SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K/A #1
-----------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _______ to _______
Commission file number 1-11438
WORLDTEX, INC.
(Exact name of registrant as specified in charter)
DELAWARE 56-1789271
(State of Incorporation) (I.R.S. Employer Identification No.)
212 12th Avenue, N.E., Hickory, North Carolina 28601
(Address of principal executive offices)
704-328-5381
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
- -------------------------------------- -----------------------------------------
<S> <C>
Common stock, par value $.01 per share New York Stock Exchange, Inc.
Preferred stock purchase rights New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
(Cover sheet continued on next page)
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 6, 1998: 14,428,671 shares of Common Stock were outstanding; and the
aggregate market value of shares held by non-affiliates was $105,676,007. (For
these purposes, a reported closing market price of $7.72 per share on March 6,
1998 has been used and "affiliates" have been arbitrarily determined to be all
directors and executive officers, although the Company does not acknowledge that
any such person is actually an "affiliate" within the meaning of the federal
securities laws.)
Documents incorporated by reference: definitive proxy statement for 1998 Annual
Meeting of Stockholders (Part III).
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The following financial statements, supplementary financial
information and schedules are filed as part of this Report:
WORLDTEX, INC.
Independent Auditors' Report
Financial Statements:
Consolidated Statements of Income,
Years Ended December 31, 1997, 1996 and 1995
Consolidated Balance Sheets,
December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity,
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows,
Years Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Supplementary Financial Information
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts Years Ended December
31, 1997, 1996 and 1995
All schedules not mentioned above are omitted for the reason that they
are not required or are not applicable, or the information is included in the
Consolidated Financial Statements or the Notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Worldtex, Inc.:
We have audited the accompanying consolidated balance sheets of Worldtex, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index of this Form 10-K. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Worldtex, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Atlanta, Georgia
February 27, 1998
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales (Notes 12 and 16) $ 203,256 207,829 187,981
Cost of goods sold 167,272 168,754 156,519
--------- --------- ---------
Gross profit 35,984 39,075 31,462
Selling and administrative expense 16,770 16,582 15,708
--------- --------- ---------
Operating profit 19,214 22,493 15,754
Interest expense 7,043 5,826 5,693
Other income (expense) - net (302) 694 170
--------- --------- ---------
Income before income taxes 11,869 17,361 10,231
Provision for income taxes (Note 11) 5,377 6,415 4,979
--------- --------- ---------
Net income before extraordinary item 6,492 10,946 5,252
Extraordinary item, net (Note 6) 1,344 - -
--------- --------- ---------
Net income $ 5,148 10,946 5,252
========= ========= =========
Basic net income per share (Note 3):
Net income before extraordinary item, net .45 .76 .36
Extraordinary item, net .09 - -
--------- --------- ---------
Net income $ .36 .76 .36
========= ========= =========
Diluted net income per share (Note 3):
Net income before extraordinary item, net .44 .75 .36
Extraordinary item, net .09 - -
--------- --------- ---------
Net income $ .35 .75 .36
========= ========= =========
Weighted average shares outstanding (Note 3)
Basic 14,420 14,463 14,476
========= ========= =========
Diluted 14,821 14,669 14,567
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
1997 1996
-------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 14,872 2,117
Accounts and notes receivable, less allowance for doubtful accounts
of $2,085 in 1997 and $2,589 in 1996 (Notes 4, 6 and 16) 46,320 39,868
Inventories (Notes 3 and 6) 54,200 37,265
Prepaid expenses and other current assets (Note 11) 3,026 2,975
-------- --------
Total current assets 118,418 82,225
Property, plant and equipment - net (Note 3) 99,160 90,282
Other assets (Notes 3 and 15) 11,946 5,147
Cost in excess of net assets of acquired businesses, net of accumulated
amortization of $7,600 in 1997 and $7,115 in 1996 82,915 28,378
-------- --------
$312,439 206,032
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings (Note 5) $ 1,819 1,342
Current installments of long-term debt (Note 6) 620 1,634
Accounts and notes payable-trade and other liabilities (Notes 8 and 10) 28,236 30,254
Income taxes payable (Note 11) - 1,525
-------- --------
Total current liabilities 30,675 34,755
Long-term debt (Note 6) 185,780 67,754
Other long-term liabilities 2,547 1,316
Deferred income taxes (Note 11) 15,935 17,029
-------- --------
Total liabilities 234,937 120,854
-------- --------
Stockholders' equity (Notes 6, 7 and 8):
Preferred stock - -
Common stock 147 147
Paid-in capital 30,059 29,946
Retained earnings 62,067 56,919
Cumulative foreign translation adjustment (13,273) (336)
Less - Treasury stock, at cost (1,498) (1,498)
-------- --------
Total stockholders' equity 77,502 85,178
Commitments and contingencies (Notes 8 and 9) - -
-------- --------
$312,439 206,032
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON PAID-IN RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------- ------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at
Dec. 31, 1994 $ 147 29,913 40,721 (837) (911) 69,033
Net income - - 5,252 - - 5,252
Foreign currency
translation
adjustment - - - 4,654 - 4,654
------- ------ ------ ------- ------ -------
Balances at
Dec. 31, 1995 147 29,913 45,973 3,817 (911) 78,939
Net income - - 10,946 - - 10,946
Foreign currency
translation
adjustment - - - (4,153) - (4,153)
Purchases of treasury
stock - - - - (587) (587)
Stock issued - 33 - - - 33
------- ------ ------ ------- ------ -------
Balances at
Dec. 31, 1996 147 29,946 56,919 (336) (1,498) 85,178
Net income - - 5,148 - - 5,148
Foreign currency
translation
adjustment - - - (12,937) - (12,937)
Stock issued - 113 - - - 113
------- ------ ------ ------- ------ -------
Balances at
December 31, 1997
(Notes 6, 7 and 8) $ 147 30,059 62,067 (13,273) (1,498) 77,502
======= ====== ====== ======= ====== =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,148 10,946 5,252
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,845 6,284 6,133
Provision for losses on accounts receivable 305 139 1,332
Deferred income taxes 720 825 (161)
Change in assets and liabilities
net of effects of acquisitions:
Accounts and notes receivable (1,064) (2,788) (2,751)
Inventories (7,396) (4,557) (1,276)
Prepaid expenses and other current assets (248) 163 (527)
Accounts and notes payable -
trade and other current liabilities (4,313) 5,344 3,950
Income taxes payable (1,494) (1,324) 94
--------- --------- ---------
Net cash (used in) provided by operating activities (1,497) 15,032 12,046
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (7,706) (13,785) (8,356)
Acquisitions, net of cash acquired (85,382) - (4,067)
Other investing activities (8,190) (1,149) (3,011)
--------- --------- ---------
Net cash used in investing activities (101,278) (14,934) (15,434)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under line of credit arrangements 3,548 16,724 7,813
Payments under line of credit arrangements (3,435) (16,321) (6,874)
Borrowings under revolving credit facility 109,550 104,660 46,038
Payments under revolving credit facility (121,940) (104,940) (40,578)
Borrowings under long term loans 175,000 - -
Payments under long term loans (50,000) - -
Stock issued or (reacquired), net 113 (554) -
Other financing activities 1,068 830 (4,217)
--------- --------- ---------
Net cash provided by financing activities 113,904 399 2,182
--------- --------- ---------
Effects of exchange rate changes in cash 1,626 (225) (100)
--------- --------- ---------
Net increase (decrease) in cash 12,755 272 (1,306)
Cash at beginning of year 2,117 1,845 3,151
--------- --------- ---------
Cash at end of year $ 14,872 2,117 1,845
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,374 5,784 5,265
========= ========= =========
Income taxes $ 7,594 7,630 3,722
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE 1 - ORGANIZATION AND BUSINESS
Worldtex, Inc. ("Worldtex" or the "Company"), a Delaware corporation organized
in July 1992, is a holding company engaged through its subsidiaries in the
manufacture of covered elastic yarn, which is used to manufacture hosiery
products and other apparel items, and narrow elastic fabrics, that are used as
components in the production of apparel products and elastic bands in women's
hosiery. Worldtex's principal markets are in North America, South America and
Europe.
Worldtex's principal subsidiaries are Regal Manufacturing Company, Inc.
("Regal"), based in Hickory, North Carolina, Rubyco (1987), Inc. ("Rubyco"),
based in Montreal, Canada, Filix Lastex, S.A. ("Filix"), based in Troyes,
France, and Fibrexa, Ltda. ("Fibrexa"), based in Bogota, Colombia. During 1997,
Worldtex acquired Elastex, Inc. ("Elastex"), based in Asheboro, North Carolina,
and Elastic Corporation of America, Inc. ("ECA"), based in Columbiana, Alabama
as discussed in Note 14. Reference to Worldtex shall include its subsidiaries
unless the context shall indicate otherwise.
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements of Worldtex as of December 31, 1997 and
1996 and for the years ended December 31, 1997, 1996 and 1995 include the
accounts of Regal, Rubyco, Filix, Fibrexa effective April 1, 1995, Elastex
effective October 3, 1997 and ECA effective December 1, 1997. All significant
intercompany balances and transactions for all periods are eliminated in the
consolidated financial statements.
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) CASH AND CASH EQUIVALENTS
At December 31, 1997, cash includes a $9,160 demand deposit with a commercial
bank earning daily money market investment yields. At December 31, 1997 and
1996, restricted cash on deposit of $2,123 and $2,004, respectively, are
included in other assets as security for loans to Fibrexa in Colombia, South
America.
(B) INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market.
As of December 31, 1997 and 1996, the major classes of inventory are:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw Materials $ 15,401 12,614
Work in Process 13,976 6,428
Finished Goods 24,823 18,223
-------- --------
$ 54,200 37,265
======== ========
</TABLE>
(C) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated primarily
using the straight-line method over the following estimated useful lives of the
related assets: machinery and equipment (6 to 20 years, with approximately 60%
being depreciated over 20 years), structures (20 to 40 years), other equipment
(5 to 10 years). Leasehold improvements are amortized over their respective
lease terms or their estimated useful lives, if shorter. Repair and maintenance
costs are charged to expense as incurred. Renewals and betterments which
substantially extend the useful life of an asset are capitalized and
depreciated. As of December 31, 1997 and 1996, property, plant and equipment
consists of:
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $2,820 2,471
Buildings and leasehold
improvements 34,172 31,181
Machinery and equipment
99,083 91,008
------- -------
136,075 124,660
Less accumulated depreciation
and amortization
36,915 34,378
------- -------
$99,160 90,282
======= ======
</TABLE>
(D) COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES
The cost in excess of net assets of acquired businesses is amortized using the
straight-line method over the expected periods to be benefited, generally 40
years. The Company assesses the recoverability of these intangible assets by
determining whether the amortization of the cost in excess of net assets of
acquired businesses over their remaining lives can be recovered through the
undiscounted future operating cash flows of the acquired business. The
assessment of the recoverability of goodwill will be impacted if estimated
future cash flows are not achieved.
(E) FORWARD EXCHANGE CONTRACTS
Rubyco enters into forward exchange contracts as a hedge against accounts
payable denominated in foreign currency. These contracts are used by Rubyco to
minimize exposure and reduce risk from exchange rate fluctuations in the regular
course of its foreign business. Gains and losses on forward contracts, which are
not material, are deferred and included in the measurement of the related
foreign currency transactions. The impact of forward contracts on cash flows is
reflected in the change in accounts and notes payable - trade. As of December
31, 1997 and 1996, $0 and $500, respectively, in contracts were outstanding.
<PAGE>
(F) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the carrying amounts
of assets and liabilities for tax purposes and financial statement purposes and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
No provision is made for income taxes which may be payable if undistributed
earnings of foreign subsidiaries were to be paid as dividends to Worldtex, since
Worldtex intends that such earnings will continue to be invested in those
countries. At December 31, 1997, the cumulative amount of foreign undistributed
earnings amounted to approximately $48,509. Foreign tax credits may be available
as a reduction of United States income taxes in the event of such distributions.
(G) FOREIGN CURRENCY
Assets and liabilities denominated in foreign currencies have been translated
into U. S. dollars at the period-end exchange rate. Revenues and expenses
denominated in foreign currencies have been translated into U.S. dollars at the
weighted average exchange rate. Translation gains and losses are accounted for
in a separate component of stockholders' equity. The exchange gains and losses
arising on transactions are charged to income as incurred.
(H) NET INCOME PER SHARE
Basic earnings per share are calculated based upon the weighted average number
of common shares outstanding during the year. Diluted earnings per share are
based upon the weighted average number of common shares and dilutive common
equivalent shares outstanding during the year. The reconciliation of income
available to common stockholders and weighted average number of common shares
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
for basic and dilutive per share amounts as required by SFAS No. 128, EARNINGS
PER SHARE is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income before
extraordinary item $ 6,492 10,946 5,252
Preferred dividends and
other adjustments
- - -
---------- ---------- ----------
Basic net income available
to common stockholders
$ 6,492 10,946 5,252
Securities effects - - -
---------- ---------- ----------
Diluted net income available
to common stockholders
$ 6,492 10,946 5,252
========== ====== ==========
Basic weighted average
common shares outstanding
14,420 14,463 14,476
Effect of dilutive options
outstanding 401 206 91
---------- ---------- ----------
Diluted weighted average
common and common
equivalent shares
outstanding
14,821 14,669 14,567
========== ========== ==========
Potentially dilutive shares
not included because
their effect was
antidilutive 80 458 651
========== ========== ==========
</TABLE>
(I) REVENUE RECOGNITION
Revenue from sales is recognized when goods are shipped to the customer, at
which point the risk of loss has passed to the customer. The Company provides
allowances for expected cash discounts based upon historical bad debts and
related claims experience and upon periodic evaluations of the aging of the
accounts receivable.
<PAGE>
(J) INTEREST RATE SWAP
The interest rate swap agreement is accounted for like a hedge of the underlying
debt obligation and interest expense is recorded using the revised interest
rate, with fees and other payments amortized as yield adjustments.
(K) STOCK OPTIONS
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion no
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which allows entities to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net income and pro forma net income per
share disclosures for employee stock option grants made in 1995 and future years
as if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
(L) ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
(M) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation. The reclassifications did not impact net income as previously
reported.
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE 4 - NOTES RECEIVABLE
Filix has the U.S. dollar equivalent of approximately $2,812 and $4,500 of
non-interest bearing notes receivable as of December 31, 1997 and 1996,
respectively, with maturities within four months of the periods ended.
NOTE 5 - SHORT-TERM BORROWINGS
Short-term debt consists of notes payable to banks and advances under bank lines
of credit and overdraft facilities.
Fibrexa has available the U.S. dollar equivalent of $4,170 under various bank
lines of credit providing for unsecured borrowings and letter of credit
financing generally due in 90 days. At December 31, 1997 and 1996, $1,560 and
$1,324, respectively, were outstanding under these agreements at average
interest rates of 7.75% and 7.57% respectively.
Filix has available the U.S. dollar equivalent of $15,049 under various
unsecured bank lines of credit and overdraft facilities bearing interest at
4.28%. At December 31, 1997 and 1996, no amounts were outstanding under these
facilities.
Rubyco has available the U.S. dollar equivalent of $1,049 under a bank line of
credit, due on demand, providing for unsecured borrowings and letter of credit
financing at the bank's prime rate (5.5% at December 31, 1997). The line of
credit is guaranteed by the Company. At December 31, 1997 and 1996, $259 and $18
amounts, respectively, were outstanding under this agreement.
<PAGE>
NOTE 6 - LONG-TERM DEBT
As of December 31, 1997 and 1996, long-term debt consists of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
9.625% Senior Notes due
December 15, 2007 $175,000 -
7.50% Senior Notes due
July 1,1998 through July 1, 2004 - 50,000
Industrial revenue bonds
due June 1, 2014 with
interest at variable rates
(5.9% average rate as of
December 31,1997) 6,000 -
Revolving credit facilities
due December 1, 2002
with interest at variable
rates (6.56% weighted
average rate as of
December 31,1996) - 12,390
Other indebtedness, primarily
fixed rate debt, due at
various dates through 2007 5,400 6,998
-------- --------
186,400 69,388
Less current installments 620 1,634
-------- --------
$185,780 67,754
======== =========
</TABLE>
The aggregate annual maturities of long-term debt during each of the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
--------------- ------------
<S> <C>
1998 $ 620
1999 485
2000 1,826
2001 601
2002 852
Thereafter 182,016
----------
$ 186,400
==========
</TABLE>
The Company entered into an indenture dated December 1, 1997, under which a
total of $175,000 Senior Notes due December 15, 2007 were issued with interest
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
at the annual rate of 9.625%. The notes are unconditionally guaranteed by each
of the U.S. subsidiaries of the Company. The Company may redeem the notes on or
after December 15, 2002, at redemption prices ranging from 104.813% in 2002 to
100% in 2005. Up to 35% of the aggregate principal amount of notes originally
issued may be redeemed at a price of 109.625% with the net proceeds of a public
offering of common stock at any time on or before December 15, 2000. The
indenture restricts the ability of the Company and its subsidiaries to incur
additional indebtedness and issue preferred stock, enter into sale and leaseback
transactions, incur liens, pay dividends or make certain other restricted
payments, apply net proceeds from certain asset sales, enter into certain
transactions with affiliates, and assign, transfer, lease, convey or otherwise
dispose of substantially all of the assets of the Company. At December 31, 1997,
Worldtex was in compliance with the various covenants.
On December 1, 1997, the Company repaid the $50,000 Senior Notes due July 2004
with part of the proceeds from the sale of the $175,000 Senior Notes due 2007.
An extraordinary charge of $1,344, net of a tax benefit of $693, was recorded
for the early debt extinguishment.
In 1994, the Company entered into an interest rate swap agreement with a
commercial bank that effectively converted a portion of its $50,000 Senior Notes
from fixed rate debt to a floating rate based on LIBOR for a period of three
years ending July 1999. At December 31, 1997, the swap agreement had a notional
principal amount of $25,000. The floating rate is reset every six months during
the term of the interest rate swap agreement with interest due January 21 and
July 21. The agreement effectively changed the interest rate on $25,000 from
7.5% to approximately 6.24%, 7.87%, 7.08%, 6.59%,6.77%, 6.52% and 6.77% for the
six month intervals ended January 21, 1995 through January 21, 1998 at which
time the effective interest rate for this portion of the debt was decreased to
6.49% for the next six months. The estimated amount at which the Company could
terminate this agreement was approximately $354 at December 31, 1997. Net
amounts due under this agreement decreased interest expense for 1997 by $257,
for 1996 by $201 and for 1995 by $20. The $50,000 Senior Notes were repaid on
<PAGE>
December 1, 1997. The Company terminated the swap agreement effective March 26,
1998. The termination did not have a material effect on the financial condition
or results of operations of the Company.
In connection with the ECA acquisition, the Company entered into a new credit
facility and repaid and terminated the existing credit facility. The new
facility provides for revolving credit borrowings in an aggregate principal
amount of up to $25,000. The new credit facility terminates and all amounts
borrowed thereunder will be due December 1, 2002. Loans under the new credit
facility bear interest at variable rates. Loans are guaranteed by all U.S.
subsidiaries of the Company and are required to be secured by liens on the
accounts receivable and inventory of the Company and its U.S. subsidiaries, 100%
of the outstanding capital stock of the Company's U.S. subsidiaries and 65% of
the outstanding capital stock of each of the foreign subsidiaries. No loans were
outstanding at December 31, 1997. The new credit facility carries a commitment
fee of .375% of the unused available borrowings. The new credit facility
contains customary covenants and restrictions on the Company's ability to engage
in certain activities. In addition, the new credit facility provides that the
Company must meet certain financial covenants, including a minimum consolidated
current ratio, a maximum leverage ratio and a minimum interest coverage ratio.
In addition, the new credit facility restricts the payment of dividends. At
December 31, 1997, Worldtex was in compliance with the various covenants.
Under the most restrictive of these debt agreements, $.4 million of retained
earnings was unrestricted as to the payment of dividends and other distributions
as of December 31, 1997.
NOTE 7 - STOCKHOLDERS' EQUITY
Worldtex is authorized to issue up to forty million shares of common stock, $.01
par value, and ten million shares of preferred stock, $.01 par value. As of
December 31, 1997 and 1996, there were issued and outstanding 14,428,671 and
14,403,271 shares of common stock, respectively, and no shares of preferred
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
stock. Worldtex is authorized to repurchase up to one million shares of its
common stock. Through December 1997, 266,300 shares had been purchased and are
carried at cost as Treasury Stock.
Preferred stock is issuable in one or more series with dividend rates,
liquidation preferences and redemption, conversion and voting rights as may be
determined by Worldtex's Board of Directors.
In connection with Worldtex's formation, each shareholder received, in addition
to one share of Worldtex common stock, one share purchase right for each
outstanding share of the former parent's common stock. Each right entitles the
registered holder to purchase from Worldtex a unit ("Unit") consisting of one
one-hundredth of a share of preferred stock of Worldtex, at a price of $30 per
Unit. The share purchase rights are not exercisable or transferable apart from
Worldtex common stock until the earlier to occur of 1) the tenth day following a
public announcement that a person or group of affiliated or associated persons
has acquired, or obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding Worldtex common stock (an "Acquiring Person"), or 2) the
tenth business day following the commencement of a tender offer or exchange
offer if, upon consummation thereof, any person or group would be an Acquiring
Person. The share purchase rights will expire at the close of business on
December 31, 2002, unless earlier redeemed or exchanged by Worldtex.
Under the terms of the Worldtex 1992 Stock Incentive Plan, as amended by the
stockholders in May 1994, options to purchase up to 1,400,000 shares of common
stock may be awarded to officers and employees. Options granted under the plan
may be for such terms and exercised at such times as determined at the time of
grant by the Compensation Committee of the Board of Directors. In addition, the
Plan provides that each outside director will be granted an option to purchase
10,000 shares of common stock of the Company. As of December 31, 1997, 1,000
shares were reserved for future awards under the plan. In addition, in
connection with the Company's acquisition of Elastic Corporation of America
("ECA") in December 1997, the Company granted to a senior executive of ECA an
<PAGE>
option outside of the 1992 Stock Incentive Plan to purchase 50,000 shares of
common stock of the Company. The 1992 Stock Incentive Plan also includes
provisions for the granting of stock appreciation rights, restricted stock,
deferred stock, employee loans and tax offset payments. At December 31, 1997, no
such grants had been issued, except for limited stock appreciation rights
applicable if there is a change of control (as defined) of the Company.
The following table summarizes stock option activity during each of the last
three years:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Balances at
December 31, 1994 996,000 $5.50
Options Granted 86,000 $6.44
Options Exercised - -
Options Cancelled 5,000 $6.44
-----------
Balances at
December 31, 1995 1,077,000 $5.57
Options Granted 255,000 $4.82
Options Exercised 6,200 $5.43
Options Cancelled 10,000 $4.19
-----------
Balances at
December 31, 1996 1,315,800 $5.44
Options Granted 80,000 $8.26
Options Exercised 25,400 $4.43
Options Cancelled 3,000 $6.44
-----------
Balances at
December 31, 1997 1,367,400 $5.53
===========
Options Exercisable:
December 31, 1995 507,200 $6.03
December 31, 1996 737,400 $5.91
December 31, 1997 891,680 $5.76
Weighted average fair
value of options
granted:
December 31, 1995 $3.01
December 31, 1996 $2.27
December 31, 1997 $3.79
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF EXERCISE NUMBER OF REMAINING AVERAGE
PRICES SHARES CONTRACTUAL LIFE EXERCISE
PRICE
<C> <C> <C> <C> <C>
$4.19 - $4.75 634,800 7.0 yrs $ 4.40
$6.44 - $6.75 652,600 5.3 yrs $ 6.48
$7.97 - $9.44 80,000 9.7 yrs $ 8.26
</TABLE>
Options exercisable at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF EXERCISE NUMBER OF REMAINING AVERAGE
PRICES SHARES CONTRACTUAL LIFE EXERCISE
PRICE
<C> <C> <C> <C> <C>
$4.19 - $4.75 293,880 7.0 yrs $ 4.40
$6.44 - $6.75 597,800 5.3 yrs $ 6.48
$7.97 - $9.44 0 9.7 yrs $ 8.26
</TABLE>
The Company continues to apply Accounting Principles Board Opinion No. 25 and
accordingly recognizes compensation expense to the extent the quoted market
price of the stock exceeds the amount the employee is required to pay as of the
date of grant of the option. 200,000 options were issued at less than quoted
market value and $30 has been charged to compensation cost in 1997, 1996 and
1995 respectively. These 200,000 options, plus 200,000 options issued at quoted
market value, vest ratably over three years while all other options vest ratably
over five years. The options have a ten year term.
Had compensation cost for the Company's stock option plan been determined
consistent with Financial Accounting Standards Statement No. 123, "Accounting
for Stock-Based Compensation", the Company's net income and net income per share
would be as follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income as reported
$5,148 10,946 5,252
Pro forma 5,046 10,872 5,240
Diluted net income
per share
as reported .35 .75 .36
Pro forma .35 .75 .36
</TABLE>
The fair value of each option grant is established on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995: dividend yield of 0%;
expected volatility of 33%, 27% and 29%; risk-free interest rates of 5.5% and
expected lives of eight years.
NOTE 8 - EMPLOYEE BENEFIT PLANS
Employees of Regal participate in a non-contributory profit-sharing plan for all
eligible employees, including officers. The plan provides for minimum employer
contribution of the lesser of five percent of Regal's income before taxes plus a
discretionary amount determined by the Regal Board of Directors or the maximum
amount deductible for Federal income tax purposes. Provisions for the years
ended December 31, 1997, 1996 and 1995 were $89, $60 and $27 respectively.
Regal employees participate in the Worldtex Employee Stock Ownership Plan
("Worldtex ESOP"). The Worldtex ESOP provides eligible employees with an
opportunity to purchase Worldtex common stock through payroll deductions, and
subject to certain limitations was matched by Worldtex. The Worldtex
contribution was suspended indefinitely effective June 1, 1996. Effective
January 11, 1998, Worldtex reinstituted its matching program at the rate of
one-third of the employee contribution up to a maximum employee contribution of
6% of salary. Contributions to the Worldtex ESOP are invested by an independent
trustee in common stock of Worldtex. Stock attributable to Worldtex
contributions vests at the rate of 20% for after two years of service, with 20%
vesting added for each year, up to five years of service, at which point an
employee is 100% vested in the plan. Contributions to the Worldtex ESOP were $0,
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
$50 and $124 in 1997, 1996 and 1995 respectively. Effective June 1, 1996, the
Company amended and renamed the plan The Worldtex, Inc. Profit Sharing and
Retirement Savings Plan in order to merge the Regal profit-sharing, the Worldtex
ESOP, and the Worldtex, Inc. 401(k) plans. All vesting schedules for Company
contributions were conformed to the one described above for the ESOP plan.
Employees of Rubyco participate in a Registered Retirement Savings plan. The
plan provides for employee contributions of 4% of salary to a maximum of $3.5
with corresponding contributions by Rubyco of 5% of salary to a maximum of $3.5.
Provisions for the years ended December 31, 1997, 1996 and 1995 were $32, $27
and $27 respectively.
Filix is legally obligated to contribute to an employee profit-sharing plan
whereby annual contributions are determined on the basis of a prescribed formula
using capitalization, salaries and certain revenues. Amounts are paid into a
bank trust fund the year following the contribution calculation. Provisions for
the years ended December 31, 1997, 1996 and 1995 were $720, $902 and $780
respectively.
Under the terms of an industry-wide labor agreement, Filix employees are
entitled to a lump-sum payment at normal retirement age of up to four months
salary depending on their number of years of service. Such amounts are payable
only if the employee remains with Filix until retirement. The plan is not
funded. The following table sets forth the plan's unfunded status as of December
31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations $ - -
====== ======
Accumulated benefit
obligation $ (185) (256)
====== ======
Projected benefit obligation $ (199) (299)
Plan assets at fair value - -
------ ------
Projected benefit obligation in (199) (299)
excess of plan assets
Unrecognized net loss 14 99
------ ------
Accrued pension liability $ (185) (200)
====== ======
<PAGE>
Net periodic pension cost of the Filix agreement for the years ended December
31, 1997, 1996 and 1995 included the following components:
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $ 8 11 9
Interest cost on projected benefit
obligation 13 25 26
Amortization of (gain)/loss - 11 -
------ ------ ------
Net periodic pension cost $ 21 47 35
====== ====== ======
</TABLE>
The projected benefit obligation at December 31, 1997 and 1996 was determined
using an assumed discount rate of 7.25% and 7.5% respectively. The assumed
long-term rate of increase in compensation was 3% for 1997 and 1996.
Worldtex has a unfunded supplemental death and retirement plan for certain key
employees. The accrued pension liability at December 31, 1997 and 1996 was
$1,487 and $1,287. Net periodic pension cost was $200, $522 and $72 in 1997,
1996 and 1995 respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under noncancelable operating leases, primarily
for real property, as of December 31, 1997 are:
1998 $ 2,174
1999 1,936
2000 1,904
2001 1,924
2002 404
---------
Total $ 8,342
=========
Rental expense for cancelable and noncancelable operating leases charged to
operations for the years ended December 31, 1997, 1996 and 1995 was
approximately $1,134, $974 and $647 respectively.
In the normal course of business, Worldtex and its subsidiaries may sometimes be
named as a defendant in litigation. In the opinion of management, based upon the
advice of counsel, any uninsured liability which may result from the resolution
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
of any present litigation or asserted claim will not have a material effect on
Worldtex's operations, financial position or liquidity.
NOTE 10 - ACCOUNTS AND NOTES PAYABLE - TRADE AND OTHER LIABILITIES
Accounts and notes payable - trade and other liabilities consist of the
following as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accounts and other $ 19,187 21,229
payables - trade
Salaries, wages and other 3,612 3,502
compensation
Pensions, profit sharing and 1,668 1,530
employee benefits
Taxes, other than income taxes 1,083 831
Interest 1,619 2,109
Other 1,067 1,053
--------- ---------
Total $ 28,236 30,254
========= =========
</TABLE>
NOTE 11 - INCOME TAXES
The provisions for income taxes for the years ended December 31, 1997, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
U. S. U.S. STATE
FEDERAL FOREIGN & LOCAL TOTAL
<S> <C> <C> <C> <C>
1997
Current $ (310) 4,335 (55) 3,970
Deferred (275) 1,794 (112) 1,407
---------- --------- ---------- ---------
Total $ (585) 6,129 (167) 5,377
========== ========= ========== =========
1996
Current $ 90 5,711 22 5,823
Deferred (154) 758 (12) 592
----------
Total $ (64) 6,469 10 6,415
========== ========= ========= =========
1995
Current $ - 5,037 - 5,037
Deferred (717) 834 (175) (58)
---------- --------- ---------- ----------
Total $ (717) 5,871 (175) 4,979
========== ========= ========== =========
</TABLE>
<PAGE>
Income before income taxes for the years ended December 31, 1997, 1996 and 1995
is comprised as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. $ (2,244) (365) (1,959)
Foreign 14,113 17,726 12,190
-------- -------- ---------
$ 11,869 17,361 10,231
======== ======== ========
</TABLE>
A reconciliation for the years ended December 31, 1997, 1996 and 1995 between
the amount computed using the U. S. Federal income tax rate and the effective
rate of tax on book income is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal income
tax rate 34.0% 34.0% 34.0%
State and local income taxes,
net of U.S. Federal income
tax benefit - - (1.1)
Effect of increase in French
tax rate on deferred taxes 9.7 - 8.7
Effect of increase in French
tax rate on current taxes 7.1 - -
Effect of foreign inflation
adjustments (7.8) - -
Amortization of goodwill 2.2 1.9 3.0
Other, net .1 1.1 4.1
----- ----- -----
Effective rate of tax on book
income 45.3% 37.0% 48.7%
====== ===== ======
</TABLE>
In October 1997, the French parliament enacted a provision that increased the
tax rate from 36.67% to 41.67%. The 36.67% rate was increased from 33.33% in
July 1995. The rate increases resulted in a $1,156 charge in 1997 and a $889
charge in 1995 to income tax provision to increase the deferred tax liability as
of January 1 of each year to the higher enacted income tax rate.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 1997 and 1996 are as
follows:
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Inventories $ 259 196
Employee benefits 843 739
Allowance for doubtful accounts 346 671
Net operating loss carryforwards 2,561 623
--------- ---------
4,009 2,229
--------- ---------
Deferred tax liabilities:
Property, plant and equipment (17,609) (16,813)
Goodwill amortization (82) -
Imputed interest (806) (838)
Other nondeductible items (362) (158)
---------- ----------
(18,859) (17,809)
---------- ----------
Net deferred income taxes $(14,850) (15,580)
========== ==========
</TABLE>
<PAGE>
Deferred taxes are classified in the accompanying Consolidated Balance Sheets
captions as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Prepaid expenses and
current assets $ 1,085 1,449
Deferred income taxes (15,935) (17,029)
-------- --------
$(14,850) (15,580)
======== ========
</TABLE>
There was a $91 valuation allowance established in 1997 for deferred tax assets
attributable to items when realized will result in adjustments to goodwill as of
December 31, 1997. There was no valuation allowance for years ended December 31,
1996 and 1995. Based upon the level of historical taxable income and the
expected reversal of future taxable temporary differences, management believes
it is more likely than not that the Company will realize the benefits of these
deductible differences at December 31, 1997.
NOTE 12 - GEOGRAPHIC INFORMATION
Financial information by geographic area for the years ended December 31, 1997,
1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
NORTH SOUTH
----- -----
AMERICA EUROPE AMERICA TOTAL
------- ------ ------- -----
<S> <C> <C> <C> <C>
1997
- ----
Net Sales $98,138 92,417 12,701 203,256
Operating Profit 3,637 12,830 2,747 19,214
Identifiable Assets 196,795 89,919 25,725 312,439
1996
- ----
Net Sales 86,280 109,785 11,764 207,829
Operating Profit 2,469 19,049 975 22,493
Identifiable Assets 79,598 101,452 24,982 206,032
1995
- ----
Net Sales 80,721 100,577 6,683 187,981
Operating Profit
(loss) (311) 14,878 1,187 15,754
Identifiable Assets 80,514 99,439 16,112 196,065
</TABLE>
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires all entities to disclose the fair value
of certain on- and off-balance sheet financial instruments in their financial
statements.
(A) CASH, ACCOUNTS AND NOTES RECEIVABLE AND ACCOUNTS AND NOTES PAYABLE
The carrying amount approximates fair value because of the short maturity of
these instruments.
(B) LONG-TERM DEBT
The fair values of each of the Company's long-term debt instruments are based on
the amount of future cash flows associated with each instrument discounted using
the Company's current borrowing rate for similar debt instruments of comparable
maturity. The estimated fair values of the Company's long-term debt instruments
are:
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------ ----------
<C> <C> <C>
9.625% Senior Notes $ 175,000 179,831
Revolving credit facilities - -
Other indebtedness 11,400 11,510
----------- -----------
Total $ 186,400 191,341
=========== ===========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(C) FORWARD EXCHANGE CONTRACTS
The forward exchange contracts described in Note 3 (e) are relatively simple,
short-term instruments in which future exchange rates are locked in for a fee.
(D) INTEREST RATE SWAP
The interest rate swap described in Note 3 (j) is discussed further in Note 6.
(E) LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
NOTE 14 - ACQUISITIONS
On December 1, 1997, the Company completed the acquisition of substantially all
of the assets of the Elastic Corporation of America division ("ECA") of NFA
Corp. for approximately $76,300 in cash and the assumption of $6,000 in long
term debt. ECA is a supplier of woven and knitted narrow elastic fabrics to the
apparel industry. On October 3, 1997, the Company purchased substantially all of
the assets of the Narrow Fabrics division ("Elastex") of Texfi Industries, Inc.
for approximately $8,400 in cash. Elastex is a supplier of knitted narrow
elastic fabrics to the apparel industry. The net proceeds from the sale of the
$175,000 senior notes were used to fund the acquisition on December 1, 1997 of
ECA and to reduce outstanding indebtedness incurred to finance the acquisition
on October 3, 1997, of Elastex. The excess of cost over fair value of net assets
acquired was approximately $52,887 for ECA and approximately $3,837 for Elastex
as of December 31, 1997, which will be amortized using the straight-line method
over 40 years. The acquisitions were accounted for as a purchase and,
accordingly, the net assets and operations of ECA and Elastex have been included
in the Company's consolidated financial statements beginning on the acquisition
effective dates.
<PAGE>
The following unaudited pro forma data presents 1997 and 1996 results of
operations of the Company, Elastex and ECA as though the acquisitions had
occurred at the beginning of each period presented, giving effect to
depreciation and amortization of assets on the accounting basis recognized in
recording the purchase and the interest on funds used to effect the purchase.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $ 283,726 279,383
Net income 5,576 7,240
Diluted net income per share .38 .49
</TABLE>
During the second quarter of 1995, a wholly owned subsidiary of the Company
acquired substantially all of the assets of Fibrexa, S.A. ("Fibrexa"), a
manufacturer of covered yarn based in Bogota, Colombia. The consideration for
the purchase was approximately $4,400 in cash, assumption of approximately
$6,500 in debt and contingent payments based on earnings from the Company's
South American operations over a five-year period. The funds for this purchase
were obtained from the Company's cash on hand and borrowings under the Company's
Revolving Credit Agreement. The excess of cost over fair value of the net assets
acquired was approximately $800 at acquisition and $1,500 at year end 1995,
$2,000 at December 1996, and $2,800 at December 1997 due to contingency payments
per the purchase agreement, which will be amortized using the straight-line
method over 40 years. The acquisition was accounted for as a purchase and,
accordingly, the net assets and operations of Fibrexa have been included in the
Company's consolidated financial statements beginning on the effective
acquisition date of April 1, 1995.
NOTE 15 - RELATED PARTY TRANSACTIONS
In 1997, 1996 and 1995, other assets include a $600 noninterest bearing note
receivable due in the year 2000 from a senior executive.
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE 16 - CONCENTRATIONS
The Company currently buys a significant portion of its Lycra and spandex yarn,
an important component of its products, from a single supplier. There are a
limited number of manufacturers of this raw material and a change in suppliers
could cause a delay in manufacturing and a possible loss of sales, which would
adversely affect operating results.
In 1995, one customer accounted for 10.5% of Worldtex's consolidated net sales.
In 1997 and 1996, no customer represented over 10% of consolidated net sales.
The majority of Worldtex's sales during 1997 were attributable to the sale of
covered elastic yarn. In 1997, Worldtex acquired two narrow elastic fabric
businesses. Any significant decline in demand for covered elastic yarn or narrow
elastic fabrics would have a material adverse effect on the operations of
Worldtex.
NOTE 17 - RESTRUCTURING CHARGE
In December 1995, the Company recorded a year-end charge of $1,715 (or eight
cents per share, net of taxes) for the closure of a Canadian manufacturing
facility and the Company's Buenos Aires, Argentina distribution branch. The
charge included accruals for severance, inventory adjustments, accounts
receivable reserves, and equipment and building write downs to estimated fair
market values. $1,300 was reflected as cost of goods sold and $400 as selling
and administrative expenses.
As of December 31, 1997, $507 is reserved primarily for inventory valuation and
allowances for the collectibility of accounts receivables related to the closed
operations.
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
The $175,000 Senior Notes are guaranteed by each of the U.S. subsidiaries of the
Company, which consist of Regal, Willcox & Gibbs Filix of Delaware, Inc., Regal
Yarns of Argentina, Inc., WTX Colombia I, Inc. and WTX Colombia II, Inc., ECA
and Elastex. The guarantor subsidiaries are wholly owned subsidiaries of the
<PAGE>
Company and the guarantees are full, unconditional and joint and several. There
are no restrictions on the ability of the guarantor subsidiaries to make
distributions to the Company, except those generally applicable under relevant
corporation laws. Separate financial statements of each guarantor subsidiary
have not been presented because management has determined that they are not
material to investors. The following pages include summarized consolidating
financial information for the Company, segregating the parent, the guarantor
subsidiaries and the nonguarantor subsidiaries.
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Statements of Income
December 31, 1997
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 77,893 138,892 (13,529) 203,256
Cost of goods sold - 69,413 111,388 (13,529) 167,272
---------- ---------- ---------- ----------- ----------
Gross profit - 8,480 27,504 - 35,984
Selling and administrative expense 2,572 4,270 9,928 - 16,770
---------- ---------- ---------- ---------- ----------
Operating profit (loss) (2,572) 4,210 17,576 - 19,214
Interest expense 5,962 247 834 - 7,043
Intercompany interest expense (income) (2,535) 844 1,691 - -
Intercompany administrative charges (2,435) 1,948 487 - -
Other income (expense) - net 87 61 (450) - (302)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (3,477) 1,232 14,114 - 11,869
Provision (benefit) for income taxes (1,083) 331 6,129 - 5,377
Undistributed earnings of subsidiaries 8,886 - - (8,886) -
---------- ---------- ---------- ---------- ----------
Net income before extraordinary Item 6,492 901 7,985 (8,886) 6,492
Extraordinary item 1,344 - - - 1,344
---------- ---------- ---------- ---------- ----------
Net income $ 5,148 901 7,985 (8,886) 5,148
========== ========== ========== =========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Statements of Income
December 31, 1996
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 66,574 150,332 (9,077) 207,829
Cost of goods sold - 59,893 117,938 (9,077) 168,754
---------- ---------- ---------- ---------- ----------
Gross profit - 6,681 32,394 - 39,075
Selling and administrative expense 2,659 3,166 10,757 - 16,582
---------- ---------- ---------- ---------- ----------
Operating profit (loss) (2,659) 3,515 21,637 - 22,493
Interest expense 4,844 194 788 - 5,826
Intercompany interest expense (income) (2,929) 885 2,044 - -
Intercompany administrative charges (3,348) 1,851 1,497 - -
Other income (expense) - net 132 144 418 - 694
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (1,094) 729 17,726 - 17,361
Provision (benefit) for income taxes (350) 296 6,469 - 6,415
Undistributed earnings of subsidiaries 11,690 - - (11,690) -
---------- ---------- ---------- ---------- ----------
Net income $ 10,946 433 11,257 (11,690) 10,946
========== ========== ========== =========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Statements of Income
December 31, 1995
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 63,621 127,110 (2,750) 187,981
Cost of goods sold - 58,626 100,584 (2,691) 156,519
---------- ---------- ---------- ---------- ----------
Gross profit - 4,995 26,526 (59) 31,462
Selling and administrative expense 2,136 4,279 9,293 - 15,708
---------- ---------- ---------- ---------- ----------
Operating profit (loss) (2,136) 716 17,233 (59) 15,754
Interest expense 4,788 183 722 - 5,693
Intercompany interest expense (income) (3,167) 753 2,414 - -
Intercompany administrative charges (3,077) 2,147 930 - -
Other income (expense) - net 62 551 (443) - 170
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (618) (1,816) 12,724 (59) 10,231
Provision (benefit) for income taxes 2 (894) 5,871 - 4,979
Undistributed earnings of subsidiaries 5,872 - - (5,872) -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 5,252 (922) 6,853 (5,931) 5,252
========== =========== ========== =========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Balance Sheets
December 31, 1997
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 10,058 321 4,493 - 14,872
Accounts and notes receivable, net - 20,870 25,450 - 46,320
Inventories - 28,251 25,949 - 54,200
Prepaid expenses and other current assets 1,402 511 1,113 - 3,026
---------- ---------- ---------- ---------- ----------
Total current assets 11,460 49,953 57,005 - 118,418
Property, plant and equipment, net 230 46,977 51,953 - 99,160
Other assets 9,480 1,495 971 - 11,946
Cost in excess of net assets of acquired
businesses, net - 64,619 18,296 - 82,915
Intercompany investments 102,246 - - (102,246) -
Intercompany advances 146,164 14,798 - (160,962) -
---------- ---------- ---------- ---------- ----------
$ 269,580 177,842 128,225 (263,208) 312,439
========== ========== ========== ========== ==========
Liabilities and Stockholders' equity
Current Liabilities
Short-term borrowings $ - - 1,819 - 1,819
Current Installments of long-term debt - - 620 - 620
Accounts and notes payable-trade and other
liabilities 3,600 8,529 16,107 - 28,236
Income taxes payable 567 (1,785) 1,218 - -
---------- ---------- ---------- ---------- ----------
Total current liabilities 4,167 6,744 19,764 - 30,675
---------- ---------- ---------- ---------- ----------
Long-term debt 175,000 6,000 4,780 - 185,780
Other long-term liabilities - - 2,547 - 2,547
Deferred income taxes (1,887) 6,820 11,002 - 15,935
Intercompany payables 14,798 123,577 22,587 (160,962) -
---------- ---------- ---------- ---------- ----------
Total liabilities 192,078 143,141 60,680 (160,962) 234,937
---------- ---------- ---------- ---------- ----------
Stockholders' equity
Preferred stock - - - - -
Common stock 147 49 31,778 (31,827) 147
Paid-in capital 30,059 15,822 - (15,822) 30,059
Retained earnings 62,067 18,830 49,040 (67,870) 62,067
Cumulative foreign translation adjustment (13,273) - (13,273) 13,273 (13,273)
Less-Treasury stock, at cost (1,498) - - - (1,498)
---------- --------- --------- ---------- ----------
Total stockholders' equity 77,502 34,701 67,545 (102,246) 77,502
---------- ---------- ---------- ---------- ----------
$ 269,580 177,842 128,225 (263,208) 312,439
========== ========== ========== =========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Balance Sheets
December 31, 1996
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 428 174 1,515 - 2,117
Accounts and notes receivable, net (200) 7,558 32,510 - 39,868
Inventories - 12,926 24,339 - 37,265
Prepaid expenses and other current assets 1,405 415 1,155 - 2,975
---------- ---------- ---------- ---------- ----------
Total current assets 1,633 21,073 59,519 - 82,225
Property, plant and equipment, net 263 30,725 59,294 - 90,282
Other assets 2,343 2,117 687 - 5,147
Cost in excess of net assets of acquired
businesses, net - 8,212 20,166 - 28,378
Intercompany investments 85,858 - - (85,858) -
Intercompany advances 75,788 14,798 - (90,586) -
---------- ---------- ---------- ---------- ----------
$165,885 76,925 139,666 (176,444) 206,032
========== ========== ========== =========== ==========
Liabilities and Stockholders' equity
Current Liabilities
Short-term borrowings $ - - 1,342 - 1,342
Current Installments of long-term debt - - 1,634 - 1,634
Accounts and notes payable trade and other
liabilities 3,193 5,937 21,124 - 30,254
Income taxes payable 750 (1,734) 2,509 - 1,525
---------- ---------- ---------- ---------- ----------
Total current liabilities 3,943 4,203 26,609 - 34,755
---------- ---------- ---------- ---------- ----------
Long-term debt 62,390 - 5,364 - 67,754
Other long-term liabilities - - 1,316 - 1,316
Deferred income taxes (424) 6,795 10,658 - 17,029
Intercompany payables 14,798 47,950 27,838 (90,586) -
---------- ---------- ---------- ---------- ----------
Total liabilities 80,707 58,948 71,785 (90,586) 120,854
---------- ---------- ---------- ---------- ----------
Stockholders' equity
Preferred stock - - - - -
Common stock 147 49 27,160 (27,209) 147
Paid-in capital 29,946 - - - 29,946
Retained earnings 56,919 17,928 41,057 (58,985) 56,919
Cumulative foreign translation adjustment (336) - (336) 336 (336)
Less-Treasury stock, at cost (1,498) - - - (1,498)
---------- ---------- ---------- ---------- ----------
Total stockholders' equity 85,178 17,977 67,881 (85,858) 85,178
---------- ---------- ---------- ---------- ----------
$ 165,885 76,925 139,666 (176,444) 206,032
========== ========== ========== =========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
December 31, 1997
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,148 901 7,985 (8,886) 5,148
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries (8,886) - - 8,886 -
Depreciation and amortization 37 2,630 4,178 - 6,845
Provision for losses on accounts receivable - 71 234 - 305
Deferred income taxes (1,099) 341 1,792 (314) 720
Change in assets and liabilities net of effects of
acquisitions:
Accounts and notes receivable (200) (3,060) 2,196 - (1,064)
Inventories - (2,007) (5,389) - (7,396)
Prepaid expenses and other current assets (86) (34) (128) - (248)
Accounts and notes payable-trade and other 406 (2,171) (1,902) (646) (4,313)
current liabilities
Income taxes payable (459) (597) (984) 546 (1,494)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) operating (5,139) (3,926) 7,982 (414) (1,497)
----------- ----------- ---------- ----------- -----------
activities
Cash flows from investing activities:
Capital expenditures (3) (2,823) (5,426) 546 (7,706)
Acquisitions, net of cash acquired (7,502) - - (77,880) (85,382)
Other investing activities (7,017) 835 (1,875) (133) (8,190)
---------- ---------- ---- ----- ---------- ----------
Net cash used in investing activities (14,522) (1,988) (7,301) (77,467) (101,278)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Borrowings under line of credit
arrangements - - 3,548 - 3,548
Payments under line of credit arrangements - - (3,435) - (3,435)
Borrowings under revolving credit facility 109,550 - - - 109,550
Payments under revolving credit facility (121,940) - - - (121,940)
Borrowings under long term loans 175,000 - - - 175,000
Payments under long term loans (50,000) - - - (50,000)
Stock issued or (reacquired), net 113 - - - 113
Advances - affiliated companies (70,376) 6,068 1,036 63,272 -
Other financing activities (119) - 1,546 (359) 1,068
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities 42,228 6,068 2,695 62,913 113,904
---------- ---------- ---------- ---------- ----------
Effects of exchange rate changes in cash (12,937) (5) (398) 14,968 1,626
----------- ----------- ----------- ---------- ----------
Net increase (decrease) in cash 9,630 147 2,978 - 12,755
Cash at beginning of year 428 174 1,515 - 2,117
---------- ---------- ---------- ---------- ----------
Cash at end of year $ 10,058 321 4,493 - 14,872
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
December 31, 1996
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 10,946 433 11,257 (11,690) 10,946
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries (11,690) - - 11,690 -
Depreciation and amortization 37 2,310 3,937 - 6,284
Provision for losses on accounts receivable (83) 222 - 139
Deferred income taxes (219) 52 992 - 825
Change in assets and liabilities net of effects of
acquisitions:
Accounts and notes receivable 200 167 (3,155) - (2,788)
Inventories - 281 (4,838) - (4,557)
Prepaid expenses and other current assets 98 (119) 184 - 163
Accounts and notes payable-trade and other
current liabilities 266 720 4,358 - 5,344
Income taxes payable (58) 14 (1,280) - (1,324)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) operating (420) 3,775 11,677 - 15,032
----------- ---------- ---------- ---------- ----------
activities
Cash flows from investing activities:
Capital expenditures (1,525) (12,260) - (13,785)
Acquisitions, net of cash acquired 3,174 - (3,174) -
Other investing activities 133 (413) (869) - (1,149)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities 3,307 (1,938) (13,129) (3,174) (14,934)
---------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Borrowings under line of credit arrangements - - 16,724 - 16,724
Payments under line of credit arrangements - - (16,321) - (16,321)
Borrowings under revolving credit facility 104,660 - - - 104,660
Payments under revolving credit facility (104,940) - - - (104,940)
Borrowings under long term loans - - - - -
Payments under long term loans - - - - -
Stock issued or (reacquired), net (554) - - - (554)
Advances - affiliated companies 2,298 (1,825) (615) 142 -
Other financing activities 230 (7) 1,573 (966) 830
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities 1,694 (1,832) 1,361 (824) 399
---------- ----------- ---------- ----------- ----------
Effects of exchange rate changes in cash (4,153) 1 (71) 3,998 (225)
----------- ---------- ----------- ---------- -----------
Net increase (decrease) in cash 428 6 (162) - 272
Cash at beginning of year - 168 1,677 - 1,845
---------- ---------- ---------- ---------- ----------
Cash at end of year $ 428 174 1,515 - 2,117
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
December 31, 1995
GUARANTOR NON-GUARANTOR
DOMESTIC FOREIGN
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,252 (922) 6,853 (5,931) 5,252
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries (5,873) - - 5,873 -
Depreciation and amortization - 2,330 3,803 - 6,133
Provision for losses on accounts receivable - 1,175 157 - 1,332
Deferred income taxes (925) (70) 834 - (161)
Change in assets and liabilities net of effects of
acquisitions:
Accounts and notes receivable (300) 1,978 (4,625) 196 (2,751)
Inventories - 82 (1,358) - (1,276)
Prepaid expenses and other current assets 35 (230) (332) - (527)
Accounts and notes payable-trade and other 547 (436) 3,839 - 3,950
current liabilities
Income taxes payable 394 (209) (91) - 94
---------- ---------- ---------- ---------- ----------
Net cash provided (used in) by operating
activities (870) 3,698 9,080 138 12,046
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (32) (513) (7,811) - (8,356)
Acquisitions, net of cash acquired (13,255) - 325 8,863 (4,067)
Other investing activities 133 128 (691) (2,581) (3,011)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities (13,154) (385) (8,177) 6,282 (15,434)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Borrowings under line of credit arrangements - - 7,813 - 7,813
Payments under line of credit arrangements - - (6,874) - (6,874)
Borrowings under revolving credit facility 46,038 - - - 46,038
Payments under revolving credit facility (40,578) - - - (40,578)
Borrowings under long term loans - - - - -
Payments under long term loans - - - - -
Stock issued or (reacquired), net - - - - -
Advances - affiliated companies 6,143 (1,323) (4,907) 87 -
Other financing activities (2,234) (593) 375 (1,765) (4,217)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities 9,369 (1,916) (3,593) (1,678) 2,182
---------- ---------- ---------- ---------- ----------
Effects of exchange rate changes in cash 4,655 (1) (12) (4,742) (100)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash - 1,396 (2,702) - (1,306)
Cash at beginning of year - (1,228) 4,379 - 3,151
---------- ----------- ---------- ---------- -----
Cash at end of year $ - 168 1,677 - 1,845
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
WORLDTEX, INC.
SUPPLEMENTARY FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DILUTED NET
UNAUDITED NET GROSS NET INCOME PER
QUARTERLY FINANCIAL DATA SALES PROFIT INCOME SHARE (A
- -------------------------- -------- -------- ------- -----------
<S> <C> <C> <C> <C>
1997 Quarter:
First $ 50,918 9,242 2,666 .18
Second 51,880 8,944 2,029 .14
Third 45,552 8,124 2,048 .14
Fourth(B) 54,906 9,673 (251) (.02)
-------- -------- -------
$203,256 35,983 6,492
======== ======== =======
1996 Quarter:
First $ 51,899 9,746 2,700 .19
Second 53,140 10,279 3,226 .22
Third 50,150 8,965 2,481 .17
Fourth 52,640 10,085 2,539 .17
-------- -------- -------
$207,829 39,075 10,946
======== ======== =======
1995 Quarter:
First $ 46,395 8,269 2,138 .15
Second 49,100 8,605 2,360 .16
Third 47,314 7,818 395 .03
Fourth 45,172 6,770 359 .02
-------- -------- -------
$187,981 31,462 5,252
======== ======== =======
NOTES:
- ------
<FN>
(A) Income per share are calculated based upon the weighted average number of
common shares outstanding and common equivalent shares during the year.
(B) 1997 fourth quarter net income after extraordinary item - ($1,595)
1997 year net income after extraordinary item - $5,148
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: April 23, 1998
WORLDTEX, INC.
By /S/ RICHARD J. MACKEY
--------------------------------------
Richard J. Mackey
Chairman of the Board and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this amendment has been signed below on April 8, 1998 by the following persons
on behalf of the registrant and in the capacities indicated.
/S/ RICHARD J. MACKEY
- ----------------------------------------------
Richard J. Mackey, Chairman of the Board,
Chief Financial Officer, Director and
Attorney for the persons indicated by asterisk
BARRY D. SETZER*
Barry D. Setzer, President, Chief Executive
Officer and Director
CLAUDE D. EGLER*
Claude D. Egler, Director
JOHN B. FRASER*
John B. Fraser, Director
- --------------------------------
Salim M. Ibrahim, Director
WILLI ROELLI*
Willi Roelli, Director
MICHAEL B. WILSON*
Michael B. Wilson, Director
JOHN K. ZIEGLER*
John K. Ziegler, Director
<PAGE>
Index to Exhibits
Exhibit No. Description
- ----------- -----------
10.6 Credit Agreement, dated as of December 1, 1997, among the
Company, the Guarantors, the Lenders named therein and
NationsBank, N.A., as Agent
23.1 Consent of Independent Auditors
CREDIT AGREEMENT
Dated as of December 1, 1997
among
WORLDTEX, INC.,
as Borrower,
CERTAIN SUBSIDIARIES OF THE BORROWER,
as Guarantors,
THE LENDERS
AND
NATIONSBANK, N.A.,
as Agent
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS..........................................................1
1.1 DEFINITIONS............................................................1
1.2 COMPUTATION OF TIME PERIODS...........................................26
1.3 ACCOUNTING TERMS......................................................27
SECTION 2 CREDIT FACILITIES...................................................27
2.1 REVOLVING LOANS.......................................................27
2.2 LETTER OF CREDIT SUBFACILITY..........................................29
2.3 FOREIGN CURRENCY LOAN SUBFACILITY.....................................34
2.4 SWINGLINE LOANS.......................................................36
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES......................38
3.1 DEFAULT RATE..........................................................38
3.2 EXTENSION AND CONVERSION..............................................38
3.3 PREPAYMENTS...........................................................39
3.4 REDUCTIONS IN COMMITMENTS.............................................40
3.5 FEES..................................................................40
3.6 CAPITAL ADEQUACY......................................................41
3.7 INABILITY TO DETERMINE INTEREST RATE..................................41
3.8 ILLEGALITY............................................................42
3.9 REQUIREMENTS OF LAW...................................................42
3.10 TAXES................................................................43
3.11 INDEMNITY............................................................46
3.12 PRO RATA TREATMENT...................................................46
3.13 SHARING OF PAYMENTS..................................................47
3.14 PAYMENTS, COMPUTATIONS, ETC..........................................47
3.15 EVIDENCE OF DEBT.....................................................50
3.16 REPLACEMENT OF LENDERS...............................................50
SECTION 4 GUARANTY............................................................51
4.1 THE GUARANTEE.........................................................51
4.2 OBLIGATIONS UNCONDITIONAL.............................................51
4.3 REINSTATEMENT.........................................................53
4.4 REMEDIES..............................................................53
4.5 RIGHTS OF CONTRIBUTION................................................53
4.6 CONTINUING GUARANTEE..................................................54
4.7 CERTAIN ADDITIONAL WAIVERS............................................54
4.8 RELEASE OF GUARANTOR..................................................54
<PAGE>
SECTION 5 CONDITIONS..........................................................55
5.1 CONDITIONS TO CLOSING.................................................55
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT................................57
SECTION 6 REPRESENTATIONS AND WARRANTIES......................................58
6.1 FINANCIAL CONDITION...................................................58
6.2 NO CHANGES OR RESTRICTED PAYMENTS.....................................58
6.3 ORGANIZATION; EXISTENCE; COMPLIANCE WITH LAW..........................59
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.........................59
6.5 NO LEGAL BAR..........................................................59
6.6 NO MATERIAL LITIGATION................................................60
6.7 NO DEFAULT............................................................60
6.8 OWNERSHIP OF PROPERTY; LIENS..........................................60
6.9 INTELLECTUAL PROPERTY.................................................60
6.10 NO BURDENSOME RESTRICTIONS...........................................60
6.11 TAXES................................................................61
6.12 ERISA................................................................61
6.13 GOVERNMENTAL REGULATIONS, ETC........................................62
6.14 PURPOSE OF EXTENSIONS OF CREDIT......................................63
6.15 ENVIRONMENTAL MATTERS................................................63
6.16 FIRST PRIORITY LIEN..................................................64
6.17 SUBSIDIARIES.........................................................64
SECTION 7 AFFIRMATIVE COVENANTS...............................................64
7.1 FINANCIAL STATEMENTS..................................................65
7.2 CERTIFICATES; OTHER INFORMATION.......................................65
7.3 NOTICES...............................................................66
7.4 PAYMENT OF OBLIGATIONS................................................67
7.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE......................68
7.6 MAINTENANCE OF PROPERTY; INSURANCE....................................68
7.7 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS................68
7.8 ENVIRONMENTAL LAWS....................................................69
7.9 FINANCIAL COVENANTS...................................................70
7.10 USE OF PROCEEDS......................................................71
7.11 ADDITIONAL GUARANTIES AND STOCK PLEDGES..............................71
SECTION 8 NEGATIVE COVENANTS..................................................72
8.1 INDEBTEDNESS..........................................................72
8.2 LIENS.................................................................73
8.3 NATURE OF BUSINESS....................................................73
8.4 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, CREATION OF
SUBSIDIARIES..........................................................73
8.5 TRANSFER OF ASSETS....................................................74
8.6 ADVANCES, INVESTMENTS AND LOANS.......................................74
8.7 RESTRICTED PAYMENTS...................................................74
8.8 TRANSACTIONS WITH AFFILIATES; MODIFICATION OF DOCUMENTATION...........76
<PAGE>
8.9 FISCAL YEAR...........................................................77
8.10 LIMITATION ON RESTRICTIONS...........................................77
8.11 SALE LEASEBACKS......................................................78
8.12 CAPITAL EXPENDITURES.................................................78
8.13 FACTORING AGREEMENT..................................................78
SECTION 9 EVENTS OF DEFAULT...................................................78
9.1 EVENTS OF DEFAULT.....................................................78
9.2 ACCELERATION; REMEDIES................................................80
SECTION 10 AGENCY PROVISIONS..................................................81
10.1 APPOINTMENT..........................................................81
10.2 DELEGATION OF DUTIES.................................................82
10.3 EXCULPATORY PROVISIONS...............................................82
10.4 RELIANCE ON COMMUNICATIONS...........................................82
10.5 NOTICE OF DEFAULT....................................................83
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS..............................83
10.7 INDEMNIFICATION......................................................84
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.....................................84
10.9 SUCCESSOR AGENT......................................................84
SECTION 11 MISCELLANEOUS......................................................85
11.1 NOTICES..............................................................85
11.2 RIGHT OF SET-OFF.....................................................86
11.3 BENEFIT OF AGREEMENT.................................................87
11.4 NO WAIVER; REMEDIES CUMULATIVE.......................................89
11.5 PAYMENT OF EXPENSES, ETC.............................................89
11.6 AMENDMENTS, WAIVERS AND CONSENTS.....................................90
11.7 COUNTERPARTS.........................................................91
11.8 HEADINGS.............................................................91
11.9 SURVIVAL.............................................................91
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE....................91
11.11 SEVERABILITY........................................................92
11.12 ENTIRETY............................................................92
11.13 BINDING EFFECT; TERMINATION.........................................92
11.14 CONFIDENTIALITY.....................................................92
11.15 CONFLICT............................................................93
<PAGE>
SCHEDULES
Schedule 1.1(a) Investments
Schedule 1.1(b) Liens
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing for Revolving Loans
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(b) Notice of Request for Letter of Credit
Schedule 2.3(b)(i) Form of Notice of Borrowing for Foreign Currency Loans
Schedule 2.4(d) Form of Swingline Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 6.17 Subsidiaries
Schedule 7.2(b) Form of Officer's Compliance Certificate
Schedule 7.2(e) Form of Borrowing Base Certificate
Schedule 7.12 Form of Joinder Agreement
Schedule 8.1 Indebtedness
Schedule 11.1 Notice
Schedule 11.3(b) Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of December 1, 1997 (the "CREDIT
AGREEMENT"), is by and among WORLDTEX, INC., a Delaware corporation (the
"BORROWER"), the subsidiaries of the Borrower listed on the signature pages
hereto and such other subsidiaries as may from time to time after the date
hereof become guarantors hereunder in accordance with the provisions hereof (the
"GUARANTORS"), the lenders named herein and such other lenders as may become a
party hereto (the "LENDERS"), and NATIONSBANK, N.A., as Agent for the Lenders
(in such capacity, the "AGENT").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a $25,000,000
credit facility for the purposes hereinafter set forth;
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
-----------
1.1 DEFINITIONS.
-----------
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"ACQUIRED ASSETS" means, collectively, those assets acquired under and
pursuant to the Purchase Agreement.
"ADJUSTED CD RATE RESERVE PERCENTAGE" means for the Interest Period
for each CD Rate Loan comprising part of the same borrowing (including
conversions and extensions) the reserve percentage applicable on the first
day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not limited to,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with deposits
exceeding one billion dollars with respect to liabilities consisting of or
<PAGE>
including (among other liabilities) Dollar nonpersonal time deposits in the
United States with a maturity equal to such Interest Period.
"AFFILIATE" means, with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person or (ii) directly or indirectly
owning or holding five percent (5%) or more of the equity interest in such
Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGENCY SERVICES ADDRESS" means NationsBank, N.A., NC1-001-15-04, 101
North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency Services,
or such other address as may be identified by written notice from the Agent
to the Borrower.
"AGENT" shall have the meaning assigned to such term in the heading
hereof, together with any successors or assigns.
"AGENT'S FEE LETTER" means that certain letter agreement, dated as of
October 27, 1997, between the Agent and the Borrower, as amended, modified,
supplemented or replaced from time to time.
"AGENT'S FEES" shall have the meaning assigned to such term in Section
3.5(c).
"AGGREGATE REVOLVING COMMITTED AMOUNT" means the aggregate amount of
Revolving Commitments in effect from time to time, being initially TWENTY
FIVE MILLION DOLLARS ($25,000,000) (such aggregate maximum amount may be
reduced or increased from time to time as provided in Section 3.4).
"APPLICABLE PERCENTAGE" means for the Loans, Letter of Credit Fee and
the Unused Fee, the appropriate applicable percentages corresponding to the
Leverage Ratio in effect as of the most recent determination date as shown
below:
<TABLE>
<CAPTION>
=========================================================================================================================
| | Applicable | | |
| | Percentage For | | |
| | Eurodollar | Applicable | |
Pricing | Leverage | Loans and CD | Percentage For | Applicable | Applicable
Level | Ratio | Rate Loans | Base Rate | Percentage For | Percentage For
| | and Swingline | Loans | Letter of Credit | Unused Fees
| | Loans | | Fees |
- ----------|---------------------------|----------------------|------------------|--------------------|--------------------
<S> <C> <C> <C> <C> <C>
I | greater than 4.25 to 1.0 | 1.75% | .75% | 1.75% | .375%
==========================================================================================================================
<PAGE>
==========================================================================================================================
II | less than or equal to | 1.50% | .50% | 1.50% | .30%
| 4.25 to 1.0 but | | | |
| greater than 3.0 to 1.0 | | | |
| | | | |
- ----------|---------------------------|----------------------|------------------|--------------------|--------------------
III | less than or equal to | 1.25% | .25% | 1.25% | .25%
| 3.0 to 1.0 but | | | |
| greater than 2.0 to 1.0 | | | |
| | | | |
- ----------|---------------------------|----------------------|------------------|--------------------|--------------------
IV | less than or equal to | | | |
| 2.0 to 1.0 | 1.00% | 0% | 1.00% | .20%
| | | | |
==========================================================================================================================
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly on
the date (each a "CALCULATION DATE") five Business Days after the date by
which the Borrower is required to provide the officer's certificate in
accordance with the provisions of Section 7.1(b); PROVIDED, HOWEVER, that
(i) the initial Applicable Percentages shall be based on Pricing Level II
until the first Calculation Date to occur after the Closing Date, and,
thereafter, the Applicable Percentages shall be determined by the Leverage
Ratio as of the fiscal quarter end immediately preceding the applicable
Calculation Date, and (ii) if the Borrower fails to provide the officer's
certificate to the Agent as required by Section 7.1(b) on or before the
most recent Calculation Date, the Applicable Percentages from such
Calculation Date shall be based on Pricing Level I until such time as an
appropriate officer's certificate is provided, whereupon the Pricing Level
shall be determined by the Leverage Ratio as of the fiscal quarter end
immediately preceding the applicable Calculation Date. Except as set forth
above, each Applicable Percentage shall be effective from one Calculation
Date until the next Calculation Date. Any adjustment in the Applicable
Percentages shall be applicable to all existing Loans and Letters of Credit
as well as any new Loans made or Letters of Credit issued. The Borrower
shall promptly deliver to the Agent at the address set forth in Section
11.1 and at the Agency Services Address the information required by Section
7.2(b) in accordance with the terms of Section 7.2(b).
"ASSIGNMENT OF FACTORING PROCEEDS" means, with respect to any
Factoring Agreement, an assignment of factoring proceeds consented to in
writing by the applicable Factor and otherwise in form and substance
satisfactory to the Agent.
"ASSESSMENT RATE" means for the Interest Period for each CD Rate Loan
comprising part of the same borrowing (including conversions and
extensions) the annual assessment rate (rounded upward to the nearest 1/100
of 1% per annum) estimated by the Agent on the first day of such Interest
Period for determining the then current annual assessment payable by the
Agent to the Federal Deposit Insurance Corporation (or any successor) for
insuring Dollar deposits of the Agent in the United States.
"AVAILABLE FOREIGN CURRENCY" means (i) British Pounds Sterling, French
Francs, Swiss Francs, Deutsche Marks, Japanese Yen and Italian Lire and
(ii) any other freely available currency which is freely transferable and
freely convertible into Dollars and in which dealings in deposits are
carried on in the London interbank market, which shall be requested by the
Borrower and approved by each Lender.
<PAGE>
"BANKRUPTCY CODE" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"BANKRUPTCY EVENT" means, with respect to any Person, the occurrence
of any of the following with respect to such Person: (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or ordering the winding up or
liquidation of its affairs; or (ii) there shall be commenced against such
Person an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or for the winding up or
liquidation of its affairs and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of ninety (90) consecutive days; or (iii) such Person
shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such
Person or for substantially all of its Property or make any general
assignment for the benefit of creditors; or (iv) such Person shall be
unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.
"BASE RATE" means, for any day, the rate per annum (rounded upwards,
if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the
greater of (i) the Federal Funds Rate in effect on such day PLUS 1/2 of 1%
or (ii) the Prime Rate in effect on such day. If for any reason the Agent
shall have determined (which determination shall be conclusive absent
manifest error) that it is unable after due inquiry to ascertain the
Federal Funds Rate for any reason, including the inability or failure of
the Agent to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to clause (i) of
the first sentence of this definition until the circumstances giving rise
to such inability no longer exist. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Rate shall be effective on
the effective date of such change in the Prime Rate or the Federal Funds
Rate, respectively.
"BASE RATE LOAN" means any Loan bearing interest at a rate determined
by reference to the Base Rate.
"BORROWER" means Worldtex, Inc., a Delaware corporation.
"BORROWING BASE" means, at any time, the sum of (a) 85% of Eligible
Receivables PLUS (b) 50% of Eligible Inventory.
<PAGE>
"BORROWING BASE CERTIFICATE" means a Borrowing Base Certificate
substantially in the form of SCHEDULE 7.2(E).
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina or New York, New
York are authorized or required by law to close, EXCEPT THAT, (i) when used
in connection with a Eurodollar Loan, such day shall also be a day on which
dealings between banks are carried on in U.S. dollar deposits in London
interbank market and (ii) when used in connection with a Foreign Currency
Loan, such day shall also be a day on which dealings between banks are
carried on in deposits in Available Foreign Currencies in London interbank
market.
"CAPITAL EXPENDITURES" means all expenditures which in accordance with
GAAP would be classified as capital expenditures, including, without
limitation, Capital Leases.
"CAPITAL LEASE" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"CAPITAL LEASE OBLIGATION" means the capital lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"CASH EQUIVALENTS" means (a) Dollars, (b) securities issued or
directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than six months from the date of acquisition,
(c) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each
case with any Lender or with any domestic commercial bank having capital
and surplus in excess of $500,000,000 and a Thompson Bank Watch Rating of
"B" or better, (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (b)
and (c) above entered into with any financial institution meeting the
qualifications specified in clause (c) above, (e) commercial paper having
the highest rating obtainable from Moody's or S&P and in each case maturing
within six months after the date of acquisition and (f) money market funds
at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (a)-(e) of this definition.
"CD RATE" means for the Interest Period for each CD Rate Loan
comprising part of the same borrowing (including conversions and
extensions), a per annum interest rate equal to the sum of:
(a) the rate obtained by dividing (i) the rate of interest
determined by the Agent to be (rounded upward to the nearest whole
multiple of 1/100 of 1% per annum) the bid rate per annum, at 10:00
A.M. (or as soon thereafter as is practicable) on the first day of
such Interest Period, of NationsBank for the purchase at face value of
<PAGE>
certificates of deposit in an amount substantially equal to the CD
Rate Loan comprising such borrowing (including extensions and
continuations) and with a maturity equal to such Interest Period, by
(ii) a percentage equal to 100% minus the Adjusted CD Rate Reserve
Percentage for such Interest Period; plus
(b) the Assessment Rate for such Interest Period.
"CD RATE LOAN" means any loan bearing interest at the CD Rate PLUS the
Applicable Percentage.
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (i) the adoption of a plan relating to the liquidation of
dissolution of the Borrower, (ii) any Person or two or more Persons acting
in concert shall have acquired "beneficial ownership," directly or
indirectly, of, or shall have acquired by contract or otherwise, or shall
have entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of, control over, Voting Stock of the
Borrower (or other securities convertible into such Voting Stock)
representing 50% or more of the combined voting power of all Voting Stock
of the Borrower, (iii) during any period of up to 24 consecutive months,
commencing after the Closing Date, individuals who at the beginning of such
24 month period were directors of the Borrower (together with any new
director whose election by the Borrower's Board of Directors or whose
nomination for election by the Borrower's shareholders 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 election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors of the Borrower then in office, or
(iv) the occurrence of a "Change of Control" under and as defined in the
Senior Note Indenture. As used herein, "beneficial ownership" shall have
the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934.
"CLOSING DATE" means the date hereof.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections.
"COLLATERAL" means all collateral referred to in and covered by the
Security Agreement and the Pledge Agreement.
"COMMITMENT" means the Revolving Commitment, the Swingline Commitment,
the Foreign Currency Commitment and the LOC Commitment.
"COMMITMENT PERIOD" means the period from and including the Closing
Date to but not including the earlier of (i) the Maturity Date, or (ii) the
<PAGE>
date on which the Revolving Commitments terminate in accordance with the
provisions of this Credit Agreement.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
security issued by such Person or of any material agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CREDIT DOCUMENTS" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, the Security Agreement, the Pledge
Agreement, the Agent's Fee Letter, and all other related financing
statements.
"CREDIT PARTY" means any of the Borrower and the Guarantors.
"CURRENT ASSETS" means, as of the date of determination, the total
amount of current assets of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP applied on a
consistent basis.
"CURRENT LIABILITIES" means, as of the date of determination, the
total amount of current liabilities of the Borrower and its Subsidiaries on
a consolidated basis determined in accordance with GAAP applied on a
consistent basis.
"CURRENT RATIO" means, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the ratio of Current Assets to
Current Liabilities.
"DEFAULT" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" means, at any time, any Lender that, at such time,
(i) has failed to make an Extension of Credit required pursuant to the
terms of this Credit Agreement, (ii) has failed to pay to the Agent or any
Lender an amount owed by such Lender pursuant to the terms of the Credit
Agreement or any other of the Credit Documents, or (iii) has been deemed
insolvent or has become subject to a bankruptcy or insolvency proceeding or
to a receiver, trustee or similar proceeding.
"DETERMINATION DATE" means, with respect to any Foreign Currency Loan:
(a) in connection with any origination of such Loan, the Business
Day which is the earliest of the date such Loan is made or the date
the interest rate is set;
(b) in connection with any extension or conversion of an existing
Foreign Currency Loan, the Business Day which is the earlier of the
date such Loan is extended or converted, or the date the interest rate
is set, as applicable, in connection with any extension or conversion;
or
<PAGE>
(c) the date of any reduction of the Revolving Committed Amount
pursuant to the terms of Section 3.4.
"DISQUALIFIED STOCK" means any capital stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after
the Maturity Date, PROVIDED, HOWEVER, that any capital stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Borrower to repurchase such capital stock upon the
occurrence of a Change of Control or an asset sale shall not constitute
Disqualified Stock if the terms of such capital stock provide that the
Borrower may not repurchase or redeem any such capital stock pursuant to
such provisions unless such repurchase or redemption complies with Section
4.07 of the Senior Note Indenture.
"DOLLAR AMOUNT" means (a) with respect to Dollars or an amount
denominated in Dollars, such amount and (b) with respect to an amount of
any Available Foreign Currency or an amount denominated in such Available
Foreign Currency, the Dollar Equivalent of such amount on the applicable
date contemplated in the Credit Agreement.
"DOLLAR EQUIVALENT" means, on any date, with respect to any amount
denominated in an Available Foreign Currency, the amount of Dollars into
which the Agent could, in accordance with its practice from time to time in
the interbank foreign exchange market, convert such amount of Available
Foreign Currency at its spot rate of exchange (inclusive of all reasonable
related costs of conversion) applicable to the relevant transaction at or
about 10:00 A.M., Charlotte, North Carolina time, on such date.
"DOLLARS" and "$" means dollars in lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary which is incorporated or
organized under the laws of any state of the United States or of the
District of Columbia.
"EBITDA" means for any period with respect to the Borrower and its
Subsidiaries on a consolidated basis the sum of Net Income PLUS Interest
Expense PLUS all provisions for any Federal, state or other domestic and
foreign income taxes PLUS depreciation, amortization and other non-cash
charges, in each case determined in accordance with GAAP applied on a
consistent basis. Except as expressly provided otherwise, the applicable
period shall be for the four consecutive quarters ending as of the date of
determination.
"ECA" means Elastic Corporation of America, Inc., a Delaware
corporation.
"ELIGIBLE INVENTORY" means, as of the date of determination, the gross
dollar value (valued at the lower of cost (on a FIFO basis) or fair market
value of all finished goods, work in process and raw materials inventory of
the Borrower and its Domestic Subsidiaries LESS appropriate reserves
<PAGE>
determined in accordance with GAAP applied on a consistent basis, but
excluding in any event (i) inventory subject to a Lien other than Liens
referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) of the
definition of Permitted Liens, (ii) inventory upon which the Agent does not
have a first priority perfected security interest, (iii) inventory which
fails to meet standards for sale or use imposed by Governmental Authorities
in the United States, (iv) inventory which is not useable or saleable at
prices approximating their cost (after taking into account, without
duplication, the amount of any reserves for obsolescence, unsaleability or
decline in value), (v) inventory having a book value of more than
$1,000,000 in the aggregate, which is leased or on consignment, (vi)
packaging materials and supplies and (vii) inventory of any Foreign
Subsidiaries.
"ELIGIBLE RECEIVABLES" means, as of any date of determination and
without duplication, (A) all amounts owing to any Credit Party at such time
under all Factoring Agreements for which the Agent has received a
satisfactory Assignment of Factoring Proceeds (net of any amounts (i) which
the Factors are entitled to offset against amounts owing to any Credit
Party under such Factoring Agreements and (ii) owing by account debtors
located outside of the United States and Canada (except to the extent that
(a) payment for the goods shipped is secured by an irrevocable letter of
credit in a form and from an institution reasonably acceptable to the Agent
or (b) a Factor has assumed the credit risk of the related accounts
receivable)) and (B) the aggregate book value of all accounts receivable,
receivables, and obligations for payment created or arising from the sale
of inventory or the rendering of services in the ordinary course of
business (collectively, the "RECEIVABLES"), owned by or owing to the
Borrower or any of its Domestic Subsidiaries, net of accrued incentive
amounts, allowances and reserves for doubtful or uncollectible accounts and
sales adjustments consistent with the Borrower's internal policies and in
any event in accordance with GAAP, but excluding in any event (i)
Receivables subject to any Lien, other than Liens referred to in clause
(i), (ii), (iii), (iv), (v) and (vi) of the definition of Permitted Liens,
(ii) Receivables upon which the Agent does not have a first priority
perfected security interest, (iii) Receivables which are more than 90 days
from the date of invoice, (iv) any Receivable not otherwise excluded by
clause (iii) above but owing from an account debtor which is the account
debtor on existing Receivables more than 50% of which are then excluded by
such clause (iii), (v) Receivables owing by an account debtor which is
subject to any bankruptcy or insolvency proceeding of any kind, (vi)
Receivables owing by an account debtor located outside of the United States
or Canada (unless payment for the goods shipped is either (A) covered by
credit insurance in form and substance acceptable to the Agent or (B)
secured by an irrevocable letter of credit in a form and from an
institution acceptable to the Agent); PROVIDED that, at any time, no more
than $3,000,000 in aggregate Receivables owing by account debtors in Canada
may be included in Eligible Receivables, (vii) Receivables which are
contingent or subject to offset, deduction, counterclaim, credit, dispute
or other defense to payment, in each case to the extent of such offset,
deduction, counterclaim, dispute or other defense, (viii) Receivables for
which any direct or indirect Subsidiary of the Borrower or any Affiliate of
the Borrower is the account debtor, (ix) Receivables representing a sale to
the government of the United States of America or any subdivision thereof
<PAGE>
unless the Borrower or its Subsidiaries, as applicable have complied (to
the satisfaction of the Agent), with respect to the granting of a security
interest in such Receivable, with the Federal Assignment of Claims Act or
other similar applicable law, and (x) Receivables (if any), to the extent
exceeding $100,000 in the aggregate at any one time, created in connection
with any sale where payment is due on delivery of inventory sold.
"ENVIRONMENTAL LAWS" means any and all lawful and applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
"EQUITY INTERESTS" means capital stock and all warrants, options or
other rights to acquire capital stock (but excluding any debt security that
is convertible into, or exchangeable for, capital stock).
"EQUITY TRANSACTION" means any issuance by the Borrower to any Person
of shares of its capital stock or other equity interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA AFFILIATE" means an entity which is under common control with
the Borrower within the meaning of Section 4001(a)(14) of ERISA, or is a
member of a group which includes the Borrower and which is treated as a
single employer under Sections 414(b) or (c) of the Code.
"ERISA EVENT" means (i) with respect to any Plan, the occurrence of a
Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as
such term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section 4041(c)
or 4041A of ERISA; (iv) the institution of proceedings to terminate or the
actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v)
any event or condition which could reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (vi) the complete or
<PAGE>
partial withdrawal of the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for
imposition of a lien under Section 302(f) of ERISA exist with respect to
any Plan; or (vii) the adoption of an amendment to any Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA.
"EURODOLLAR LOAN" means any Loan bearing interest at a rate determined
by reference to the Eurodollar Rate.
"EURODOLLAR RATE" means, for the Interest Period for each Eurodollar
Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to
the following formula:
Eurodollar Rate = INTERBANK OFFERED RATE
--------------------------
1 - Eurodollar Reserve Percentage
"EURODOLLAR RESERVE PERCENTAGE" means for any day, that percentage
(expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System (or
any successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as
that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate
of Eurodollar Loans is determined), whether or not Lender has any
Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"EVENT OF DEFAULT" means such term as defined in Section 9.1.
"EXISTING INDEBTEDNESS" means such term as defined in Section 8.1(b).
"EXTENSION OF CREDIT" means, as to any Lender, the making of, or
participation in, a Loan by such Lender or the issuance or extension of, or
participation in, a Letter of Credit.
"FACTOR" means such term as defined in the definition of "FACTORING
AGREEMENT" set forth in this Section 1.1.
"FACTORING AGREEMENT" means each agreement between the Borrower or any
of its Subsidiaries and Republic Business Credit Corporation or any other
<PAGE>
Person (each of Republic Business Credit Corporation and each such other
Person, in such capacity, a "FACTOR") providing for credit, collection and
application services to be performed by a Factor with respect to accounts
receivable of the Borrower or any of such Subsidiaries, as applicable,
and/or for the purchase by a Factor, subject to the terms thereof, of some
or all of such accounts receivable, and which may grant to a Factor a
security interest in the factored accounts receivable of the Borrower or
any of such Subsidiaries, as applicable.
"FEES" means all fees payable pursuant to Section 3.5.
"FEDERAL FUNDS RATE" means, for any day, the rate of interest per
annum (rounded upwards, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
PROVIDED that (i) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day and (ii) if no such rate is so published on such next
preceding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to the Agent on such day on such transactions as
determined by the Agent.
"FLOATING CD RATE" means, for each Swingline Loan, the interest rate
per annum at which deposits in Dollars are available to the Swingline
Lender for 90 days in the form of negotiable certificates of deposit in the
secondary certificate of deposit market (the "90 Day CD rate") on or about
10:00 A.M. (Charlotte, North Carolina time) on the date of making the
Swingline Loan, in an amount substantially the same as such Swingline Loan,
as adjusted to reflect the cost of any applicable reserve requirements,
assessments of the Federal Deposit Insurance Corporation (or any successor)
and other assessments, which Floating CD Rate shall change as of the date
that the 90 Day CD rate shall change and shall change as often as the 90
Day CD rate shall change.
"FOREIGN CURRENCY" means the Available Foreign Currency.
"FOREIGN CURRENCY COMMITMENT" means, with respect to each Lender, the
commitment of such Lender to make Foreign Currency Loans in an aggregate
principal amount at any time outstanding of up to such Lender's Foreign
Currency Commitment Percentage of the Foreign Currency Committed Amount.
"FOREIGN CURRENCY COMMITMENT PERCENTAGE" means, for any Lender, the
percentage identified as its Foreign Currency Commitment Percentage on
SCHEDULE 2.1(A), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 11.3.
"FOREIGN CURRENCY COMMITTED AMOUNT" means, collectively, the aggregate
amount of all Foreign Currency Commitments as referenced in Section 2.3(a)
and, individually, the amount of each Lender's Foreign Currency Commitment
as specified on SCHEDULE 2.1(A).
<PAGE>
"FOREIGN CURRENCY EQUIVALENT" means, on any date, with respect to an
amount denominated in Dollars, the amount of any applicable Available
Foreign Currency into which the Agent could, in accordance with its
practice from time to time in the interbank foreign exchange market,
convert such amount of Dollars at its spot rate of exchange (inclusive of
all reasonable related costs of conversion) applicable to the relevant
transaction on or about 10:00 A.M. (Charlotte, North Carolina time) on such
date.
"FOREIGN CURRENCY LOANS" shall have the meaning assigned to such term
in Section 2.3(a).
"FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower which is not
a Domestic Subsidiary.
"FUNDED DEBT" means, with respect to any Person, without duplication,
(i) all Indebtedness of such Person for borrowed money, (ii) all purchase
money Indebtedness of such Person, including without limitation the
principal portion of all obligations of such Person under Capital Leases,
(iii) all Guaranty Obligations of such Person with respect to Funded Debt
of another Person, (iv) the maximum available amount of all standby letters
of credit or acceptances issued or created for the account of such Person,
(v) all Funded Debt of another Person secured by a Lien on any Property of
such Person, whether or not such Funded Debt has been assumed, PROVIDED
that for purposes hereof the amount of such Funded Debt shall be limited to
the greater of (A) the amount of such Funded Debt as to which there is
recourse to such Person and (B) the fair market value of the property which
is subject to the Lien, (vi) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product to which such Person is a
party, where such transaction is considered borrowed money indebtedness for
tax purposes but is classified as an operating lease in accordance with
GAAP. The Funded Debt of any Person shall include the Funded Debt of any
partnership or joint venture in which such Person is a general partner or
joint venturer, but only to the extent to which there is recourse to such
Person for the payment of such Funded Debt.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis and subject to the terms of Section
1.3 hereof.
"GOVERNMENTAL AUTHORITY" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory
body.
"GUARANTEED OBLIGATIONS" means, as to each Guarantor, without
duplication, (i) all obligations of the Borrower to the Lenders (including
the Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes or the Credit Documents relating to the Obligations
hereunder (including, but not limited to, any interest accruing after the
occurrence of a Bankruptcy Event with respect to any Credit Party,
regardless of whether such interest is an allowed claim under the
Bankruptcy Code), and (ii) all liabilities and obligations, whenever
<PAGE>
arising, owing from the Borrower to any Lender, or any Affiliate of a
Lender, arising under any Hedging Agreement relating to the Loans or
Obligations hereunder.
"GUARANTOR" means such term as defined in the first paragraph hereof.
"GUARANTY OBLIGATIONS" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, including without
limitation any such obligation, whether or not contingent, (i) to purchase
any such Indebtedness or any Property constituting security therefor, (ii)
to advance or provide funds or other support for the payment or purchase of
any such Indebtedness or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation
keep well agreements, maintenance agreements, or similar agreements or
arrangements) for the benefit of any holder of Indebtedness of such other
Person, (iii) to lease or purchase Property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness, or
(iv) to otherwise assure or hold harmless the holder of such Indebtedness
against loss in respect thereof. The amount of any Guaranty Obligation
hereunder shall (subject to any limitations set forth therein) be deemed to
be an amount equal to the outstanding principal amount of the Indebtedness
in respect of which such Guaranty Obligation is made.
"HEDGING AGREEMENTS" means any interest rate protection agreement or
foreign currency exchange agreement between the Borrower and any Lender, or
any Affiliate of a Lender.
"INDEBTEDNESS" of any Person means (i) all obligations of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest payments
are customarily made, (iii) all obligations of such Person under
conditional sale or other title retention agreements relating to Property
purchased by such Person (other than customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary
course of business), (iv) all obligations of such Person issued or assumed
as the deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (v) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, Property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (vi) all Guaranty Obligations of such Person, (vii) the principal
portion of all obligations of such Person under Capital Leases, (viii) all
obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity purchase or
option agreements or other interest or exchange rate or commodity price
hedging agreements (including, but not limited to, the Hedging Agreements),
<PAGE>
(ix) the maximum amount of all standby letters of credit issued or bankers'
acceptances facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed), (x)
all preferred stock issued by such Person and required by the terms thereof
to be redeemed, or for which mandatory sinking fund payments are due, by a
fixed date, and (xi) the principal balance outstanding under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product to which such Person is a party, where
such transaction is considered borrowed money indebtedness for tax purposes
but is classified as an operating lease in accordance with GAAP. The
Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer, but only to the extent to which there is recourse to such
Person for payment of such Indebtedness.
"INTERBANK OFFERED RATE" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal
to the rate of interest, determined by the Agent on the basis of the
offered rates for deposits in dollars or applicable Available Foreign
Currency, for whichever of such currencies such Loan is denominated, for a
period of time corresponding to such Interest Period (and commencing on the
first day of such Interest Period), appearing on Telerate Page 3750 (or,
if, for any reason, Telerate Page 3750 is not available, the Reuters Screen
LIBO Page) as of approximately 11:00 A.M. (London time) two (2) Business
Days before the first day of such Interest Period. As used herein,
"Telerate Page 3750" means the display designated as page 3750 by Dow Jones
Telerate, Inc. (or such other page as may replace such page on that service
for the purpose of displaying the British Bankers Association London
interbank offered rates) and "Reuters Screen LIBO Page" means the display
designated as page "LIBO" on the Reuters Monitor Money Rates Service (or
such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks).
"INTEREST COVERAGE RATIO" means, as of the end of each fiscal quarter
of the Borrower for the Borrower and its Subsidiaries on a consolidated
basis for the four consecutive quarters ending on such date, the ratio of
(a) EBITDA for the applicable period to (b) Interest Expense for the
applicable period.
"INTEREST EXPENSE" means for any period with respect to the Borrower
and its Subsidiaries on a consolidated basis all interest expense,
including the amortization of debt discount and premium and the interest
component under Capital Leases, in each case determined in accordance with
GAAP applied on a consistent basis. Except as expressly provided otherwise,
the applicable period shall be for the four consecutive quarters ending as
of the date of determination.
"INTEREST PAYMENT DATE" means (i) as to any Base Rate Loan, the last
Business Day of each calendar quarter (March, June, September and December)
of the Borrower and the Maturity Date and (ii) as to any Eurodollar Loan or
any CD Rate Loan, the last day of each Interest Period for such Loan and
<PAGE>
the Maturity Date, and in addition if the Interest Period for a Eurodollar
Loan is more than 3 months, then also on the date 3 months from the
beginning of the Interest Period, or if the Interest Period for a CD Rate
Loan is greater than 90 days, then also on the date 90 days from the
beginning of the Interest Period. If an Interest Payment Date falls on a
date which is not a Business Day, such Interest Payment Date shall be
deemed to be the next succeeding Business Day, EXCEPT THAT in the case of
Eurodollar Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day.
"INTEREST PERIOD" means (i) as to any Eurodollar Loan, a period of
one, two, three or six month's duration, as the Borrower may elect,
commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals) and (ii) with respect to CD Rate
Loans, a period of 30, 60, 90 or 180 days' duration, as the Borrower may
elect, commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals); PROVIDED, HOWEVER, (A) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that in the case of Eurodollar Loans where the next succeeding
Business Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (B) no Interest Period shall extend beyond the
Maturity Date, and (C) in the case of Eurodollar Loans, where an Interest
Period begins on a day for which there is no numerically corresponding day
in the calendar month in which the Interest Period is to end, such Interest
Period shall end on the last day of such calendar month.
"INVESTMENT" means (i) any loan or advance to any Person, (ii) any
purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of, or equity interest in, any
Person or (iii) any capital contribution to any Person or any other
investment in any Person, including, without limitation, any Guaranty
Obligation incurred for the benefit of such Person.
"ISSUING LENDER" means NationsBank, N.A.
"ISSUING LENDER FEES" shall have the meaning assigned to such term in
Section 3.5(b)(ii).
"JOINDER AGREEMENT" means a joinder agreement substantially in the
form of SCHEDULE 7.12.
"LENDERS" means each of the Persons identified as a "Lender" on the
signature pages hereto, and their successors and assigns.
"LETTER OF CREDIT" means any letter of credit issued by the Issuing
Lender for the account of the Borrower in accordance with the terms of
Section 2.3.
"LETTER OF CREDIT FEE" shall have the meaning given such term in
Section 3.5(b).
<PAGE>
"LEVERAGE RATIO" means, as of the last day of any fiscal quarter of
the Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of Funded Debt on such day to EBITDA for the
period of four consecutive fiscal quarters ending as of such day.
"LIEN" means any mortgage, pledge, hypothecation, collateral
assignment, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, and any lease in the nature thereof).
"LOAN" or "LOANS" means the Revolving Loans (or a portion of any
Revolving Loan bearing interest at the Base Rate, CD Rate or the Eurodollar
Rate and referred to as a Base Rate Loan, CD Rate Loan or a Eurodollar
Loan), and/or any Swingline Loans and/or any Foreign Currency Loan (or any
Foreign Currency Loan referred to as a Eurodollar Loan), individually or
collectively, as appropriate.
"LOC COMMITMENT" means the commitment of the Issuing Lender to issue,
and to honor payment obligations under, Letters of Credit hereunder and
with respect to each Lender, the commitment of each Lender to purchase
participation interests in the Letters of Credit up to such Lender's LOC
Committed Amount as specified in SCHEDULE 2.1(A), as such amount may be
reduced from time to time in accordance with the provisions hereof.
"LOC COMMITTED AMOUNT" means, collectively, the aggregate amount of
all of the LOC Commitments of the Lenders to issue and participate in
Letters of Credit as referenced in Section 2.3(a) and, individually, the
amount of each Lender's LOC Commitment as specified in SCHEDULE 2.1(A).
"LOC DOCUMENTS" means, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application
or applicable only to such Letter of Credit) governing or providing for (i)
the rights and obligations of the parties concerned or at risk or (ii) any
collateral security for such obligations.
"LOC OBLIGATIONS" means, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Letters of Credit PLUS
(ii) the aggregate amount of all drawings under Letters of Credit honored
by the Issuing Lender but not theretofore reimbursed.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
condition (financial or otherwise), operations, business, assets,
liabilities or prospects of the Borrower and its Subsidiaries taken as a
whole, (ii) the ability of the Borrower and its Subsidiaries as a whole to
<PAGE>
perform any material obligation under the Credit Documents to which it is a
party or (iii) the rights and remedies of the Lenders under the Credit
Documents.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MATURITY DATE" means December 1, 2002.
"MOODY'S" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating
securities.
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"MULTIPLE EMPLOYER PLAN" means a Plan which the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate and at least one employer
other than the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate are contributing sponsors.
"NATIONSBANK" means NationsBank, N.A. and its successors.
"NET CASH PROCEEDS" means gross cash proceeds (including any cash
received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received in
connection with an Equity Transaction net of actual costs and taxes
incurred by such Person in connection with and attributable to such Equity
Transaction.
"NET INCOME" means for any period , the net income with respect to the
Borrower and its Subsidiaries on a consolidated basis as determined in
accordance with GAAP applied on a consistent basis, but excluding for
purposes of determining the Leverage Ratio and the Interest Coverage Ratio,
any extraordinary gains or losses and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded gains and any
tax deductions or credits on account of any such excluded losses.
"NET WORTH" means, as of any date, shareholders' equity or net worth
of the Borrower and its Subsidiaries on a consolidated basis, as determined
in accordance with GAAP; PROVIDED, HOWEVER, that (A) foreign currency
translation adjustments under Financial Accounting Standards Board
Statement No. 52, "Foreign Currency Translation" and (B) items reported in
comprehensive income and accumulated other comprehensive income under
Financial Accounting Standards Statement No. 130 (including but not limited
to gains or losses for derivatives designated as a hedge of exposure to
variable cash flows of forecasted transactions and derivatives designated
<PAGE>
as a hedge of foreign currency exposure of a net investment in a foreign
operation), shall not in either case be taken into account in calculating
Net Worth.
"NON-EXCLUDED TAXES" means such term as is defined in Section 3.10.
"NOTE" or "NOTES" means any Revolving Note, as the context may
require.
"NOTICE OF BORROWING" means a written notice of borrowing in
substantially the form of SCHEDULE 2.1(B)(I), as required by Section
2.1(b)(i) in the case of Revolving Loans or Schedule 2.3(b)(i), as required
by Section 2.3(b)(i) in the case of Foreign Currency Loans.
"NOTICE OF EXTENSION/CONVERSION" means the written notice of extension
or conversion in substantially the form of SCHEDULE 3.2, as required by
Section 3.2.
"NFA INDUSTRIAL DEVELOPMENT BOND DOCUMENTS" means those agreements
executed in connection with the $8,100,000 Revenue Bonds (NFA Corp.
Project), Series 1992-A, issued by the Industrial Development Board of the
City of Columbiana, Alabama, under that certain Trust Indenture date June
1, 1992, as amended by First Supplemental Trust Indenture dated May 1,
1997, as amended in connection with the assumption of such agreements by
ECA pursuant to the terms of the Purchase Agreement.
"OBLIGATIONS" means, collectively, the Revolving Loans, the Foreign
Currency Loans, the Swingline Loans and the LOC Obligations.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed) which
is not a Capital Lease other than any such lease in which that Person is
the lessor.
"PARTICIPATION INTEREST" means the purchase by a Lender of a
participation in Letters of Credit and LOC Obligations as provided in
Section 2.2(c), in Swingline Loans as provided in Section 2.4(b)(iii) and
in Revolving Loans as provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"PERMITTED BUSINESS" means the same or similar line of business as the
Borrower or any of its Subsidiaries is engaged in as of the Closing Date.
"PERMITTED HEDGING OBLIGATIONS" means such term as defined in Section
8.1(d).
"PERMITTED INVESTMENTS" means Investments which are either (i) cash
and Cash Equivalents, (ii) accounts receivable created, acquired or made in
the ordinary course of business and payable or dischargeable in accordance
with customary trade terms, (iii) Investments consisting of stock,
<PAGE>
obligations, securities or other property received in settlement of
accounts receivable (created in the ordinary course of business) from
defaulting obligors, (iv) Investments existing as of the Closing Date and
set forth in SCHEDULE 1.1(A), (v) Investments made as a result of the
receipt of non-cash consideration from an asset sale that was made pursuant
to and in compliance with Section 8.5; (vi) Investments in any Subsidiary
or in the Borrower, (vii) Investments in any joint ventures or Affiliates
in an amount not to exceed $10,000,000 in the aggregate at any time
outstanding; (viii) the acquisition of the assets or capital stock of
another Person provided that (A) the purchase price of such acquisition,
when taken together with all other Investments made pursuant to this clause
(viii) during the term of this Credit Agreement, shall not exceed
$25,000,000 plus, after such $25,000,000 has been expended, the amount (if
any) permitted to be invested for such purpose pursuant to Section 8.7
hereof and (B) if the acquisition is of the capital stock of another
Person, such Person shall become a Subsidiary upon the consummation of such
acquisition and (ix) advances to employees, with respect to salary, bonus,
travel, relocation and similar matters in an aggregate amount not to exceed
$1,000,000 at any time outstanding.
"PERMITTED LIENS" means:
(i) Liens in favor of the Agent on behalf of the Lenders;
(ii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens
imposed by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, PROVIDED that such
Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(iv) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made by the Borrower and its Subsidiaries in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, bids,
leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the
payment of borrowed money);
<PAGE>
(v) Liens in connection with attachments or judgments (including
judgment or appeal bonds) PROVIDED that the judgments secured shall,
within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been discharged
within 30 days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect,
impairing the use of the encumbered Property for its intended
purposes;
(vii) Liens (a) which exist on Property at the time of
acquisition thereof by the Borrower or any of its Subsidiaries, (b)
which exist on the Property of any Person at the time such Person
becomes a Subsidiary of the Borrower or merges or consolidates with
the Borrower or any of its Subsidiaries, or (c) created solely to
secure the purchase price of property or to secure Indebtedness
(including Capital Lease Obligations) incurred solely for the purpose
of acquiring, constructing or improving property to the extent
permitted under Section 8.1(c), PROVIDED that no such Lien shall cover
any property other than the particular property (or proceeds thereof)
being acquired or improved or previously subject to a Lien;
(viii) leases or subleases granted to others not interfering in
any material respect with the business of the Borrower or any of its
Subsidiaries;
(ix) any interest of title of a lessor under, and Liens arising
from UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by
this Credit Agreement;
(x) normal and customary rights of setoff upon deposits of cash
in favor of banks or other depository institutions;
(xi) inchoate Liens arising under ERISA to secure current service
pension liabilities as they are incurred under the provisions of any
Plan;
(xii) Liens existing as of the Closing Date and set forth on
SCHEDULE 1.1(B);
(xiii) Liens in connection with a Factoring Agreement, but (i)
only to the extent of the applicable accounts receivable subject to
such Factoring Agreement and (ii) only if the proceeds payable
thereunder have been assigned to the Agent for the benefit of the
Lenders in a manner reasonably acceptable to the Agent;
<PAGE>
(xiv) Liens to secure Permitted Refinancing Indebtedness,
provided that such Liens extend only to the assets that secured the
Indebtedness refinanced with the proceeds of such Permitted
Refinancing Indebtedness;
(xv) Liens securing Permitted Hedging Obligations;
(xvi) Liens on assets of Foreign Subsidiaries securing
Indebtedness of any such Person where such Indebtedness was permitted
to be incurred by the terms of this Credit Agreement; and
(xvii) additional Liens securing Indebtedness in an amount not to
exceed $5 million in the aggregate at any time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Borrower or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Borrower or any of its Subsidiaries (other
than intercompany Indebtedness); PROVIDED, that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Obligations, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to, the Obligations on terms at
least as favorable to the Lenders as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Borrower or by a Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"PLAN" means any employee benefit plan (as defined in Section 3(3) of
ERISA) which is covered by ERISA and with respect to which the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan
were terminated at such time, would under Section 4069 of ERISA be deemed
to be) an "employer" within the meaning of Section 3(5) of ERISA.
<PAGE>
"PLEDGE AGREEMENT" means the Pledge Agreement dated as of the date
hereof entered into by the Borrower in favor of the Agent for the benefit
of the Lenders (and affiliates of Lenders as to certain obligations under
Hedge Agreements), as amended and modified.
"PRIME RATE" means the rate of interest per annum publicly announced
from time to time by NationsBank, N.A. as its prime rate in effect at its
principal office in Charlotte, North Carolina, with each change in the
Prime Rate being effective on the date such change is publicly announced as
effective (it being understood and agreed that the Prime Rate is a
reference rate used by NationsBank, N.A. in determining interest rates on
certain loans and is not intended to be the lowest rate of interest charged
on any extension of credit by NationsBank, N.A. to any debtor).
"PRIOR CREDIT AGREEMENT" means that certain Credit Agreement among the
Borrower (as assignee of Willcox & Gibbs, Inc.), certain Subsidiaries of
the Borrower, NationsBank, N.A., as Agent (f/k/a NationsBank of North
Carolina, N.A.) and the lenders party thereto dated as of November 12,
1992, as amended or modified from time to time.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"PURCHASE AGREEMENT" means that certain Asset Purchase Agreement dated
as of October 29, 1997 among ECA, the Borrower and NFA Corp., a
Massachusetts corporation.
"REGISTER" shall have the meaning given such term in Section 11.3(c).
"REGULATION G, T, U, OR X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor to all or a portion thereof.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment (including the abandonment or discarding of barrels,
containers and other closed receptacles containing any Materials of
Environmental Concern).
"REPORTABLE EVENT" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"REQUIRED LENDERS" means, at any time, Lenders which are then in
compliance with their obligations hereunder (as determined by the Agent)
and holding in the aggregate at least 67% of (i) the Commitments, and (ii)
if the Commitments have been terminated, the outstanding Loans and
Participation Interests (including the Participation Interests of the
Issuing Lender in any Letters of Credit).
<PAGE>
"REQUIREMENT OF LAW" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its material property
is subject.
"RESPONSIBLE OFFICER" means the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Financial Officer, any Vice
President or other duly authorized officer.
"RESTRICTED PAYMENT" means such term as defined in Section 8.7.
"REVOLVING COMMITMENT" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans in an aggregate principal
amount at any time outstanding of up to such Lender's Revolving Commitment
Percentage of the Aggregate Revolving Committed Amount as specified in
SCHEDULE 2.1(A), as such amount may be reduced from time to time in
accordance with the provisions hereof.
"REVOLVING COMMITMENT PERCENTAGE" means, for each Lender, a fraction
(expressed as a decimal) the numerator of which is the Revolving Commitment
of such Lender at such time and the denominator of which is the Aggregate
Revolving Committed Amount at such time. The initial Revolving Commitment
Percentages are set out on SCHEDULE 2.1(A).
"REVOLVING COMMITTED AMOUNT" means, collectively, the aggregate amount
of all of the Revolving Commitments as referenced in Section 2.1(a) and,
individually, the amount of each Lender's Revolving Commitment as specified
in SCHEDULE 2.1(A).
"REVOLVING LOANS" shall have the meaning assigned to such term in
Section 2.1(a).
"REVOLVING NOTE" or "REVOLVING NOTES" means the promissory notes of
the Borrower in favor of each of the Lenders evidencing the Revolving Loans
and the Foreign Currency Loans in substantially the form attached as
SCHEDULE 2.1(E), individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended, renewed
or replaced from time to time.
"REVOLVING OBLIGATIONS" means, collectively, Revolving Loans, Foreign
Currency Loans, Swingline Loans and LOC Obligations.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"SECURITY AGREEMENT" means the Security Agreement dated as of the date
hereof entered into by the Borrower and certain of its Subsidiaries in
<PAGE>
favor of the Agent for the benefit of the Lenders (and affiliates of
Lenders as to certain obligations under Hedge Agreements), as amended and
modified.
"SENIOR NOTE" means any of the 95/8% Senior Notes due 2007 issued by
the Borrower in favor of the Senior Noteholders pursuant to the Senior Note
Indenture, as such Senior Notes may be amended, modified, restated or
supplemented and in effect from time to time.
"SENIOR NOTE INDENTURE" means that certain Indenture dated as of the
Closing Date among the Borrower, the Guarantors and IBJ Schroder Bank &
Trust Company, in its capacity as trustee for the Senior Noteholders, as
the same may be amended, modified, restated or supplemented and in effect
from time to time.
"SENIOR NOTEHOLDER" means any one of the holders from time to time of
the Senior Notes.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
"SOLVENT" or "SOLVENCY" means, with respect to any Person as of a
particular date, that on such date (i) such Person is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (ii)
such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature in their ordinary course, (iii) such Person is not
engaged in a business or a transaction, and is not about to engage in a
business or a transaction, for which such Person's Property would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which such Person is engaged or is
to engage, (iv) the fair value of the Property of such Person is greater
than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person and (v) the present fair saleable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness which is
subordinate under instruments in form and substance satisfactory to the
Required Lenders to the Obligations.
"SUBSIDIARY" means, as to any Person, (a) any corporation more than
50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or
classes of such corporation shall have or might have voting power by reason
<PAGE>
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries, and (b) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than 50% of the voting interests
at any time. Unless otherwise identified, "Subsidiary" or "Subsidiaries"
shall mean Subsidiaries of the Borrower.
"SWINGLINE COMMITMENT" means the commitment of the Swingline Lender to
make Swingline Loans in an aggregate principal amount at any time
outstanding of up to the Swingline Committed Amount.
"SWINGLINE COMMITTED AMOUNT" shall have the meaning assigned to such
term in Section 2.4(a).
"SWINGLINE LENDER" means NationsBank, N.A.
"SWINGLINE LOAN" shall have the meaning assigned to such term in
Section 2.4(a).
"SWINGLINE NOTE" means the promissory note of the Borrower in favor of
the Swingline Lender in the original principal amount of $5,000,000, as
such promissory note may be amended, modified, restated or replaced from
time to time.
"UNUSED FEE" shall have the meaning given such term in Section 3.5(a).
"VOTING STOCK" means, with respect to any Person, capital stock issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to
vote has been suspended by the happening of such a contingency.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
1.2 COMPUTATION OF TIME PERIODS.
---------------------------
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
<PAGE>
1.3 ACCOUNTING TERMS.
-----------------
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP. All calculations made for
the purposes of determining compliance with this Credit Agreement shall (except
as otherwise expressly provided herein) be made by application of GAAP applied
on a basis consistent with the most recent annual or quarterly financial
statements delivered pursuant to Section 7.1 hereof (or, prior to the delivery
of the first financial statements pursuant to Section 7.1 hereof, consistent
with the annual audited financial statements referenced in Section 6.1);
PROVIDED, HOWEVER, if (a) the Borrower shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or (b)
the Agent or the Required Lenders shall so object in writing within 30 days
after delivery of such financial statements, then such calculations shall be
made on a basis consistent with the most recent financial statements delivered
by the Borrower to the Lenders as to which no such objection shall have been
made.
Notwithstanding the above, the parties hereto acknowledge and agree
that, for purposes of all calculations made in determining compliance with the
financial covenants set forth in Section 7.9 and for purposes of the definition
of "Applicable Percentage" set forth in Section 1.1, income statement items
(whether negative or positive) attributable to the Acquired Assets and any
Property acquired in any Investment described in clause (viii) of the definition
of "Permitted Investment" and any Indebtedness incurred by the Borrower or any
of its Subsidiaries in order to consummate such acquisition or Investment shall
be included to the extent relating to any period applicable in such calculations
occurring after the date of such Investment (and, notwithstanding the foregoing,
during the first four fiscal quarters following the date of the acquisition of
the Acquired Assets or of such Investment, such acquisition or Investment and
any Indebtedness incurred by the Borrower or any of its Subsidiaries in order to
consummate such acquisition or Investment (A) shall be deemed to have occurred
on the first day of the four fiscal quarter period immediately preceding the
date of such acquisition or Investment and (B) if such Indebtedness has a
floating or formula rate, then the implied rate of interest for such
Indebtedness for the applicable period shall be determined by utilizing the rate
which is or would be in effect with respect to such Indebtedness as at the
relevant date of determination).
SECTION 2
CREDIT FACILITIES
-----------------
2.1 REVOLVING LOANS.
---------------
(a) REVOLVING COMMITMENT. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
<PAGE>
credit loans in Dollars (the "REVOLVING LOANS") to the Borrower from time to
time in the amount of such Lender's Revolving Commitment Percentage of such
Revolving Loans for the purposes hereinafter set forth; PROVIDED that (i) with
regard to the Lenders collectively, the amount of the Revolving Obligations
outstanding (including the Dollar Amount (determined as of the most recent
Determination Date) of the outstanding Foreign Currency Loans) shall not exceed
the lesser of (A) the Aggregate Revolving Committed Amount and (B) the Borrowing
Base, and (ii) with regard to each Lender individually, the amount of such
Lender's Revolving Commitment Percentage of the sum of the Revolving Loans PLUS
the Dollar Amount (determined as of the most recent Determination Date) of the
Foreign Currency Loans PLUS LOC Obligations PLUS Swingline Loans outstanding
shall not exceed such Lender's Revolving Committed Amount. Revolving Loans may
consist of Base Rate Loans, CD Rate Loans or Eurodollar Loans, or a combination
thereof, as the Borrower may request, and may be repaid and reborrowed in
accordance with the provisions hereof.
(b) REVOLVING LOAN BORROWINGS.
(i) NOTICE OF BORROWING. The Borrower shall request a Revolving Loan
borrowing by written notice (or telephone notice promptly confirmed in
writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina
time) on the Business Day of the requested borrowing in the case of Base
Rate Loans, on the Business Day prior to the date of the requested
borrowing in the case of CD Rate Loans, and on the third Business Day prior
to the date of the requested borrowing in the case of Eurodollar Loans
denominated in Dollars. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Revolving Loan is requested, (B)
the date of the requested borrowing (which shall be a Business Day), (C)
the aggregate principal amount to be borrowed, and (D) whether the
borrowing shall be comprised of Base Rate Loans, CD Rate Loans, Eurodollar
Loans or a combination thereof, and if Eurodollar Loans or CD Rate Loans
are requested, the Interest Period(s) therefor. If the Borrower shall fail
to specify in any such Notice of Borrowing (I) an applicable Interest
Period in the case of a Eurodollar Loan, then such notice shall be deemed
to be a request for an Interest Period of one month, or (II) the type of
Revolving Loan requested, then such notice shall be deemed to be a request
for a Base Rate Loan hereunder. The Agent shall give notice to each Lender
promptly upon receipt of each Notice of Borrowing pursuant to this Section
2.1(b)(i), the contents thereof and each such Lender's share of any
borrowing to be made pursuant thereto.
(ii) MINIMUM AMOUNTS. Each Revolving Loan shall be in a minimum
aggregate principal amount of $1,000,000, in the case of Eurodollar Loans
and CD Rate Loans, or $500,000 (or the remaining Revolving Committed
Amount, if less), in the case of Base Rate Loans, and integral multiples of
$100,000 in excess thereof.
(iii) ADVANCES. Each Lender will make its Revolving Commitment
Percentage of each Revolving Loan borrowing available to the Agent for the
account of the Borrower as specified in Section 3.14(b), or in such other
manner as the Agent may specify in writing, by 1:00 P.M. (Charlotte, North
Carolina time) on the date specified in the applicable Notice of Borrowing
in Dollars and in funds immediately available to the Agent. Such borrowing
<PAGE>
will then be made available to the Borrower by the Agent by crediting the
account of the Borrower on the books of such office with the aggregate of
the amounts made available to the Agent by the Lenders and in like funds as
received by the Agent.
(c) REPAYMENT. The principal amount of all Revolving Loans shall be due and
payable in full on the Maturity Date.
(d) INTEREST. Subject to the provisions of Section 3.1,
(i) BASE RATE LOANS. During such periods as Revolving Loans shall be
comprised in whole or in part of Base Rate Loans, such Base Rate Loans
shall bear interest at a per annum rate equal to the Base Rate PLUS the
Applicable Percentage;
(ii) CD RATE LOANS. During such periods as Revolving Loans shall be
comprised in whole or in part of CD Rate Loans, such CD Rate Loans shall
bear interest at a per annum rate equal to the CD Rate PLUS the Applicable
Percentage;
(iii) EURODOLLAR LOANS. During such periods as Revolving Loans shall
be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans
shall bear interest at a per annum rate equal to the Eurodollar Rate PLUS
the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) REVOLVING NOTES. The Revolving Loans shall be evidenced by a duly
executed Revolving Note in favor of each Lender substantially in the form of
SCHEDULE 2.1(E).
(f) MAXIMUM NUMBER OF EURODOLLAR LOANS. The Borrower will be limited to a
maximum number of seven (7) Eurodollar Loans outstanding at any time. For
purposes hereof, Eurodollar Loans with separate or different Interest Periods
will be considered as separate Eurodollar Loans even if their Interest Periods
expire on the same date.
2.2 LETTER OF CREDIT SUBFACILITY.
----------------------------
(a) ISSUANCE. During the Commitment Period, subject to the terms and
conditions hereof and of the LOC Documents, if any, the Issuing Lender shall
upon the request of the Borrower issue, and the Lenders shall participate in,
such Letters of Credit in Dollars, for the purposes hereinafter set forth;
PROVIDED that (i) the aggregate Dollar Amount of LOC Obligations shall not
exceed SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) at any time (the
"LOC COMMITTED AMOUNT"), (ii) with regard to the Lenders collectively, (A) the
amount of the Revolving Obligations outstanding (including the Dollar Amount
(determined as of the most recent Determination Date) of the Foreign Currency
Loans) shall not exceed the lesser of (I) the Aggregate Revolving Committed
Amount, as reduced from time to time, and (II) the Borrowing Base and (B) the
Dollar Amount (determined as of the most recent Determination Date) of the sum
<PAGE>
of Foreign Currency Loans shall not exceed the Foreign Currency Committed
Amount, and (iii) with regard to each Lender individually, (A) the amount of
such Lender's Revolving Commitment Percentage of the sum of Revolving Loans PLUS
LOC Obligations PLUS Swingline Loans outstanding PLUS the Dollar Amount
(determined as of the most recent Determination Date) of the Foreign Currency
Loans shall not exceed such Lender's Revolving Committed Amount and (B) the
Dollar Amount (determined as of the most recent Determination Date) of such
Lender's portion (including participation interests therein) of the sum of
Foreign Currency Loans shall not exceed such Lender's Foreign Currency Committed
Amount. Letters of Credit issued hereunder shall not have an original expiry
date more than one year from the date of issuance or extension, nor an expiry
date, whether as originally issued or by extension, extending beyond the
Maturity Date. Each Letter of Credit shall comply with the related LOC Documents
and shall be either (x) a standby letter of credit issued to support the
obligations (including pension or insurance obligations), contingent or
otherwise, of the Borrower or any of its Subsidiaries, or (y) a commercial
letter of credit in respect of the purchase of goods or services by the Borrower
or any of its Subsidiaries in the ordinary course of business. The issuance date
of each Letter of Credit shall be a Business Day.
(b) NOTICE AND REPORTS. The request for the issuance of a Letter of Credit
shall be submitted by the Borrower to the Issuing Lender at least three (3)
Business Days prior to the requested date of issuance (or such shorter period as
may be agreed by the Issuing Lender). A form of Notice of Request for Letter of
Credit is attached as SCHEDULE 2.2(B). The Issuing Lender will provide to the
Agent at least monthly, and more frequently upon request, a detailed summary
report on its Letters of Credit and the activity thereon, in form and substance
acceptable to the Agent. In addition, the Issuing Lender will provide to the
Agent for dissemination to the Lenders at least quarterly, and more frequently
upon request, a detailed summary report on its Letters of Credit and the
activity thereon, including, among other things, the beneficiary, the face
amount and the expiry date. The Issuing Lender will provide copies of the
Letters of Credit to the Agent and the Lenders promptly upon request.
(c) PARTICIPATION. Each Lender, upon issuance of a Letter of Credit, shall
be deemed to have purchased without recourse a risk participation from the
Issuing Lender in such Letter of Credit and the obligations arising thereunder,
in each case in an amount equal to its Revolving Commitment Percentage of the
obligations under such Letter of Credit and shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety, and be obligated
to pay to the Issuing Lender therefor and discharge when due, its pro rata share
of the obligations arising under such Letter of Credit. Without limiting the
scope and nature of each Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required hereunder or
under any such Letter of Credit, each such Lender shall pay to the Issuing
Lender its Revolving Commitment Percentage of such unreimbursed drawing in same
day funds on the day of notification by the Issuing Lender of an unreimbursed
drawing pursuant to the provisions of subsection (d) hereof. The obligation of
each Lender to so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an Event
of Default or any other occurrence or event. Any such reimbursement shall not
relieve or otherwise impair the obligation of the Borrower to reimburse the
Issuing Lender under any Letter of Credit, together with interest as hereinafter
provided.
<PAGE>
(d) REIMBURSEMENT. In the event of any drawing under any Letter of Credit,
the Issuing Lender will promptly notify the Borrower. Unless the Borrower shall
immediately notify the Issuing Lender that the Borrower intends to otherwise
reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to
have requested that the Lenders make a Revolving Loan in the Dollar Amount of
the drawing as provided in subsection (e) hereof on the related Letter of
Credit, the proceeds of which will be used to satisfy the related reimbursement
obligations. The Borrower promises to reimburse the Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a Revolving Loan
obtained hereunder or otherwise) in same day funds. If the Borrower shall fail
to reimburse the Issuing Lender as provided hereinabove, the unreimbursed Dollar
Amount of such drawing shall bear interest at a per annum rate equal to the Base
Rate plus two percent (2%). The Borrower's reimbursement obligations hereunder
shall be absolute and unconditional under all circumstances irrespective of any
rights of setoff, counterclaim or defense to payment the Borrower may claim or
have against the Issuing Lender, the Agent, the Lenders, the beneficiary of the
Letter of Credit drawn upon or any other Person, including without limitation
any defense based on any failure of the Borrower to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of Credit. The
Issuing Lender will promptly notify the other Lenders of the amount of any
unreimbursed drawing and each Lender shall promptly pay to the Agent for the
account of the Issuing Lender in immediately available funds, the amount of such
Lender's pro rata share of such unreimbursed drawing. Such payment shall be made
on the day such notice is received by such Lender from the Issuing Lender if
such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time)
otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North
Carolina time) on the Business Day next succeeding the day such notice is
received. If such Lender does not pay such amount to the Issuing Lender in full
upon such request, such Lender shall, on demand, pay to the Agent for the
account of the Issuing Lender interest on the unpaid Dollar Amount during the
period from the date of such drawing until such Lender pays such amount to the
Issuing Lender in full at a rate per annum equal to, if paid within two (2)
Business Days of the date that such Lender is required to make payments of such
amount pursuant to the preceding sentence, the Federal Funds Rate and thereafter
at a rate equal to the Base Rate. Each Lender's obligation to make such payment
to the Issuing Lender, and the right of the Issuing Lender to receive the same,
shall be absolute and unconditional, shall not be affected by any circumstance
whatsoever and without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default or the
acceleration of the obligations of the Borrower hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a Lender to the Issuing
Lender, such Lender shall, automatically and without any further action on the
part of the Issuing Lender or such Lender, acquire a participation in an amount
equal to such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed drawing
portion of the LOC Obligation and in the interest thereon and in the related LOC
Documents, and shall have a claim against the Borrower with respect thereto.
(e) REPAYMENT WITH REVOLVING LOANS. On any day on which the Borrower shall
have requested, or been deemed to have requested, a Revolving Loan advance to
reimburse a drawing under a Letter of Credit, the Agent shall give notice to the
<PAGE>
Lenders that a Revolving Loan has been requested or deemed requested by the
Borrower to be made in connection with a drawing under a Letter of Credit, in
which case a Revolving Loan advance comprised of Base Rate Loans (or Eurodollar
Loans to the extent the Borrower has complied with the procedures of Section
2.1(b)(i) with respect thereto) shall be immediately made to the Borrower by all
Lenders (notwithstanding any termination of the Commitments pursuant to Section
9.2) PRO RATA based on the respective Revolving Commitment Percentages of the
Lenders (determined before giving effect to any termination of the Commitments
pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the
Issuing Lender for application to the respective LOC Obligations. Each such
Lender hereby irrevocably agrees to make its pro rata share of each such
Revolving Loan immediately upon any such request or deemed request in the
amount, in the manner and on the date specified in the preceding sentence
NOTWITHSTANDING (i) the amount of such borrowing may not comply with the minimum
amount for advances of Revolving Loans otherwise required hereunder, (ii)
whether any conditions specified in Section 5.2 are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) failure for any such
request or deemed request for Revolving Loan to be made by the time otherwise
required hereunder, (v) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made hereunder or (vi) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower), then each such Lender hereby
agrees that it shall forthwith purchase (as of the date such borrowing would
otherwise have occurred, but adjusted for any payments received from the
Borrower on or after such date and prior to such purchase) from the Issuing
Lender such participation in the outstanding LOC Obligations as shall be
necessary to cause each such Lender to share in such LOC Obligations ratably
(based upon the respective Revolving Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments pursuant
to Section 9.2)), PROVIDED that in the event such payment is not made on the day
of drawing, such Lender shall pay in addition to the Issuing Lender interest on
the Dollar Amount of its unfunded Participation Interest at a rate equal to, if
paid within two (2) Business Days of the date of drawing, the Federal Funds
Rate, and thereafter at the Base Rate.
(f) RENEWAL, EXTENSION. The renewal or extension of any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the issuance
of a new Letter of Credit hereunder.
(g) UNIFORM CUSTOMS AND PRACTICES. The Issuing Lender may have the Letters
of Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
deemed in all respects to be a part thereof.
(h) INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
(i) In addition to its other obligations under this Section 2.2 but
without duplication of Section 10.7 hereof, the Borrower hereby agrees to
protect, indemnify, pay and save the Issuing Lender harmless from and
against any and all claims, demands, liabilities, damages, losses, costs,
<PAGE>
charges and expenses (including reasonable attorneys' fees actually
incurred) that the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of
Credit or (B) the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future Governmental Authority (all such acts or
omissions, herein called "GOVERNMENT ACTS").
(ii) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible: (A) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with
the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (D) for
any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under a Letter of Credit or of the proceeds
thereof; and (E) for any consequences arising from causes beyond the
control of the Issuing Lender, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuing Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith, shall not put such
Issuing Lender under any resulting liability to the Borrower. It is the
intention of the parties that this Credit Agreement shall be construed and
applied to protect and indemnify the Issuing Lender against any and all
risks involved in the issuance of the Letters of Credit, all of which risks
are hereby assumed by the Borrower, including, without limitation, any and
all Government Acts. The Issuing Lender shall not, in any way, be liable
for any failure by the Issuing Lender or anyone else to pay any drawing
under any Letter of Credit as a result of any Government Acts or any other
cause beyond the control of the Issuing Lender.
(iv) Nothing in this subsection (h) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (d)
above. The obligations of the Borrower under this subsection (h) shall
survive the termination of this Credit Agreement. No act or omissions of
any current or prior beneficiary of a Letter of Credit shall in any way
affect or impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (h), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing Lender
<PAGE>
(A) arising solely out of the gross negligence or willful misconduct of the
Issuing Lender, as determined by a court of competent jurisdiction, or (B)
caused by the Issuing Lender's failure to pay under any Letter of Credit
after presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit, as determined by a court of competent
jurisdiction, unless such payment is prohibited by any law, regulation,
court order or decree.
(i) RESPONSIBILITY OF ISSUING LENDER. It is expressly understood and agreed
that the obligations of the Issuing Lender hereunder to the Lenders are only
those expressly set forth in this Credit Agreement and that the Issuing Lender
shall be entitled to assume that the conditions precedent set forth in Section
5.2 have been satisfied unless it shall have acquired actual knowledge that any
such condition precedent has not been satisfied; PROVIDED, HOWEVER, that nothing
set forth in this Section 2.2 shall be deemed to prejudice the right of any
Lender to recover from the Issuing Lender any amounts made available by such
Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it
is determined by a court of competent jurisdiction that the payment with respect
to a Letter of Credit constituted gross negligence or willful misconduct on the
part of the Issuing Lender.
(j) CONFLICT WITH LOC DOCUMENTS. In the event of any conflict between this
Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.3 FOREIGN CURRENCY LOAN SUBFACILITY.
---------------------------------
(a) FOREIGN CURRENCY COMMITMENT. During the Commitment Period, each
Lender severally agrees to make certain foreign currency revolving loans in
Available Foreign Currencies ("FOREIGN CURRENCY LOANS") to the Borrower from
time to time in the amount of such Lender's Foreign Currency Commitment
Percentage of such Foreign Currency Loans; PROVIDED, HOWEVER, that the Dollar
Amount (as determined as of the most recent Determination Date) of the sum of
Foreign Currency Loans outstanding at any time shall not exceed FIVE MILLION
DOLLARS ($5,000,000) (the "FOREIGN CURRENCY COMMITTED AMOUNT"); PROVIDED,
FURTHER, (i) with regard to each Lender individually, (A) the amount of such
Lender's Revolving Commitment Percentage of the sum of the Revolving Loans PLUS
the Dollar Amount (determined as of the most recent Determination Date) of the
Foreign Currency Loans PLUS LOC Obligations PLUS Swingline Loans Outstanding
shall not exceed such Lender's Revolving Commitment Percentage of the Revolving
Committed Amount, and (B) the amount of such Revolving Lender's portion
(including participation interests therein) of the Dollar Amount (determined as
of the most recent Determination Date) of the Foreign Currency Loans outstanding
shall not exceed such Lender's Foreign Currency Commitment Percentage of the
Foreign Currency Committed Amount and (ii) with regard to the Lenders
collectively, the amount of the Revolving Obligations outstanding (including the
Dollar Amount (as determined as of the most recent Determination Date of the
Foreign Currency Loans outstanding) shall not exceed the lesser of (I) the
Aggregate Revolving Committed Amount, as reduced, and (II) the Borrowing Base.
Foreign Currency Loans shall consist solely of Eurodollar Loans and may be
repaid and reborrowed in accordance with the provisions hereof. For purposes
<PAGE>
hereof, Eurodollar Loans with different Interest Periods and/or in different
currencies shall be considered as separate Eurodollar Loans, even if they begin
on the same date, although borrowings, extensions and conversions may, in
accordance with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new Eurodollar Loan with a single Interest
Period and in the same currency.
(b) FOREIGN CURRENCY LOAN BORROWINGS.
--------------------------------
(i) NOTICE OF BORROWING. The Borrower shall request a Foreign Currency
Loan borrowing by written notice (or telephone notice promptly confirmed in
writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina
time) on the third Business Day prior to the date of the requested
borrowing. Each such request for borrowing shall be irrevocable and shall
specify (A) that a Foreign Currency Loan is requested, (B) the requested
Available Foreign Currency, (C) the date of the requested borrowing (which
shall be a Business Day), (D) the aggregate principal amount to be borrowed
and (E) the Interest Period(s) therefor. If the Borrower shall fail to
specify in any such Notice of Borrowing an applicable Interest Period, then
such notice shall be deemed to be a request for an Interest Period of one
month. The Agent shall give notice to each Lender promptly upon receipt of
each Notice of Borrowing, the contents thereof and each such Lender's share
of any borrowing to be made pursuant thereto.
(ii) MINIMUM AMOUNTS. Each Foreign Currency Loan shall be in a minimum
aggregate principal amount equal to the applicable Foreign Currency
Equivalent of $1,000,000 and integral multiples of the applicable Foreign
Currency Equivalent of $100,000 in excess thereof (or the remaining amount
of the Foreign Currency Commitment, if less).
(iii) ADVANCES. Each Lender will make its Foreign Currency Commitment
Percentage of each Foreign Currency Loan borrowing available to the Agent
by 1:00 P.M., local time in the place where such deposit is required to be
made by the succeeding terms hereof, on the date specified in the
applicable Notice of Borrowing by deposit with the Agent, at the same place
and same account specified in Section 3.14(b) for payments by the Borrower
in the applicable Available Foreign Currency, of same day funds in the
applicable Available Foreign Currency. Such deposit will be made to such
accounts in the primary market for such Foreign Currencies as the Agent
shall specify from time to time by notice to the Lenders. To the extent
funds are received from the Lenders, the Agent shall promptly make such
funds available to the Borrower by wire transfer to such accounts as the
Borrower shall have specified to the Agent.
(c) REPAYMENT. The principal amount of all Foreign Currency Loans shall be
due and payable in full in the applicable Available Foreign Currency on the
Maturity Date.
(d) INTEREST. Subject to the provisions of Section 3.1, Foreign Currency
Loans shall bear interest at a per annum rate equal to the Eurodollar Rate PLUS
the Applicable Percentage. Interest on Foreign Currency Loans shall be payable
<PAGE>
(in the applicable Available Foreign Currency) in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) FOREIGN CURRENCY NOTES. The Foreign Currency Loans shall be evidenced
by a Revolving Note duly executed by the Borrower in favor of each Lender.
2.4 SWINGLINE LOANS.
---------------
(a) SWINGLINE COMMITMENT. During the Commitment Period, subject to the
terms and conditions hereof, the Swingline Lender, in its individual capacity,
agrees to make certain revolving credit loans to the Borrower (each a "SWINGLINE
LOAN" and, collectively, the "SWINGLINE LOANS") from time to time from the
Closing Date until the Maturity Date for the purposes hereinafter set forth;
PROVIDED, HOWEVER, (i) the aggregate principal amount of Swingline Loans
outstanding at any time shall not exceed FIVE MILLION DOLLARS ($5,000,000) (the
"SWINGLINE COMMITTED AMOUNT"), and (ii) with regard to the Lenders collectively,
the amount of outstanding Revolving Obligations outstanding (including the
Dollar Amount (determined as of the most recent Determination Date) of the
outstanding Foreign Currency Loans) shall not exceed the lesser of (A) the
Aggregate Revolving Committed Amount and (B) the Borrowing Base. Swingline Loans
hereunder shall bear interest at the Floating CD Rate plus the Applicable
Percentage, and may be repaid and reborrowed in accordance with the provisions
hereof.
(b) SWINGLINE LOAN ADVANCES.
-----------------------
(i) NOTICES; DISBURSEMENT. Whenever the Borrower desires a Swingline
Loan advance hereunder it shall give written notice (or telephone notice
promptly confirmed in writing) to the Swingline Lender not later than 11:00
a.m. (Charlotte, North Carolina time) on the Business Day of the requested
Swingline Loan advance. Each such notice shall be irrevocable and shall
specify (A) that a Swingline Loan advance is requested, (B) the date of the
requested Swingline Loan advance (which shall be a Business Day) and (C)
the principal amount of the Swingline Loan advance requested. Each
Swingline Loan shall have such maturity date as the Swingline Lender and
the Borrower shall agree upon receipt by the Swingline Lender of any such
notice from the Borrower. The Swingline Lender shall initiate the transfer
of funds representing the Swingline Loan advance to the Borrower by 3:00
p.m. (Charlotte, North Carolina time) on the Business Day of the requested
borrowing.
(ii) MINIMUM AMOUNT. Each Swingline Loan shall be in a minimum
principal amount of $100,000 and in integral multiples of $100,000 in
excess thereof (or the remaining amount of the Swingline Committed Amount,
if less).
(iii) REPAYMENT OF SWINGLINE LOANS. The principal amount of all
Swingline Loans shall be due and payable on the Maturity Date. The
Swingline Lender may, at any time, in its sole discretion, by written
notice to the Borrower and the Lenders, demand repayment of its Swingline
Loans by way of a Revolving Loan advance, in which case the Borrower shall
<PAGE>
be deemed to have requested a Revolving Loan advance comprised solely of
Base Rate Loans in the amount of such Swingline Loans; PROVIDED, HOWEVER,
that any such demand shall be deemed to have been given one Business Day
prior to the Maturity Date and on the date of the occurrence of any Event
of Default described in Section 9.1 and upon acceleration of the
indebtedness hereunder and the exercise of remedies in accordance with the
provisions of Section 9.2. Each Lender hereby irrevocably agrees to make
its pro rata share of each such Revolving Loan in the amount, in the manner
and on the date specified in the preceding sentence NOTWITHSTANDING (I) the
amount of such borrowing may not comply with the minimum amount for
advances of Revolving Loans otherwise required hereunder, (II) whether any
conditions specified in Section 5.2 are then satisfied, (III) whether a
Default or Event of Default then exists, (IV) failure of any such request
or deemed request for Revolving Loan to be made by the time otherwise
required hereunder, (V) whether the date of such borrowing is a date on
which Revolving Loans are otherwise permitted to be made hereunder or (VI)
any termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or any
other Credit Party), then each Lender hereby agrees that it shall forthwith
purchase (as of the date such borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date
and prior to such purchase) from the Swingline Lender such participations
in the outstanding Swingline Loans as shall be necessary to cause each such
Lender to share in such Swingline Loans ratably based upon its Commitment
Percentage of the Revolving Committed Amount (determined before giving
effect to any termination of the Commitments pursuant to Section 3.4),
PROVIDED that (A) all interest payable on the Swingline Loans shall be for
the account of the Swingline Lender until the date as of which the
respective participation is purchased and (B) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing
Lender shall be required to pay to the Swingline Lender in accordance with
the terms of subsection (c)(ii) hereof, interest on the principal amount of
participation purchased for each day from and including the date of demand
therefor but excluding the date of payment for such participation, at the
rate equal to the Federal Funds Rate.
(c) INTEREST ON SWINGLINE LOANS.
(i) Subject to the provisions of Section 3.1, each Swingline Loan
shall bear interest at a per annum rate (computed on the basis of the
actual number of days elapsed over a year of 365 days) equal to the
Floating CD Rate PLUS the Applicable Percentage.
(ii) Interest on Swingline Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(d) SWINGLINE NOTE. The Swingline Loans shall be evidenced by a duly
executed promissory note of the Borrower to the Swingline Lender in
substantially the form of SCHEDULE 2.4(D).
<PAGE>
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
3.1 DEFAULT RATE.
------------
If the principal of, interest on the Loans or any other amounts owing
hereunder or under the other Credit Documents shall not be paid when due, such
amount shall thereafter bear interest, payable on demand, at a per annum rate 2%
greater than the rate which would otherwise be applicable (or if no rate is
applicable, whether in respect of interest, fees or other amounts, then 2%
greater than the Base Rate).
3.2 EXTENSION AND CONVERSION.
------------------------
Subject to the terms of Section 5.2, the Borrower shall have the option, on
any Business Day, to extend existing Loans into a subsequent permissible
Interest Period or to convert Loans into Loans of another interest rate type;
PROVIDED, HOWEVER, that (i) except as provided in Section 3.8, Eurodollar Loans
may be converted into Base Rate Loans or CD Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) CD Rate Loans may be converted into
Eurodollar Loans or Base Rate Loans only on the last day of the Interest Period
applicable thereto, (iii) Eurodollar Loans and CD Rate Loans may be extended (or
converted to CD Rate Loans or Eurodollar Loans, as applicable), and Base Rate
Loans may be converted into Eurodollar Loans or CD Rate Loans, only if no
Default or Event of Default is in existence on the date of extension or
conversion and the conditions set forth in subsections (a), (b), (c) and (d) of
Section 5.2 have been satisfied, (iv) Loans extended as, or converted into,
Eurodollar Loans or CD Rate Loans shall be subject to the terms of the
definition of "INTEREST PERIOD" set forth in Section 1.1 and shall be in such
minimum amounts as provided in, with respect to Revolving Loans, Section
2.1(b)(ii) or, with respect to Foreign Currency Loans, Section 2.3(b)(ii) and
(v) any request for extension or conversion of a Eurodollar Loan or CD Rate
Loans which shall fail to specify an Interest Period shall be deemed to be a
request for an Interest Period of one month or 30 days, as applicable. Each such
extension or conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephone notice promptly confirmed in writing) to the
Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day
of, in the case of the conversion of a Eurodollar Loan or CD Rate Loan into a
Base Rate Loan, on the third Business Day prior to, in the case of the extension
of a Eurodollar Loan as, or conversion of a Base Rate Loan or a CD Rate Loan
into, a Eurodollar Loan, or on the Business Day prior to, in the case of the
extension of a CD Rate Loan as, or conversion of a Base Rate Loan or Eurodollar
Loan into, a CD Rate Loan, the date of the proposed extension or conversion,
specifying the date of the proposed extension or conversion, the Loans to be so
extended or converted, the types of Loans into which such Loans are to be
<PAGE>
converted and, if appropriate, the applicable Interest Periods with respect
thereto. Each request for extension or conversion shall be irrevocable and shall
constitute a representation and warranty by the Borrower of the matters
specified in subsections (a) through (d) of Section 5.2. In the event the
Borrower fails to request extension or conversion of any Eurodollar Loan or CD
Rate Loan in accordance with this Section, or any such conversion or extension
is not permitted or required by this Section, then (i) in the case of any
Eurodollar Loan which is not a Foreign Currency Loan, such Eurodollar Loan shall
be automatically converted into a Base Rate Loan at the end of the Interest
Period applicable thereto, (ii) in the case of any Foreign Currency Loan, such
Eurodollar Loan shall be automatically continued as a Eurodollar Loan in the
same Available Foreign Currency for an Interest Period of one month and (iii) in
the case of any CD Rate Loan, such CD Rate Loan shall be automatically converted
into a Base Rate Loan at the end of the Interest Period applicable thereto. The
Agent shall give each Lender notice as promptly as practicable of any such
proposed extension or conversion affecting any Loan.
3.3 PREPAYMENTS.
-----------
(a) VOLUNTARY PREPAYMENTS. Loans may be repaid in whole or in part without
premium or penalty; PROVIDED that (i) Eurodollar Loans and CD Rate Loans may
only be prepaid after the Borrower has provided three (3) Business Days' prior
written notice to the Agent (ii) any prepayment of Eurodollar Loans or CD Rate
Loans other than at the end of the Interest Period applicable thereto, will be
subject to Section 3.11, (iii) Base Rate Loans may be prepaid by the Borrower by
giving notice to the Agent prior to 11:00 a.m. (Charlotte, North Carolina time)
of the requested prepayment, and (iv) each such partial prepayment shall be in a
minimum principal Dollar Amount of $1,000,000, in the case of Eurodollar Loans
or CD Rate Loans, and $500,000, in the case of Base Rate Loans, and in integral
multiples of $100,00 in excess thereof. Amounts prepaid hereunder may be
reborrowed in accordance with the provisions hereof. Any such voluntary
prepayments shall be applied first to Base Rate Loans, then to CD Rate Loans in
the direct order of their Interest Period maturities and then to Eurodollar
Loans in direct order of their Interest Period maturities.
(b) MANDATORY PREPAYMENTS. If at any time (i) the amount of the Revolving
Obligations then outstanding (including the Dollar Amount (determined as of the
most recent Determination Date) of the Foreign Currency Loans outstanding) shall
exceed the LESSER of (A) the Aggregate Revolving Committed Amount, as reduced
from time to time and (B) the Borrowing Base, (ii) the aggregate amount of LOC
Obligations outstanding shall exceed the LOC Committed Amount, or (iii) the sum
of the Dollar Amounts (determined as of the most recent Determination Date) of
the Foreign Currency Loans outstanding shall exceed the Foreign Currency
Committed Amount, the Borrower shall immediately make payment on the Loans
and/or to a cash collateral account in respect of the LOC Obligations, in an
amount sufficient to eliminate the deficiency. Any such mandatory prepayments
shall be applied first to Loans in the currency in which such payment is
received, and FIRST to Base Rate Loans, SECOND to CD Rate Loans in the direct
order of their Interest Period maturities, then to Eurodollar Loans in direct
order of their Interest Period maturities and then to a cash collateral account
<PAGE>
to secure LOC Obligations. Amounts prepaid hereunder may be reborrowed in
accordance with the provisions hereof.
3.4 REDUCTIONS IN COMMITMENTS.
-------------------------
The Borrower may from time to time permanently reduce the aggregate amount
of the Revolving Commitments in whole or in part without premium or penalty
except as provided in Section 3.11 upon three (3) Business Days' prior written
notice to the Agent, PROVIDED that (i) after giving effect to any voluntary
reduction the amount of the Revolving Obligations then outstanding (including
the Dollar Amount (determined as of the most recent Determination Date) of the
Foreign Currency Loans outstanding) shall not exceed the lesser of (a) the
Aggregate Revolving Committed Amount, as reduced from time to time and (b) the
Borrowing Base, and (ii) partial reductions shall be in a minimum principal
amount of $1,000,000, and in integral multiples of $500,000 in excess thereof.
3.5 FEES.
----
(a) UNUSED FEE. In consideration of the Revolving Commitments hereunder,
the Borrower agrees to pay to the Agent, for the ratable benefit of the Lenders,
an unused fee (the "UNUSED FEE") equal to the Applicable Percentage per annum
for Unused Fees then in effect (calculated on the basis of actual number of days
elapsed in a year of 360 days) on the average daily unused portion of the
Revolving Committed Amount (excluding any amounts outstanding under the
Swingline facility) for the applicable period. The Unused Fee shall accrue from
the Closing Date and shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the immediately preceding
quarter (or portion thereof) beginning with the first such date to occur after
the Closing Date.
(b) LETTER OF CREDIT FEES.
---------------------
(i) LETTER OF CREDIT ISSUANCE FEE. In consideration of the issuance of
Letters of Credit hereunder, the Borrower promises to pay to the Agent, for
the account of each Lender a fee (the "LETTER OF CREDIT FEE") on such
Lender's Revolving Commitment Percentage of the average daily maximum
amount available to be drawn under each such Letter of Credit computed at a
per annum rate for each day from the date of issuance to the date of
expiration equal to the Applicable Percentage for the Letter of Credit Fee.
The Letter of Credit Fee will be payable quarterly in arrears on the last
Business Day of each March, June, September and December for the
immediately preceding quarter (or a portion thereof).
(ii) ISSUING LENDER FEE. In addition to the Letter of Credit Fee
payable pursuant to clause (i) above, the Borrower promises to pay to the
Issuing Lender for its own account without sharing by the other Lenders (A)
a letter of credit fronting fee of one-eighth percent (1/8%) per annum on
the average daily maximum amount available to be drawn under outstanding
<PAGE>
Letters of Credit payable quarterly in arrears with the Letter of Credit
Fee, and (B) customary charges from time to time of the Issuing Lender with
respect to the issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letters of Credit
(collectively, the "ISSUING LENDER FEES").
(c) ADMINISTRATIVE FEES. The Borrower agrees to pay to the Agent, for
its own account, an annual administrative fee and such other fees, if any,
referred to in the Agent's Fee Letter (collectively, the "AGENT FEES").
3.6 CAPITAL ADEQUACY.
----------------
If any Lender has determined, after the date hereof, that the adoption or
the becoming effective of, or any change in, or any change by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof in the interpretation or administration of, any
applicable law, rule or regulation regarding capital adequacy, or compliance by
such Lender with any request or directive 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 such
Lender's capital or assets as a consequence of its commitments or obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, effectiveness, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy), then, upon notice from
such Lender to the Borrower, the Borrower shall be obligated to pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction; PROVIDED that (i) if any Lender fails to give such notice within 90
days after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 3.6 in respect of any
costs resulting from such event, only be entitled to payment under this Section
3.6 for costs incurred from and after the date 90 days prior to the date that
such Lender does give such notice and (ii) each Lender will designate a
different applicable lending office with respect to the matters affected by such
event if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender. Each determination by any such Lender of amounts
owing under this Section shall, absent manifest error, be conclusive and binding
on the parties hereto.
3.7 INABILITY TO DETERMINE INTEREST RATE.
------------------------------------
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
or CD Rate for such Interest Period, the Agent shall give telecopy or telephonic
notice thereof to the Borrower and the Lenders as soon as practicable
thereafter. If such notice is given (a) any Eurodollar Loans or CD Rate Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans and (b) any Loans that were to have been converted on the first
day of such Interest Period to or continued as Eurodollar Loans or CD Rate Loans
<PAGE>
shall be converted to or continued as Base Rate Loans. Until such notice has
been withdrawn by the Agent, no further Eurodollar Loans or CD Rate Loans shall
be made or continued as such, nor shall the Borrower have the right to convert
Base Rate Loans to Eurodollar Loans or CD Rate Loans.
3.8 ILLEGALITY.
----------
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans or Foreign Currency Loans as contemplated by this
Credit Agreement, (a) such Lender shall promptly give written notice of such
circumstances to the Borrower and the Agent (which notice shall be withdrawn
whenever such circumstances no longer exist), (b) the commitment of such Lender
hereunder to make Eurodollar Loans or Foreign Currency Loans, continue
Eurodollar Loans or Foreign Currency Loans as such and convert a Base Rate Loan
to Eurodollar Loans or Foreign Currency Loans, shall forthwith be canceled and,
until such time as it shall no longer be unlawful for such Lender to make or
maintain Eurodollar Loans or Foreign Currency Loans, such Lender shall then have
a commitment only to make a Base Rate Loan when a Eurodollar Loan or Foreign
Currency Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans or Foreign Currency Loans, if any, shall be converted
automatically to Base Rate Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan or Foreign Currency
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, the Borrower shall pay to such Lender such amounts,
if any, as may be required pursuant to Section 3.11.
3.9 REQUIREMENTS OF LAW.
-------------------
If, after the date hereof, the adoption of or any change in any Requirement
of Law or in the interpretation or application thereof applicable to any Lender,
or compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority, in each
case made subsequent to the Closing Date (or, if later, the date on which such
Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind whatsoever with
respect to any Letter of Credit, any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of taxation of payments
to such Lender in respect thereof (except for (i) Non-Excluded Taxes covered by
Section 3.10 (including Non-Excluded Taxes imposed solely by reason of any
failure of such Lender to comply with its obligations under Section 3.10(b)) and
(ii) changes in taxes measured by or imposed upon the overall net income, or
franchise tax (imposed in lieu of such net income tax), of such Lender or its
applicable lending office, branch, or any affiliate thereof));
<PAGE>
(b) shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender which
is not otherwise included in the determination of the Eurodollar Rate hereunder;
or
(c) shall impose on such Lender any other condition (excluding any tax of
any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable,
PROVIDED that, in any such case, the Borrower may elect to convert the
Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the
Agent at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to such Lender, upon demand, without duplication,
such amounts, if any, as may be required pursuant to Section 3.11. If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall provide prompt notice thereof to the Borrower, through the Agent,
certifying (x) that one of the events described in this paragraph (a) has
occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof; PROVIDED that (i) if any Lender fails to give such
notice within 90 days after it obtains actual knowledge of such an event, such
Lender shall, with respect to compensation payable pursuant to this Section 3.9
in respect of any costs resulting from such event, only be entitled to payment
under this Section 3.9 for costs incurred from and after the date 90 days prior
to the date that such Lender does give such notice and (ii) each Lender will
designate a different applicable lending office with respect to the Letters of
Credit and/or Eurodollar Loans affected by such event if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the sole opinion of such Lender, be disadvantageous to such Lender. Such a
certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender, through the Agent, to the Borrower shall be conclusive
and binding on the parties hereto in the absence of manifest error. This
covenant shall survive the termination of this Credit Agreement and the payment
of the Loans and all other amounts payable hereunder.
3.10 TAXES.
-----
(a) Except as provided below in this subsection, all payments made by the
Borrower under this Credit Agreement and any Notes shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
<PAGE>
withheld or assessed by any court, or governmental body, agency or other
official, excluding taxes measured by or imposed upon the net income of any
Lender or its applicable lending office, or any branch or affiliate thereof, and
all franchise taxes, branch taxes, taxes on doing business or taxes on the
capital or net worth of any Lender or its applicable lending office, or any
branch or affiliate thereof, imposed: (i) by any jurisdiction under the laws of
which such Lender, applicable lending office, branch or affiliate is organized
or is located, or in which its principal executive office is located, or any
nation within which such any jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender, applicable lending office,
branch or affiliate other than a connection arising solely from such Lender
having executed, delivered or performed its obligations, or received payment
under or enforced, this Credit Agreement or any Notes. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("NON-EXCLUDED TAXES") are required to be withheld from any amounts payable to
the Agent or any Lender hereunder or under any Notes, (A) the amounts so payable
to the Agent or such Lender shall be increased to the extent necessary to yield
to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Credit Agreement and any Notes, PROVIDED, HOWEVER, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States of America or a state thereof
if such Lender (I) fails to comply with the requirements of subsection (b) below
whenever any Non-Excluded Taxes are payable by the Borrower or (II) any forms
described in subsection (b) below become in applicable or cannot be completed or
delivered as a result of (x) any addition to or change in a treaty, law or
regulation in the nature of a limitation on benefits provision or similar
provision restricting eligibility for treaty benefits or (y) any change in
treaty, law or regulation that was pending on the date on which such Lender
becomes a Lender, and (B) as promptly as possible thereafter the Borrower shall
send to the Agent for its own account or for the account of such Lender, as the
case may be, a certified copy of any original official receipt or other evidence
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other required documentary evidence,
the Borrower shall indemnify the Agent and the Lenders for any incremental
taxes, interest or penalties that may become payable by the Agent or any Lender
as a result of any such failure. The agreements in this subsection shall survive
the termination of this Credit Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X) (i) on or before the date of any payment by the Borrower under
this Credit Agreement or Notes to such Lender, deliver to the Borrower
and the Agent (A) two (2) duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and any Notes without deduction
or withholding of any United States federal income taxes and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable
<PAGE>
form, as the case may be, certifying that it is entitled to an
exemption from United States backup withholding tax;
(ii) deliver to the Borrower and the Agent two (2) further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower
or the Agent; or
(Y) in the case of any such Lender that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent
to the Borrower (for the benefit of the Borrower and the Agent) that it is
not a bank within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (ii) furnish to the Borrower on or before the date of any
payment by the Borrower, with a copy to the Agent two (2) accurate and
complete original signed copies of Internal Revenue Service Form W-8, or
successor applicable form certifying to such Lender's legal entitlement at
the date of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue Code with
respect to payments to be made under this Credit Agreement and any Notes
(and to deliver to the Borrower and the Agent two (2) further copies of
such form on or before the date it expires or becomes obsolete and after
the occurrence of any event requiring a change in the most recently
provided form and, if necessary, obtain any extensions of time reasonably
requested by the Borrower or the Agent for filing and completing such
forms), and (iii) to the extent legally entitled to do so, upon reasonable
request by the Borrower, provide to the Borrower (for the benefit of the
Borrower and the Agent) such other forms as may be reasonably required in
order to establish the legal entitlement of such Lender to an exemption
from withholding with respect to payments under this Credit Agreement and
any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Agent. Each Person that shall become a Lender or a participant
of a Lender pursuant to subsection 11.3 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms, certifications and
statements required pursuant to this subsection, PROVIDED that in the case of a
participant of a Lender the obligations of such participant of a Lender pursuant
to this subsection (b) shall be determined as if the participant of a Lender
were a Lender except that such participant of a Lender shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased and the Borrower and the Agent.
<PAGE>
3.11 INDEMNITY.
---------
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans or CD Rate Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Credit Agreement, (b) default by the Borrower in making any prepayment of a
Eurodollar Loan or a CD Rate Loan after the Borrower has given a notice thereof
in accordance with the provisions of this Credit Agreement or (c) the making of
a prepayment of Eurodollar Loans or CD Rate Loans on a day which is not the last
day of an Interest Period with respect thereto. With respect to Eurodollar Loans
and CD Rate Loans, such indemnification may include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Eurodollar Loans or CD Rate Loans provided for herein over
(ii) with respect to Eurodollar Loans, the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market, or with respect to CD Rate Loans the
amount of interest (as reasonably determined by such Lender) which would have
accrued to such Lender on such amount by placing such amount as a certificate of
deposit. The covenants of the Borrower set forth in this Section 3.11 shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.12 PRO RATA TREATMENT.
------------------
Except to the extent otherwise provided herein:
(a) LOANS. Each Extension of Credit in respect of Revolving Loans, Foreign
Currency Loans and LOC Obligations and payments of principal, interest and fees
(including Unused Fee and Letter of Credit Fee) on or in respect thereof and
each reduction in Commitments, relating thereto, and each conversion or
extension of such Loans and Obligations, shall be allocated pro rata among the
Lenders in accordance with the respective principal amounts of their outstanding
Revolving Loans or Foreign Currency Loans and Participation Interests.
(b) ADVANCES. Unless the Agent shall have been notified in writing by any
Lender prior to a borrowing that such Lender will not make the amount that would
constitute its ratable share of such borrowing available to the Agent, the Agent
may assume that such Lender is making such amount available to the Agent, and
the Agent may, in reliance upon such assumption, make available to the Borrower
a corresponding amount. If such amount is not made available to the Agent by
such Lender within the time period specified therefor hereunder, such Lender
shall pay to the Agent, on demand, such amount with interest thereon (or, in the
<PAGE>
case of a Foreign Currency Loan interest on the daily Dollar Equivalent thereof)
at a rate equal to the Federal Funds Rate for the period until such Lender makes
such amount immediately available to the Agent. A certificate of the Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
3.13 SHARING OF PAYMENTS.
-------------------
The Lenders agree among themselves that, in the event that any Lender shall
obtain payment in respect of any Loan, LOC Obligations or any other obligation
owing to such Lender under this Credit Agreement through the exercise of a right
of setoff, banker's lien or counterclaim, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly purchase from the other
Lenders a participation in such Loans, LOC Obligations and other obligations in
such amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all Lenders share such payment in accordance with
their respective ratable shares as provided for in this Credit Agreement. The
Lenders further agree among themselves that if payment to a Lender obtained by
such Lender through the exercise of a right of setoff, banker's lien,
counterclaim or other event as aforesaid shall be rescinded or must otherwise be
restored, each Lender which shall have shared the benefit of such payment shall,
by repurchase of a participation theretofore sold, return its share of that
benefit (together with its share of any accrued interest payable with respect
thereto) to each Lender whose payment shall have been rescinded or otherwise
restored. The Borrower agrees that any Lender so purchasing such a participation
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
participation as fully as if such Lender were a holder of such Loan, LOC
Obligations or other obligation in the amount of such participation. Except as
otherwise expressly provided in this Credit Agreement, if any Lender or the
Agent shall fail to remit to the Agent or any other Lender an amount payable by
such Lender or the Agent to the Agent or such other Lender pursuant to this
Credit Agreement on the date when such amount is due, such payments shall be
made together with interest thereon for each date from the date such amount is
due until the date such amount is paid to the Agent or such other Lender at a
rate per annum equal to the Federal Funds Rate. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section 3.13 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders under this Section 3.13 to
share in the benefits of any recovery on such secured claim.
3.14 PAYMENTS, COMPUTATIONS, ETC.
---------------------------
(a) Each payment on account of an amount due from the Borrower hereunder or
under any other Credit Document shall be made by the Borrower to the
Administrative Agent for the PRO RATA account of the Lenders entitled to receive
<PAGE>
such payment as provided herein in the currency in which such amount is
denominated and in such funds as are customary at the place and time of payment
for the settlement of international payments in such currency. Without limiting
the terms of the preceding sentence, accrued interest on any Loans denominated
in a Foreign Currency shall be payable in the same Foreign Currency as such
Loan. Upon request, the Agent will give the Borrower a statement showing the
computation used in calculating such amount, which statement shall be conclusive
in the absence of manifest error. The obligation of the Borrower to make each
payment on account of such amount in the currency in which such amount is
denominated shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment, which is expressed in or converted into any other
currency, except to the extent such tender or recovery shall result in the
actual receipt by the Agent of the full amount in the appropriate currency
payable hereunder. The Borrower agrees that its obligation to make each payment
on account of such amount in the currency in which such amount is denominated
shall be enforceable as an additional or alternative claim for recovery in such
currency of the amount (if any) by which such actual receipt shall fall short of
the full amount of such currency payable hereunder, and shall not be affected by
judgment being obtained for such amount.
(b) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in dollars in immediately available funds,
without offset, deduction, counterclaim or withholding of any kind, at the
Agent's office specified in Section 11.1 not later than 2:00 P.M. (Charlotte,
North Carolina time) on the date when due. Payments received after such time
shall be deemed to have been received on the next succeeding Business Day. The
Agent may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Borrower
maintained with the Agent (with notice to the Borrower). The Borrower shall, at
the time it makes any payment under this Credit Agreement, specify to the Agent
the Loans, LOC Obligations, Fees, interest or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event that
it fails so to specify, or if such application would be inconsistent with the
terms hereof, the Agent shall distribute such payment to the Lenders in such
manner as the Agent may determine to be appropriate in respect of obligations
owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The
Agent will distribute such payments to such Lenders, if such payment is received
prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like
funds as received prior to the end of such Business Day and otherwise the Agent
will distribute such payment to such Lenders on the next succeeding Business
Day. Whenever any payment hereunder shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for the period
of such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of interest
and fees shall be made on the basis of actual number of days elapsed over a year
of 360 days, except with respect to computation of interest on Base Rate Loans
which (unless the Base Rate is determined by reference to the Federal Funds
Rate) shall be calculated based on a year of 365 or 366 days, as appropriate.
Interest shall accrue from and include the date of borrowing, but exclude the
date of payment.
<PAGE>
(c) ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT. Notwithstanding any
other provisions of this Credit Agreement to the contrary, after the occurrence
and during the continuance of an Event of Default, all amounts collected or
received by the Agent or any Lender on account of the Obligations or any other
amounts outstanding under any of the Credit Documents shall be paid over or
delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees actually
incurred) of the Agent in connection with enforcing the rights of the
Lenders under the Credit Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees actually
incurred) of each of the Lenders in connection with enforcing its rights
under the Credit Documents or otherwise with respect to the Obligations
owing to such Lender;
FOURTH, to the payment of all accrued interest and fees on or in
respect of the Obligations;
FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of the
outstanding LOC Obligations);
SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Credit Documents or otherwise and not
repaid pursuant to clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Obligations held by such Lender bears to the aggregate then outstanding
Obligations) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such amounts
shall be held by the Agent in a cash collateral account and applied (A) first,
to reimburse the Issuing Lender for any drawings under such Letters of Credit
and (B) then, following the expiration or earlier cancellation of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 3.14(c).
<PAGE>
3.15 EVIDENCE OF DEBT.
----------------
(a) Each Lender shall maintain an account or accounts evidencing each Loan
made by such Lender to the Borrower from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Credit Agreement. Each Lender will make reasonable efforts to maintain the
accuracy of its account or accounts and to promptly update its account or
accounts from time to time, as necessary.
(b) The Agent shall maintain the Register pursuant to Section 11.3(c)
hereof, and a subaccount for each Lender, in which Register and subaccounts
(taken together) shall be recorded (i) the amount, type and Interest Period of
each such Loan hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable to each Lender hereunder and (iii) the
amount of any sum received by the Agent hereunder from or for the account of the
Borrower and each Lender's share thereof. The Agent will make reasonable efforts
to maintain the accuracy of the subaccounts referred to in the preceding
sentence and to promptly update such subaccounts from time to time, as
necessary.
(c) The entries made in the accounts, Register and subaccounts maintained
pursuant to subsection (b) of this Section 3.15 (and, if consistent with the
entries of the Agent, subsection (a)) shall be prima facie evidence of the
existence and amounts of the obligations of the Borrower therein recorded;
PROVIDED, HOWEVER, that the failure of any Lender or the Agent to maintain any
such account, such Register or such subaccount, as applicable, or any error
therein, shall not in any manner affect the obligation of the Borrower to repay
the Loans made by such Lender in accordance with the terms hereof.
3.16 REPLACEMENT OF LENDERS.
----------------------
If any Lender requests compensation pursuant to Section 3.6, 3.8, 3.9 or
3.10 hereof, or any Lender's obligation to make, convert into, or to continue
Eurodollar Loans shall be suspended pursuant to Section 3.8 or 3.9 hereof (any
such Lender being herein called a "REQUESTING LENDER"), the Borrower, upon ten
(10) Business Days' notice to the Agent and the Requesting Lender may require
that such Requesting Lender execute and deliver an Assignment Agreement whereby
the Requesting Lender shall assign its entire Commitment to any bank or other
financial institution (a "PROPOSED LENDER") identified by the Borrower that is
reasonably satisfactory to the Agent (i) if such Proposed Lender agrees to
assume all of the obligations of such Requesting Lender hereunder, and to
purchase all of such Requesting Lender's Loans hereunder for consideration equal
to the aggregate outstanding principal amount of such Requesting Lender's Loans,
together with interest thereon to the date of such purchase, and satisfactory
arrangements are made for payment to such Requesting Lender of all other costs
and amounts payable hereunder to such Requesting Lender on or prior to the date
of such transfer (including any fees accrued hereunder and any amounts that
would be payable under Section 3.11 hereof, as if all of such Requesting
Lender's Loans were being prepaid in full on such date) and (ii) if such
Requesting Lender has requested compensation pursuant to Section 3.6, 3.8, 3.9
or 3.10 hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 3.6, 3.8, 3.9 or 3.10 with respect to such Requesting
<PAGE>
Lender's Loans is lower than that of the Requesting Lender; PROVIDED that in no
event will (a) the Agent or any Lender be obligated to assist the Borrower in
identifying any entity that is willing to become a Proposed Lender or (b) any
such assignment be required if the consummation thereof conflicts with any
Requirement of Law. Such Proposed Lender shall be a "Lender" for all purposes
hereunder.
SECTION 4
GUARANTY
--------
4.1 THE GUARANTEE.
-------------
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, to each Affiliate of a Lender that enters into a Hedging Agreement and
to the Agent as hereinafter provided the prompt payment of the Guaranteed
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, as a mandatory prepayment, by acceleration or otherwise)
in accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents or Hedging Agreements, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or unenforceable
for any reason (including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
4.2 OBLIGATIONS UNCONDITIONAL.
-------------------------
The obligations of the Guarantors under Section 4.1 hereof are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 4.2 that the obligations of the
<PAGE>
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as the Lenders (and any Affiliates of Lenders entering
into Hedging Agreements) have been paid in full, all Commitments under the
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Credit Documents or Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to any Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be waived or any other guarantee of any of the Guaranteed Obligations or
any security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Agent or any Lender or
Lenders as security for any of the Guaranteed Obligations shall fail to
attach or be perfected; or
(v) any of the Guaranteed Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any creditor
of any Guarantor) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
<PAGE>
4.3 REINSTATEMENT.
-------------
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by the Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.4 REMEDIES.
--------
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Guaranteed Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Guaranteed
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Guaranteed Obligations
being deemed to have become automatically due and payable), the Guaranteed
Obligations (whether or not due and payable by any other Person) shall forthwith
become due and payable by the Guarantors for purposes of said Section 4.1.
4.5 RIGHTS OF CONTRIBUTION.
----------------------
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 4.5), pay to such Excess Funding Guarantor
an amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.5 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "EXCESS FUNDING Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 4 (hereafter, the "GUARANTIED
OBLIGATIONS"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Guarantied Obligations; (ii) "EXCESS PAYMENT" shall mean, in
respect of any Guarantied Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and
<PAGE>
(iii) "PRO RATA SHARE", for the purposes of this Section 4.5, shall mean, for
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.5 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date).
4.6 CONTINUING GUARANTEE.
--------------------
The guarantee in this Section 4 is a continuing guarantee, and shall apply
to all Guaranteed Obligations whenever arising.
4.7 CERTAIN ADDITIONAL WAIVERS.
--------------------------
Without limiting the generality of the provisions of this Section 4, each
Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. Sections
26-7 through 26-9, inclusive, to the extent applicable. Each Guarantor further
agrees that such Guarantor shall have no right of recourse to security for the
Guaranteed Obligations, except through the exercise of the rights of subrogation
pursuant to Section 4.2 and through the exercise of rights of contribution
pursuant to Section 4.5.
4.8 RELEASE OF GUARANTOR.
--------------------
In the event of a sale or other disposition of all of the capital stock of
any Guarantor, by way of a merger, consolidation or otherwise, then such
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) will
be released and relieved of any obligations under the guarantee in this Section
4; PROVIDED that at the time of such disposition no Default or Event of Default
(i) shall have occurred and is continuing or (ii) would occur as a result from
such disposition. Upon request of the Borrower, the Agent shall execute and
deliver to Borrower an instrument evidencing any such release in accordance with
this Section 4.8.
<PAGE>
SECTION 5
CONDITIONS
----------
5.1 CONDITIONS TO CLOSING.
---------------------
This Credit Agreement shall become effective, and the initial Extensions of
Credit may be made, upon the satisfaction of the following conditions precedent:
(a) EXECUTION OF CREDIT AGREEMENT AND CREDIT DOCUMENTS. Receipt of (i)
multiple counterparts of this Credit Agreement, (ii) a Revolving Note for each
Lender, and a Swingline Note for the Swingline Lender, (iii) multiple
counterparts of the Pledge Agreement, (iv) multiple counterparts of the Security
Agreement and UCC financing statements relating thereto, if any, executed by a
duly authorized officer of each party thereto and in each case conforming to the
requirements of this Credit Agreement.
(b) ABSENCE OF LEGAL PROCEEDINGS. There shall not exist any (i) order,
decree, judgment, ruling or injunction which restrains the consummation of the
acquisition of the Acquired Assets in the manner contemplated by the Purchase
Agreement or (ii) pending or threatened action, suit, investigation or
proceeding which if adversely determined against the Borrower or any of its
Subsidiaries would have or would reasonably be expected to have a Material
Adverse Effect.
(c) LEGAL OPINIONS. Receipt of opinions of counsel for the Credit Parties
relating to the Credit Documents and the transactions contemplated herein, in
form and substance satisfactory to the Agent and the Required Lenders.
(d) BORROWING BASE CERTIFICATE. Receipt by the Agent of a Borrowing Base
Certificate dated as of the date hereof in form and substance satisfactory to
the Agent.
(e) CORPORATE DOCUMENTS. Receipt of the following for each of the Credit
Parties:
(i) ARTICLES OF INCORPORATION. Copies of the articles of incorporation
or charter documents certified to be true and complete as of a recent date
by the appropriate governmental authority of the state of its
incorporation.
(ii) RESOLUTIONS. Copies of resolutions of the Board of Directors
approving and adopting the respective Credit Documents, the transactions
contemplated therein and authorizing execution and delivery thereof,
certified by a secretary or assistant secretary as of the Closing Date to
be true and correct and in force and effect as of such date.
(iii) BYLAWS. Copies of the bylaws certified by a secretary or
assistant secretary as of the Closing Date to be true and correct and in
force and effect as of such date.
<PAGE>
(iv) GOOD STANDING. Copies, where applicable, of certificates of good
standing, existence or its equivalent certified as of a recent date by the
appropriate governmental authorities of the state of incorporation.
(v) INCUMBENCY. An incumbency certificate of each Credit Party
certified by a secretary or assistant secretary to be true and correct as
of the Closing Date.
(f) PERSONAL PROPERTY COLLATERAL. Receipt of the following in form and
substance satisfactory to the Agent:
(i) searches of Uniform Commercial Code ("UCC") filings in the
jurisdiction of the chief executive office of the each Credit Party and
each jurisdiction where any Collateral is located or where a filing would
need to be made in order to perfect the Agents' security interest, for the
behalf of Lenders, in the Collateral, copies of the financing statements on
file in such jurisdictions and evidence that no Liens exist other than
Permitted Liens; and
(ii) duly executed UCC financing statements for each appropriate
jurisdiction as is necessary, in the Agent's sole discretion, to perfect
the Lenders' security interest, for the behalf of the Lenders, in the
Collateral.
(g) EVIDENCE OF INSURANCE. Receipt by the Agent of copies of insurance
policies or certificates of insurance of the Borrower evidencing casualty
insurance meeting the requirements set forth in the Credit Documents, including,
but not limited to, naming the Agent as sole loss payee on behalf of the Lenders
with respect to the Collateral.
(h) SENIOR DEBT. (i) The Borrower shall have entered into the Senior Note
Indenture, (ii) the Borrower shall have executed the Senior Notes, (iii) the
Agent shall have received a copy, certified by an officer of the Borrower as
true and complete, of the Senior Note Indenture and each of the Senior Notes as
originally executed and delivered, and no amendment or modification thereof
shall have been entered into on or prior to the Closing Date which shall not
have been approved by each of the Lenders and (iv) the Borrower shall have
received proceeds from the sale of Senior Notes in an aggregate principal amount
of $175,000,000.00.
(i) OFFICER'S CERTIFICATE. The Agent shall have received a certificate or
certificates executed by an officer of the Borrower as of the Closing Date
stating that (A) the Borrower and each of the Borrower's Subsidiaries are in
compliance with all existing material financial obligations, (B) all
governmental, shareholder and third party consents and approvals, if any, with
respect to the Credit Documents and the transactions contemplated thereby have
been obtained, (C) no action, suit, investigation or proceeding is pending or
threatened in any court or before any arbitrator or governmental instrumentality
that purports to effect the Borrower, any of the Borrower's Subsidiaries or any
transaction contemplated by the Credit Documents, or could have or might be
reasonably expected to have a Material Adverse Effect, (D) the transactions
contemplated by the Purchase Agreement have been consummated in accordance with
the terms thereof and (E) immediately after giving effect to this Credit
<PAGE>
Agreement, the other Credit Documents and all the transactions contemplated
herein or therein to occur on such date, (1) the Borrower and each of the
Borrower's Subsidiaries is Solvent, (2) no Default or Event of Default exists,
(3) all representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects, and (4) the Borrower is
in compliance with each of the financial covenants set forth in Section 7.9.
(j) PURCHASE AGREEMENT. The acquisition of the Acquired Assets shall have
been consummated in accordance with the terms of the Purchase Agreement and all
applicable law.
(k) FEES. Receipt of all fees and expenses owed to the Lenders and the
Agent, including, without limitation, any fees set forth in the Agent's Fee
Letter.
(l) FIRST PRIORITY LIEN. Receipt by the Agent of evidence satisfactory in
form and substance to the Agent, that the Agent, on behalf of the Lenders, holds
a perfected, first priority lien, subject to no other Liens other than the
Permitted Liens, in the Collateral.
(m) PAYMENT OF PRIOR CREDIT FACILITY. Receipt by the Agent of evidence that
all indebtedness under the Prior Credit Agreement has been paid in full and all
obligations thereunder (other than those indemnifications that specifically
survive) have been terminated.
(n) ADDITIONAL MATTERS. All other documents and legal matters in connection
with the transactions contemplated by this Credit Agreement shall be reasonably
satisfactory in form and substance to the Agent and the Required Lenders.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
--------------------------------------
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) NOTICE. The Borrower shall have delivered (i) in the case of any new
Revolving Loan or Foreign Currency Loan, a Notice of Borrowing, duly executed
and completed in accordance with the terms hereof and (ii) in the case of any
extension or conversion of a Loan, a duly executed and completed Notice of
Extension/Conversion by the time specified in Section 3.2.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties made
by the Borrower herein or in any other Credit Documents or which are contained
in any certificate furnished at any time under or in connection herewith shall
be true and correct in all material respects on and as of the date of such
Extension of Credit as if made on and as of such date (except for those which
expressly relate to an earlier date).
<PAGE>
(c) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall
have occurred and be continuing on such date or after giving effect to the
Extension of Credit to be made on such date unless such Default or Event of
Default shall have been waived in accordance with this Credit Agreement.
(d) NO MATERIAL ADVERSE EFFECT. No circumstances, events or conditions
shall have occurred since the date of the audited financial statements
referenced in Section 6.1 which would have a Material Adverse Effect.
Each request for Extension of Credit (including extensions and conversions)
and each acceptance by the Borrower of an Extension of Credit (including
extensions and conversions) shall be deemed to constitute a representation and
warranty by the Borrower as of the date of such Extension of Credit that the
applicable conditions in paragraphs (b), (c) and (d) of this subsection have
been satisfied.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each Credit Party hereby represents
and warrants to the Agent and to each Lender that:
6.1 FINANCIAL CONDITION.
-------------------
The financial statements of the Borrower and its Subsidiaries set forth on
pages F-3 through F-43 of the Offering Memorandum dated November 20, 1997,
relating to the Senior Notes have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby (except as otherwise
stated therein and except that the interim financial statements do not include
all footnotes required by GAAP), and present fairly in all material respects the
financial condition and results from operations of the entities and for the
periods specified, subject in the case of interim company-prepared statements to
normal year-end adjustments.
6.2 NO CHANGES OR RESTRICTED PAYMENTS.
---------------------------------
Since the date of the audited financial statements referenced in Section
6.1, (a) there has been no circumstance, development or event relating to or
affecting the Borrower or any of its Subsidiaries which has had or would be
reasonably expected to have a Material Adverse Effect, and (b) except as
permitted herein, no Restricted Payments have been made or declared or are
contemplated by the Borrower or any of its Subsidiaries.
<PAGE>
6.3 ORGANIZATION; EXISTENCE; COMPLIANCE WITH LAW.
--------------------------------------------
The Borrower and each of its Subsidiaries (a) is a corporation or other
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the corporate or other necessary
power and authority, and the legal right to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law, except to
the extent that the failure to comply therewith would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
---------------------------------------------
Each Credit Party has the corporate or other necessary power and authority,
and the legal right, to make, deliver and perform the Credit Documents to which
it is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of the Credit Documents to which it is
a party. No consent or authorization of, filing with, notice to or other act by
or in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery or
performance of any Credit Documents by any Credit Party (other than those which
have been obtained) or with the validity or enforceability of any Credit
Document against such Credit Party (except such filings as are necessary in
connection with the perfection of the Liens created by such Credit Documents).
Each Credit Document to which it is a party constitutes a legal, valid and
binding obligation of each Credit Party enforceable against such Credit Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.5 NO LEGAL BAR.
------------
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any Credit Party or any
of its Subsidiaries. None of the Credit Parties nor any of its Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which would reasonably be expected to have a Material Adverse Effect.
<PAGE>
6.6 NO MATERIAL LITIGATION.
----------------------
No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of any
Credit Party, threatened by or against, the Borrower or any of its Subsidiaries
or against any of their respective properties or revenues which (a) relate to
the Credit Documents or any of the transactions contemplated hereby or thereby,
or (b) would reasonably be expected to have a Material Adverse Effect.
6.7 NO DEFAULT.
----------
No Default or Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS.
----------------------------
The Borrower and each of its Subsidiaries has good record and marketable
title in fee simple to, or a valid leasehold interest in, all its material real
property, and good title to, or a valid leasehold interest in, all its other
material property, and none of such property is subject to any Lien, except for
Permitted Liens.
6.9 INTELLECTUAL PROPERTY.
---------------------
The Borrower and each of its Subsidiaries owns, or has the legal right to
use, all United States trademarks, tradenames, copyrights, technology, know-how
and processes, if any, necessary for each of them to conduct its business as
currently conducted (the "INTELLECTUAL PROPERTY") except for those the failure
to own or have such legal right to use would not be reasonably expected to have
a Material Adverse Effect. No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and the use of such Intellectual Property
by the Borrower or any of its Subsidiaries does not infringe on the rights of
any Person, except for such claims and infringements that in the aggregate,
would not be reasonably expected to have a Material Adverse Effect.
6.10 NO BURDENSOME RESTRICTIONS.
--------------------------
No Requirement of Law or Contractual Obligation of the Borrower or any of
its Subsidiaries would be reasonably expected to have a Material Adverse Effect.
<PAGE>
6.11 TAXES.
-----
The Borrower and each of its Subsidiaries (a) has filed or caused to be
filed all United States federal income tax returns and all other material tax
returns required to be filed and (b) has paid (i) all taxes shown to be due and
payable on said returns, (ii) all taxes shown to be due and payable on any
assessments of which it has received notice made against it or any of its
property and (iii) all other taxes, fees or other charges imposed on it or any
of its property by any Governmental Authority (other than in the case of (b)(i),
(ii) and (iii) above, any (x) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate, would not have a Material Adverse Effect,
(y) taxes, fees or other charges the amount or validity of which are currently
being contested and with respect to which reserves in conformity with GAAP have
been provided on the books of such Person or (z) taxes, fees or other charges
which are not past due), and (c) no tax Lien has been filed, and, to the best
knowledge of the Credit Parties, no claim is being asserted, with respect to any
such tax, fee or other charge other than any tax Liens, which in the aggregate,
would not have a Material Adverse Effect.
6.12 ERISA
-----
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own terms and
in material compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC or a
Plan has arisen or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer
Plan, as of the last annual valuation date prior to the date on which this
representation is made or deemed made (determined, in each case, in accordance
with Financial Accounting Standards Board Statement 87, utilizing the actuarial
assumptions used in such Plan's most recent actuarial valuation report), did not
exceed as of such valuation date the fair market value of the assets of such
Plan.
(c) Neither the Borrower, nor any of its Subsidiaries nor any ERISA
Affiliate has incurred, or, to the best knowledge of the Credit Parties, could
be reasonably expected to incur, any withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower, nor any of
its Subsidiaries nor any ERISA Affiliate would become subject to any withdrawal
liability under ERISA if the Borrower, any of its Subsidiaries or any ERISA
<PAGE>
Affiliate were to withdraw completely from all Multiemployer Plans and Multiple
Employer Plans as of the valuation date most closely preceding the date on which
this representation is made or deemed made. Neither the Borrower, nor any of its
Subsidiaries nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section 4241 of
ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan
is, to the best knowledge of the Credit Parties, reasonably expected to be in
reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) or breach of fiduciary responsibility has occurred
with respect to a Plan which has subjected or may subject the Borrower, any of
its Subsidiaries or any ERISA Affiliate to any liability under Sections 406,
409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which the Borrower, any of its
Subsidiaries or any ERISA Affiliate has agreed or is required to indemnify any
person against any such liability.
(e) Neither the Borrower, nor any of its Subsidiaries, nor any ERISA
Affiliates has any material liability with respect to "expected post-retirement
benefit obligations" within the meaning of the Financial Accounting Standards
Board Statement 106. Each Plan which is a welfare plan (as defined in Section
3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code
apply has been administered in compliance in all material respects of such
sections.
6.13 GOVERNMENTAL REGULATIONS, ETC.
-----------------------------
(a) No part of the proceeds of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation G or Regulation U, or for the purpose of purchasing or
carrying or trading in any securities. If requested by any Lender or the Agent,
the Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 referred to
in said Regulation U. No indebtedness being reduced or retired out of the
proceeds of the Loans was or will be incurred for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U or any "margin
security" within the meaning of Regulation T. None of the transactions
contemplated by this Credit Agreement (including, without limitation, the direct
or indirect use of the proceeds of the Loans) will violate or result in a
violation of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation
G, T, U or X.
(b) Neither the Borrower, nor any of its Subsidiaries, is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940, each as amended. In addition,
neither the Borrower, nor any of its Subsidiaries, is (i) an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, and is not controlled by such a company, or (ii) a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
<PAGE>
(c) The Borrower and each of its Subsidiaries has obtained all material
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its respective Property and to the conduct of its business.
(d) Neither the Borrower, nor any of its Subsidiaries is in violation of
any applicable statute, regulation or ordinance of the United States of America,
or of any state, city, town, municipality, county or any other jurisdiction, or
of any agency thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a Material
Adverse Effect.
(e) The Borrower and each of its Subsidiaries is current with all material
reports and documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance in all
material respects with all applicable rules and regulations of such commissions.
6.14 PURPOSE OF EXTENSIONS OF CREDIT.
-------------------------------
The Loans will be used solely (a) to repay existing indebtedness and/or (b)
for other general corporate purposes. The Letters of Credit shall be used only
for the purposes set forth in Section 2.2(a).
6.15 ENVIRONMENTAL MATTERS.
---------------------
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "PROPERTIES") and all operations at the
Properties are in compliance with all applicable Environmental Laws, and there
is no violation of any Environmental Law with respect to the Properties or the
businesses operated by the Borrower or any of its Subsidiaries (the
"BUSINESSES"), and there are no conditions relating to the Businesses or
Properties that could give rise to liability under any applicable Environmental
Laws.
(b) None of the Properties contains any Materials of Environmental Concern
at, on or under the Properties in amounts or concentrations that constitute or
constituted a violation of, or could give rise to liability under, Environmental
Laws.
(c) Neither the Borrower nor any of its Subsidiaries has received any
written notice from any Governmental Authority regarding, any violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Properties or the Businesses.
<PAGE>
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, or generated, treated, stored or disposed of
at, on or under any of the Properties or any other location, in each case by or
on behalf of the Borrower or any of its Subsidiaries in violation of, or in a
manner that would be reasonably likely to give rise to liability under, any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of the Credit Parties, threatened, under any
Environmental Law to which the Borrower or any of its Subsidiaries is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
the Borrower or any of its Subsidiaries, the Properties or the Businesses.
(f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations (including, without limitation, disposal) of the Borrower or any
of its Subsidiaries in connection with the Properties or otherwise in connection
with the Businesses, in violation of or in amounts or in a manner that could
give rise to liability under Environmental Laws.
6.16 FIRST PRIORITY LIEN.
-------------------
The Agent, on behalf of the Lenders, holds a first priority lien, subject
to no other Liens other than the Permitted Liens, in the Collateral.
6.17 SUBSIDIARIES.
------------
Set forth on SCHEDULE 6.17 is a complete and accurate list of all
Subsidiaries of the Borrower. Information on SCHEDULE 6.17 includes jurisdiction
of incorporation, the number of shares of each class of capital stock
outstanding and the number and percentage of outstanding shares of each class
owned (directly or indirectly) by the Borrower. There are no outstanding
options, warrants, rights of conversion or purchase or any other similar rights
with respect to shares of any of the Subsidiaries of the Borrower. The
outstanding capital stock of each such Subsidiary is validly issued, fully paid
and non-assessable and is owned by the Borrower, directly or indirectly, free
and clear of all Liens (other than those arising under or contemplated in
connection with the Credit Documents).
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each Credit Party covenants and agrees that so long as this Credit
Agreement is in effect and until the Commitments have been terminated, no
<PAGE>
Obligations remain outstanding and all amounts due hereunder or in connection
herewith have been paid in full, the Borrower and each of its Subsidiaries
shall:
7.1 FINANCIAL STATEMENTS.
--------------------
Furnish, or cause to be furnished, to each of the Lenders:
(a) AUDITED FINANCIAL STATEMENTS. As soon as available, but in any event
within 105 days after the end of each fiscal year, an audited consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the fiscal
year and the related consolidated statements of income, shareholders' equity and
cash flows for the year, audited by independent certified public accountants of
nationally recognized standing, setting forth in each case in comparative form
the figures for the previous year, reported without a "going concern" or like
qualification or exception, or qualification indicating that the scope of the
audit was inadequate to permit such independent certified public accountants to
certify such financial statements without such qualification, together with a
schedule setting forth the unaudited consolidating balance sheet and the related
consolidating statements of income, shareholders equity and cash flows for the
Borrower and its Subsidiaries in a format and with detail sufficient to
calculate the applicable financial covenants.
(b) COMPANY-PREPARED FINANCIAL STATEMENTS. As soon as available, but in any
event within 60 days after the end of the first three fiscal quarters of each
fiscal year, a company-prepared consolidated and consolidating balance sheet of
the Borrower and its Subsidiaries and the Borrower and its Subsidiaries as of
the end of such quarter and related company-prepared consolidated and
consolidating statements of income and shareholders' equity for such period and
for the fiscal year to date in a format and with detail sufficient to calculate
the applicable financial covenants in each case setting forth in comparative
form the consolidated figures for the corresponding period or periods of the
preceding fiscal year or the portion of the fiscal year ending with such period,
as applicable, in each case subject to normal recurring year-end audit
adjustments.
All such financial statements will be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein except as otherwise noted
therein and, in the case of quarterly financial statements, except for the
absence of all footnotes required by GAAP) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change in the application of accounting principles as provided in
Section 1.3.
7.2 CERTIFICATES; OTHER INFORMATION.
-------------------------------
Furnish, or cause to be furnished, to the Agent for distribution to the
Lenders:
<PAGE>
(a) ACCOUNTANT'S CERTIFICATE AND REPORTS. Concurrently with the delivery of
the financial statements referred to in subsection 7.1(a) above, a certificate
of the independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as specified
in such certificate.
(b) OFFICER'S CERTIFICATE. Concurrently with the delivery of the financial
statements referred to in Sections 7.1(a) and 7.1(b) above, a certificate of a
Responsible Officer demonstrating compliance with the financial covenants
contained in Section 7.9 and stating that, to the best of such Responsible
Officer's knowledge and belief, (i) the financial statements fairly present in
all material respects the financial condition of the parties covered by such
financial statements, (ii) during such period the Borrower and its Subsidiaries
have observed or performed in all material respects the covenants and other
agreements hereunder and under the other Credit Documents relating to them, and
satisfied in all material respects the conditions, contained in this Credit
Agreement to be observed, performed or satisfied by them, except as stated in
the certificate, and (iii) such Responsible Officer has obtained no knowledge of
the occurrence during such period of any Default or Event of Default except as
specified in such certificate. A form of Officer's Certificate is attached as
SCHEDULE 7.2(B).
(c) ACCOUNTANTS' REPORTS. Promptly upon the request of the Agent, a copy of
any final (as distinguished from a preliminary or discussion draft) "management
letter" or other similar report submitted by independent accountants to the
Borrower or any of its Subsidiaries in connection with any annual, interim or
special audit.
(d) PUBLIC INFORMATION. Within thirty days after the same are sent, copies
of all reports (other than those otherwise provided pursuant to subsection 7.1)
and other financial information which the Borrower or any of its Subsidiaries
sends to its public stockholders, and within thirty days after the same are
filed, copies of all financial statements and non-confidential reports which the
Borrower or any of its Subsidiaries may make to, or file with, the Securities
and Exchange Commission or any successor or analogous Governmental Authority.
(e) BORROWING BASE CERTIFICATE. Within 30 days after the end of each
calendar month, a Borrowing Base Certificate (including an accounts receivable
detail and an inventory detail) as of the end of the immediately preceding
month, substantially in the form of SCHEDULE 7.2(E) and certified by a
Responsible Officer of the Borrower to be true and correct as of such date.
(f) OTHER INFORMATION. Promptly, such additional financial and other
information as the Agent, at the request of any Lender, may from time to time
reasonably request.
7.3 NOTICES.
-------
Give notice to the Agent (which shall promptly transmit such notice to each
Lender) of:
<PAGE>
(a) DEFAULTS. Immediately after any Credit Party knows or has reason to
know thereof, the occurrence of any Default or Event of Default.
(b) CONTRACTUAL OBLIGATIONS. Promptly, the initiation of any default or
event of default under any Contractual Obligation of the Borrower or any of its
Subsidiaries which would reasonably be expected to have a Material Adverse
Effect.
(c) LEGAL PROCEEDINGS. Promptly, any litigation, or any investigation or
proceeding (including without limitation, any environmental proceeding) known to
the Borrower or any of its Subsidiaries, or any material development in respect
thereof, affecting the Borrower or any of its Subsidiaries which would
reasonably be expected to have a Material Adverse Effect.
(d) ERISA. Promptly, after any Responsible Officer of any Credit Party
knows or has reason to know of (i) any event or condition, including, but not
limited to, any Reportable Event, that constitutes, or might reasonably lead to,
an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of
notice as prescribed in ERISA or otherwise of any withdrawal liability assessed
against any of their ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the meaning of
Title IV of ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which the Borrower or any of
its Subsidiaries or any ERISA Affiliate are required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding standard set
forth in ERISA and the Code with respect; or (iv) any change in the funding
status of any Plan that reasonably could be expected to have a Material Adverse
Effect; together with a description of any such event or condition or a copy of
any such notice and a statement by the chief financial officer of the Credit
Parties briefly setting forth the details regarding such event, condition, or
notice, and the action, if any, which has been or is being taken or is proposed
to be taken by the Credit Parties with respect thereto. Promptly upon request,
the Borrower or any of its Subsidiaries shall furnish the Agent and the Lenders
with such additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto required to
be filed with the Department of Labor and/or the Internal Revenue Service
pursuant to ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
(e) OTHER. Promptly, any other development or event which a Responsible
Officer determines could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Credit Parties propose to take with respect thereto.
7.4 PAYMENT OF OBLIGATIONS.
----------------------
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
<PAGE>
obligations of the Borrower or any of its Subsidiaries of whatever nature
(including without limitation all taxes, assessments and governmental charges or
levies) and any additional costs that are imposed as a result of any failure to
so pay, discharge or otherwise satisfy such obligations, except when the amount
or validity of such obligations and costs is currently being contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity with
GAAP with respect thereto have been provided on the books of the Borrower or any
of its Subsidiaries, as the case may be.
7.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
------------------------------------------------
Continue to engage in a Permitted Business and preserve, renew and keep in
full force and effect its corporate existence and take all reasonable action to
maintain all material rights, privileges, licenses and franchises necessary or
desirable in the normal conduct of its business; comply with all Contractual
Obligations and Requirements of Law applicable to it except to the extent that
failure to comply therewith would not, in the aggregate, have a Material Adverse
Effect.
7.6 MAINTENANCE OF PROPERTY; INSURANCE.
----------------------------------
Keep all material property useful and necessary in its business in
reasonably good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies casualty,
liability and such other insurance (which may include plans of self-insurance)
with such coverage and deductibles, and in such amounts as may be consistent
with prudent business practice and in any event consistent with normal industry
practice (except to any greater extent as may be required by the terms of any of
the other Credit Documents); and furnish to the Agent, upon written request,
full information as to the insurance carried.
7.7 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
------------------------------------------------------
(a) Keep proper books of records and accounts in conformity with GAAP and
all Requirements of Law; and permit, during regular business hours and upon
reasonable notice by the Agent, the Agent to visit and inspect any of its
properties and examine and make abstracts (including photocopies) from any of
its books and records (other than materials protected by the attorney-client
privilege and materials which the Credit Parties may not disclose without
violation of a confidentiality obligation binding upon them) at any reasonable
time, and to discuss the business, operations, properties and financial and
other condition of the Borrower and any of its Subsidiaries with officers and
employees of the Borrower and any of its Subsidiaries and with their independent
certified public accountants. The cost of the inspection referred to in the
preceding sentence shall be for the account of the Lenders, unless an Event of
Default has occurred and is continuing, in which case the cost of such
inspection shall be for the account of the Credit Parties.
<PAGE>
(b) In addition to the foregoing subsection (a), permit the Agent to have
agents or representatives conduct a "field audit" of its inventory and accounts,
including inspection of the inventory and account records and a right to examine
and make abstracts (including photocopies) from its books and records relating
to its inventory and accounts on a semi-annual basis, and more frequently after
the occurrence of an Event of Default. After the occurrence and during the
continuance of an Event of Default, the cost of such "field audits" will be
promptly paid by the Borrower.
7.8 ENVIRONMENTAL LAWS.
------------------
(a) Comply in all material respects with, and take reasonable actions to
ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws and obtain and comply in all
material respects with and maintain, and take reasonable actions to ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect;
(b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws except
to the extent that the same are being contested in good faith by appropriate
proceedings and the failure to do or the pendency of such proceedings would not
reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower or any of its Subsidiaries or the Properties, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this paragraph shall survive repayment of the Loans and all
other amounts payable hereunder, and termination of the Commitments.
<PAGE>
7.9 FINANCIAL COVENANTS.
-------------------
(a) LEVERAGE RATIO. There shall be maintained with respect to the Borrower
and its Subsidiaries as of the end of each fiscal quarter to occur during the
periods shown, a Leverage Ratio less than:
(i) From the Closing Date to and including June 29, 1998, 4.9 to
1.0;
(ii) From June 30, 1998 to and including September 29, 1998, 4.8
to 1.0;
(iii) From September 30, 1998 to and including December 30, 1998, 4.7
to 1.0;
(iv) From December 31, 1998 to and including March 30, 1999, 4.5
to 1.0;
(v) From March 31, 1999 to and including June 29, 1999, 4.3 to 1.0;
(vi) From June 30, 1999 to and including December 30, 1999, 4.2
to 1.0;
(vii) From December 31, 1999 to and including June 29, 2000, 4.0 to
1.0;
(viii) From June 30, 2000 to and including December 30, 2000, 3.75 to
1.0; and
(ix) From December 31, 2000 and thereafter, 3.6 to 1.0.
(b) INTEREST COVERAGE RATIO. There shall be maintained with respect to the
Borrower and its Subsidiaries as of the end of each fiscal quarter to occur
during the periods shown, a Interest Coverage Ratio greater than:
(i) From the Closing Date to and including March 30, 1998, 1.75
to 1.0;
(ii) From March 31, 1998 to and including June 29, 1998, 1.9 to 1.0;
(iii) From June 30, 1998 to and including December 30, 1998, 2.0 to
1.0;
(iv) From December 31, 1998 to and including March 30, 1999, 2.1 to
1.0;
(v) From March 31, 1999 to and including December 30, 1999, 2.25
to 1.0;
(vi) From December 31, 1999 to and including March 30, 2000, 2.35 to
1.0;
(vii) From March 31, 2000 to and including September 29, 2000, 2.5 to
1.0; and
(viii) From September 30, 2000 and thereafter, 2.6 to 1.0.
<PAGE>
(c) CURRENT RATIO. There shall be maintained with respect to the Borrower
and its Subsidiaries at all times a Current Ratio of greater than:
(i) From the Closing Date to and including December 30, 1998, 2.5 to
1.0; and
(ii) From December 31, 1998 and thereafter, 2.75 to 1.0.
(d) NET WORTH. At all times Net Worth shall be no less than $87,000,000
increased on a cumulative basis by an amount equal to, (i) as of the last day of
each fiscal quarter, 50% of Net Income for the fiscal quarter then ended
(without deductions for losses) PLUS (ii) 100% of the Net Cash Proceeds from any
Equity Transaction subsequent to the Closing Date.
7.10 USE OF PROCEEDS.
---------------
Extensions of Credit will be used solely for the purposes provided in
Section 6.14.
7.11 ADDITIONAL GUARANTIES AND STOCK PLEDGES.
---------------------------------------
(a) DOMESTIC SUBSIDIARIES. At any time any Person becomes a Domestic
Subsidiary, the Borrower will promptly notify the Agent thereof and cause such
Domestic Subsidiary to become a Guarantor hereunder by (i) execution of a
Joinder Agreement, (ii) execution of a Security Agreement granting the Agent on
behalf of the Lenders a security interest in all accounts receivable and
inventory of such Person, together with UCC financing statements required by the
Agent, (iii) delivery of supporting resolutions, incumbency certificates,
corporation formation and organizational documentation and opinions of counsel
as the Agent may reasonably request, and (iv) delivery of stock certificates and
a related pledge agreement or pledge joinder agreement evidencing the pledge of
100% of the Voting Stock of such Domestic Subsidiary and of 100% of the Voting
Stock of each of such Person's Domestic Subsidiaries and 66% of the Voting Stock
of each of its Foreign Subsidiaries held by it and/or any of its Domestic
Subsidiaries, together in each case with undated stock transfer powers executed
in blank and UCC financing statements requested by the Agent.
(b) FOREIGN SUBSIDIARIES. Within sixty (60) days after the Closing Date
with respect to the Foreign Subsidiaries owned directly as of the Closing Date
by a Credit Party, and at any time any Credit Party acquires a Foreign
Subsidiary, the Borrower will promptly notify the Agent thereof and cause (i)
delivery of supporting resolutions, incumbency certificates, corporation
formation and organizational documentation and opinions of counsel as the Agent
may reasonably request, and (ii) delivery of stock certificates (where required
for perfection under local law) and a related pledge agreement or pledge joinder
agreement evidencing the pledge of 66% of the Voting Stock of such Foreign
Subsidiary, together in each case with undated stock transfer powers executed in
blank and UCC financing statements requested by the Agent.
<PAGE>
SECTION 8
NEGATIVE COVENANTS
------------------
Each Credit Party covenants and agrees that so long as this Credit
Agreement is in effect and until the Commitments have been terminated, no
Obligations remain outstanding and all amounts due hereunder or in connection
herewith, have been paid in full, neither the Borrower nor any of its
Subsidiaries shall:
8.1 INDEBTEDNESS.
------------
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit Agreement and
the other Credit Documents;
(b) Indebtedness set forth in SCHEDULE 8.1 ("Existing Indebtedness");
(c) Capital Lease Obligations and Indebtedness incurred, in each case,
to provide all or a portion of the purchase price or costs of construction
or improvement of an asset, PROVIDED that the total principal amount of all
such Indebtedness shall not exceed $5,000,000 at any time outstanding;
(d) Indebtedness and obligations owing under interest rate protection
agreements relating to the Obligations hereunder and under interest rate,
commodities and foreign currency exchange protection agreements entered
into in the ordinary course of business to manage existing or anticipated
risks and not for speculative purposes ("Permitted Hedging Obligations");
(e) Indebtedness of the Borrower arising under the Senior Note
Indenture and the Senior Notes and Guaranty Obligations of any Guarantor
with respect thereto.
(f) the Permitted Refinancing Indebtedness of the Borrower or any of
its Subsidiaries in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund Indebtedness (other
than intercompany Indebtedness) permitted by Section 8.1(b), (c) or (f);
(g) intercompany Indebtedness between or among the Borrower or any of
its Subsidiaries; PROVIDED, HOWEVER, that (i) if the Borrower is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated
to the prior payment in full in cash of the Obligations and (ii) (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Borrower or a
<PAGE>
Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Borrower or a Subsidiary
thereof shall be deemed, in each case, to constitute an incurrence of
Indebtedness by the Borrower or such Subsidiary, as the case may be, that
was not permitted by this clause (g);
(h) the guarantee by the Borrower or any of its Subsidiaries of any
Indebtedness of the Borrower or a Subsidiary of the Borrower that was
permitted to be incurred pursuant to this Section 8.1;
(i) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Borrower or any Subsidiary in the ordinary course of
business; and
(j) additional Indebtedness of the Borrower or any of its Subsidiaries
in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (j), not to exceed $15,000,000.
For purposes of determining compliance with this Section 8.1, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (a) through (j) above,
the Borrower shall, in its sole discretion, determine under which of the clauses
(a) through (j) above such Indebtedness will be counted.
8.2 LIENS.
-----
Contract, create, incur, assume or permit to exist any Lien with respect to
any of their respective property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 NATURE OF BUSINESS.
------------------
Engage in any business other than a Permitted Business.
8.4 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS,
CREATION OF SUBSIDIARIES.
--------------------------------------------------
Merge or consolidate with or into, or convey, transfer, lease (as lessor)
or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, except that (i) any Guarantor may merge or
consolidate with or into, or transfer assets to, any other Guarantor, (ii) any
Guarantor may merge into or transfer assets to the Borrower, (iii) any Foreign
Subsidiary may merge or consolidate with or into, or transfer assets to, the
<PAGE>
Borrower, a Guarantor or another Foreign Subsidiary, and (iv) any transaction
that is permitted under Section 8.5 is permitted hereunder.
8.5 TRANSFER OF ASSETS.
------------------
Sell, lease (as lessor), transfer or otherwise dispose of any item of
property or asset (including by way of merger or consolidation) other than
sales, leases, transfers or other dispositions;
(a) in the ordinary course of business;
(b) among the Guarantors, among the Foreign Subsidiaries or by a Subsidiary
to the Borrower or by the Borrower to a Guarantor;
(c) of assets or property which are obsolete, worn out or no longer useful
in Borrower's or any Subsidiary's business;
(d) if, after giving effect thereto, (i) no Default or Event of Default
exists, (ii) the properties and assets disposed of during the then current
fiscal year of Borrower pursuant to this Section 8.5(d) would not have an
aggregate book value, each determined at the time of disposition, in excess of
ten percent (10%) of Borrower's consolidated total assets as calculated at the
end of the immediately preceding full fiscal year and (iii) the properties and
assets in the aggregate disposed of subsequent to the Closing Date pursuant to
this Section 8.5(d) would not have an aggregate book value in excess of twenty
percent (20%) of the Borrower's consolidated total assets calculated at the end
of the immediately preceding full fiscal year;
(e) consisting of the use of cash in a manner not prohibited by the terms
of this Credit Agreement; or
(f) consisting of the sale of accounts receivable to the Factor under the
Factor Agreement.
8.6 ADVANCES, INVESTMENTS AND LOANS.
-------------------------------
Lend money or extend credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, or otherwise make an Investment in, any Person
except for Permitted Investments.
<PAGE>
8.7 RESTRICTED PAYMENTS.
-------------------
(a) Directly or indirectly: (i) declare or pay any dividend or make any
other payment or distribution on account of the Borrower's or any of its
Subsidiaries' Equity Interest (including, without limitation, any payment in
connection with any merger or consolidation involving the Borrower or any of its
Subsidiaries) or to the direct or indirect holders of the Borrower's or any of
its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable (x) in Equity Interests (other than
Disqualified Stock) of the Borrower or (y) to the Borrower or a Subsidiary of
the Borrower); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Borrower) any Equity Interest of the Borrower or any direct or
indirect parent of the Borrower or other Affiliate of the Borrower (other than
any such Equity Interest owned by the Borrower or any Wholly Owned Subsidiary of
the Borrower); (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Subordinated
Indebtedness except a payment of interest or principal at Stated Maturity; (iv)
make any acquisition of the assets or capital stock of another Person if the
aggregate purchase price for all transactions during the term of this Credit
Agreement exceeds $25,000,000 (all such payment and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(A) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(B) the Borrower would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Senior Note Indenture; and
(C) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Borrower and its Subsidiaries after
the date of this Credit Agreement (excluding Restricted Payments permitted
by clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less
than the sum, without duplication, of (i) 50% of Net Income of the Borrower
for the period (taken as one accounting period) from October 1, 1997 to the
end of the Borrower's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Borrower since the date of this Credit Agreement as a contribution to its
common equity capital or from the issue or sale of Equity Interests of the
Borrower (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Borrower that have been
converted into such Equity Interest (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Borrower), plus (iii) $2.0 million; and
(D) if such Restricted Payment is in connection with the acquisition
of the capital stock of another Person, such Person shall become a
Subsidiary upon the consummation of such acquisition.
<PAGE>
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of this Credit
Agreement (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Subordinated Indebtedness or Equity Interest of the Borrower
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Borrower) of, other Equity Interest of
the Borrower (other than any Disqualified Stock); provided that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (C) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of Subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Subsidiary of the Borrower to the holders of its
common Equity Interests on a pro rata basis; and (v) the repurchase, redemption
or other acquisition or retirement for value of any Equity Interests of the
Borrower or any Subsidiary of the Borrower held by any employee or director of
the Borrower or any Subsidiary of the Borrower held by any employee or director
of the Borrower (or any of its Subsidiaries) pursuant to any management equity
subscription agreement or stock option agreement approved by the Board of
Directors of the Borrower, provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Borrower or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be conclusive and shall be delivered to
the Agent. Not later than the date of making any Restricted Payment, the
Borrower shall deliver to the Agent an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 8.7 were computed.
(b) Make any prepayment, redemption, defeasance or acquisition for value
(including without limitation, by way of depositing money or securities with the
trustee with respect thereto before due with the purpose of payment when due),
or refund, refinance or exchange any Indebtedness arising under the Senior Note
Indenture and the Senior Notes except as required by the terms of the Senior
Note Indenture.
8.8 TRANSACTIONS WITH AFFILIATES; MODIFICATION OF DOCUMENTATION.
-----------------------------------------------------------
Enter into or permit to exist any transaction or series of transactions,
whether or not in the ordinary course of business, with any officer, director or
Affiliate which is not a Subsidiary other than (i) customary fees and expenses
paid to directors, (ii) reasonable employee compensation and other benefit
arrangements approved by the disinterested members of the Board of Directors of
<PAGE>
the Borrower, (iii) payment of reasonable directors fees, (iv) reasonable
indemnities of officers, directors and employees of the Borrower or any
Subsidiary permitted by applicable law, (v) Restricted Payments that are
permitted by the provisions of Section 8.7 and (v) where such transactions are
on terms and conditions substantially as favorable as would be obtainable in a
comparable arm's-length transaction with a Person other than an officer,
director, or Affiliate which is not a Subsidiary.
8.9 FISCAL YEAR.
-----------
Change its fiscal year.
8.10 LIMITATION ON RESTRICTIONS.
--------------------------
Create or permit to exist any restriction of any kind on the ability of any
Subsidiary to (i) pay dividends or make any other distributions to the Borrower,
(ii) pay Indebtedness owed to the Borrower, (iii) make loans or advances to the
Borrower or (iv) transfer any of its properties or assets to the Borrower except
(in respect of any of the matters referred to in clauses (i) through (iv) above)
for such restrictions existing under or by reason of (A) this Credit Agreement
and the other Credit Documents and (B) (I) the NFA Industrial Development Bond
Documents or (II) the Senior Note Indenture and the Senior Notes, (C) applicable
law, (D) any instrument governing Indebtedness or the capital stock of a Person
acquired by the Borrower or any of its Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness is
permitted by the terms of the Credit Agreement, (E) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (F) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iv) above on the property so acquired, (G) any
agreement for the sale of a Subsidiary that restricts distributions by that
Subsidiary pending its sale, (H) Permitted Refinancing Indebtedness, PROVIDED
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced, (I)
Liens securing Indebtedness otherwise permitted to be incurred pursuant to the
provisions of Section 8.2 that limits the right of the debtor to dispose of the
assets securing such Indebtedness, (J) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business and
(K) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
<PAGE>
8.11 SALE LEASEBACKS.
---------------
Except for any Capital Lease permitted by Section 8.1(c), directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real or personal or mixed), whether now owned or hereafter
acquired, (i) which such Person contemporaneously has sold or transferred or is
to sell or transfer to any other Person other than the Borrower or (ii) which
such Person intends to use for substantially the same purpose as any other
Property which contemporaneously has been sold or is to be sold or transferred
by such Person to any other Person in connection with such lease.
8.12 CAPITAL EXPENDITURES.
--------------------
Make or incur Capital Expenditures in any fiscal year of more than
$17,500,000.
8.13 FACTORING AGREEMENT.
-------------------
The Borrower will not, and will not permit its Subsidiaries to, incur or
permit to exist any loans or advances from a Factor under any Factoring
Agreement.
SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 EVENTS OF DEFAULT.
-----------------
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "EVENT OF DEFAULT"):
(a) PAYMENT. The Borrower shall
(i) default in the payment when due of any principal of any of
the Loans or any principal of any reimbursement obligations arising
from drawings under Letters of Credit, or
(ii) default, and such defaults shall continue for five (5) or
more Business Days, in the payment when due of any interest on the
Loans or any interest on reimbursement obligations arising from
drawings under Letters of Credit, or of any Fees or other amounts
owing hereunder, under any of the other Credit Documents or in
connection herewith or therewith; or
<PAGE>
(b) REPRESENTATIONS. Any representation or warranty of the Borrower or any
Subsidiary made or deemed to be made herein, in any of the other Credit
Documents, or in any certificate delivered or required to be delivered pursuant
hereto or thereto shall prove untrue in any material respect on the date as of
which it was deemed to have been made; or
(c) COVENANTS.
(i) a default in the due performance or observance of any term,
covenant or agreement contained in Section 7.2(e), 7.3(a), 7.9, 7.10, 8.1,
8.2, 8.4, 8.5, 8.6, 8.7, 8.8, 8.10, or 8.12, or
(ii) a default in the due performance or observance by it of any term,
covenant or agreement (other than those referred to in subsections (a), (b)
or (c)(i) of this Section 9.1) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30 days after
notice thereof by the Agent; or
(d) OTHER CREDIT DOCUMENTS. (i) Any Credit Party shall default in the due
performance or observance of any term, covenant or agreement in any of the other
Credit Documents (subject to applicable grace or cure periods, if any), or (ii)
any Credit Document shall fail to be in full force and effect or to give the
Agent and/or the Lenders any material part of the Liens, rights, powers and
privileges purported to be created thereby; or
(e) BANKRUPTCY, ETC. Any Bankruptcy Event shall occur with respect to the
Borrower or any of its Subsidiaries; or
(f) DEFAULTS UNDER OTHER AGREEMENTS. With respect to other Indebtedness
(other than Indebtedness outstanding under this Credit Agreement) of the
Borrower or any of its Subsidiaries in an aggregate amount in excess of
$1,000,000, (A) (1) the Borrower or any of its Subsidiaries shall default in any
payment of principal, interest or premium (and such default shall continue
unwaived beyond the applicable grace period and after giving of required notice
with respect thereto, if any) with respect to any such Indebtedness, or (2) the
occurrence and continuance of a default in the observance or performance
relating to such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event or condition shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such Indebtedness (or
trustee or agent on behalf of such holders) to cause (after the giving of notice
or lapse of time if required), any such Indebtedness to become due prior to its
stated maturity; or (B) any such Indebtedness shall be declared due and payable,
or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
(g) JUDGMENTS. One or more judgments or decrees shall be entered against
one or more of the Borrower or any of its Subsidiaries involving a liability of
$1,000,000 or more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage and has the
ability to perform) and any such judgments or decrees shall not have been
<PAGE>
vacated, discharged or stayed or bonded pending appeal within 30 days from the
entry thereof; or
(h) ERISA. Any of the following events or conditions, if such event or
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of the Borrower or
any of its Subsidiaries or any ERISA Affiliate in favor of the PBGC or a Plan;
(2) an ERISA Event shall occur with respect to a Single Employer Plan, which is,
in the reasonable opinion of the Agent, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in (i) the termination of such
Plan for purposes of Title IV of ERISA, or (ii) the Borrower or any of its
Subsidiaries or any ERISA Affiliate incurring any liability in connection with a
withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such
Plan; or (4) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall
occur which may subject the Borrower or any of its Subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA
or Section 4975 of the Code, or under any agreement or other instrument pursuant
to which the Borrower or any of its Subsidiaries or any ERISA Affiliate has
agreed or is required to indemnify any person against any such liability; or
(i) SENIOR NOTE INDENTURE. There shall occur an Event of Default under and
as defined in the Senior Note Indenture.
(j) OWNERSHIP. There shall occur a Change of Control.
9.2 ACCELERATION; REMEDIES.
----------------------
Upon the occurrence of an Event of Default, and at any time thereafter, the
Agent shall, upon the request and direction of the Required Lenders, by written
notice to the Borrower take any of the following actions:
(i) TERMINATION OF COMMITMENTS. Declare the Commitments terminated
whereupon the Commitments shall be immediately terminated.
(ii) ACCELERATION. Declare the unpaid principal of and any accrued
interest in respect of all Loans, any reimbursement obligations arising
from drawings under Letters of Credit and any and all other indebtedness or
obligations of any and every kind owing by the Borrower to the Agent and/or
any of the Lenders hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
<PAGE>
(iii) CASH COLLATERAL. Direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an Event
of Default under Section 9.1(e), it will immediately pay) to the Agent
additional cash, to be held by the Agent, for the benefit of the Lenders,
in a cash collateral account as additional security for the LOC Obligations
in respect of subsequent drawings under all then outstanding Letters of
Credit in an amount equal to the maximum aggregate amount which may be
drawn under all Letters of Credits then outstanding.
(iv) ENFORCEMENT OF RIGHTS. Enforce any and all rights and interests
created and existing under the Credit Documents and all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(e) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Agent and/or any of the Lenders
hereunder automatically shall immediately become due and payable without
presentment, demand, protest or the giving of any notice or other action by the
Agent or the Lenders, all of which are hereby waived by the Borrower.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 APPOINTMENT.
-----------
Each Lender hereby designates and appoints NationsBank, N.A. as Agent (in
such capacity, the "Agent") of such Lender to act as specified herein and the
other Credit Documents, and each such Lender hereby authorizes the Agent as the
Agent for such Lender, to take such action on its behalf under the provisions of
this Credit Agreement and the other Credit Documents and to exercise such powers
and perform such duties as are expressly delegated by the terms hereof and of
the other Credit Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
herein and in the other Credit Documents, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and the Borrower shall have any rights as a third
party beneficiary of the provisions hereof. In performing its functions and
duties under this Credit Agreement and the other Credit Documents, the Agent
shall act solely as Agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower or any of its Affiliates.
<PAGE>
10.2 DELEGATION OF DUTIES.
--------------------
The Agent may execute any of their respective duties hereunder or under the
other Credit Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS.
----------------------
The Agent and its officers, directors, employees, agents, attorneys-in-fact
or affiliates shall not be (i) liable for any action lawfully taken or omitted
to be taken by it or such Person under or in connection herewith or in
connection with any of the other Credit Documents (except for its or such
Person's own gross negligence or willful misconduct), or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by any of the Credit Parties contained herein or in any of the
other Credit Documents or in any certificate, report, document, financial
statement or other written or oral statement referred to or provided for in, or
received by the Agent under or in connection herewith or in connection with the
other Credit Documents, or enforceability or sufficiency therefor of any of the
other Credit Documents, or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be responsible to any
Lender for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Credit Agreement, or any of the other
Credit Documents or for any representations, warranties, recitals or statements
made herein or therein or made by the Borrower in any written or oral statement
or in any financial or other statements, instruments, reports, certificates or
any other documents in connection herewith or therewith furnished or made by the
Agent to the Lenders or by or on behalf of the Borrower to the Agent or any
Lender or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or the
use of the Letters of Credit or of the existence or possible existence of any
Default or Event of Default or to inspect the properties, books or records of
the Borrower or its Affiliates.
10.4 RELIANCE ON COMMUNICATIONS.
--------------------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower, independent accountants and other experts
selected by the Agent with reasonable care). The Agent may deem and treat the
Lenders as the owner of their respective interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent in accordance with Section 11.3(b) hereof. The
Agent shall be fully justified in failing or refusing to take any action under
this Credit Agreement or under any of the other Credit Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
<PAGE>
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 NOTICE OF DEFAULT.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or the Borrower referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
---------------------------------------
Each Lender expressly acknowledges that each of the Agent and its officers,
directors, employees, agents, attorneys-in-fact or affiliates has not made any
representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of the
Borrower or any of its Affiliates, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower or its Affiliates and made its own decision to
make its Loans hereunder and enter into this Credit Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Credit Agreement, and to
make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower and its Affiliates. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Borrower or its respective
Affiliates which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
<PAGE>
10.7 INDEMNIFICATION.
---------------
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitments (or if the
Commitments have expired or been terminated, in accordance with the respective
principal amounts of outstanding Loans and Participation Interests of the
Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the final payment of all of the obligations of the Borrower
hereunder and under the other Credit Documents) be imposed on, incurred by or
asserted against the Agent in its capacity as such in any way relating to or
arising out of this Credit Agreement or the other Credit Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; PROVIDED that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section shall
survive the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower, its Subsidiaries or
their respective Affiliates as though the Agent were not the Agent hereunder.
With respect to the Loans made by and all obligations of the Borrower hereunder
and under the other Credit Documents, the Agent shall have the same rights and
powers under this Credit Agreement as any Lender and may exercise the same as
though it were not the Agent, and the terms "Lender" and "Lenders" shall include
the Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
---------------
The Agent may, at any time, resign upon twenty (20) days' written notice to
the Borrower and the Lenders. Upon any such resignation, the Required Lenders
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the notice of resignation, then the retiring
Agent shall select a successor Agent provided such successor is a Lender
hereunder or a commercial bank organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus of at
least $400,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor, such successor Agent shall thereupon succeed to and become vested
<PAGE>
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as Agent,
as appropriate, under this Credit Agreement and the other Credit Documents and
the provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Credit
Agreement.
SECTION 11
MISCELLANEOUS
-------------
11.1 NOTICES.
-------
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) with
receipt confirmed, to the number set out below, (iii) the day following the day
on which the same has been delivered prepaid to a reputable national overnight
air courier service, or (iv) the third Business Day following the day on which
the same is sent by certified or registered mail, postage prepaid, in each case
to the respective parties at the address, in the case of any Credit Party and
the Agent, set forth below, and, in the case of the Lenders, set forth on
SCHEDULE 11.1, or at such other address as such party may specify by written
notice to the other parties hereto:
if to the Borrower:
WORLDTEX, INC.
212 12th Avenue NE
P.O. Box 2363
Hickory, North Carolina 28603
Attn: Barry D. Setzer
President and Chief Executive Officer
Telephone: (704) 328-5381
Telecopy: (704) 328-6172
<PAGE>
if to any Guarantor:
[NAME OF GUARANTOR]
c/o Worldtex, Inc.
212 12th Avenue NE
P.O. Box 2363
Hickory, North Carolina 28603
Attn: Barry D. Setzer
President and Chief Executive Officer
Telephone: (704) 328-5381
Telecopy: (704) 328-6172
if to the Agent:
NATIONSBANK, N.A.
NationsBank Corporate Center, 8th Floor
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: E. Phifer Helms
Telephone: (704) 386-5358
Telecopy: (704) 386-1270
11.2 RIGHT OF SET-OFF.
----------------
In addition to any rights now or hereafter granted under applicable law or
otherwise, and not by way of limitation of any such rights, upon the occurrence
of an Event of Default, each Lender is authorized at any time and from time to
time, without presentment, demand, protest or other notice of any kind (all of
which rights being hereby expressly waived), to set-off and to appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by such Lender (including, without limitation branches,
agencies or Affiliates of such Lender wherever located) to or for the credit or
the account of the Borrower against obligations and liabilities of such Person
to such Lender hereunder, under the Notes, the other Credit Documents or
otherwise, irrespective of whether such Lender shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
may be contingent or unmatured, and any such set-off shall be deemed to have
been made immediately upon the occurrence of an Event of Default even though
such charge is made or entered on the books of such Lender subsequent thereto.
Any Person purchasing a participation in the Loans and Commitments hereunder
pursuant to Section 3.13 or Section 11.3(d) may exercise all rights of set-off
with respect to its participation interest as fully as if such Person were a
Lender hereunder to the fullest extent permitted by law.
<PAGE>
11.3 BENEFIT OF AGREEMENT.
--------------------
(a) GENERALLY. This Credit Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; PROVIDED that the Borrower may not assign or transfer any of its
interests without prior written consent of the Lenders; PROVIDED FURTHER that
the rights of each Lender to transfer, assign or grant participations in its
rights and/or obligations hereunder shall be limited as set forth in this
Section 11.3, PROVIDED however that nothing herein shall prevent or prohibit any
Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank, or
(ii) granting assignments or selling participations in such Lender's Loans
and/or Commitments hereunder to its parent company and/or to any Affiliate or
Subsidiary of such Lender.
(b) ASSIGNMENTS. Each Lender may assign all or a portion of its rights and
obligations hereunder, pursuant to an assignment agreement substantially in the
form of SCHEDULE 11.3(B), to (i) any Lender or any Affiliate or Subsidiary of a
Lender, or (ii) any other commercial bank, financial institution or "accredited
investor" (as defined in Regulation D of the Securities and Exchange Commission)
reasonably acceptable to the Agent and, so long as no Default or Event of
Default has occurred and is continuing, the Borrower; PROVIDED that (i) any such
assignment (other than any assignment to an existing Lender) shall be in a
minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the
Commitment being assigned by such Lender) of the Commitments and in integral
multiples of $1,000,000 above such amount and (ii) each such assignment shall be
of a constant, not varying, percentage of all such Lender's rights and
obligations under this Credit Agreement. Any assignment hereunder shall be
effective upon delivery to the Agent of written notice of the assignment
together with a transfer fee of $3,500 payable to the Agent for its own account
from and after the later of (i) the effective date specified in the applicable
assignment agreement and (ii) the date of recording of such assignment in the
Register pursuant to the terms of subsection (c) below. The assigning Lender
will give prompt notice to the Agent and the Borrower of any such assignment.
Upon the effectiveness of any such assignment (and after notice to, and (to the
extent required pursuant to the terms hereof), with the consent of, the Borrower
as provided herein), the assignee shall become a "Lender" for all purposes of
this Credit Agreement and the other Credit Documents and, to the extent of such
assignment, the assigning Lender shall be relieved of its obligations hereunder
to the extent of the Loans and Commitment components being assigned. Along such
lines the Borrower agrees that upon notice of any such assignment and surrender
of the appropriate Note or Notes, it will promptly provide to the assigning
Lender and to the assignee separate promissory notes in the amount of their
respective interests substantially in the form of the original Note (but with
notation thereon that it is given in substitution for and replacement of the
original Note or any replacement notes thereof). By executing and delivering an
assignment agreement in accordance with this Section 11.3(b), the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim; (ii) except
as set forth in clause (i) above, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Credit
Agreement, any of the other Credit Documents or any other instrument or document
<PAGE>
furnished pursuant hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement, any
of the other Credit Documents or any other instrument or document furnished
pursuant hereto or thereto or the financial condition of the Borrower or any of
its Affiliates or the performance or observance by the Borrower of any of its
obligations under this Credit Agreement, any of the other Credit Documents or
any other instrument or document furnished pursuant hereto or thereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has received
a copy of this Credit Agreement, the other Credit Documents and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such assignment agreement; (v) such assignee
will independently and without reliance upon the Agent, such assigning Lender or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Credit Agreement and the other Credit Documents;
(vi) such assignee appoints and authorizes the Agent to take such action on its
behalf and to exercise such powers under this Credit Agreement or any other
Credit Document as are delegated to the Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Credit Agreement and the other Credit
Documents are required to be performed by it as a Lender.
(c) MAINTENANCE OF REGISTER. The Agent shall maintain at one of its offices
in Charlotte, North Carolina a copy of each Lender assignment agreement
delivered to it in accordance with the terms of subsection (b) above and a
register for the recordation of the identity of the principal amount, type and
Interest Period of each Loan outstanding hereunder, the names, addresses and the
Commitments of the Lenders pursuant to the terms hereof from time to time (the
"REGISTER"). The Agent will make reasonable efforts to maintain the accuracy of
the Register and to promptly update the Register from time to time, as
necessary. The entries in the Register shall be conclusive in the absence of
manifest error and the Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Credit Agreement. The Register shall be
available for inspection by the Borrower and each Lender, at any reasonable time
and from time to time upon reasonable prior notice.
(d) PARTICIPATIONS. Each Lender may sell, transfer, grant or assign
participations in all or any part of such Lender's interests and obligations
hereunder; PROVIDED that (i) such selling Lender shall remain a "Lender" for all
purposes under this Credit Agreement (such selling Lender's obligations under
the Credit Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or be
granted, rights to approve any amendment or waiver relating to this Credit
Agreement or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or Fees in
respect of any Loans in which the participant is participating or (B) postpone
the date fixed for any payment of principal (including extension of the Maturity
Date or the date of any mandatory prepayment), interest or Fees in which the
participant is participating, and (iii) sub-participations by the participant
(except to an affiliate, parent company or affiliate of a parent company of the
participant) shall be prohibited. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or the other
<PAGE>
Credit Documents (the participant's rights against the selling Lender in respect
of such participation to be those set forth in the participation agreement with
such Lender creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation,
PROVIDED, however, that such participant shall be entitled to receive additional
amounts under Sections 3.8, 3.9, 3.10 and 3.11 on the same basis as if it were a
Lender. Notwithstanding the foregoing, (i) a participant shall not be entitled
to receive any greater payment under Sections 3.8, 3.9 and 3.10 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such participant, unless the sale of the participation to
such participant is made with the Borrower's prior written consent and (ii) a
participant that is not incorporated under the laws of the United States of
America or a state thereof shall not be entitled to the benefits of Section 3.10
unless the Borrower is notified of the participation sold to such participant
and such participant agrees, for the benefit of the Borrower, to comply with
Section 3.10.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
------------------------------
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Agent or any Lender and the Borrower shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies provided herein
are cumulative and not exclusive of any rights or remedies which the Agent or
any Lender would otherwise have. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or the Lenders to any other or further action in any circumstances without
notice or demand.
11.5 PAYMENT OF EXPENSES, ETC.
------------------------
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Agent in connection with the negotiation, preparation,
execution and delivery of this Credit Agreement and the other Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC, special
counsel to the Agent), and any amendment, waiver or consent relating hereto and
thereto including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Borrower under this Credit Agreement and (B) of the
Agent and the Lenders in connection with enforcement of the Credit Documents and
the documents and instruments referred to therein (including, without
limitation, in connection with any such enforcement, the reasonable fees and
disbursements of counsel for the Agent and each of the Lenders); (ii) pay and
hold each of the Lenders harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save each of the Lenders harmless from and against any and all liabilities with
<PAGE>
respect to or resulting from any delay or omission (other than to the extent
attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender,
its officers, directors, employees, representatives and Agents from and hold
each of them harmless against any and all losses, liabilities, claims, damages
or expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of (A) any investigation, litigation or other
proceeding (whether or not any Lender is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of proceeds
of any Loans (including other extensions of credit) hereunder or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding or (B) the presence or Release of any Materials of Environmental
Concern at, under or from any Property owned, operated or leased by the Borrower
or any of its Subsidiaries, or the failure by the Borrower or any of its
Subsidiaries to comply with any Environmental Law (but excluding, in the case of
either of clause (A) or (B) above, any such losses, liabilities, claims, damages
or expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
--------------------------------
Neither this Credit Agreement nor any of the other Credit Documents, nor
any of the terms hereof or thereof may be amended, changed, waived, discharged
or terminated unless such amendment, change, waiver, discharge or termination is
in writing entered into by, or approved in writing by, the Required Lenders and
the Borrower, PROVIDED, HOWEVER, that:
(a) no such amendment, change, waiver, discharge or termination shall,
without the consent of each Lender directly affected thereby, (i) reduce the
rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates) on any
Loan or fees hereunder, (ii) extend (A) the Commitments of the Lenders, (B) the
final maturity of any Loan, or any portion thereof, or (C) the time of payment
of any reimbursement obligation, or any portion thereof, arising from drawings
under Letters of Credit, (iii) reduce the principal amount on any Loan; (iv)
increase the Commitments of the Lenders over the amount thereof in effect (it
being understood and agreed that a waiver of any Default or Event of Default or
of a mandatory reduction in the total commitments shall not constitute a change
in the terms of any Commitment of any Lender), (v) release all or substantially
all of the Collateral, (vi) release all or substantially all of the Guarantors
from the Guaranty Obligations hereunder (vii) release any of ECA, Elastex, Inc.
or Regal Manufacturing Company, Inc. from their respective Guaranty Obligations
hereunder, (viii)amend, modify or waive any provision of this Section 11.6 or
Section 3.6, 3.10, 3.11, 3.12, 3.13, 9.1(a), 11.2, 11.3, 11.5 or 11.9, (ix)
reduce any percentage specified in, or otherwise modify, the definition of
"Required Lenders," or (x) consent to the assignment or transfer by the Borrower
of any of its rights and obligations under (or in respect of) the Credit
Documents to which it is a party; and
(b) no provision of Section 2.2 may be amended without the consent of the
Issuing Lender and no provision of Section 10 may be amended without the consent
of the Agent.
<PAGE>
11.7 COUNTERPARTS.
------------
This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 HEADINGS.
--------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL.
--------
All indemnities set forth herein, including, without limitation, in Section
2.2(h), 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Borrower herein shall survive
delivery of the Notes and the making of the Loans hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
------------------------------------------------
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA. Any legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the State of North
Carolina, or of the United States for the Middle District of North Carolina,
and, by execution and delivery of this Credit Agreement, the Borrower hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the nonexclusive jurisdiction of such courts. The Borrower
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the address
set out for notices pursuant to Section 11.1, such service to become effective
three (3) Business Days after such mailing. Nothing herein shall affect the
right of the Agent to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against the Borrower in any
other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Credit Agreement or any
other Credit Document brought in the courts referred to in subsection (a) hereof
and hereby further irrevocably waives and agrees not to plead or claim in any
<PAGE>
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS AND THE
BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT,
ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.11 SEVERABILITY.
------------
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
--------
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.13 BINDING EFFECT; TERMINATION.
---------------------------
(a) This Credit Agreement shall become effective at such time on or after
the Closing Date when it shall have been executed by the Borrower and the Agent,
and the Agent shall have received copies hereof (telefaxed or otherwise) which,
when taken together, bear the signatures of each Lender, and thereafter this
Credit Agreement shall be binding upon and inure to the benefit of the Borrower,
the Agent and each Lender and their respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding and until all of the Commitments
hereunder shall have expired or been terminated.
11.14 CONFIDENTIALITY.
---------------
The Agent and the Lenders agree to keep confidential (and to cause their
respective affiliates, officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to the Agent or any such Lender by or on behalf of the Borrower
(whether before or after the Closing Date) which relates to the Borrower or any
<PAGE>
of its Subsidiaries (the "INFORMATION"). Notwithstanding the foregoing, the
Agent and each Lender shall be permitted to disclose Information (i) to its
affiliates, officers, directors, employees, agents and representatives in
connection with its participation in any of the transactions evidenced by this
Credit Agreement or any other Credit Documents or the administration of this
Credit Agreement or any other Credit Documents; (ii) to the extent required by
applicable laws and regulations or by any subpoena or similar legal process, or
requested by any Governmental Authority; (iii) to the extent such Information
(A) becomes publicly available other than as a result of a breach of this Credit
Agreement or any agreement entered into pursuant to clause (iv) below, (B)
becomes available to the Agent or such Lender on a non-confidential basis from a
source other than the Borrower or any of its Subsidiaries or (C) was available
to the Agent or such Lender on a non-confidential basis prior to its disclosure
to the Agent or such Lender by the Borrower or any of its Subsidiaries; (iv) to
any assignee or participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or participant) first
specifically agrees in a writing furnished to and for the benefit of the
Borrower to be bound by the terms of this Section 11.14; or (v) to the extent
that the Borrower shall have consented in writing to such disclosure. Nothing
set forth in this Section 11.14 shall obligate the Agent or any Lender to return
any materials furnished by the Borrower.
11.15 CONFLICT.
--------
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
<PAGE>
Signature Page to Credit Agreement, dated as of December 1, 1997, among
Worldtex, Inc., as Borrower, certain Subsidiaries of the Borrower, the Lenders
and NationsBank, N.A., as Agent.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: WORLDTEX, INC.,
- -------- a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
GUARANTORS: REGAL MANUFACTURING COMPANY, INC.,
- ---------- a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
ELASTIC CORPORATION OF AMERICA, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
ELASTEX, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
WTX COLOMBIA I, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE>
Signature Page to Credit Agreement, dated as of December 1, 1997, among
Worldtex, Inc., as Borrower, certain Subsidiaries of the Borrower, the Lenders
and NationsBank, N.A., as Agent.
WTX COLOMBIA II, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
WILLCOX & GIBBS FILIX OF DELAWARE,
INC., a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
REGAL YARNS OF ARGENTINA, INC.,
a North Carolina corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE>
Signature Page to Credit Agreement, dated as of December 1, 1997, among
Worldtex, Inc., as Borrower, certain Subsidiaries of the Borrower, the Lenders
and NationsBank, N.A., as Agent.
BANQUE NATIONALE DE PARIS
By:______________________________________
Name:____________________________________
Title:___________________________________
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Worldtex, Inc.:
We consent to incorporation by reference in the registration statements of
Worldtex, Inc. on Forms S-8 (Nos. 33-55124 and 33-72640) and S-4 (333-45331) of
our report dated February 27, 1998, relating to the consolidated balance sheets
as of December 31, 1997 and 1996 and the related consolidated statements of
income, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997 and the related financial statement
schedule, which report appears in the December 31, 1997 annual report on Form
10-K of Worldtex, Inc.
KPMG Peat Marwick LLP
Atlanta, Georgia
April 22, 1998
