity.......................................................67
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REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated as of
October 8, 1997 among DANSKIN, INC. a corporation organized under the laws of
the State of Delaware ("Borrower"), the financial institutions which are now or
which become a party hereto (collectively, the "Lenders" and individually a
"Lender") and CENTURY BUSINESS CREDIT CORPORATION ("CBCC"), a corporation
organized under the laws of the State of New York, as agent for the Lenders
(CBCC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS
1.1 Accounting Terms. As used in this Agreement, any Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP applied in preparation of the audited
financial statements of Borrower for the fiscal year ended December 28, 1996.
1.2 General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Advances" shall mean and include the Revolving Advances, Letters of
Credit, and the Term Loans.
"Advance Rates" shall mean collectively, the Inventory Advance Rates
and the Receivables Advance Rates.
"Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 5% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (y) 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 preamble to this
Agreement and shall include its successors and assigns.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Bank" shall mean The Chase Manhattan Bank and any successor
thereto.
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"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Borrower" shall mean Danskin, Inc., a Delaware corporation, and all
permitted successors and assigns.
"Borrower's Account" shall have the meaning set forth in Section
2.8.
"Business Day" shall mean with respect to Eurodollar Rate Loans, any
day on which commercial banks are open for domestic and international business,
including dealings in Dollar deposits, in London, England and New York, New York
and with respect to all other matters, any day other than a day on which
commercial banks in New York are authorized or required by law to close or any
other day that Agent is closed for business.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean any of the following: (a) any person
or group of persons (within the meaning of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities Exchange Act of 1934, as amended) of (i)
twenty five percent (25%) or more of the issued and outstanding shares of
capital stock of Borrower having the right to vote for the election of directors
of Borrower under ordinary circumstances (other than an acquisition of
Borrower's stock by (x) Danskin Investors, LLC or (y) any of its members
pursuant to the terms of the Amended and Restated Limited Liability Company
Operating Agreement of Danskin Investors, LLC dated as of September 17, 1997 as
in existence on the Closing Date) or (ii) all or substantially all of the assets
of Borrower; or (b) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the board of
directors of Borrower (together with any new directors whose election by the
board of directors of Borrower or whose nomination for election by the
stockholders of Borrower was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of
such period or whose elections or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office; or (c) Borrower shall cease to own and
control all of the economic and voting rights associated with all of the
outstanding capital stock of each of its Subsidiaries.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property
taxes, custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, Borrower or any
of its Affiliates.
"Closing Date" shall mean October 8, 1997 or such other date as may
be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
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"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles (including the Trademarks);
(d) all Inventory;
(e) all Real Property;
(f) all Subsidiary Stock;
(g) all of Borrower's right, title and interest in and to
(i) its goods and other property including, but not limited to, all merchandise
returned or rejected by Customers, relating to or securing any of the
Receivables; (ii) all of Borrower's rights as a consignor, a consignee, an
unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of Borrower's contract rights, rights of
payment which have been earned under a contract right, instruments, documents,
chattel paper, warehouse receipts, deposit accounts, money, securities and
investment property; (vi) if and when obtained by Borrower, all real and
personal property of third parties in which Borrower has been granted a lien or
security interest as security for the payment or enforcement of Receivables; and
(vii) any other goods, personal property or real property now owned or hereafter
acquired in which Borrower has expressly granted a security interest or may in
the future grant a security interest to Agent hereunder, or in any amendment or
supplement hereto or thereto, or under any other agreement between Agent and
Borrower;
(h) all of Borrower's ledger sheets, ledger cards,
files, correspondence, records, books of account, business papers, computers,
computer software (whether owned by Borrower or in which it has an interest),
computer programs, tapes, disks and documents relating to (a), (b), (c), (d),
(e), (f) or (g) of this Paragraph; and
(i) all proceeds and products of (a), (b), (c), (d),
(e), (f), (g) and (h) in whatever form, including, but not limited to: cash,
deposit accounts (whether or not comprised solely of proceeds), certificates of
deposit, insurance proceeds (including hazard, flood and credit insurance),
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements, documents, eminent domain proceeds, condemnation
proceeds and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form
of Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
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"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
Borrower's business, including, without limitation, any Consents required under
all applicable federal, state or other applicable law.
"Contract Rate" shall mean, as applicable, an interest rate per
annum equal to (a) the sum of the Prime Rate plus one half of one (1/2%) percent
with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus
two and three quarters (2-3/4%) percent with respect to Eurodollar Rate Loans.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"Current Assets" at a particular date, shall mean all cash, cash
equivalents, accounts and inventory of Borrower and all other items which would,
in conformity with GAAP, be included under current assets on a balance sheet of
Borrower as at such date; provided, however, that such amounts shall not include
(a) any amounts for any Indebtedness owing by an Affiliate of Borrower to
Borrower, unless such Indebtedness arose in connection with the sale of goods or
rendition of services in the ordinary course of business and would otherwise
constitute current assets in conformity with GAAP, (b) any shares of stock
issued by an Affiliate of Borrower to Borrower, or (c) the cash surrender value
of any life insurance policy.
"Current Liabilities" at a particular date, shall mean all amounts
which would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower, as at such date, but in any event including, without
limitation, the amounts of (a) all Indebtedness of Borrower payable on demand,
or, at the option of the Person to whom such Indebtedness is owed, not more than
twelve (12) months after such date, (b) any payments in respect of any
Indebtedness of Borrower (whether installment, serial maturity, sinking fund
payment or otherwise) required to be made not more than twelve (12) months after
such date, (c) all reserves in respect of liabilities or Indebtedness payable on
demand or, at the option of the Person to whom such Indebtedness is owed, not
more than twelve (12) months after such date, the validity of which is not
contested at such date, and (d) all accruals for federal or other taxes measured
by income payable within a twelve (12) month period.
"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.
"Danskin Advance Rate" shall have the meaning set forth in Section
2.1(a) hereof.
"Danskin Division" shall mean the activewear business of Borrower
conducted primarily at Borrower's York, Pennsylvania location.
"Danskin Eligible Receivables" shall mean Eligible Receivables of
the Danskin Division.
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"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in Section
2.16(a) hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Prime Rate.
"Effective Date" shall have the meaning set forth in Section 2.1(b)
hereof.
"Eligible Inventory" shall mean and include Inventory (excluding
work in process and packaging supplies but including Greige Piece Goods and
Greige Finished Goods), valued at the lower of cost or market value, determined
on a first-in-first-out basis, which is not, in the good faith exercise of
Agent's credit judgment, obsolete, slow moving or unmerchantable and which
Agent, in the good faith exercise of its credit judgment, shall not deem
ineligible Inventory, based on such considerations as Agent may from time to
time deem appropriate including, without limitation, whether the Inventory is
subject to a perfected, first priority security interest in favor of Agent
subject to no Liens other than Permitted Encumbrances and whether the Inventory
conforms to all standards imposed by any governmental agency, division or
department thereof which has regulatory authority over such goods or the use or
sale thereof. Eligible Inventory shall include all Inventory in-transit for
which title has passed to Borrower, which is insured to the full value thereof
and for which Agent shall have in its possession (a) all negotiable bills of
lading properly endorsed and (b) all non-negotiable bills of lading issued in
Agent's name.
"Eligible Receivables" shall mean each Receivable arising in the
ordinary course of Borrower's business and which Agent, in the good faith
exercise of its credit judgment, shall deem to be an Eligible Receivable, based
on such considerations as Agent may from time to time deem appropriate. A
Receivable shall not be deemed eligible unless such Receivable is subject to
Agent's first priority perfected security interest and no other Lien (other than
Permitted Encumbrances), and is evidenced by an invoice, bill of lading or other
documentary evidence reasonably satisfactory to Agent. In addition, no
Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower;
(b) it is due or unpaid more than (i) ninety (90) days after the
original due date or (ii) one hundred twenty (120) days after the original
invoice date, whichever is sooner;
(c) fifty 50% percent or more of the Receivables from the Customer
are not deemed Eligible Receivables hereunder;
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(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the United States of
America, unless the sale is on letter of credit, guaranty, acceptance or third
party credit insurance terms in each case acceptable to Agent in the good faith
exercise of its discretion, or which Receivables are otherwise acceptable to the
Agent in its sole discretion. In the case of credit insurance, the policy must
be issued at Borrower's expense by a carrier and on terms reasonably acceptable
to Agent;
(g) the sale to the Customer is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper not pledged to or in the
possession of Agent;
(h) Agent believes, in the good faith exercise of its judgment,
that collection of such Receivable is insecure or that such Receivable may not
be paid by reason of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless Borrower
effectuates an assignment of its right to payment of such Receivable to Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise
complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been shipped
and delivered to and accepted by the Customer or the services giving rise to
such Receivable have not been performed by Borrower and accepted by the Customer
or the Receivable otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in the good faith exercise of its credit judgment, to the
extent such Receivable exceeds such limit;
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier or the
Receivable is contingent in any respect or for any reason;
(m) Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt
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payment, all of which discounts or allowances are reflected in the calculation
of the face value of each respective invoice related thereto;
(n) any return, rejection or repossession of the merchandise has
occurred;
(o) such Receivable is not payable to Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, decisions, orders and directives of
federal, state and local governmental agencies and authorities with respect
thereto.
"Equipment" shall mean and include all of Borrower's goods
(excluding Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery, apparatus,
motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories
and all replacements and substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Eurodollar Base Rate" shall mean with respect to each day during
each Interest Period pertaining to a Eurodollar Rate Loan, the rate per annum
determined by the Bank to be the arithmetic mean (rounded to the nearest 1/100th
of 1%) of the offered rates for deposits in Dollars with a term comparable to
such Interest Period that appears on the Telerate British Bankers Assoc.
Interest Settlement Rates Page at approximately 11:00 A.M., London time, on the
second full Business Day preceding the first day of such Interest Period;
provided, however, that if there shall at any time no longer exist a Telerate
British Bankers Assoc. Interest Settlement Rates Page, "Eurodollar Base Rate"
shall mean, with respect to each day during each Interest Period pertaining to a
Eurodollar Rate Loan, the rate per annum equal to the rate at which Bank is
offered Dollar deposits at or about 10:00 A.M., New York City time, two (2)
Business Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect to its Eurodollar Rate Loans are then being conducted for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its Eurodollar
Rate Loan to be outstanding during such Interest Period.
"Eurodollar Rate" shall mean with respect to each day during each
Interest Period pertaining to a Eurodollar Rate Loan, a rate per annum
determined for such day in accordance with the following formula (rounded upward
to the nearest 1/100th of 1%):
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Eurodollar Base Rate
1.00 - Eurocurrency Reserve
Requirements
"Eurocurrency Reserve Requirements" for any day as applied to a
Eurodollar Rate Loan, shall mean the aggregate (without duplication) of the
rates (expressed as a decimal fraction ) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Body having jurisdiction with
respect thereto) dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of the Federal Reserve System.
"Event of Default" shall mean the occurrence and continuance of any
of the events set forth in Article X hereof.
"50% Rate" shall have the meaning set forth in Section 2.1(a).
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include all of Borrower's
general intangibles, whether now owned or hereafter acquired including, without
limitation, all chooses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment of any of the
Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Greige Finished Goods" shall mean Inventory which has been cut,
sewn and otherwise completed but for dyeing and packaging.
"Greige Piece Goods" shall mean Inventory which is uncut, on rolls
and does not represent remnants.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as
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amended (49 U.S.C. Sections 1801, et seq.), RCRA or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean all of Borrower's now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in Borrower's
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them.
"Inventory Advance Rates" shall mean collectively, the 60% Rate and
the 50% Rate.
"Lender" and "Lenders" shall have the meaning ascribed to such term
in the preamble to this Agreement, and shall include each Person which is a
transferee, successor or assign of any Lender.
"Letters of Credit" shall have the meaning set forth in Section 2.9
and other letters of guaranty issued by Agent on account of Borrower.
"Letter of Credit Fees" shall have the meaning set forth in Section
3.2.
"Letter of Credit Supplement" shall have the meaning set forth in
Section 2.9.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
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<PAGE>
"Material Adverse Effect" shall mean a material adverse effect on
(i) the condition, operations, assets, business or prospects of the applicable
Person or Persons, (ii) Borrower's ability to pay the Obligations in accordance
with the terms thereof or (iii) the aggregate value of the Collateral, or the
Liens on the Collateral or the priority of any such Lien.
"Maximum Loan Amount" shall mean $45,000,000.
"Maximum Revolving Advance Amount" shall mean $45,000,000 less the
outstanding principal balance of the Term Loans.
"Monthly Advances" shall have the meaning set forth in Section 3.1
hereof.
"Mortgages" shall mean the mortgages, deeds of trust and/or
leasehold deeds of trust on the Real Property securing the original principal
amount of $45,000,000 together with all extensions, renewals, amendments,
supplements, modifications, substitutions and replacements thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001 (a)(3) of ERISA.
"Notes" shall mean collectively, the Term Notes and the Revolving
Credit Note.
"Notice Period" shall have the meaning set forth in Section 2.1(b)
hereof.
"Obligations" shall mean and include any and all of Borrower's
Indebtedness and/or liabilities to Agent or the Lenders of every kind, nature
and description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated under
this Agreement, the Other Documents or under any other agreement between Agent
or the Lenders and Borrower executed in connection herewith, all obligations of
Borrower to Agent or the Lenders to perform acts or refrain from taking any
action under this Agreement, the Other Documents or under any other agreement
between Agent or the Lenders and Borrower executed in connection herewith and
all obligations of Borrower to CBCC in connection with any guarantees issued by
CBCC on behalf of Borrower.
"Other Documents" shall mean the Mortgages, the Notes, the
Questionnaire and any and all other agreements, instruments and documents,
including, without limitation, guaranties, pledges, powers of attorney,
consents, and all other writings heretofore, now or hereafter executed by
Borrower and/or delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"Participant" shall mean each Person who shall be granted the right
by any Lender to participate in any of the Advances and who shall have entered
into a participation agreement in form and substance satisfactory to such
Lender.
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"Payment Office" shall mean initially 119 West 40th Street, New
York, New York 10018; thereafter, such other office of Agent, if any, which it
may designate by notice to Borrower and each Lender to be the Payment Office.
"Pennaco Advance Rate" shall mean have the meaning set forth in
Section 2.1(a).
"Pennaco Division" shall mean the legwear business of Borrower
conducted primarily at Borrower's Grenada, Mississippi location.
"Pennaco Eligible Receivables" shall mean Eligible Receivables of
the Pennaco Division.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no adverse effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of Borrower's business; (f) judgment
Liens that have been stayed or bonded and mechanics', workers', materialmen's or
other like Liens arising in the ordinary course of Borrower's business with
respect to obligations which are not due or which are being contested in good
faith by Borrower; (g) Liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof, provided that (x) any such lien
shall not encumber any other property of Borrower and (y) the aggregate amount
of Indebtedness secured by such Liens incurred as a result of such purchases
during any fiscal year shall not exceed the amount provided for in Section 7.6;
(h) reservations, exceptions, easements, rights of way, and other similar
consensual encumbrances affecting Real Property, provided that, in the good
faith exercise of Agent's judgment, they do not in the aggregate materially
detract from its value or materially interfere with their use in the ordinary
course of Borrower's business and, if said Real Property constitutes Collateral,
Agent has consented thereto in the Mortgages; and (i) Liens disclosed on
Schedule 1.2(A).
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrower or any member of the
Controlled Group or any such Plan to which Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Prepayment Date" shall have the meaning set forth in Section 13.1
hereof.
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"Prime Rate" shall mean the prime commercial lending rate of the
Bank as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by the Bank as
a means of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
"Pro Forma Balance Sheet" shall have the meaning set forth in
Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b)
hereof.
"Purchasing Lender" shall have the meaning set forth in Section 15.3
hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrower and delivered to
Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. ss.ss. 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Borrower's right, title and
interest in and to the owned and leased premises identified on Schedule 1.2(B)
hereto.
"Recapitalization" shall mean the transactions contemplated by the
Recapitalization Documents.
"Recapitalization Documents" shall mean the Securities Purchase
Agreement dated as of September 22, 1997 between Danskin Investors, LLC and
Borrower and all documents and agreements executed and delivered in connection
therewith.
"Receivables" shall mean and include all of Borrower's accounts,
contract rights, instruments (including those evidencing indebtedness owed to
Borrower by its Affiliates), documents, chattel paper, general intangibles
relating to accounts, drafts and acceptances, and all other forms of obligations
owing to Borrower arising out of or in connection with the sale or lease of
Inventory or the rendition of services, all guarantees and other security
therefor, whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to the Agent hereunder.
"Receivables Advance Rates" shall mean collectively, the Danskin
Advance Rate and the Pennaco Advance Rate.
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Rent Reserves" shall mean any reserve which the Agent may elect to
impose from time to time to assure the payment by the Borrower of rent due or to
become due with respect to real property leased by Borrower which property is
not subject to a landlord waiver agreement acceptable to Agent including,
without limitation, a waiver of statutory or other landlord liens and
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providing for a right of access, in each case, acceptable to the Agent; for each
such premises, the amount of such reserve shall be initially established by
Agent no earlier than one month following the Closing Date and shall equal one
month's rent, but the foregoing arrangement shall not prevent the Agent from
establishing other procedures in the exercise of its discretion after such
initial one month period.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or of the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least fifty one
(51%) percent of the Advances and, if no Advances are outstanding, shall mean
Lenders holding fifty one (51%) percent of the Commitment Percentages.
"Retail Inventory" shall mean finished goods Inventory located at
Borrower's retail stores identified on Schedule 1.2(c) hereto.
"Revolving Advances" shall mean Advances made other than Letters of
Credit or the Term Loans.
"Revolving Credit Note" shall mean the promissory note referred to
in Section 2.1(a) hereof.
"Settlement Date" shall mean the Closing Date and thereafter on
Wednesday of each Week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day or such earlier Business Day as Agent
shall determine.
"Subordinated Notes" shall mean the convertible subordinated notes
issued by Borrower to Danskin Investors, LLC on September 22, 1997 in the
original aggregate principal sum of $15,000,000 as in effect on the Closing Date
and such other promissory notes as shall be issued in connection with the
reduction of such obligations so long as they are in form and substance
identical to such notes but for changes in date and/or principal amount.
"Subordination Agreement" shall mean the Subordination Agreement
dated the Closing Date among Danskin Investors, LLC, Borrower and Agent.
"Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Tangible Net Worth" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP consistently applied excluding such assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of Borrower excluding all non-cash items that relate
to the Recapitalization.
"Term" shall mean the Closing Date through October 8, 2002.
"Term Loan A" shall have the meaning set forth in Section 2.4(a).
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"Term Loan A Notes" shall have the meaning set forth in Section
2.4(a).
"Term Loan B" shall have the meaning set forth in Section 2.4(b).
"Term Loan B Notes" shall have the meaning set forth in Section
2.4(b).
"Term Loans" shall mean collectively, Term Loan A and Term Loan B.
"Term Notes" shall mean collectively, Term Loan A Notes and Term
Loan B Notes.
"Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of either Borrower or any
member of the Controlled Group from a Plan or Multiemployer Plan during a plan
year in which such entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan
in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Plan or Multiemployer
Plan; (v) any event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of either Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. ss.ss. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Trademarks" shall mean "Danskin", "Dance France", "Round-the-Clock"
and such other trademarks, applied for or registered by Borrower in the United
States Patent and Trademark Office or any similar office or agency of the United
States or any state thereof.
"Transactions" shall have the meaning set forth in Section 5.5
hereof.
"Transferee" shall have the meaning set forth in Section 15.3(b)
hereof.
"Undrawn Availability" at a particular date shall mean an amount
equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances
(other than the Term Loans) plus (ii) fees and expenses for which Borrower is
liable in connection with the Transactions but which have not been paid or
charged to Borrower's Account.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
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1.3 Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York shall have the
meaning given therein unless otherwise defined herein.
1.4 Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements to which Agent is a party, including, without
limitation, references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS
2.1 (a) Revolving Advances Subject to the terms and conditions set forth
in this Agreement, each Lender, severally and not jointly, will make Revolving
Advances to Borrower in aggregate amounts outstanding at any time not greater
than such Lender's Commitment Percentage of the lesser of (x) the Maximum
Revolving Advance Amount less the aggregate amount of outstanding Letters of
Credit or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b)(i)
hereof, of Danskin Eligible Receivables ("Danskin Advance Rate"),
plus
(ii) up to 80%, subject to the provisions of Section 2.1(b)(i)
hereof, of Pennaco Eligible Receivables ("Pennaco Advance Rate"),
plus
(iii) subject to the provisions of Sections 2.1(b)(i) and
2.1(b)(ii), up to 60% of the value of Eligible Inventory consisting
of raw materials, finished goods located at the Real Property and
Retail Inventory ("60% Rate") and (b) 50% of the value of Eligible
Inventory consisting of Greige Goods ("50% Rate"), plus
(iv) the product of (a) the aggregate amount of outstanding
documentary Letters of Credit issued in connection with the import
of finished goods Inventory times (b) 60%, minus
(v) the aggregate amount of outstanding Letters of Credit, minus
(vi) such reserves as Agent may reasonably deem proper and
necessary from time to time including, without limitation, the Rent
Reserves.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) and
(iii) and (iv) minus (y) Section 2.1 (a)(y)(vi) at any time and from time to
time shall be referred to as the "Formula Amount". The Revolving Advances shall
be evidenced by one or more secured promissory notes (collectively, the
"Revolving Credit Note") substantially in the form attached hereto as Exhibit
2.1(a).
(b) (i) Discretionary Rights The Advance Rates and the reserves
may be increased or decreased by Agent at any time and from time to time in the
good faith exercise of its
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reasonable discretion provided that Agent shall provide Borrower with at least
two Business Days prior notice to any such increase or decrease of the Advance
Rates (the "Notice Period"). Borrower consents to any such increases or
decreases and acknowledges that decreasing the Advance Rates or increasing the
reserves may limit or restrict Advances requested by Borrower. Any increase or
decrease of the Receivables Advance Rates shall not be effective ("Effective
Date") until the expiration of the Notice Period and shall be effective solely
with respect to Eligible Receivables created on or after the Effective Date.
(ii) Inventory Advances. In no event shall the aggregate
Advances outstanding at any time with respect to (x) Inventory of Borrower
consisting of Retail Inventory exceed $6,000,000 and (y) Inventory of Borrower
consisting of raw materials, finished goods located at the Real Property or
Greige Goods exceed $20,000,000.
2.2. Procedure for Borrowing Revolving Advances
(a) Borrower may notify Agent by telephone promptly confirmed in
writing or by telecopier prior to 11:00 a.m. on a Business Day of its request to
incur, on that day, a Revolving Advance hereunder. Should any amount required to
be paid as interest hereunder, or as fees or other charges under this Agreement
or any Other Documents with Agent or Lenders, or with respect to any other
Obligation, become due, same shall be deemed a request for a Revolving Advance
as of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other agreement
with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, it shall give Agent at least
three (3) Business Days' prior written or telephonic notice (promptly confirmed
in writing); specifying (i) the date of the proposed borrowing (which shall be a
Business Day), (ii) the type of borrowing and the amount to be borrowed, which
amount on the date of such Advance shall be an integral multiple of $1,000,000,
and (iii) the duration of the first Interest Period therefor. Interest Periods
for Eurodollar Rate Loans shall be for 30 days. No Eurodollar Rate Loans shall
be made available to Borrower during the continuance of a Default or an Event of
Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence
on the date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in (b)(iii) above provided that:
(i) any Interest Period which would otherwise end on a
day which is not a Business Day shall be the next preceding or succeeding
Business Day as is Bank's custom in the market to which such Eurodollar Rate
Loan relates;
(ii) no Interest Period shall end after the last day of the
Term; and
(iii) any Interest Period which begins on a day for which
there is no numerically corresponding day in the calendar month during which
such Interest Period is to end, shall (subject to clause (i) above) end on the
last day of such calendar month; and
(iv) Borrower may not select an Interest Period with respect
to any portion of the Term Loans which extends beyond an installment payment
date for the Term Loan unless after giving effect to such election, the portion
of the Term Loan not subject to the Interest Periods
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ending after such installment payment date is equal to or greater than the
principal due on such installment payment date.
Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrower shall elect the duration of each succeeding
Interest Period by giving irrevocable written notice to Agent of such duration
not less than three (3) Business Days prior to the last day of the then current
Interest Period applicable to such Eurodollar Rate Loan. If Agent does not
receive timely notice of the Interest Period elected by Borrower, Borrower shall
be deemed to have elected to convert to a Domestic Rate Loan subject to Section
2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and be
continuing, Borrower may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Rate Loan, or as to any Domestic
Rate Loan on a Business Day, convert any such loan into a loan of another type
in the same aggregate principal amount provided that any conversion of a
Eurodollar Rate Loan shall be made only on the last Business Day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Borrower
desires to convert a loan, it shall give Agent not less than three (3) Business
Days' prior written or telephonic notice promptly confirmed in writing to
convert from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1) Business
Day's prior written or telephonic notice promptly confirmed in writing to
convert a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date of
such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than five (5) Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior written
notice, Borrower may prepay the Eurodollar Rate Loans in whole at any time, with
accrued interest on the principal being prepaid to the date of such repayment.
In the event that any prepayment of a Eurodollar Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, Borrower shall indemnify Agent and Lenders
therefor in accordance with Section 2.2(f) hereof. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrower shall be conclusive absent manifest error.
(f) Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent and
Lenders may sustain or incur as a consequence of any prepayment, conversion of
or any default by Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including (but not limited to) any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder.
(g) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans to make or maintain its
Eurodollar Rate Loans, the obligation of the Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrower shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either
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pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar
Rate Loans into loans of another type. If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrower shall pay Agent, upon
Agent's request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lenders to lenders
of funds obtained by Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by such Lender to Borrower shall be conclusive
absent manifest error.
2.3 Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions of this Agreement. The proceeds
of each Revolving Advance requested by Borrower or deemed to have been requested
by Borrower under Section 2.2(a) hereof shall, with respect to requested
Revolving Advances to the extent the Lenders make such Revolving Advances, be
made available to Borrower on the day so requested by way of credit to
Borrower's operating account at Bank, or such other bank as Borrower may
designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested, be disbursed to Agent to be applied to
the outstanding Obligations giving rise to such deemed request.
2.4. Term Loans.
(a) Term Loan A. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, will make a term loan to
Borrower in the sum equal to such Lender's Commitment Percentage of $5,000,000
("Term Loan A"). Term Loan A shall be advanced on the Closing Date and shall be,
with respect to principal, payable in thirty (30) consecutive monthly
installments, the first twenty nine (29) of which shall be in the sum of
$166,666.67 commencing on the first day of the first month following the first
anniversary of the Closing Date and on the first day of each month thereafter
with a thirtieth (30th) final and installment in the amount of the unpaid
principal amount of Term Loan A. Term Loan A shall be subject to acceleration
upon the occurrence of an Event of Default under this Agreement or termination
of this Agreement and shall be evidenced by and subject to the terms and
conditions set forth in one or more secured promissory note (collectively, the
"Term Loan A Notes") substantially in the form attached hereto as Exhibit
2.4(a).
(b) Term Loan B. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, will make a term loan to
Borrower in the sum equal to such Lender's Commitment Percentage of $5,000,000
("Term Loan B"). Term Loan B shall be advanced on the Closing Date and shall be,
with respect to principal, payable in eighteen (18) consecutive monthly
installments, the first seventeen (17) of which shall be in the sum of
$166,666.67 commencing on the first day of the forty third (43rd) month
following the Closing Date and on the first day of each month thereafter with an
eighteenth (18th) and final installment in the amount of the unpaid principal
amount of Term Loan B payable on the last day of the Term. Term Loan B shall be
subject to acceleration upon the occurrence of an Event of Default under this
Agreement or termination of this Agreement and shall be evidenced by and subject
to the terms and conditions set forth in one or more secured promissory notes
(collectively, the "Term Loan B Notes") substantially in the form attached
hereto as Exhibit 2.4(b).
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2.5. Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount less outstanding Letters of Credit or (b) the Formula Amount less
outstanding Letters of Credit.
2.6. Repayment of Advances
(a) The Advances shall be due and payable in full on the last day
of the Term subject to earlier prepayment as herein provided. The Term Loans
shall be due and payable as provided in Section 2.4 hereof and in the Term
Notes.
(b) Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrower's account as
of the Business Day on which Agent receives those items of payment, Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by Agent on account of the Obligations one (1) Business
Day after the Business Day that Agent receives such payments via wire transfer
or electronic depository check. Agent is not, however, required to credit
Borrower's Account for the amount of any item of payment which is unsatisfactory
to Agent in the good faith exercise of its discretion and Agent may charge
Borrower's Account for the amount of any item of payment which is returned to
Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 12:00 Noon (New York Time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrower's Account or by making Advances as provided in Section 2.2
hereof.
(d) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any Other Documents, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.8. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Lenders and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Lenders and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower unless Agent receives a written
statement of Borrower's specific exceptions thereto within sixty (60) days after
such statement is received by Borrower. The records of Agent with respect to the
loan account shall be prima facie evidence of the amounts of Advances and other
charges thereto and of payments applicable thereto.
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2.9. Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of Letters of Credit ("Letters of Credit")
provided, however, Agent will not be required to issue or cause to be issued any
Letters of Credit to the extent that the face amount of such Letters of Credit
would then cause the sum of (i) the outstanding Revolving Advances plus (ii)
outstanding Letters of Credit (with the requested Letter of Credit being deemed
to be outstanding for purposes of this calculation) to exceed the lesser of (x)
the Maximum Revolving Advance Amount or (y) the Formula Amount. All
disbursements or payments related to Letters of Credit shall be deemed to be
Revolving Advances and shall bear interest at the applicable Contract Rate;
Letters of Credit that have not been drawn upon shall not bear interest. Letters
of Credit shall be subject to the terms and conditions set forth in the Letter
of Credit Supplement attached hereto as Exhibit 2.9 ("Letter of Credit
Supplement").
2.10. Issuance of Letters of Credit
(a) Borrower may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent at the Payment Office, Agent's standard
form of Letter of Credit together with any issuing bank's standard form of
Letter of Credit Application (collectively, the "Letter of Credit Application")
completed to the satisfaction of Agent; and, such other certificates, documents
and other papers and information as Agent may reasonably request.
(b) Each Letter of Credit shall, among other things, (i) provide
for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than one hundred twenty
(120) days after such Letter of Credit's date of issuance and in no event later
than the last day of the Term. Each Letter of Credit Application and each Letter
of Credit shall be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
and any amendments or revision thereof and, to the extent not inconsistent
therewith, the laws of the State of New York.
2.11. Requirements For Issuance of Letters of Credit
(a) In connection with the issuance of any Letter of Credit
Borrower shall indemnify, save and hold Agent and each Lender harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent and any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created for Borrower. Borrower shall be bound by Agent's or any
issuing or accepting bank's regulations and good faith interpretations of any
Letter of Credit issued or created for Borrower's Account, although this
interpretation may be different from Borrower's own; and, neither Agent nor any
Lender, the bank which opened the Letter of Credit, nor any of its
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrower's instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit except for
Agent's or any Lender's or such correspondents' gross negligence or willful
misconduct.
(b) Borrower shall authorize and direct any bank which issues a
Letter of Credit to name Borrower as the "Account Party" therein and to deliver
to Agent all instruments, documents, and other writings and property received by
the bank pursuant to the Letter of Credit and to
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accept and rely solely upon Agent's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit, the application
therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or caused to
be issued by Agent under this Agreement, Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority if an Event of Default
shall have occurred and be continuing, (i) to sign and/or endorse Borrower's
name upon any warehouse or other receipts, letter of credit applications and
acceptances; (ii) to sign Borrower's name on bills of lading; (iii) to clear
Inventory through the United States of America Customs Department ("Customs") in
the name of Borrower or Agent or Agent's designee, and to sign and deliver to
Customs officials powers of attorney in the name of Borrower for such purpose;
and (iv) to complete in Borrower's name or Agent's, or in the name of Agent's
designee, any order, sale or transaction, obtain the necessary documents in
connection therewith, and collect the proceeds thereof. Neither Agent nor its
attorneys will be liable for any acts or omissions nor for any error of judgment
or mistakes of fact or law, except for Agent's or its attorney's gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(d) Each Lender shall be deemed to have irrevocably purchased an
undivided participation in Agent's credit support enhancement provided to the
issuing bank of any Letter of Credit and each Revolving Advance made as a
consequence of the issuance of a Letter of Credit and all disbursements
thereunder in an amount equal to such Lender's applicable Commitment Percentage
times the outstanding amount of the Letters of Credit and disbursements
thereunder. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of the Maximum Revolving Advance Amount or the Formula
Amount, and such disbursement is not reimbursed by Borrower within two (2)
Business Days, Agent shall promptly notify each Lender and upon Agent's demand
each Lender shall pay to Agent such Lender's proportionate share of such
unreimbursed disbursement together with such Lender's proportionate share of
Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from Borrower of any amount
disbursed by Agent for which Agent had already been reimbursed by the Lenders,
Agent shall deliver to each Lender that Lender's pro rata share of such
repayment. Each Lender's participation commitment shall continue until the last
to occur of any of the following events: (A) Agent ceases to be obligated to
issue Letters of Credit hereunder; (B) no Letter of Credit issued hereunder
remains outstanding and uncancelled or (C) all Persons (other than Borrower)
have been fully reimbursed for all payments made under or relating to Letters of
Credit.
2.12. Additional Payments. Any sums due and payable by Borrower hereunder
and any sums expended by Agent or any Lender due to Borrower's failure to
perform or comply with its obligations under this Agreement or any Other
Document including, without limitation, Borrower's obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.
2.13. Manner of Borrowing and Payment
(a) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of the Lenders. The Term Loans shall be
advanced according to the Commitment Percentages of the Lenders.
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(b) Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Revolving Credit Note, shall be
applied to the Revolving Advances pro rata according to the Commitment
Percentages of the Lenders. Each payment (including each prepayment) by Borrower
on account of the principal of and interest on the Term Notes, shall be made
from or to, or applied to that portion of the Term Loans evidenced by the Term
Notes pro rata according to the Commitment Percentages of the Lenders. Except as
expressly provided herein, all payments (including prepayments) to be made by
Borrower on account of principal, interest and fees shall be made without
set-off or counterclaim and shall be made to Agent on behalf of the Lenders to
the Payment Office, in each case on or prior to 12:00 Noon, New York time, in
Dollars and in immediately available funds. Any payments credited to Agent's
account subsequent to 12:00 noon (New York time) on any particular day shall be
credited to the Revolving Advances the next Business Day.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.13(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by Borrower on account of Revolving Advances
shall be applied first to those Revolving Advances made by Agent. On or before
12:00 Noon, New York time, on each Settlement Date commencing with the first
Settlement Date following the Closing Date, Agent and the Lenders shall make
certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with its Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest
hereunder on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent
shall submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Transferee (a "benefited Lender") shall at
any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefited 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 benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including,
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without limitation, rights of set-off) with respect to such portion as fully as
if such Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed
in writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrower a corresponding amount. Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is made
available to Agent on a date after a Settlement Date, such Lender shall pay to
Agent on demand an amount equal to the product of (i) the daily average Federal
Funds Rate (computed on the basis of a year of 360 days) during such period as
quoted by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph (e) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to such Revolving Advances hereunder, on
demand from Borrower; provided, however, that Agent's right to such recovery
shall not prejudice or otherwise adversely affect Borrower's rights (if any)
against such Lender.
2.14. Mandatory Prepayments. Subject to the provisions of Section
4.3(b)(i), when Borrower sells or otherwise disposes of any Collateral (other
than Inventory in the ordinary course of business) Borrower shall repay the
Advances in an amount equal to the net proceeds of such sale (i.e., gross
proceeds less the reasonable costs of such sales or other dispositions), such
repayments to be made promptly but in no event more than three (3) Business Days
following receipt of such net proceeds, and until the date of payment, such
proceeds shall be held in trust for Agent. The foregoing shall not be deemed to
be implied consent to any such sale otherwise prohibited by the terms and
conditions hereof. Such repayments shall be applied first, to the outstanding
principal installments on Term Loan A in the inverse order of the maturities
thereof, second, to the outstanding principal installments on Term Loan B in the
inverse order of the maturities thereof and, third, to the remaining Advances in
such order as Agent may determine, subject to Borrower's ability to reborrow
Revolving Advances in accordance with the terms hereof.
2.15. Use of Proceeds. Borrower shall apply the proceeds of Advances to
(i) repay existing indebtedness owed to First Union National Bank of North
Carolina and First Union Commercial Corporation, (ii) pay fees and expenses
relating to the Transactions, and (iii) to provide for its working capital
needs.
2.16. Defaulting Lender
(a) Notwithstanding anything to the contrary contained herein, in
the event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrower that it does not intend to
make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.16 while such Lender Default remains in effect.
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(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions
to Agent or to approve, disapprove, consent to or vote on any matters relating
to this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(d) Other than as expressly set forth in this Section 2.16, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.16 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES
3.1. Interest. Interest on Advances shall accrue from the date the
applicable Advance is made through (a) and including the date preceding
repayment of such Advance if such repayment is received before 12:00 noon (New
York time) of such day and (b) the date of repayment of such Advance if such
repayment is received after 12:00 noon (New York time) of such day and shall be
payable in arrears on the last day of each month with respect to Domestic Rate
Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest
Period. Interest charges shall be computed on the actual principal amount of
Advances outstanding during the month (the "Monthly Advances") at a rate per
annum equal to the Contract Rate. Whenever, subsequent to the date of this
Agreement, the Prime Rate is increased or decreased, the applicable Contract
Rate with respect to Domestic Rate Loans shall be similarly changed without
notice or demand of any kind effective as of the opening of business on the
Business Day that such change becomes effective by an amount equal to the amount
of such change in the Prime Rate during the time such change or changes remain
in effect. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the applicable
Contract Rate plus two (2%) percent per annum (the "Default Rate").
3.2. Letter of Credit Fees. Borrower shall pay Agent (i) for the benefit
of the Lenders for issuing or causing the issuance of Letters of Credit, the
Letter of Credit Fees set forth in the Letter of
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Credit Supplement and (ii) any issuing bank's customary charges payable in
connection with Letters of Credit as in effect from time to time.
3.3. (a) Closing Fee. On the Closing Date, Borrower shall pay to Agent a
closing fee of $300,000 less that portion of the commitment fee of $200,000
heretofore paid by Borrower to Agent remaining after application of such fee to
actual out of pocket expenses.
(b) Unused Line Fee. If, for any month during the Term, the
average daily unpaid balance of the Revolving Advances plus outstanding Letters
of Credit for each day of such month does not equal the Maximum Revolving
Advance Amount, then Borrower shall pay to Agent for the benefit of the Lenders
a fee at a rate equal to three-eighths of one percent (3/8%) per annum on the
amount by which the Maximum Revolving Advance Amount exceeds such average daily
unpaid balance. Such fee shall be payable to Agent in arrears on the last day of
each month and on the last day of the Term.
3.4. (a) Service Fee. Borrower shall pay Agent a service fee equal to
$4,000 per month commencing on the Closing Date and thereafter on the first day
of each month thereafter during the Term. The service fee shall be deemed earned
in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any
reason.
(b) Collateral Monitoring Fee. Borrower shall pay to Agent on the
first day of each month following any month in which Agent performs any
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent in the
good faith exercise of its business judgment and which monitoring is undertaken
by Agent or for Agent's benefit - a collateral monitoring fee in an amount equal
to $600 per day for each person employed to perform such monitoring, plus all
costs and disbursements incurred by Agent in the performance of such examination
or analysis.
3.5. Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that Agent or any Lender has received interest and other
charges hereunder in excess of the highest rate permissible hereto, such excess
amount shall be first applied to any unpaid principal balance owed by Borrower,
and if the then remaining excess amount is greater than the previously unpaid
principal balance, the Lenders shall promptly refund such excess amount to
Borrower and the provisions hereof shall be deemed amended to provide for such
permissible rate.
3.7. Increased Costs. In the event of any change in applicable law,
treaty or governmental regulation, or any change therein or in the
interpretation or application thereof, or requirements for compliance by any
Lender (for purposes of this Section 3.7, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate
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Loans with any request or directive received after the Closing Date (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or change the basis of taxation of payments to
Agent or any Lender of principal, fees, interest or any other amount payable
hereunder or under any Other Documents (except for changes in the rate of tax on
the overall net income of Agent or any Lender by the jurisdiction in which it
maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement, any Other
Documents;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be, provided that the foregoing shall
not apply to increased costs which are reflected in the Eurodollar Rate. Agent
or such Lender shall certify the amount of such additional cost or reduced
amount to Borrower, and such certification shall be conclusive absent manifest
error.
3.8. Basis for Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Eurodollar
Rate applicable pursuant to Section 2.2 hereof for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan;
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of
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the then current Interest Period applicable to such affected Eurodollar Rate
Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the
last Business Day of the then current Interest Period for such affected
Eurodollar Rate Loans. Until such notice has been withdrawn, the Lenders shall
have no obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and Borrower shall not have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.
3.9. Capital Adequacy
(a) In the event that Agent or any Lender shall have determined
that any change in applicable law, rule, regulation or guideline regarding
capital adequacy, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans with any request or directive received after
the Closing Date regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on Agent or any Lender's capital as a
consequence of its obligations hereunder to a level below that which Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material,
then, from time to time, Borrower shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender for
such reduction. In determining such amount or amounts, Agent or such Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.9(a) hereof when delivered to Borrower shall be conclusive
absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt payment
and performance to Agent and each Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Agent for the ratable benefit of each Lender a
continuing security interest in and to all of the Collateral, whether now owned
or existing or hereafter acquired or arising and wheresoever located. Borrower
shall mark its books and records as may be necessary or appropriate to evidence,
protect and perfect Agent's security interest and shall cause its financial
statements to reflect such security interest.
4.2. Perfection of Security Interest. Borrower shall take all action that
Agent may request, so as at all times to maintain the validity, perfection,
enforceability and priority of Agent's security interest in the Collateral or to
enable Agent to protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to (i) promptly discharging all Liens
other than Permitted Encumbrances, (ii) obtaining landlords' or mortgagees' lien
waivers, (iii) delivering to Agent, endorsed or accompanied by such instruments
of assignment as Agent may specify, and stamping or marking, in such manner as
Agent may specify, any and all chattel paper, instruments, letters of credits
and advices
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thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of the Uniform Commercial Code as adopted in the State of New
York. All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrower's
Account as a Revolving Advance and added to the Obligations, or, at Agent's
option, shall be paid to Agent for the ratable benefit of the Lenders
immediately upon demand.
4.3. Disposition of Collateral. Borrower will safeguard and protect all
Collateral for Agent's general account and make no disposition thereof whether
by sale, lease or otherwise except (a) the sale of Inventory in the ordinary
course of business and (b) the disposition or transfer of obsolete and worn-out
Equipment in the ordinary course of business during any fiscal year having an
aggregate fair market value of not more than $250,000 and only to the extent
that (i) the proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Agent's first priority security interest or (ii)
the proceeds of which are remitted to Agent as a prepayment in accordance with
the provisions of Section 2.14.
4.4. Preservation of Collateral. Following the occurrence and during the
continuance of an Event of Default in addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral, including the hiring of such security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of Borrower's premises a custodian who shall have full authority
to do all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any of Borrower's owned or leased lifts, hoists, trucks
and other facilities or equipment for handling or removing the Collateral; and
(e) shall have, and is hereby granted, a right of ingress and egress to the
places where the Collateral is located, and may proceed over and through any of
Borrower's owned or leased property. Borrower shall cooperate fully with all of
Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may reasonably direct. All of Agent's expenses
of preserving the Collateral, including any expenses relating to the bonding of
a custodian, shall be charged to Borrower's Account as a Revolving Advance and
added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) Borrower shall
be the sole owner of and fully authorized and able to sell, transfer, pledge
and/or grant a security interest in each and every item of the Collateral to
Agent which, except for Permitted Encumbrances, shall be free and clear of all
Liens and encumbrances whatsoever; (b) each document and agreement executed by
Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all respects; (c) all signatures and endorsements
of Borrower that appear on such documents and agreements shall be genuine and
Borrower shall have full capacity to execute same; and (d) Borrower's Equipment
and Inventory shall be located as set forth on Schedule 4.5 and shall not be
removed from such location(s) without the prior written consent of Agent which
shall not be unreasonably withheld except with respect to the sale of Inventory
in the ordinary course of business and Equipment to the extent permitted in
Section 4.3 hereof.
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4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Borrower shall defend Agent's interests in the Collateral against
any and all Persons whatsoever. At any time following demand by Agent for
payment of all Obligations, Agent shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, Borrower shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and the
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. At
Agent's request at any time following the occurrence and during the continuance
of an Event of Default, Borrower shall instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into
Borrower's possession, they, and each of them, shall be held by Borrower in
trust as Agent's trustee, and Borrower will immediately deliver them to Agent in
their original form together with any necessary endorsement.
4.7. Books and Records. Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrower.
4.8. Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Agent and each Lender copies of any of Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Agent and each
Lender any information such accountants may have concerning Borrower's financial
status and business operations. Borrower hereby authorizes all federal, state
and municipal authorities to furnish to Agent and each Lender copies of reports
or examinations relating to Borrower, whether made by Borrower or otherwise;
provided, however, Agent and each Lender will request such information or
materials in writing directly from Borrower and allow Borrower a reasonable
period of time to deliver such information or materials prior to obtaining such
information or materials from such accountants or such authorities.
4.9. Compliance with Laws. Borrower shall comply in all material respects
with all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to the Collateral or any part thereof or
to the operation of Borrower's business the non-compliance with
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which could reasonably be expected to have a Material Adverse Effect. Borrower
may, however, contest or dispute any acts, rules, regulations, orders and
directions of those bodies or officials in any reasonable manner, provided that
any related Lien is inchoate or stayed and sufficient reserves are established
to the reasonable satisfaction of Agent to protect Agent's Lien on or security
interest in the Collateral. The Collateral and any other assets of Borrower at
all times shall be maintained in accordance with the requirements of all
insurance carriers which provide insurance with respect to the Collateral and
other assets of Borrower so that such insurance shall remain in full force and
effect.
4.10. Inspection of Premises. At all reasonable times Agent and any Lender
shall have full access to and the right to audit, check, inspect and make
abstracts and copies from Borrower's books, records, audits, correspondence and
all other papers relating to the Collateral and the operation of Borrower's
business. Agent, any Lender and their agents may enter upon any of Borrower's
premises at any time during business hours and at any other reasonable time, and
from time to time, for the purpose of inspecting the Collateral and any and all
records pertaining thereto and the operation of Borrower's business.
4.11. Insurance. Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At Borrower's own cost and
expense in amounts and with carriers acceptable to Agent, Borrower shall (a)
keep all its insurable properties and properties in which Borrower has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to Borrower's including, without limitation, business interruption
insurance; (b) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to Borrower's insuring against larceny,
embezzlement or other criminal misappropriation of insured's officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of Borrower either directly or through authority to draw
upon such funds or to direct generally the disposition of such assets; (c)
maintain public and product liability insurance against claims for personal
injury, death or property damage suffered by others; (d) maintain all such
worker's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which Borrower is engaged in business; (e) maintain
a life insurance policy covering the lives of Beverly Eichel and MaryAnn
Domuracki for so long as each is employed by the Borrower as executive officers
of the Borrower in the face amounts of at least $1,000,000 and $2,000,000,
respectively; and (f) furnish Agent with (i) copies of all policies and evidence
of the maintenance of such policies by the renewal thereof at least thirty (30)
days before any expiration date, and (ii) appropriate loss payable and mortgagee
endorsements in form and substance satisfactory to Agent, naming Agent as a
co-insured, assignee and loss payee as its interests may appear with respect to
all insurance coverage referred to in clauses (a), (c) and (e) above, and
providing (A) that all proceeds thereunder shall be payable to Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and
Borrower to make payment for such loss to Agent and not to Borrower and Agent
jointly. If any insurance losses are paid by check, draft or other instrument
payable to Borrower and Agent jointly, Agent may endorse Borrower's name thereon
and do such other things as Agent may deem advisable to reduce the same to cash.
Agent is hereby authorized to adjust and compromise claims under insurance
coverage referred to in clauses (a), (b) and (e) above. All loss recoveries
received by Agent upon any such insurance may be applied to the Obligations, in
such order as Agent in its sole discretion shall determine. Any surplus shall be
paid by Agent to Borrower or applied as may be otherwise required by law. Any
deficiency thereon shall be paid by Borrower to Agent, on demand. Anything
hereinabove to
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the contrary notwithstanding, and subject to the fulfillment of the conditions
set forth below, Agent shall remit to Borrower insurance proceeds received by
Agent during any calendar year under insurance policies procured and maintained
by Borrower which insure Borrower's insurable properties to the extent such
insurance proceeds do not exceed $500,000 in the aggregate during such calendar
year. In the event Borrower has previously received (or, after giving effect to
any proposed remittance by Agent to Borrower would receive) insurance proceeds
which equal or exceed $500,000 in the aggregate during any calendar year, then
Agent shall not be obligated to remit the insurance proceeds in excess of
$500,000 to Borrower but may, in its sole discretion, either remit the insurance
proceeds to Borrower upon Borrower providing Agent with evidence reasonably
satisfactory to Agent that the insurance proceeds will be used by Borrower to
repair, replace or restore the insured property which was the subject of the
insurable loss, or apply the proceeds to the Obligations, as aforesaid. The
agreement of Agent to remit insurance proceeds in the manner above provided
shall be subject in each instance to satisfaction of each of the following
conditions: (x) No Event of Default or Default shall then have occurred and be
continuing, and (y) Borrower shall use such insurance proceeds to repair,
replace or restore the insurable property which was the subject of the insurable
loss and for no other purpose.
4.12. Failure to Pay Insurance. If Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor for Borrower's Account,
and charge Borrower's Account therefor and such expenses so paid shall be part
of the Obligations.
4.13. Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any Charge by any
governmental authority is or may be imposed on or as a result of any transaction
between Borrower and Agent or any Lender which Agent or any Lender may be
required to withhold or pay or if any Charges remain unpaid after the date fixed
for their payment, or if any claim shall be made which, in Agent's or any
Lender's opinion, may possibly create a valid Lien on the Collateral, Agent may
without notice to Borrower pay the Charges and Borrower hereby indemnifies and
holds Agent and each Lender harmless in respect thereof. Agent will not pay any
Charges to the extent that Borrower has contested or disputed those Charges in
good faith, by expeditious protest, administrative or judicial appeal or similar
proceeding provided that any related Lien is stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent's security
interest in or Lien on the Collateral. The amount of any payment by Agent under
this Section 4.13 shall be charged to Borrower's Account as a Revolving Advance
and added to the Obligations and, until Borrower shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Borrower's credit and Agent shall retain its
security interest in any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Except as described on Schedule
4.14 hereof, Borrower shall at all times pay, when and as due, its rental
obligations under all leases under which it is a tenant for premises at which
Collateral is located except to the extent any such amounts are being contested
in good faith and by appropriate proceedings and as to which Agent shall have
notice in writing, and shall otherwise comply, in all material respects, with
all other terms of such leases and keep them in full force and effect and, at
Agent's request, will provide evidence of having done so.
4.15. Receivables
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(a) Nature of Receivables. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrower to Agent.
(b) Solvency of Customers. Each Customer, to Borrower's actual
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of Borrower who are not solvent Borrower has
set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables.
(c) Locations of Borrower. Borrower's chief executive office is
located at 111 West 40th Street, New York, New York 10018. Until written notice
is given to Agent by Borrower of any other office at which it keeps its records
pertaining to Receivables, all such records shall be kept at such executive
office and at 4075 East Market Street, York, Pennsylvania 17403.
(d) Collection of Receivables. Until Borrower's authority to do so
is terminated by Agent (which notice Agent may give at any time following the
occurrence and during the continuance of an Event of Default, Borrower will, at
Borrower's sole cost and expense, but on Agent's behalf and for Agent's account,
collect as Agent's property and in trust for Agent all amounts received on
Receivables, and shall not commingle such collections with Borrower's funds or
use the same except to pay Obligations. Borrower shall, upon request, deliver to
Agent, the Blocked Account or the Depositary Account in original form and on the
date of receipt thereof, all checks, drafts, notes, money orders, acceptances,
cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time
following the occurrence and during the continuance of an Event of Default,
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. During the
existence of an Event of Default, Agent shall have the sole right to collect the
Receivables, take possession of the Collateral, or both. Agent's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrower's
Account and added to the Obligations.
(f) Power of Agent to Act on Borrower's Behalf. Agent shall have
the right to receive, endorse, assign and/or deliver in the name of Agent or
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Agent or Agent's designee as Borrower's attorney with power
(i) following the occurrence and during the continuance of an Event of Default
(a) to sign Borrower's name on any invoice or bill of lading relating to any of
the Receivables; (b) to demand payment of the Receivables; (c) to enforce
payment of the Receivables by legal proceedings or otherwise; (d) to exercise
all of Borrower's rights and remedies with respect to the collection of the
Receivables and any other Collateral; (e) to settle, adjust, compromise, extend
or renew the Receivables; (f) to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (g) to prepare, file and sign
Borrower's name on a proof of
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claim in bankruptcy or similar document against any Customer; (h) to prepare,
file and sign Borrower's name on any notice of Lien, assignment or satisfaction
of Lien or similar document in connection with the Receivables and (ii) at any
other time (a) to endorse Borrower's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment or Collateral; (b) to send
verifications of Receivables to any Customer; (c) to sign Borrower's name on all
financing statements or any other documents or instruments deemed necessary or
appropriate by Agent to preserve, protect, or perfect Agent's interest in the
Collateral and to file same; and (d) to do all other acts and things necessary
to carry out this Agreement. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of omission or commission nor for any error of judgment or mistake of fact
or of law, unless done maliciously or with gross (not mere) negligence; this
power being coupled with an interest is irrevocable while any of the Obligations
remain unpaid. Agent shall have the right at any time following the occurrence
and during the continuance of an Event of Default, to change the address for
delivery of mail addressed to Borrower to such address as Agent may designate
and to receive, open and dispose of all mail addressed to Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom except with respect to its own gross negligence
or willful misconduct. Following the occurrence and during the continuance of an
Event of Default Agent may, without notice or consent from Borrower, (i) sue
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept following the
occurrence and during the continuance of an Event of Default or Default the
return of the goods represented by any of the Receivables, without notice to or
consent by Borrower, all without discharging or in any way affecting Borrower's
liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. Subject
to the provisions of Section 4.3(b)(i), all proceeds of Collateral shall, at the
direction of Agent, be deposited by Borrower into a lockbox account, dominion
account or such other blocked account ("Blocked Accounts") as Agent may require
pursuant to an arrangement with such bank as may be selected by Borrower and be
acceptable to Agent. Borrower shall issue to any such bank, an irrevocable
letter of instruction directing said bank to transfer such funds so deposited to
Agent, either to any account maintained by Agent at said bank or by wire
transfer to appropriate account(s) of Agent. All funds deposited in such Blocked
Account shall immediately become the property of Agent and Borrower shall obtain
the agreement by such bank to waive any offset rights against the funds so
deposited. Agent assumes no responsibility for such Blocked Account arrangement,
including without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Alternatively,
Borrower shall promptly deliver all proceeds of Collateral received by Borrower
in kind to Agent or Agent may establish depository accounts ("Depository
Accounts") in the name of Agent at a bank or banks for the deposit of such funds
and Borrower shall deposit all proceeds of Collateral or cause same to be
deposited, in kind, in such Depository Accounts of Agent in lieu of depositing
same to the Blocked Accounts.
(i) Adjustments. Borrower will not, without Agent's consent,
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or accept any material returns of merchandise or grant any
additional discounts, allowances or credits thereon except
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for those compromises, adjustments, returns, discounts, credits and allowances
as have been heretofore customary in the business of Borrower.
4.16. Inventory. All Inventory manufactured in the United States has been,
and will be, produced by Borrower in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof except to
the extent directly caused by its own gross negligence or willful misconduct.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of Borrower's obligations under any contract or agreement
assigned to Agent or such Lender, and neither Agent nor any Lender shall be
responsible in any way for the performance by Borrower of any of the terms and
conditions thereof.
4.19. Environmental Matters. (a) Borrower shall ensure that the Real
Property remains in compliance with all Environmental Laws and it will not place
or permit to be placed any Hazardous Substances on any Real Property except as
not prohibited by applicable law or appropriate governmental authorities.
(b) Borrower shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Borrower shall (i) employ in connection with its use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrower shall use its best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person or entity, including any state agency
responsible in whole
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or in part for environmental matters in the state in which the Real Property is
located or the United States Environmental Protection Agency (any such person or
entity hereinafter the "Authority"), then Borrower shall, within five (5)
Business Days, give written notice of same to Agent detailing facts and
circumstances of which Borrower is aware giving rise to the Hazardous Discharge
or Environmental Complaint. Such information is to be provided to allow Agent to
protect its security interest in the Real Property and is not intended to create
nor shall it create any obligation upon Agent or any Lender with respect
thereto.
(e) Borrower shall promptly forward to Agent copies of any request
for information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by Borrower to
dispose of Hazardous Substances and shall continue to forward copies of
correspondence between Borrower and the Authority regarding such claims to Agent
until the claim is settled. Borrower shall promptly forward to Agent copies of
all documents and reports concerning a Hazardous Discharge at the Real Property
that Borrower is required to file under any Environmental Laws. Such information
is to be provided solely to allow Agent to protect Agent's security interest in
the Real Property and the Collateral.
(f) Borrower shall respond in a timely manner to any Hazardous
Discharge or Environmental Complaint and take all action deemed necessary in its
reasonable discretion in order to safeguard the health of any Person and to
avoid subjecting the Collateral or Real Property to any Lien. If Borrower shall
fail to respond promptly to any Hazardous Discharge or Environmental Complaint,
Agent on behalf of the Lenders, upon giving written notice to Borrower at least
ten (10) days in advance, may, but without the obligation to do so, for the sole
purpose of protecting Agent's interest in Collateral: (A) give such notices or
(B) enter onto the Real Property (or authorize third parties to enter onto the
Real Property) and take such actions as Agent (or such third parties as directed
by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate
or otherwise deal with any such Hazardous Discharge or Environmental Complaint.
All reasonable costs and expenses incurred by Agent and the Lenders (or such
third parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrower, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and Borrower. If,
however, within ten (10) days after receiving written notice of the Agent's
intent to respond or act on behalf of the Lenders, Borrower responds to any
Hazardous Discharge or Environmental Complaint, Agent may not proceed to act on
behalf of the Lenders as provided under the previous two sentences.
(g) In addition to those required under Section 6.10 of this
Agreement, and not more frequently than once every two years at Borrower's
expense, or more frequently at Borrower's expense in the event that Agent has
determined (in the exercise of its good faith judgment) that reasonable cause
exists for the performance of an environmental site assessment of the Real
Property, Agent may, upon reasonable advance written notice and without
unreasonable interference with Borrower or Borrower's operations, require
Borrower to provide Agent with an environmental site assessment to determine the
presence or absence of Hazardous Substances on the Real Property, and the
potential costs in connection with abatement, cleanup, remediation or removal of
any Hazardous Substances found on, under, at or within the Real Property
("Environmental Site Assessment" or "Assessment") performed by an environmental
engineering firm acceptable in the reasonable opinion of the Agent
("Environmental Consultant"). The existence of reasonable cause for purposes of
Agent
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requiring Borrower to perform an Environmental Site Assessment as set forth
above shall be Agent's good faith belief of new occurrences or any significant
change in existing conditions, either of which is reasonably likely to cause the
Real Property to be subject to investigation by Authorities or cleanup pursuant
to any Environmental Law. Any such Environmental Site Assessment report shall be
prepared using the applicable then-current ASTM standards, or in any other form
that is acceptable to an appropriate Authority that is charged to oversee the
clean-up of such Hazardous Discharge. If the Environmental Consultant, in
performing the Assessments, determines that the potential costs, individually or
in the aggregate, of abatement, cleanup, remediation or removal of any Hazardous
Substances found on, under, at or within the Real Property exceed $100,000,
Agent shall have the right to require Borrower to post a bond, letter of credit
or other security reasonably satisfactory to Agent to secure payment of these
costs and expenses.
(h) Borrower shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, Affiliates, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or the Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Borrower's
obligations under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Substances at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Substances. Borrower's
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrower's right, title and interest
in and to its owned and leased premises.
4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all Obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and of the Other Documents (a) are within Borrower's corporate powers,
have been duly authorized, are not in contravention of law or the terms of
Borrower's by-laws, certificate of incorporation or other applicable documents
relating to Borrower's formation or to the conduct of Borrower's business or of
any material agreement or undertaking to which Borrower is a party or by which
Borrower is bound, and (b) will not conflict with nor result in any breach in
any of the provisions of or constitute a default under or result in the creation
of any Lien except Permitted Encumbrances upon any asset of Borrower under the
provisions of any agreement,
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charter document, instrument, by-law, or other instrument to which Borrower is a
party or by which it or its property may be bound.
5.2. Formation and Qualification. (a) Borrower is duly incorporated and
in good standing under the laws of the State of Delaware and is qualified to do
business and is in good standing in the states listed on Schedule 5.2(a) which
constitute all states in which qualification and good standing are necessary for
Borrower to conduct its business and own its property except where the failure
to so qualify could not have a Material Adverse Effect. Borrower has delivered
to Agent true and complete copies of its certificate of incorporation and
by-laws and will promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of Borrower are listed on Schedule
5.2(b).
5.3. Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement and the Other Documents shall
be true at the time of Borrower's execution of this Agreement and the Other
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto. Any misrepresentation or breach of any representation or
warranty whatsoever contained in this Agreement or the Other Documents shall be
deemed material.
5.4. Tax Returns. Borrower's federal tax identification number is
62-1284179. Except as set forth on Schedule 5.4, Borrower has filed all federal,
state and local tax returns and other reports it is required by law to file and
has paid all taxes, assessments, fees and other governmental charges that are
due and payable. Federal, state and local income tax returns of Borrower have
been examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years listed on Schedule 5.4.
The provision for taxes on the books of Borrower are adequate for all years not
closed by applicable statutes, and for its current fiscal year, and Borrower has
no knowledge of any deficiency or additional assessment in connection therewith
not provided for on its books.
5.5. Financial Statements
(a) The pro forma balance sheet of Borrower (the "Pro Forma
Balance Sheet") furnished to Agent on the Closing Date reflects the consummation
of the transactions contemplated by the Recapitalization Documents and under
this Agreement (the "Transactions") and is accurate, complete and correct and
fairly reflects the financial condition of Borrower as of the Closing Date after
giving effect to the Transactions, has been prepared in accordance with GAAP,
consistently applied subject to certain post closing adjustments previously
disclosed to Lender (as so adjusted, the "Closing Balance Sheet"). The Pro Forma
Balance Sheet of Borrower has been certified as accurate, complete and correct
in all material respects by the President and Chief Financial Officer of
Borrower. All financial statements referred to in this subsection 5.5(a),
including the related schedules and notes thereto, have been prepared, in
accordance with GAAP, except as may be disclosed in such financial statements.
(b) The cash flow projections of Borrower and its projected
balance sheets as of the Closing Date, copies of which are annexed hereto as
Exhibit 5.5(b) (the "Projections") were prepared by the Chief Financial Officer
of Borrower, are based on underlying assumptions which provide a reasonable
basis for the projections contained therein and reflect Borrower's judgment
based on present circumstances of the most likely set of conditions and course
of action for the projected
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period. The cash flow Projections together with the Pro Forma Balance Sheet, are
referred to as the "Pro Forma Financial Statements".
(c) The consolidated and consolidating balance sheets of Borrower,
its Subsidiaries and such other Persons described therein (including the
accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of most recent fiscal year end, and the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such date, all accompanied by reports thereon
containing opinions without qualification by independent certified public
accountants, copies of which have been delivered to Agent, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in
which such accountants concur and present fairly the financial position of
Borrower and its Subsidiaries at such date and the results of their operations
for such period. Since most recent fiscal year end there has been no change in
the condition, financial or otherwise, of Borrower or its Subsidiaries as shown
on the consolidated balance sheet as of such date and no change in the aggregate
value of machinery, equipment and Real Property owned by Borrower and its
Subsidiaries, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5.6. Corporate Name. Borrower has not been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on Schedule 5.6, nor has Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.
5.7. O.S.H.A. and Environmental Compliance. To the best of Borrower's
knowledge:
(a) Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds and Equipment are in compliance in all material
respects with, the provisions of the Federal Occupational Safety and Health Act,
CERCLA, RCRA and all other Environmental Laws; there have been no outstanding
citations, notices or orders of non-compliance issued to Borrower or relating to
its business, assets, property, leaseholds or Equipment under any such laws,
rules or regulations.
(b) Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws.
(c) (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
Hazardous Substances at, upon, under or within any Real Property; (ii) there are
no underground storage tanks or polychlorinated biphenyls on the Real Property;
(iii) the Real Property has never been used as a treatment, storage or disposal
facility of Hazardous Waste; and (iv) no Hazardous Substances are present on the
Real Property or any other premises leased by Borrower, excepting such
quantities as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of Borrower or of
its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the Transactions, Borrower will be
solvent, able to pay its debts as they mature, have capital sufficient to carry
on its business and all businesses in which it is about to engage, and (i) as of
the Closing Date, the fair present saleable value of its assets, calculated on a
going concern basis, is in excess of the amount of its liabilities and (ii)
subsequent to the Closing
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Date, the fair saleable value of its assets (calculated on a going concern
basis) will be in excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower has (i) no
pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect, and (ii) no
liabilities nor indebtedness other than the Obligations.
(c) Borrower is not in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect on Borrower, nor is Borrower in violation of any
order of any court, governmental authority or arbitration board or tribunal.
(d) Neither Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and Borrower and each member
of the Controlled Group has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of each Plan, (ii) each Plan which is
intended to be a qualified plan under Section 401(a) of the Code as currently in
effect has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) neither Borrower nor any
member of the Controlled Group has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof or by the PBGC, and there is no occurrence which would cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Plan, (v) at this
time, the current value of the assets of each Plan exceeds the present value of
the accrued benefits and other liabilities of such Plan and neither Borrower nor
any member of the Controlled Group knows of any facts or circumstances which
would materially change the value of such assets and accrued benefits and other
liabilities, (vi) neither Borrower nor any member of the Controlled Group has
breached any of the responsibilities, obligations or duties imposed on it by
ERISA with respect to any Plan, (vii) neither Borrower nor any member of a
Controlled Group has incurred any liability for any excise tax arising under
Section 4972 or 4980B of the Code, and no fact exists which could give rise to
any such liability, (viii) neither Borrower nor any member of the Controlled
Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a
"prohibited transaction" described in Section 406 of the ERISA or Section 4975
of the Code nor taken any action which would constitute or result in a
Termination Event with respect to any such Plan which is subject to ERISA, (ix)
Borrower and each member of the Controlled Group has made all contributions due
and payable with respect to each Plan, (x) there exists no event described in
Section 4043(b) of ERISA, for which the thirty (30) day notice period contained
in 29 CFR ss.2615.3 has not been waived, (xi) neither Borrower nor any member of
the Controlled Group has any fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than employees or
former employees of Borrower and any member of the Controlled Group, and (xii)
neither Borrower nor any member of the Controlled Group has withdrawn,
completely or partially, from any Multiemployer Plan so as to incur liability
under the Multiemployer Pension Plan Amendments Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower are set
forth on Schedule 5.9, are valid and have been duly registered or filed with all
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appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such patent,
trademark, copyright, design right, tradename, trade secret or license and
Borrower is not aware of any grounds for any challenge, except as set forth in
Schedule 5.9 hereto. Each patent, patent application, patent license, trademark,
trademark application, trademark license, service mark, service mark
application, service mark license, design right, copyright, copyright
application and copyright license owned or held by Borrower and all trade
secrets used by Borrower consists of original material or property developed by
Borrower or was lawfully acquired by Borrower from the proper and lawful owner
thereof. Each of such items has been maintained so as to preserve the value
thereof from the date of creation or acquisition thereof. With respect to all
software used by Borrower, Borrower is in possession of all source and object
codes related to each piece of software or is the beneficiary of a source code
escrow agreement, each such source code escrow agreement being listed on
Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, Borrower
(a) is in compliance with and (b) has procured and is now in possession of, all
material licenses or permits required by any applicable federal, state or local
law or regulation for the operation of its business in each jurisdiction wherein
it is now conducting or proposes to conduct business and where the failure to
procure such licenses or permits could have a Material Adverse Effect.
5.11. Default of Indebtedness. Borrower is not in default in the payment
of the principal of or interest on any material Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
5.12. No Default. Borrower is not in default in the payment or performance
of any of its contractual obligations which default could have a Material
Adverse Effect and no Default has occurred which has a Material Adverse Effect.
5.13. No Burdensome Restrictions. Borrower is not party to any contract or
agreement the performance of which could have a Material Adverse Effect.
Borrower has not agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
5.14. No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of any of Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
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5.16. Investment Company Act. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by Borrower in this
Agreement or in the Recapitalization Documents or in any financial statement,
report, certificate or any other document furnished in connection herewith or
therewith contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein not misleading.
There is no fact known to Borrower or which reasonably should be known to
Borrower which Borrower has not disclosed to Agent in writing with respect to
the transactions contemplated by the Recapitalization Documents or this
Agreement which could have a Material Adverse Effect.
5.18. Delivery of Recapitalization Documents. Agent has received complete
copies of the Recapitalization Documents (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto, if any)
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
5.19. Swaps. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower has agreed or will agree to pledge any
collateral for such arrangement or to swap interest rates or currencies unless
same provides that damages upon termination following an event of default
thereunder are payable on an unlimited "two-way basis" without regard to fault
on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.21. Application of Certain Laws and Regulations. Neither Borrower nor
any Affiliate of Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22. Business and Property of Borrower. Upon and after the Closing Date,
Borrower does not propose to engage in any business other than the design,
manufacture, marketing and licensing of various product categories including,
but not limited to activewear clothing, dancewear, tights and legwear and
activities necessary to conduct such business. On the Closing Date, Borrower
will own all the property and possess all of the rights and Consents necessary
for the conduct of the business of Borrower.
VI. AFFIRMATIVE COVENANTS
Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
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6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge the account of Borrower for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral which failure to so operate, maintain,
enforce or protect could have a Material Adverse Effect; (b) keep in full force
and effect its existence and comply in all material respects with the laws and
regulations governing the conduct of its business where the failure to do so
could have a Material Adverse Effect; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof where the failure to do so could have a Material Adverse
Effect.
6.3. Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to Borrower which could have a Material Adverse Effect.
6.4. Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between Borrower and the United States, any
state or any department, agency or instrumentality of any of them.
6.5. Tangible Net Worth. Maintain as of the end of each month a Tangible
Net Worth in an amount not less than $2,000,000 subject to adjustment solely to
the extent that Tangible Net Worth as reflected on the Closing Date Balance
Sheet is different than Tangible Net Worth reflected on the Pro Forma Balance
Sheet.
6.6. Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its material
obligations and liabilities of whatever nature, except when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
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6.8. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments and the absence of notes) and to be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting accountants or
officer, as the case may be, and disclosed therein).
6.9. Exercise of Rights. Enforce all of its rights under the
Recapitalization Documents including, but not limited to, all indemnification
rights and pursue all remedies available to it with diligence consistent with
Borrower's business judgment and in good faith in connection with the
enforcement of any such rights.
6.10. Environmental Site Assessments. Within fifteen (15) days of the
Closing Date, Borrower shall engage independent environmental engineering firms
to conduct Phase I Environmental Site Assessments of all Real Property owned or
leased by Borrower (other than Wyomissing, Pennsylvania and the retail outlets)
which reports shall be delivered to Agent in form and substance satisfactory to
it no later than forty five (45) days following the Closing Date. If any such
Phase I Environmental Site Assessment indicates that a Phase II Environmental
Site Assessment ("Phase II") is recommended, promptly following receipt of such
assessment Borrower shall engage an independent environmental engineering firm
to conduct any such recommended Phase II. If any Phase II indicates that certain
remediation efforts are recommended, Borrower shall promptly conduct such
recommended remediation action.
6.11. Surveys. Within forty-five (45) days of the Closing Date, Borrower
shall deliver to Agent surveys in form and substance satisfactory to Agent on
all Real Property subject to a Mortgage. In the event that any survey shall
indicate that (a) there is more than an immaterial deviation in the boundaries
with respect to and/or the size of the parcel comprising any such Real Property
or (b) any structure or other improvement on any such Real Property is not
located within the boundaries as set forth in the survey with respect to such
Real Property (any such Real Property, and "Affected Parcel"), Borrower shall
deliver to Agent no later than one hundred twenty (120) days following the
Closing Date, an appraisal of the fair market value of the Affected Parcel,
conducted by independent third parties who are satisfactory to Agent (such
appraisal, a "New Appraisal"). If the fair market value of the Affected Parcel
as set forth in the New Appraisal is in Agent's credit judgment materially
different from that set forth in the appraisals provided to Agent prior to the
Closing Date, Agent may impose a reserve in such amounts as Agent shall
reasonably determine necessary.
VII NEGATIVE COVENANTS
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets
(a) Enter into any merger, consolidation or other reorganization
with or into any other Person or acquire all or a substantial portion of the
assets or stock of any Person or permit any other Person to consolidate with or
merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business or as
permitted pursuant to Section 4.3 hereof.
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7.2. Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on Schedule 7.3, and (b) the endorsement of checks in
the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency; and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business and (b) loans or
advances to its employees in the ordinary course of business not to exceed the
aggregate amount of $100,000 at any time outstanding.
7.6. Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for fixed or capital assets (including capitalized leases)
including, without limitation, with respect to fixtures or decorations purchased
in whole or in part for installation in (x) stores of third party Customers of
Borrower to enhance Borrower's identity and/or sales of Borrower's products or
(y) Borrower's own retail stores in any fiscal year in an amount in excess of
$6,000,000.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower (other than dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of Borrower
except (a) Borrower may repurchase any redeemed capital stock of terminated
employees of Borrower in accordance with the provisions of The Danskin, Inc.
Savings Plan and (b) so long as no Event of Default shall have occurred or would
occur after giving effect thereto Borrower may declare and pay dividends as
expressly provided in the Certificate of Designations, Preferences and Rights of
Series D Cumulative Convertible Preferred Stock of Borrower filed with the
Secretary of State of Delaware as of September 22, 1997 as in effect on such
date.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of Borrower except in respect of (i)
Indebtedness to Lenders; (ii) Indebtedness incurred for capital expenditures
permitted under Section 7.6 hereof; and (iii) Indebtedness as described on
Schedule 7.8 hereof.
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7.9. Nature of Business. Substantially change the nature of the business
in which it is presently engaged, nor except as specifically permitted herein
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions disclosed in the
ordinary course of business, on an arm's-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate.
7.11. Subsidiaries
(a) Form any Subsidiary unless (i) such Subsidiary expressly joins
in this Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrower hereunder, and under the Notes, and under any other
agreement between Borrower and Lenders and such Subsidiary grants a first
priority security interest in and/or lien upon all of its assets to Agent for
the benefit of Lenders, as collateral for the Obligations hereunder and (ii)
Agent shall have received all documents, including legal opinions, it may
reasonably require to establish compliance with each of the foregoing
conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.12. Fiscal Year and Accounting Changes. Change its fiscal year from a
year ending on the last Saturday in December of each year or make any
significant change (i) in accounting treatment and reporting practices except as
required by GAAP or (ii) in tax reporting treatment except as required by law.
7.13. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower's business as conducted on
the date of this Agreement.
7.14. Amendment of Articles of Incorporation, By-Laws. Other than as
contemplated by the Recapitalization amend, modify or waive any term or material
provision of its Articles of Incorporation or By-Laws unless required by law.
7.15. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d); (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code; (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code; (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of Borrower or any member of the Controlled Group or the
imposition of a lien on the property of Borrower or any member of the Controlled
Group pursuant to Section 4068 of ERISA; (v) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d); (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(vii) fail promptly to notify Agent of the occurrence of any Termination Event;
(viii) fail to comply, or permit a member of
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the Controlled Group to fail to comply, with the requirements of ERISA or the
Code or other applicable laws in respect of any Plan; (ix) fail to meet, or
permit any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.
7.16. Prepayment of Indebtedness. Except as described in Schedule 7.16
hereto, at any time, directly or indirectly, prepay any Indebtedness for
borrowed money (other than to Lenders), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of Borrower other than in the ordinary course
of its business consistent with its past practices.
7.17. Subordinated Obligations. Except as described on Schedule 7.16
hereto, at any time, directly or indirectly, pay, prepay, repurchase, redeem,
retire or otherwise acquire, or make any payment on account of any principal of,
interest on or premium payable in connection with the repayment or redemption of
the Subordinated Obligations, except as expressly permitted in the Subordination
Agreement as in effect on the Closing Date.
7.18. Other Agreements. Enter into any material amendment, waiver or
modification of the Recapitalization Documents or any related agreements.
VIII. CONDITIONS PRECEDENT
8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Notes. Agent shall have received the Notes duly executed and
delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any Other Document or under law or reasonably
requested by the Agent to be filed, registered or recorded in order to create,
in favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
(c) Corporate Proceedings of Borrower. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the Board of Directors of Borrower authorizing (i) the execution, delivery
and performance of this Agreement, the Notes, the Mortgages, any related
agreements and the Recapitalization Documents (collectively the "Documents") and
(ii) the granting by Borrower of the security interests in and liens upon the
Collateral in each case certified by the Secretary or an Assistant Secretary of
Borrower as of the Closing Date; and, such certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
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(d) Incumbency Certificates of Borrower. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the Articles
or Certificate of Incorporation of Borrower, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation together with copies of the By-Laws of Borrower
and all agreements of Borrower's shareholders certified as accurate and complete
by the Secretary of Borrower;
(f) Good Standing Certificates. Agent shall have received good
standing certificates for Borrower dated not more than thirty (30) days prior to
the Closing Date, issued by the Secretary of State or other appropriate official
of Borrower's jurisdiction of incorporation and each jurisdiction where the
conduct of Borrower's business activities or the ownership of its properties
necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed legal
opinion of Morgan Lewis & Bockius LLP and counsel in Mississippi reasonably
acceptable to Agent in form and substance satisfactory to Agent which shall
cover such matters incident to the transactions contemplated by this Agreement,
the Notes, the Recapitalization Documents and related agreements as Agent may
reasonably require and Borrower hereby authorizes and directs such counsel to
deliver such opinions to Agent and the Lenders;
(h) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or against the officers or directors of Borrower (A)
in connection with the Documents or any of the transactions contemplated thereby
or (B) which if adversely determined, could, in the reasonable opinion of Agent,
have a Material Adverse Effect; and (ii) no injunction, writ, restraining order
or other order of any nature materially adverse to Borrower or the conduct of
its business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(i);
(j) Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to the Agent, of the Receivables, Inventory, General
Intangibles, Real Property and Equipment of Borrower and all books and records
in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent and
the Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) Pro Forma Financial Statements. Agent shall have received a
copy of the Pro Forma Financial Statements and the financial statements referred
to in Section 5.5(c) hereof which shall be satisfactory in all respects to
Agent;
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(m) Recapitalization Documents. Agent shall have received final
executed copies of the Recapitalization Documents and all related agreements,
documents and instruments as in effect on the Closing Date and the transactions
contemplated by such documentation including the transactions contemplated by
Section 9.18 thereof shall be consummated to the satisfaction of Agent;
(n) Subordination Agreements. Agent shall have entered into the
Subordination Agreement with Borrower and each Person listed on Schedule 8.1(n)
hereto which shall set forth the basis upon which such Persons may receive, and
Borrower may make, payments with respect to the applicable Subordinated Notes
which basis shall be satisfactory in form and substance to Agent in its sole
discretion;
(o) Other Documents. Agent shall have received executed copies of
all Other Documents, each in form and substance satisfactory to Agent;
(p) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrower's liability insurance policies, together with endorsements naming Agent
as a co-insured;
(q) Title Insurance. Agent shall have received fully paid
mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Agent's satisfaction to evidence the form of such
policies to be delivered with respect to the Mortgages), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Real Property subject to the
Mortgages, insuring the Mortgages to create a valid Lien on the Real Property
with no exceptions which Agent shall not have approved in writing and no survey
exceptions;
(r) Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(s) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral and such letters as shall be
acceptable to Agent evidencing that all Blocked Accounts and Depository Accounts
and all bank accounts which transmit funds to such Blocked Accounts or
Depository Accounts will accept changes in instructions only from Agent;
(t) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(u) No Adverse Material Change. (i) Since December 28, 1996, there
shall not have occurred (x) any material adverse change in the condition,
financial or otherwise, operations, properties or prospects of Borrower, (y) no
material damage or destruction to any of the Collateral nor any material
depreciation in the value thereof and (z) no event, condition or state of facts
which could have a Material Adverse Effect and (ii) no representations made or
information supplied to Agent or any Lender shall have been proven to be
inaccurate or misleading in any material respect;
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(v) Third Party Agreements. Agent shall have received landlord,
mortgagee, warehouseman or licensor agreements satisfactory to Agent with
respect to all premises leased by Borrower at which Inventory is located or all
Inventory which may be subject to claims of third parties;
(w) Mortgages. Agent shall have received in form and substance
satisfactory to Agent (i) executed Mortgages, (ii) title policies for the Real
Property and (iii) surveys; and
(x) Contract Review. Agent shall have reviewed all contracts of
Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(y) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as of the
Closing Date, stating that (i) all representations and warranties set forth in
this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrower is on such date in compliance with all the terms and
provisions set forth in this Agreement and the other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(z) Borrowing Base. Agent shall have received evidence from
Borrower that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Revolving Advances and
Letters of Credit in the amount requested by Borrower on the Closing Date;
(ab) Undrawn Availability. After giving effect to the Advances made
on the Closing Date hereunder, Borrower shall have Undrawn Availability of at
least $5,000,000;
(ac) Appraisals. Agent shall have received appraisals on the
Company's trademarks, retail inventory (evidencing a net recovery rate of at
least 75% of the Company's cost) and for the auction value of machinery and
equipment and the fair market value of real estate, conducted by independent
third parties who are satisfactory to Agent and which appraisals are
satisfactory in form and substance to Agent. In addition, in the event that
Agent shall not receive the foregoing appraisals with respect to the retail
inventory in form and substance satisfactory to Agent prior to closing the
advance rate on Inventory located at the Company's retail stores shall not
exceed 45%; and
(ad) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent, the Lenders and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, its
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations
and warranties made by Borrower in or pursuant to this Agreement and any related
agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any
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related agreement shall be true and correct in all material respects on and as
of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have occurred
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date; provided, however that Lenders in
their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be
made, after giving effect thereto, the aggregate Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
Borrower's reclamation or repossession of, or the return to Borrower of, a
material amount of goods or claims or disputes asserted by any Customer or other
obligor.
9.2. Schedules. Deliver to Agent on or before (x) the tenth (10th) day of
each month as to clauses (a) and (b) below and, as to clause (c) below on or
before the fifteenth (15th) day of each month as and for the prior month or more
frequently if requested by Agent (a) accounts receivable ageings, (b) accounts
payable schedules and (c) Inventory reports. In addition, Borrower will deliver
to Agent at such intervals as Agent may require: (i) confirmatory assignment
schedules, (ii) copies of Customer's invoices, (iii) evidence of shipment or
delivery, (iv) credit and debit memos issued by Borrower and (v) such further
schedules, documents and/or information regarding the Collateral as Agent may
require including, without limitation, trial balances and test verifications.
Agent shall have the right to confirm and verify all Receivables by any manner
and through any medium it considers advisable. The items to be provided under
this Section are to be in form satisfactory to Agent and executed by Borrower
and delivered to Agent from time to time solely for Agent's convenience in
maintaining records of the Collateral, and Borrower's failure to deliver any of
such items to Agent shall not affect, terminate, modify or otherwise limit
Agent's Lien with respect to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President and/or Chief Financial Officer of Borrower
stating, to the best of his knowledge, that Borrower is in compliance in all
material respects with all federal, state and local laws relating to
environmental protection and control and occupational safety and health. To the
extent Borrower is not in compliance
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with the foregoing laws, the certific pate shall set forth with specificity all
areas of non-compliance and the proposed action Borrower will implement in order
to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any litigation, suit
or administrative proceeding affecting Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which may
have a Material Adverse Effect.
9.5. Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event of default
under the Recapitalization Documents; (c) any event which with the giving of
notice or lapse of time, or both, would constitute an event of default under the
Recapitalization Documents; (d) any event, development or circumstance whereby
any financial statements or other reports furnished to Agent fail in any
material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of Borrower as of the date
of such statements; (e) any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of the Code, could subject Borrower to a tax imposed by
Section 4971 of the Code; (f) each and every default by Borrower which might
result in the acceleration of the maturity of any Indebtedness, including the
names and addresses of the holders of such Indebtedness with respect to which
there is a default existing or with respect to which the maturity has been or
could be accelerated, and the amount of such Indebtedness; and (g) any other
development in the business or affairs of Borrower which might have a Material
Adverse Effect; in each case describing the nature thereof and the action
Borrower proposes to take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between Borrower and the United States, any
state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrower, financial statements of Borrower
including, but not limited to, statements of income and stockholders' equity and
cash flow from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon without qualification by
an independent certified public accounting firm selected by Borrower and
satisfactory to Agent (the "Accountants"). In addition, the reports shall be
accompanied by a certificate of Borrower's President and/or Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within forty five (45)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrower and unaudited statements of income and stockholders' equity and cash
flow of Borrower reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's President and/or Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such
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Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such default
and, such certificate shall have appended thereto calculations which set forth
Borrower's compliance with the requirements or restrictions imposed by Sections
6.5, 7.6 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days
after the end of each month (or forty five (45) days after the end of any month
that is also the end of a fiscal quarter), an unaudited balance sheet of
Borrower and unaudited statements of income and stockholders' equity and cash
flow of Borrower reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's President and/or Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such default, and such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Section 6.5, 7.6 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and/or file with the Securities and Exchange Commission and (ii)
copies of all notices sent pursuant to the Recapitalization Documents.
9.11. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent and
Lenders to determine whether the terms, covenants, provisions and conditions of
this Agreement and the Notes have been complied with by Borrower including,
without limitation and without the necessity of any request by Agent, (a) copies
of all environmental audits and reviews, (b) written notice at least five (5)
days prior to Borrower's opening of any new office or place of business or
within thirty (30) days following the Borrower's closing of any existing office
or place of business, and (c) promptly upon Borrower's learning thereof, notice
of any labor dispute to which Borrower may become a party, any strikes or
walkouts relating to any of its plants or other facilities, and the expiration
of any labor contract to which Borrower is a party or by which Borrower is
bound.
9.12. Projected Operating Budget. Furnish Agent (x) no later than thirty
(30) days following the beginning of fiscal year 1998 and (y) no later than
thirty (30) days prior to the beginning of each of Borrower's fiscal years
commencing with fiscal year 1999, a month by month projected operating budget
and cash flow of Borrower for such fiscal year (including an income statement
for each month and a balance sheet as at the end of the last month in each
fiscal quarter), such projections to be accompanied by a certificate signed by
Borrower's President or President and/or Chief Financial Officer to the effect
that such projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
monthly report, a written report summarizing all material variances from budgets
submitted by Borrower pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.
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9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent issued to Borrower by any
Governmental Body or any other Person that is material to the operation of
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by Borrower with any Governmental Body or Person, if such
reports indicate any material change in the business, operations, affairs or
condition of Borrower, or if copies thereof are requested by Agent, and (iv)
copies of any material notices and other communications from any Governmental
Body or Person which specifically relate to Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Service, Department of Labor or PBGC with respect thereto,
(ii) Borrower or any member of the Controlled Group knows or has reason to know
that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Code) has occurred together with a written statement describing such
transaction and the action which Borrower or any member of the Controlled Group
has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all
communications received by either Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
Plan or the establishment of any new Plan or the commencement of contributions
to any Plan to which either Borrower or any member of the Controlled Group was
not previously contributing shall occur, (v) Borrower or any member of the
Controlled Group shall receive from the PBGC a notice of intention to terminate
a Plan or to have a trustee appointed to administer a Plan, together with copies
of each such notice, (vi) Borrower or any member of the Controlled Group shall
receive any favorable or unfavorable determination letter from the Service
regarding the qualification of a Plan under Section 401(a) of the Code, together
with copies of each such letter; (vii) Borrower or any member of the Controlled
Group shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) Borrower or any member of the
Controlled Group shall fail to make a required installment or any other required
payment under Section 412 of the Code on or before the due date for such
installment or payment; (ix) Borrower or any member of the Controlled Group
knows that (a) a Multiemployer Plan has been terminated, (b) the administrator
or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer
Plan, or (c) the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
XI. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of
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intention to prepay, or by required prepayment or failure to pay any other
liabilities or make any other payment, fee or charge provided for herein or in
any Other Document when due;
10.2. any representation or warranty made or deemed made by Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by Borrower to (i) furnish financial information when due or
when requested or (ii) permit the inspection of its books or records in
accordance with Agent's rights under the terms of this Agreement;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of Borrower's property which is not stayed
or lifted within thirty (30) days;
10.5. (i) failure or neglect of Borrower to perform, keep or observe the
provisions of (a) Section 6.5 which shall not be cured within thirty (30) days
of such occurrence or (b) Sections 4.6, 4.7, 4.8, 4.9, 4.11, 4.19, 6.1, 6.3,
6.4, 6.6, 9.4, 9.6 or 9.10 which shall not be cured within ten (10) days of such
occurrence or (ii) failure or neglect of Borrower to perform, keep or observe
any other term, provision, condition, covenant herein contained, or contained in
any Other Document or arrangement which is included within the definition of
Obligations hereunder, now or hereafter entered into between Borrower, Agent
and/or any Lender;
10.6. any judgment is rendered or judgment liens filed against Borrower
for an amount in excess of $500,000 which within thirty (30) days of such
rendering or filing is not either satisfied, stayed or discharged of record;
10.7. Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within forty-five (45) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
10.8. Borrower shall admit in writing its inability, or be unable, to pay
its debts as they become due or cease operations of its present business;
10.9. any Subsidiary of Borrower shall (i) apply for, consent to or suffer
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of effecting any of
the foregoing;
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10.10. any material change in Borrower's condition or affairs (financial
or otherwise) which in Lenders' opinion impairs the Collateral or the ability of
Borrower to perform its Obligations under this Agreement;
10.11. any Lien created hereunder or provided for hereby with respect to a
material portion of the Collateral or under any related agreement for any reason
ceases to be or is not a valid and perfected Lien having a first priority
interest (other than as a result of Permitted Encumbrances which have priority
over any Lien created hereunder as a matter of law or which have priority over
any Lien created hereunder as of the Closing Date);
10.12. default of the obligations of Borrower has occurred and is
continuing under the Recapitalization Documents which default shall not have
been cured or waived within any applicable grace period which default has a
Material Adverse Effect;
10.13. a default of the obligations of Borrower under any other agreement
to which it is a party shall occur which has a Material Adverse Effect and which
default is not cured within any applicable grace period;
10.14 an event of default has occurred and is continuing with respect to
any Subordinated Note which default shall not have been cured or waived within
any applicable grace period and for which the holder of such Subordinated Note
is entitled to take action against Borrower;
10.15. any Change of Control shall occur;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent;
10.17. if (i) any Governmental Body shall (A) revoke, terminate, suspend
or adversely modify any license, permit, patent, trademark or tradename of
Borrower, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such license, permit, trademark, tradename or patent and such
proceedings shall not be dismissed or discharged within sixty (60) days, or (c)
schedule or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of Borrower's business and
the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trademark, tradename or patent; (ii) any agreement which is
necessary or material to the operation of Borrower's business shall be revoked
or terminated and not replaced by a substitute acceptable to Agent within thirty
(30) days after the date of such revocation or termination, and such revocation
or termination and non-replacement could have a Material Adverse Effect;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body, or Borrower or the title and rights of Borrower or any
Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the opinion
of Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;
10.19. the operations of Borrower's manufacturing facility are interrupted
at any time for more than 14 consecutive days, unless (x) for purposes of
conducting inventory for not more than 14 consecutive days and (y) Borrower
shall (i) be entitled to receive for such period of interruption,
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proceeds of business interruption insurance sufficient to assure that its per
diem cash needs during such period is at least equal to its average per diem
cash needs for the consecutive three month period immediately preceding the
initial date of interruption and (ii) receive such proceeds in the amount
described in clause (i) preceding not later than thirty (30) days following the
initial date of any such interruption; provided, however, that notwithstanding
the provisions of clauses (i) and (ii) of this section, an Event of Default
shall be deemed to have occurred if Borrower shall be receiving the proceeds of
business interruption insurance for a period of thirty (30) consecutive days; or
10.20. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any
member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, could have a Material Adverse Effect.
XII. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over Borrower. Upon the occurrence of any Event of Default, Agent
shall have the right to exercise any and all other rights and remedies provided
for herein, under the Uniform Commercial Code and at law or equity generally,
including, without limitation, the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Following the occurrence and during the
continuance of an Event of Default Agent may enter any of Borrower's premises or
other premises without legal process and without incurring liability to Borrower
therefor, and Agent may thereupon, or at any time thereafter, in its discretion
without notice or demand, take the Collateral and remove the same to such place
as Agent may deem advisable and Agent may require Borrower to make the
Collateral available to Lenders at a convenient place. Following the occurrence
and during the continuance of an Event of Default, with or without having the
Collateral at the time or place of sale, Agent may sell the Collateral, or any
part thereof, at public or private sale, at any time or place, in one or more
sales, at such price or prices, and upon such terms, either for cash, credit or
future delivery, as Agent may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Agent shall give Borrower reasonable
notification of such sale or sales, it being agreed that in all events written
notice mailed to Borrower at least five (5) Business Days prior to such sale or
sales is reasonable notification. At any public sale Agent or any Lender may bid
for and become the purchaser, and Agent, any Lender or any other purchaser at
any such sale thereafter shall hold the Collateral sold absolutely free from any
claim or right of whatsoever kind, including any equity of redemption and such
right and equity are hereby expressly waived and released by Borrower. In
connection with the exercise of the foregoing remedies, Agent is granted
permission, without charge, to use all of Borrower's trademarks, trade styles,
trade names, patents, patent applications, licenses, franchises and other
proprietary rights which are used in connection with (a) Inventory for the
purpose
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of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Agent and Lenders
for collection and for acquisition, completion, protection, removal, storage,
sale and delivery of the Collateral; second, to interest due upon any of the
Obligations; and, third, to the principal of the Obligations. If any deficiency
shall arise, Borrower shall remain liable to Agent and the Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any of Borrower's
property held by Agent and such Lender or by the Bank to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XIII. WAIVERS AND JUDICIAL PROCEEDINGS
12.1. Waiver of Notice. Borrower hereby waives notice of non-payment of
any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION
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WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIV. EFFECTIVE DATE AND TERMINATION
13.1. Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of each of
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until the last day of the Term unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time upon ninety (90) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are voluntarily prepaid in full prior
to the last day of the Term (the date of such prepayment hereinafter referred to
as the "Prepayment Date"), Borrower shall pay an early termination fee in an
amount equal to (x) $1,350,000 if the Prepayment Date occurs from the Closing
Date to and including the date immediately preceding the first anniversary of
the Closing Date, (y) $900,000 if the Prepayment Date occurs on or after the
first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date, and (z) $200,000 if the
Prepayment Date occurs on or after the second anniversary of the Closing Date to
and including the date immediately preceding the third anniversary of the
Closing Date. Such early termination fee shall also be due and payable by
Borrower upon termination of this Agreement by Agent and Lenders following the
occurrence of an Event of Default.
13.2. Termination. The termination of the Agreement shall not affect any
of Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that Borrower's Account may from time to time be temporarily in a zero or
credit position, until all of the Obligations of Borrower have been paid or
performed in full after the termination of this Agreement or Borrower has
furnished Agent and the Lenders with an indemnification satisfactory to Agent
and the Lenders with respect thereto. Accordingly, Borrower waives any rights
which it may have under Section 9-404(1) of the Uniform Commercial Code to
demand the filing of termination statements with respect to the Collateral, and
Agent shall not be required to send such termination statements to Borrower, or
to file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XV. REGARDING AGENT
14.1. Appointment. Each Lender hereby designates CBCC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees
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(except the fees set forth in Sections 3.3(a) and 3.4), charges and collections
(without giving effect to any collection days) received pursuant to this
Agreement, for the benefit of Lenders. Agent may perform any of its duties
hereunder by or through its agents or employees. As to any matters not expressly
provided for by this Agreement (including without limitation, collection of the
Note) Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding; provided, however,
that Agent shall not be required to take any action which exposes Agent to
liability or which is contrary to this Agreement or the Other Documents or
applicable law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of Borrower to perform its obligations hereunder. Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect the properties,
books or records of Borrower. The duties of Agent as respects the Advances to
Borrower shall be mechanical and administrative in nature; Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any Lender;
and nothing in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon Agent any obligations in respect of this
Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of Borrower in connection with the making and the continuance of the
Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of Borrower. Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by Borrower pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of Borrower, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Note, the Other Documents or the financial
condition of Borrower, or the existence of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower.
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Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, 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. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, 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 Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrower as
if it were not performing the
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duties specified herein, and may accept fees and other consideration from
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8 and 9.9 from Borrower pursuant to
the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrower's Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrower's obligations to make payments for the account of the Lenders
or the relevant one or more of them pursuant to this Agreement.
XVI. MISCELLANEOUS
15.1. Governing Law. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York except to the extent of the
Confession of Judgment provided for in Section 15.1(b) of this Agreement to
which the laws of the Commonwealth of Pennsylvania shall apply. Any judicial
proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, Borrower accepts for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrower at its address set forth in Section 15.6
and service so made shall be deemed completed five (5) Business Days after the
same shall have been so deposited in the mails of the United States of America.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the right of Agent or any Lender to bring proceedings
against Borrower in the courts of any other jurisdiction. Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Any judicial proceeding by Borrower against Agent or any
Lender involving, directly or indirectly, any matter or claim in any way arising
out of, related to or connected with this Agreement or any related agreement,
shall be brought only in a federal or state court located in the City of New
York, State of New York.
(b) BORROWER EMPOWERS ANY ATTORNEY OR ANY COURT OF RECORD WITHIN
THE UNITED STATES OF AMERICA, OR ELSEWHERE, AS ATTORNEY FOR AGENT AND THE
LENDERS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS APPEAR FOR AND, WITH OR
WITHOUT A DECLARATION FILED, TO CONFESS JUDGMENT OR A SERIES OF JUDGMENTS
AGAINST BORROWER IN FAVOR OF AGENT AND THE LENDERS, EACH FOR THE FULL AMOUNT OF
THE OBLIGATIONS INCLUDING ALL INTEREST ACCRUED THEREON AND ALL OTHER SUMS THEN
PAYABLE TO AGENT AND THE LENDERS FOR WHICH JUDGMENT HAS NOT HERETOFORE BEEN
ENTERED AGAINST BORROWER, TOGETHER WITH COSTS OF SUIT AND REASONABLE ATTORNEY'S
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<PAGE>
COMMISSIONS FOR COLLECTION AND BORROWER HEREBY FOREVER WAIVES AND RELEASES ANY
AND ALL ERRORS IN SAID PROCEEDINGS, WAIVES STAY OF EXECUTION, STAY, CONTINUANCE
OR ADJOURNMENT OF SALE ON EXECUTION, THE RIGHT TO PETITION TO SET ASIDE OR ORDER
A RESALE, THE RIGHT OF INQUISITION AND EXTENSION OF TIME OF PAYMENT, AND AGREES
TO CONDEMNATION OF ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY EXECUTION ISSUED ON
ANY SUCH JUDGMENT, AND BORROWER SPECIFICALLY WAIVES ALL EXEMPTIONS FROM LEVY AND
SALE OFANY PROPERTY THAT NOW IS OR MAY HEREAFTER BE EXEMPT UNDER ANY EXISTING OR
FUTURE LAWS OF THE UNITED STATES OF AMERICA OR THE COMMONWEALTH OF PENNSYLVANIA
OR OF ANY OTHER JURISDICTION. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER
JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS AGENT AND THE
LENDERS OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS SHALL DEEM NECESSARY OR
DESIRABLE.
15.2. Entire Understanding. (a) This Agreement and the documents executed
concurrently herewith contain the entire understanding between Borrower, Agent
and each Lender and supersedes all prior agreements and understandings, of, or
relating to the subject matter hereof. Any promises, representations, warranties
or guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, and executed by the party or parties making such
representations, warranties or guarantees. Neither this Agreement nor any
portion or provisions hereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged. Borrower acknowledges that it has been advised by counsel
in connection with the execution of this Agreement and Other Documents and is
not relying upon oral representations or statements inconsistent with the terms
and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrower may, subject to the provisions of this Section
15.2 (b), from time to time enter into written supplemental agreements to this
Agreement, the Notes or the Other Documents executed by Borrower, for the
purpose of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of the Lenders, Agent or Borrower thereunder or
the conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all the Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) increase the Maximum Loan Amount or the Maximum
Revolving Advance Amount or permit any Revolving Advance to be made if after
giving effect thereto the total of Revolving Advances outstanding would exceed
the Formula Amount for more than sixty (60) consecutive Business days or exceed
110% of the Formula Amount;
(iii) extend the final maturity of any Note or any
scheduled date for any payment of principal, interest or fees payable hereunder,
or decrease the rate of interest or reduce any fee payable by Borrower to
Lenders pursuant to this Agreement;
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(iv) alter the definition of the term Required Lenders
or alter, amend or modify this Section 15.2(b);
(v) release any Collateral during any calendar year
(other than in accordance with the provisions of this Agreement) having an
aggregate value in excess of $250,000; or
(vi) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
15.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the benefit
of Borrower, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Transferee").
(c) CBCC may sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions approved by Borrower which approval shall not be
unreasonably withheld and one or more additional banks or financial institutions
may commit to make Advances hereunder (each a "Purchasing Lender"), in minimum
amounts of not less than $10,000,000, pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording provided, that, after giving effect to any
such transfer, CBCC shall retain a Commitment Percentage of at least 51%. Upon
such execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
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 thereunder with a Commitment Percentage as set forth therein, and (ii)
the transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a notation for that
purpose. 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 the
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 Other Documents. Borrower hereby consents to the addition
of such Purchasing Lender and the resulting adjustment of the 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 Other Documents. Borrower shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.
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<PAGE>
(d) Agent shall maintain at its address 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 Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrower, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $2500 payable by the applicable Purchasing Lender upon the effective
date of each transfer or assignment to such Purchasing Lender.
(e) Subject to the provisions of Section 15.15, Borrower
authorizes each Lender to disclose to any Transferee or Purchasing Lender and
any prospective Transferee or Purchasing Lender any and all financial
information in such Lender's possession concerning Borrower which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement
or in connection with such Lender's credit evaluation of Borrower provided such
Transferee or Purchasing Lender first executes and delivers to Agent a
confidentiality agreement substantially in the form annexed hereto as Exhibit
15.3(e).
15.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
15.5. Indemnity. Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Agent or any
Lender in any litigation, proceeding or investigation instituted or conducted by
any governmental agency or instrumentality or any other Person with respect to
any aspect of, or any transaction contemplated by, or any matter related to,
this Agreement or the Other Documents, whether or not Agent or any Lender is a
party thereto, except to the extent that any of the foregoing arises out of the
willful misconduct or gross (not mere) negligence of the party being
indemnified.
15.6. Notice. Any notice or request hereunder may be given to Borrower or
to Agent or any Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered mail,
postage
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prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:
(A) If to Agent at: Century Business Credit Corporation
119 West 40th Street
New York, New York 10018
Attention: Thomas Pizzo
Telephone: (212) 703-3500
Telecopier: (212) 703-3520
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Linda C. Berman, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to Lender other than Agent, as specified on the signature pages
hereof
(C) If to Borrower, at: Danskin, Inc.
111 West 40th Street
New York, New York 10018
Attention: Beverly Eichel
Telephone: (212) 930-9157
Telecopier: (212) 768-1638
with a copy to: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Michael J. Pedrick, Esq.
Telephone: (215) 963-4808
Telecopier: (215) 963-5299
15.7. Survival. The obligations of Borrower under Sections 2.2(f), 3.7,
3.8, 3.9, 4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
15.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.9. Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of the Lenders and the Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement or any consents or waivers hereunder and all related agreements,
documents and
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instruments, or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent's security interest in or Lien on any of the Collateral,
whether through judicial proceedings or otherwise, or (d) in defending or
prosecuting any actions or proceedings arising out of or relating to Agent's or
any Lender's transactions with Borrower, or (e) in connection with any advice
given to Agent or any Lender with respect to its rights and obligations under
this Agreement and all related agreements, may be charged to Borrower's Account
and shall be part of the Obligations.
15.10. Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy at law may prove to be inadequate relief to the
Lenders; therefore, each Lender, if such Lender so requests, shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving that actual damages are not an adequate remedy.
15.11. Consequential Damages. Neither Agent, any Lender nor any agent or
attorney for any of them shall be liable to Borrower for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
15.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13. Counterparts; Telecopied Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.15. Confidentiality. Agent, each Lender and each Transferee shall hold
all non-public information obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with its customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders that are in compliance with Section 15.3 (e),
and (c) as required or requested by any Governmental Body or representative
thereof or pursuant to legal process; provided, further that (i) unless
specifically prohibited by applicable law or court order, Agent, each Lender and
each Transferee shall use its best efforts prior to disclosure thereof, to
notify Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated.
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15.16. Publicity. Borrower hereby authorizes Agent with Borrower's prior
consent which shall not be unreasonably withheld to make appropriate
announcements of the financial arrangement entered into among Borrower, Agent
and Lenders, including, without limitation, announcements which are commonly
known as tombstones, in such publications and to such selected parties as Agent
shall in its sole and absolute discretion deem appropriate.
Each of the parties has signed this Agreement as of the day and year first
above written.
DANSKIN, INC.
By: /s/ Beverly Eichel
------------------------
Its: Executive Vice President
Chief Financial officer
[SEAL]
111 West 40th Street
New York, New York 10018
CENTURY BUSINESS CREDIT CORPORATION, as
Lender and as Agent
By: /s/ Thomas Pizzo
-------------------------
Its: SVP
119 West 40th Street
New York, New York 10018
Commitment Percentage: 100%
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<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 8th day of October, 1997, before me personally came
Beverly Eichel, to me known, who, being by me duly sworn, did
depose and say that he/she is the CFO of Danskin, Inc, the
corporation described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the board
of directors of said corporation, and that he/she signed his/her name thereto by
like order.
/s/ Loukia Harris
------------------------------
NOTARY PUBLIC
[SEAL]
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 8th day of October, 1997, before me personally came
Thomas Pizzo, to me known, who, being by me duly sworn, did
depose and say that he is the SVP of Century Business Credit
Corporation, the corporation described in and which executed the foregoing
instrument and that he signed his name thereto by order of the board of
directors of said corporation.
/s/ Loukia Harris
------------------------------
NOTARY PUBLIC
[SEAL]
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NEWS FROM
DANSKIN, INC.
DANSKIN, INC. ANNOUNCES COMPLETION OF RECAPITALIZATION
AND NEW BOARD OF DIRECTORS
NEW YORK, NY, October 9, 1997 -- Danskin, Inc. (OTC:DANS) today announced a new
$45 million credit facility (the "Credit Facility) with Century Business Credit
Corporation. The Credit Facility was used to repay all indebtedness to First
Union National Bank, the Company's former principal lender, and to establish a
working capital line of credit. The Credit Facility, consisting of $10 million
in term loans and a $35 million revolving credit facility, represents the final
phase of restructuring the Company's long term debt and working capital
facility. Under the terms of the restructuring agreement among the Company,
Danskin Investors, LLC, an investor group led by Onyx Partners, Inc. (the
"Investor"), and First Union National Bank , the Company's secured term debt was
permanently decreased by $10.265 million. The reduction of term debt and the new
capital investment made by the Investor, and the proceeds of a rights offering
to be made shortly, all net of related financing costs, will increase the
Company's capital by approximately $20 million.
David Chu, founder of Nautica, Executive Vice President, Nautica Enterprises,
Inc. and Chief Executive Officer and Chief Designer Nautica International, Inc.,
and Michael Hsieh, President LF International, Inc., a venture capital company
of Li & Fung, which is a global trading company, will be joining Danskin's
eleven member expanded Board of Directors. Other members of the Board of
Directors of Danskin, Inc., designated by the Investor, include Nina McLemore,
Managing Partner of Regent Capital Partners, LP, founder and President of Liz
Claiborne Accessories and a member of the Liz Claiborne, Inc. Policy Committee;
Andrew Astrachan, President and founder of Onyx Partners; Gabriel Brener of the
Brener Group, a family investment fund with varied industry interests, including
past interests in Groupo Syncho, the Mexican hosiery manufacturer; and Jim
Jalil, representing the interests of Alpine Associates. In addition, Donald
Schupak serves as Chairman of the Board, while Mary Ann Domuracki, Henry T.
Mortimer, Larry Shelton and Howard Cooley continue as directors of the Company.
"Danskin's new capital structure, with its decreased leverage and increased
working capital, and the new board members with their experience and skills will
assist Danskin to a new level of prosperity and leadership" said Donald Schupak,
the Company's Chairman. "We are also fortunate to have attracted David Chu to
become an active member of our Board. David is one of the most talented and
successful businesspersons in the apparel industry. His guidance in development
of brand strategy will add immeasurably to the realization of Danskin's growth
plans."
<PAGE>
NEWS FROM
DANSKIN, INC.
Page 2
Mr. Schupak continued, "I am particularly gratified that Nina McLemore, one of
the most respected and entrepreneurial executives in the apparel industry, has
agreed to devote her time and energy as Vice Chairman of the Board of
Directors."
Ms. Nina McLemore stated, "This creates an exciting opportunity to grow an
important and respected brand. The Danskin growth plan includes expansion of the
product line, a new marketing plan to build on Danskin's strong brand equity,
selected Danskin retail concept stores in upscale image locations, building on
the core competence of its domestic manufacturing and dyeing plants to provide
"Just In Time" inventory and private label, stronger overseas sourcing
capabilities, and building activewear departments. The Pennaco plans include
innovative new product development and stronger marketing for its existing and
future brands of legwear."
Mary Ann Domuracki, Chief Executive Officer of the Company, said that "It is
truly gratifying to see Danskin finally escape from the burden of the excessive
debt levels it has carried in recent years. This satisfies our financing
requirements for the near term and will permit management and our powerful new
Board to turn their full attention to the opportunities that exist in the
marketplace. We all look forward to building our brands consistently on a long
term basis."
In consequence of the repayment of the First Union revolving credit, certain of
the securities issued to the Investor at the time of its initial investment have
automatically converted to new securities of the Company. The investment group
led by the Investor now holds $12 million of 8% Series D Convertible Preferred
Stock, convertible into shares of Common Stock at $0.30 per share, $3 million of
Subordinated Debt, and warrants that are exercisable for 10,000,000 shares of
Common Stock at $0.30 per share. The Subordinated Debt is expected to be
utilized by the Investor in connection with its agreement to serve as the
standby purchaser for a $3 million rights offering to be made shortly by the
Company and to pay for the subscription price of the Investor's pro rata share
of the rights offering. The Investor now holds, with the power to vote, a
majority of the voting securities of the Company and has the right to elect a
majority of the members of the Board of Directors.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: Certain statements in this news release are forward looking and subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected in the forward looking statements. Investors
should consider the risks and uncertainties discussed in the December 28, 1996
Form 10-K filed by the Company with the Securities and Exchange Commission and
in the Forms 10-Q for the quarters ended March 29, 1997 and June 28, 1997.
<PAGE>
NEWS FROM
DANSKIN, INC.
Page 3
***********
If the rights of offering is made, a registration statement with respect to such
rights will be filed with the Securities and Exchange commission. Such rights
may not be sold nor may offers to buy be accepted prior to the time of the
registration statement becomes effective. This news release shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these rights in any State in which such offer, solicitation or sale
would be unlawful prior to the registration or qualification under the
securities laws of any such State. Each offering will be made only by means of a
prospectus.
Danskin, Inc. markets and manufactures women's activewear and dancewear under
the Danskin(R) and Dance France(R) trademarks and legwear under the Danskin(R),
Anne Klein(R), Givenchy(R) and Round the Clock(R) trademarks. Danskin's Pennaco
Hosiery Division is the largest manufacturer of private label hosiery sold in
department stores and fine specialty stores nationwide.
Contact: Beverly Eichel
Chief Financial Officer
(212) 930-9157
