UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 3, 1998
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OR
|_| 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 1-6853
SHAW INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1032521
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
616 E. WALNUT AVENUE, DALTON, GEORGIA 30720
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area
code (706) 278-3812
NOT APPLICABLE Former name, former address and former fiscal year, if
changed since last report.
Indicate by check |X|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 ______.
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: November 6, 1998 - 140,711,597 shares
<PAGE>
SHAW INDUSTRIES, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBERS
--------------------- ------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - October 3, 1998
and January 3, 1998 ..................................... 3-4
Condensed Consolidated Statements of Income and Retained
Earnings - For the Three Months Ended
October 3, 1998 and September 27, 1997 ........ 5
Condensed Consolidated Statements of Income and Retained
Earnings - For the Nine Months Ended
October 3, 1998 and September 27, 1997 ................. 6
Condensed Consolidated Statements of Cash Flow-
For the Nine Months Ended October 3, 1998
and September 27, 1997 ......................... 7
Notes to Condensed Consolidated Financial Statements .... 8-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ........ 11-13
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ....................................... 13
Item 2. Changes in Securities and Use of Proceeds ............... 14
Item 3. Defaults Upon Senior Securities ......................... 14
Item 4. Submission of Matters to a Vote of Security Holders ..... 14
Item 5. Other Information ....................................... 14
Item 6. Exhibits and Reports on Form 8-K ........................ 15
SIGNATURES ............................................................ 16
<PAGE>
PART 1 - ITEM ONE - FINANCIAL INFORMATION
SHAW INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND IN THOUSANDS)
ASSETS October 3, January 3,
1998 1998
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents ................... $ 3,807 $ 43,571
----------- -----------
Accounts receivable, less
allowance for doubtful accounts and
discounts of $16,830 and $16,283 .......... 219,004 374,516
----------- -----------
Inventories -
Raw materials ............................. 259,375 235,820
Work-in-process ........................... 29,291 23,584
Finished goods ............................ 239,410 270,655
----------- -----------
528,076 530,059
----------- -----------
Other current assets ........................ 119,013 118,267
----------- -----------
TOTAL CURRENT ASSETS .......... 869,900 1,066,413
----------- -----------
PROPERTY, PLANT AND EQUIPMENT,
at cost:
Land and land improvements .................. 25,694 27,827
Buildings and leasehold improvements ........ 265,742 299,090
Machinery and equipment ..................... 954,180 987,561
Construction in progress .................... 85,820 69,345
----------- -----------
1,331,436 1,383,823
Less - Accumulated depreciation and
amortization ......................... (765,022) (759,444)
----------- -----------
566,414 624,379
----------- -----------
GOODWILL, net ................................ 100,506 236,209
----------- -----------
INVESTMENT IN JOINT VENTURE .................. 21,124 21,269
----------- -----------
OTHER ASSETS ................................. 69,385 19,344
----------- -----------
TOTAL ASSETS .................. $ 1,627,329 $ 1,967,614
=========== ===========
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
(UNAUDITED AND IN THOUSANDS, EXCEPT SHARE
DATA)
October 3, January 3,
1998 1998
----------- -----------
CURRENT LIABILITIES:
Notes payable ............................... $ -- $ 10
Current maturities of long-term debt ........ 8 2,752
Accounts payable ............................ 162,128 161,964
Accrued liabilities ......................... 229,618 160,728
----------- -----------
TOTAL CURRENT LIABILITIES .............. 391,754 325,454
----------- -----------
LONG-TERM DEBT, less current maturities ...... 709,015 930,424
----------- -----------
DEFERRED INCOME TAXES ........................ 57,707 61,689
----------- -----------
OTHER LIABILITIES ............................ 11,582 12,513
----------- -----------
SHAREHOLDERS' INVESTMENT:
Common stock, no par, $1.11 stated value,
authorized 500,000,000 shares; issued and
outstanding: 133,486,684 shares at
October 3, 1998 and 131,118,065 shares
at January 3, 1998 ......................... 148,171 145,542
Paid-in capital ............................. 80,672 54,745
Unrealized loss on equity securities ........ (11,950) --
Cumulative translation adjustment ........... (5,186) (620)
Retained earnings ........................... 421,934 437,867
----------- -----------
633,641 637,534
Less - Treasury stock, at cost (13,097,661
shares at October 3, 1998) ........... 176,370 --
----------- -----------
TOTAL SHAREHOLDERS' INVESTMENT ......... 457,271 637,534
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
INVESTMENT ........................... $ 1,627,329 $ 1,967,614
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SHAW INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
October 3, September 27,
1998 1997
----------- -----------
NET SALES .................................... $ 851,634 $ 922,997
COSTS AND EXPENSES:
Cost of sales .............................. 642,442 686,762
Selling, general and administrative ........ 128,146 177,445
Pre-opening expenses, retail operations .... -- 578
Interest expense, net ...................... 14,740 15,795
Other expense, net ......................... 387 1,286
----------- -----------
INCOME BEFORE INCOME TAXES ................... 65,919 41,131
PROVISION FOR INCOME TAXES ................... 26,722 17,048
----------- -----------
INCOME BEFORE EQUITY IN INCOME OF
JOINT VENTURE .............................. 39,197 24,083
EQUITY IN INCOME OF JOINT VENTURE ............ 420 1,252
----------- -----------
NET INCOME ................................... $ 39,617 $ 25,335
=========== ===========
DIVIDENDS PAID PER COMMON SHARE .............. $ -- $ 0.075
=========== ===========
EARNINGS PER COMMON SHARE:
Basic ...................................... $ 0.32 $ 0.19
=========== ===========
Diluted .................................... $ 0.32 $ 0.19
=========== ===========
RETAINED EARNINGS:
Beginning of period ........................ $ 382,317 $ 464,897
Add - net income ........................... 39,617 25,335
(Deduct) - dividends paid .................. -- (10,096)
----------- -----------
End of period .............................. $ 421,934 $ 480,136
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SHAW INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
October 3, September 27,
1998 1997
----------- -----------
NET SALES .................................... $ 2,589,768 $ 2,646,882
COSTS AND EXPENSES:
Cost of sales .............................. 1,921,523 1,973,565
Selling, general and administrative ........ 464,553 528,935
Charge to record loss on sale of residential
retail operations, store closing
costs and writedown of certain
assets ................................... 141,526 --
Pre-opening expenses, retail operations .... 232 3,521
Interest expense, net ...................... 45,548 44,865
Other expense(income), net ................. 3,853 (4,817)
----------- -----------
INCOME BEFORE INCOME TAXES ................... 12,533 100,813
PROVISION FOR INCOME TAXES ................... 19,314 42,070
----------- -----------
(LOSS)INCOME BEFORE EQUITY IN INCOME OF
JOINT VENTURE .............................. (6,781) 58,743
EQUITY IN INCOME OF JOINT VENTURE ............ 682 2,571
----------- -----------
NET (LOSS) INCOME ............................ $ ( 6,099) $ 61,314
=========== ===========
DIVIDENDS PAID PER COMMON SHARE .............. $ 0.075 $ 0.225
=========== ===========
(LOSS)EARNINGS PER COMMON SHARE:
Basic ...................................... $ (0.05) $ 0.46
=========== ===========
Diluted .................................... $ (0.05) $ 0.46
=========== ===========
RETAINED EARNINGS:
Beginning of period ........................ $ 437,867 $ 448,939
Add - net (loss) income .................... (6,099) 61,314
(Deduct) - dividends paid .................. (9,834) (30,117)
----------- -----------
End of period .............................. $ 421,934 $ 480,136
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SHAW INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOW NINE MONTHS NINE MONTHS
(UNAUDITED AND IN THOUSANDS) ENDED ENDED
October 3, September 27,
1998 1997
----------- -----------
OPERATING ACTIVITIES:
Net (loss) income ........................... $ (6,099) $ 61,314
----------- -----------
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization ............. 58,449 70,152
Provision for doubtful accounts ........... 4,574 7,510
Deferred income taxes ..................... (3,024) (4,060)
Charge to record loss on sale of residential
retail operations, store closing
costs and writedown of certain
assets .................................. 98,203 --
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable .................. 111,584 (28,258)
Inventories .......................... (82,690) (31,351)
Other current assets ................. 35,032 (3,237)
Accounts payable ..................... 33,939 (19,165)
Accrued liabilities .................. 50,993 1,952
Other, net ........................... 3,379 (27,767)
----------- -----------
Total adjustments .................. 310,439 (34,224)
----------- -----------
Net cash provided by operating
activities ............................... 304,340 27,090
----------- -----------
INVESTING ACTIVITIES:
Additions to property, plant and equipment .. (47,893) (60,279)
Disposal of U.K. assets ..................... (16,566) --
Sale of residential retail operations ....... 14,378 --
Acquisitions of business assets ............. -- (28,926)
----------- -----------
Net cash used in investing activities ..... (50,081) (89,205)
----------- -----------
FINANCING ACTIVITIES:
Decrease in notes payable ................... (10) (39,381)
(Decrease)increase in long-term debt, net ... (135,352) 110,546
Dividends paid .............................. (9,834) (30,117)
Purchase of common stock held in treasury ... (176,370) --
Proceeds from exercise of stock options ..... 27,543 296
----------- -----------
Net cash (used in) provided by financing
activities .............................. (294,023) 41,344
----------- -----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ................................ (39,764) (20,771)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD .................................. 43,571 49,581
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ... $ 3,807 $ 28,810
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SHAW INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 3, 1998
(UNAUDITED)
---------------------------------------------------------------
1. Basis of Presentation
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information not misleading. These financial statements should be read
in conjunction with the financial statements and related notes contained in the
Company's 1997 Annual Report on Form 10-K. In the opinion of management, the
accompanying unaudited financial statements contain all adjustments necessary to
present fairly the Company's financial position, results of operations and cash
flow at the dates and for the periods presented. Interim results of operations
are not necessarily indicative of the results to be expected for a full year.
2. Receivables Securitization
On September 3, 1998, the Company entered into agreements pursuant to which
it sold a percentage ownership interest in a defined pool of the Company's trade
receivables to a securitization conduit. As collections reduce accounts
receivable included in the pool, the Company sells participating interests in
new receivables to the conduit to bring the amount in the pool up to the maximum
permitted by the agreements. The receivables are sold to the conduit at a
discount which reflects, among other things, the conduit's financing cost of
issuing its own commercial paper backed by these accounts receivable and
accounts receivable sold by other participating entities. The agreement expires
September 1, 1999, but may be extended for additional one-year terms. On
September 4, 1998, the Company received $198,971,000 of proceeds from the
initial sale of such receivables, which proceeds were used to reduce outstanding
borrowings under its domestic revolving credit facility and was reflected as a
reduction of receivables in the condensed consolidated balance sheet and as an
operating activity in the condensed consolidated statement of cash flow.
3. Inventories
The Company uses the last-in, first-out (LIFO) method of valuing
substantially all of its domestic inventories. If LIFO inventories were valued
at current costs, the inventories would have been $13,783,000 and $11,707,000
lower at October 3, 1998 and January 3, 1998, respectively. Certain of the
Company's finished goods inventories, representing approximately 16 percent of
total inventories, are valued at the lower of first-in, first-out (FIFO) cost or
market.
4. Long-term Debt
In March 1998, the Company completed a new domestic revolving credit
facility which provides for borrowings of up to $1.0 billion and expires in
March 2003. The borrowings bear interest at variable rates equal to the London
Interbank Offered Rate (LIBOR) plus margins ranging from 0.220 percent to 0.750
percent, depending on the Company's consolidated funded debt to earnings ratio,
as defined. Fees associated with the domestic revolving credit agreement include
a facility fee on the committed amount ranging from 0.10 percent to 0.25
percent. The LIBOR-based rate at October 3, 1998 was 6.14 percent and borrowings
outstanding under this new facility totaled $668,000,000.
5. Sale of Residential Retail Operations, Store Closing Costs and Writedown of
Certain Assets
On June 23, 1998, the Company agreed to sell substantially all of its
residential retail operations to The Maxim Group, Inc. in exchange for 3.15
million shares of Maxim stock, $25 million in cash and a one-year note
receivable in the principal amount of approximately $18 million. For the quarter
ended July 4, 1998, the Company incurred a charge to record the loss on sale of
the residential retail operations, store closing costs and writedown of certain
assets of $141,526,000 ($98,203,000, net of tax benefit) related to the exiting
of its residential retail business. The sale was completed effective August 9,
1998 at which time the 3.15 million shares of Maxim stock were valued at their
fair market value of $70,308,000. As of October 3, 1998, the fair value of the
Maxim shares, which are classified as available for sale and included in other
assets in the condensed consolidated balance sheet, was $50,464,000. The related
unrealized loss on equity securities of $19,884,000 ($11,950,000, net of tax
benefit) was recorded in equity as required by SFAS No. 115.
6. Earnings Per Share
The Company adopted SFAS No. 128, "Earnings Per Share," effective January
3, 1998. Earnings per share for the three and nine month periods ended October
3, 1998 and September 27, 1997 have been computed based upon the weighted
average shares and dilutive potential common shares outstanding. The net (loss)
income amounts presented in the accompanying condensed consolidated statements
of income represent amounts available or related to shareholders.
The following table reconciles the denominator of the basic and diluted
earnings per share computations:
Three Months Ended
October 3, September 27,
1998 1997
- - ---------------------------------------------------- ----------- -----------
Weighted average common shares ..................... 122,082,216 134,576,745
Dilutive incremental shares from assumed
conversions of options under 1987 and
1992 incentive stock option plans .............. 2,511,952 118,923
- - ---------------------------------------------------- ----------- -----------
Weighted average common shares and
dilutive potential common shares ............... 124,594,168 134,695,668
- - ---------------------------------------------------- ----------- -----------
Nine Months Ended
October 3, September 27,
1998 1997
- - ---------------------------------------------------- ----------- -----------
Weighted average common shares ..................... 124,006,200 133,794,986
Dilutive incremental shares from assumed
conversions of options under 1987 and
1992 incentive stock option plans .............. -- 145,747
- - ---------------------------------------------------- ----------- -----------
Weighted average common shares and
dilutive potential common shares ............... 124,006,200 133,940,733
- - ---------------------------------------------------- ----------- -----------
7. Derivative Financial Instruments
The Company uses interest rate swaps to fix interest rates on current and
anticipated borrowings to reduce exposure to interest rate fluctuations. Under
existing accounting literature, these interest rate swaps are accounted for as
hedging activities. The net cash paid or received on interest rate hedges is
included in interest expense. The Company may also employ foreign currency
exchange contracts when, in the normal course of business, they are determined
to effectively manage and reduce foreign currency exchange fluctuation risk. At
October 3, 1998, the Company had no foreign currency exchange contracts
outstanding. The Company does not enter into financial derivatives for
speculative or trading purposes.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS No. 133 is
effective, and the Company expects to adopt this new standard, in the Company's
first quarter of fiscal 2000. The Company's management has not determined the
impact this new statement will have on the financial statements.
8. Comprehensive Income
Effective January 4, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires additional disclosure of amounts
comprising comprehensive income. The Company has other comprehensive income in
the form of cumulative translation adjustments and an unrealized loss on
available-for-sale equity securities which resulted in total comprehensive
income of $26,800,000 and $24,961,000 for the quarters ended October 3, 1998 and
September 27, 1997, respectively, and total comprehensive (loss) income of
($22,615,000) and $59,903,000 for the nine months ended October 3, 1998 and
September 27, 1997, respectively.
<PAGE>
9. Subsequent Event
On October 6, 1998, the Company completed its previously announced merger
with Queen Carpet Corporation for approximately $603 million including 19.4
million shares of common stock of the Company, 3.15 million shares of The Maxim
Group, Inc. stock acquired in the sale of the Company's residential retail
operation to Maxim on August 9, 1998, and cash. The Company also assumed
liabilities of approximately $216,000,000. As a result of the sale of the 3.15
million shares of Maxim stock during the fourth quarter ending January 2, 1999,
the Company will record a realized loss on equity securities of approximately
$13,370,000, net of income tax benefit, consisting primarily of the unrealized
loss of $11,950,000 included in comprehensive income in the third quarter ended
October 3, 1998.
<PAGE>
SHAW INDUSTRIES, INC. AND SUBSIDIARIES
ITEM TWO-MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - --------------------------------------------------------------------------------
GENERAL
The Company's business, as well as the U.S. carpet industry in general,
is cyclical in nature and is significantly affected by general economic
conditions. The level of domestic carpet sales tends to reflect fluctuations in
consumer spending for durable goods and, to a lesser extent, fluctuations in
interest rates and new housing starts. The Company's international operations
are also impacted by the economic climates in the markets in which they operate
(primarily Australia and Mexico). During the first nine months of 1998, demand
for the Company's domestic wholesale manufacturing business improved over that
of the first nine months of 1997, while sales prices were comparable and margins
substantially improved. The Australian market improved in late 1997 and the
first nine months of 1998, and margins improved slightly in the first nine
months of 1998 compared to the first nine months of 1997, while sales prices
substantially declined.
During the nine months ended October 3, 1998, net sales for the
Company's residential retail and commercial contract business totaled $628.2
million compared to $684.7 million for the nine months ended September 27, 1997.
In August 1998, the Company sold substantially all of its residential retail
operations to The Maxim Group, Inc. and closed stores not sold. For the second
quarter ended July 4, 1998, the Company recorded nonrecurring charges for the
loss on sale of its residential retail operations, store closing costs, and the
writedown of certain assets of $141.5 million ($98.2 million, net of tax
benefit) resulting from exiting substantially all of its residential retail
business.
On October 6, 1998, the Company completed its previously announced
merger with Queen Carpet Corporation for approximately $603 million including
19.4 million shares of the Company's common stock, 3.15 million shares of The
Maxim Group, Inc. stock acquired in the sale of the Company's residential retail
operations, and approximately $36 million of cash. The Company also assumed
liabilities of approximately $216 million.
LIQUIDITY AND CAPITAL RESOURCES
At October 3, 1998, the Company had working capital of $478.1 million,
a decrease of $262.9 million or 35.5 percent, from the working capital of $741.0
million at January 3, 1998. The working capital decrease resulted primarily from
a receivables securitization program established September 3, 1998 under which
the Company sold a percentage ownership interest in a defined pool of the
Company's trade receivables to a securitization conduit. As collections reduce
accounts receivable included in the pool, the Company will be entitled to sell
participation interests in new receivables to the conduit to bring the amount in
the pool up to the maximum permitted under the program. The Company used the
initial proceeds from the receivables securitization to reduce outstanding
borrowings under its domestic revolving credit facility. The receivables
securitization program expires September 1, 1999, but may be extended for
additional one-year terms. As of October 3, 1998, the Company had approximately
$199 million outstanding under this program.
Cash and cash equivalents decreased $39.8 million from $43.6 million at
January 3, 1998 to $3.8 million at October 3, 1998. The Company's operations
generated cash flow of $304.3 million in the first nine months of 1998,
principally from depreciation and amortization of $58.4 million, a charge to
record the loss on sale of its residential retail operations, store closing
costs and writedown of certain assets of $98.2 million, a decrease in accounts
receivable and other current assets of $146.6 million primarily related to the
previously described sale of receivables, and an increase in accounts payable
and accrued liabilities of $84.9 million, offset in part by an increase in
inventories of $82.7 million. In the first nine months of 1997, cash generated
from operating activities was $27.1 million primarily as a result net income of
$61.3 million adjusted for depreciation and amortization of $70.2 million,
offset in part by increases in inventories and accounts receivable of $59.6
million and decreases in accounts payable and other, net, of $48.2 million.
In the first nine months of 1998, the Company's investing activities
primarily included additions to property, plant and equipment, net of
retirements, of $47.9 million and the liquidation of Carpets International, Plc
(U.K.) and the residential retail operations' assets, net of liabilities, of
$2.2 million compared to additions to property, plant and equipment, net of
retirements, of $60.3 million and acquisitions of business assets of $28.9
million in the first nine months of 1997. Cash used in financing activities for
the first nine months of 1998 of $294.0 million included the purchase of common
stock of $176.4 million, net payments on long-term borrowings of $135.3 million
funded primarily by the sale of receivables and the payment of cash dividends of
$9.8 million, offset in part by the proceeds from the exercise of stock options
of $27.5 million. Cash flow provided by financing activities for the first nine
months of 1997 of $41.3 million included a net increase in long-term borrowings
of $110.5 million offset in part by cash dividends of $30.1 million and payments
on notes payable of $39.4 million.
The Company has continued to maintain a strong working capital
position. Effective use of capital and the Company's ability to generate cash
flow from operations has enabled it to invest in technologies which reduce
production costs, generate operating margins that have historically exceeded
industry averages and implement its growth strategy.
Capital expenditures for property, plant and equipment, net of
retirements, necessary to maintain the Company's facilities in a modern
state-of-the-art condition and expand its production capacity were $47.9 million
for the nine months ended October 3, 1998. Management anticipates total capital
expenditures and capitalized lease obligations of approximately $25 million for
the remainder of 1998 to expand and upgrade its manufacturing and distribution
equipment to meet anticipated increases in sales volume, to improve efficiency
and to upgrade its current commercial contract distribution operations.
The Company has an unsecured revolving credit facility with a banking
syndicate which provides for borrowings of up to $1.0 billion and expires in
March 2003. Interest on borrowings under this facility is currently based on
LIBOR, and was 6.14 percent at October 3, 1998. At October 3, 1998, borrowings
outstanding under this credit facility were $668.0 million. The Company
subsequently borrowed an additional $272 million on the facility related to
funding the acquisition of and refinancing certain debt assumed from Queen
Carpet Corporation. To provide further financing capacity, on October 28, 1998,
the Company entered into a one-year $150 million senior unsecured revolving
credit facility.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS No. 133 is
effective, and the Company expects to adopt this new standard, in the Company's
first quarter of fiscal 2000. The Company's management has not determined the
impact this new statement will have on the financial statements.
RESULTS OF OPERATIONS
Three Months Ended October 3, 1998 Compared to Three Months Ended September 27,
1997
- - --------------------------------------------------------------------------------
Net sales decreased $71.4 million, or 7.7 percent, to $851.6 million in
the third quarter of 1998. The decrease was primarily attributable to $47.6
million in net sales related to the Company's U.K. operations sold at the close
of the first quarter of 1998 and $103.7 million associated with the Company's
exiting the residential retail business at the beginning of the third quarter of
1998, offset in part by an increase in domestic wholesale and commercial
contract sales of $80.2 million. Gross margin as a percentage of net sales
decreased 1.0 percent to 24.6 percent in the third quarter of 1998 compared to
the third quarter of 1997, primarily due to the reduction in higher margin
residential retail sales, offset in part by improved sales product mix and
increases in the efficiency relationships of volume and fixed costs for the
domestic wholesale business.
Selling, general and administrative expenses for the third quarter of
1998 were $128.1 million, or 15.0 percent of net sales, compared to $177.4
million, or 19.2 percent of net sales, in the comparable period of 1997. The
decrease of $49.3 million, or 4.2 percent of net sales, was primarily due to the
Company's exiting the residential retail business. Interest expense was $14.7
million for the third quarter of 1998 compared to $15.8 million for the third
quarter of 1997 as a result of lower borrowings.
The effective income tax rate for the third quarter of 1998 decreased
to 40.5 percent compared to 41.4 percent for the third quarter of 1997 due to
more profitable Australian operations in 1998 which are taxed at a lower
effective income tax rate.
Nine Months Ended October 3, 1998 Compared to Nine Months Ended September 27,
1997
Net sales decreased $57.1 million, or 2.2 percent, to $2,589.8 million
in the first nine months of 1998. The decrease was primarily attributable to
$93.6 million in net sales related to the U.K. operations sold during the first
quarter of 1998 and $125.1 million associated with the Company's exiting the
residential retail business, offset in part by an increase in domestic wholesale
and commercial contract sales of $160.9 million. Gross margin as a percentage of
net sales increased .4 percent to 25.8 percent in the first nine months of 1998
compared to the first nine months of 1997, primarily due to improved product
sales mix and increases in the efficiency relationships of volume and fixed
costs for the domestic and international wholesale business, offset in part by
the reduction in higher margin residential retail sales.
Selling, general and administrative expenses for the first nine months
of 1998 were $464.6 million, or 17.9 percent of net sales, compared to $528.9
million, or 20.0 percent of net sales, in the comparable period of 1997. The
decrease of $64.3 million, or 2.1 percent of net sales, was principally due to
the Company's exiting the residential retail business. Interest expense
increased $.6 million to $45.5 million for the first nine months of 1998 from
$44.9 million for the first nine months of 1997 as a result of higher average
borrowings.
Results for the first nine months of 1998 included nonrecurring charges
of $141.5 million ($98.2 million net of tax benefit, or $.78 per share) as
discussed in note 5 of notes to condensed consolidated financial statements. Net
income before nonrecurring charges was $92.1 million, or $.73 per share. After
nonrecurring charges, the net loss was $6.1 million, or $.05 per share on basic
and diluted basis. Net income was $61.3 million, or $.46 per share, for the
first nine months of 1997.
The effective income tax rate for the first nine months of 1998 before
the nonrecurring charges decreased to 40.7 percent compared to 41.7 percent for
the first nine months of 1997 due to more profitable foreign operations in 1998
which are taxed at a lower effective income tax rate.
FOREIGN OPERATIONS
The Company's primary foreign operations are conducted through its
Australian subsidiaries, where the functional currency is the Australian dollar.
Fluctuations in the value of foreign currencies create exposures which can
impact the Company's operating results. The Company may employ foreign currency
forward exchange contracts when, in the normal course of business, they are
determined to effectively manage and reduce such exposure. The Company does not
enter into foreign currency forward exchange contracts for speculative trading
purposes.
YEAR 2000 READINESS DISCLOSURE
The Company has completed its internal assessment of the year 2000
compliance of the systems and technologies supporting all operations of the
business. The Company's assessment of external compliance readiness is ongoing.
The Company has developed and is implementing plans to correct identified
compliance problems that would adversely affect the Company's operations.
Compliance remediation efforts are proceeding on schedule. The majority of the
efforts are expected to be completed in fiscal 1998 with compliance testing to
follow in 1999.
As a result, the Company anticipates no significant disruption to
business operations after January 1, 2000 as a result of the year 2000
compliance of its systems, nor does it currently anticipate material disruption
to its operations in the event of noncompliance of an external party. The
Company estimates the cost of internal compliance remediation efforts, which are
expensed as incurred, to be immaterial to the results of operations.
FORWARD-LOOKING INFORMATION
Certain statements in this report, including those regarding
anticipated total capital expenditures and capitalized lease obligations, Year
2000 readiness and estimated remediation costs, and the effects of litigation on
the Company's future results of operations, are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1933, as amended, and are subject
to the safe harbor provisions of those Acts. When used in this report, the words
"believes," "expects," "anticipates," "estimates" or "intends," and similar
expressions, are intended to identify forward-looking statements. The
forward-looking statements herein involve a number of risks and uncertainties
that could cause actual results to differ materially from those expressed or
reflected in such statements. The important factors which may affect the
Company's future results and could cause those results to differ materially from
the results expressed or reflected in the forward-looking statements include,
but are not limited to, the following: changes in economic conditions generally;
changes in consumer spending for durable goods, interest rates and new housing
starts; competition from other carpet, rug and floorcovering manufacturers;
changes in raw material prices; the degree of success in the integration of the
Company's recent acquisition; failure of the Company's vendors, customers and
suppliers to timely identify and adequately address Year 2000 compliance issues;
and other factors identified from time to time in the Company's reports and
other filings with the Securities and Exchange Commission.
ITEM THREE - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM ONE - LEGAL PROCEEDINGS
The Company is a party to several lawsuits incidental to its various
activities and incurred in the ordinary course of business. The Company believes
that it has meritorious claims and defenses in each case. After consultation
with counsel, it is the opinion of management that, although there can be no
assurance given, none of the associated claims, when resolved, will have a
material adverse effect upon the Company.
From time to time, the Company is subject to claims and suits arising
in the course of its business. The Company is a defendant in certain litigation
alleging personal injury resulting from personal exposure to volatile organic
compounds found in carpet produced by the Company. The complaints seek
injunctive relief and unspecified money damages on all claims. The Company has
denied any liability. The Company believes that it has meritorious defenses and
that the litigation will not have a material adverse effect on the Company's
financial condition or results of operations.
In June 1994, the Company and several other carpet manufacturers
received a grand jury subpoena from the Antitrust Division of the United States
Department of Justice relating to an investigation of the industry. In October,
1997, the Company received formal notification from the Department of Justice
that the investigation has been closed. In December 1995, the Company learned
that it was one of six carpet companies named as additional defendants in a
pending antitrust suit filed in the United States District Court in Rome,
Georgia. The amended complaint alleges price-fixing regarding certain types of
carpet products in violation of Section 1 of the Sherman Act. The amount of
damages sought is not specified. If any damages were to be awarded, they may be
trebled under the applicable statute. The Company has filed an answer to the
complaint that denies plaintiffs' allegations and sets forth several defenses.
In September 1997, the Court issued an order certifying a nationwide plaintiff
class of persons and entities who purchased "mass production" polypropylene
carpet directly from any of the defendants from June 1, 1991 through June 30,
1995, excluding, among others, any persons or entities whose only purchases were
from any of the Company's retail establishments. Discovery began in November
1997. The Company is also a party to two consolidated lawsuits pending in the
Superior Court of the State of California, City and County of San Francisco,
both of which were brought on behalf of a purported class of indirect purchasers
of carpet in the State of California and which seek damages for alleged
violations of California antitrust and fair competition laws. The Company
believes that it has meritorious defenses to plaintiffs' claims in the lawsuits
described in this paragraph and intends to defend these actions vigorously.
After consultation with counsel, it is the opinion of management that, although
there can be no assurance given, none of the claims described in this paragraph,
when resolved, will have a material adverse effect on the Company.
On October 23, 1998, the Company learned that it was one of five
defendants in a pending antitrust suit filed in the United States District
Court, in Rome, Georgia. The complaint alleges price-fixing regarding certain
types of carpet products in violation of Section 1 of the Sherman Act. The
amount of damages sought is not specified. If any damages were to be awarded,
they may be trebled under the applicable statute. The Company has not yet filed
an answer to the complaint. The Company believes it has meritorious defenses to
plaintiffs' claims in the lawsuit described in this paragraph and intends to
defend itself vigorously. After consultation with counsel, it is the opinion of
management that, although there can be no assurance given, none of the claims
described in this paragraph, when resolved, will have a material adverse effect
on the Company.
The Company is subject to a variety of environmental regulations
relating to the use, storage, discharge and disposal of hazardous materials used
in its manufacturing processes. Failure by the Company to comply with present
and future regulations could subject it to future liabilities. In addition, such
regulations could require the Company to acquire costly equipment or to incur
other significant expenses to comply with environmental regulations. The Company
is not involved in any material environmental proceedings.
At the end of the quarter ended October 3, 1998, there were no other
pending legal proceedings to which the Company was a party or to which any of
its property was subject which, in the opinion of management, were likely to
have a material adverse effect on the Company's business, financial condition or
results of operations.
ITEM TWO - CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM THREE - DEFAULTS UPON SENIOR SECURITIES
None
ITEM FOUR - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM FIVE - OTHER INFORMATION
None
<PAGE>
ITEM SIX - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27 - Financial Data Schedule
99.1 - Transfer and Administration Agreement, dated as of September 3,
1998, among Shaw Funding Company, Shaw Industries, Inc.,
Enterprise Funding Corporation, NationsBank, N.A. and the
financial institutions from time to time parties thereto.
99.2 - Receivables Purchase Agreement, dated as of September 3, 1998,
between Shaw Industries, Inc. and Shaw Funding Company and Form
of Subordinated Non-Negotiable Revolving Note.
99.3 - $150,000,000 Credit Agreement, dated as of October 28, 1998, by
and among Shaw Industries, Inc., the lenders named therein,
NationsBank, N.A., as administrative agent, and SunTrust Bank,
Atlanta, as documentation agent, together with Form of Syndicate
Note, Form of Guaranty and Form of Assignment and Assumption
Agreement.
Shareholders may obtain copies of Exhibits without charge upon written
request to the Corporate Secretary, Shaw Industries, Inc., Mail drop 061-22,
P.O. Drawer 2128, Dalton, Georgia 30722-2128.
(B)1. A report on Form 8-K was filed on August 24, 1998, reporting the
disposition of substantially all of the Company's residential
retail store assets to The Maxim Group, Inc.
2. A report on Form 8-K was filed on August 28, 1998, reporting that
the Company had entered into an agreement and plan of merger
dated August 13, 1998 with Chessman Acquisition Corp., a
wholly-owned subsidiary, and Queen Carpet Corporation to acquire
Queen Carpet Corporation. 3. A report on Form 8-K/A was filed on
September 2, 1998 reporting the sale of substantially all of the
Company's residential retail store assets to The Maxim Group,
Inc. as amended to include unaudited pro forma condensed
consolidated financial statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHAW INDUSTRIES, INC.
(The Registrant)
DATE: November 16, 1998 /s/ Robert E. Shaw
- - -------------------------- ------------------------------------------
Robert E. Shaw
Chairman of the Board, Chief Executive
Officer and President
DATE: November 16, 1998 /s/ Kenneth G. Jackson
- - -------------------------- ------------------------------------------
Kenneth G. Jackson
Vice President and Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS OF SHAW INDUSTRIES, INC. AND SUBSIDIARIES
AS OF OCTOBER 3, 1998 AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND CASH FLOWS FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
NOTE: EARNINGS PER SHARE (E.P.S.) HAVE BEEN CALCULATED IN ACCORDANCE WITH FASB
128.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> OCT-03-1998
<CASH> 3,807,000
<SECURITIES> 0
<RECEIVABLES> 219,004,000
<ALLOWANCES> 16,830,000
<INVENTORY> 528,076,000
<CURRENT-ASSETS> 119,013,000
<PP&E> 1,331,436,000
<DEPRECIATION> 765,022,000
<TOTAL-ASSETS> 1,627,329,000
<CURRENT-LIABILITIES> 391,754,000
<BONDS> 0
0
0
<COMMON> 148,171,000
<OTHER-SE> 661,830,000
<TOTAL-LIABILITY-AND-EQUITY> 1,627,329,000
<SALES> 2,589,768,000
<TOTAL-REVENUES> 2,589,768,000
<CGS> 1,921,523,000
<TOTAL-COSTS> 1,921,523,000
<OTHER-EXPENSES> 605,590,000
<LOSS-PROVISION> 4,574,000
<INTEREST-EXPENSE> 45,548,000
<INCOME-PRETAX> 12,533,000
<INCOME-TAX> 19,314,000
<INCOME-CONTINUING> (6,781,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,099,000)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"),
dated as of September 3, 1998, by and among SHAW FUNDING COMPANY, a Delaware
corporation, as transferor (in such capacity, the "Transferor"), SHAW
INDUSTRIES, INC., a Georgia corporation, individually and as Collection Agent
(in such capacity, the "Collection Agent"), ENTERPRISE FUNDING CORPORATION, a
Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS FROM TIME TO
TIME PARTIES HERETO, as Bank Investors, and NATIONSBANK, N.A., a national
banking association ("NationsBank"), as agent for the Company and the Bank
Investors (in such capacity, the "Agent").
PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to convey, transfer and
assign, from time to time, undivided percentage interests in certain accounts
receivable, and the Company may desire to, and the Bank Investors, if requested,
shall, accept such conveyance, transfer and assignment of such undivided
percentage interests, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Administration Fee" means the fee payable by the Transferor
to the Administrative Agent pursuant to Section 2.7(a) hereof, the terms of
which are set forth in the Fee Letter.
"Administrative Agent" means NationsBank, N.A., as
administrative agent.
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person (including any UCC financing statement
or any similar instrument filed against such Person's assets or properties).
"Affected Assets" means, collectively, the Receivables and the
Related Security, Collections and Proceeds relating thereto.
<PAGE>
9
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of voting stock, by contract or
otherwise.
"Aged Receivables Ratio" means, as of the last day of each
Fiscal Month, the percentage equivalent of a fraction, (i) the numerator of
which shall be the sum of (A) the aggregate Outstanding Balance of Receivables
that were unpaid for 61-90 days after their respective original due dates and
(B) the aggregate Outstanding Balance of Receivables that were charged-off as
uncollectible during such Fiscal Month prior to the date which is 90 days after
their respective original due dates and (ii) the denominator of which shall be
the aggregate Receivables originated by the Seller during the third prior Fiscal
Month.
"Agent" means NationsBank, N.A., in its capacity as agent for
the Company and the Bank Investors, and any successor thereto appointed pursuant
to Article IX.
"Aggregate Unpaids" means, at any time, an amount equal to the
sum of (i) the aggregate accrued and unpaid Discount with respect to all Tranche
Periods at such time, (ii) the Net Investment at such time, and (iii) all other
amounts owed (whether due or accrued) hereunder by the Transferor to the Company
at such time.
"Arrangement Fee" means the fee payable by the Seller to the
Administrative Agent pursuant to Section 2.7(b) hereof, the terms of which are
set forth in the Fee Letter.
"Assignment Amount" means, with respect to a Bank Investor at
any time, an amount equal to the least of (i) such Bank Investor's Pro Rata
Share of the Net Investment at such time, (ii) such Bank Investor's Pro Rata
Share of the sum of the Outstanding Balances of all Receivables (other than
Defaulted Receivables) at such time and (iii) such Bank Investor's unused
Commitment.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of Exhibit G attached hereto.
"Average Collection Period" means at any time a period of days
equal to the product of (i) a fraction the numerator of which shall be the
amount set forth in the most recent Investor Report as the "Beginning Balance"
of the Receivables and the denominator of which shall be the Collections as set
forth in the most recent Investor Report and (ii) thirty (30).
"Bank Investor" means NationsBank, N.A. and each other
financial institution identified as such on the signature pages hereof and their
respective successors and assigns.
<PAGE>
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. ss.ss.101 et seq., as amended.
"Base Rate" or "BR" means, a rate per annum equal to the
greater of (i) the prime rate of interest announced by NationsBank from time to
time, changing when and as said prime rate changes (such rate not necessarily
being the lowest or best rate charged by NationsBank and (ii) the sum of (a)
1.50% and (b) the rate 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, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day for such transactions received
by NationsBank from three Federal funds brokers of recognized standing selected
by it.
"Benefit Plan" means any employee pension benefit plan as
defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA, in
respect of which the Transferor the Seller or any ERISA Affiliate of the
Transferor, or the Seller is, or at any time during the immediately preceding
six years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day excluding Saturday, Sunday and
any day on which banks in New York, New York, Charlotte, North Carolina or
Atlanta, Georgia are authorized or required by law to close, and, when used with
respect to the determination of any Eurodollar Rate or any notice with respect
thereto, any such day which is also a day for trading by and between banks in
United States dollar deposits in the London interbank market.
"BR Tranche" means a Tranche as to which Discount is
calculated at the Base Rate.
"BR Tranche Period" means, with respect to a BR Tranche,
either (i) prior to the Termination Date, a period of up to 30 days requested by
the Transferor and agreed to by the Company, NationsBank on behalf of the
Liquidity Providers, or the Agent, as the case may be, commencing on a Business
Day requested by the Transferor and agreed to by the Company, NationsBank, on
behalf of the Liquidity Providers, or the Agent, as the case may be, or (ii)
after the Termination Date, a period of one day. If such BR Tranche Period would
end on a day which is not a Business Day, such BR Tranche Period shall end on
the next succeeding Business Day.
"Capitalized Lease" of a Person means any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Certificate" means the certificate issued to the Agent for
the benefit of the Company and the Bank Investors pursuant to Section 2.2(d)
hereof.
<PAGE>
"Class 1 Obligor" means any Obligor whose long-term senior
unsecured debt (i) is rated below Baa3 by Moody's or below BBB- by S&P or (ii)
has not been rated by Moody's or S&P.
"Class 2 Obligor" means any Obligor or parent of any Obligor
whose long-term senior unsecured debt is rated Baa3 or higher by Moody's and
BBB- or higher by S&P.
"Closing Date" means September 3, 1998.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor thereto.
"Collateral Agent" means NationsBank, N.A., as collateral
agent for any Liquidity Provider, any Credit Support Provider, the holders of
Commercial Paper and certain other parties.
"Collection Account" means the account, established by the
Agent, for the benefit of the Company and the Bank Investors, pursuant to
Section 2.12.
"Collection Agent" means at any time the Person then
authorized pursuant to Section 6.1 to service, administer and collect
Receivables.
"Collection Agent Default" has the meaning specified in
Section 6.4 hereof.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, all cash proceeds of Related Security
with respect to such Receivable, and all Deemed Collections of such Receivable.
"Commercial Paper" means the promissory notes issued by the
Company in the commercial paper market.
<PAGE>
"Commitment" means (i) with respect to each Bank Investor
party hereto, the commitment of such Bank Investor to make acquisitions from the
Transferor or the Company in accordance herewith in an amount not to exceed the
dollar amount set forth opposite such Bank Investor's signature on the signature
page hereto under the heading "Commitment", minus the dollar amount of any
Commitment or portion thereof assigned pursuant to an Assignment and Assumption
Agreement plus the dollar amount of any increase to such Bank Investor's
Commitment consented to by such Bank Investor prior to the time of
determination, (ii) with respect to any assignee of a Bank Investor party hereto
taking pursuant to an Assignment and Assumption Agreement, the commitment of
such assignee to make acquisitions from the Transferor or the Company not to
exceed the amount set forth in such Assignment and Assumption Agreement minus
the dollar amount of any Commitment or portion thereof assigned by such Bank
Investor pursuant to an Assignment and Assumption Agreement prior to such time
of determination and (iii) with respect to any assignee of an assignee referred
to in clause (ii), the commitment of such assignee to make acquisitions from the
Transferor or the Company not to exceed the sum of (A) the amount set forth in
an Assignment and Assumption Agreement between such assignee and its Assignor,
plus (B) the amount of the Commitment (if any) of such Assignee immediately
prior to such assignment.
"Commitment Termination Date" means September 1, 1999, or such
later date to which the Commitment Termination Date may be extended by
Transferor, the Agent and the Bank Investors not later than 60 days prior to the
then current Commitment Termination Date.
"Company" means Enterprise Funding Corporation, and its
successors and assigns.
"Concentration Factor" means on any date of determination (i)
with respect to any Class 1 Obligor, 2.5% of the aggregate Outstanding Balance
of Eligible Receivables on such date, (ii) with respect to any Class 2 Obligor,
5% of the aggregate Outstanding Balance of Eligible Receivables on such date,
and (iii) without duplication with clauses (i) or (ii) above, 5% of the
aggregate Outstanding Balance of Eligible Receivables owed by Canadian dollar
Obligors on such date if the Canadian foreign currency short-term rating is
"A-1" and "P-1" or its equivalent from S&P and Moody's or 2% if such rating
falls below "A-1" and "P-1" or its equivalent.
"Concentration Percentage" means the greater of (i) three (3)
times the percentage applicable to the Concentration Factor applicable to Class
1 Obligors and (ii) one (1) times the percentage applicable to the Concentration
Factor applicable to Class 2 Obligors.
"Conduit Assignee" shall mean any commercial paper conduit
administered by NationsBank and designated by NationsBank from time to time to
accept an assignment from the Company of all or a portion of the Net Investment.
"Contract" means an invoice in substantially the form of one
of the forms attached hereto as Exhibit A or otherwise approved by the Company,
pursuant to or under which an Obligor shall be obligated to pay for merchandise
purchased or services rendered.
"CP Rate" means, with respect to any CP Tranche Period, the
rate equivalent to the rate (or if more than one rate, the weighted average of
the rates) at which Commercial Paper having a term equal to such CP Tranche
Period may be sold by any placement agent or commercial paper dealer selected by
the Company, provided, however, that if the rate (or rates) as agreed between
any such agent or dealer and the Company is a discount rate, then the rate (or
if more than one rate, the weighted average of the rates) resulting from the
Company's converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum.
"CP Tranche" means a Tranche as to which Discount is
calculated at a CP Rate.
<PAGE>
"CP Tranche Period" means, with respect to a CP Tranche, a
period of days not to exceed 90 days commencing on a Business Day requested by
the Transferor and agreed to by the Company pursuant to Section 2.3. If a CP
Tranche Period would end on a day which is not a Business Day, such CP Tranche
Period shall end on the next succeeding Business Day.
"Credit and Collection Policy" shall mean the Seller's credit
and collection policy or policies and practices, relating to Contracts and
Receivables existing on the date hereof and referred to in Exhibit B attached
hereto, as modified from time to time in compliance with Section 5.2(c).
"Credit Support Agreement" means the agreement between the
Company and the Credit Support Provider evidencing the obligation of the Credit
Support Provider to provide credit support to the Company in connection with the
issuance by the Company of Commercial Paper.
"Credit Support Provider" means the Person or Persons who
provides credit support to the Company in connection with the issuance by the
Company of Commercial Paper.
"Dealer Fee" means the fee payable by the Transferor to the
Collateral Agent, pursuant to Section 2.4 hereof, the terms of which are set
forth in the Fee Letter.
"Deemed Collections" means any Collections on any Receivable
deemed to have been received pursuant to Section 2.9(a) or (b) hereof.
"Defaulted Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for more than 90 days from the original
due date for such Receivable; (ii) as to which an Event of Bankruptcy has
occurred and is continuing with respect to the Obligor thereof; (iii) which has
been identified by the Transferor or the Collection Agent as uncollectible; or
(iv) which, consistent with the Credit and Collection Policy, should be written
off as uncollectible.
"Delinquency Ratio" means, the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month by dividing (i) the
aggregate Outstanding Balance of all Delinquent Receivables as of such date by
(ii) the aggregate Outstanding Balance of all Receivables (other than Defaulted
Receivables) as of such date.
"Delinquent Receivable" means a Receivable: (i) as to which
any payment, or part thereof, remains unpaid for more than 60 days from the
original due date for such Receivable and (ii) which is not a Defaulted
Receivable.
<PAGE>
"Designated Obligor" means, at any time, each Obligor and its
Affiliates; provided, however, that any Obligor shall cease to be a Designated
Obligor three (3) Business Days after notice is given to the Transferor by the
Agent that such Obligor is no longer a Designated Obligor.
"Dilution Horizon Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month by dividing (i) the
aggregate Outstanding Balance of Receivables originated by the Seller during the
immediately preceding Fiscal Month by (ii) the difference between the aggregate
Outstanding Balance of Receivables and the aggregate Outstanding Balance of all
Defaulted Receivables, each as of such last day.
"Dilution Ratio" means, the ratio (expressed as a percentage)
computed as of the last day of each Fiscal Month by dividing (i) the aggregate
amount of any Receivables that are reduced or canceled as a result of any
defective, rejected or returned merchandise or services and all credits,
rebates, discounts, disputes, warranty claims, repossessed or returned goods,
chargebacks, allowances, other dilutive factors, and any other billing or other
adjustment (whether effected through the granting of credits against the
applicable Receivables or by the issuance of a check or other payment in respect
of (and as payment for) such reduction) by the Seller, the Transferor or the
Collection Agent, provided to Obligors in respect of Receivables during such
Fiscal Month (excluding from the foregoing contractual payment discounts
included in the Payment Discount Reserve) by (ii) the aggregate Outstanding
Balance of all Receivables which arose during the preceding Fiscal Month.
"Dilution Reserve Ratio" means, as of any Investor Report Date
and continuing until (but not including the next Investor Report Date, an amount
equal to:
(AxB+C) x D
Where:
A = 1.5
B = the average Dilution Ratio for the immediately preceding twelve (12) Fiscal
Months
C = the Dilution Volatility Factor for the Fiscal Month immediately preceding
such Investor Report Date
D = the Dilution Horizon Ratio for the Fiscal Month immediately preceding such
Investor Report Date
"Dilution Volatility Factor" means for any Fiscal Month, the
result of (a) the highest Dilution Ratio during the preceding twelve (12) Fiscal
Months minus the average Dilution Ratio for the preceding twelve (12) Fiscal
Months, times (b) the highest Dilution Ratio for the preceding twelve (12)
Fiscal Months divided by the average Dilution Ratio for the preceding twelve
(12) Fiscal Months.
<PAGE>
"Discount" means, with respect to any Tranche Period:
(TR x TNI x AD)
360
Where:
TR = the Tranche Rate applicable to such Tranche Period;
TNI = the portion of the Net Investment allocated to such Tranche Period;
AD = the actual number of days during such Tranche Period;
provided, however, that no provision of this Agreement shall require the payment
or permit the collection of Discount in excess of the maximum amount permitted
by applicable law; and provided, further, that Discount shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
be returned for any reason.
"Discount Reserve" means, at any time, an amount equal to:
TD + LY
Where:
TD = the sum of the unpaid Discount for all Tranche Periods.
LY = the Liquidation Yield
"Early Collection Fee" means, for any Tranche Period (such
Tranche Period to be determined without regard to the last sentence in Section
2.3(a) hereof) during which the portion of the Net Investment that was allocated
to such Tranche Period is reduced for any reason whatsoever, the excess, if any,
of (i) the additional Discount that would have accrued during such Tranche
Period if such reductions had not occurred, minus (ii) the income, if any,
received by the recipient of such reductions from investing the proceeds of such
reductions.
<PAGE>
"Eligible Investments" means any of the following (a)
negotiable instruments or securities represented by instruments in bearer or
registered or in book-entry form which evidence (i) obligations fully guaranteed
by the United States of America; (ii) time deposits in, or bankers acceptances
issued by, any depositary institution or trust company incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by Federal or state banking or depositary
institution authorities; provided, however, that at the time of investment or
contractual commitment to invest therein, the certificates of deposit or
short-term deposits, if any, or long-term unsecured debt obligations (other than
such obligation whose rating is based on collateral or on the credit of a Person
other than such institution or trust company) of such depositary institution or
trust company shall have a credit rating from Moody's and S&P of at least "P-1"
and "A-1", respectively, in the case of the certificates of deposit or
short-term deposits, or a rating not lower than one of the two highest
investment categories granted by Moody's and by S&P; (iii) certificates of
deposit having, at the time of investment or contractual commitment to invest
therein, a rating from Moody's and S&P of at least "P-1" and "A-1",
respectively; or (iv) investments in money market funds rated in the highest
investment category or otherwise approved in writing by the applicable rating
agencies; (b) demand deposits in any depositary institution or trust company
referred to in (a)(ii) above or in any other depository institution or trust
company where such deposits are swept each Business Day into an account at a
depository institution or trust company referred to in (a)(ii) above; (c)
commercial paper (having original or remaining maturities of no more than 30
days) having, at the time of investment or contractual commitment to invest
therein, a credit rating from Moody's and S&P of at least "P-1" and "A-1",
respectively; (d) Eurodollar time deposits having a credit rating from Moody's
and S&P of at least "P-1" and "A-1", respectively; and (e) repurchase agreements
involving any of the Eligible Investments described in clauses (a)(i), (a)(iii)
and (d) hereof so long as the other party to the repurchase agreement has at the
time of investment therein, a rating from Moody's and S&P of at least "P-1" and
"A-1", respectively.
"Eligible Receivable" means, at any time, any Receivable:
(i) which has been originated by the Seller, sold to the
Transferor pursuant to (and in accordance with) the Receivables
Purchase Agreement and to which the Transferor has good title thereto,
free and clear of all Adverse Claims;
(ii) which (together with the Collections and Related Security
related thereto) has been the subject of either a valid transfer and
assignment from the Transferor to the Agent, on behalf of the Company
and the Bank Investors, of all of the Transferor's right, title and
interest therein or the grant of a first priority perfected security
interest therein (and in the Collections and Related Security related
thereto), effective until the termination of this Agreement.
(iii) the Obligor of which is a United States or Canadian
resident, is a Designated Obligor at the time of the initial creation
of an interest therein hereunder, is not an Affiliate of any of the
parties hereto, and is not a government or a governmental subdivision
or agency;
(iv) which is not a Defaulted Receivable at the time of the
initial creation of an interest therein hereunder;
(v) which is not a Delinquent Receivable at the time of the
initial creation of an interest of the Company therein;
<PAGE>
(vi) which, (A) arises pursuant to a Contract with respect to
which each of the Seller and the Transferor has performed all
obligations required to be performed by it thereunder, including
without limitation shipment of the merchandise and/or the performance
of the services purchased thereunder; (B) has been billed; and (C)
according to the Contract related thereto, is required to be paid in
full within 120 days of the original billing date therefor, provided,
however, that no greater than 15% of the aggregate Outstanding Balance
of Eligible Receivables shall be required to be paid in more than 60
days;
(vii) which is an "eligible asset" as defined in Rule 3a-7
under the Investment Company Act of 1940, as amended;
(viii) a purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(ix) which is an "account" within the meaning of Article 9
of the UCC of all applicable jurisdictions;
(x) which is denominated and payable only in United States
dollars in the United States or in Canadian dollars in Canada;
(xi) which arises under a Contract that, together with the
Receivable related thereto, is in full force and effect as to all
material terms thereof and constitutes the legal, valid and binding
obligation of the related Obligor enforceable against such Obligor in
accordance with its terms and is not subject to any litigation,
dispute, offset, counterclaim or other defense, provided, that, to the
extent the portion of such Receivable which is subject to any of the
foregoing is identifiable, the remaining portion of such Receivable may
constitute an Eligible Receivable;
(xii) which, together with the Contract related thereto, does
not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no part of the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(xiii) which (A) satisfies all applicable requirements of the
Credit and Collection Policy, (B) is assignable without the consent of,
or notice to, the Obligor thereunder, and (C) complies with such other
criteria and requirements as the Agent (exercising its reasonable
judgment) may from time to time specify to the Transferor following
five days' notice;
<PAGE>
(xiv) which was generated in the ordinary course of the
Seller's business;
(xv) the Obligor of which has been directed to make all
payments to a specified account of the Seller with respect to which
there shall be a Lock-Box Agreement in effect;
(xvi) as to which the Agent has not notified the Transferor
that such Receivable or class of Receivables is not acceptable for
purchase hereunder because of the nature of the business of the
Obligor;
(xvii) the assignment of which under the Receivables Purchase
Agreement by the Seller and hereunder by the Transferor does not in any
material respect violate, conflict or contravene any applicable laws,
rules, regulations, orders or writs or any contractual or other
restriction, limitation or encumbrance; and
(xviii) which has not been compromised, adjusted or modified
(including by the extension of time for payment or the granting of any
discounts, allowances or credits); provided, however, that only such
portion of such Receivable that is the subject of such compromise,
adjustment or modification shall be deemed to be ineligible pursuant to
the terms of this clause (xviii).
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code (as in effect from time to
time, the "Code")) as such Person; (ii) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with such Person; or (iii) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as such Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above.
<PAGE>
"Estimated Maturity Period" shall mean, at any time, the
period, rounded upward to the nearest whole number of days, equal to the
weighted average number of days until due of the Receivables as calculated by
the Collection Agent in good faith and set forth in the most recent Investor
Report, such calculation to be based on the assumptions that (a) each Receivable
within a particular aging category, (as set forth in the Investor Report) will
be paid on the last day of such aging category and (b) the last day of the last
such aging category coincides with the last date on which any Outstanding
Balance of any Receivables would be written off as uncollectible or charged
against any applicable reserve or similar account in accordance with the
objective requirements of the Credit and Collection Policy and the Seller's
normal accounting practices applied on a basis consistent with those reflected
in the Seller's financial statements, provided, however, that if the Agent, the
Company or any of the Bank Investors shall reasonably disagree with any such
calculation, the Agent may recalculate the Estimated Maturity Period, and such
recalculation, in the absence of manifest error, shall be conclusive.
"Eurodollar Rate" means, with respect to any Eurodollar
Tranche Period, a rate which is 0.75% in excess of a rate per annum equal to the
sum (rounded upwards, if necessary, to the next higher 1/100 of 1%) of (A) the
rate obtained by dividing (i) the applicable LIBOR Rate by (ii) a percentage
equal to 100% minus the reserve percentage used for determining the maximum
reserve requirement as specified in Regulation D (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) that is
applicable to the Agent during such Eurodollar Tranche Period in respect of
eurocurrency or eurodollar funding, lending or liabilities (or, if more than one
percentage shall be so applicable, the daily average of such percentage for
those days in such Eurodollar Tranche Period during which any such percentage
shall be applicable) plus (B) the then daily net annual assessment rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) as estimated by the Agent for
determining the current annual assessment payable by the Agent to the Federal
Deposit Insurance Corporation in respect of eurocurrency or eurodollar funding,
lending or liabilities.
"Eurodollar Tranche" means a Tranche as to which Discount is
calculated at the Eurodollar Rate.
"Eurodollar Tranche Period" means, with respect to a
Eurodollar Tranche, prior to the Termination Date, a period of up to one month
requested by the Transferor and agreed to by the Company, NationsBank, on behalf
of the Liquidity Provider, or the Agent, as the case may be, commencing on a
Business Day requested by the Transferor and agreed to by the Company,
NationsBank, on behalf of the Liquidity Provider, or the Agent, as applicable;
provided, however, that if such Eurodollar Tranche Period would expire on a day
which is not a Business Day, such Eurodollar Tranche Period shall expire on the
next succeeding Business Day; provided, further, that if such Eurodollar Tranche
Period would expire on (a) a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such Eurodollar
Tranche Period shall expire on the next preceding Business Day or (b) a Business
Day for which there is no numerically corresponding day in the applicable
subsequent calendar month, such Eurodollar Tranche Period shall expire on the
last Business Day of such month.
"Event of Bankruptcy" means, with respect to any Person, (i)
that such Person (a) shall generally not pay its debts as such debts become due
or (b) shall admit in writing its inability to pay its debts generally or (c)
shall make a general assignment for the benefit of creditors; (ii) any
proceeding shall be instituted by or against such Person seeking to adjudicate
it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property or (iii) if such Person is a corporation, such Person or any
Subsidiary shall take any corporate action to authorize any of the actions set
forth in the preceding clauses (i) or (ii).
<PAGE>
"Excluded Receivables" means (i) the types or items of
property described in the UCC-1 financing statements attached hereto as Exhibit
N-1 and Exhibit N-2, arising under or in connection with any present or former
private-label credit card program of the Seller, it being understood that the
property described in such financing statements is not the subject of the
transaction described in this Agreement and (ii) all accounts receivable of any
Person who merges or consolidates with the Seller after the date hereof,
including the accounts receivable of any of such Person's Subsidiaries;
provided, however, that (x) payments under such accounts receivable are not
remitted to any Lock-Box Account and (y) the Seller, the Transferor, the Agent
and the Majority Bank Investors may agree in writing to include such accounts
receivable at a later date.
"Excluded Taxes" shall have the meaning specified in Section
8.3 hereof.
"Executive Officer" means those officers of the Seller or the
Transferor, as the case may be, who are deemed to be "Executive Officers"
thereof pursuant to Rule 405 of Regulation C of the Securities and Exchange Act
of 1934, as amended, or any officer of the Seller or the Transferor, as the case
may be, who is a vice president thereof, or any individual performing a similar
role as any individual who is a vice president of the Seller or the Transferor
on the Closing Date. The term "Executive Officer" shall also include the
Director-Treasury Management and the Financial Manager of the Seller or the
Transferor.
"Facility Fee" means the fee payable by the Transferor to the
Company pursuant to Section 2.7(a) hereof, the terms of which are set forth in
the Fee Letter.
"Facility Limit" means $200,000,000; provided that such amount
may not at any time exceed the aggregate Commitments at any time in effect.
"Fee Letter" means the letter agreement dated the date hereof
between the Transferor and the Company with respect to the fees to be paid by
the Transferor hereunder, as amended, modified or supplemented from time to
time.
"Finance Charges" means, with respect to a Contract, any
finance, interest, late or similar charges owing by an Obligor pursuant to such
Contract.
"Fiscal Month" means an accounting period of the Seller
consisting of either four or five weeks. The Fiscal Months of the Seller for
fiscal year 1998 and fiscal year 1999 (through the month of December, 1999) are
set forth on Schedule 1 hereto and the Fiscal Months for subsequent fiscal years
of the Seller will be determined on a basis consistent with the determination of
such Fiscal Months for fiscal year 1998. An updated Schedule 1 will be delivered
by the Collection Agent to the Agent prior to the commencement of each fiscal
year.
<PAGE>
"GAAP" has the meaning set forth in statements from Auditing
Standards No. 69 entitled "The Meaning of 'Present Fairly in Conformance with
Generally Accepted Accounting Principles in the Independent Auditors Reports"
issued by the Auditing Standards Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances.
"Guaranty" means, with respect to any Person any agreement by
which such Person assumes, guarantees, endorses, contingently agrees to purchase
or provide funds for the payment of, or otherwise becomes liable upon, the
obligation of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person or otherwise assures
any other creditor of such other Person against loss, including, without
limitation, any comfort letter, operating agreement or take-or-pay contract and
shall include, without limitation, the contingent liability of such Person in
connection with any application for a letter of credit.
"Incremental Transfer" means a Transfer which is made pursuant
to Section 2.2(a) hereof.
"Indebtedness" means, with respect to any Person such Person's
(i) obligations for borrowed money, (ii) obligations representing the deferred
purchase price of property other than accounts payable arising in the ordinary
course of such Person's business on terms customary in the trade, (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) Capitalized Lease obligations and (vi) obligations for which
such Person is obligated pursuant to a Guaranty.
"Indemnified Amounts" has the meaning specified in Section 8.1
hereof.
"Indemnified Parties" has the meaning specified in Section 8.1
hereof.
"Interest Component" shall mean, (i) with respect to any
Commercial Paper issued on an interest-bearing basis, the interest payable on
such Commercial Paper at its maturity (including any dealer commissions) and
(ii) with respect to any Commercial Paper issued on a discount basis, the
portion of the face amount of such Commercial Paper representing the discount
incurred in respect thereof (including any dealer commissions).
"Investor Report" means a report, in substantially the form
attached hereto as Exhibit E or in such other form as is mutually agreed to by
the Transferor and the Agent, furnished by the Collection Agent pursuant to
Section 2.11(a) hereof.
"Investor Report Date" means the twenty-second (22nd) day of
each calendar month, provided, that, if such day is not a Business Day in any
month, the Investor Report Date for such month shall be the next succeeding
Business Day.
"Law" means any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
<PAGE>
"LIBOR Rate" means, with respect to any Eurodollar Tranche
Period, the rate at which deposits in dollars are offered to the Agent, in the
London interbank market at approximately 11:00 a.m. (London time) two Business
Days before the first day of such Eurodollar Tranche Period in an amount
approximately equal to the Eurodollar Tranche to which the Eurodollar Rate is to
apply and for a period of time approximately equal to the applicable Eurodollar
Tranche Period.
"Liquidation Yield" means, at any time, an amount equal to:
(RVF x LBR x NI) x (EMP x 1.5)
-----------
360
Where:
RVF = the Rate Variance Factor at such time;
LBR = the Base Rate at such time which is applicable to the liquidation period
after a Termination Event;
NI = the Net Investment at such time; and
EMP = the Estimated Maturity Period of the Receivables.
"Liquidity Provider" means the Bank Investors who will provide
liquidity support to the Company in connection with the issuance by the Company
of Commercial Paper.
"Liquidity Provider Agreement" means the agreement between the
Company and the Liquidity Provider evidencing the obligation of the Liquidity
Provider to provide liquidity support to the Company in connection with the
issuance by the Company of Commercial Paper.
"Lock-Box Account" means an account maintained by the
Transferor at a Lock-Box Bank for the purpose of receiving Collections from
Receivables.
"Lock-Box Agreement" means an agreement among the Seller, the
Transferor, the Agent, the Collection Agent and a Lock-Box Bank in substantially
the form of Exhibit D hereto.
"Lock-Box Bank" means each of the banks set forth in Exhibit C
hereto and such banks as may be added thereto or deleted therefrom pursuant to
Section 2.8(b) hereof.
"Loss and Dilution Reserve" means on any day the result of:
NI NI
1-RRR
<PAGE>
Where:
NI = Net Investment
RRR = Required Reserve Ratio
"Loss Horizon Ratio" means as of any Investor Report Date and
continuing until the next Investor Report Date, the quotient of (i) the
aggregate Outstanding Balance of Receivables originated by the Seller during the
preceding three (3) Fiscal Months and (ii) the difference between the aggregate
Outstanding Balance of Receivables and the aggregate Outstanding Balance of
Defaulted Receivables.
"Loss Reserve Ratio" means, as of any Investor Report Date and
continuing until the next Investor Report Date an amount equal to:
1.5 x ARR x LHR x PTF
Where:
ARR = the highest three (3) Fiscal Month rolling average of the
Aged Receivables Ratio during the immediately preceding twelve
(12) Fiscal Months.
LHR = Loss Horizon Ratio.
PTF = Payment Terms Factor.
"Loss-to-Liquidation Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month by dividing (i) the
aggregate Outstanding Balance of all Receivables which became Defaulted
Receivables during such period, by (ii) the aggregate amount of Collections in
the form of cash received by the Collection Agent during such period.
"Majority Bank Investors" shall mean, at any time, the Agent
and those Bank Investors which hold Commitments aggregating in excess of 51% of
the Facility Limit as of such date.
"Material Adverse Effect" means any event or condition which
would have a material adverse effect on (i) the collectibility of the
Receivables, (ii) the condition (financial or otherwise), businesses or
properties of the Transferor or of the Seller and its Subsidiaries taken as a
whole, (iii) the ability of the Transferor or Seller to perform their respective
obligations under the Transaction Documents to which it is a party and (iv) the
interests of the Agent, the Company or the Bank Investors under the Transaction
Documents.
"Maximum Percentage Factor" means 98%.
<PAGE>
"Minimum Required Reserve Ratio" means as of any Investor
Report Date and continuing until the next Investor Report Date, the sum of the
Concentration Percentage and the product of (i) the twelve (12) Fiscal Month
average Dilution Ratio and (ii) the Dilution Horizon Ratio.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding five years contributed to by the Transferor,
the Seller or any ERISA Affiliate of the Transferor or the Seller on behalf of
its employees.
"Net Investment" means the sum of the cash amounts paid to the
Transferor for each Incremental Transfer less the aggregate amount of
Collections received and applied by the Agent to reduce such Net Investment
pursuant to Section 2.5, 2.6 or 2.9 hereof; provided that the Net Investment
shall be restored and reinstated in the amount of any Collections so received
and applied if at any time the distribution of such Collections is rescinded or
must otherwise be returned for any reason; and provided further that the Net
Investment may be increased by the amount described in Section 9.9(d) as
described therein.
"Net Receivables Balance" means at any time the Outstanding
Balance of the Eligible Receivables at such time reduced by the sum of (i) the
aggregate amount by which the Outstanding Balance of all Eligible Receivables of
each Designated Obligor (or group of Designated Obligors in the case of Canadian
Obligors) exceeds the Concentration Factor for such Designated Obligor (or group
of Designated Obligors in the case of Canadian Obligors), plus (ii) the
aggregate Outstanding Balance of all Eligible Receivables which are Defaulted
Receivables or Delinquent Receivables, plus (iii) the aggregate Outstanding
Balance of all Eligible Receivables of each of the fifty (50) Obligors with the
greatest dollar values of Receivables transferred hereunder with respect to
which either 20% or more of such Obligor's Receivables are Defaulted Receivables
or 40% or more of such Obligor's Receivables are Delinquent Receivables.
"Obligor" means a Person obligated to make payments for the
provision of goods and services pursuant to a Contract.
"Official Body" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"Other Transferor" means any Person other than the Transferor
that has entered into a receivables purchase agreement or transfer and
administration agreement with the Company.
<PAGE>
"Outstanding Balance" means, with respect to any Receivable at
any time, the then outstanding principal amount thereof excluding any accrued
and outstanding Finance Charges related thereto.
"Payment Discount Reserve" means the product of (x) the
aggregate of available contractual payment discounts with respect to the
Receivables, whether or not exercised, as calculated at the end of any Fiscal
Month, and (y) the Payment Discount Factor.
"Payment Discount Factor" means 1.1 times the quotient of (x)
the sum of available contractual payment discounts with respect to the
Receivables exercised over the immediately preceding twelve (12) Fiscal Months
and (y) the sum of all available contractual payment discounts with respect to
the Receivables, whether or not exercised, during the twelve (12) Fiscal Months
immediately preceding the just-concluded Fiscal Month (but not including the
just-concluded Fiscal Month), provided, however, that the Payment Discount
Factor shall not exceed 100%.
"Payment Terms Factor" means, as of any Investor Report Date
and continuing up to, but not including, the next Investor Report Date, (x) 1.0
when the weighted average of the periods within which Receivables are required
to be paid falls within one (1) to forty-five (45) days, (y) 1.17 when the
weighted average of the periods within which Receivables are required to be paid
falls within forty-six (46) to sixty (60) days, and (z) 1.33 when the weighted
average of the periods within which Receivables are required to be paid is
greater than sixty(60) days. For purposes of this calculation, Receivables
exclude contractual payment discount terms designated by the Receivables Systems
as "cash against documents" and "letter of credit".
"Percentage Factor" shall mean the fraction (expressed as a
percentage) computed at any time of determination as follows:
NI + LDR + DR + TAR + PDR + SFR
NRB
Where:
NI = the Net Investment at the time of such computation;
LDR = the Loss and Dilution Reserve at the time of such computation;
DR = the Discount Reserve at the time of such computation;
TAR = the Translation Adjustment Reserve at the time of such computation;
PDR = the Payment Discount Reserve at the time to such computation;
SFR = the Servicing Fee Reserve at the time of such computation; and
<PAGE>
NRB = the Net Receivables Balance at the time of such computation.
The Percentage Factor shall be calculated by the Collection
Agent on the day of the initial Incremental Transfer hereunder. Thereafter,
until the Termination Date, the Collection Agent shall recompute the Percentage
Factor at the time of each Incremental Transfer pursuant to Section 2.2(a) and
as of the close of business on each Business Day and report such recomputations
to the Agent in the Investor Report and as otherwise requested by the Agent. The
Percentage Factor shall remain constant from the time as of which any such
computation or recomputation is made until the time as of which the next such
recomputation shall be made, notwithstanding any additional Receivables arising,
any Incremental Transfer made pursuant to Section 2.2(a) or any reinvestment
Transfer made pursuant to Section 2.2(b) and 2.5 during any period between
computations of the Percentage Factor. The Percentage Factor, as calculated at
the close of business on the Business Day immediately preceding the Termination
Date, shall remain constant at all times thereafter until such time as the
Agent, on behalf of the Company and the Bank Investors, shall have received the
Aggregate Unpaids, in cash, at which time the Percentage Factor shall be
recomputed in accordance with Section 2.6.
"Person" means any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"Potential Termination Event" means an event which but for the
lapse of time or the giving of notice, or both, would constitute a Termination
Event.
"Pro Rata Share" means, for a Bank Investor, the Commitment of
such Bank Investor divided by the sum of the Commitments of all Bank Investors.
"Proceeds" means "proceeds" as defined in Section 9-306(1) of
the UCC.
"Program Fee" means the fee payable by the Transferor to the
Company pursuant to Section 2.7(a) hereof, the terms of which are set forth in
the Fee Letter.
"Purchased Interest" means the interest in the Receivables
acquired by the Liquidity Provider through purchase pursuant to the terms of the
Liquidity Provider Agreement.
"Purchase Termination Date" means the date upon which the
Transferor shall cease, for any reason whatsoever, to make purchases of
Receivables from the Seller under the Receivables Purchase Agreement or the
Receivables Purchase Agreement shall terminate for any reason whatsoever.
<PAGE>
"Rate Variance Factor" means the number, computed from time to
time in good faith by the Agent, that reflects the largest potential variance
(from minimum to maximum) in selected interest rates over a period of time
selected by the Agent from time to time, set forth in a written notice by the
Agent to the Transferor and the Collection Agent.
"Receivable" means the indebtedness owed to the Seller by any
Obligor (without giving effect to any purchase under the Receivables Purchase
Agreement by the Transferor at any time) under a Contract and sold by the Seller
to the Transferor pursuant to the Receivables Purchase Agreement, whether
constituting an account, chattel paper, instrument, investment property or
general intangible, arising in connection with the sale of merchandise or the
rendering of services by the Seller, and includes the right to payment of any
Finance Charges and other obligations of such Obligor with respect thereto;
provided, however, that the term Receivable shall not include any Excluded
Receivables. Notwithstanding the foregoing, once a Receivable has been deemed
collected pursuant to Section 2.9 hereof, it shall no longer constitute a
Receivable hereunder.
"Receivables Purchase Agreement" means the Receivables
Purchase Agreement of even date herewith by and between the Seller and the
Transferor, as purchaser, as such agreement may be amended, modified or
supplemented and in effect from time to time.
"Receivables Systems" has the meaning specified in Section
3.3(l) hereof.
"Records" means all Contracts and other documents, books,
records and other information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software, to the extent assignable,
and related property and rights) maintained with respect to Receivables and the
related Obligors.
"Reinvestment Termination Date" means the second Business Day
after the delivery by the Company to the Transferor of written notice that the
Company elects to commence the amortization of its interest in the Net
Investment or otherwise liquidate its interest in the Transferred Interest.
"Related Commercial Paper" shall mean Commercial Paper issued
by the Company the proceeds of which were used to acquire, or refinance the
acquisition of, an interest in Receivables with respect to the Transferor.
"Related Security" means with respect to any Receivable, all
of the Transferor's rights, title and interest in, to and under:
(i) the merchandise (including returned or repossessed
merchandise), if any, the sale of which by the Seller gave rise to such
Receivable;
<PAGE>
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to
such Receivable or otherwise;
(iv) all Records related to such Receivable;
(v) all rights and remedies of the Transferor under the
Receivables Purchase Agreement, together with all financing statements
filed by the Transferor against the Seller in connection therewith; and
(vi) all Proceeds of any of the foregoing.
"Required Reserve Ratio" means the greater of (i) the Minimum
Required Reserve Ratio and (ii) the sum of the Loss Reserve Ratio and the
Dilution Reserve Ratio.
"Section 8.2 Costs" has the meaning specified in Section
8.2(d) hereof.
"Seller" means Shaw Industries, Inc., a Georgia corporation
and its successors and permitted assigns.
"Servicing Fee" means the fees payable by the Company or the
Bank Investors to the Collection Agent, with respect to a Tranche, in an amount
equal to 1% per annum on the amount of the Net Investment allocated to such
Tranche pursuant to Section 2.3 hereof. Such fee shall accrue from the date of
the initial purchase of an interest in the Receivables to the date on which the
Percentage Factor is reduced to zero. Such fee shall be payable only from
Collections pursuant to, and subject to the priority of payments set forth in,
Section 2.5 hereof. After the Termination Date, such fee shall be payable only
from Collections pursuant to, and subject to the priority of payments set forth
in, Section 2.6 hereof.
"Servicing Fee Reserve" means at any time an amount equal to
the product of (i) the aggregate Outstanding Balance of all Receivables at such
time, (ii) the Servicing Fee percentage and (iii) a fraction having as the
numerator, the sum of (a) 1.5 times the Estimated Maturity Period plus (b) 30,
and as the denominator, 360.
"Shaw Financial Covenants" means the financial covenants set
forth in Schedule 2 hereto.
"Standard & Poor's" or "S&P" means Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc..
<PAGE>
"Subordinated Note" shall have the meaning specified in the
Receivables Purchase Agreement.
"Subsidiary" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"Taxes" shall have the meaning specified in Section 8.3 hereof.
"Termination Date" means the earliest of (i) the Business Day
designated by the Transferor to the Agent as the Termination Date at any time
following 60 days' written notice to the Company, (ii) the effective date of
termination of the commitment of the Liquidity Provider under the Liquidity
Provider Agreement, (iii) the effective date of termination of the commitment of
the Credit Support Provider under the Credit Support Agreement, (iv) the day
upon which the Termination Date is declared or automatically occurs pursuant to
Section 7.2(a) hereof, (v) two Business Days prior to the Commitment Termination
Date, (vi) the day on which a Reinvestment Termination Date shall occur, (vi)
the Purchase Termination Date, or (vii) September 1, 1999 (or such later date as
may be agreed to in writing by the Company and the Bank Investors from time to
time).
"Termination Event" means an event described in Section 7.1
hereof.
"Tranche" means a portion of the Net Investment allocated to a
Tranche Period pursuant to Section 2.3 hereof.
"Tranche Period" means a CP Tranche Period, a BR Tranche
Period or a Eurodollar Tranche Period.
"Tranche Rate" means the CP Rate, the Base Rate or the
Eurodollar Rate.
"Transaction Costs" has the meaning specified in Section
8.4(a) hereof.
"Transaction Documents" means, collectively, this Agreement,
the Receivables Purchase Agreement, the Fee Letter, the Lock-Box Agreements, the
Certificates, the Transfer Certificates and all of the other instruments,
documents and other agreements executed and delivered by the Seller or the
Transferor in connection with any of the foregoing, in each case, as the same
may be amended, restated, supplemented, extended, renewed or otherwise modified
from time to time.
<PAGE>
"Transfer" means a conveyance, transfer and assignment by the
Transferor to the Company or the Bank Investors of an undivided percentage
ownership interest in Receivables hereunder (including, without limitation, as a
result of any reinvestment of Collections in Transferred Interests pursuant to
Section 2.2(b) and 2.5).
"Transfer Certificate" has the meaning specified in Section
2.2(a) hereof.
"Transfer Date" means, with respect to each Transfer, the
Business Day on which such Transfer is made.
"Transfer Price" means with respect to any Incremental
Transfer, the amount paid to the Transferor by the Company or the Bank Investors
as described in the applicable Transfer Certificate.
"Transferor" means Shaw Funding Company, a Delaware
corporation, and its successors and permitted assigns.
"Transferor Material Adverse Effect" means a material adverse
effect on: (a) the financial condition, business, assets or operations of the
Transferor; (b) the ability of the Transferor to perform its obligations under
this Agreement or the other Transaction Documents to which it is a party; (c)
the validity, enforceability, perfection or priority of the Company's, the Bank
Investors' or the Agent's interest in the Transferred Interest; or (d) the
collectability or enforceability of a significant portion of the Receivables.
"Transferred Interest" means, at any time of determination, an
undivided percentage ownership interest in (i) each and every then outstanding
Receivable, (ii) all Related Security with respect to each such Receivable,
(iii) all Collections with respect thereto, and (iv) other Proceeds of the
foregoing, which undivided ownership interest shall be equal to the Percentage
Factor at such time, and only at such time (without regard to prior
calculations). The Transferred Interest in each Receivable, together with
Related Security, Collections and Proceeds with respect thereto, shall at all
times be equal to the Transferred Interest in each other Receivable, together
with Related Security, Collections and Proceeds with respect thereto. To the
extent that the Transferred Interest shall decrease as a result of a
recalculation of the Percentage Factor, the Agent, on behalf of the Company or
the Bank Investors, as applicable, shall be considered to have reconveyed to the
Transferor an undivided percentage ownership interest in each Receivable,
together with Related Security, Collections and Proceeds with respect thereto,
in an amount equal to such decrease such that in each case the Transferred
Interest in each Receivable shall be equal to the Transferred Interest in each
other Receivable.
"Translation Adjustment Reserve" means the product of (i) 0.10
and (ii) the Outstanding Balance of Eligible Receivables due and payable in
Canadian dollars.
"UCC" means, with respect to any state, the Uniform Commercial
Code as from time to time in effect in such state.
<PAGE>
"U.S." or "United States" means the United States of America.
"Year 2000 Compliant" has the meaning specified in Section
3.3(l) hereof.
SECTION 1.2. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
SECTION 1.3. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including", the words "to" and "until" each means "to but excluding", and the
word "within" means "from and excluding a specified date and to and including a
later specified date".
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. Facility. Upon the terms and subject to the
conditions herein set forth, provided that the Termination Date shall not have
occurred, (x) the Transferor may, at its option, convey, transfer and assign to
the Agent, on behalf of the Company or the Bank Investors, as applicable, and
(y) the Agent, on behalf of the Company may, at the Company's option, or the
Agent, on behalf of the Bank Investors, shall, if so requested, accept such
conveyance, transfer and assignment from the Transferor of, without recourse
except as provided herein, undivided percentage ownership interests in the
Receivables, together with Related Security, Collections and Proceeds with
respect thereto, from time to time. By accepting any conveyance, transfer and
assignment hereunder, none of the Company, any Bank Investor or the Agent
assumes or shall have any obligations or liability under any of the Contracts,
all of which shall remain the obligations and liabilities of the Transferor and
the Seller.
<PAGE>
SECTION 2.2. Transfers; Certificates; Eligible Receivables (a)
Incremental Transfers. Upon the terms and subject to the conditions herein set
forth the Transferor may, at its option, convey, transfer and assign to the
Agent, on behalf of the Company or the Agent, on behalf of the Bank Investors,
as applicable, and the Agent, on behalf of the Company may, provided that the
Termination Date shall not have occurred, at the Company's option, or the Agent,
on behalf of the Bank Investors, provided that the Termination Date shall not
have occurred and that the Bank Investors shall have previously accepted the
assignment by the Company of all of its interest in the Affected Assets, shall,
if so requested by the Transferor, accept such conveyance, transfer and
assignment from the Transferor, without recourse except as provided herein,
undivided percentage ownership interests in the Receivables, together with
Related Security, Collections and Proceeds with respect thereto (each, an
"Incremental Transfer"); provided that after giving effect to the payment to the
Transferor of such Transfer Price the sum of the Net Investment plus, in the
case where the Transferred Interest is held by the Agent on behalf of the
Company, the Interest Component of all outstanding Related Commercial Paper,
would not exceed the Facility Limit; and, provided further, that the
representations and warranties set forth in Section 3.1 (other than those
representations and warranties which by their terms relate solely to an earlier
date) shall be true and correct (subject only to such qualifications or
exceptions as shall have been disclosed to, and consented to by, the Agent in
writing) both immediately before and immediately after giving effect to any such
Incremental Transfer and the payment to the Transferor of the Transfer Price
related thereto and an Investor Report shall have been delivered with respect to
such Incremental Transfer as required by Section 3.2 hereof.
<PAGE>
The Transferor shall, by notice to the Agent given by
telecopy, offer to convey, transfer and assign to the Agent, on behalf of the
Company or the Bank Investors, as applicable, undivided percentage ownership
interests in the Receivables and the other Affected Assets relating thereto at
least three (3) Business Days prior to the proposed date of any Incremental
Transfer (or, in the case of the initial Incremental Transfer, one (1) Business
Day prior to such Incremental Transfer). Each such notice shall specify (w)
whether such request is made to the Agent, on behalf of the Company or on behalf
of the Bank Investors (it being understood and agreed that once any Transferred
Interest hereunder is acquired on behalf of the Bank Investors, the Agent, on
behalf of Bank Investors, shall be required to purchase all Transferred
Interests held by the Agent on behalf of the Company in accordance with Section
9.9 and thereafter no additional Incremental Transfers shall be acquired on
behalf of the Company hereunder), (x) the desired Transfer Price (which shall be
at least $5,000,000 or integral multiples of $1,000,000 in excess thereof) or,
to the extent that the then available unused portion of the Facility Limit is
less than such amount, such lesser amount equal to such available portion of the
Facility Limit), (y) the desired date of such Incremental Transfer and (z) the
desired Tranche Period(s) and allocations of the Net Investment of such
Incremental Transfer thereto as required by Section 2.3. The Agent will promptly
notify the Company or each of the Bank Investors, as the case may be, of the
Agent's receipt of any request for an Incremental Transfer to be made to the
Agent on behalf of such Person. To the extent that any such Incremental Transfer
is requested of the Agent, on behalf of the Company, the Company shall instruct
the Agent to accept or reject such offer by notice given to the Transferor and
the Agent by telephone or telecopy by no later than the close of its business on
the Business Day following its receipt of any such request. Each notice of
proposed Transfer shall be irrevocable and binding on the Transferor and,
provided that the certificate described in the last sentence of this paragraph
is delivered to the Transferor in timely fashion, the Transferor shall indemnify
the Company and each Bank Investor against any loss or expense actually incurred
by the Company or any Bank Investor, either directly or indirectly (including,
in the case of the Company, through the Liquidity Provider Agreement) as a
result of any failure by the Transferor to complete such Incremental Transfer
(except to the extent the Transferor has selected a BR Tranche Period for such
Incremental Transfer) including, without limitation, any loss (including loss of
anticipated profits) or expense incurred by the Company or any Bank Investor,
either directly or indirectly (including, in the case of the Company, pursuant
to the Liquidity Provider Agreement) by reason of the liquidation or
reemployment of funds acquired by the Company (or the Liquidity Provider) or any
Bank Investor (including, without limitation, funds obtained by issuing
commercial paper or promissory notes or obtaining deposits as loans from third
parties) for the Company or any Bank Investor to fund such Incremental Transfer.
The Company or each Bank Investor (as applicable) incurring such loss or expense
shall deliver a certificate setting forth the calculation of such losses and
expenses to the Transferor within ten (10) days after the failure of the
Transferor to complete such Incremental Transfer.
On the date of the initial Incremental Transfer, the Agent, on
behalf of the Company or the Bank Investors, as applicable, shall deliver
written confirmation to the Transferor of the Transfer Price, the Tranche
Period(s) and the Tranche Rate(s) relating to such Transfer and the Transferor
shall deliver to the Agent the Transfer Certificate in the form of Exhibit F
hereto (the "Transfer Certificate"). The Agent shall indicate the amount of the
initial Incremental Transfer together with the date thereof on the grid attached
to the Transfer Certificate. On the date of each subsequent Incremental
Transfer, the Agent shall send written confirmation to the Transferor of the
Transfer Price, the Tranche Period(s), the Transfer Date and the Tranche Rate(s)
applicable to such Incremental Transfer. The Agent shall indicate the amount of
the Incremental Transfer together with the date thereof as well as any decrease
in the Net Investment on the grid attached to the Transfer Certificate. The
Transfer Certificate shall evidence the Incremental Transfers. Following each
Incremental Transfer, the Company shall deposit to the Transferor's account at
the location indicated in Section 10.3 hereof, in immediately available funds,
an amount equal to the Transfer Price for such Incremental Transfer made to the
Company and the Bank Investors, respectively.
<PAGE>
By no later than 11:00 a.m. (New York time) on any Transfer
Date, the Company or each Bank Investor, as the case may be, shall remit its
share (which, in the case of an Incremental Transfer to the Bank Investors,
shall be equal to such Bank Investor's Pro Rata Share) of the aggregate Transfer
Price for such Transfer to the account of the Agent specified therefor from time
to time by the Agent by notice to such Persons. The obligation of each Bank
Investor to remit its Pro Rata Share of any such Transfer Price shall be several
from that of each other Bank Investor, and the failure of any Bank Investor to
so make such amount available to the Agent shall not relieve any other Bank
Investor of its obligation hereunder. Following each Incremental Transfer and
the Agent's receipt of funds from the Company or the Bank Investors as
aforesaid, the Agent shall remit the Transfer Price to the Transferor's account
at the location indicated in Section 10.3 hereof, in immediately available
funds, an amount equal to the Transfer Price for such Incremental Transfer.
Unless the Agent shall have received notice from the Company or any Bank
Investor, as applicable, that such Person will not make its share of any
Transfer Price relating to any Incremental Transfer available on the applicable
Transfer Date therefor, the Agent may (but shall have no obligation to) make the
Company's or any such Bank Investor's share of any such Transfer Price available
to the Transferor in anticipation of the receipt by the Agent of such amount
from the Company or such Bank Investor. To the extent the Company or any such
Bank Investor fails to remit any such amount to the Agent after any such advance
by the Agent on such Transfer Date, the Company or such Bank Investor, on the
one hand, and the Transferor, on the other hand, shall be required to pay such
amount, together with interest thereon at a per annum rate equal to the Federal
funds rate (as determined in accordance with clause (ii) of the definition of
"Base Rate"), in the case of the Company or any such Bank Investor, or the Base
Rate, in the case of the Transferor, to the Agent upon its demand therefor
(provided that the Company shall have no obligation to pay such interest amounts
except to the extent that it shall have sufficient funds to pay the face amount
of its Commercial Paper in full). Until such amount shall be repaid, such amount
shall be deemed to be Net Investment paid by the Agent and the Agent shall be
deemed to be the owner of a Transferred Interest hereunder. Upon the payment of
such amount to the Agent (x) by the Transferor, the amount of the aggregate Net
Investment shall be reduced by such amount or (y) by the Company or such Bank
Investor, such payment shall constitute such Person's payment of its share of
the applicable Transfer Price for such Transfer.
(b) Reinvestment Transfers. On each Business Day occurring
after the initial Incremental Transfer hereunder and prior to the Termination
Date, the Transferor hereby agrees to convey, transfer and assign to the Agent,
on behalf of the Company or the Bank Investors, and in consideration of
Transferor's agreement to maintain at all times prior to the Termination Date a
Net Receivables Balance in an amount at least sufficient to maintain the
Percentage Factor at an amount not greater than the Maximum Percentage Factor,
the Agent, on behalf of the Company may, and the Agent, on behalf of the Bank
Investors shall agree to purchase from the Transferor undivided percentage
ownership interests in each and every Receivable, together with Related
Security, Collections and Proceeds with respect thereto, to the extent that
Collections are available for such Transfer in accordance with Section 2.5
hereof, such that after giving effect to such Transfer, (i) the amount of the
Net Investment at the close of business on such Business Day shall be equal to
the amount of the Net Investment at the close of the business on the Business
Day immediately preceding such Business Day plus the Transfer Price of any
Incremental Transfer made on such day, if any, and (ii) the Transferred Interest
in each Receivable, together with Related Security, Collections and Proceeds
with respect thereto, shall be equal to the Transferred Interest in each other
Receivable, together with Related Security, Collections and Proceeds with
respect thereto.
(c) All Transfers. Each Transfer shall constitute a purchase
by the Agent, on behalf of the Company or the Bank Investors, as applicable, of
undivided percentage ownership interests in each and every Receivable, together
with Related Security, Collections and Proceeds with respect thereto, then
existing, as well as in each and every Receivable, together with Related
Security, Collections and Proceeds with respect thereto, which arises at any
time after the date of such Transfer. The Agent's aggregate undivided percentage
ownership interest in the Receivables, together with the Related Security,
Collections and Proceeds with respect thereto, held on behalf of the Company or
the Bank Investors, as applicable, shall equal the Percentage Factor in effect
from time to time. The Agent shall hold the Transferred Interests on behalf of
the Company and each Bank Investor in accordance with each of the Company's and
each Bank Investor's percentage interest in the Transferred Interest (determined
on the basis of the relationship that the portion of the Net Investment funded
by such Person bears to the aggregate Net Investment of the Company and all of
the Bank Investors at such time).
<PAGE>
(d) Certificate. The Transferor shall issue to the Agent the
Certificate, in the form of Exhibit M, on or prior to the date hereof.
(e) Percentage Factor. The Percentage Factor shall be
initially computed as of the opening of business of the Collection Agent on the
date of the initial Incremental Transfer hereunder. Thereafter until the
Termination Date, the Percentage Factor shall be automatically recomputed as of
the close of business of the Collection Agent on each day (other than a day
after the Termination Date). The Percentage Factor shall remain constant from
the time as of which any such computation or recomputation is made until the
time as of which the next such recomputation, if any, shall be made. The
Percentage Factor, as computed as of the day immediately preceding the
Termination Date shall remain constant at all times on and after the Termination
Date until the date on which the Net Investment has been reduced to zero, and
all accrued Discount and Servicing Fees have been paid in full and all other
Aggregate Unpaids have been paid in full.
SECTION 2.3. Selection of Tranche Periods and Tranche Rates.
(a) Prior to the Termination Date; Transferred Interest held
on behalf of the Company. At all times hereafter, but prior to the Termination
Date and not with respect to any portion of the Transferred Interest held on
behalf of the Bank Investors (or any of them), the Transferor may, subject to
the Company's approval and the limitations described below, request Tranche
Periods and allocate a portion of the Net Investment to each selected Tranche
Period, so that the aggregate amounts allocated to outstanding Tranche Periods
at all times shall equal the Net Investment held on behalf of the Company. The
Transferor shall give the Company irrevocable notice by telephone of the new
requested Tranche Period(s) at least three (3) Business Days prior to the
expiration of any then existing Tranche Period; provided, however, that the
Company may select, in its sole discretion, any such new Tranche Period if (i)
the Transferor fails to provide such notice on a timely basis or (ii) the
Company determines, in its sole discretion, that the Tranche Period requested by
the Transferor is unavailable or for any reason commercially undesirable. The
Company confirms that it is its intention to allocate all or substantially all
of the Net Investment held on behalf of it to one or more CP Tranche Periods;
provided that the Company may determine, from time to time, in its sole
discretion, that funding such Net Investment by means of one or more CP Tranche
Periods is not possible or is not desirable for any reason. If the Liquidity
Provider acquires from the Company a Purchased Interest with respect to the
Receivables pursuant to the terms of the Liquidity Provider Agreement,
NationsBank, on behalf of the Liquidity Provider, may exercise the right of
selection granted to the Company hereby. The initial Tranche Period applicable
to any such Purchased Interest shall be a period of not greater than 14 days and
such Tranche shall be a BR Tranche. Thereafter, provided that the Termination
Date shall not have occurred, the Tranche Period applicable thereto shall be the
BR Rate or the Eurodollar Rate, as determined by NationsBank. In the case of any
Tranche Period outstanding upon the Termination Date, such Tranche Period shall
end on such date.
<PAGE>
(b) After the Termination Date; Transferred Interest Held on
behalf of the Company. At all times on and after the Termination Date, with
respect to any portion of the Transferred Interest which shall be held by the
Agent on behalf of the Company, the Company or NationsBank, as applicable, shall
select all Tranche Periods and Tranche Rates applicable thereto.
(c) Prior to the Termination Date; Transferred Interest Held
on Behalf of Bank Investor. At all times with respect to any portion of the
Transferred Interest held by the Agent on behalf of the Bank Investors, but
prior to the Termination Date, the initial Tranche Period applicable to such
portion of the Net Investment allocable thereto shall be a period of not greater
than 14 days and such Tranche shall be a BR Tranche. Thereafter, with respect to
such portion, and with respect to any other portion of the Transferred Interest
held on behalf of the Bank Investors (or any of them), provided that the
Termination Date shall not have occurred, the Tranche Period applicable thereto
shall be, at the Transferor's option, either a BR Tranche or a Eurodollar
Tranche. The Transferor shall give the Agent irrevocable notice by telephone of
the new requested Tranche Period at least three (3) Business Days prior to the
expiration of any then existing Tranche Period. In the case of any Tranche
Period outstanding upon the occurrence of the Termination Date, such Tranche
Period shall end on the date of such occurrence.
(d) After the Termination Date; Transferred Interest Held on
behalf of Bank Investor. At all times on and after the Termination Date, with
respect to any portion of the Transferred Interest held by the Agent on behalf
of the Bank Investors, the Agent shall select all Tranche Periods and Tranche
Rates applicable thereto.
(e) Eurodollar Rate Protection; Illegality. (i) If the Agent
is unable to obtain on a timely basis the information necessary to determine the
LIBOR Rate for any proposed Eurodollar Tranche, then
(A) the Agent shall forthwith notify the
Company or Bank Investors, as applicable, and the Transferor
that the Eurodollar Rate cannot be determined for such
Eurodollar Tranche, and
(B) while such circumstances exist, none of
the Company, the Bank Investors or the Agent shall allocate
the Net Investment of any additional Transferred Interests
purchased during such period or reallocate the Net Investment
allocated to any then existing Tranche ending during such
period, to a Eurodollar Tranche.
<PAGE>
(ii) If, with respect to any outstanding Eurodollar Tranche,
the Company or any of the Bank Investors on behalf of which the Agent holds any
Transferred Interest therein notifies the Agent that it is unable to obtain
matching deposits in the London interbank market to fund its purchase or
maintenance of such Transferred Interest or that the Eurodollar Rate applicable
to such Transferred Interest will not adequately reflect the cost to the Person
of funding or maintaining its respective Transferred Interest for such Tranche
Period then the Agent shall forthwith so notify the Transferor, whereupon
neither the Agent nor the Company or the Bank Investors, as applicable, shall,
while such circumstances exist, allocate any Net Investment of any additional
Transferred Interest purchased during such period or reallocate the Net Interest
allocated to any Tranche Period ending during such period, to a Eurodollar
Tranche.
(iii) Notwithstanding any other provision of this Agreement,
if the Company or any of the Bank Investors, as applicable, shall notify the
Agent that such Person has determined (or has been notified by any Liquidity
Provider) that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful (either for the Company, such Bank
Investor, or such Liquidity Provider, as applicable), or any central bank or
other governmental authority asserts that it is unlawful, for the Company, such
Bank Investor or such Liquidity Provider, as applicable, to fund the purchases
or maintenance of Transferred Interests at the Eurodollar Rate, then (x) as of
the effective date of such notice from such Person to the Agent, the obligation
or ability of the Company or such Bank Investor, as applicable, to fund its
purchase or maintenance of Transferred Interests at the Eurodollar Rate shall be
suspended until such Person notifies the Agent that the circumstances causing
such suspension no longer exist and (y) the Net Investment of each Eurodollar
Tranche in which such Person owns an interest shall either (1) if such Person
may lawfully continue to maintain such Transferred Interest at the Eurodollar
Rate until the last day of the applicable Tranche Period, be reallocated on the
last day of such Tranche Period to another Tranche Period in respect of which
the Net Investment allocated thereto accrues Discount at a Tranche Rate other
than the Eurodollar Rate or (2) if such Person shall determine that it may not
lawfully continue to maintain such Transferred Interest at the Eurodollar Rate
until the end of the applicable Tranche Period, such Person's share of the Net
Investment allocated to such Eurodollar Tranche shall be deemed to accrue
Discount at the Base Rate from the effective date of such notice until the end
of such Tranche Period.
<PAGE>
SECTION 2.4. Discount, Fees and Other Costs and
Expenses. Notwithstanding the limitation on recourse under Section 2.1
hereof, the Transferor shall pay, as and when due in accordance with
this Agreement, all fees hereunder, Discount (including Discount due
the Company or any Bank Investor), all amounts payable pursuant to
Article VIII hereof, if any, and the Servicing Fees. On the last day of
each Tranche Period, the Transferor shall pay to the Agent, on behalf
of the Company or the Bank Investors, as applicable, an amount equal to
the accrued and unpaid Discount for such Tranche Period together with,
in the event the Transferred Interest is held on behalf of the Company,
an amount equal to the discount accrued on the Company's Commercial
Paper to the extent such Commercial Paper was issued in order to fund
the Transferred Interest in an amount in excess of the Transfer Price
of an Incremental Transfer. The Transferor shall pay to the Agent, on
behalf of the Company, on each day on which Related Commercial Paper is
issued by the Company, the Dealer Fee. Discount shall accrue with
respect to each Tranche on each day occurring during the Tranche Period
related thereto. Nothing in this Agreement shall limit in any way the
obligations of the Transferor to pay the amounts set forth in this
Section 2.4.
SECTION 2.5. Non-Liquidation Settlement and
Reinvestment Procedures. On each day after the date of any Incremental
Transfer but prior to the Termination Date and provided that no
Potential Termination Event shall have occurred and be continuing, the
Collection Agent shall out of the Percentage Factor of Collections
received on or prior to such day and not previously applied or
accounted for: (i) set aside and hold in trust for the Agent, on behalf
of the Company or the Bank Investors, as applicable (or deposit into
the Collection Account if so required pursuant to Section 2.12 hereof)
an amount equal to all Discount and the Servicing Fee accrued through
such day and not so previously set aside or paid and (ii) apply the
balance of such Percentage Factor of Collections remaining after
application of Collections as provided in clause (i) of this Section
2.5 hereof to the Transferor, for the benefit of the Agent, on behalf
of the Company or the Bank Investors, as applicable, to the purchase of
additional undivided percentage interests in each Receivable pursuant
to Section 2.2(b) hereof. On the last day of each Tranche Period, from
the amounts set aside as described in clause (i) of the first sentence
of this Section 2.5 hereof, the Collection Agent shall deposit to the
Agent's account, for the benefit of the Company or the Bank Investors,
as applicable, an amount equal to the accrued and unpaid Discount for
such Tranche Period and shall deposit to its own account an amount
equal to the accrued and unpaid Servicing Fee for such Tranche Period.
The Agent, upon its receipt of such amounts in the Agent's account,
shall distribute such amounts to the Company and/or the Bank Investors
entitled thereto as set forth above; provided that if the Agent shall
have insufficient funds to pay all of the above amounts in full on any
such date, the Agent shall pay such amounts ratably (based on the
amounts owing to each such Person) to all such Persons entitled to
payment thereof. In addition, the Collection Agent shall remit to the
Transferor at the end of each Tranche Period, such portion of
Collections not allocated to the Agent, on behalf of Company or the
Bank Investors, as applicable.
<PAGE>
SECTION 2.6. Liquidation Settlement Procedures. If at
any time on or prior to the Termination Date, the Percentage Factor is
greater than the Maximum Percentage Factor, then the Transferor shall
immediately pay to the Agent, for the benefit of the Company or the
Bank Investors, as applicable, from previously received Collections, an
amount equal to the amount such that, when applied in reduction of the
Net Investment, will result in a Percentage Factor less than or equal
to the Maximum Percentage Factor. Such amount shall be applied to the
reduction of the Net Investment of Tranche Periods selected by the
Agent. On the Termination Date and on each day thereafter, and on each
day on which a Potential Termination Event has occurred and is
continuing, the Collection Agent shall set aside and hold in trust for
the Agent, on behalf of the Company or the Bank Investors, as
applicable (or deposit into the Collection Account if so required
pursuant to Section 2.12 hereof) the Percentage Factor of all
Collections received on such day and shall set aside and hold in trust
for the Transferor such portion of Collections not allocated to the
Agent, on behalf of the Company or the Bank Investors, as applicable.
On the Termination Date or the day on which a Potential Termination
Event occurs, the Collection Agent shall deposit to the Agent's
account, for the benefit of the Company or the Bank Investors, as
applicable, any amounts set aside pursuant to Section 2.5 above. On the
last day of each Tranche Period to occur on or after the Termination
Date or during the continuance of a Potential Termination Event, the
Collection Agent shall deposit to the Agent's account to the extent not
already so deposited, for the benefit of the Company or the Bank
Investors, as applicable, the amounts so set aside for the Agent, on
behalf of the Company or the Bank Investors, pursuant to the second
preceding sentence, but not to exceed the sum of (i) the accrued
Discount for such Tranche Period, (ii) the portion of the Net
Investment allocated to such Tranche Period, and (iii) all other
Aggregate Unpaids. On such day, the Collection Agent shall deposit to
its account, from the amounts set aside for the Company and the Bank
Investors pursuant to the preceding sentence which remain after payment
in full of the aforementioned amounts, the accrued Servicing Fee for
such Tranche Period. If there shall be insufficient funds on deposit
for the Collection Agent to distribute funds in payment in full of the
aforementioned amounts, the Collection Agent shall distribute funds
first, in payment of the accrued Discount, second, if the Transferor,
the Seller or any Affiliate of the Transferor or the Seller is not then
the Collection Agent, to the Collection Agent's account, in payment of
the Servicing Fee payable to the Collection Agent, third, in reduction
of the Net Investment allocated to any Tranche Period ending on such
date, fourth, in payment of all fees payable by the Transferor
hereunder, fifth, in payment of all other Aggregate Unpaids and sixth,
if the Transferor, the Seller or any Affiliate of the Transferor or the
Seller is the Collection Agent, to its account as Collection Agent, in
payment of the Servicing Fee payable to such Person as Collection
Agent. The Agent, upon its receipt of such amounts in the Agent's
account, shall distribute such amounts to the Company and/or the Bank
Investors entitled thereto as set forth above; provided that if the
Agent shall have insufficient funds to pay all of the above amounts in
full on any such date, the Agent shall pay such amounts in the order of
priority set forth above and, with respect to any such category above
for which the Agent shall have insufficient funds to pay all amounts
owing on such date, ratably (based on the amounts in such categories
owing to such Persons) among all such Persons entitled to payment
thereof.
<PAGE>
Following the date on which the Net Investment has
been reduced to zero, all accrued Discount and Servicing Fees have been
paid in full and all other Aggregate Unpaids have been paid in full,
(i) the Collection Agent shall recompute the Percentage Factor, (ii)
the Agent, on behalf of the Company and the Bank Investors, shall be
considered to have reconveyed to the Transferor all of the Agent's
right, title and interest in and to the Affected Assets (including the
Transferred Interest), (iii) the Collection Agent shall pay to the
Transferor any remaining Collections set aside and held by the
Collection Agent pursuant to the third sentence of this Section 2.6 and
(iv) the Agent, on behalf of the Company and the Bank Investors, shall
execute and deliver to the Transferor, at the Transferor's expense,
such documents or instruments as are necessary or reasonably requested
by the Transferor to terminate the Agent's interests in the Affected
Assets. Any such documents shall be prepared by or on behalf of the
Transferor. On the last day of each Tranche Period, the Collection
Agent shall remit to the Transferor such portion of Collections set
aside for the Transferor pursuant to this Section 2.6.
SECTION 2.7. Fees. Notwithstanding any limitation
on recourse contained in this Agreement, the Transferor shall pay the
following non-refundable fees:
(a) On the Investor Report Date, to the
Company solely for its own account, the Program Fee and the
Administration Fee, and to the Administrative Agent, on behalf
of the Bank Investors, the Facility Fee.
(b) On the date of execution and delivery
hereof, to the Administrative Agent solely for its own
account, the Arrangement Fee.
<PAGE>
SECTION 2.8. Protection of Ownership Interest of the
Company and the Bank Investors. (a) The Transferor agrees that it will,
and will cause the Seller to, from time to time, at its expense,
promptly execute and deliver all instruments and documents and take all
actions as may be necessary or as the Agent may reasonably request in
order to perfect or protect the Transferred Interest or to enable the
Agent, the Company or the Bank Investors to exercise or enforce any of
their respective rights hereunder. Without limiting the foregoing, the
Transferor will, and will cause the Seller to, upon the request of the
Agent, the Company or any of the Bank Investors, in order to accurately
reflect this purchase and sale transaction, (x) execute and file such
financing or continuation statements or amendments thereto or
assignments thereof as may be requested by the Agent, the Company or
any of the Bank Investors and (y) to the extent reasonably practicable,
mark its respective master data processing records and other documents
with a legend describing the conveyance to the Transferor of the
Receivables (in the case of the Seller) and to the Agent, for the
benefit of the Company and the Bank Investors, of the Transferred
Interest. The Transferor shall, and will cause the Seller to, upon
request of the Agent, the Company or any of the Bank Investors obtain
such additional search reports as the Agent, the Company or any of the
Bank Investors shall reasonably request. To the fullest extent
permitted by applicable law, the Agent shall be permitted to sign and
file continuation statements and amendments thereto and assignments
thereof without the Transferor's or the Seller's signature. Carbon,
photographic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement. The Transferor
shall not, and shall not permit the Seller to, change its respective
name, identity or corporate structure (within the meaning of Section
9-402(7) of the UCC as in effect in the States of New York and Georgia)
nor relocate its respective chief executive office or any office where
Records are kept unless it shall have: (i) given the Agent at least ten
(10) days prior notice thereof and (ii) prepared at Transferor's
expense and delivered to the Agent all financing statements,
instruments and other documents necessary to preserve and protect the
Transferred Interest or requested by the Agent in connection with such
change or relocation. Any filings under the UCC or otherwise that are
occasioned by such change in name or location shall be made at the
expense of Transferor.
(b) The Collection Agent shall instruct all Obligors to cause
all Collections to be deposited directly with a Lock-Box Bank. Any
Lock-Box Account maintained by a Lock-Box Bank pursuant to the related
Lock-Box Agreement shall be under the exclusive ownership and control
of the Agent which is hereby granted to the Agent by the Seller and the
Transferor. The Collection Agent shall be permitted to give
instructions to the Lock-Box Banks for so long as it shall not have
received written notice of the occurrence of either a Collection Agent
Default or any other Termination Event, provided that, upon its receipt
of written notice from the Agent that such Collection Agent Default or
Termination Event is waived in accordance with the provisions of this
Agreement, the right of the Collection Agent to give such instructions
shall be restored. The Collection Agent shall not add any bank as a
Lock-Box Bank to those listed on Exhibit C attached hereto unless such
bank has entered into a Lock-Box Agreement. The Collection Agent shall
not terminate any bank as a Lock-Box Bank unless the Agent shall have
received fifteen (15) days' prior notice of such termination. If the
Transferor, the Seller or the Collection Agent receives any
Collections, the Transferor, the Seller or the Collection Agent, as
applicable, shall immediately, but in any event within two (2) Business
Days of receipt, remit (and shall cause the Seller to remit) such
Collections to a Lock-Box Account.
SECTION 2.9. Deemed Collections; Application of
Payments. (a) If on any day the Outstanding Balance of a Receivable is
either (x) reduced or canceled as a result of any defective, rejected
or returned merchandise or services, any discount, credit, rebate,
dispute, warranty claim, repossessed or returned goods, chargeback,
allowance, any billing adjustment, dilutive factor or other adjustment,
or (y) reduced or canceled as a result of a setoff or offset in respect
of any claim by any Person (whether such claim arises out of the same
or a related transaction or an unrelated transaction), the Transferor
shall be deemed to have received on such day a Collection of such
Receivable in the amount of such reduction or cancellation and the
Transferor shall pay to the Collection Agent an amount equal to such
reduction or cancellation and such amount shall be applied by the
Collection Agent as a Collection in accordance with Section 2.5 or 2.6
hereof, as applicable, provided, that prior to the Commitment
Termination Date, such amount shall not be required to be actually paid
by the Transferor if the exclusion of such Receivable from the
calculation of the Percentage Factor would not cause the Percentage
Factor to exceed the Maximum Percentage Factor. Whenever such amount
referred to above is paid by the Transferor, the Net Investment shall
be reduced by the amount of such payment applied to the reduction of
the Net Investment and actually received by the Agent.
<PAGE>
(b) If on any day any of the representations or warranty in
Article III was or becomes untrue with respect to a Receivable (whether
on or after the date of any transfer of an interest therein to the
Agent, the Company or the Bank Investors as contemplated hereunder),
the Transferor shall be deemed to have received on such day a
Collection of such Receivable in full and the Transferor shall on such
day pay to the Collection Agent an amount equal to the Outstanding
Balance of such Receivable and such amount shall be allocated and
applied by the Collection Agent as a Collection allocable to the
Transferred Interest in accordance with Section 2.5 or 2.6 hereof, as
applicable, provided, that prior to the Commitment Termination Date,
such amount shall not be required to be actually paid by the Transferor
if the exclusion of such Receivable from the calculation of the
Percentage Factor would not cause the Percentage Factor to exceed the
Maximum Percentage Factor. The Net Investment shall be reduced by the
amount of such payment applied to the reduction of the Net Investment
and actually received by the Agent.
(c) Any payment by an Obligor in respect of any indebtedness
owed by it to the Transferor or the Seller shall, except as otherwise
specified by such Obligor or otherwise required by contract or law and
unless otherwise instructed by the Agent, be applied as a Collection of
any Receivable of such Obligor included in the Transferred Interest
(starting with the oldest such Receivable) to the extent of any amounts
then due and payable thereunder before being applied to any other
receivable or other indebtedness of such Obligor.
SECTION 2.10. Payments and Computations, Etc. All
amounts to be paid or deposited by the Transferor or the Collection
Agent hereunder shall be paid or deposited in accordance with the terms
hereof no later than 11:00 a.m. (New York City time) on the day when
due in immediately available funds; if such amounts are payable to the
Agent (whether on behalf of the Company or any Bank Investor or
otherwise) they shall be paid or deposited in the account indicated in
Section 10.3 hereof, until otherwise notified by the Agent. The
Transferor shall, to the extent permitted by law, pay to the Agent, for
the benefit of the Company and the Bank Investors upon demand, interest
on all amounts not paid or deposited when due hereunder at a rate equal
to 2% per annum plus the Base Rate. All computations of Discount,
interest and all per annum fees hereunder shall be made on the basis of
a year of 360 days for the actual number of days (including the first
but excluding the last day) elapsed. Any computations by the Agent of
amounts payable by the Transferor hereunder shall be binding upon the
Transferor absent manifest error.
SECTION 2.11. Reports. (a) Prior to the twenty-second
(22nd) day of each calendar month, the Collection Agent shall prepare
and forward to the Agent and the Administrative Agent (i) an Investor
Report as of the end of the last day of the immediately preceding
Fiscal Month, (ii) if requested by the Agent or the Administrative
Agent, a listing by Obligor of all Receivables together with an aging
of such Receivables and (iii) such other information as the Agent or
the Administrative Agent may reasonably request.
<PAGE>
(b) On each Investor Report Date, the Collection Agent shall
prepare and forward to the Administrative Agent and the Agent a
certification as to the Net Receivables Balance, the Percentage Factor
and such other information as the Agent may request from time to time
as at the close of business on the immediately preceding Business Day.
SECTION 2.12. Collection Account. There shall be
established on the day of the initial Incremental Transfer hereunder
and maintained with the Agent, a segregated account (the "Collection
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Agent, on behalf of
the Company and the Bank Investors. During the existence of a
Collection Agent Default or a Termination Event, the Collection Agent
shall remit daily within forty-eight hours of receipt to the Collection
Account all Collections received with respect to any Receivables. Funds
on deposit in the Collection Account (other than investment earnings)
shall be invested by the Agent in Eligible Investments that will mature
so that such funds will be available prior to the last day of each
successive Tranche Period following such investment. On the last day of
each Tranche Period, all interest and earnings (net of losses and
investment expenses) on funds on deposit in the Collection Account
shall be retained in the Collection Account and be available to make
any payments required to be made hereunder (including Discount) by the
Transferor. On the date on which the Net Investment is zero, all
accrued Discount and Servicing Fees have been paid in full and all
other Aggregate Unpaids have been paid in full, any funds remaining on
deposit in the Collection Account shall be paid to the Transferor.
SECTION 2.13. Sharing of Payments, Etc. If the
Company or any Bank Investor (for purposes of this Section only, being
a "Recipient") shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of setoff, or otherwise)
on account of Transferred Interest owned by it (other than pursuant to
Section 2.7, or Article VIII and other than as a result of the
differences in the timing of the applications of Collections pursuant
to Section 2.5 or 2.6) in excess of its ratable share of payments on
account of Transferred Interest obtained by the Company and/or the Bank
Investors entitled thereto, such Recipient shall forthwith purchase
from the Company and/or the Bank Investors entitled to a share of such
amount participations in the Percentage Interests owned by such Persons
as shall be necessary to cause such Recipient to share the excess
payment ratably with each such other Person entitled thereto; provided,
however, that if all or any portion of such excess payment is
thereafter recovered from such Recipient, such purchase from each such
other Person shall be rescinded and each such other Person shall repay
to the Recipient the purchase price paid by such Recipient for such
participation to the extent of such recovery, together with an amount
equal to such other Person's ratable share (according to the proportion
of (a) the amount of such other Person's required payment to (b) the
total amount so recovered from the Recipient) of any interest or other
amount paid or payable by the Recipient in respect of the total amount
so recovered.
<PAGE>
SECTION 2.14. Right of Setoff. Without in any way
limiting the provisions of Section 2.13, each of the Company and the
Bank Investors is hereby authorized (in addition to any other rights it
may have) at any time after the occurrence of the Termination Date or
during the continuance of a Potential Termination Event to set-off,
appropriate and apply (without presentment, demand, protest or other
notice which are hereby expressly waived) any deposits and any other
indebtedness held or owing by the Company or such Bank Investor to, or
for the account of, the Transferor against the amount of the Aggregate
Unpaids owing by the Transferor to such Person or to the Agent on
behalf of such Person (even if contingent or unmatured).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the
Transferor. The Transferor represents and warrants to the Agent, the
Company and the Bank Investors that:
(a) Corporate Existence and Power. The Transferor is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate
power and all material governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in
which its business is now conducted. The Transferor is duly qualified
to do business in, and is in good standing in, every other jurisdiction
in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would
not have a Transferor Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Transferor of this
Agreement, the Receivables Purchase Agreement, the Fee Letter, the
Certificates, the Transfer Certificates and the other Transaction
Documents to which the Transferor is a party are within the
Transferor's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or
filing with, any Official Body or official thereof (except as
contemplated by Section 2.8 hereof), and do not (i) contravene (1) any
provision of applicable law, rule or regulation, the contravention of
which would have a Transferor Material Adverse Effect, (2) the
Certificate of Incorporation or Bylaws of the Transferor, or (3) any
judgment, injunction, order, writ, or decree, the contravention of
which would have a Transferor Material Adverse Effect or (ii) violate
or constitute a default under any material agreement or instrument
binding upon the Transferor or (iii) result in the creation or
imposition of any Adverse Claim on the assets of the Transferor (except
as contemplated by Section 2.8 hereof).
<PAGE>
(c) Binding Effect. Each of this Agreement, the Receivables
Purchase Agreement, the Fee Letter, the Certificates and the other
Transaction Documents to which the Transferor is a party constitutes
and the Transfer Certificate upon payment of the Transfer Price set
forth therein will constitute the legal, valid and binding obligation
of the Transferor, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
(d) Perfection. Immediately preceding each Transfer hereunder,
the Transferor shall be the owner of all of the Receivables, free and
clear of all Adverse Claims. On or prior to each Transfer and each
recomputation of the Transferred Interest, all financing statements and
other documents required to be recorded or filed in order to perfect
and protect Agent's Transferred Interest against all creditors of and
purchasers from the Transferor and the Seller will have been duly filed
in each filing office necessary for such purpose and all filing fees
and taxes, if any, payable in connection with such filings shall have
been paid in full.
(e) Accuracy of Information. All information heretofore
furnished by the Transferor (including without limitation, the Investor
Reports, any reports delivered pursuant to Section 2.11 hereof and the
Transferor's financial statements) to the Company, any Bank Investors,
the Agent or the Administrative Agent for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
such information hereafter furnished by the Transferor to the Company,
any Bank Investors, the Agent or the Administrative Agent will be
complete and correct in every material respect on the date such
information is stated or certified, to the extent necessary to give the
recipient a true and accurate knowledge of the subject matter, or, in
the case of financial statements, present fairly, in accordance with
GAAP consistently applied throughout the periods involved, the
financial position of the Transferor as at the date thereof in the
results of operations for such period. All financial projections and
other pro forma financial information delivered to the Agent and the
Bank Investors, or any of them, have been based on good faith estimates
and assumptions believed by the Transferor to be reasonable at the time
made and at the time furnished to the Agent and/or the Bank Investors.
<PAGE>
(f) Tax Status. The Transferor has filed or caused to be filed
all tax returns (federal, state and local) required to be filed by it
and has paid or made adequate provision for the payment of all taxes,
assessments and other governmental charges, if any, which it is
obligated to pay, the failure of which to file or pay (as the case may
be) would have a Transferor Material Adverse Effect; provided, however,
that this Section shall not require the payment or discharge of any
such tax, assessment, charge, levy or claim which is being contested in
good faith by appropriate proceedings which operate to suspend the
collection thereof and for which adequate reserves have been
established on the books of the Transferor in accordance with GAAP.
(g) Action, Suits. Except as set forth in Exhibit H hereof,
there are no actions, suits or proceedings pending, or to the knowledge
of the Transferor threatened, against or affecting the Transferor or
its properties, in or before any court, arbitrator or other body, which
may be, individually or in the aggregate (i) asserting the invalidity
of this Agreement or any other Transaction Document to which the
Transferor is a party, (ii) seeking to prevent the sale and assignment
of any Receivable or other Affected Assets or the consummation of any
of the other transactions contemplated by this Agreement or any other
Transaction Document to which the Transferor is a party, or (iii)
seeking any determination or ruling that would have a Transferor
Material Adverse Effect.
(h) Place of Business. The principal place of business and
chief executive office of the Transferor are located at the address of
the Transferor indicated in Section 9.3 hereof and the offices where
the Transferor keeps all its Records, are located at the address(es)
described on Exhibit I or such other locations notified to the Company
in accordance with Section 2.8 hereof in jurisdictions where all action
required by Section 2.8 hereof has been taken and completed.
(i) Good Title. Upon each Transfer and each recomputation of
the Transferred Interest, the Agent shall acquire a valid undivided
percentage ownership interest to the extent of the Transferred Interest
or a first priority perfected security interest in each Receivable that
exists on the date of such Transfer and recomputation and in the
Related Security (other than Related Security consisting of instruments
and letters of credit which will be delivered to the Agent following
the Agent's request therefor, and other than merchandise, including
returned or repossessed merchandise, provided, however, that such
merchandise is not located in any jurisdiction contemplated in Sections
4.1(i) and (j) of this Agreement) and Collections with respect thereto,
in each case free and clear of any Adverse Claim other than any Adverse
Claim arising pursuant to the Transaction Documents.
(j) Tradenames, Etc. As of the date hereof: (i) the
Transferor's chief executive office is located at the address for
notices set forth in Section 10.3 hereof; (ii) the Transferor has no
subsidiaries or divisions; and (iii) the Transferor has, within the
last five (5) years, operated only under the tradenames identified in
Exhibit J hereto, and, within the last five (5) years, has not changed
its name, merged with or into or consolidated with any other
corporation or been the subject of any proceeding under the Bankruptcy
Code, except as disclosed in Exhibit J hereto.
<PAGE>
(k) Nature of Receivables. Each Receivable (x) represented by
the Transferor or the Collection Agent to be an Eligible Receivable
(including in any Investor Report or other report delivered pursuant to
Section 2.11 hereof) or (y) included in the calculation of the Net
Receivables Balance in fact satisfies at such time the definition of
"Eligible Receivable" set forth herein.
(l) Coverage Requirement; Amount of Receivables. The
Percentage Factor does not exceed the Maximum Percentage Factor. As of
August 8, 1998, the aggregate Outstanding Balance of the Receivables in
existence was $276,459,847 and the Net Receivable Balance was
$255,023,094.
(m) Credit and Collection Policy. Since the effective date(s)
indicated thereon, there have been no material changes in the Credit
and Collection Policy other than as permitted hereunder. Since such
date, no material adverse change has occurred in the overall rate of
collection of the Receivables.
(n) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or a Potential Termination Event.
(o) Not an Investment Company. The Transferor is not, and is
not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(p) ERISA. Each of the Transferor and its ERISA Affiliates is
in compliance in all material respects with ERISA and no lien exists in
favor of the Pension Benefit Guaranty Corporation on any of the
Receivables.
(q) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C hereto (or
at such other Lock-Box Banks and/or with such other Lock-Box Accounts
as have been notified to the Collateral Agent and for which Lock-Box
Agreements have been executed in accordance with Section 2.8(b) hereof
and delivered to the Collection Agent). All Obligors have been
instructed to make payment to a Lock-Box Account and only Collections
are deposited into the Lock-Box Accounts.
(r) Bulk Sales. No transaction contemplated hereby or by the
Receivables Purchase Agreement requires compliance with any bulk sales
act or similar law.
(s) Transfers Under Receivables Purchase Agreement. Each
Receivable which has been transferred to the Transferor by the Seller
has been purchased by the Transferor from the Seller pursuant to, and
in accordance with, the terms of the Receivables Purchase Agreement.
<PAGE>
(t) Preference; Voidability. The Transferor shall have given
reasonably equivalent value to the Seller in consideration for the
transfer to the Transferor of the Receivables and Related Security from
the Seller, and each such transfer shall not have been made for or on
account of an antecedent debt owed by the Seller to the Transferor.
(u) Representations and Warranties of the Seller. Each of the
representations and warranties of the Seller set forth in Section 4.01
of the Receivables Purchase Agreement are true and correct in all
material respects and the Transferor hereby reaffirms all such
representations and warranties for the benefit of the Agent, the
Company, the Bank Investors and the Administrative Agent.
SECTION 3.2. Reaffirmation of Representations and
Warranties by the Transferor. On each day that a Transfer is made
hereunder, the Transferor, by accepting the proceeds of such Transfer,
whether delivered to the Transferor pursuant to Section 2.2(a) or
Section 2.5 hereof, shall be deemed to have certified that all
representations and warranties described in Section 3.1 hereof (other
than any representations and warranties which by their terms relate
solely to an earlier date, and subject to such qualifications and
exceptions as shall have been disclosed to, and consented to by, the
Agent in writing) are correct on and as of such day as though made on
and as of such day. Each Incremental Transfer shall be subject to the
further condition precedent that prior to the date of such Incremental
Transfer, the Collection Agent shall have delivered to the Agent and
the Administrative Agent, in form and substance satisfactory to the
Agent and the Administrative Agent, a completed Investor Report and a
Net Receivables Balance certification dated within ten (10) days prior
to the date of such Incremental Transfer (or in the case of the initial
Incremental Transfer, dated as of the Closing Date), together with a
listing by Obligor, if requested, and such additional information as
may be reasonably requested by the Administrative Agent or the Agent;
and the Transferor shall be deemed to have represented and warranted
that such conditions precedent have been satisfied.
SECTION 3.3. Representations and Warranties of the
Collection Agent. The Seller, in its capacity as Collection Agent,
represents and warrants, and the Seller shall cause any Affiliate,
should such Affiliate become the Collection Agent, to represent and
warrant, to the Company and the Bank Investors that:
(a) Corporate Existence and Power. The Collection Agent is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate
power and all material governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in
which its business is now conducted. The Collection Agent is duly
qualified to do business in, and is in good standing in, every other
jurisdiction in which the nature of its business requires it to be so
qualified, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
<PAGE>
(b) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Collection Agent of this
Agreement are within the Collection Agent's corporate powers, have been
duly authorized by all necessary corporate action, require no action by
or in respect of, or filing with, any Official Body or official
thereof, and do not (i) contravene (1) any provision of applicable law,
rule or regulation, the contravention of which would have a Material
Adverse Effect, (2) the Articles of Incorporation or Bylaws of the
Collection Agent, or (3) any judgment, injunction, order, writ or
decree, the contravention of which would have a Material Adverse
Effect, (ii) violate or constitute a default under any material
agreement or instrument binding upon the Collection Agent or (iii)
result in the creation or imposition of any Adverse Claim on the
Affected Assets of the Collection Agent other than in accordance with
the Transaction Documents.
(c) Binding Effect. This Agreement constitutes the legal,
valid and binding obligation of the Collection Agent, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of
creditors and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
(d) Accuracy of Information. All information heretofore
furnished by the Collection Agent to the Agent, the Company, any Bank
Investor or the Administrative Agent for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
such information hereafter furnished by the Collection Agent to the
Agent, the Company, any Bank Investor or the Administrative Agent will
be complete and correct in every material respect, on the date such
information is stated or certified, to the extent necessary to give the
recipient a true and accurate knowledge of the subject matter, or, in
the case of financial statements, present fairly, in accordance with
GAAP consistently applied throughout the periods involved, the
financial position of the Collection Agent and its Subsidiaries, on a
consolidated basis, as at the date thereof in the results of operations
for such period. All financial projections and other pro forma
financial information delivered to the Agent and the Bank Investors, or
any of them, have been based on good faith estimates and assumptions
believed by the Collection Agent to be reasonable at the time made and
at the time furnished to the Agent and/or the Bank Investors.
<PAGE>
(e) Action, Suits. Except as set forth in Exhibit H, there are
no actions, suits or proceedings pending, or to the knowledge of the
Collection Agent threatened, against or affecting the Collection Agent
or its properties, in or before any court, arbitrator or other body,
which may be, individually or in the aggregate, (i) asserting the
invalidity of this Agreement or any other Transaction Document to which
the Collection Agent is a party, (ii) seeking to prevent the sale and
assignment of any Receivable or other Affected Assets or the
consummation of any of the other transactions contemplated by this
Agreement or any other Transaction Document to which the Collection
Agent is a party, or (iii) seeking any determination or ruling that
would have a Material Adverse Effect.
(f) Nature of Receivables. Each Receivable included in the
calculation of the Net Receivables Balance in fact satisfies at such
time the definition of "Eligible Receivable" and is not a Receivable of
the type described in clauses (i) through (iii) of the definition of
"Net Receivables Balance".
(g) Amount of Receivables. As of August 8, 1998, the aggregate
Outstanding Balance of the Receivables in existence was $276,459,847
and the Net Receivable Balance was $255,023,094.
(h) Credit and Collection Policy. Since the effective date(s)
indicated thereon, there have been no material changes in the Credit
and Collection Policy other than as permitted hereunder. Since such
date, no material adverse change has occurred in the overall rate of
collection of the Receivables.
(i) Collections and Servicing. Since January 3, 1998, there
has been no material adverse change in the ability of the Collection
Agent to service and collect the Receivables.
(j) Not an Investment Company. The Collection Agent is not,
and is not controlled by, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(k) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C (or at such
other Lock-Box Banks and/or with such other Lock-Box Accounts as have
been notified to the Transferor and the Agent and for which Lock-Box
Agreements have been executed in accordance with Section 2.8(b) hereof
and delivered to the Collection Agent). All Obligors have been
instructed to make payment to a Lock-Box Account and only Collections
are deposited into the Lock-Box Accounts.
<PAGE>
(l) Year 2000 Compliance. The Collection Agent has (i)
initiated a review and assessment of all areas within its and each of
its Subsidiaries' business and operations (including those affected by
suppliers, vendors and customers) that could be adversely affected by
the "Year 2000 Problem" (that is, the risk that computer applications
used by the Collection Agent or any of its Subsidiaries (or suppliers,
vendors and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Based on the
foregoing, the Collection Agent believes that all computer applications
(including those of its suppliers, vendors and customers) that are
material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 Compliant"), except to the extent that a
failure to do so could not reasonably be expected (a) to have a
Material Adverse Effect, or (b) to result in a Termination Event.
The Collection Agent (i) has completed a review and
assessment of all computer applications (including, but not limited to
those of its suppliers, vendors, customers and any third party
servicers), which are related to or involved in the origination,
collection, management or servicing of the Receivables (the "Receivable
Systems") and (ii) has determined that such Receivable Systems are Year
2000 Compliant or will be Year 2000 Compliant on or before January 1,
1999 and thereafter.
The costs of all assessment, remediation, testing and
integration related to the Collection Agent's plan for becoming Year
2000 Compliant will not have a Material Adverse Effect.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing. On or prior to
the date of execution hereof, the Transferor shall deliver to the Agent
the following documents, instruments and fees all of which shall be in
a form and substance acceptable to the Agent:
(a) A copy of the resolutions of the Board of Directors of the
Transferor certified by its Secretary or Assistant Secretary approving
the execution, delivery and performance by the Transferor of this
Agreement, the Receivables Purchase Agreement and the other Transaction
Documents to be delivered by the Transferor hereunder or thereunder.
(b) A copy of the resolutions of the Board of Directors of the
Seller certified by its Secretary or Assistant Secretary approving the
execution, delivery and performance by the Seller of this Agreement,
the Receivables Purchase Agreement and the other Transactions Documents
to be delivered by the Collection Agent hereunder or thereunder.
(c) The Certificate of Incorporation of the Transferor
certified by the Secretary of State or other similar official of the
Transferor's jurisdiction of incorporation dated a date reasonably
prior to the Closing Date.
<PAGE>
(d) The Articles of Incorporation of the Seller certified by
the Secretary of State or other similar official of the Seller's
jurisdiction of incorporation dated a date reasonably prior to the
Closing Date.
(e) A Good Standing Certificate for the Transferor issued by
the Secretary of State or a similar official of the Transferor's
jurisdiction of incorporation and certificates of qualification as a
foreign corporation issued by the Secretaries of State or other similar
officials of each jurisdiction where such qualification is material to
the transactions contemplated by this Agreement and the other
Transaction Documents, in each case, dated a date reasonably prior to
the Closing Date.
(f) A Good Standing Certificate for the Seller issued by the
Secretary of State or a similar official of the Seller's jurisdiction
of incorporation and certificates of qualification as a foreign
corporation issued by the Secretaries of State or other similar
officials of each jurisdiction when such qualification is material to
the transactions contemplated by this Agreement and the Receivables
Purchase Agreement and the other Transaction Documents, in each case,
dated a date reasonably prior to the Closing Date.
(g) A Certificate of the Secretary or Assistant Secretary of
the Transferor substantially in the form of Exhibit L-1 attached
hereto.
(h) A Certificate of the Secretary or Assistant Secretary of
the Seller substantially in the form of Exhibit L-2 attached hereto.
(i) Proper financing statements (Form UCC-1) naming the
Transferor as the debtor in favor of the Agent, for the benefit of the
Company and the Bank Investors, secured party or other similar
instruments or documents as may be necessary or in the reasonable
opinion of the Agent desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the Agent's undivided
percentage interest in all Receivables and the Related Security and
Collections relating thereto.
(j) Proper financing statements (Form UCC-1) naming the Seller
as the debtor in favor of the Transferor as secured party and the
Agent, for the benefit of the Company and the Bank Investors, as
assignee of the secured party or other similar instruments or documents
as may be necessary or in the reasonable opinion of the Agent desirable
under the UCC of all appropriate jurisdictions or any comparable law to
perfect the Transferor's ownership interest in all Receivables.
(k) Proper partial release or termination statements (Form
UCC-3), if any, necessary to terminate all security interests and other
rights of any person in Receivables previously granted by Transferor.
<PAGE>
(l) Proper partial release or termination statements (Form
UCC-3), if any, necessary to terminate all security interests and other
rights of any person in Receivables previously granted by the Seller.
(m) Certified copies of request for information or copies
(Form UCC-11) (or a similar search report certified by parties
acceptable to the Agent) dated a date reasonably near the date of the
initial Incremental Transfer listing all effective financing statements
which name the Transferor or the Seller (under their respective present
names and any previous names) as debtor and which are filed in
jurisdictions in which the filings were made pursuant to items (i) or
(j) above together with copies of such financing statements (none of
which shall cover any Receivables or Contracts).
(n) Executed copies of the Lock-Box Agreements relating to
each of the Lock-Boxes and the Lock-Box Accounts.
(o) An opinion of Powell, Goldstein, Frazer & Murphy LLP,
special counsel to the Transferor and the Seller covering the matters
set forth in Exhibit K-1 hereto.
(p) An opinion of Bennie M. Laughter, Esq., General Counsel to
the Seller and the Transferor covering the matters set forth in Exhibit
K-2 hereto.
(q) An opinion of Powell, Goldstein, Frazer & Murphy LLP,
special counsel to the Transferor and the Seller, covering certain
bankruptcy and insolvency matters in form and substance satisfactory to
the Agent and Agent's counsel.
(r) A computer tape setting forth all Receivables and the
Outstanding Balances thereon and such other information as the Agent
may reasonably request.
(s) An executed copy of this Agreement, the Receivables
Purchase Agreement, the Fee Letter and each of the other Transaction
Documents to be executed by the Seller or the Transferor.
(t) The Transfer Certificate, duly executed by the Transferor.
(u) The Certificate, duly executed by the Transferor and
appropriately completed.
(v) The Arrangement Fee in accordance with Section 2.7(b).
(w) An Investor Report for the Fiscal Month ended August 8,
1998.
<PAGE>
(x) Evidence of the appointment of Corporation Service Company
as agent for process as required by Section 10.4(d) hereof.
(y) Such other documents, instruments, certificates and
opinions as the Agent or the Administrative Agent, shall reasonably
request.
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Transferor. At all times
from the date hereof to the later to occur of (i) the Termination Date
or (ii) the date on which the Net Investment has been reduced to zero,
all accrued Discount and Servicing Fees shall have been paid in full
and all other Aggregate Unpaids shall have been paid in full, in cash,
unless the Agent shall otherwise consent in writing:
(a) Financial Reporting. The Transferor will, and will cause
the Seller and each of the Transferor's and the Seller's Subsidiaries
to, maintain, for itself and each of its respective Subsidiaries, a
system of accounting established and administered in accordance with
GAAP, and furnish to the Agent:
(i) Annual Reporting. Within ninety (90) days after the close
of the Transferor's and the Seller's fiscal years, audited financial
statements, prepared in accordance with GAAP on a consolidated basis
for the Seller and its Subsidiaries and prepared on a consolidating
basis for the Transferor, in each case, including balance sheets as of
the end of such period, related statements of operations, shareholder's
equity and cash flows, accompanied (in the case of the Seller's
consolidated financial statements) by an unqualified audit report
certified by independent certified public accountants, acceptable to
the Agent, prepared in accordance with generally accepted auditing
principles and any management letter prepared by said accountants and
by a certificate of said accountants that, in the course of the
foregoing, they have obtained no knowledge of any Termination Event or
Potential Termination Event, or if, in the opinion of such accountants,
any Termination Event or Potential Termination Event shall exist,
stating the nature and status thereof.
<PAGE>
(ii) Quarterly Reporting. Within forty-five (45) days after
the close of the first three quarterly periods of each of the
Transferor's and the Seller's fiscal years, (x) for the Seller and its
Subsidiaries, consolidated unaudited balance sheets as at the close of
each such period and consolidated related statements of operations,
shareholder's equity and cash flows for the period from the beginning
of such fiscal year to the end of such quarter, and (y) for the
Transferor, consolidating, unaudited balance sheets at the close of
such period and consolidating statements of operations, shareholder's
equity and cash flows from the beginning of such fiscal year to the end
of such quarter, all certified by its chief financial officer.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate signed by the
Transferor's or the Seller's, as applicable, chief financial officer
stating that (x) the attached financial statements have been prepared
in accordance with GAAP and fairly present the financial condition of
the Transferor or the Seller as applicable and (y) to the best of such
Person's knowledge, no Termination Event or Potential Termination Event
exists, or if any Termination Event or Potential Termination Event
exists, stating the nature and status thereof and, for any Certificate
delivered pursuant to paragraph (i) above, showing the computation of,
and showing compliance with, each of the financial ratios and
restrictions set forth in Section 5.3 hereof.
(iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of the Transferor or the Seller,
copies of all financial statements, reports and proxy statements so
furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, copies
of all registration statements and annual, quarterly, monthly or other
regular reports which the Seller or any subsidiary files with the
Securities and Exchange Commission.
(vi) Notice of Termination Events or Potential Termination
Events. As soon as possible and in any event within two (2) Business
Days after an Executive Officer of the Transferor obtains actual
knowledge of the occurrence of each Termination Event or each Potential
Termination Event, a statement of the chief financial officer or chief
accounting officer of the Transferor setting forth details of such
Termination Event or Potential Termination Event and the action which
the Transferor proposes to take with respect thereto.
(vii) Change in Credit and Collection Policy and Debt Ratings.
Within ten (10) days after the date any material change in or amendment
to the Credit and Collection Policy is made, a copy of the Credit and
Collection Policy then in effect indicating such change or amendment.
Within five (5) days after the date of any change in the Transferor's
or the Seller's public or private debt ratings, if any, a written
certification of the Transferor's or the Seller's public and private
debt ratings after giving effect to any such change.
(viii) Credit and Collection Policy. Within ninety (90) days
after the close of each of the Seller's and the Transferor's fiscal
years, a complete copy of the Credit and Collection Policy then in
effect.
<PAGE>
(ix) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any Reportable Event
(as defined in Article IV of ERISA other than those Reportable Events
for which the thirty (30) day notice requirement is waived) which the
Transferor, the Seller or any ERISA Affiliate of the Transferor or the
Seller files under ERISA with the Internal Revenue Service, the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or which
the Transferor, the Seller or any ERISA Affiliates of the Transferor or
the Seller receives from the Internal Revenue Service, the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor.
(x) Year 2000. Simultaneously with the certificate to be
delivered under clause (iii) above, a certificate signed by an
Executive Officer of each of the Transferor and the Collection Agent
that no material event, problems or conditions have occurred which in
the opinion of management would (i) prevent or materially delay the
Transferor's or the Collection Agent's plan to become Year 2000
Compliant or (ii) cause or be likely to cause the Transferor's
representations and warranties with respect to being or becoming Year
2000 compliant to no longer be true.
(xi) Nonconsolidated Financial Statements of the Transferor.
Notwithstanding the requirements of clauses (i) and (ii) of this
Section 5.1(a), in the event GAAP does not permit the financial
statements referenced therein to be prepared on a consolidated basis
for the Seller and the Transferor, such financial statements shall be
prepared separately for each of the Seller and the Transferor.
(xii) Other Information. Such other information (including
non-financial information) as the Agent or the Administrative Agent may
from time to time reasonably request with respect to the Seller, the
Transferor or any Subsidiary of any of the foregoing.
(b) Conduct of Business. The Transferor will carry on and
conduct its business solely for the corporate purposes specified in its
Certificate of Incorporation and do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(c) Compliance with Laws. The Transferor will comply with all
laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it or its respective properties may be
subject, the failure to comply with which would have a Transferor
Material Adverse Effect.
<PAGE>
(d) Furnishing of Information and Inspection of Records. The
Transferor will, and will cause the Seller to, furnish to the Agent
from time to time such information with respect to the Receivables as
the Agent may reasonably request, including, without limitation,
listings identifying the Obligor and the Outstanding Balance for each
Receivable. The Transferor will, and will cause the Seller to, at any
time and from time to time during regular business hours, and upon
reasonable advance notice, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and take abstracts
from all Records and (ii) to visit the offices and properties of the
Transferor or the Seller, as applicable, for the purpose of examining
such Records, and to discuss matters relating to Receivables or the
Transferor's or the Seller's performance hereunder and under the other
Transaction Documents to which such Person is a party with any of the
officers, directors, employees or independent public accountants of the
Transferor or the Seller, as applicable, having knowledge of such
matters.
(e) Keeping of Records and Books of Account. The Transferor
will, and will cause the Seller to, maintain and implement
administrative and operating procedures (including, without limitation,
an ability to recreate records evidencing Receivables in the event of
the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the daily identification of each
new Receivable and all Collections of and adjustments to each existing
Receivable). The Transferor will, and will cause the Seller to, give
the Agent notice of any material change in the administrative and
operating procedures of the Transferor or the Seller, as applicable,
referred to in the previous sentence.
(f) Performance and Compliance with Receivables and Contracts.
The Transferor, at its expense, will, and will cause the Seller to,
timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by the Transferor
or the Seller under the Contracts related to the Receivables, subject,
however, to the right of the Seller or Transferor to dispute or contest
its obligations so to perform or to comply with any such provision,
covenant or other promise where it reasonably believes that such
performance or compliance is not required or is not in the best
interest of the Seller or the Transferor (as the case may be), and such
failure to perform or comply would not have a material adverse effect
on the collectability or enforceability of the related Receivables.
(g) Credit and Collection Policies. The Transferor will, and
will cause the Seller to, comply in all material respects with the
Credit and Collection Policy in regard to each Receivable and the
related Contract.
(h) Collections. The Transferor shall, and shall cause the
Seller to, instruct all Obligors to cause all Collections other than
Collections remitted directly to the Collection Account to be deposited
directly to a Lock-Box Account.
<PAGE>
(i) Collections Received. The Transferor shall, and shall
cause the Seller to, hold in trust, and deposit, immediately, but in
any event not later than two (2) Business Days following its receipt
thereof, to a Lock-Box Account all Collections received from time to
time by the Transferor or the Seller, as the case may be.
(j) Sale Treatment. The Transferor will not (i) and will not
permit the Seller to, account for (including for accounting and tax
purposes), or otherwise treat, the transactions contemplated by the
Receivables Purchase Agreement in any manner other than as a sale of
Receivables by the Seller to the Transferor, or (ii) account for (other
than for tax purposes) or otherwise treat the transactions contemplated
hereby in any manner other than as a sale of Receivables by the
Transferor to the Agent on behalf of the Company or the Bank Investors,
as applicable. In addition, the Transferor shall, and shall cause the
Seller to, disclose (in a footnote or otherwise) in all of its
respective financial statements (including any such financial
statements consolidated with any other Persons' financial statements)
the existence and nature of the transaction contemplated hereby and by
the Receivables Purchase Agreement and the interest of the Transferor
(in the case of the Seller's financial statements) and the Agent, on
behalf of the Company and the Bank Investors, in the Affected Assets.
<PAGE>
(k) Separate Business. The Transferor shall at all times (i)
to the extent the Transferor's office is located in the offices of the
Seller or any Affiliate of the Seller, pay fair market rent for its
executive office space located in the offices of the Seller or any
Affiliate of the Seller, (ii) have at all times a member of its board
of directors which is not and has never been an employee, officer or
director of the Seller or any Affiliate of the Seller or of any major
creditor of the Seller or any Affiliate of the Seller and is a person
who is familiar and has experience with asset securitization, (iii)
maintain the Transferor's books, financial statements, accounting
records and other corporate documents and records separate from those
of the Seller or any other entity, (iv) not commingle the Transferor's
assets with those of the Seller or any other entity, (v) act solely in
its corporate name and through its own authorized officers and agents,
(vi) make investments directly or by brokers engaged and paid by the
Transferor or its agents (provided that if any such agent is an
Affiliate of the Transferor it shall be compensated at a fair market
rate for its services), (vii) separately manage the Transferor's
liabilities from those of the Seller or any Affiliates of the Seller
and pay its own liabilities, including all administrative expenses,
from its own separate assets, except that the Seller may pay the
organizational expenses of the Transferor, and (viii) pay from the
Transferor's assets all obligations and indebtedness of any kind
incurred by the Transferor. The Transferor shall abide by all corporate
formalities, including the maintenance of current minute books, and the
Transferor shall cause its financial statements to be prepared in
accordance with GAAP in a manner that indicates the separate existence
of the Transferor and its assets and liabilities. The Transferor shall
(A) pay all its liabilities, (B) not assume the liabilities of the
Seller or any Affiliate of the Seller, (C) not lend funds or extend
credit to the Seller or any affiliate of the Seller except pursuant to
the Receivables Purchase Agreement in connection with the purchase of
Receivables thereunder and (D) not guarantee the liabilities of the
Seller or any Affiliates of the Seller. The officers and directors of
the Transferor (as appropriate) shall make decisions with respect to
the business and daily operations of the Transferor independent of and
not dictated by any controlling entity. The Transferor shall not engage
in any business not permitted by its Certificate of Incorporation as in
effect on the Closing Date, or as amended in accordance with Section
5.1(l).
(l) Year 2000 Compliance. The Transferor will promptly notify
the Agent in the event the Transferor discovers or determines that any
computer application (including those of its suppliers, vendors and
customers) that is material to its business and operations will not be
Year 2000 Compliant on a timely basis, except to the extent that such
failure could not reasonably be expected (i) to have a Transferor
Material Adverse Effect, or (ii) to result in a Termination Event. For
purposes of this paragraph, none of the Company, the Bank Investors,
the Credit Support Provider and the Liquidity Provider shall be deemed
to constitute a supplier, vendor or customer of the Transferor.
SECTION 5.2. Negative Covenants of the Transferor. At
all times from the date hereof to the later to occur of (i) the
Termination Date or (ii) the date on which the Net Investment has been
reduced to zero, all accrued Discount and Servicing Fees shall have
been paid in full and all other Aggregate Unpaids shall have been paid
in full, in cash, unless the Agent shall otherwise consent in writing:
(a) No Sales, Liens, Etc. Except as otherwise provided herein
and in the Receivables Purchase Agreement, the Transferor will not
sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Adverse Claim upon (or the filing
of any financing statement) or with respect to (x) any of the Affected
Assets, (y) any inventory or goods, the sale of which may give rise to
a Receivable or any Receivable or related Contract, or (z) any account
which concentrates in a Lock-Box Bank to which any Collections of any
Receivable are sent, or assign any right to receive income in respect
thereof.
(b) No Extension or Amendment of Receivables. Except as
otherwise permitted in Section 6.2 hereof, the Transferor will not
extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Contract related
thereto.
(c) No Change in Business or Credit and Collection Policy. The
Transferor will not make any change in the character of its business or
in the Credit and Collection Policy, which change would, in either
case, impair the collectibility of any Receivable or otherwise have a
Transferor Material Adverse Effect.
<PAGE>
(d) No Mergers, Etc. The Transferor will not (i) consolidate
or merge with or into any other Person, or (ii) sell, lease or transfer
all or substantially all of its assets to any other Person (other than
the sale of Transferred Interests pursuant to this Agreement).
(e) Change in Payment Instructions to Obligors. The Transferor
will not add or terminate any bank as a Lock-Box Bank or any account as
a Lock-Box Account to or from those listed in Exhibit C hereto or make
any change in its instructions to Obligors regarding payments to be
made to any Lock-Box Account, unless (i) such instructions are to
deposit such payments to another existing Lock-Box Account or (ii) the
Agent shall have received written notice of such addition, termination
or change at least 30 days prior thereto and the Agent shall have
received a Lock-Box Agreement executed by each new Lock-Box Bank or an
existing Lock-Box Bank with respect to each new Lock-Box Account, as
applicable.
(f) Deposits to Lock-Box Accounts. The Transferor will not
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Receivables.
(g) Change of Name, Etc. The Transferor will not change its
name, identity or structure or the location of its chief executive
office, unless at least 10 days prior to the effective date of any such
change the Transferor or the Seller, as applicable, delivers to the
Agent (i) such documents, instruments or agreements, executed by the
Transferor or the Seller, as applicable, as are necessary to reflect
such change and to continue the perfection of the Agent's ownership
interests or security interests in the Affected Assets and (ii) new or
revised Lock-Box Agreements executed by the Lock-Box Banks which
reflect such change and enable the Agent to continue to exercise its
rights contained in Section 2.8 hereof.
(h) Amendment to Receivables Purchase Agreement. The
Transferor will not supplement the Receivables Purchase Agreement or
waive any provision thereof, in each case except with the prior written
consent of the Agent and the Administrative Agent; nor shall the
Transferor take, or permit the Seller to take, any other action under
the Receivables Purchase Agreement that shall have a material adverse
affect on the Agent, the Company or any Bank Investor or which is
inconsistent with the terms of this Agreement.
<PAGE>
(i) Other Debt. Except as provided for herein, the Transferor
will not create, incur, assume or suffer to exist any indebtedness
whether current or funded, or any other liability other than (i)
indebtedness of the Transferor representing fees, expenses and
indemnities arising hereunder or under the Receivables Purchase
Agreement for the purchase price of the Receivables under the
Receivables Purchase Agreement, and (ii) other indebtedness or
obligations incurred in the ordinary course of its business (and solely
for use in connection with the corporate purposes set forth in its
Certificate of Incorporation) in an amount not to exceed $100,000 at
any time outstanding.
(j) ERISA Matters. The Transferor will not (i) engage or
permit any of its respective ERISA Affiliates to engage in any
prohibited transaction (as defined in Section 4975 of the Code and
Section 406 of ERISA) for which an exemption is not available or has
not previously been obtained from the U.S. Department of Labor; (ii)
permit to exist any accumulated funding deficiency (as defined in
Section 302(a) of ERISA and Section 412(a) of the Code) or funding
deficiency with respect to any Benefit Plan other than a Multiemployer
Plan; (iii) fail to make any payments to any Multiemployer Plan that
the Transferor, the Seller or any ERISA Affiliate of the Transferor or
the Seller is required to make under the agreement relating to such
Multiemployer Plan or any law pertaining thereto; (iv) terminate any
Benefit Plan so as to result in any liability; or (v) permit to exist
any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability to the Transferor, the
Seller, or any ERISA Affiliate of the Transferor of the Seller under
ERISA or the Code, if such prohibited transactions, accumulated funding
deficiencies, payments, terminations and reportable events occurring
within any fiscal year of the Transferor and the Seller, in the
aggregate, involve a payment of money or an incurrence of liability by
the Transferor, the Seller or any ERISA Affiliate of the Transferor or
the Seller, in an amount in excess of $1,000,000.
(k) Payment to the Seller. With respect to any Receivable sold
by the Seller to the Transferor, the Transferor shall, and shall cause
the Seller to, effect such sale under, and pursuant to the terms of,
the Receivables Purchase Agreement, including, without limitation, the
payment by the Transferor either in cash or by increase in the amount
of the Subordinated Note to the Seller of an amount equal to the
purchase price for such Receivable as required by the terms of the
Receivables Purchase Agreement.
(l) Corporate Documents. The Transferor shall not amend,
alter, change or repeal Articles III, IV(b), VI, VII, VIII(a) or (e)
and XI of its Certificate of Incorporation so long as it possesses any
assets.
SECTION 5.3. Financial Covenant. The Transferor shall
maintain a tangible net worth which is not less than an amount equal to
the sum of (i) the Outstanding Balance of all Defaulted Receivables at
such time, (ii) the Outstanding Balance of all Delinquent Receivables
at such time and (iii) the sum of the Outstanding Balances of the three
largest Receivables of the Class 1 Obligors; provided, however, that in
any case, the tangible net worth shall never be less than $15,000,000.
<PAGE>
SECTION 5.4. Affirmative Covenants of the Collection
Agent. At all times from the date hereof to the later to occur of (i)
the Termination Date or (ii) the date on which the Net Investment has
been reduced to zero, all accrued Discount and Servicing Fees shall
have been paid in full and all other Aggregate Unpaids shall have been
paid in full, in cash, unless the Agent shall otherwise consent in
writing:
(a) Conduct of Business. The Collection Agent will carry on
and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is
conducted.
(b) Compliance with Laws. The Collection Agent will comply
with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it or its respective properties
may be subject.
(c) Furnishing of Information and Inspection of Records. The
Collection Agent will furnish to the Agent from time to time such
information with respect to the Receivables as the Agent may reasonably
request, including, without limitation, listings identifying the
Obligor and the Outstanding Balance for each Receivable. The Collection
Agent will, at any time and from time to time during regular business
hours and upon reasonable advance notice permit the Agent, or its
agents or representatives, (i) to examine and make copies of and take
abstracts from all Records and (ii) to visit the offices and properties
of the Collection Agent for the purpose of examining such Records, and
to discuss matters relating to Receivables or the Transferor's, the
Seller's or the Collection Agent's performance hereunder and under the
other Transaction Documents to which such Person is a party with any of
the officers, directors, employees or independent public accountants of
the Collection Agent having knowledge of such matters. Absent a
Termination Event or a change in the information systems of the Seller,
the Collection Agent, or the Transferor, the Agent shall be entitled to
one such examination and visit per annum at the Transferor's expense.
The cost of any additional visits during the course of such year, so
long as neither a Termination Event nor a change in the information
systems of the Seller, the Collection Agent or the Transferor has
occurred, shall be borne by the Agent. Notwithstanding the foregoing,
the Collection Agent or, in any case where the Collection Agent is not
an affiliate of the Seller, the Seller may restrict access to certain
facilities, so long as such restrictions comply with reasonably adopted
procedures pertaining to safety and security. Any Person conducting any
such examination and visit on behalf of the Agent, the Company, and the
Bank Investors shall use reasonable efforts to maintain the
confidentiality of non-public information received during such
examination and visit.
<PAGE>
(d) Keeping of Records and Books of Account. The Collection
Agent will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents, books,
records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records
adequate to permit the daily identification of each new Receivable and
all Collections of and adjustments to each existing Receivable). The
Collection Agent will give the Agent notice of any material change in
the administrative and operating procedures of the Collection Agent
referred to in the previous sentence.
(e) Notice of Agent's Interest. In the event that the
Transferor or the Seller shall sell or otherwise transfer any interest
in accounts receivable, any computer tapes or files or other documents
or instruments provided by the Collection Agent in connection with any
such sale or transfer shall disclose the Transferor's ownership of the
Receivables and the Agent's interest therein.
(f) Credit and Collection Policies. The Collection Agent will
comply in all material respects with the Credit and Collection Policy
in regard to each Receivable and the related Contract.
(g) Collections. The Collection Agent shall instruct all
Obligors to cause all Collections other than Collections remitted
directly to be deposited directly to a Lock-Box Account.
(h) Collections Received. The Collection Agent shall hold in
trust, and deposit, immediately, but in any event not later than two
(2) Business Days of its receipt thereof, to a Lock-Box Account all
Collections received from time to time by the Collection Agent.
(i) Year 2000 Compliance. The Collection Agent will promptly
notify the Agent in the event the Collection Agent discovers or
determines that any computer application (including those of its
suppliers, vendors and customers) (i) that is necessary for the
origination, collection, management, or servicing of the Receivables
will not be Year 2000 compliant on or before January 1, 1999 and
thereafter, or (ii) that is otherwise material to its or any of its
Subsidiaries' business and operations will not be Year 2000 compliant
on a timely basis, except to the extent that, in the case of (ii)
above, such failure could not reasonably be expected (a) to have a
Material Adverse Effect, or (b) to result in a Termination Event.
SECTION 5.5. Negative Covenants of the Collection Agent. At
all times from the date hereof to the later to occur of (i) the
Termination Date or (ii) the date on which the Net Investment has been
reduced to zero, all accrued Discount and Servicing Fees shall have
been paid in full and all other Aggregate Unpaids shall have been paid
in full, in cash, unless the Agent shall otherwise consent in writing:
<PAGE>
(a) No Extension or Amendment of Receivables. Except as
otherwise permitted in Section 6.2 hereof, the Collection Agent will
not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Contract related
thereto.
(b) No Change in Business or Credit and Collection Policy. The
Collection Agent will not make any change in the character of its
business or in the Credit and Collection Policy, which change would, in
either case, impair the collectibility of any Receivable or otherwise
have a Material Adverse Effect.
(c) No Mergers, Etc. The Collection Agent will not (i)
consolidate or merge with or into any other Person, or (ii) sell, lease
or transfer all or substantially all of its assets to any other Person,
provided, however, the Collection Agent may merge or consolidate with
another corporation, if (A) the Collection Agent shall be the
continuing or surviving corporation; and (B) immediately prior to and
immediately after such merger or consolidation, and after giving effect
thereto, no Termination Event or Potential Termination Event shall then
exist or would result therefrom; provided, further, however, that so
long as the Seller is the Collection Agent, no accounts receivable of
any Person with whom the Collection Agent shall have merged or
consolidated (including such accounts receivable arising from such
Person's businesses or divisions after the date thereof) shall be sold
to the Transferor pursuant to the Receivables Purchase Agreement, be
deemed to be a Receivable hereunder, or be collected or deposited in
any Lock-Box or Lock-Box Account, unless the Agent, the Majority Bank
Investors and the Transferor shall have consented thereto in writing.
(d) Change in Payment Instructions to Obligors. The Collection
Agent will not add or terminate any bank as a Lock-Box Bank or any
account as a Lock-Box Account to or from those listed in Exhibit C
hereto or make any change in its instructions to Obligors regarding
payments to be made to any Lock-Box Account, unless (i) such
instructions are to deposit such payments to another existing Lock-Box
Account or (ii) the Agent shall have received written notice of such
addition, termination or change at least 30 days prior thereto and the
Agent shall have received a Lock-Box Agreement executed by each new
Lock-Box Bank or an existing Lock-Box Bank with respect to each new
Lock-Box Account, as applicable.
(e) Deposits to Lock-Box Accounts. The Collection Agent will
not deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Receivables.
<PAGE>
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Appointment of Collection Agent. The
servicing, administering and collection of the Receivables shall be
conducted by such Person (the "Collection Agent") so designated from
time to time in accordance with this Section 6.1. Until the Company
gives notice to the Seller of the designation of a new Collection
Agent, the Seller is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Collection Agent pursuant to the
terms hereof. The Collection Agent may not delegate any of its rights,
duties or obligations hereunder, or designate a substitute Collection
Agent, without the prior written consent of the Agent, and provided
that the Collection Agent shall continue to remain solely liable for
the performance of the duties as Collection Agent hereunder
notwithstanding any such delegation hereunder. The Agent may, and upon
the direction of the Majority Investors the Agent shall, after the
occurrence of a Collection Agent Default or any other Termination Event
designate as Collection Agent any Person (including itself) to succeed
the Seller or any successor Collection Agent, on the condition in each
case that any such Person so designated shall agree to perform the
duties and obligations of the Collection Agent pursuant to the terms
hereof. At any time during the existence of a Termination Event, the
Agent may notify any Obligor of the Transferred Interest.
SECTION 6.2. Duties of Collection Agent.
<PAGE>
(a) The Collection Agent shall take or cause to be taken all
such action as may be necessary or advisable to collect each Receivable
from time to time, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy. Each of the
Transferor, the Company, the Agent and the Bank Investors hereby
appoints as its agent the Collection Agent, from time to time
designated pursuant to Section 6.1 hereof, to enforce its respective
rights and interests in and under the Affected Assets. To the extent
permitted by applicable law, each of the Transferor and the Seller (to
the extent not then acting as Collection Agent hereunder) hereby grants
to any Collection Agent appointed hereunder an irrevocable power of
attorney to take any and all steps in the Transferor's and/or the
Seller's name and on behalf of the Transferor or the Seller necessary
or desirable, in the reasonable determination of the Collection Agent,
to collect all amounts due under any and all Receivables, including,
without limitation, endorsing the Transferor's and/or the Seller's name
on checks and other instruments representing Collections and enforcing
such Receivables and the related Contracts. The Collection Agent shall
set aside for the account of the Transferor and the Agent their
respective allocable shares of the Collections of Receivables in
accordance with Sections 2.5 and 2.6 hereof. The Collection Agent shall
segregate and deposit to the Agent's account the Agent's allocable
share of Collections of Receivables when required pursuant to Article
II hereof. So long as no Termination Event shall have occurred and be
continuing, the Collection Agent may, in accordance with the Credit and
Collection Policy, extend the maturity of Receivables, but not beyond
sixty (60) days past the original due date of such Receivables, and
extend the maturity or adjust the Outstanding Balance as the Collection
Agent may determine to be appropriate to maximize Collections thereof;
provided, however, that such extension or adjustment shall not alter
the status of such Receivable as a Delinquent Receivable or a Defaulted
Receivable. The Transferor shall deliver to the Collection Agent and
the Collection Agent shall hold in trust for the Transferor and the
Agent, on behalf of the Company and the Bank Investors, in accordance
with their respective interests, all Records which evidence or relate
to Receivables or Related Security. Notwithstanding anything to the
contrary contained herein, at any time during the existence of a
Termination Event, the Agent shall have the absolute and unlimited
right to direct the Collection Agent (whether the Collection Agent is
the Seller or any other Person) to commence or settle any legal action
to enforce collection of any Receivable or to foreclose upon or
repossess any Related Security. The Collection Agent shall not make the
Agent, the Company or any of the Bank Investors a party to any
litigation without the prior written consent of such Person.
(b) The Collection Agent shall, as soon as practicable
following receipt thereof, turn over to the Transferor any collections
of any indebtedness of any Person which is not on account of a
Receivable. If the Collection Agent is not the Transferor or the Seller
or an Affiliate of the Transferor or the Seller, the Collection Agent,
by giving three (3) Business Days' prior written notice to the Agent,
may revise the percentage used to calculate the Servicing Fee so long
as the revised percentage will not result in a Servicing Fee that
exceeds 110% of the reasonable and appropriate out-of-pocket costs and
expenses of such Collection Agent incurred in connection with the
performance of its obligations hereunder as documented to the
reasonable satisfaction of the Agent, provided, however, that at any
time after the Percentage Factor equals or exceeds 100%, any
compensation to the Collection Agent in excess of the Servicing Fee
initially provided for herein shall be an obligation of the Transferor
and shall not be payable, in whole or in part, from Collections
allocated to the Company or the Bank Investors, as applicable. The
Collection Agent, if other than the Transferor or the Seller or an
Affiliate of the Transferor or the Seller, shall as soon as practicable
upon demand, deliver to the Seller all Records in its possession which
evidence or relate to indebtedness of an Obligor which is not a
Receivable.
<PAGE>
(c) On or before 90 days after the end of each fiscal year of
the Collection Agent, beginning with the fiscal year ending January 2,
1999, the Collection Agent shall cause a firm of independent public
accountants (who may also render other services to the Collection
Agent, the Transferor, the Seller or any Affiliates of any of the
foregoing) to furnish a report to the Agent to the effect that they
have (i) compared the information contained in the Investor Reports
delivered during such fiscal year then ended with the information
contained in the Contracts and the Collection Agent's records and
computer systems for such period, and that, on the basis of such
examination and comparison, such firm is of the opinion that the
information contained in the Investor Reports reconciles with the
information contained in the Contracts and the Collection Agent's
records and computer system and that the servicing of the Receivables
has been conducted in compliance with this Agreement, (ii) confirmed
the Net Receivables Balance as of the end of each Fiscal Month during
such fiscal year, and (iii) verified that the Receivables treated by
the Collection Agent as Eligible Receivables in fact satisfied the
requirements of the definition thereof contained herein, except, in
each case for (a) such exceptions as such firm shall believe to be
immaterial (which exceptions need not be enumerated) and (b) such other
exceptions as shall be set forth in such statement.
(d) Notwithstanding anything to the contrary contained in this
Article VI, the Collection Agent, if not the Transferor, the Seller or
any Affiliate of the Transferor or the Seller, shall have no obligation
to collect, enforce or take any other action described in this Article
VI with respect to any indebtedness that is not included in the
Transferred Interest other than to deliver to the Transferor the
collections and documents with respect to any such indebtedness as
described in Section 6.2(b) hereof. Nothing contained in this
Agreement, however, shall prohibit the Seller or the Transferor (as
applicable) from pursuing independent legal action to collect such
indebtedness not part of the Transferred Interest.
SECTION 6.3. Rights After Designation of New
Collection Agent. At any time following the designation of a Collection
Agent (other than the Transferor, the Seller or any Affiliate of the
Transferor or the Seller) pursuant to Section 6.1 hereof:
(i) The Agent may direct that payment of all amounts payable
under any Receivable be made directly to the Agent or its designee.
(ii) The Transferor shall, at the Agent's request and at the
Transferor's expense, give notice of the Agent's, the Transferor's
and/or the Bank Investors' ownership of Receivables to each Obligor and
direct that payments be made directly to the Agent or its designee.
(iii) The Transferor shall, at the Agent's request, (A)
assemble all of the Records, and shall make the same available to the
Agent or its designee at a place selected by the Agent or its designee,
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections of Receivables in a manner
acceptable to the Agent and shall, promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
<PAGE>
(iv) The Transferor and the Seller hereby authorize the Agent
to take any and all steps in the Transferor's or the Seller's name and
on behalf of the Transferor and the Seller necessary or desirable, in
the determination of the Agent, to collect all amounts due under any
and all Receivables, including, without limitation, endorsing the
Transferor's or the Seller's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts.
SECTION 6.4. Collection Agent Default. The occurrence of any
one or more of the following events shall constitute a Collection Agent
Default:
(a) (i) the Collection Agent shall fail to observe or perform
any term, covenant or agreement to be observed or performed by it
hereunder (other than as referred to in clause (ii) immediately
hereafter), and such failure shall remain unremedied for two (2)
Business Days after notice to the Collection Agent if such failure is
the failure to deliver an Investor Report when due pursuant to Section
2.8(b), or thirty (30) days after notice to the Collection Agent in all
other cases, or (ii) the Collection Agent shall fail to make any
payment or deposit required to be made by it hereunder when due; or
(b) any representation, warranty, certification or statement
made by the Collection Agent in this Agreement, the Receivables
Purchase Agreement or in any of the other Transaction Documents or in
any certificate or report delivered by it pursuant to any of the
foregoing shall prove to have been incorrect in any material respect
when made or deemed made; or
(c) failure of the Collection Agent to pay when due any
amounts due under any agreement under which any Indebtedness greater
than $20,000,000 is governed or the default by the Collection Agent in
the performance of any term, provision or condition contained in any
agreement under which any Indebtedness greater than $20,000,000 was
created or is governed, in each of the foregoing cases after giving
effect to any applicable grace or cure period; or any Indebtedness of
the Collection Agent greater than $20,000,000 shall be declared to be
due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the scheduled date of maturity thereof; or
(d) any Event of Bankruptcy shall occur with respect to the
Collection Agent; or
(e) failure of the Collection Agent (so long as such
Collection Agent is the Seller or an Affiliate of the Seller) to
satisfy any of the Shaw Financial Covenants; or
<PAGE>
(f) there shall have occurred any material adverse change in
the operations of the Collection Agent since the end of the last fiscal
year ending prior to the date of its appointment as Collection Agent
hereunder or any other event shall have occurred which, in the
commercially reasonably judgment of the Agent, materially and adversely
affects the Collection Agent's ability to either collect the
Receivables or to perform under this Agreement.
SECTION 6.5. Responsibilities of the Transferor and
the Seller. Anything herein to the contrary notwithstanding, the
Transferor shall, or shall cause the Seller to, (i) perform all of the
Seller's obligations under the Contracts related to the Receivables to
the same extent as if interests in such Receivables had not been sold
hereunder and under the Receivables Purchase Agreement, and the
exercise by the Agent, the Company and the Bank Investors of their
rights hereunder and under the Receivables Purchase Agreement shall not
relieve the Transferor or the Seller from such obligations and (ii) pay
when due any taxes, including without limitation, any sales taxes
payable in connection with the Receivables and their creation and
satisfaction. Neither the Agent, the Company nor any of the Bank
Investors shall have any obligation or liability with respect to any
Receivable or related Contracts, nor shall it be obligated to perform
any of the obligations of the Seller thereunder.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events. The occurrence of any one or
more of the following events shall constitute a Termination Event:
(a) the Transferor shall fail to make any payment or deposit
to be made by it hereunder or under the Receivables Purchase Agreement
when due hereunder or thereunder; or
(b) any representation, warranty, certification or statement
made by the Transferor in this Agreement, any other Transaction
Document to which it is a party or in any other document delivered
pursuant hereto or thereto shall prove to have been incorrect in any
material respect when made or deemed made; or
(c) the Transferor, or the Collection Agent, shall default in
the performance of any payment or undertaking (other than those covered
by clause (a) above) (i) to be performed or observed under Sections
5.1(a)(vi), 5.1(a)(vii), 5.1(f), 5.1(g), 5.1(i), 5.1(l), or Sections
5.2(a), (c), (d), (e), (f) or (g) or (ii) to be performed or observed
under any other provision hereof and such default in the case of this
clause (ii) shall continue for a period of thirty (30) days after the
earlier of (x) the date upon which any Executive Officer of the
Transferor or the Seller obtains actual knowledge of such failure or
(y) the date upon which the Transferor has received written notice of
such failure from the Agent; or
<PAGE>
(d) failure of the Transferor to pay when due any amounts due
under any agreement to which Transferor is a party and under which any
Indebtedness greater than $100,000 is governed or the default by the
Transferor in the performance of any term, provision or condition
contained in any agreement to which any such Person is a party and
under which any Indebtedness owing by the Transferor greater than
$100,000 was created or is governed, in each of the foregoing cases
after giving effect to any applicable grace or cure period; or any
Indebtedness owing by the Transferor greater than $100,000 shall be
declared to be due and payable or required to be prepaid (other than by
a regularly scheduled payment) prior to the date of maturity thereof;
or
(e) any Event of Bankruptcy shall occur with respect to the
Transferor; or
(f) the Agent, on behalf of the Company and the Bank
Investors, shall, for any reason, fail or cease to have a valid and
perfected first priority ownership or security interest in the Affected
Assets free and clear of any Adverse Claims; or
(g) a Collection Agent Default shall have occurred; or
(h) the Receivables Purchase Agreement shall have terminated;
or
(i) Since the date hereof, any Transferor Material Adverse
Effect or Material Adverse Effect shall have occurred; or
(j) the Liquidity Provider or the Credit Support Provider
shall have given notice that an event of default has occurred and is
continuing under any of its respective agreements with the Company; or
(k) the Commercial Paper issued by the Company shall not be
rated lower than "A-2" by Standard & Poor's and or "P-2" by Moody's; or
(l) (i) the Percentage Factor exceeds the Maximum Percentage
Factor unless the Transferor reduces the Net Investment or increases
the balance of the Affected Assets on the next Business Day so as to
reduce the Percentage Factor to less than or equal to 98%; (ii) the
Percentage Factor equals or exceeds 100% at any time; or (iii) the Net
Investment plus, in the case where the Transferred Interest is held by
the Company, the Interest Component of all outstanding Related
Commercial Paper, shall exceed the Facility Limit; or
(m) the Dilution Ratio for any Fiscal Month exceeds 10%; or
(n) the three (3) Fiscal Month average Loss to Liquidation
Ratio exceeds 0.80%; or
<PAGE>
(o) the three (3) Fiscal Month average Delinquency Ratio for
any Fiscal Month exceeds 1.5%; or
(p) the date on which the Transferor ceases to make purchases
of Receivables under the Receivables under the Receivables Purchase
Agreement.
SECTION 7.2. Termination. (a) Upon the occurrence of any
Termination Event, the Agent may, or at the direction of the Majority
Bank Investors shall, by notice to the Transferor and the Collection
Agent declare the Termination Date to have occurred; provided, however,
that in the case of any event described in Section 7.1(e), 7.1(f),
7.1(g) (to the extent that the applicable Collection Agent Default
arose under Section 6.4(d)), 7.1(l)(ii), 7.1(l)(iii) or 7.1(p) above,
the Termination Date shall be deemed to have occurred automatically
upon the occurrence of such event. Upon any such declaration or
automatic occurrence, the Agent shall have, in addition to all other
rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and
other applicable laws, all of which rights shall be cumulative.
(b) At all times after the declaration or automatic occurrence
of the Termination Date pursuant to Section 7.2(a) (other than the
occurrence of the Termination Date as a result of the Termination
Events described in Section 7.1(j), 7.1(k) and, to the extent the
Transferor has provided sixty (60) days' prior written notice to the
Agent of the termination of purchases under the Receivables Purchase
Agreement, 7.1(p)), the Base Rate plus 2.00% shall be the Tranche Rate
applicable to the Net Investment for all existing and future Tranches.
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
<PAGE>
SECTION 8.1. Indemnities by the Transferor. Without
limiting any other rights which the Agent, the Company or the Bank
Investors may have hereunder or under applicable law, the Transferor
hereby agrees to indemnify the Company, the Bank Investors, the Agent,
the Administrative Agent, the Collateral Agent, the Liquidity Provider
and the Credit Support Provider and any successors and permitted
assigns and their respective any officers, directors and employees
(collectively, "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, costs and expenses, including,
without limitation, reasonable attorneys' fees (which such attorneys
may be employees of the Liquidity Provider, the Credit Support
Provider, the Agent, the Administrative Agent or the Collateral Agent,
as applicable) and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or
incurred by any of them in any action or proceeding between the
Transferor or the Seller (including, in its capacity as the Collection
Agent) and any of the Indemnified Parties or between any of the
Indemnified Parties and any third party or otherwise arising out of or
as a result of this Agreement, the other Transaction Documents, the
ownership or maintenance, either directly or indirectly, by the Agent,
the Company or any Bank Investor of the Transferred Interest or any of
the other transactions contemplated hereby or thereby, excluding,
however, (i) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of an Indemnified Party or
(ii) recourse (except as otherwise specifically provided in this
Agreement) for uncollectible Receivables. Without limiting the
generality of the foregoing, the Transferor shall indemnify each
Indemnified Party for Indemnified Amounts relating to or resulting
from:
(i) any representation or warranty made by the Transferor or
the Seller (including, in its capacity as the Collection Agent) or any
officers of the Transferor or the Seller (including, in its capacity as
the Collection Agent) under or in connection with this Agreement, the
Receivable Purchase Agreement, any of the other Transaction Documents,
any Investor Report or any other information or report delivered by the
Transferor or the Collection Agent pursuant hereto, which shall have
been false or incorrect in any material respect when made or deemed
made;
(ii) the failure by the Transferor or the Seller (including,
in its capacity as the Collection Agent) to comply with any applicable
law, rule or regulation with respect to any Receivable or the related
Contract, or the nonconformity of any Receivable or the related
Contract with any such applicable law, rule or regulation;
(iii) the failure (x) to vest and maintain vested in the
Agent, on behalf of the Company and the Bank Investors, an undivided
first priority, perfected percentage ownership interest (to the extent
of the Transferred Interest) in the Affected Assets free and clear of
any Adverse Claim or (y) to create or maintain a valid and perfected
first priority security interest in favor of the Agent, for the benefit
of the Company and the Bank Investors, in the Affected Assets as
contemplated pursuant to Section 10.11, free and clear of any Adverse
Claim;
(iv) the failure to file, or any delay in filing, financing
statements, continuation statements, or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any of the Affected Assets;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being the legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of
merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
<PAGE>
(vi) any failure of the Collection Agent to perform its duties
or obligations in accordance with the provisions hereof; or
(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable;
(viii) the transfer of an ownership interest in any Receivable
other than an Eligible Receivable;
(ix) the failure by the Transferor or the Seller (individually
or as Collection Agent) to comply with any term, provision or covenant
contained in this Agreement or any of the other Transaction Documents
to which it is a party or to perform any of its respective duties under
the Contracts;
(x) the Percentage Factor exceeding the Maximum Percentage
Factor at any time;
(xi) the failure of the Seller to pay when due any taxes,
including without limitation, sales, excise or personal property taxes
payable in connection with any of the Receivables;
(xii) any repayment by any Indemnified Party of any amount
previously distributed in reduction of Net Investment which such
Indemnified Party believes in good faith is required to be made;
(xiii) the commingling by the Transferor, the Seller or the
Collection Agent of Collections of Receivables at any time with other
funds;
(xiv) any investigation, litigation or proceeding related to
this Agreement, any of the other Transaction Documents, the use of
proceeds of Transfers by the Transferor or the Seller, the ownership of
Transferred Interests, or any Receivable, Related Security or Contract;
(xv) the failure of any Lock-Box Bank to remit any amounts
held in the Lock-Boxes and/or the Lock-Box Accounts pursuant to the
instructions of the Collection Agent, the Transferor, the Seller or the
Agent (to the extent such Person is entitled to give such instructions
in accordance with the terms hereof and of any applicable Lock-Box
Agreement) whether by reason of the exercise of set-off rights or
otherwise, except as permitted in the applicable Lock-Box Agreement;
<PAGE>
(xvi) any inability to obtain any judgment in or utilize the
court or other adjudication system of, any state in which an Obligor
may be located as a result of the failure of the Transferor or the
Seller to qualify to do business or file any notice of business
activity report or any similar report;
(xvii) any failure of the Transferor to give reasonably
equivalent value to the Seller in consideration of the purchase by the
Transferor from the Seller of any Receivable, or any attempt by any
Person to void, rescind or set-aside any such transfer under statutory
provisions or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code; or
(xviii) any action taken by the Transferor, the Seller, or the
Collection Agent (if the Transferor, the Seller or any Affiliate or
designee of the Transferor or the Seller) in the enforcement or
collection of any Receivable; provided, however, that if the Company
enters into agreements for the purchase of interests in receivables
from one or more Other Transferors, the Company shall allocate such
Indemnified Amounts which are in connection with the Liquidity Provider
Agreement, the Credit Support Agreement or the credit support furnished
by the Credit Support Provider to the Transferor and each Other
Transferor; and provided, further, that if such Indemnified Amounts are
attributable to the Transferor, the Seller or the Collection Agent and
not attributable to any Other Transferor, the Transferor shall be
solely liable for such Indemnified Amounts or if such Indemnified
Amounts are attributable to Other Transferors and not attributable to
the Transferor, the Seller or the Collection Agent, such Other
Transferors shall be solely liable for such Indemnified Amounts.
SECTION 8.2. Indemnity for Taxes, Reserves and
Expenses. (a) If after the date hereof, the adoption of any Law or bank
regulatory guideline or any amendment or change in the interpretation
of any existing or future Law or bank regulatory guideline by any
Official Body charged with the administration, interpretation or
application thereof, or the compliance with any directive of any
Official Body (in the case of any bank regulatory guideline, whether or
not having the force of Law):
<PAGE>
(i) shall subject any Indemnified Party to any tax, duty or
other charge (other than Excluded Taxes) with respect to this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest, the Receivables or payments
of amounts due hereunder, or shall change the basis of taxation of
payments to any Indemnified Party of amounts payable in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest, the Receivables or payments
of amounts due hereunder or its obligation to advance funds hereunder,
under the Liquidity Provider Agreement or the credit support provided
by the Credit Support Provider or otherwise in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest or the Receivables (except for
changes in the rate of general corporate, franchise, net income or
other income tax imposed on such Indemnified Party by the jurisdiction
in which such Indemnified Party's principal executive office is
located);
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System) against assets of, deposits with or for the account of,
or credit extended by, any Indemnified Party or shall impose on any
Indemnified Party or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interest, the Receivables
or payments of amounts due hereunder or its obligation to advance funds
hereunder, under the Liquidity Provider Agreement or the credit support
provided by the Credit Support Provider or otherwise in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest or the Receivables; or
(iii) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and
expenses, and expenses of litigation or preparation therefor in
contesting any of the foregoing) with respect to this Agreement, the
other Transaction Documents, the ownership, maintenance or financing of
the Transferred Interest, the Receivables or payments of amounts due
hereunder or its obligation to advance funds hereunder under the
Liquidity Provider Agreement or the credit support furnished by the
Credit Support Provider or otherwise in respect of this Agreement, the
other Transaction Documents, the ownership, maintenance or financing of
the Transferred Interests or the Receivables, and the result of any of
the foregoing is to increase the cost to such Indemnified Party with
respect to this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the
Receivables, the obligations hereunder, the funding of any purchases
hereunder, the Liquidity Provider Agreement or the Credit Support
Agreement, by an amount deemed by such Indemnified Party to be
material, then the Transferor shall pay to the Agent, for the benefit
of such Indemnified Party, such additional amount or amounts as will
compensate such Indemnified Party for such increased cost or reduction.
<PAGE>
(b) If any Indemnified Party shall have determined that after
the date hereof, the adoption of any applicable Law or bank regulatory
guideline regarding capital adequacy, or any change therein, or any
change in the interpretation thereof by any Official Body, or any
directive regarding capital adequacy (in the case of any bank
regulatory guideline, whether or not having the force of law) of any
such Official Body, has or would have the effect of reducing the rate
of return on capital of such Indemnified Party (or its parent) as a
consequence of such Indemnified Party's obligations hereunder or with
respect hereto to a level below that which such Indemnified Party (or
its parent) could have achieved but for such adoption, change, request
or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Indemnified Party to be
material, then from time to time the Transferor shall pay to the Agent,
for the benefit of such Indemnified Party, such additional amount or
amounts as will compensate such Indemnified Party (or its parent) for
such reduction.
(c) The Agent will promptly notify the Transferor of any event
of which it has knowledge, occurring after the date hereof, which will
entitle an Indemnified Party to compensation pursuant to this Section
8.2. A notice by the Agent or the applicable Indemnified Party claiming
compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, the Agent or any
applicable Indemnified Party may use any reasonable averaging and
attributing methods.
(d) Anything in this Section 8.2 to the contrary
notwithstanding, if the Company enters into agreements for the
acquisition of interests in receivables from one or more Other
Transferors, the Company shall allocate the liability for any amounts
under this Section 8.2 which are in connection with the Liquidity
Provider Agreement, the Credit Support Agreement or the credit support
provided by the Credit Support Provider ("Section 8.2 Costs") to the
Transferor and each Other Transferor; provided, however, that if such
Section 8.2 Costs are attributable to the Transferor, the Seller or the
Collection Agent and not attributable to any Other Transferor, the
Transferor shall be solely liable for such Section 8.2 Costs or if such
Section 8.2 Costs are attributable to Other Transferors and not
attributable to the Transferor, the Seller or the Collection Agent,
such Other Transferors shall be solely liable for such Section 8.2
Costs.
SECTION 8.3. Taxes. All payments made hereunder by
the Transferor or the Collection Agent (each, a "payor") to the
Company, any Bank Investor or the Agent (each, a "recipient") shall be
made free and clear of and without deduction for any present or future
income, excise, stamp or franchise taxes and any other taxes, fees,
duties, withholdings or other charges of any nature whatsoever imposed
by any taxing authority on any recipient (or any assignee of such
parties) (such non-excluded items being called "Taxes"), but excluding
franchise taxes and taxes imposed on or measured by the recipient's net
income or gross receipts ("Excluded Taxes"). In the event that any
withholding or deduction from any payment made by the payor hereunder
is required in respect of any Taxes, then such payor shall:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
<PAGE>
(c) pay to the recipient such additional amount or amounts as
is necessary to ensure that the net amount actually received by the
recipient will equal the full amount such recipient would have received
had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any recipient with
respect to any payment received by such recipient hereunder, the
recipient may pay such Taxes and the payor will promptly pay such
additional amounts (including any penalties, interest or expenses) as
shall be necessary in order that the net amount received by the
recipient after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such recipient would have
received had such Taxes not been asserted.
If the payor fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the recipient the
required receipts or other required documentary evidence, the payor
shall indemnify the recipient for any incremental Taxes, interest, or
penalties that may become payable by any recipient as a result of any
such failure.
SECTION 8.4. Other Costs, Expenses and Related
Matters. (a) The Transferor agrees, upon receipt of a written invoice,
to pay or cause to be paid, and to save the Company, the Bank Investors
and the Agent harmless against liability for the payment of, all
reasonable out-of-pocket expenses (including, without limitation,
attorneys', accountants' and other third parties' fees and expenses,
any filing fees and expenses incurred by the Company, the Bank
Investors and/or the Agent) or intangible, documentary or recording
taxes incurred by or on behalf of the Company, any Bank Investor and
the Agent (i) in connection with the negotiation, execution, delivery
and preparation of this Agreement, the other Transaction Documents and
any documents or instruments delivered pursuant hereto and thereto and
the transactions contemplated hereby or thereby (including, without
limitation, the perfection or protection of the Transferred Interest)
and (ii) from time to time (a) relating to any amendments, waivers or
consents under this Agreement and the other Transaction Documents, (b)
arising in connection with the Company's, any Bank Investor's, the
Agent's or the Collateral Agent's enforcement or preservation of rights
(including, without limitation, the perfection and protection of the
Transferred Interest under this Agreement), or (c) arising in
connection with any audit (subject to the provisions of Sections 5.1(d)
and 5.4(c) hereof), dispute, disagreement, litigation or preparation
for litigation involving this Agreement or any of the other Transaction
Documents (all of such amounts, collectively, "Transaction Costs").
(b) The Transferor shall pay the Agent, for the account of the
Company and the Bank Investors, as applicable, on demand any Early
Collection Fee due on account of the reduction of a Tranche on a day
prior to the last day of its Tranche Period, provided that such demand
is accompanied by a certificate of the Person demanding payment of an
Early Collection Fee setting forth in reasonable detail the calculation
of such Early Collection Fee.
<PAGE>
SECTION 8.5. Reconveyance Under Certain
Circumstances. The Transferor agrees to accept the reconveyance from
the Agent, on behalf of the Company and/or the Bank Investors, of the
Transferred Interest if the Agent notifies Transferor of a material
breach of any representation or warranty made or deemed made pursuant
to Article III of this Agreement and Transferor shall fail to cure such
breach within 30 days (or, in the case of the representations and
warranties in Sections 3.1(d) and 3.1(j), 10 days) of such notice. The
reconveyance price shall be paid by the Transferor to the Agent, for
the account of the Company and the Bank Investors, as applicable, in
immediately available funds on such 15th day (or 3rd day, if
applicable) in an amount equal to the Aggregate Unpaids.
SECTION 8.6. Amounts Payable. The Transferor is
hereby obligated to pay all amounts due under this Article within 30
days of demand of any such payment. Each demand shall be in the form of
a certificate specifying in such detail consistent with the Company's
and/or applicable Bank Investor's internal policies.
ARTICLE IX
THE AGENT; BANK COMMITMENT
<PAGE>
SECTION 9.1. Authorization and Action. (a) The
Company and each Bank Investor hereby irrevocably appoints and
authorizes the Agent to act as its agent under this Agreement and the
other Transaction Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and
the other Transaction Documents, together with such other powers as are
reasonably incidental thereto. The Agent (which term as used in this
sentence and in Section 9.5 and the first sentence of Section 9.6
hereof shall include its Affiliates and its own and its Affiliates'
officers, directors, employees, and agents): (a) shall not have any
duties or responsibilities except those expressly set forth in this
Agreement and shall not be a trustee or fiduciary for the Company or
any Bank Investor; (b) shall not be responsible to the Company or any
Bank Investor for any recital, statement, representation, or warranty
(whether written or oral) made in or in connection with any Transaction
Document or any certificate or other document referred to or provided
for in, or received by any of them under, any Transaction Document, or
for the value, validity, effectiveness, genuineness, enforceability, or
sufficiency of any Transaction Document, or any other document referred
to or provided for therein or for any failure by any of the Transferor,
the Seller or the Collection Agent or any other Person to perform any
of its obligations thereunder; (c) shall not be responsible for or have
any duty to ascertain, inquire into, or verify the performance or
observance of any covenants or agreements by any of the Transferor, the
Seller or the Collection Agent or the satisfaction of any condition or
to inspect the property (including the books and records) of any of the
Transferor, the Seller or the Collection Agent or any of their
Subsidiaries or Affiliates; (d) shall not be required to initiate or
conduct any litigation or collection proceedings under any Transaction
Document; and (e) shall not be responsible for any action taken or
omitted to be taken by it under or in connection with any Transaction
Document, except for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 9.2. Agent's Reliance, Etc. The Agent shall
be entitled to rely upon any certification, notice, instrument,
writing, or other communication (including, without limitation, any
thereof by telephone or telecopy) believed by it to be genuine and
correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for any of the Transferor, the Seller or the
Collection Agent), independent accountants, and other experts selected
by the Agent. As to any matters not expressly provided for by this
Agreement, the Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Majority Investors, and such
instructions shall be binding on the Company and all of the Bank
Investors; provided, however, that the Agent shall not be required to
take any action that exposes the Agent to personal liability or that is
contrary to any Transaction Document or applicable law or unless it
shall first be indemnified to its satisfaction by the Bank Investors
against any and all liability and expense which may be incurred by it
by reason of taking any such action.
SECTION 9.3. Termination Events. The Agent shall not
be deemed to have knowledge or notice of the occurrence of a Potential
Termination Event or a Termination Event unless the Agent has received
written notice from the Company or any Bank Investor specifying such
Potential Termination Event or Termination Event and stating that such
notice is a "Notice of Termination Event". In the event that the Agent
receives such a notice of the occurrence of a Potential Termination
Event or Termination Event, the Agent shall give prompt notice thereof
to the Company and Bank Investors. The Agent shall (subject to Section
9.2 hereof) take such action with respect to such Potential Termination
Event or Termination Event as shall reasonably be directed by the
Majority Investors, provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action,
with respect to such Potential Termination Event or Termination Event
as it shall deem advisable in the best interest of the Company and the
Bank Investors.
<PAGE>
SECTION 9.4. Rights as Bank Investor. With respect to
its Commitment, NationsBank (and any successor acting as Agent) in its
capacity as a Bank Investor hereunder shall have the same rights and
powers hereunder as any other Bank Investor and may exercise the same
as though it were not acting as the Agent, and the term "Bank Investor"
or "Bank Investors" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. NationsBank (and any
successor acting as Agent) and its Affiliates may (without having to
account therefor to the Company or any Bank Investor) accept deposits
from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with
any of the Transferor, the Seller and the Collection Agent or any of
their Subsidiaries or Affiliates as if it were not acting as Agent, and
NationsBank (and any successor acting as Agent) and its Affiliates may
accept fees and other consideration from any of the Transferor, the
Seller and the Collection Agent or any of their Subsidiaries or
Affiliates for services in connection with this Agreement or otherwise
without having to account for the same to the Company or any Bank
Investor.
SECTION 9.5. Indemnification of the Agent. The Bank
Investors agree to indemnify the Agent (to the extent not reimbursed by
the Transferor), ratably in accordance with their Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against the Agent
(including by the Company or any Bank Investor) in any way relating to
or arising out of this Agreement or any other Transaction Document or
the transactions contemplated thereby or any action taken or omitted by
the Agent under this Agreement or any other Transaction Document,
provided that no Bank Investors shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person indemnified. Without limitation of the
foregoing, the Bank Investors agree to reimburse the Agent, ratably in
accordance with their Pro Rata Shares, promptly upon demand for any
out-of-pocket expenses (including attorneys' fees) incurred by the
Agent in connection with the administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities
under, this Agreement and the other Transaction Documents, to the
extent that such expenses are incurred in the interests of or otherwise
in respect of the Bank Investors hereunder and/or thereunder and to the
extent that the Agent is not reimbursed for such expenses by the
Transferor. The agreements contained in this Section shall survive
payment in full of the Net Investment and all other amounts payable
under this Agreement.
<PAGE>
SECTION 9.6. Non-Reliance. The Company and each Bank
Investor agrees that it has, independently and without reliance on the
Agent or the Company or any Bank Investor, and based on such documents
and information as it has deemed appropriate, made its own credit
analysis of the Transferor, the Seller, and the Collection Agent and
their Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Agent, the Company
or any Bank Investor, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis
and decisions in taking or not taking action under the Transaction
Documents. Except for notices, reports, and other documents and
information expressly required to be furnished to the Company and the
Bank Investors 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 affairs, financial condition, or business of
any of the Transferor, the Seller or the Collection Agent or any of
their Subsidiaries or affiliates that may come into the possession of
the Agent or any of its affiliates.
SECTION 9.7. Resignation of Agent. The Agent may
resign at any time by giving notice thereof to the Company, the Bank
Investors, the Transferor, and the Collection Agent. Upon any such
resignation, the Majority Investors shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by
the Majority Investors and shall have accepted such appointment within
thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Company and
the Bank Investors, appoint a successor Agent which shall be a
commercial bank organized under the laws of the United States of
America having combined capital and surplus of at least $100,000,000.
Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor shall thereupon succeed to and become vested
with all the rights, powers, discretion, privileges, and duties of the
retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article IX shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
SECTION 9.8. Payments by the Agent. Unless
specifically allocated to a Bank Investor pursuant to the terms of this
Agreement, all amounts received by the Agent on behalf of the Bank
Investors shall be paid by the Agent to the Bank Investors (at their
respective accounts specified in their respective Assignment and
Assumption Agreements) in accordance with their respective related pro
rata interests in the Net Investment on the Business Day received by
the Agent, unless such amounts are received after 12:00 noon on such
Business Day, in which case the Agent shall use its reasonable efforts
to pay such amounts to the Bank Investors on such Business Day, but, in
any event, shall pay such amounts to the Bank Investors in accordance
with their respective related pro rata interests in the Net Investment
not later than the following Business Day.
SECTION 9.9. Bank Commitment; Assignment to Bank Investors.
<PAGE>
(a) Bank Commitment. At any time on or prior to the Commitment
Termination Date, in the event that the Company does not effect an
Incremental Transfer as requested under Section 2.2(a), then at any
time, the Transferor shall have the right to require the Company to
assign its interest in the Net Investment in whole to the Bank
Investors pursuant to this Section 9.9. In addition, at any time on or
prior to the Commitment Termination Date (i) upon the occurrence of a
Termination Event that results in the Termination Date or (ii) the
Company elects to give notice to the Transferor of a Reinvestment
Termination Date, the Transferor hereby requests and directs that the
Company assign its interest in the Net Investment in whole to the Bank
Investors pursuant to this Section 9.9 and the Transferor hereby agrees
to pay the amounts described in Section 9.9(d) above. Upon any such
election by the Company or any such request by the Transferor, the
Company shall make such assignment and the Bank Investors shall accept
such assignment and shall assume all of the Company's obligations
hereunder. In connection with any assignment from the Company to the
Bank Investors pursuant to this Section 9.9, each Bank Investor shall,
on the date of such assignment, pay to the Company an amount equal to
its Assignment Amount. Upon any assignment by the Company to the Bank
Investors contemplated hereunder, the Company shall cease to make any
additional Incremental Transfers hereunder.
<PAGE>
(b) Assignment. No Bank Investor may assign all or a portion
of its interests in the Net Investment, the Receivables, and
Collections, Related Security and Proceeds with respect thereto and its
rights and obligations hereunder to any Person unless approved in
writing by the Administrative Agent, on behalf of the Company, and the
Agent and, so long as no Termination Event then exists, by the
Transferor (which approval by the Transferor shall not be unreasonably
withheld). In the case of an assignment by the Company to the Bank
Investors or by a Bank Investor to another Person, the assignor shall
deliver to the assignee(s) an Assignment and Assumption Agreement in
substantially the form of Exhibit G attached hereto, duly executed,
assigning to the assignee a pro rata interest in the Net Investment,
the Receivables, and Collections, Related Security and Proceeds with
respect thereto and the assignor's rights and obligations hereunder and
the assignor shall promptly execute and deliver all further instruments
and documents, and take all further action, that the assignee may
reasonably request, in order to protect, or more fully evidence the
assignee's right, title and interest in and to such interest and to
enable the Agent, on behalf of such assignee, to exercise or enforce
any rights hereunder and under the other Transaction Documents to which
such assignor is or, immediately prior to such assignment, was a party.
Upon any such assignment, (i) the assignee shall have all of the rights
and obligations of the assignor hereunder and under the other
Transaction Documents to which such assignor is or, immediately prior
to such assignment, was a party with respect to such interest for all
purposes of this Agreement and under the other Transaction Documents to
which such assignor is or, immediately prior to such assignment, was a
party, to the extent of the interests so assigned (it being understood
that the Bank Investors, as assignees, shall (x) be obligated to fund
Incremental Transfers under Section 2.2(a) in accordance with the terms
thereof, notwithstanding that the Company was not so obligated and (y)
not have the right to elect the commencement of the amortization of the
Net Investment pursuant to the definition of "Reinvestment Termination
Date", notwithstanding that the Company had such right) and (ii) the
assignor shall relinquish its rights with respect to such interest for
all purposes of this Agreement and under the other Transaction
Documents to which such assignor is or, immediately prior to such
assignment, was a party. No such assignment shall be effective unless a
fully executed copy of the related Assignment and Assumption Agreement
shall be delivered to the Agent and the Transferor. All costs and
expenses of the Agent and the assignor and assignee incurred in
connection with any assignment hereunder shall be borne by the
Transferor and not by the assignor or any such assignee. No Bank
Investor shall assign any portion of its Commitment hereunder without
also simultaneously assigning an equal portion of its interest in the
Liquidity Provider Agreement.
(c) Effects of Assignment. By executing and delivering an
Assignment and Assumption Agreement, the assignor and assignee
thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and
Assumption Agreement, the assignor makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement, the other Transaction Documents or any other instrument or
document furnished pursuant hereto or thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value
or this Agreement, the other Transaction Documents or any such other
instrument or document; (ii) the assignor makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Transferor, the Seller or the Collection Agent or the
performance or observance by the Transferor, the Seller or the
Collection Agent of any of their respective obligations under this
Agreement, the Receivables Purchase Agreement, the other Transaction
Documents or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, the Receivables Purchase Agreement, and such other
instruments, documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment
and Assumption Agreement and to purchase such interest; (iv) such
assignee will, independently and without reliance upon the Agent, or
any of its Affiliates, or the assignor and based on such agreements,
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 Agreement and the other Transaction Documents; (v)
such assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement,
the other Transaction Documents and any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agent by
the terms hereof or thereof, together with such powers as are
reasonably incidental thereto and to enforce its respective rights and
interests in and under this Agreement, the other Transaction Documents,
the Receivables, the Contracts and the Related Security; (vi) such
assignee agrees that it will perform in accordance with their terms all
of the obligations which by the terms of this Agreement and the other
Transaction Documents are required to be performed by it as the
assignee of the assignor; and (vii) such assignee agrees that it will
not institute against the Company any proceeding of the type referred
to in Section 10.9 prior to the date which is one year and one day
after the payment in full of all Commercial Paper issued by the
Company.
<PAGE>
(d) Transferor's Obligation to Pay Certain Amounts;
Additional Assignment Amount. The Transferor shall pay to the Agent,
for the account of the Company, in connection with any assignment by
the Company to the Bank Investors pursuant to this Section 9.9, an
aggregate amount equal to all Discount to accrue through the end of
each outstanding Tranche Period plus all other Aggregate Unpaids (other
than the Net Investment). To the extent that such Discount relates to
interest or discount on Related Commercial Paper, if the Transferor
fails to make payment of such amounts at or prior to the time of
assignment by the Company to the Bank Investors, such amount shall be
paid by the Bank Investors (in accordance with their respective Pro
Rata Shares) to the Company as additional consideration for the
interests assigned to the Bank Investors and the amount of the "Net
Investment" hereunder held by the Bank Investors shall be increased by
an amount equal to the additional amount so paid by the Bank Investors.
(e) Administration of Agreement After Assignment. After any
assignment by the Company to the Bank Investors pursuant to this
Section 9.9 (and the payment of all amounts owing to the Company in
connection therewith), all rights of the Administrative Agent and the
Collateral Agent set forth herein shall be deemed to be afforded to the
Agent on behalf of the Bank Investors instead of either such party.
(f) Payments. After any assignment by the Company to the Bank
Investors pursuant to this Section 9.9, all payments to be made
hereunder by the Transferor or the Collection Agent to the Company
shall be made to the Agent's account as such account shall have been
notified to the Transferor and the Collection Agent. In the event that
the Assignment Amount paid by the Bank Investors is less than the sum
of the Net Investment plus the Interest Component of all outstanding
Commercial Paper, then to the extent payments made hereunder in respect
of the Net Investment (excluding Discount) exceed the Assignment Amount
such excess amounts shall be remitted by the Agent to the Company.
<PAGE>
(g) Downgrade of Bank Investor. If at any time prior to any
assignment by the Company to the Bank Investors as contemplated
pursuant to this Section 9.9, the short term debt rating of any Bank
Investor shall be "A-2" or "P-2" from Standard & Poor's or Moody's,
respectively, with negative credit implications, such Bank Investor,
upon request of the Agent, shall, within 30 days of such request,
assign its rights and obligations hereunder to another financial
institution (which institution's short term debt shall be rated at
least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively,
and which shall not be so rated with negative credit implications). If
the short term debt rating of a Bank Investor shall be "A-3" or "P-3",
or lower, from Standard & Poor's or Moody's, respectively (or such
rating shall have been withdrawn by Standard & Poor's or Moody's), such
Bank Investor, upon request of the Agent, shall, within five (5)
Business Days of such request, assign its rights and obligations
hereunder to another financial institution (which institution's short
term debt shall be rated at least "A-2" and "P-2" from Standard &
Poor's and Moody's, respectively, and which shall not be so rated with
negative credit implications). In either such case, if any such Bank
Investor shall not have assigned its rights and obligations under this
Agreement within the applicable time period described above, the
Company shall have the right to require such Bank Investor to accept
the assignment of such Bank Investor's Pro Rata Share of the Net
Investment; such assignment shall occur in accordance with the
applicable provisions of this Section 9.9. Such Bank Investor shall be
obligated to pay to the Company, in connection with such assignment, in
addition to the Pro Rata Share of the Net Investment, an amount equal
to the interest component of the outstanding Commercial Paper issued to
fund the portion of the Net Investment being assigned to such Bank
Investor, as reasonably determined by the Agent. Notwithstanding
anything contained herein to the contrary, upon any such assignment to
a downgraded Bank Investor as contemplated pursuant to the immediately
preceding sentence, the aggregate available amount of the Facility
Limit, solely as it relates to new Incremental Transfers by the
Company, shall be reduced by the amount of unused Commitment of such
downgraded Bank Investor; it being understood and agreed, that nothing
in this sentence or the two preceding sentences shall affect or
diminish in any way any such downgraded Bank Investor's Commitment to
the Transferor or such downgraded Bank Investor's other obligations and
liabilities hereunder and under the other Transaction Documents.
(h) Defaulting Bank Investor. Any Bank Investor that fails to
remit its Pro Rata Share of any Transfer Price (a "Defaulting Bank
Investor") shall not be entitled to receive any portion of its interest
in any Collections or Proceeds, and for purposes of voting or
consenting to matters with respect to the Transaction Documents, such
Bank Investor shall not be deemed to be a "Bank Investor" hereunder and
such Bank Investor's Commitment shall be deemed to be zero ($0), unless
and until (a) all other payments of Collections and Proceeds have been
paid in full, (b) such failure to fulfill its obligation to fund is
cured and such Bank Investor shall have paid, as and to the extent
provided in this Agreement, to the applicable party, such amount then
owing or (c) the Termination Date shall have occurred. Upon notice of
the existence of a Defaulting Bank Investor, the Agent shall use
reasonable efforts to replace such Defaulting Bank Investor. Any such
replacement shall have been consented to by the Transferor (such
consent not to be unreasonably withheld).
ARTICLE X
MISCELLANEOUS
<PAGE>
SECTION 10.1. Term of Agreement. This Agreement shall
terminate on the date following the Termination Date upon which the Net
Investment has been reduced to zero, all accrued Discount and Servicing
Fees have been paid in full and all other Aggregate Unpaids have been
paid in full, in each case, in cash; provided, however, that (i) the
rights and remedies of the Agent, the Company, the Bank Investors and
the Administrative Agent with respect to any representation and
warranty made or deemed to be made by the Transferor pursuant to this
Agreement, (ii) the indemnification and payment provisions of Article
VIII, and (iii) the agreement set forth in Section 10.9 hereof, shall
be continuing and shall survive any termination of this Agreement for a
period of one (1) year.
SECTION 10.2. Waivers; Amendments. (a) No failure or
delay on the part of the Agent, the Company, the Administrative Agent
or any Bank Investor in exercising any power, right or remedy under
this Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or remedy preclude any
other further exercise thereof or the exercise of any other power,
right or remedy. The rights and remedies herein provided shall be
cumulative and nonexclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement or any other Transaction
Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Transferor, the Collection
Agent, the Company and the Majority Investors (and, if Article IX or
the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by each
Bank Investor directly affected thereby, (i) increase the Commitment of
a Bank Investor, (ii) reduce the Net Investment or rate of Discount to
accrue thereon or any fees or other amounts payable hereunder, (iii)
postpone any date fixed for the payment of any scheduled distribution
in respect of the Net Investment or Discount with respect thereto or
any fees or other amounts payable hereunder or for termination of any
Commitment, (iv) change the percentage of the Commitments or the number
of Bank Investors, which shall be required for the Bank Investors or
any of them to take any action under this Section or any other
provision of this Agreement, (v) release all or substantially all of
the property with respect to which a security or ownership interest
therein has been granted hereunder to the Agent or the Bank Investors
or (vi) extend or permit the extension of the Commitment Termination
Date. In the event the Agent requests the Company's or a Bank
Investor's consent pursuant to the foregoing provisions and the Agent
does not receive a consent (either positive or negative) from the
Company or such Bank Investor within 10 Business Days of the Company's
or Bank Investor's receipt of such request, then the Company or such
Bank Investor (and its percentage interest hereunder) shall be
disregarded in determining whether the Agent shall have obtained
sufficient consent hereunder.
<PAGE>
SECTION 10.3. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing
(including telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice
to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 10.3 and confirmation
is received, (ii) if given by mail three (3) Business Days following
such posting, postage prepaid, U.S. certified or registered, (iii) if
given by overnight courier, one (1) Business Day after deposit thereof
with a national overnight courier service, or (iv) if given by any
other means, when received at the address specified in this Section
10.3. However, anything in this Section to the contrary
notwithstanding, the Transferor hereby authorizes the Company to effect
Transfers, Tranche Period and Tranche Rate selections based on
telephonic notices made by any Person which the Company in good faith
believes to be acting on behalf of the Transferor. The Transferor
agrees to deliver promptly to the Company a written confirmation of
each telephonic notice signed by an authorized officer of Transferor.
However, the absence of such confirmation shall not affect the validity
of such notice. If the written confirmation differs in any material
respect from the action taken by the Company, the records of the
Company shall govern absent manifest error.
If to the Company:
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center - North Tower
250 Vesey Street - 11th floor
New York, New York 10281
Attention: Stewart Cutler
Telephone: (212) 449-7468
Telecopy: (212) 449-8939
(with a copy to the Administrative Agent)
If to the Transferor:
Shaw Funding Company
616 East Walnut Avenue
Dalton, Georgia 30721
Telephone: (706) 275-1010 (Attention: Kenneth G. Jackson)
Telecopy: (706) 275-1985
Payment Information:
ABA # 111000012
Account of Shaw Industries, Inc.
Account No. 3751079206
Ref: Shaw Funding Company
with a copy to Ben Laughter, General Counsel, at the above address for
the Transferor (telephone: 706-275-1018 and telecopy: 706-275-1442),
and in case of notices of Termination Events, Potential Termination
Events or Reinvestment Termination Dates, a notice to Powell,
Goldstein, Frazer & Murphy LLP, attention Robert C. Lewinson, Esq.
(Tel: 404-572-6623, Fax: 404-572-6999).
<PAGE>
If to Shaw Industries, Inc.
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30721
Telephone: (706) 275-1010 (Attention: Kenneth G. Jackson)
Telecopy: (706) 275-1985
with a copy to Ben Laughter, General Counsel, at the above address for
the Transferor (telephone: 706-275-1018 and telecopy: 706-275-1442),
and in case of notices of Termination Events, Potential Termination
Events or Reinvestment Termination Dates, a notice to Powell,
Goldstein, Frazer & Murphy LLP, attention Robert C. Lewinson, Esq.
(Tel: 404-572-6623, Fax: 404-572-6999).
If to the Collateral Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
Acct: Operations/Administration
Account No. 0659-79-4523
Ref: Shaw Funding Company
If to the Administrative Agent:
<PAGE>
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Bank Investors, at their respective
addresses set forth on the signature pages hereto or of the Assignment
and Assumption Agreement pursuant to which it became a party hereto.
SECTION 10.4. Governing Law; Submission to Jurisdiction;
Integration.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE TRANSFEROR
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW
YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. The Transferor hereby irrevocably
waives, to the fullest extent it may effectively do so, any objection
which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum. Nothing in this Section 10.4 shall affect the right of the
Company to bring any action or proceeding against the Transferor or its
property in the courts of other jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED
WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement and the other Transaction Documents contain
the final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect
to the subject matter hereof superseding all prior oral or written
understandings.
<PAGE>
(d) The Transferor and the Seller each hereby appoint
Corporation Service Company located at 2 World Trade Center, Suite
8746, 87th Floor, New York, New York 10048-0203 as the authorized agent
upon whom process may be served in any action arising out of or based
upon this Agreement, the other Transaction Documents to which such
Person is a party or the transactions contemplated hereby or thereby
that may be instituted in the United States District Court for the
Southern District of New York and of any New York State court sitting
in The City of New York by the Company, the Agent, any Bank Investor,
the Collateral Agent or any assignee of any of them.
SECTION 10.5. Severability; Counterparts. This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement. Any
provisions of this Agreement which are prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.6. Successors and Assigns. (a) This
Agreement shall be binding on the parties hereto and their respective
successors and assigns; provided, however, that neither the Transferor
nor the Seller may assign any of its rights or delegate any of its
duties hereunder or under the Receivables Purchase Agreement or under
any of the other Transaction Documents to which it is a party without
the prior written consent of the Agent. No provision of this Agreement,
other than Section 9.9, shall in any manner restrict the ability of the
Company or any Bank Investor to assign, participate, grant security
interests in, or otherwise transfer any portion of the Transferred
Interest.
<PAGE>
(b) Notwithstanding the foregoing, the Company may, from time
to time, with prior or concurrent notice to Transferor and Collection
Agent, in one transaction or a series of transactions, assign all or a
portion of the Net Investment and its rights and obligations under this
Agreement and any other Transaction Documents to which it is a party to
a Conduit Assignee. Upon and to the extent of such assignment by the
Company to a Conduit Assignee, (i) such Conduit Assignee shall be the
owner of the assigned portion of the Net Investment, (ii) the related
administrative or managing agent for such Conduit Purchaser will act as
the Administrative Agent for such Conduit Assignee, with all
corresponding rights and powers, express or implied, granted to the
Administrative Agent hereunder or under the other Transaction
Documents, (iii) such Conduit Assignee and its liquidity support
provider(s) and credit support provider(s) and other related parties
shall have the benefit of all the rights and protections provided to
the Company and its Liquidity Support Provider(s) and Credit Support
Provider(s), respectively, herein and in the other Transaction
Documents (including, without limitation, any limitation on recourse
against such Conduit Assignee or related parties, any agreement not to
file or join in the filing of a petition to commence an insolvency
proceeding against such Conduit Assignee, and the right to assign to
another Conduit Assignee as provided in this paragraph), (iv) such
Conduit Assignee shall assume, by written instrument delivered to the
Company, with copies to the Transferor, the Collection Agent and each
Bank Investor, all (or the assigned or assumed portion) of the
Company's obligations, if any, hereunder and each other Transaction
Document, and the Company shall be released from such obligations, in
each case to the extent of such assignment, and the obligations of the
Company and such Conduit Assignee shall be several and not joint, (v)
all distributions in respect of the Net Investment shall be made to the
applicable agent or administrative agent, as applicable, on behalf of
the Company and such Conduit Assignee on a pro rata basis according to
their respective interests, (vi) the definition of the term "CP Rate"
with respect to the portion of the Net Investment funded with
commercial paper issued by the Company from time to time shall be
determined in the manner set forth in the definition of "CP Rate"
applicable to the Company on the basis of the interest rate or discount
applicable to commercial paper issued by such Conduit Assignee (rather
than the Company), (vii) the defined terms and other terms and
provisions of this Agreement and the other Transaction Documents shall
be interpreted in accordance with the foregoing, and (viii) if
requested by the Agent or the agent or administrative agent with
respect to the Conduit Assignee, the parties will execute and deliver
such further agreements and documents and take such other actions as
the Agent or such agent or administrative agent may reasonably request
to evidence and give effect to the foregoing. No Assignment by the
Company to a Conduit Assignee of all or any portion of the Net
Investment shall in any way diminish the related Bank Investors'
obligation under Section 9.9 to fund any Incremental Transfer not
funded by the Company or such Conduit Assignee or to acquire from the
Company or such Conduit Assignee all or any portion of the Net
Investment.
(c) The Seller hereby agrees and consents to the assignment by
the Company from time to time of all or any part of its rights under,
interest in and title to this Agreement and the Transferred Interest to
any Liquidity Provider or to any Conduit Assignee as set forth in
Section 10.6(b). In addition, each of the Transferor and the Seller
hereby consents to and acknowledges the assignment by the Company of
all of its rights under, interest in and title to this Agreement and
the Transferred Interest to the Collateral Agent.
<PAGE>
SECTION 10.7. Confidentiality. Except as otherwise
provided by Applicable Law, the Agent, the Company, and each Bank
Investor, by the acceptance of the benefits of this Agreement, hereby
agree to utilize all non-public information obtained pursuant to the
requirements of this Agreement or any other Transaction Document which
has been identified as confidential or proprietary by the Seller, the
Transferor, the Collection Agent or any of their Affiliates in
accordance with customary procedure of the Agent, the Company, or such
Bank Investor, as the case may be, for handling confidential
information of this nature and in accordance with safe and sound
banking practices. However, in any event, the Agent, the Company, and
the Bank Investors may make disclosure: (a) to any of their respective
Affiliates (provided such Affiliates shall agree to keep such
information confidential in accordance with the terms of this Section);
(b) as reasonably required by any bona fide transferee or participant
in connection with the contemplated transfer of any rights or interest
hereunder; (c) as required by any governmental authority or
representative thereof pursuant to legal process; (d) to the
independent auditors and other professional advisors of the Agent, the
Company, or any Bank Investor (provided they shall be notified of the
confidential nature of the information); and (e) after the happening
and during the continuance of a Termination Event, to any other Person,
in connection with the exercise of their remedial rights hereunder or
under any of the Transaction Documents.
SECTION 10.8. No Bankruptcy Petition Against the
Company. Each of the Transferor, the Collection Agent and the Seller
hereby covenants and agrees that, prior to the date which is one year
and one day after the payment in full of all outstanding Commercial
Paper or other indebtedness of the Company, it will not institute
against, or join any other Person in instituting against, the Company
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United
States or any State of the United States.
SECTION 10.9. No Recourse Against Stockholders,
Officers or Directors. No recourse under any obligation, covenant or
agreement of the Company contained in this Agreement shall be had
against Merrill Lynch Money Markets Inc. (or any Affiliate thereof), or
any stockholder, officer or director of the Company, as such, by the
enforcement of any assessment or by any legal or equitable proceeding,
by virtue of any statute or otherwise; it being expressly agreed and
understood that this Agreement is solely a corporate obligation of the
Company, and that no personal liability whatsoever shall attach to or
be incurred by Merrill Lynch Money Markets Inc. (or any affiliate
thereof), or the stockholders, officers or directors of the Company, as
such, or any of them, under or by reason of any of the obligations,
covenants or agreements of the Company contained in this Agreement, or
implied therefrom, and that any and all personal liability for breaches
by the Company of any of such obligations, covenants or agreements,
either at common law or at equity, or by statute or constitution, of
Merrill Lynch Money Markets Inc. (or any affiliate thereof) and every
such stockholder, officer or director of the Company is hereby
expressly waived as a condition of and consideration for the execution
of this Agreement.
<PAGE>
SECTION 10.10. Characterization of the Transactions
Contemplated by the Agreement. It is the intention of the parties that
the transactions contemplated hereby constitute the sale of the
Transferred Interest, conveying good title thereto free and clear of
any Adverse Claims to the Agent, on behalf of the Company and the Bank
Investors, and that the Transferred Interest not be part of the
Transferor's estate in the event of an insolvency. If, notwithstanding
the foregoing, the transactions contemplated hereby should be deemed a
financing, the parties intend that the Transferor shall be deemed to
have granted to the Agent, on behalf of the Company and the Bank
Investors, and the Transferor hereby grants to the Agent, on behalf of
the Company and the Bank Investors, a first priority perfected and
continuing security interest in all of the Transferor's right, title
and interest in, to and under the Receivables, together with Related
Security, Collections and Proceeds with respect thereto, and together
with all of the Transferor's rights under the Receivables Purchase
Agreement with respect to the Receivables and with respect to any
obligations thereunder of the Seller with respect to the Receivables,
and that this Agreement shall constitute a security agreement under
applicable law. The Transferor hereby assigns to the Agent, on behalf
of the Company and the Bank Investors, all of its rights and remedies
under the Receivables Purchase Agreement with respect to the
Receivables and with respect to any obligations thereunder of the
Sellers with respect to the Receivables.
[THE REMAINDER OF THIS PAGE INTENTIONALLY IS LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Transfer and Administration Agreement as of the date
first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:__/s/ Steven Newman______________________
Name: Steven Newman
Title: Vice President
SHAW FUNDING COMPANY,
as Transferor
By:__/s/ Bennie M. Laughter___________________
Name: Bennie M. Laughter
Title: Vice President
SHAW INDUSTRIES, INC., individually
and as Collection Agent
By:__/s/ Kenneth G. Jackson__________________
Name: Kenneth G. Jackson
Title: Vice President and CFO
Commitment NATIONSBANK, N.A., as Agent
$200,000,000 and a Bank Investor
By:__/s/ Michelle M. Heath____________________
Name: Michelle M. Heath
Title: Senior Vice President
Signature page to Transfer and Administration
Agreement dated as of September 3, 1998
::ODMA\PCDOCS\ATL\255736\1
<PAGE>
SCHEDULE 1
TO
TRANSFER AND ADMINISTRATION AGREEMENT
Dated as of September 3, 1998
Fiscal 1998
Month-End Closing Dates
February 7, 1998 March 7, 1998 April 4, 1998 May 9, 1998 June 6, 1998
July 4, 1998 August 8, 1998 September 5, 1998 October 3, 1998 November
7, 1998 December 5, 1998 January 2, 1999
Fiscal 1999
Month-End Closing Dates
February 6, 1999 March 6, 1999 April 3, 1999 May 8, 1999 June 5, 1999
July 3, 1999 August 7, 1999 September 4, 1999 October 2, 1999 November
6, 1999 December 4, 1999 January 1, 2000
<PAGE>
SCHEDULE 2
TO
TRANSFER AND ADMINISTRATION AGREEMENT
Dated as of September 3, 1998
Shaw Financial Covenants
All defined terms used below are as defined in that
certain Amended and Restated Credit Agreement (the "Credit Agreement"),
dated as of March 16, 1998, by and among Shaw Industries, Inc., the
Lenders named therein, NationsBank, N.A., as Issuing Bank and
Administrative Agent, SunTrust Bank, Atlanta, as Documentation Agent,
Wachovia Bank, N.A., as Managing Agent, Nationsbanc Montgomery
Securities LLC, as Arranger and Co-Syndication Agent and SunTrust
Equitable Securities Corporation, as Co-Arranger and Co-Syndication
Agent, as in effect on the date hereof. In the event that the Credit
Agreement is terminated prior to the expiration of this Transfer and
Administration Agreement, the defined terms below shall retain their
meanings as set forth in the Credit Agreement as was in effect on the
date hereof. Any amendment of any defined term in the Credit Agreement
shall not amend such term's meaning, as of the date hereof, under this
Transfer and Administration Agreement unless such amendment is approved
by the Agent and the Majority Bank Investors.
The Seller shall not, directly or indirectly:
1. EBIT to Interest Ratio. Permit, as at the end of
each fiscal quarter of the Seller, the Consolidated EBIT/Interest Ratio
to be less than 2.25 to 1.00.
<PAGE>
2. Minimum Net Worth. Permit as at the end of each
fiscal quarter of the Seller, its Consolidated Net Worth to be less
than the sum of: (i) $510,000,000 plus (ii) 50% of the cumulative
positive Consolidated Net Income of the Seller earned after January 3,
1998 plus (iii) the aggregate net proceeds received by the Seller and
its Subsidiaries from any sale or issuance of any shares, interests,
warrants, participations or other equity instruments of the Seller or
its Subsidiaries occurring after January 3, 1998 minus (iv) the
aggregate amount of all cash and non-cash consideration paid by the
Seller and its Subsidiaries in connection with any purchase,
redemption, retirement or other acquisition of any shares, interests,
warrants, participations or other equity instruments of the Seller and
its Subsidiaries occurring after January 3, 1998 in an amount up to,
but not to exceed, $150,000,000; it being understood that (1) any
equity issuance net proceeds received by, or purchase, redemption,
retirement or other acquisition consideration paid to, a Subsidiary
from the Seller or vice-versa shall not be included in determining the
amounts described in items (iii) and (iv) above, (2) for purposes of
determining the amount of non-cash consideration paid by the Seller and
its Subsidiaries in connection with any purchase, redemption,
retirement or other acquisition of any equity instruments, the fair
market value of such consideration shall be used, or, if such non-cash
consideration is in the form of a note or other debt security, the
amount of non-cash consideration shall be deemed to be the original
principal amount of the note or debt security and (3) the ability of
the Seller and its Subsidiaries to purchase, redeem, retire, or
otherwise acquire shares or other equity instruments shall continue to
be subject to Section 10.5 of the Credit Agreement.
3. Funded Debt to EBITDA Ratio. Permit, as of the end
of each fiscal quarter of the Seller, the Consolidated Funded
Debt/EBITDA Ratio to be greater than 4.00 to 1.00.
<PAGE>
iii
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<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
ARTICLE IDEFINITIONS.....................................................................................1
SECTION 1.1. Certain Defined Terms.............................................................1
SECTION 1.2. Other Terms......................................................................24
SECTION 1.3. Computation of Time Periods......................................................24
PURCHASES AND SETTLEMENTS...............................................................................24
SECTION 2.1. Facility.........................................................................24
SECTION 2.2. Transfers; Certificates; Eligible Receivables(a) Incremental Transfers...........24
SECTION 2.3. Selection of Tranche Periods and Tranche Rates...................................28
SECTION 2.4. Discount, Fees and Other Costs and Expenses......................................30
SECTION 2.5. Non-Liquidation Settlement and Reinvestment Procedures...........................31
SECTION 2.6. Liquidation Settlement Procedures................................................31
SECTION 2.7. Fees.............................................................................33
SECTION 2.8. Protection of Ownership Interest of the Company and the Bank Investors...........33
SECTION 2.9. Deemed Collections; Application of Payments......................................34
SECTION 2.10. Payments and Computations, Etc..................................................35
SECTION 2.11. Reports.........................................................................35
SECTION 2.12. Collection Account..............................................................36
SECTION 2.13. Sharing of Payments, Etc........................................................36
SECTION 2.14. Right of Setoff.................................................................37
ARTICLE IIIREPRESENTATIONS AND WARRANTIES...............................................................37
SECTION 3.1. Representations and Warranties of the Transferor.................................37
SECTION 3.2. Reaffirmation of Representations and Warranties by the Transferor................41
SECTION 3.3. Representations and Warranties of the Collection Agent...........................41
ARTICLE IVCONDITIONS PRECEDENT..........................................................................44
SECTION 4.1. Conditions to Closing............................................................44
ARTICLE VCOVENANTS......................................................................................47
SECTION 5.1. Affirmative Covenants of Transferor.....................................47
SECTION 5.2. Negative Covenants of the Transferor.............................................52
SECTION 5.3. Financial Covenant...............................................................54
SECTION 5.4. Affirmative Covenants of the Collection Agent....................................54
SECTION 5.5. Negative Covenants of the Collection Agent.......................................56
ARTICLE VIADMINISTRATION AND COLLECTIONS................................................................58
SECTION 6.1. Appointment of Collection Agent..................................................58
SECTION 6.2. Duties of Collection Agent.......................................................58
SECTION 6.3. Rights After Designation of New Collection Agent.................................60
SECTION 6.4. Collection Agent Default.........................................................61
SECTION 6.5. Responsibilities of the Transferor and the Seller................................62
ARTICLE VIITERMINATION EVENTS...........................................................................62
SECTION 7.1. Termination Events...............................................................62
SECTION 7.2. Termination......................................................................64
ARTICLE VIIIINDEMNIFICATION; EXPENSES; RELATED MATTERS..................................................64
SECTION 8.1. Indemnities by the Transferor....................................................64
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses.......................................67
SECTION 8.3. Taxes............................................................................69
SECTION 8.4. Other Costs, Expenses and Related Matters........................................70
SECTION 8.5. Reconveyance Under Certain Circumstances.........................................71
SECTION 8.6. Amounts Payable..................................................................71
ARTICLE IXTHE AGENT; BANK COMMITMENT....................................................................71
SECTION 9.1. Authorization and Action.........................................................71
SECTION 9.2. Agent's Reliance, Etc............................................................72
SECTION 9.3. Termination Events...............................................................72
SECTION 9.4. Rights as Bank Investor..........................................................72
SECTION 9.5. Indemnification of the Agent.....................................................73
SECTION 9.6. Non-Reliance.....................................................................73
SECTION 9.7. Resignation of Agent.............................................................74
SECTION 9.8. Payments by the Agent............................................................74
SECTION 9.9. Bank Commitment; Assignment to Bank Investors....................................74
ARTICLE XMISCELLANEOUS..................................................................................78
SECTION 10.1. Term of Agreement...............................................................78
SECTION 10.2. Waivers; Amendments.............................................................79
SECTION 10.3. Notices.........................................................................79
SECTION 10.4. Governing Law; Submission to Jurisdiction; Integration..........................82
SECTION 10.5. Severability; Counterparts......................................................83
SECTION 10.6. Successors and Assigns..........................................................83
SECTION 10.7. Confidentiality.................................................................84
SECTION 10.8. ................................................................................85
No Bankruptcy Petition Against the Company.....................................................85
SECTION 10.9. No Recourse Against Stockholders, Officers or Directors.........................85
SECTION 10.10. Characterization of the Transactions Contemplated by the Agreement.............85
</TABLE>
<PAGE>
iv
<PAGE>
vii
<PAGE>
EXHIBITS
EXHIBIT A Form of Contract
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Lock-Box Banks
EXHIBIT D Form of Lock-Box Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Form of Transfer Certificate
EXHIBIT G Form of Assignment and Assumption Agreement
EXHIBIT H List of Actions and Suits
EXHIBIT I Location of Records
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K-1 Form of Opinion of Counsel for the Seller and the Transferor
EXHIBIT K-2 Form of Opinion of In-House Counsel for the Seller and the
Transferor
EXHIBIT L-1 Form of Secretary's Certificate for the Transferor
EXHIBIT L-2 Form of Secretary's Certificate for the Seller
EXHIBIT M Form of Certificate
EXHIBIT N-1 UCC-1 Financing Statement relating to Private Label Credit Card
Program with General Electric Capital Corporation
EXHIBIT N-2 UCC-1 Financing Statement relating to Private Label Credit Card
Program with Monogram Credit Card Bank of Georgia
<PAGE>
SCHEDULES
SCHEDULE 1 Fiscal Months
SCHEDULE 2 Shaw Financial Covenants
<PAGE>
---------------------------------------------------------------
TRANSFER AND ADMINISTRATION AGREEMENT
among
SHAW FUNDING COMPANY
as Transferor
and
SHAW INDUSTRIES, INC.
individually and
as Collection Agent
and
ENTERPRISE FUNDING CORPORATION,
as Company
and
THE FINANCIAL INSTITUTIONS FROM
TIME TO TIME PARTIES HERETO
as Bank Investors
and
NATIONSBANK, N.A.
as Agent
Dated as of September 3, 1998
--------------------------------------------------------------
::ODMA\PCDOCS\ATL\255736\1
RECEIVABLES PURCHASE AGREEMENT
Dated as of September 3, 1998
among
SHAW INDUSTRIES, INC.
as the Seller
and
SHAW FUNDING COMPANY
<PAGE>
-ii-
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<CAPTION>
<S> <C>
ARTICLE IDEFINITIONS............................................................................................-1-
1.01. Certain Definitions.............................................................................-1-
1.02. Accounting Terms................................................................................-4-
1.03. Other Terms.....................................................................................-4-
1.04. Computation of Time Periods.....................................................................-4-
ARTICLE IIAMOUNTS AND TERMS OF THE PURCHASES....................................................................-5-
2.01. Purchases of Receivables; Agreement to Purchase.................................................-5-
2.02. Payment for the Purchases; Settlements..........................................................-6-
2.03. Transfer of Records to SFC......................................................................-8-
ARTICLE IIICONDITIONS PRECEDENT.................................................................................-9-
3.01. Conditions Precedent to Agreement...............................................................-9-
3.02. Conditions Precedent to Ongoing Purchases.......................................................-9-
3.03. Effect of Payment of Purchase Price............................................................-10-
ARTICLE IVREPRESENTATIONS AND WARRANTIES.......................................................................-10-
4.01. Representations and Warranties of the Seller...................................................-10-
4.02. Representations and Warranties of SFC..........................................................-14-
ARTICLE VGENERAL COVENANTS OF THE SELLER.......................................................................-15-
5.01. Affirmative Covenants of the Seller............................................................-15-
5.02. Negative Covenants of the Seller...............................................................-17-
ARTICLE VIADMINISTRATION AND COLLECTION........................................................................-20-
6.01. Collection of Receivables......................................................................-20-
SECTION 6.02. Rights of SFC........................................................-20-
6.03. Responsibilities of the Seller.................................................................-21-
6.04. Further Action Evidencing Purchases............................................................-21-
6.05. Application of Collections.....................................................................-22-
ARTICLE VIIINDEMNIFICATION.....................................................................................-22-
7.01. Indemnities by the Seller......................................................................-22-
ARTICLE VIIIMISCELLANEOUS......................................................................................-24-
8.01. Waivers; Amendments.............................................................................-24-
8.02. Notices.........................................................................................-24-
8.03. Effectiveness; Binding Effect; Assignability...................................................-25-
8.04. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL................................-26-
8.05. Costs and Expenses.............................................................................-27-
8.06. Confidentiality.................................................................................-27-
8.07. Execution in Counterparts; Severability........................................................-27-
8.08. Purchase Termination...........................................................................-27-
8.09. No Proceedings.................................................................................-27-
8.10. Entire Agreement...............................................................................-28-
EXHIBITS AND SCHEDULES
Exhibit A - Form of Subordinated Note
Schedule 4.01(g)..- Actions, Suits
Schedule 4.01(i) - Addresses and Locations of Books and Records of the Sellers
Schedule 4.01(k)..- Tradenames, Subsidiaries, Etc.
Schedule 4.01(o) .- ERISA Matters
Schedule 4.01(p) - Lock-Box Banks; Lock-Box Accounts; Lock-Box Numbers
Schedule 4.01(q)..- Material Adverse Change
</TABLE>
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT (the "Agreement"), dated
as of September 3, 1998, is made by and among SHAW INDUSTRIES, INC., a Georgia
corporation (the "Seller"), and SHAW FUNDING COMPANY, a Delaware corporation
("SFC") .
WITNESSETH:
WHEREAS, the Seller desires to sell, and SFC has agreed to
purchase, all of the Seller's right, title and interest in certain of its
accounts receivable on the terms and conditions provided herein; and
WHEREAS, SFC, as "Transferor", the Seller, as the initial
"Collection Agent", Enterprise Funding Corporation (the "Company"), those
institutions from time to time party thereto as "Bank Investors", and
NationsBank, N.A., as "Agent" have entered into that certain Transfer and
Administration Agreement of even date herewith (as amended, restated,
supplemented or otherwise modified from time to time, the "TAA"), pursuant to
which SFC may from time to time convey, transfer and assign undivided percentage
interests in accounts receivable purchased from the Seller, and the Company may,
and the Bank Investors, if requested, shall, accept such conveyance, transfer
and assignment of such undivided percentage interests;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Definitions. For all purposes of this
Agreement, except as otherwise specifically provided herein, capitalized terms
used in this Agreement without definition shall have the meanings ascribed to
such terms in the TAA. In addition, as used in this Agreement, the following
terms shall have the following meanings:
"Affected Assets" has the meaning specified in Section 2.01(a)
hereof.
<PAGE>
C:\Apps\EE\FILING\10-Q\3rd\5HBY01!.DOC
-31-
"Aged Receivables Ratio" means, as of the last day of each
calendar month, the percentage equivalent of a fraction, (i) the numerator of
which shall be the sum of (A) the aggregate Outstanding Balance of Receivables
that were unpaid for 61-90 days after their respective original due dates and
(B) the aggregate Outstanding Balance of Receivables that were charged-off as
uncollectible during such month prior to the date which is 90 days after their
respective original due dates and (ii) the denominator of which shall be the
aggregate Receivables originated by the Seller during the third prior calendar
month.
"Calculation Period" means each period commencing on the
Business Day immediately following a Cut-Off Date and ending on (and including)
the next succeeding Cut-Off Date; provided, however, that the first Calculation
Period shall begin and end on the Closing Date.
"Collection Date" means the date occurring after the
Termination Date upon which the Aggregate Unpaids shall have been paid in full,
in cash.
"Contributed Assets" has the meaning specified in Section
2.01(a) hereof.
"Cut-Off Date" means the last day of each Fiscal Month.
"Dilution Adjustment" means, with respect to all Receivables
sold by the Seller to SFC hereunder during any Calculation Period, and as of any
Settlement Date, an amount calculated in the Investor Report for the applicable
Calculation Period covered thereby equal to the aggregate reductions in the
Outstanding Balances of all Receivables originated and sold by the Seller to SFC
during such Calculation Period as a result of any Dilutive Factors.
"Dilutive Factors" means any of the following factors which
may reduce or cancel the aggregate amount of any Receivables: defective,
rejected or returned merchandise or services and all credits, rebates,
discounts, disputes, warranty claims, repossessed or returned goods,
chargebacks, allowances, other dilutive factors, and any other billing or other
adjustment (whether effected through the granting of credits against the
applicable Receivables or by the issuance of a check or other payment in respect
of (and as payment for) such reduction) by the Seller, SFC or the Collection
Agent (excluding from the foregoing contractual payment discounts included in
the Payment Discount Reserve) provided to an Obligor.
"Loss Horizon Ratio" means as of any Investor Report Date and
continuing until the next Investor Report Date, the quotient of (i) the
aggregate Outstanding Balance of Receivables originated by the Seller during the
immediately preceding three (3) Fiscal Months and (ii) the difference between
the aggregate Outstanding Balance of Receivables and the aggregate Outstanding
Balance of Defaulted Receivables as of the last day of the immediately preceding
Fiscal Month.
<PAGE>
"Loss Reserve Ratio" means, as of any Investor Report Date and
continuing until the next Investor Report Date an amount equal to:
1.5 x ARR x LHR x PTF
Where:
ARR = the highest three (3) month rolling average of the Aged
Receivables Ratio during the immediately preceding twelve (12)
Fiscal Months.
LHR =........Loss Horizon Ratio.
PTF = .......Payment Terms Factor
"Noncomplying Receivable" means any Receivable which, as of
the date of the Purchase thereof by SFC hereunder, did not meet the criteria for
an Eligible Receivable.
"Payment Terms Factor" means, as of any Investor Report Date
and continuing up to, but not including, the next Investor Report Date, (x) 1.0
when the weighted average of the periods within which Receivables are required
to be paid falls within one (1) to forty-five (45) days, (y) 1.17 when the
weighted average of the periods within which Receivables are required to be paid
falls within forty-six (46) to sixty (60) days, and (z) 1.33 when the weighted
average of the periods within which Receivables are required to be paid is
greater than sixty (60) days. For purposes of this calculation, Receivables
exclude contractual payment discount terms designated by the Receivables Systems
as "cash against documents" and "letter of credit".
"Purchase" means, on any Business Day, the sale, contribution
and conveyance of all Receivables from the Seller to SFC for which the Purchase
Price has not been previously paid or which have not previously been sold,
contributed or otherwise conveyed to SFC by the Seller, in either case, in
accordance with the terms of Section 2.02 hereof.
"Purchase Price" has the meaning specified in Section 2.02(b)
hereof.
"Purchase Price Adjustment" has the meaning specified in
Section 2.02(b) hereof.
"Purchase Price Percentage" has the meaning specified in
Section 2.02(b) hereof.
"Purchased Assets" has the meaning specified in Section
2.01(a) hereof.
"Seller Loans" has the meaning specified in Section 2.02(d)
hereof.
"Seller Related Security" means with respect to any
Receivable, all of the Seller's rights, title and interest in, to and under:
<PAGE>
(i) all of the interest in the merchandise (including returned
or repossessed merchandise);
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to
such Receivable or otherwise;
(iv) all Records related to such Receivable; and
(v) all Proceeds of any of the foregoing.
"Settlement Date" means each Investor Report Date.
"Subordinated Note" has the meaning specified in Section
2.02(e) hereof.
"Transferred Assets" has the meaning specified in Section
2.01(a) hereof.
SECTION 1.02. Accounting Terms. Under this Agreement, all
accounting terms not specifically defined herein shall be interpreted, all
accounting determinations made, and all financial statements prepared, in
accordance with GAAP.
SECTION 1.03. Other Terms. All other undefined terms contained
in this Agreement shall, unless the context indicates otherwise, have the
meanings provided for by the UCC as in effect in the State of New York to the
extent the same are used or defined therein. The words "herein," "hereof," and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, as the same may from time to
time be amended or supplemented and not to any particular section, subsection,
or clause contained in this Agreement, and all references to Sections, Exhibits
and Schedules shall mean, unless the context clearly indicates otherwise, the
Sections hereof and the Exhibits and Schedules attached hereto, the terms of
which Exhibits and Schedules are hereby incorporated into this Agreement.
Whenever appropriate, in the context, terms used herein in the singular also
include the plural, and vice versa.
<PAGE>
SECTION 1.04. Computation of Time Periods. In this Agreement,
in the computation of a period of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding", and the word "within" means "from and
excluding a specified date and to and including a later specified date".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Purchases of Receivables; Agreement to Purchase.
(a) Subject to the terms and conditions hereinafter set forth (including the
conditions set forth in Article III), SFC hereby purchases from the Seller, and
the Seller hereby sells, transfers, assigns and otherwise conveys to SFC all of
the Seller's right, title and interest in all of the Seller's Receivables
existing as of the Business Day immediately preceding the Closing Date or
thereafter arising until the Business Day, immediately preceding the Termination
Date, in each case together with all of the Seller Related Security relating to
such Receivables and all Collections with respect to and other Proceeds of such
Receivables and Seller Related Security (such Seller Related Security,
Collections and Proceeds, collectively, the "Affected Assets"). On each Business
Day and on each Settlement Date, SFC shall pay for the Purchases described in
the preceding sentence no later than 5:00 p.m. (New York time) by making
available to the Seller the payment of the Purchase Price and, to the extent
applicable, the Purchase Price Adjustment required under Section 2.02, except to
the extent that any such Receivables and Affected Assets shall have been
contributed to SFC's capital at or prior to such time. Prior to paying the
Purchase Price or Purchase Price Adjustment hereunder, SFC may request of the
Seller, and the Seller shall deliver, such approvals, opinions, information,
reports or documents as SFC may reasonably request. As used in this Agreement,
(i) the term "Purchased Assets" shall mean all Receivables which are paid for
through cash and/or Seller Loans under this Agreement and all Affected Assets
relating thereto, (ii) the term "Contributed Assets" shall mean all Receivables
which are contributed to SFC's capital and all Affected Assets relating thereto
and (iii) the term "Transferred Assets" shall mean, collectively, all Purchased
Assets and all Contributed Assets.
<PAGE>
(b) It is the intention of the parties hereto that each
Purchase of Receivables made hereunder shall constitute a "sale of accounts," as
such term is used in Article 9 of the UCC, which sales are absolute and
irrevocable and provide SFC with the full benefits of ownership of the
Receivables. Neither the Seller nor SFC intends the transactions contemplated
hereunder to be, or for any purpose to be characterized as, loans from SFC to
the Seller secured by such accounts. Except for the Dilution Adjustment made on
each Settlement Date and certain indemnities pursuant to Section 7.01(viii) with
respect to Noncomplying Receivables sold by the Seller to SFC, each sale of
Receivables by the Seller to SFC is made without recourse to the Seller;
provided, however, that (i) the Seller shall be liable to SFC for all
representations, warranties and covenants made by the Seller pursuant to the
terms of this Agreement, and (ii) such sale does not constitute and is not
intended to result in an assumption by SFC or any assignee thereof of any
obligation of the Seller or any other person arising in connection with the
Receivables, the Affected Assets and/or the related Contracts, or any other
obligations of the Seller. In view of the intention of the parties hereto that
the Purchases of Receivables made hereunder shall constitute sales of such
Receivables rather than a loan secured by such Receivables, the Seller agrees to
note on its financial statements and in its books and records that its
Receivables have been sold to SFC and to respond to any inquiries made by
third-parties as to the ownership of the Receivables so sold that such
Receivables have been sold to SFC.
(c) Notwithstanding any other provision of this Agreement, SFC
shall not purchase from the Seller nor shall the Seller sell to SFC any
Receivable from and after the time of any bankruptcy filing by or against the
Seller or against SFC, provided, that if such bankruptcy filing arises as a
result of an involuntary bankruptcy or other proceeding and such proceeding is
dismissed or otherwise terminated prior to the Termination Date, then, in any
such case, SFC shall automatically resume the purchase of Receivables from the
Seller.
(d) If, notwithstanding the provisions of the immediately
preceding clause (b), the Purchases hereunder are deemed for any reason not to
constitute valid "sales of accounts" as set forth above, then this Agreement
shall be deemed to create a security interest (within the meaning of Articles 8
and 9 of the Uniform Commercial Code as in effect in all applicable
jurisdictions) in favor of SFC in all of the Seller's rights, title and interest
in, to and under the Transferred Assets. Upon each such Purchase, the Seller
hereby grants such a security interest to SFC in the Transferred Assets which
are the subject of such Purchase, and this Agreement shall constitute a security
agreement within the meaning of Article 8 and Article 9 of the UCC of all
applicable jurisdictions.
SECTION 2.02. Payment for the Purchases; Settlements. (a)
Except as otherwise provided below in this Section 2.02, the Purchase Price for
the Receivables sold by the Seller under this Agreement during any Calculation
Period shall be payable in full in cash by SFC to the Seller, on the date of
such Purchase, except that (A) in the case of the initial Purchase of
Receivables hereunder on the Closing Date, the Purchase Price for such
Receivables shall be payable on the Closing Date, (B) a portion of the Purchase
Price to be paid on the Closing Date and at certain times thereafter shall be
funded through the Seller's making a capital contribution to SFC in an amount
satisfactory to the Seller and (C) SFC may, with respect to any Purchase, offset
against such Purchase Price (i) any amounts shown on an Investor Report as owing
from the Seller to SFC and which remain unpaid or (ii) any other uncontested
amounts owed by the Seller to SFC hereunder and which remain unpaid.
<PAGE>
(b) On each Settlement Date, the Collection Agent, shall
deliver to each party hereto an Investor Report in the form required under the
TAA, which Investor Report shall set forth, among other things, (i) the
aggregate Purchase Price owed to the Seller for all Receivables purchased during
the immediately preceding Calculation Period, (ii) the aggregate amounts paid by
SFC to the Seller in respect of the Purchase Price for such Receivables during
such Calculation Period pursuant to Section 2.02(c), (iii) an amount for the
Seller for such Calculation Period equal to the amount set forth in clause (i)
immediately above minus the amount set forth in clause (ii) immediately above
(such amount being the "Purchase Price Adjustment" with respect to the Seller
for such Calculation Period), and (iv) the Dilution Adjustment. The Purchase
Price (the "Purchase Price") owing to the Seller with respect to any Calculation
Period (prior to giving effect to any cash payments made by SFC to the Seller
during such Calculation Period as described on Section 2.02(c)) shall be
calculated to equal the product of (i) the aggregate Outstanding Balances of new
Receivables noted as being sold to SFC by the Seller on the Investor Report
during such period times (ii) the Purchase Price Percentage (the "Purchase Price
Percentage") in effect on such date pursuant to the remaining provisions of this
Section 2.02(b). From the Closing Date until the Calculation Period commencing
October 5, 1998, the Purchase Price Percentage shall equal 95.68%. Thereafter,
the Purchase Price Percentage shall be calculated in accordance with the
following formula:
Purchase Price Percentage = 100% - Loss Reserve Ratio.
The Purchase Price Percentage shall be calculated on each
Settlement Date for the immediately succeeding Calculation Period and such
calculation shall be utilized in the calculation of the Purchase Price owed
under this Agreement for all Purchases occurring during such subsequent
Calculation Period. Promptly after the end of each Calculation Period, the
Seller shall provide to the Collection Agent, as applicable, all information
necessary for the Collection Agent to calculate the foregoing matters and to
prepare the Investor Report within the time frame specified herein.
(c) On each Business Day, out of Collections or proceeds from
any Incremental Transfers received by SFC, which, in any case, it is not
required to hold in trust for, or remit to, the Collection Agent or the Agent
pursuant to the TAA, SFC shall remit such funds to the Seller (net of any funds
needed to pay existing expenses which are then accrued and unpaid) in the
following order of priority and application: first to pay the Purchase Price
owed to the Seller; and second to pay amounts owed by SFC to the Seller under
the Subordinated Note described in Section 2.02(d) below.
(d) To the extent SFC shall have insufficient available cash
to pay any amounts owing by it on any Settlement Date as described herein, then
SFC may, by notice to the Seller (orally, with prompt confirmation in writing to
follow), elect to pay such remaining part of the Purchase Price by borrowing a
revolving loan (each a "Seller Loan") under its Subordinated Note issued in
favor of the Seller, and the Seller shall have irrevocably agreed to advance,
and shall be deemed to have advanced, a Seller Loan on such date in the amount
so specified by SFC; provided, however, that SFC may not make any such election
if, as a result thereof (and after giving effect thereto), SFC's net worth
(calculated (i) after giving effect to all such Purchases and Seller Loans to be
made on such date and (ii) without giving effect to any Receivables that are not
included in the Net Receivables Balance at such time) would be less than 5% of
the aggregate Outstanding Balance of all Receivables at such time.
<PAGE>
If such result shall be a negative number, such amount shall
be shown on the Investor Report as an amount owing to SFC from the Seller as an
additional capital contribution, and SFC shall, on the applicable Settlement
Date, credit all such net amounts due to it against any outstanding principal
amount of the Subordinated Note issued to the Seller and any remaining net
amounts due by the Seller to SFC shall be credited by SFC against all future
Purchases from the Seller; provided, however, that if (x) a balance is owing by
the Seller to SFC for two consecutive Calculation Periods, then on the
Settlement Date following such second Calculation Period the Seller shall pay
SFC such balance in cash on the next succeeding Business Day and (ii) if any
balance is owing by the Seller on any Settlement Date occurring after the
Termination Date, the Seller shall pay to shall pay SFC such balance in cash on
such Settlement Date.
(e) The Seller Loans shall be subordinated to the prior right
and payment in full of the Aggregate Unpaids and any other obligations of SFC
arising under the TAA. The Seller Loans advanced by the Seller shall be
evidenced by, and payable in accordance with the terms and provisions of, a
promissory note (the "Subordinated Note") payable to the Seller in the form of
Exhibit A attached hereto.
(f) Unless and until the Termination Date has occurred, if,
after giving effect to all allocations of cash and Seller Loans provided for in
Section 2.02(d), the remaining Purchase Price (after giving effect to the
Dilution Adjustment) payable by SFC to the Seller on any Settlement Date is not
paid in full as a result of the limitation on the amount of the Subordinated
Note, then, subject to the limitations set forth in Section 2.01(c), the Seller
shall be deemed to have contributed Receivables to SFC's capital having a
Purchase Price equal to the otherwise unpaid portion of the total Purchase Price
otherwise owed to the Seller on such date; to the extent that aggregate amount
of deemed capital contribution exceeds the Purchase Price of Receivables
transferred by the Seller to SFC during any Calculation Period covered by an
Investor Report, then SFC shall reflect such capital contribution as a reduction
in the outstanding principal amount of the Subordinated Note payable to the
Seller.
(g) If on any day any of the representations and warranties in
Section 4.01(i) or (k) is not true with respect to any Receivable, the Seller
shall deliver to the Collection Agent in same day funds an amount equal to the
Outstanding Balance of such Receivable for application by the Collection Agent
to the same extent as if Collections of such Outstanding Balance had actually be
received on such date, provided, that prior to the Commitment Termination Date,
such amount may be paid by a reduction to the Purchase Price to be paid to the
Seller on the next occurring Investor Report Date.
<PAGE>
SECTION 2.03. Transfer of Records to SFC. (a) In connection
with the Purchases of Receivables hereunder, the Seller hereby sells, transfers,
assigns and otherwise conveys to SFC all of the Seller's right and title to and
interest in the Records relating to all Receivables included in the Transferred
Assets, without the need for any further documentation in connection with any
Purchase. In connection with such transfer, the Seller hereby grants to each of
SFC and the Collection Agent (including, without limitation, any successor
Collection Agent appointed in accordance with the TAA) an irrevocable,
non-exclusive license to use, without royalty or payment of any kind, all
software used by the Seller to account for the Receivables, to the extent
necessary to administer the Receivables, whether such software is owned by the
Seller or is owned by others and used by the Seller under license agreements
with respect thereto. The license granted hereby shall be irrevocable, and shall
terminate on the date occurring after the Termination Date upon which all
Aggregate Unpaids shall have been paid in full, in cash.
(b) The Seller shall take all commercially reasonable action
requested by SFC and/or the Collection Agent (including any successor Collection
Agent appointed in accordance with the TAA), from time to time hereafter, that
may be reasonably necessary or appropriate to ensure that SFC (and its
assignees, including, without limitation, the Agent and the Purchasers) has (i)
an enforceable ownership interest in the Records relating to the Receivables
purchased from the Seller hereunder and (ii) an enforceable right (whether by
license or sublicense or otherwise) to use all of the computer software used to
account for the Receivables and/or to recreate such Records. The Seller hereby
represents that as of the Closing Date it has obtained all necessary consents
for the use by SFC and the Collection Agent of all such software which the
Seller does not own.
SECTION 2.04. Limitation on Recourse. Except as specifically
provided in this Agreement, the purchase and sale of Receivables and the
Affected Assets under this Agreement shall be without recourse to the Seller;
provided, however, that the Seller shall be liable to SFC for all
representations, warranties, covenants and indemnities made by the Seller
pursuant to the terms of this Agreement, it being understood that no such
liability of the Seller will arise on account of the failure of an Obligor to
make any payment in respect of a Receivable for credit reasons.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Agreement. This
Agreement is subject to the conditions precedent that (i) each of the conditions
precedent to the execution, delivery and effectiveness of the TAA and each other
Transaction Document (other than a condition precedent in any such other
Transaction Document relating to the effectiveness of this Agreement) shall have
been fulfilled to the satisfaction of SFC and the Agent, and (ii) SFC and the
Agent shall have received original copies, executed by each of the parties
thereto in such reasonable number as shall be specified by SFC and the Agent, of
each of the other Transaction Documents to be executed and delivered in
connection herewith, on or before the Closing Date, each (unless otherwise
indicated) dated as of the Closing Date or such other recent date acceptable to
SFC and the Agent and each in form and substance satisfactory to SFC and the
Agent.
<PAGE>
SECTION 3.02. Conditions Precedent to Ongoing Purchases. The
obligation of SFC on any Business Day to accept and pay for the transfers of
Receivables under this Agreement is subject to the conditions precedent that the
representations and warranties contained in Article IV are true and correct in
all material respects as of such Business Day. The Seller, by accepting the
Purchase Price paid for each Purchase of Receivables generated by the Seller and
the Related Assets of the Seller, shall be deemed to have certified, with
respect to the Receivables and the Affected Assets paid for on such day, that
its representations and warranties contained in Article IV are true and correct
on and as of such day, with the same effect as though made on and as of such
day.
SECTION 3.03. Effect of Payment of Purchase Price and/or
Contribution. Upon the payment of the Purchase Price for any Purchase (whether
in cash or by an increase in the Seller's Subordinated Note pursuant to Section
2.02(c)) or the contribution of any Contributed Assets by the Seller to the
capital of SFC pursuant to Section 2.02(f), title to the Receivables and the
Affected Assets included in such Purchase shall vest in SFC, whether or not the
conditions precedent to such Purchase were in fact satisfied; provided, however,
that SFC shall not be deemed to have waived any claim it may have under this
Agreement for the failure by the Seller in fact to satisfy any such condition
precedent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller.
The Seller represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) and as of
the date of each Purchase:
(a) Corporate Existence and Power. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. The
Seller is duly qualified to do business in, and is in good standing in, every
other jurisdiction in which the nature of its business requires it to be so
qualified, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Seller of this Agreement and the
other Transaction Documents to which it is a party are within the Seller's
corporate powers, have been duly authorized by all necessary corporate and
shareholder action, require no action by or in respect of, or filing with, any
Official Body or official thereof (except as contemplated by Section 5.01(a)),
and do not (i) contravene, (l) any provision of applicable law, rule or
regulation, the contravention of which would have a Material Adverse Effect, (2)
the Articles of Incorporation or Bylaws of the Seller or (3) any judgment,
injunction, order, writ or decree, (ii) violate or constitute a default under
any material agreement or other material instrument, binding upon the Seller or
(iii) result in the creation or imposition of any Adverse Claim on the assets of
the Seller (except as contemplated hereunder).
<PAGE>
(c) Binding Effect. Each of this Agreement and the other
Transaction Documents to which the Seller is a party constitutes the legal,
valid and binding obligation of the Seller, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally, and to general
principles of equity (regardless of whether such enforceability is considered)
in a proceeding at law or in equity.
(d) Ownership Interest. Immediately preceding each Purchase
hereunder, the Seller shall be the owner of all of the Receivables, free and
clear of all Adverse Claims. On or prior to each Purchase and on each day
thereafter, all financing statements and other documents required to be recorded
or filed in order to more fully evidence the interests of SFC under this
Agreement will have been duly filed (and continued and/or amended, as
applicable) in each filing office necessary for such purpose and all filing fees
and taxes, if any, payable in connection with such filings shall have been paid
in full.
(e) Accuracy of Information. All information heretofore
furnished by the Seller to SFC and the Agent for purposes of or in connection
with this Agreement, any other Transaction Document to which the Seller is a
party or any transaction contemplated hereby or thereby is, and all such
information hereafter furnished by the Seller to SFC and the Agent will be
complete and correct in every material respect, on the date such information is
stated or certified, to the extent necessary to give the recipient a true and
accurate knowledge of the subject matter, or, in the case of financial
statements, present fairly, in accordance with GAAP consistently applied
throughout the periods involved, the financial position of the Seller or SFC (as
the case may be) as at the date thereof in the results of operations for such
period. All financial projections and other pro forma financial information
delivered to SFC and the Agent have been based on good faith estimates and
assumptions believed by the Seller to be reasonable at the time made and at the
time furnished to SFC and the Agent.
.......(f) Tax Status. The Seller has filed or caused to be filed,
all tax returns (federal, state and local) required to be filed by it and has
paid or made adequate provision for the payment of all taxes, assessments and
other governmental charges.
(g) Action, Suits. Except as set forth on Schedule 4.01(g)
hereof, there are no actions, suits or proceedings pending, or to the knowledge
of the Seller threatened, against or affecting the Seller or its properties, in
or before any court, arbitrator or other body, which may be, individually or in
the aggregate (i) asserting the invalidity of this Agreement or any other
Transaction Document to which the Seller is a party, (ii) seeking to prevent the
sale and assignment of any Receivable or other Affected Assets or the
consummation of any of the other transactions contemplated by this Agreement or
any other Transaction Document to which the Seller is a party, or (iii) seeking
any determination or ruling that would have a Material Adverse Effect.
<PAGE>
(h) Place of Business. The principal place of business and
chief executive office of the Seller are located at the address of the Seller
indicated in Section 8.02 hereof and the offices where the Seller keeps all its
Records, are located at the address(es) described on Schedule 4.01(i) or such
other locations notified to SFC and the Agent in accordance with Section 5.02(h)
hereof in jurisdictions where all action required by Section 6.05 hereof has
been taken and completed.
(i) Good Title. Upon each Purchase from the Seller, SFC shall
acquire an ownership interest in each of the Seller's Receivables and the
Related Assets relating thereto that exist on the date of such Purchase and in
the Seller Related Security and Collections with respect thereto free and clear
of any Adverse Claim (except as contemplated hereunder), and no such Transferred
Assets shall constitute Property of the Seller. No effective financing statement
or other instrument similar in effect covering all or any part of such
Transferred Assets from the Seller Assets shall at such time be on file in any
filing or recording office except as may be filed in favor of the Agent (as
assignee of SFC) pursuant to the Transaction Documents.
(j) Tradenames, Etc. As of the date hereof: (i) the Seller has
no Subsidiaries other than those disclosed on Schedule 4.01(k) hereto and (ii)
the Seller has, within the last five (5) years, operated only under the
tradenames identified on Schedule 4.01(k) hereto, and, within the last five (5)
years, has not changed its name, merged with or into or consolidated with any
other corporation or been the subject of any proceeding under the Bankruptcy
Code, except as disclosed on Schedule 4.01(k) hereto.
(k) Nature of Receivables. Except as identified in any
Investor Report or other interim report by the Seller or the Collection Agent,
each Receivable purchased from the Seller by SFC hereunder satisfies at the time
of the Purchase thereof the definition of "Eligible Receivable" set forth in the
TAA and is an "eligible asset" as defined in Rule 3a-7 under the Investment
Company Act, of 1940, as amended.
(l) Credit and Collection Policy. Since the effective date(s)
indicated thereon, there have been no material changes in the Credit and
Collection Policy other than as permitted hereunder and under the TAA.
(m) Not an Investment Company or a Public Utilities Holding
Company. The Seller is not, nor is it controlled by, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. The Seller
is not a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company", within the meanings of such terms set
forth in the Public Utility Holding Borrower Act of 1935, as amended.
<PAGE>
(n) ERISA. Except as set forth on Schedule 4.01(o), neither
the Seller nor any of its ERISA Affiliates maintains any Benefit Plans. The
Seller and its ERISA Affiliates are in compliance in all material respects with
ERISA and no Adverse Claims exists in favor of the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor on any of the Receivables on the
assets or properties of the Seller or any of its ERISA Affiliates.
(o) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks of the Seller, together with the account numbers of the Lock-Box
Accounts and the numbers of the related Lock-Boxes at such Lock-Box Banks are
specified on Schedule 4.01(p) hereto (or at such other Lock-Box Banks and/or
with such other Lock-Box Accounts as have been notified to SFC and the Agent and
for which Lock-Box Agreements have been executed in accordance with Section
5.02(f) hereof and delivered to the Agent). The Seller has instructed all of its
Obligors to make payments on the Receivables directly to a Lock-Box or a
Lock-Box Account and only Collections of the Seller's Receivables and Seller
Related Security are deposited into Lock-Box Accounts.
(p) Bulk Sales. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(q) Financial Statements; Material Adverse Change. The audited
consolidated and the unaudited consolidating balance sheets of the Seller and
its Subsidiaries, in each case, dated as of January 3, 1998, and the
consolidated and unconsolidated statements of income, cash flows and changes in
financial position relating thereto for the Fiscal Year then ended, copies of
which have been furnished to the Agent, fairly present the financial condition
of each such Persons as at such date and the results of the operations and cash
flows of each such Person for the period ended on such date, all in accordance
with generally accepted accounting principles consistently applied. Since
January 3, 1998, there has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Seller or its
Subsidiaries, other than as described in Schedule 4.01(q) hereto, or as
otherwise disclosed to the Seller in writing.
(r) Preference; Voidability. Each Receivable transferred by
the Seller to SFC hereunder shall have been transferred in contemporaneous
exchange for reasonably equivalent value to the Seller, and no such Purchase
shall have been made for or on account of an antecedent debt owed by the Seller
to SFC.
(s) Collection and Servicing. Since January 3, 1998, there has
been no material adverse change in the ability of the Seller then acting as
Collection Agent to service and collect the Receivables.
<PAGE>
(t) Year 2000 Compliance. The Seller has (i) initiated a
review and assessment of all areas within its and each of its Subsidiaries'
business and operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Seller or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Based on the foregoing,
the Company believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely basis
to be Year 2000 Compliant, except to the extent that a failure to do so could
not reasonably be expected to have a Material Adverse Effect.
The Seller (i) has completed a review and assessment of the
Receivable Systems and (ii) has determined that such Receivable Systems are Year
2000 Compliant or will be Year 2000 Compliant on or before January 1, 1999 and
thereafter.
The costs of all assessment, remediation, testing and
integration related to the Seller's plan for becoming Year 2000 Compliant will
not have a Material Adverse Effect.
SECTION 4.02. Representations and Warranties of SFC. SFC
represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) as of the
date of each Purchase:
(a) Corporate Existence and Power. SFC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. SFC
is duly qualified to do business in, and is in good standing in, every other
jurisdiction in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by SFC of this Agreement and the other
Transaction Documents to which it is a party are within SFC's corporate powers,
have been duly authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any Official Body or official thereof
(except as contemplated by Section 2.8 of the TAA), and do not (i) contravene
(1) any provision of applicable law, rule or regulation, the contravention of
which would have a Transferor Material Adverse Effect, (2) the Certificate of
Incorporation or Bylaws of SFC, or (3) any judgment, injunction, order, writ or
decree, (ii) violate or constitute a default under any agreement or other
instrument where such violation would have a Transferor Material Adverse Effect,
binding upon SFC or (iii) result in the creation or imposition of any Adverse
Claim on the assets of SFC.
(c) Binding Effect. Each of this Agreement, the Subordinated
Notes and the other Transaction Documents to which SFC is a party constitutes
the legal, valid and binding obligation of SFC, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
<PAGE>
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller. At all
times from the date hereof to the Collection Date, the Seller will, in addition
to those covenants binding the Seller under the TAA, and unless SFC and the
Agent shall otherwise consent in writing:
(a) Protection of Ownership Interest. (i) Promptly execute and
deliver all instruments and documents and take all actions as may be necessary
or as the Agent may reasonably request in order to perfect or protect the
Transferred Interest or to enable SFC, the Company or the Bank Investors to
exercise or enforce any of their respective rights under this Agreement and the
TAA.
(A) Without limiting the foregoing, the Seller shall
execute and file such financing statements (which statements may be in
any form, including in the form of a carbon, photographic or other
reproduction of this Agreement) continuation statements or amendments
thereto or assignments thereof as may be requested by the Agent, the
Company or any of the Bank Investors;
(B) To the extent reasonably practicable, mark its
master data processing records and, upon the Agent's, any Bank
Investor's or the Company's request, its Contracts and other documents
with a legend (in form and substance satisfactory to the Agent)
describing the conveyance hereunder to SFC and the Agent, for the
benefit of the Company and the Bank Investors, of the Transferred
Assets; and
(C) Obtain additional search reports as may be
reasonably requested by SFC, the Agent, the Company or any of the Bank
Investors.
(ii) The Seller hereby authorizes and appoints each of SFC
(and the Agent as assignee of SFC) and the Collection Agent as its
attorney-in-fact, to the fullest extent permitted by applicable law, to sign and
file UCC financing statements, continuation statements and amendments thereto
and assignments thereof without the Seller's signature. A carbon, photographic
or other reproduction of this Agreement or any financing statement covering the
Transferred Assets or any part thereof, shall be sufficient as a financing
statement.
<PAGE>
(b) Designation of New Collection Agent. At any time after the
designation of a Collection Agent (other than SFC, the Seller or any Affiliate
of SFC or the Seller pursuant to Section 6.1 of the TAA), the Seller hereby
authorizes the Agent to take any and all steps in the Seller's name and on
behalf of the Seller necessary or desirable, in the determination of the Agent,
to collect all amounts due under any and all Receivables, including without
limitation, endorsing the Seller's name on checks and other instruments
representing Collections and enforcing the Seller's Receivables and the related
Contracts.
(c) Conduct of Business. Carry on and conduct its business
solely for the corporate purposes specified in its Certificate of Incorporation
and do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(d) Compliance with Laws. Comply, and cause each of its
Subsidiaries to comply, with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it or its respective
properties may be subject, the failure to comply with which would have a
Material Adverse Effect.
(e) Furnishing of Information and Inspection of Records.
Furnish to SFC and the Agent from time to time such information with respect to
the Receivables as SFC or the Agent may reasonably request, including, without
limitation, listings identifying the Obligor and the Outstanding Balance for
each Receivable. Permit SFC and the Agent, or its agents or representatives, at
any time and from time to time during regular business hours, and upon
reasonable advance notice, (i) to examine and make copies of, and make abstracts
from, all of the Seller's Records and (ii) to visit the offices and properties
of the Seller, for the purpose of examining such Records, and to discuss matters
relating to the Seller's Receivables or the Seller's performance hereunder and
under the other Transaction Documents to which the Seller is a party with any of
the officers, directors, employees or independent public accountants of the
Seller having knowledge of such matters.
......(f) Keeping of Records and Books of Account. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing its Receivables in the
event of the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the Collection of all of the Seller's Receivables (including,
without limitation, records adequate to permit the daily identification of each
new Receivable and all Collections of and adjustments to each existing
Receivable). Give SFC and the Agent notice of any material change in the
administrative and operating procedures of the Seller referred to in the
previous sentence.
(g) Performance and Compliance with Receivables and Contracts.
At the Seller's expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by the Seller
under the Contracts related to the Receivables, subject, however, to the right
of the Seller to dispute or contest obligations to perform or to comply with any
such provision, covenant or promise where the Seller reasonably believes that
such performance or compliance is not required or is not in the best interest of
the Seller and such failure to perform or comply would not have a Material
Adverse Effect.
<PAGE>
(h) Credit and Collection Policy. Comply in all material
respects with the Credit and Collection Policy in regard to each of its
Receivables and the related Contracts.
(i) Collections. Instruct all of its Obligors to cause all
Collections to be remitted directly to a Lock-Box or Lock-Box Account.
(j) Collections Received. Hold in trust, and deposit,
immediately, but in any event not later than two (2) Business Days following the
Seller's receipt thereof, to one of its Lock-Box Accounts, all Collections
received from time to time by the Seller.
(k) Separate Identity. Take all actions reasonably required to
maintain SFC's status as a separate legal entity, including, without limitation,
(i) not misleading third parties as to SFC's identity as an entity with assets
and liabilities distinct from the Seller and the Seller's Subsidiaries; (ii) not
holding itself out to be responsible for the debts or decisions or actions
relating to the business and affairs of SFC; (iii) taking such other actions as
are necessary on its part to ensure that the covenants made by SFC in Section
5.1 of the TAA are true and correct at all times; and (iv) taking such other
actions as are necessary on its part to ensure that SFC's corporate procedures
required by its certificate of incorporation and by-laws are duly and validly
taken.
(l) Preservation of Corporate Existence; Separate Business.
Preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, and qualify and remain qualified in
good standing as a foreign corporation in each respective jurisdiction where the
failure to preserve and maintain such existence, rights, franchises, privileges
and qualification would have a Material Adverse Effect.
(m) Year 2000 Compliance. The Seller will promptly notify SFC
in the event the Seller discovers or determines that any computer application
(including those of its suppliers, vendors and customers) (i) that is necessary
for the origination, collection, management, or servicing of the Receivables
will not be Year 2000 Compliant on or before January 1, 1999 and thereafter, or
(ii) that is otherwise material to its or any of its Subsidiaries' business and
operations will not be Year 2000 Compliant on a timely basis, except to the
extent that, in the case of (ii) above, such failure could not reasonably be
expected to have a Material Adverse Effect or a Transferor Material Adverse
Effect.
SECTION 5.02. Negative Covenants of the Seller. From the date
hereof until the Collection Date, the Seller shall not, without the written
consent of SFC and the Agent:
<PAGE>
(a) No Sales, Liens, Etc. Except as otherwise provided herein
and the TAA, sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to (x) any of the Affected Assets, (y) any inventory or goods, the sale of which
may give rise to a Receivable, except where such Person in whose favor such
Adverse Claim exists has acknowledged in writing in form and substance
satisfactory to SFC and the Agent that it does not claim, and thereby releases,
any Adverse Claim in the Affected Assets, whether arising as Proceeds of such
Person's collateral or otherwise, or (z) upon or with respect to any Lock-Box
Account to which any Collections of any Receivable are sent or deposited, or
assign any right to receive income in respect thereof.
(b) No Extension or Amendment of Receivables. Except as
otherwise permitted under the TAA, extend, amend or otherwise modify the terms
of any Receivable, or amend, modify or waive any term or condition of any
Contract related thereto.
(c) No Change in Business or Credit and Collection Policy.
Make any change in the character of its business or in the Credit and Collection
Policy, which change would, in either case, impair the collectability of any
Receivable or otherwise have a Material Adverse Effect.
(d) No Mergers, Etc. (i) Consolidate or merge with or into any
other Person except where the Seller shall be the surviving entity of such
merger of consolidation and no Termination Event or Potential Termination Event
shall then be outstanding or would result therefrom, provided that unless the
Agent, the Majority Bank Investors and SFC shall have consented, no receivables
of any Person with whom the Seller shall have merged or consolidated (including
such receivables arising from such Person's businesses or divisions after the
date thereof) shall be sold to SFC hereunder, deemed to be a Receivable
hereunder, or collected or deposited in any Lock-Box or Lock-Box Account, or
(ii) sell, lease or transfer all or substantially all of its assets to any other
Person.
(e) Assignment. Assign any of the Seller's rights or delegate
any of the Seller's duties under this Agreement, the TAA, or any of the other
Transaction Documents to which the Seller is a party, without the prior written
consent of SFC and the Agent.
(f) Change in Payment Instructions to Obligors. Add or
terminate any bank as a Lock-Box Bank, any account as a Lock-Box Account or any
lock-box as Lock-Box to or from those listed on Schedule 4.01(p) hereto or make
any change in its instructions to Obligors regarding payments to be made to any
Lock-Box or Lock-Box Account, unless, (i) such instructions are to deposit such
payments to another existing Lock-Box or Lock-Box Account of the Seller or (ii)
SFC and the Agent shall have received written notice of such addition,
termination or change at least 30 days prior thereto and the Agent shall have
received a Lock-Box Agreement executed by each new Lock-Box Bank or an existing
Lock-Box Bank with respect to each new Lock-Box Account or Lock-Box.
(g) Deposits to Lock-Box Accounts. Deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Lock-Box or
Lock-Box Account any cash or cash proceeds other than Collections of
Receivables.
<PAGE>
(h) Change of Name, Etc. Change its name, identity or
corporate structure (within the meaning of Section 9-402(7) of the UCC as in
effect in the State of New York and the State in which the Seller's chief
executive office and principal place of business is located) nor the location of
its chief executive office or any office where Records are kept, unless at least
10 days prior to the effective date of any such change the Seller delivers to
SFC, the Agent and the Collateral Agent (i) such documents, instruments or
agreements, executed by the Seller as are necessary to reflect such change and
to continue the perfection of SFC's, the Agent's and the Collateral Agent's
ownership interests or security interests in the Affected Assets and (ii) new or
revised Lock-Box Agreements and executed by the Lock-Box Banks which reflect
such change.
(i) ERISA Matters. Permit any of its ERISA Affiliates to, (i)
engage in any prohibited transaction (as defined in Section 4975 of the Code and
Section 406 of ERISA) for which an exemption is not available or has not
previously been obtained from the U.S. Department of Labor; (ii) permit to exist
any accumulated funding deficiency (as defined in Section 302(a) of ERISA and
Section 412(a) of the Code) or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Seller or any of its ERISA Affiliates is required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
liability; or (v) permit to exist any occurrence of any reportable event
described in Title IV of ERISA which represents a material risk of a liability
to the Seller or any of its ERISA Affiliates under ERISA or the Code, if such
prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events occurring within any Fiscal Year, in the
aggregate, involve a payment of money or an incurrence of liability by the
Seller or any of its ERISA Affiliates, in an amount in excess of $1,000,000.
(j) Sale Treatment. Account for (including for accounting and
tax purposes), or otherwise treat, the transactions contemplated by this
Agreement in any manner other than as a sale or capital contribution, as
applicable, of Receivables by the Seller to SFC. In addition, fail to disclose
(in a footnote or otherwise) in all of its respective financial statements
(including any such financial statements consolidated with any other Persons'
financial statements) the existence and nature of the transaction contemplated
hereby and the interest of SFC hereunder, all in accordance with GAAP.
<PAGE>
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Collection of Receivables. (a) The servicing,
administering and collection of the Receivables shall be conducted by the
Collection Agent. For so long as the Person acting as Collection Agent is the
Seller, the Seller shall perform its duties as Collection Agent under the TAA in
accordance with the terms thereof, it being understood that it shall hold all
Transferred Assets which it receives from time to time solely in its capacity as
Collection Agent and shall not claim or retain any legal or beneficial title or
interest therein. If at any time the Collection Agent is a Person other than the
Seller, the Seller agrees promptly to provide all information requested by the
Collection Agent in connection with the performance of its responsibilities
under the TAA, and agrees to exert reasonable efforts to assist any successor
Collection Agent in assuming and performing its duties as Collection Agent.
(b) The Seller hereby acknowledges and agrees that the Agent
has the exclusive ownership and control of each Lock-Box and Lock-Box Account
maintained by the Seller at a Lock-Box Bank, and the Seller hereby agrees to
take any further action necessary or that the Agent or SFC may reasonably
request to evidence and/or effect such ownership and control. If the Collection
Agent or the Seller or its agents or representatives shall at any time receive
any cash, checks or other instruments constituting Collections, such recipient
shall immediately, but in any event within forty-eight (48) hours of such
receipt, remit such Collections, duly endorsed or with duly executed instruments
of transfer, to a Lock-Box Account.
(c) The Seller hereby authorizes SFC and/or the Collection
Agent, on behalf of SFC, and gives each of SFC and the Collection Agent its
irrevocable power of attorney, which authorization shall be coupled with an
interest, to take any and all steps in the Seller's name and on behalf of the
Seller, which steps are necessary or desirable, in the reasonable determination
of SFC and/or the Collection Agent, to collect all amounts due under the
Transferred Assets, including, without limitation, endorsing the Seller's name
on checks and other instruments representing Collections and enforcing such
Receivables and the related Contracts.
SECTION 6.02. Rights of SFC. At any time:
(a) SFC (or the Agent as assignee of SFC) may direct that
payment of all amounts payable under any Receivable be made directly to SFC (or
the Agent, as the case may be) or its designee.
(b) The Seller shall, at SFC's request (or at the request of
the Agent, as assignee of SFC) and at the Seller's expense, give notice of SFC's
ownership of Receivables and/or the Agent's interest in the Receivables to each
Obligor and direct that payments be made directly to SFC (or the Agent, as the
case may be) or its designee.
<PAGE>
(c) The Seller shall, at SFC's or the Agent's request, (A)
assemble all of the Records, and shall make the same available to SFC, the Agent
or its designee at a place selected by SFC, the Agent or its designee, and (B)
segregate all cash, checks and other instruments received by it from time to
time constituting Collections of Receivables in a manner acceptable to SFC and
the Agent and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Agent or its designee.
SECTION 6.03. Responsibilities of the Seller. Anything herein
to the contrary notwithstanding:
(a) The Seller shall (i) perform all of its obligations under
the Contracts related to the Receivables sold by it hereunder to the same extent
as if such Receivables had not been sold hereunder and the exercise by SFC (or
any of its assignees) of its respective rights hereunder shall not relieve the
Seller from such obligations and (ii) pay when due any taxes relating to the
origination and sale of the Receivables and the other Transferred Assets.
(b) SFC and its assignees shall have no obligation or
liability with respect to any Receivable or related Contract, nor shall SFC or
any such assignee be obligated to perform any of the obligations of the Seller
thereunder.
(c) The Seller shall, upon the request of SFC, its assigns
(including the Agent) or the Collection Agent, deliver to SFC, such assigns
and/or the Collection Agent, as directed, all Records that evidence or relate to
the Receivables and other Transferred Assets conveyed to SFC under this
Agreement.
SECTION 6.04. Further Action Evidencing Purchases. (a) The
Seller agrees that at any time and from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and take all
further action that may be reasonably necessary to perfect, protect or more
fully evidence SFC's, the Agent's and the Bank Investors' respective interests
in the Transferred Assets, or to enable SFC, the Agent or any of the Bank
Investors to exercise or enforce any of their respective rights hereunder.
Without limiting the generality of the foregoing, the Seller will (i) execute
and file such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments and notices, as may be necessary
or appropriate or as SFC, the Agent, any Bank Investor or any of the foregoing's
agents, representatives or permitted assignees may reasonably request, and (ii)
to the extent reasonably practicable, mark its master data processing records
evidencing such Receivables and related Contracts with a legend indicating SFC's
and the Agent's respective interests therein.
<PAGE>
(b) If the Seller fails to perform any of its agreements or
obligations under this Agreement, following expiration of any applicable cure
period, SFC (or any assignee thereof) may (but shall not be required to)
perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of SFC (or any such assignee) incurred in connection
therewith shall be payable by the Seller within thirty (30) days after SFC's (or
any such assignee's) written demand therefor (which demand shall itemize such
expenses in reasonable detail).
SECTION 6.05. Application of Collections. Any payment by an
Obligor in respect of any indebtedness or other obligations owed by such Obligor
to the Seller shall, except as otherwise specified by such Obligor or otherwise
required by law, be applied as a Collection of any Receivable of such Obligor
purchased hereunder (in the order of the age by invoice date of such
Receivables, starting with the oldest such Receivable) to the extent of any
amounts then due and payable thereunder before being applied to (i) any
Receivable arising subsequent to the Purchase Termination Date which is not
purchased hereunder or (ii) any other indebtedness of such Obligor to the
Seller.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnities by the Seller. Without limiting any
other rights which SFC may have hereunder or under applicable law, the Seller
hereby agrees to indemnify SFC and any successors and permitted assigns and
their respective officers, directors and employees (collectively, "Indemnified
Parties") from and against any and all damages, losses, claims, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them in any action
or proceeding between the Seller (including such Person's capacity as the
Collection Agent) and any of the Indemnified Parties or between any of the
Indemnified Parties and any third party or otherwise arising out of or as a
result of this Agreement, or the other Transaction Documents, excluding,
however, (i) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of an Indemnified Party or (ii) recourse for
Receivables which become Defaulted Receivables for credit reasons. Without
limiting the generality of the foregoing, the Seller shall indemnify each
Indemnified Party for Indemnified Amounts relating to or resulting from:
(i) any representation or warranty made by the Seller
(including in such Person's capacity as the Collection Agent) or any
officers of the Seller (including in such Person's capacity as the
Collection Agent) under or in connection with this Agreement, any of
the other Transaction Documents, any Investor Report delivered by the
Collection Agent or any other information or report delivered by the
Seller or the Collection Agent on the Seller's behalf pursuant hereto,
which shall have been false or incorrect in any material respect when
made or deemed made;
(ii) the failure by the Seller (including such Person's
capacity as the Collection Agent) to comply with any applicable law,
rule or regulation with respect to any Receivable or the related
Contract, or the nonconformity of any Receivable or the related
Contract with any such applicable law, rule or regulation;
(iii) the failure to vest and maintain vested in SFC or to
transfer to SFC, a valid and enforceable ownership interest in the
Affected Assets, which are, or are purported to be, sold by the Seller
hereunder, free and clear of any Adverse Claim (other than Adverse
Claims created under the other Transaction Documents);
(iv) the failure to file, or any delay in filing, financing
statements, continuation statements, or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any of the Affected Assets;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of goods,
inventory or merchandise or services related to such Receivable or the
furnishing or failure to furnish such goods, inventory, merchandise or
services;
(vi) any failure of the Collection Agent to perform its duties
or obligations in accordance with the provisions hereof;
(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with goods, merchandise,
inventory or services which are the subject of any Receivable or
Contract;
(viii) the transfer of an ownership interest in any Receivable
other than an Eligible Receivable;
(ix) the failure by the Seller (individually or as Collection
Agent) to comply with any term, provision or covenant contained in this
Agreement or any of the other Transaction Documents to which the Seller
is a party or to perform any of its respective duties under the
Contracts;
(x) the failure of the Seller to pay when due any taxes,
including without limitation, sales, excise or personal property taxes
payable in connection with any of the Receivables;
(xi) any repayment by an Indemnified Party of any amount
previously distributed which such Indemnified Party believes in good
faith is required to be made;
<PAGE>
(xii) the commingling by the Seller or the Collection Agent of
Collections of Receivables at any time with other funds;
(xiii) any investigation, litigation or proceeding related to
this Agreement, any of the other Transaction Documents, the use of
proceeds of Purchases by the Seller, the ownership or maintenance of
any interest in the Transferred Assets of or any Receivable, Seller
Related Security or Contract;
(xiv) the failure of any Lock-Box Bank to remit any amounts
held in the Lock-Boxes or the Lock-Box Accounts pursuant to the
instructions of the Collection Agent, the Agent, SFC or the Seller (to
the extent such Person is entitled to give such instructions in
accordance with the terms hereof and of any applicable Lock-Box
Agreement whether by reason of the exercise of set-off rights or
otherwise;
(xv) any inability to obtain any judgment in or utilize the
court or other adjudication system of, any state in which an Obligor of
the Seller may be located as a result of the failure of the Seller to
qualify to do business or file any notice of business activity report
or any similar report; or
(xvi) any action taken by the Seller, or the Collection Agent
(if the Seller or any Affiliate or designee of the Seller) in the
enforcement or Collection of any Receivable.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Waivers; Amendments. No failure or delay on the
part of SFC (or any assignee thereof) in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy. The rights
and remedies herein provided shall be cumulative and nonexclusive of any rights
or remedies provided by law. Any provision of this Agreement may be amended if,
but only if, such amendment is in writing and is signed by SFC and the Agent (as
assignee of SFC).
<PAGE>
SECTION 8.02. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing (including
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth below its
name on the signature pages hereto or at such other address or telecopy number
as such party may hereafter specify for the purposes of notice to such party. A
copy of each such notice shall be sent to each Person entitled to a copy thereof
if such notice were given pursuant to the TAA instead of this Agreement. Each
such notice or other communication shall be effective (i) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified for such
Person and confirmation is received, (ii) if given by mail, three (3) Business
Days following such posting, postage prepaid, U.S. certified or registered,
(iii) if given by overnight courier, one (1) Business Day after deposit thereof
with a national overnight courier service, or (iv) if given by any other means,
when received at the address specified on the signature pages hereof.
SECTION 8.03. Effectiveness; Binding Effect; Assignability.
(a) This Agreement shall become effective on the Closing Date and shall, from
and after such date, be binding upon and inure to the benefit of the Seller and
SFC and their respective successors and permitted assigns. The Seller may not
assign any of its rights or delegate any of its duties hereunder or any interest
herein without the prior written consent of SFC and the Agent. No provision of
this Agreement shall in any manner restrict the ability of SFC (or the Company
or any Bank Investor as assignees of SFC) to assign, participate, grant security
interests in, or otherwise transfer any of their rights or remedies hereunder.
(b) Without limiting the foregoing, the Seller hereby
acknowledges that, contemporaneously herewith, SFC is selling, assigning,
transferring and conveying to the Agent (for its benefit and for the benefit of
the Company, the Bank Investors, and each of the foregoing respective assignees,
under the TAA), all of SFC's right and title to and interest in, among other
things, the Transferred Assets and this Agreement, including all of SFC's
rights, remedies, powers and privileges, and all claims of SFC against the
Seller, under or with respect to this Agreement (whether arising pursuant to the
terms of this Agreement or otherwise available at law or in equity), including
(i) the right of SFC and the obligations of the Seller hereunder and (ii) the
right, at any time, to give or withhold consents, requests, notices, directions,
approvals, demands, extensions or waivers under or with respect to this
Agreement or the obligations in respect of the Seller hereunder to the same
extent as SFC may do. The Seller hereby consents to such sale, transfer,
assignment and conveyance to the Agent and acknowledges and agrees that the
Agent, as the assignee of SFC for the benefit of the Company, the Bank Investors
and each of the foregoing's respective assignees, including but not limited to
the Collateral Agent, shall be third party beneficiaries of the rights of SFC
arising hereunder and under the other Transaction Documents to which the Seller
is a party.
(c) The Seller hereby agrees to execute all agreements,
instruments and documents, and to take all other action, that SFC or the Agent
reasonably determines is necessary or appropriate to evidence the assignments
described in clause (b) immediately above. To the extent that SFC, individually
or through the Collection Agent, has granted or grants powers of attorney to the
Agent under the TAA, the Seller hereby grants a corresponding power of attorney
on the same terms to SFC. The Seller hereby acknowledges and agrees that SFC, in
all of its capacities, shall assign to the Agent for the benefit of the Company,
the Bank Investors, and each of the foregoing's respective assignees, such
powers of attorney and other rights and interests granted by the Seller to SFC
hereunder and agrees to cooperate fully with the Agent in the exercise of such
rights.
<PAGE>
(d) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the date occurring after the Termination Date
upon which the Aggregate Unpaids have been paid in full, in cash; provided,
however, that the rights and remedies with respect to (i) any breach of any
representation and warranty made by the Seller pursuant to Article IV, (ii) the
indemnification and payment provisions of Article VII and Section 8.06 and (iii)
any breach of Section 8.07, shall be continuing and shall survive any
termination of this Agreement for a period of one (1) year.
SECTION 8.04. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE SELLER AND SFC
HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT
SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH OF THE SELLER AND SFC HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THEY
MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING IN THIS SECTION 8.04 SHALL AFFECT THE RIGHT OF SFC
TO BRING ANY ACTION OR PROCEEDING AGAINST THE SELLER OR ITS PROPERTY IN THE
COURTS OF OTHER JURISDICTIONS.
(b) EACH OF THE SELLER AND SFC HEREBY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR
INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR
THE OTHER TRANSACTION DOCUMENTS.
(c) The Seller hereby appoints Corporation Service Company,
located at 2 World Trade Center, Suite 8746, 87th Floor, New York, New York
10048-0203, as the authorized agent upon whom process may be served in any
action arising out of or based upon this Agreement, the other Transaction
Documents to which such Person is a party or the transactions contemplated
hereby or thereby that may be instituted in the United States District Court for
the Southern District of New York and of any New York State court sitting in The
City of New York by SFC or any of its assignees.
<PAGE>
SECTION 8.05. Costs and Expenses. In addition to the rights of
indemnification under Article VII hereof, the Seller agree to pay SFC on demand
all costs and expenses (including without limitation, reasonable counsel fees
and expenses) incurred by SFC in connection with the enforcement of the
covenants, agreements, liabilities and obligations of the Seller and the
Collection Agent under this Agreement and the other Transaction Documents.
SECTION 8.06. Confidentiality. (a) Except as otherwise
provided by applicable law, SFC (and the Agent, as assignee of SFC), by the
acceptance of the benefits of this Agreement, hereby agrees to utilize all
non-public information obtained pursuant to the requirements of this Agreement
or any other Transaction Document which has been identified as confidential or
proprietary by the Seller only in a manner consistent with the confidentiality
restrictions described in Section 10.7 of the TAA.
(b) Not withstanding the foregoing, the Seller hereby consents
to the disclosure of any non-public information with respect to it received by
SFC to any of the Company, the Agent, the Administrative Agent, any nationally
recognized rating agency rating the Company's Commercial Paper, any Bank
Investor or potential Bank Investor, the Liquidity Provider or the Credit
Support Provider in relation to the TAA.
SECTION 8.07. Execution in Counterparts; Severability. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 8.08. Purchase Termination. (a) The agreements of the
Seller to sell Receivables hereunder may be terminated at any time by the Seller
by giving written notice thereof to SFC and the Agent of the Seller' election to
terminate this Agreement, in which event the Purchase Termination Date shall
thereafter occur on the date specified therefor by the Seller in such notice,
but in any event not less than 60 days after the Agent's receipt of such notice.
(b) Notwithstanding any such termination described under
paragraph (a) above, all other provisions of this Agreement shall remain in full
force and effect as provided in Section 8.04. On or after the termination of
this Agreement, SFC will, at the request and expense of the Seller, execute and
deliver to the Seller, or cause the Agent to execute and deliver, such UCC
termination statements and other documents as the Seller may reasonably request
to evidence such termination.
<PAGE>
SECTION 8.09. No Proceedings. (a) The Seller hereby covenants
and agrees that, prior to the date which is one year and one day after the
payment in full of all outstanding Commercial Paper or other indebtedness of the
Company, it will not institute against, or join any other Person in instituting
against, the Company any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the United
States or any other state of the United States.
(b) Each of the Seller and the Collection Agent hereby agrees
that it will not institute against SFC, or join any other Person in instituting
against SFC, any proceeding of the type referred to in the definition of
"Bankruptcy Event", so long as any Aggregate Unpaid shall be outstanding or
there shall not have elapsed one year plus one day since the last day on which
any such Aggregate Unpaid shall have been outstanding. The foregoing shall limit
the rights of the Seller under any and all agreements it may have with SFC but
shall not limit the right of the Seller to file any claim in or otherwise take
any action with respect to any insolvency proceeding that was instituted against
SFC by any Person other than the Seller or any Affiliate thereof or in a
voluntary proceeding filed by SFC in accordance with its Certificate of
Incorporation.
SECTION 8.10. Entire Agreement. This Agreement, together with
the other Transaction Documents, including the exhibits and schedules hereto and
thereto, contains a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all previous oral statements and other
writings with respect thereto.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
........ SHAW INDUSTRIES, INC.
BBy:_/s/
Kenneth G. Jackson___________________
Name: Kenneth G. Jackson
Title: Vice President and CFO
616 East Walnut Avenue
Dalton, Georgia 30721
Telephone: (706) 275-1010
(Attention: Kenneth G. Jackson)
Telecopy: (706) 275-1985
SHAW FUNDING COMPANY
BBy:_/s/
Bennie M. Laughter__________________
Name: Bennie M. Laughter
Title: Vice President
616 East Walnut Avenue
Dalton, Georgia 30721
Telephone: (706) 275-1010
(Attention: Kenneth G. Jackson)
Telecopy: (706) 275-1985
Signature Page to Receivables Purchase Agreement
<PAGE>
EXHIBIT A
to
Receivables Purchase Agreement
FORM OF SUBORDINATED NON-NEGOTIABLE
REVOLVING NOTE
The indebtedness evidenced by this instrument is subordinated
to the prior payment in full of the Aggregate Unpaids under (and as such term is
defined in) that certain Transfer and Administration Agreement dated as of the
date hereof (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "TAA") among Shaw Funding Company, Shaw
Industries, Inc., Enterprise Funding Corporation, the financial institutions
from time to time parties thereto as "Bank Investors", and NationsBank, N.A., as
the Agent and as a Bank Investor thereunder.
SUBORDINATED NON-NEGOTIABLE REVOLVING NOTE
FOR VALUE RECEIVED, the undersigned SHAW FUNDING COMPANY, a
Delaware corporation ("SFC"), hereby promises to pay to the order of Shaw
Industries, Inc., a Georgia corporation (the "Seller"), at the Seller's office
at 616 East Walnut Street, Dalton, Georgia 30722 (or at such other address as
the Seller may from time to time specify in a written notice to SFC), in lawful
money of the United States of America and in immediately available funds (and
subject to the limitations on recourse set forth herein):
(i) on each Investor Report Date after all amounts
due and payable under the TAA and the RPA (as defined in the
TAA) have been satisfied, principal on all Seller Loans owed
to the Seller by SFC as of such date; and
(ii) on the Business Day (such Business Day being the
"Maturity Date") occurring on the later to occur of the first
Business Day which is at least ninety-one (91) days after (i)
the Termination Date under (and as defined in) the TAA, and
(ii) the payment in full of all of the Aggregate Unpaids and
the reduction of the Net Investment to zero, the aggregate
unpaid principal balance of all Seller Loans owed to the
Seller by SFC as of such date, plus all accrued but unpaid
interest thereon (at the rate set forth below).
This Subordinated Non-Negotiable Revolving Note (this "Note")
is the "Subordinated Note" referred to in, and was executed and delivered
pursuant to, that certain Receivables Purchase Agreement dated as of the date
hereof (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Receivables Purchase Agreement") between the Seller and
SFC. Reference to the Receivables Purchase Agreement is hereby made for a
statement of the terms and conditions under which the Seller Loans evidenced
hereby have been and will be made, and such terms are incorporated herein by
this reference. Reference is made to the terms and conditions of the Receivables
Purchase Agreement for a statement of certain other rights and obligations of
the Seller and SFC. In the case of any conflict between the provisions of this
Note and those of the Receivables Purchase Agreement, the terms of the
Receivables Purchase Agreement shall control. All capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the
Receivables Purchase Agreement or, if not defined therein, then in the TAA.
Amounts borrowed and repaid or prepaid hereunder from time to
time may be reborrowed, subject to and in accordance with the terms hereof and
the Receivables Purchase Agreement.
SFC agrees to pay interest on the outstanding unpaid principal
balance hereof from the date hereof until payment in full hereof at the per
annum rate equal to the Base Rate under (and as such term is defined in) the
TAA. In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by SFC or inadvertently received by the
Seller, then such excess sum shall be credited as a payment of principal, unless
SFC shall notify the Seller, in writing, that SFC elects to have such excess sum
returned to it forthwith. It is the express intent hereof that SFC not pay and
the Seller not receive, directly or indirectly, in any manner whatsoever,
interest in excess of that which may be lawfully paid by SFC under applicable
law. Any change in such rate shall be effective when such change is announced.
Interest on this Note shall be calculated on the basis of a 360-day year for the
actual number of days (including the first day but excluding the last day)
elapsed. Interest shall be payable on each Investor Report Date (as defined in
the TAA), in arrears, solely out of funds available to SFC after payment of all
amounts then due and owing under the TAA, and to the extent insufficient funds
exist to pay the aggregate amount of accrued and unpaid interest on all Seller
Loans, such available amount shall be allocated among all Seller Loans ratably,
with all remaining accrued but unpaid interest being due on the earlier to occur
of (i) the next Investor Report Date upon which available funds exist to pay
such amount or (ii) the Maturity Date. The outstanding principal of (together
with the accrued and unpaid interest on) any Seller Loan made under this Note
may be repaid or prepaid at any time, in whole or in part, without premium or
penalty, to the extent then permitted under the TAA and the Receivables Purchase
Agreement; provided, that any such prepayment shall be accompanied by a payment
of all then accrued but unpaid interest on the principal amount to be so
prepaid. Partial payments hereunder shall be applied first to accrued and unpaid
interest, and then to outstanding principal.
The Seller is authorized and directed by SFC to enter on the
grid attached hereto, or, at its option, in its books and records, the date and
amount of each Seller Loan made by it which is evidenced by this Note and the
amount of each payment of principal made by SFC, and absent manifest error, such
entries shall constitute prima facie evidence of the accuracy of the information
so entered; provided, however, that neither the failure of the Seller to make
any such entry nor any error therein shall expand, limit, impair or otherwise
affect the obligations of SFC hereunder.
The indebtedness evidenced by this Note is payable solely from
the proceeds of the Receivables and the Related Security acquired by SFC from
the Seller (whether such proceeds arise from Collections or the sale of
Transferred Interests by SFC pursuant to the TAA) and is subordinated to the
prior payment in full of all Aggregate Unpaids owing under the TAA; and the
Seller shall have no (and hereby waives any) Claim (as such term is hereinafter
defined) as against SFC or any of its other assets or properties for any
deficiency to the extent such proceeds (after the payment of all such Aggregate
Unpaids under the TAA) are insufficient to repay all amounts owing hereunder. As
used in this Note, the term "Claim" shall mean a "claim" as defined in Section
101(4) of the Bankruptcy Code.
In addition, the Seller hereby agrees that it shall not
institute or join any other Person in instituting against, or with respect to,
SFC any proceeding of a type referred to in the definition of "Bankruptcy Event"
set forth in the TAA until one year and one day after the date following the
Termination Date upon which all of the Aggregate Unpaids shall have been paid in
full in cash and the Percentage Factor shall have been reduced to zero. The
foregoing shall not limit the right of the Seller to file any claim in or
otherwise take any action with respect to any such insolvency proceeding that
was instituted against SFC by any Person other than the Seller, or any such
insolvency proceeding instituted by SFC in accordance with the applicable
provisions of SFC's certificate of incorporation. The provisions of this
paragraph shall survive the termination of this Note.
This Note shall not be amended or modified except by written
instrument, in accordance with Section 8.01 of the Receivables Purchase
Agreement, and signed by the Seller and SFC. No failure or delay on the part of
the Seller in exercising any power or right hereunder shall operate or be
construed as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right.
THIS NOTE AND SHALL BE DEEMED TO HAVE BEEN MADE AT NEW YORK,
NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS
OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
Wherever possible each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
This Note (and the terms and restrictions set forth herein)
shall be binding upon and inure to the benefit of SFC and, by its acceptance
hereof, the Seller and each of the foregoing's respective successors and
assigns. The successors and assigns for either such person shall include a
debtor-in-possession or trustee of or for such Person.
All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest and notice
of dishonor. By its acceptance hereof, the Seller hereby assents to the
extension of the time of payment, forbearance or other indulgence under the TAA
and the instruments, documents and agreements relating thereto, and any and all
amendments, supplements, waivers or other modifications to any of the foregoing,
without notice and without affecting in any way any of the rights, remedies, or
undertakings of the Seller hereunder and without affecting in any way the
subordination provisions hereof.
This Note is non-negotiable.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, SFC has caused this Note to be executed
and delivered by its duly authorized officer as of the ____ day of September,
1998.
SHAW FUNDING COMPANY
By:_________________________________
Bennie M. Laughter
Vice President and Secretary
[Subordinated, Non-Negotiable
Revolving Note]
::ODMA\PCDOCS\ATL\255747\1
<PAGE>
PAYMENT GRID
Principal Principal Notation
Date Amount Borrowed Amount Repaid Made by
THIS CREDIT AGREEMENT dated as of October 28, 1998 by and among SHAW
INDUSTRIES, INC., a corporation organized under the laws of the State of Georgia
(the "Borrower"), the Lenders named herein, NATIONSBANK, N.A., as Administrative
Agent and SUNTRUST BANK, ATLANTA, as Documentation Agent.
WHEREAS, the Borrower desires to obtain a revolving credit facility on
the terms and conditions hereof; and
WHEREAS, the Lenders are willing to extend credit to the Borrower on
the terms and conditions hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1. Definitions.
In addition to terms defined elsewhere herein, the following terms
shall have the following meanings for the purposes of this Agreement:
"Adjusted LIBO Rate" means, for any LIBOR Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) determined by the Administrative Agent to be equal to the
quotient obtained by dividing (a) LIBOR for such LIBOR Loan for such Interest
Period by (b) 1 minus the Reserve Requirement for such LIBOR Loan for such
Interest Period.
"Administrative Agent" means NationsBank, N.A., as agent for the
Lenders under the terms of this Agreement, and any successor agent.
"Affiliate" means any Person (other than the Administrative Agent or
any Lender): (a) directly or indirectly controlling, controlled by, or under
common control with, the Borrower; (b) directly or indirectly owning or holding
five percent (5%) or more of any equity interest in the Borrower; or (c) five
percent (5%) or more of whose voting stock or other equity interest is directly
or indirectly owned or held by the Borrower. For purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means the possession directly
or indirectly of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agreement" means this Credit Agreement, as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Agreement Date" means the date as of which this Agreement is dated.
"Applicable Law" means all applicable laws, including all applicable
provisions of constitutions, statutes, rules, ordinances, regulations and orders
of all Governmental Authorities and all orders, rulings, writs and decrees of
all courts, tribunals and arbitrators.
"Applicable Margin" means the percentage rate set forth below for a
given Type of Loan corresponding to the Consolidated Funded Debt/EBITDA Ratio of
the Borrower in effect at such time:
<TABLE>
<CAPTION>
<S> <C> <C>
- - --------------------------------------------------- ---------------------------- -------------------------
Consolidated Funded Applicable Margin for Base Applicable Margin for
Debt/EBITDA Ratio Rate Loans LIBOR Loans
- - --------------------------------------------------- ---------------------------- -------------------------
Greater than 3.50 to 1.00 0% 0.775%
- - --------------------------------------------------- ---------------------------- -------------------------
Less than or equal to 3.50 to 1.00 but greater
than 3.00 to 1.00 0% 0.575%
- - --------------------------------------------------- ---------------------------- -------------------------
- - --------------------------------------------------- -------------------------
Less than or equal to 3.00 to 1.00 but greater
than 2.50 to 1.00 0% 0.475%
- - --------------------------------------------------- ---------------------------- -------------------------
- - --------------------------------------------------- ---------------------------- -------------------------
Less than or equal to 2.50 to 1.00 but greater
than 2.00 to 1.00 0% 0.375%
- - --------------------------------------------------- ---------------------------- -------------------------
- - --------------------------------------------------- ---------------------------- -------------------------
Less than or equal to 2.00 to 1.00 0% 0.245%
- - --------------------------------------------------- ---------------------------- -------------------------
</TABLE>
The Applicable Margin shall be determined by the Administrative Agent on a
quarterly basis commencing with the fiscal quarter ending on October 3, 1998.
The Consolidated Funded Debt/EBITDA Ratio shall be determined by the
Administrative Agent promptly after receipt of the financial statements required
to be delivered by the Borrower to the Administrative Agent and the Lenders
pursuant to Section 7.1. or 7.2., as applicable. Any adjustment to the
Applicable Margin shall be effective on and as of the date (the "Adjustment
Date") on which the quarterly (or annual) financial statements are required to
be delivered to the Administrative Agent; provided, however, that, with respect
to any LIBOR Loans outstanding on the Adjustment Date, no such adjustment shall
be made to the Applicable Margin relating to such LIBOR Loan until the end of
the Interest Period then in effect for such LIBOR Loan. Notwithstanding the
foregoing, for the period from the Effective Date through and including November
16, 1998, the Applicable Margin for Base Rate Loans shall equal 0% and the
Applicable Margin for LIBOR Loans shall equal .575%. Thereafter, the Applicable
Margin shall be adjusted from time to time as set forth above.
"Arranger" means NationsBanc Montgomery Securities LLC.
"Assignment Agreement" has the meaning given that term in Section 11.5.
(c).
"Available Revolving Commitment" means, on any date of determination
thereof: (a) the Revolving Commitment in effect on such date minus (b) the
aggregate outstanding principal amount of all Loans on such date.
"Base Rate" means, for any day, the rate per annum equal to the higher
of: (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%)
per annum and (b) the Prime Rate for such day. Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Rate, as the case may be,
shall be effective on the effective date of such change in the Prime Rate or
Federal Funds Rate, as the case may be.
"Base Rate Loans" means Loans bearing interest at a rate based on the
Base Rate.
"Borrower" has the meaning set forth in the introductory paragraph
hereof and shall include the Borrower's successors and permitted assigns.
"Borrowing" means a borrowing by the Borrower of Loans pursuant to
Section 2.2.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Atlanta, Georgia or New York, New York are authorized or
required to close.
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"Capitalized Lease Obligation" means, with respect to any Person at any
time of determination, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease obligations in
accordance with GAAP, and the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date determined in accordance
with GAAP.
"Cash Equivalents" means: (i) securities issued, guaranteed or insured
by the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired issued by a U.S. federal or state
chartered commercial bank of recognized standing, which has capital and
unimpaired surplus in excess of $500,000,000.00 and which bank or its holding
company has a short-term commercial paper rating of at least A-2 or the
equivalent by Standard & Poor's Ratings Services, a division of McGraw-Hill,
Inc. or at least P-2 or the equivalent by Moody's Investors Services, Inc.;
(iii) reverse repurchase agreements with terms of not more than seven days from
the date acquired, for securities of the type described in (i) above and entered
into only with commercial banks having the qualifications described in (ii)
above; (iv) commercial paper or finance company paper issued by any Person
incorporated under the laws of the United States or any state thereof and rated
at least A-2 or the equivalent thereof by Standard & Poor's Ratings Services, a
division of McGraw-Hill, Inc. or at least P-2 or the equivalent thereof by
Moody's Investors Services, Inc., in each case with maturities of not more than
one year from the date acquired; and (v) investments in money market funds
registered under the Investment Company Act of 1940, which have net assets of at
least $500,000,000.00 and at least eighty-five percent (85%) of whose assets
consist of securities and other obligations of the type described in clauses (i)
through (iv) above.
"Collateral" means any collateral security hereafter pledged by any
Loan Party to secure the Obligations or any portion thereof.
"Commitment" means, as to each Lender, such Lender's obligation to make
Syndicate Loans hereunder in an amount up to, but not exceeding, the amount set
forth for such Lender on Annex I as such Lender's "Initial Commitment Amount",
as the same may be reduced from time to time pursuant to Section 2.10.
"Consolidated EBIT" means, with respect to the Borrower and its
Subsidiaries for any period of computation thereof, the sum of, without
duplication, (a) Consolidated Net Income of the Borrower and its Subsidiaries
for such period plus (b) to the extent deducted in determining Consolidated Net
Income (i) Consolidated Interest Expense of the Borrower and its Subsidiaries
for such period plus (ii) all income taxes of the Borrower and its Subsidiaries
paid or accrued during such period, all in accordance with GAAP.
"Consolidated EBITDA" means, with respect to the Borrower and its
Subsidiaries for any period of computation thereof, the sum of, without
duplication, (a) Consolidated EBIT for such period plus (b) to the extent
deducted in determining Consolidated Net Income (i) amortization expense of the
Borrower and its Subsidiaries for such period plus (ii) depreciation expense of
the Borrower and its Subsidiaries for such period, all in accordance with GAAP;
provided, however, that for purposes of calculating Consolidated EBITDA of the
Borrower and its Subsidiaries for any period, the Consolidated EBITDA of any
Person acquired by, or merged into or consolidated with, the Borrower or its
Subsidiaries during such period shall be included on a pro forma basis for such
period (assuming for purposes of such calculation that the consummation of such
acquisition, merger or consolidation in connection therewith occurred on the
first day of such period).
"Consolidated EBIT/Interest Ratio" means, with respect to the Borrower
and its Subsidiaries for each rolling Four-Quarter Period ending on the date of
the computation thereof, the ratio of (i) Consolidated EBIT for such
Four-Quarter Period to (ii) Consolidated Interest Expense for such Four-Quarter
Period.
"Consolidated Funded Debt" means, on the date of any computation
thereof, with respect to the Borrower and its Subsidiaries (determined on a
consolidated basis but without duplication in accordance with GAAP): (a) all
indebtedness for money borrowed of the Borrower and its Subsidiaries regardless
of maturity including all revolving and term indebtedness and all other lines of
credit; (b) all indebtedness: (i) represented by notes payable, and drafts
accepted, that represent extensions of credit; (ii) constituting obligations
evidenced by bonds, debentures, notes or similar instruments; or (iii)
constituting purchase money indebtedness, conditional sales contracts, title
retention debt instruments or other similar instruments upon which interest
charges are customarily paid or that are issued or assumed as full or partial
payment for property; (c) all Capitalized Lease Obligations under which the
Borrower and/or its Subsidiaries are obligated; (d) all reimbursement
obligations under any standby, trade or other letters of credit or acceptances
(whether or not drawings thereunder have been then presented for payment) issued
for the account of the Borrower or its Subsidiaries or under which the Borrower
and its Subsidiaries are otherwise obligated; (e) all Hedging Obligations of the
Borrower and its Subsidiaries; (f) all Indebtedness of the Borrower and its
Subsidiaries that is such by virtue of clause (b) of the definition of
Indebtedness, but only to the extent that the obligations Guaranteed are
obligations that would constitute Consolidated Funded Debt under subparagraphs
(a) through (e) above; (g) the principal portion of all obligations of the
Borrower and its Subsidiaries under any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified and accounted for as an operating lease in accordance
with GAAP; and (h) all Sold Receivables Indebtedness; provided, however, that
Consolidated Funded Debt shall not include trade payables of the Borrower and
its Subsidiaries incurred in the ordinary course of business and due within
ninety days of the incurrence thereof.
"Consolidated Funded Debt/EBITDA Ratio" means, with respect to the
Borrower and its Subsidiaries at the time of the computation thereof, the ratio
of (i) the Consolidated Funded Debt of the Borrower and its Subsidiaries
outstanding at such time to (ii) Consolidated EBITDA for the Four-Quarter Period
ending on the date of the computation thereof.
"Consolidated Interest Expense" means, with respect to the Borrower for
any period, the sum of (without duplication): (i) the consolidated interest
expense of the Borrower and its Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings or any Permitted
Receivables Facility, and net payments (if any) pursuant to Hedging Obligations)
and (ii) the consolidated interest expense of the Borrower and its Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by the Borrower or one of its
Subsidiaries or secured by a Lien on assets of the Borrower or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon), in each
case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Borrower and its
Subsidiaries for any period of computation thereof, the net income (or loss) of
the Borrower and its Subsidiaries on a consolidated basis for such period (taken
as a single accounting period) determined in conformity with GAAP; provided,
however, that the following shall be excluded when determining Consolidated Net
Income: (i) any after-tax item of gain or loss resulting from sale, conversion,
exchange or other disposition of assets other than in the ordinary course of
business (including abandonment of reserves relating thereto); (ii) any
after-tax gains or losses on the acquisition, retirement, sale or other
disposition of capital stock and other securities of the Borrower and its
Subsidiaries; (iii) the undistributed earnings of any Subsidiary of the Borrower
to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule, or governmental regulation applicable to such Subsidiary; (iv) the
cumulative effect of any change in accounting principles; (v) any net gain or
loss from any discontinued operations or the disposition thereof; (vi) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of income accrued during such period;
(vii) net gains or losses on the collection of proceeds of life insurance
policies; (viii) any write-up of any asset; and (ix) any other net gains or
losses of an extraordinary nature as determined in accordance with GAAP;
provided, further, that any cash payments made with respect to losses which are
excluded from Consolidated Net Income by virtue of the foregoing proviso shall
be deducted from Consolidated Net Income for purposes of calculating the same.
"Consolidated Net Worth" means, with respect to any Person, such
Person's total shareholder's equity (including capital stock, additional paid-in
capital and retained earnings, after deducting treasury stock) which would
appear as such on a balance sheet of such Person prepared in accordance with
GAAP (determined on a consolidated basis and excluding intercompany items and
excluding any upward adjustments after the Agreement Date due to revaluation of
assets).
"Continue", "Continuation" and "Continued" shall refer to the
continuation of a LIBOR Loan from one Interest Period to the next Interest
Period pursuant to Section 2.6.
"Convert", "Conversion" and "Converted" shall refer to the conversion
of a Loan of one Type into a Loan of another Type pursuant to Section 2.6.
"Credit Event" means any of the following: (a) the making (or deemed
making) of any Loan; and (b) the Conversion or Continuation of a Loan.
"Credit Percentage" means, as to each Lender, the ratio, expressed as a
percentage, of (a) the amount of such Lender's Commitment to (b) the aggregate
amount of the Commitments of all Lenders hereunder; provided, however, that if
at the time of determination the Commitments have terminated or been reduced to
zero, the "Credit Percentage" of each Lender shall be the Credit Percentage of
such Lender in effect immediately prior to such termination or reduction.
"Default" means any of the events specified in Section 9.1., whether or
not there has been satisfied any requirement for the giving of notice, the lapse
of time, a determination of materiality or the happening of any other condition.
"Defaulting Lender" has the meaning set forth in Section 2.3.(c).
Documentation Agent" means SunTrust Bank, Atlanta and its successors
and assigns.
"Dollars" or "$" means the lawful currency of the United States of
America.
"Effective Date" means the later of: (a) the Agreement Date; and (b)
the date on which all of the conditions precedent set forth in Section 4.1.
shall have been fulfilled or waived in writing by the Requisite Lenders.
"Eligible Assignee" means (i) a Lender; (ii) an affiliate of a Lender;
and (iii) any other Person approved by the Administrative Agent and the
Borrower; provided, however, that (a) the approval of the Borrower shall not be
unreasonably withheld or delayed and such approval shall be deemed given by the
Borrower if no objection is received by the assigning Lender and the
Administrative Agent from the Borrower within two (2) Business Days after notice
of such proposed assignment has been provided by the assigning Lender to the
Borrower; (b) the approval of the Administrative Agent and the Borrower shall
not be required if an Event of Default has occurred and is continuing at the
time any assignment is effected in accordance with Section 11.5.; and (c)
neither the Borrower nor an affiliate of the Borrower shall qualify as an
Eligible Assignee.
"Environmental Laws" means any Applicable Law relating to environmental
protection or the manufacture, storage, disposal or clean-up of Hazardous
Materials including, without limitation, the following: Clean Air Act, 42 U.S.C.
ss. 7401 et seq; Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et
seq.; Solid Waste Disposal Act, 42 U.S.C. ss. 6901 et seq.; Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et
seq.; National Environmental Policy Act, 42 U.S.C. ss. 4321 et seq.; regulations
of the Environmental Protection Agency and any applicable rule of common law and
any judicial interpretation thereof relating primarily to the environment or
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time, or any successor law.
"ERISA Affiliate" means any entity required at any relevant time to be
aggregated with the Borrower or any Subsidiary under Sections 414(b) or (c) of
the Internal Revenue Code. In addition, for purposes of any provision of this
Agreement that relates to Section 412(n) of the Internal Revenue Code, the term
ERISA Affiliate shall mean any entity aggregated with the Borrower or any
Subsidiary under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
"Event of Default" means any of the events specified in Section 9.1.,
provided that any requirement for notice or lapse of time or any other condition
has been satisfied.
"Existing Consolidated Funded Debt" means the Consolidated Funded Debt
of the Borrower and its Subsidiaries outstanding as of the Agreement Date and
set forth on Schedule 1.1(a) attached hereto.
"Existing Liens" means Liens on the property and assets of the Borrower
and its Subsidiaries in existence as of the Agreement Date and described on
Schedule 1.1(b) hereof.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 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 (a) 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 as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to NationsBank on such
day on such transactions as determined by the Administrative Agent.
"Fee Letter" has the meaning set forth in Section 3.15.
"Fees" means the fees and commissions provided for or referred to in
Sections 3.14. and 3.15. and any other fees payable by the Borrower hereunder or
under any other Loan Document.
"Foreign Lender" means any Lender organized under the laws of a
jurisdiction other than the United States of America or any state thereof.
"Four-Quarter Period" means a period of four full consecutive fiscal
quarters of the Borrower, taken together as one accounting period and, unless
set forth herein to the contrary, shall mean the previous four fiscal quarters
of the Borrower and ending on the day of any computation of any ratio contained
herein.
"GAAP" means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning of 'Present
Fairly in Conformance with Generally Accepted Accounting Principles in the
Independent Auditors Reports'" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances. Unless otherwise agreed, references to GAAP herein shall
be to GAAP as in effect on the Agreement Date.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including, without limitation, the
Federal Deposit Insurance Corporation, the Comptroller of the Currency or the
Federal Reserve Board, any central bank or any comparable agency or authority)
or any arbitrator with authority to bind a party at law.
"Guarantor" means, as of the Agreement Date, Shaw Contract Flooring
Services, Inc., and after the Agreement Date, each other Material Subsidiary
required to execute and deliver a Guaranty pursuant to Section 6.9.
"Guaranty", "Guaranteed" or to "Guarantee" as applied to any
Indebtedness means and includes:
(a) a guaranty (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), directly or indirectly, in any
manner, of any part or all of any Indebtedness; or
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such Indebtedness whether by:
(i) the purchase of securities or obligations;
(ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the purpose
of enabling the obligor with respect to such Indebtedness to make any
payment or performance (or payment of damages in the event of
nonperformance) of or on account of any part or all of such
Indebtedness, or to assure the owner of such Indebtedness against loss;
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such Indebtedness;
(iv) repayment of amounts drawn down by beneficiaries of
letters of credit; or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's Indebtedness under a
Guaranty of any obligation or indemnifying or holding harmless, in any
way, such Person against any part or all of such Indebtedness.
As the context requires, "Guaranty" shall also mean each guaranty executed and
delivered by each Material Subsidiary pursuant to Section 6.9.
"Hazardous Materials" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental Laws as "hazardous substances", "hazardous materials",
"hazardous wastes", "toxic substances" or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity or
"TLCP" toxicity, "EP" toxicity; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (c)
any flammable substances or explosives or any radioactive materials; and (d)
asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million.
"Hedging Obligations" means obligations of the Borrower and its
Subsidiaries under any interest rate swap agreement, interest rate cap or collar
agreement, hedging arrangement or other similar arrangement or agreement
designed to protect against fluctuations in interest rates or currency exchange
rates.
"Indebtedness" as applied to a Person means, without duplication, (a)
Consolidated Funded Debt and all other items which in accordance with GAAP would
be included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is to be
determined including, without limitation, all Capitalized Lease Obligations of
such Person and all reimbursement obligations of such Person under letters of
credit and acceptances issued for its account, and (b) any Guaranty of any
obligation described in subparagraph (a) above executed by such Person or under
which such Person is obligated.
"Interest Period" means, for each LIBOR Loan, the period commencing on
the date of the Borrowing, Conversion or Continuation of such LIBOR Loan and
ending on the last day of the period selected by the Borrower pursuant to this
definition. The duration of each Interest Period for a LIBOR Loan shall be one,
two, three or six months, in each case as the Borrower may, in an appropriate
Notice of Syndicate Borrowing, Notice of Continuation or Notice of Conversion,
select. In no event shall an Interest Period for a LIBOR Loan extend beyond the
Termination Date. Whenever the last day of any Interest Period for a LIBOR Loan
would otherwise occur on a day other than a LIBOR Business Day, the last day of
such Interest Period for such LIBOR Loan shall be extended to occur on the next
succeeding LIBOR Business Day; provided, however, that if such extension would
cause the last day of such Interest Period for such LIBOR Loan to occur in the
next following calendar month, the last day of such Interest Period for such
LIBOR Loan shall occur on the next preceding LIBOR Business Day.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended or any successor federal tax code.
"Investment" means, with respect to any Person and whether or not such
investment constitutes a controlling interest in such Person:
(a) the purchase or other acquisition of any share of capital stock,
evidence of Indebtedness or other security issued by any other Person;
(b) the purchase or acquisition of the assets of another Person;
(c) any loan, advance or extension of credit to, or contribution (in
the form of money or goods) to the capital of, any other Person;
(d) any Guaranty of the Indebtedness of any other Person;
(e) any other investment in any other Person (including the entering of
any joint venture or partnership (whether as a general or limited partner)); and
(f) any commitment or option to make an Investment in any other Person.
"Lender" means each of the financial institutions from time to time
identified as Lenders on the then current Annex I attached hereto, together with
its respective successors and permitted assigns.
"Lending Office" means, for each Lender and for each Type of Loan, the
"Lending Office" of such Lender (or affiliate of such Lender) designated for
such Type of Loan on the signature pages hereof or such other office of such
Lender (or an affiliate of such Lender) as such Lender may from time to time
specify to the Administrative Agent and the Borrower by written notice in
accordance with the terms hereof as the office by which its Loans of such Type
are to be made and maintained.
"LIBOR" means, for any LIBOR Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two LIBOR Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR" shall mean, for any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two LIBOR Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100 of 1%).
"LIBOR Business Day" means any day on which banks are scheduled to be
open for business and quoting interest rates for Dollar deposits on the London
interbank market and which is also a Business Day.
"LIBOR Loans" means Loans that bear interest at rates based upon the
Adjusted LIBO Rate.
"Lien" as applied to the property of any Person means: (a) any security
interest, encumbrance, mortgage, deed to secure debt, deed of trust, pledge,
lien, charge or lease constituting a Capitalized Lease Obligation, conditional
sale or other title retention agreement, or other security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom; (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person; and (c) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction.
"Loan Document" means this Agreement, each of the Notes, each of the
Guaranties and each other document or instrument now or hereafter executed and
delivered by a Loan Party in connection with or pursuant to this Agreement or
the Revolving Credit Facility.
"Loan Party" means each of the Borrower, each Guarantor, each other
Person who guarantees all or a portion of the Obligations and/or who pledges any
Collateral.
"Loans" means, collectively, the Syndicate Loans; and "Loan" means any
Syndicate Loan.
"Material Adverse Change" means, with respect to any Person, a material
adverse change in such Person's business, assets, liabilities, financial
condition, results of operations or business prospects.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect upon (a) such Person's business, assets, liabilities, financial
condition, results of operations or business prospects; (b) the rights and
remedies of the Lenders and the Administrative Agent under the Loan Documents,
or the ability of the Borrower or any Subsidiary to perform its obligations
under the Loan Documents to which it is a party, as applicable; or (c) the
legality, validity or enforceability of any Loan Documents. Unless otherwise set
forth herein, any reference to a "Material Adverse Effect" shall be a reference
to the effect on the Borrower and its Subsidiaries, taken as a whole.
"Material Subsidiary" means a Subsidiary other than a Receivables
Subsidiary that, as of the date of any determination thereof, owns assets having
a book value equal to or greater than 10% of the book value of the consolidated
assets of the Borrower and its Subsidiaries.
"Material Subsidiary Group" shall mean any group of Subsidiaries
(excluding (a) any Receivables Subsidiary and (b) any Material Subsidiary that
has executed and delivered a Guaranty pursuant to Section 6.9.) of which, if
combined, would own assets having a book value equal to or greater than 20% of
the book value of the consolidated assets of the Borrower and its Subsidiaries
(excluding any Receivables Subsidiary).
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 4001(a)(3) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"NationsBank" means NationsBank, N.A., in its individual capacity and
not as an Agent, and its successors and assigns.
"Notes" means, collectively, the Syndicate Notes; and "Note" means each
Syndicate Note.
"Notice of Continuation" means a notice in the form of Exhibit B to be
delivered to the Administrative Agent pursuant to Section 2.6. evidencing the
Borrower's request for the Continuation of a LIBOR Loan.
"Notice of Conversion" means a notice in the form of Exhibit C to be
delivered to the Administrative Agent pursuant to Section 2.6. evidencing the
Borrower's request for the Conversion of a Loan from one Type to another Type.
"Notice of Syndicate Borrowing" means a notice in the form of Exhibit A
to be delivered to the Administrative Agent pursuant to Section 2.2. evidencing
the Borrower's request for a Borrowing of Syndicate Loans.
"Obligations" means, individually and collectively: (a) all Loans and
the obligation of the Borrower to repay the same and the accrued interest
thereon in accordance with this Agreement; and (b) all other present and future
indebtedness, liabilities, obligations, covenants and duties of the Borrower and
the other Loan Parties owing to the Administrative Agent and/or the Lenders of
every kind, nature and description, under or in respect of this Agreement or any
of the other Loan Documents including, without limitation, the Fees and
indemnification obligations, whether direct or indirect, absolute or contingent,
due or not due, contractual or tortious, liquidated or unliquidated, and whether
or not evidenced by any promissory note.
"Outstanding Credit" means, at any given time, the aggregate principal
amount of Loans outstanding at such time.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"Permitted Liens" means, as to any Person: (a) Liens securing taxes,
assessments and other charges or levies imposed by any Governmental Authority
(excluding any Lien imposed pursuant to any of the provisions of ERISA) or the
claims of materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of business which
are not required to be paid or discharged under Section 6.6.; (b) Liens
consisting of deposits or pledges made, in the ordinary course of business, in
connection with, or to secure payment of, obligations under workmen's
compensation, unemployment insurance or similar Applicable Laws; (c) Liens
consisting of encumbrances in the nature of zoning restrictions, easements, and
rights or restrictions of record on the use of real property, which do not
materially detract from the value of such property or impair the use thereof in
the business of such Person; (d) Existing Liens not required to be terminated
pursuant to Section 4.1.; (e) Purchase Money Liens and Liens constituting
Capital Lease Obligations but only to the extent the Indebtedness secured by
such Liens is permitted pursuant to Section 8.2.(d); (f) Liens securing any
Hedging Obligations owing to a Lender; (g) Liens on accounts receivable (and
related general intangibles) to reflect sales of such receivables (and related
general intangibles) to and by the Receivables Subsidiary pursuant to a
Permitted Receivables Facility; and (h) Liens on assets of the Receivables
Subsidiary in connection with the Permitted Receivables Facility.
"Permitted Receivables Facility" means, with respect to the Borrower
and its Subsidiaries, any receivables securitization program implemented by the
Securitization Agreements, pursuant to which the Borrower and/or its
Subsidiaries receives proceeds arising out of a pledge, financing, sale or other
encumbrance of its accounts receivable.
"Person" means an individual, corporation, partnership (general,
limited or limited liability), limited liability company, association, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Plan" means an employee benefit or pension plan maintained for
employees of the Borrower, any of the other Loan Parties or any Affiliate
thereof that is covered by Title IV of ERISA, or subject to minimum funding
standards under Section 412 of the Internal Revenue Code, including such plans
as may be established after the Agreement Date.
"Prime Rate" means the per annum rate of interest established from time
to time by NationsBank as its prime rate, which rate may not be the lowest rate
of interest charged by NationsBank to its customers.
"Principal Office" means the main office of the Administrative Agent
located at 101 North Tryon Street, 15th Floor, Charlotte, North Carolina
28255-0001, Attention: Margaret Rhodes, or any other office which the
Administrative Agent may designate as such in a written notice to the Borrower
and the Lenders.
"Purchase Money Lien" means a Lien on any item of equipment acquired
after the Agreement Date; provided, however, that: (a) such Lien shall attach
only to the equipment to be acquired; (b) the Indebtedness incurred in
connection with such acquisition shall not exceed the amount of the purchase
price of such item of equipment then being financed; (c) such Lien shall secure
only such Indebtedness; and (d) a description is promptly furnished to the
Administrative Agent of any property so acquired, the purchase price of which is
greater than $5,000,000.
"Quarterly Dates" means the last day of each fiscal quarter of the
Borrower, the first of which shall be January 2, 1999. The Borrower agrees that
the fiscal quarters of the Borrower shall be set in a manner such that the
fiscal year of the Borrower shall be divided into four periods of relatively
equal length.
"Receivables Subsidiary" means a direct or indirect wholly-owned
Subsidiary of the Borrower created solely for the purpose of, and which engages
in no activities other than activities in connection with or incidental to, the
purchasing, financing and/or sale of the accounts receivable of the Borrower
and/or its Subsidiaries pursuant to a Permitted Receivables Facility, so long as
(unless the Administrative Agent shall (in its reasonable discretion) otherwise
agree in writing) it: (a) has no Indebtedness other than non-recourse
Indebtedness; (b) is not party to any agreement, contract, arrangement or
understanding with the Borrower or any other Subsidiary of the Borrower unless
the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Borrower or such Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Borrower; (c) is
a Person with respect to which neither the Borrower nor any of its other
Subsidiaries has any direct obligation to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and (d) has not Guaranteed or otherwise directly provided
credit support for any Indebtedness of the Borrower or any of its other
Subsidiaries.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for 30
days' notice to the PBGC is waived under applicable regulations.
"Requisite Lenders" means (a) so long as no Event of Default has
occurred and is continuing, Lenders whose combined Credit Percentages equal or
exceed 51% and (b) during the continuance of an Event of Default, Lenders who,
on a combined basis, hold at least 51% of the Outstanding Credit.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D of the Board of Governors of
the Federal Reserve System). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to (i) any category of liabilities which
includes deposits by reference to which the Adjusted LIBO Rate is to be
determined, or (ii) any category of extensions of credit or other assets which
include LIBOR Loans. The Adjusted LIBO Rate shall be adjusted automatically on
and as of the effective date of any change in the Reserve Requirement.
"Revolving Commitment" means $150,000,000, as the same may be reduced
from time to time pursuant to the terms of this Agreement.
"Revolving Credit Facility" means the revolving credit facility
described in Article 2.
"Securitization Agreements" shall mean (a) that certain Receivables
Purchase Agreement dated as of September 3, 1998, by and between the Borrower,
as seller, and Shaw Funding Company, a Delaware corporation and a wholly owned
Subsidiary of the Borrower, as purchaser, and (b) that certain Transfer and
Administration Agreement dated as of September 3, 1998, by and among Shaw
Funding Company, as transferor, the Borrower, individually and as collection
agent, Enterprise Funding Corporation, as purchaser, and NationsBank, N.A., as
agent, and the financial institutions from time to time party thereto as "Bank
Investors" thereunder; as such agreements may be respectively amended,
supplemented, extended, renewed or restated from time to time, provided that the
maximum size of the receivables securitization facility established thereunder
shall not exceed the amount referred to in Section 8.2(j) hereof.
"Securitization Agreements" shall also mean and include (i) any additional
agreements from time to time implementing another trade receivables
securitization transaction, and (ii) any agreement(s) that replace either or
both of the agreements referred to in clauses (a) or (b) above, but only, in
each case, if the Administrative Agent shall have consented (such consent not to
be unreasonably withheld) in writing to any such additional or replacement
agreement.
"Sold Receivables Indebtedness" means, as of any date of determination,
the aggregate outstanding amount of indebtedness evidenced by certificates of
participation or other interests in the accounts receivable of the Borrower
and/or its Subsidiaries which participations or interests are sold or issued to
third Persons in connection with a Permitted Receivables Facility.
"Solvent" means, when used with respect to any Person, that (a) the
fair value and the fair salable value of its assets (excluding any Indebtedness
due from any Affiliate of such Person) are each in excess of the fair valuation
of its total liabilities (including all contingent liabilities); and (b) such
Person is able to pay its debts or other obligations in the ordinary course as
they mature and (c) that the Person has capital not unreasonably small to carry
on its business and all business in which it proposes to be engaged.
"Subsidiary" means (i) a Person of which an aggregate of 50% or more of
the issued and outstanding capital stock of any class or classes having by the
terms thereof ordinary voting power to elect the directors (or other management
personnel) of such Person or 50% or more of other voting or equity interests is
owned of record, directly or beneficially, by another Person, or by one or more
Subsidiaries of such other Person, or by such other Person and one or more
Subsidiaries of such Person and (ii) any other Person whose financial statements
are required to be consolidated with the Borrower in accordance with GAAP.
"Syndicate Loan" means a loan made by a Lender to the Borrower pursuant
to Section 2.1.
"Syndicate Note" has the meaning set forth in Section 3.7.
"Termination Date" means October 26, 1999.
"Termination Event" means (a) a Reportable Event; (b) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA; (c) the institution of proceedings to
terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment of
a trustee to administer any Plan; (d) the withdrawal of the Borrower, any
Subsidiary or any ERISA Related Party from a Plan during a plan year in which
such employer was a "substantial employer" as defined in ERISA Section
4001(a)(2); (e) the partial or complete withdrawal from a Multiemployer Plan
within the meaning of ERISA Section 4203 and 4205; or (f) an event that could
result in the Borrower, its Subsidiaries or any ERISA Related Party providing
security as required by Internal Revenue Code Section 401(a)(29).
"Total Assets" means, at any time of determination, the total
consolidated assets of the Borrower and its Subsidiaries, as shown on the
consolidated balance sheet of the Borrower most recently delivered to the
Administrative Agent and the Lenders pursuant to Section 9.1 or 9.2, as
applicable; provided, however, that, for purposes of calculating `Total Assets'
at any time prior to the delivery to the Agent and the Lenders of the financial
statements of the Borrower for the annual fiscal period ending January 2, 1999,
`Total Assets' include the assets (including without limitation any related
goodwill) acquired by (and at the time of determination owned by) the Borrower
pursuant to that certain Agreement and Plan of Merger dated as of August 13,
1998, as amended by a First Amendment to Agreement and Plan of Merger dated as
of October 6, 1998, among the Borrower, Queen Carpet Corporation, Chessman
Acquisition Corp. and the other parties named therein.
"Transaction Costs" shall mean, with respect to a given transaction,
all reasonable brokerage and investment banking fees, fees and expenses of
appraisers and accountants, fees and disbursements of legal counsel and other
reasonable out-of-pocket costs and expenses incurred by Borrower or a Subsidiary
(or required to be paid by Borrower or a Subsidiary) in connection with such
transaction.
"Type" with respect to any Syndicate Loan, refers to whether such Loan
is a LIBOR Loan or Base Rate Loan.
Section 1.2. General.
Unless otherwise indicated, all accounting terms, ratios and
measurements shall be interpreted or determined in accordance with GAAP in
effect as of the Agreement Date. References in this Agreement to "Sections",
"Articles", "Exhibits" and "Schedules" are to sections, articles, exhibits and
schedules herein and hereto unless otherwise indicated. references in this
Agreement to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified or supplemented from time to time and
in effect at any given time. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular and
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter. Unless explicitly set forth
to the contrary, a reference to "Subsidiary" means a Subsidiary of the Borrower
or a Subsidiary of such Subsidiary and a reference to an "Affiliate" means a
reference to an Affiliate of the Borrower. Unless otherwise indicated, all
references to time are references to Eastern Standard Time or Eastern Daylight
Savings Time, as the case may be.
ARTICLE 2. SYNDICATE LOAN CREDIT FACILITY
Section 2.1. Syndicate Loans.
Subject to Section 3.1. and the other terms and conditions hereof, and
in reliance upon the representations and warranties of the Borrower set forth
herein, during the period from the Effective Date to but excluding the
Termination Date, each Lender severally and not jointly agrees to make Syndicate
Loans to the Borrower in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the Revolving Commitment times such
Lender's Credit Percentage. Subject to the terms and conditions of this
Agreement, during the period from the Effective Date to the Termination Date,
the Borrower may borrow, repay and reborrow Loans hereunder.
Section 2.2. Borrowings of Syndicate Loans.
Each Borrowing of Syndicate Loans shall be in an aggregate minimum
amount of $5,000,000 and integral multiples of $1,000,000 in excess of that
amount. The Borrower shall give the Administrative Agent written notice pursuant
to a Notice of Syndicate Borrowing or telephonic notice of each Borrowing of a
Syndicate Loan. Any such telephonic notice shall include all information to be
specified in a written Notice of Syndicate Borrowing and shall be promptly
confirmed in writing by the Borrower pursuant to a Notice of Syndicate Borrowing
sent to the Administrative Agent by facsimile transmission on the same day of
such telephonic notice. The Administrative Agent will promptly transmit by
facsimile transmission the Notice of Syndicate Borrowing (or the information
contained in such Notice of Syndicate Borrowing) to each Lender. The Notice of
Syndicate Borrowing shall specify the aggregate principal amount of Syndicate
Loans to be borrowed from the Lenders pursuant to the Notice of Syndicate
Borrowing, the Type of Loans, and the proposed date such Syndicate Loans are to
be borrowed. Each Notice of Syndicate Borrowing shall be delivered to the
Administrative Agent before 11:00 a.m. (a) in the case of LIBOR Loans, on the
date three LIBOR Business Days prior to the proposed date of such Borrowing and
(b) in the case of Base Rate Loans, on the date of the proposed Borrowing. Each
Notice of Syndicate Borrowing or telephonic notice of each such Borrowing shall
be irrevocable once given and binding on the Borrower.
Section 2.3. Disbursements of Syndicate Loans.
(a) No later than 12:00 noon on the date specified in the Notice of
Syndicate Borrowing, each Lender will make available for the account of its
applicable Lending Office to the Administrative Agent at its Principal Office,
in immediately available funds, the Syndicate Loan to be made by such Lender
using the wiring instructions for the Administrative Agent set forth on Annex I
or as otherwise directed by the Administrative Agent. With respect to Syndicate
Loans to be made after the Effective Date, unless the Administrative Agent shall
have been notified by any Lender prior to the specified date of Borrowing of a
Syndicate Loan that such Lender does not intend to make available to the
Administrative Agent the Syndicate Loan to be made by such Lender on such date,
the Administrative Agent may assume that such Lender will make the proceeds of
such Syndicate Loan available to the Administrative Agent on the date of the
requested Borrowing as set forth in the Notice of Syndicate Borrowing and the
Administrative Agent may, in reliance upon such assumption (but shall not be
obligated to), make available to the Borrower the amount of such Syndicate Loan
to be provided by such Lender.
(b) Provided that the applicable conditions set forth in Article 4. for
such Borrowing of Syndicate Loans are fulfilled, the Administrative Agent will
make the proceeds of such Borrowing of Syndicate Loans available to the Borrower
at the account specified by the Borrower in such Notice of Syndicate Borrowing.
(c) If, with respect to Syndicate Loans to be made after the Effective
Date: (i) a Lender (such Lender being hereinafter referred to as a "Defaulting
Lender") does not make the amount of such Lender's Syndicate Loan available to
the Administrative Agent; (ii) such Lender has not notified the Administrative
Agent that it will not make such amount available to the Administrative Agent;
and (iii) the Administrative Agent has nevertheless made available to the
Borrower the amount of the Syndicate Loan to be provided by such Lender, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Defaulting Lender. If such Defaulting Lender does not pay such
corresponding amount immediately upon the Administrative Agent's demand, the
Administrative Agent shall promptly notify the Borrower and the Borrower shall
promptly (but in no event later than one Business Day after such demand) pay
such corresponding amount to the Administrative Agent. The Administrative Agent
shall also be entitled to recover from such Defaulting Lender interest on such
corresponding amount for each day from the date such amount was made available
by the Administrative Agent to the Borrower to the date such amount is recovered
by the Administrative Agent at a rate per annum equal to the applicable Federal
Funds Rate. The Administrative Agent shall be entitled to recover from the
Borrower the amount of interest accruing on such amount of such Syndicate Loan
at the rate therefor in accordance with its Type; provided, however, any amount
paid by the Defaulting Lender pursuant to the immediately preceding sentence
shall reduce the amounts owed by the Borrower under this sentence. The
Administrative Agent shall also be entitled to recover from the Borrower and
such Defaulting Lender an amount equal to any costs (including reasonable legal
expenses) and losses incurred as a result of the failure of such Defaulting
Lender to provide such amount as provided in this Agreement. Nothing herein
shall be deemed to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights which the Borrower may have
against any Defaulting Lender, including, without limitation, the right of the
Borrower to seek reimbursement from any Defaulting Lender for any amounts paid
by the Borrower under this Section because of such Defaulting Lender's default.
If the Borrower and the Defaulting Lender fail to reimburse the Administrative
Agent as provided above, in addition to the rights the Administrative Agent may
have under Applicable Law or under this Agreement, the Administrative Agent
shall be subrogated to the rights of such Defaulting Lender under this Agreement
to the extent of such failure and shall thereafter (until such Defaulting Lender
shall so reimburse the Administrative Agent) be entitled to the percentage of
voting rights of such Defaulting Lender under this Agreement.
Section 2.4. Repayment of Syndicate Loans.
Unless payable earlier pursuant to the terms of this Agreement, the
Borrower shall repay the outstanding principal balance of all Syndicate Loans,
and all accrued but unpaid interest and fees thereon, on the Termination Date.
Section 2.5. Several Obligations.
No Lender shall be responsible for the failure of any other Lender to
make a Loan to be made by such other Lender hereunder and the failure of any
Lender to make a Loan to be made by it hereunder shall not relieve the
obligation of each other Lender to make any Loan to be made by such other
Lender.
Section 2.6. Continuation and Conversion of Syndicate Loans.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, the Borrower may on any LIBOR Business Day, with respect to any
LIBOR Loan, elect to maintain such LIBOR Loan or any portion thereof as a LIBOR
Loan by selecting a new Interest Period for such LIBOR Loan. Each new Interest
Period selected under this Section for a Syndicate Loan shall commence on the
last day of the immediately preceding Interest Period for such Syndicate Loan.
Each selection of a new Interest Period shall be made by the Borrower's giving
of a Notice of Continuation not later than 12:00 noon on the third LIBOR
Business Day prior to the date of any such Continuation to the Administrative
Agent. Promptly after receipt of a Notice of Continuation, the Administrative
Agent shall notify each Lender by telex or telecopy, or other similar form of
transmission of the proposed Continuation. Such notice by the Borrower of a
Continuation shall be by telephone or telecopy, confirmed immediately in writing
if by telephone, in the form of a Notice of Continuation, specifying (a) the
date of such Continuation, (b) the LIBOR Loan and portion thereof subject to
such Continuation and (c) the duration of the selected Interest Period, all of
which shall be specified in such manner as is necessary to comply with all
limitations on Syndicate Loans outstanding hereunder. Upon receipt of a Notice
of Continuation, the Administrative Agent shall determine the Adjusted LIBO Rate
and promptly notify the Borrower and the Lenders by telephone (promptly
confirmed in writing by telecopier) or in writing by telecopier. Each Notice of
Continuation shall be irrevocable by and binding on the Borrower once given. If
the Borrower shall fail to select in a timely manner a new Interest Period for
any LIBOR Loan in accordance with this Section, such Loan will automatically, on
the last day of the current Interest Period therefore, Convert into a Base Rate
Loan notwithstanding failure of the Borrower to comply with Section 2.2.
(b) So long as no Event of Default shall have occurred and be
continuing, the Borrower may on any Business Day, upon the Borrower's giving of
a Notice of Conversion to the Administrative Agent, Convert the entire amount of
all or a portion of a Loan of one Type into a Loan of another Type. Promptly
after receipt of a Notice of Conversion, the Administrative Agent shall notify
each Lender by telex or telecopy, or other similar form of transmission of the
proposed Conversion. Any Conversion of a LIBOR Loan into a Base Rate Loan shall
be made on, and only on, the last day of an Interest Period for such LIBOR Loan.
Each such Notice of Conversion shall be given not later than 12:00 noon on the
Business Day prior to the date of any proposed Conversion into Base Rate Loans
and on the third LIBOR Business Day prior to the date of any proposed Conversion
into LIBOR Loans. Subject to the restrictions specified above, each such notice
by the Borrower of a Conversion shall be by telephone or telecopy, confirmed
immediately in writing if by telephone, in the form of a Notice of Continuation
specifying (a) the requested date of such Conversion, (b) the Type of Loan to be
Converted, (c) the portion of such Type of Loan to be Converted, (d) the Type of
Loan such Loan is to be Converted into and (e) if such Conversion is into a
LIBOR Loan, the requested duration of the Interest Period of such Loan. Each
Notice of Conversion shall be irrevocable by and binding on the Borrower once
given. Each Conversion from a Base Rate Loan to a LIBOR Loan shall be in an
aggregate amount for the Loans of all Lenders of not less than $5,000,000 or
integral multiples of $1,000,000 in excess of that amount. Upon receipt of a
Notice of Conversion, the Administrative Agent shall determine the Adjusted LIBO
Rate or the Base Rate, as the case may be, and promptly notify the Borrower and
the Lenders by telephone (promptly confirmed in writing by telecopier) or in
writing by telecopier.
Section 2.7. Unavailability of Certain Loans; Illegality.
(a) If on or prior to the first day of any Interest Period for any
LIBOR Loan:
(i) the Administrative Agent determines (which determination
shall be conclusive) that by reason of circumstances affecting the
London interbank or other relevant market, adequate and reasonable
means do not exist for ascertaining LIBOR for such Interest Period; or
(ii) the Requisite Lenders determine (which determination
shall be conclusive) and notify the Administrative Agent that the
Adjusted LIBO Rate will not adequately and fairly reflect the cost to
the Lenders of funding LIBOR Loans for such Interest Period,
then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional LIBOR Loans, Continue LIBOR Loans, or to Convert
Base Rate Loans into LIBOR Loans and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for the outstanding LIBOR Loans, either
prepay such LIBOR Loans or Convert such Loans into Base Rate Loans in accordance
with the terms of this Agreement.
(b) Notwithstanding any other provision of this Agreement, in the event
that it becomes unlawful for any Lender or its Lending Office to make, maintain,
or fund LIBOR Loans hereunder, then such Lender shall promptly notify the
Borrower and the Administrative Agent thereof and such Lender's obligation to
make or Continue LIBOR Loans and to Convert Base Rate Loans into LIBOR Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund LIBOR Loans (in which case the provisions of Section 2.8. shall be
applicable).
Section 2.8. Treatment of Affected Loans.
If the obligation of any Lender to make or Continue a LIBOR Loan, or to
Convert Base Rate Loans into LIBOR Loans shall be suspended pursuant to Section
2.6., 2.7. or 3.16. (such Loans being herein called "Affected Loans"), such
Lender's Affected Loans shall be automatically Converted into Base Rate Loans on
the last day(s) of the then current Interest Period(s) for Affected Loans (or,
in the case of a Conversion required by Section 2.7., on such earlier date as
such Lender may specify to the Borrower with a copy to the Administrative Agent)
and, unless and until such Lender gives notice as provided below that the
circumstances specified in Section 2.7. or 3.16. that gave rise to such
Conversion no longer exist (or in the case of Section 2.6., the applicable
Default or Event of Default has been cured or waived pursuant to the terms
hereof):
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such Lender
as LIBOR Loans shall be made or Continued instead as Base Rate Loans, and all
Loans of such Lender that would otherwise be Converted into LIBOR Loans shall be
Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the
Administrative Agent) that the circumstances specified in Section 2.7. or 3.16.
hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant
to this Section 2.8. no longer exist (which such Lender agrees to do promptly
upon such circumstances ceasing to exist) (or in the case of Section 2.6., the
applicable Default or Event of Default has been cured or waived pursuant to the
terms hereof) at a time when LIBOR Loans made by other Lenders are outstanding,
such Lender's Base Rate Loans shall be automatically Converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding LIBOR
Loans, to the extent necessary so that, after giving effect thereto, all Loans
held by the Lenders holding LIBOR Loans and by such Lender are held pro rata (as
to principal amounts, Types, and Interest Periods) in accordance with their
respective Commitments.
Section 2.9. Compensation.
Upon the request of any Lender, the Borrower shall pay to such Lender,
such amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost or expense (including loss of
anticipated profits) incurred by such Lender as a result of:
(a) any payment, mandatory or optional prepayment or Conversion of a
LIBOR Loan for any reason (including, without limitation, acceleration) on a
date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any of the applicable conditions precedent specified
in Article 4. to be satisfied) to borrow, Continue, Convert or prepay a LIBOR
Loan on the date for such borrowing, Continuation, Conversion or prepayment
under this Agreement.
Such compensation shall include, without limitation, an amount equal to
the excess, if any, of (i) the amount of interest that otherwise would have
accrued on the principal amount so paid, prepaid or Converted or not borrowed
for the period from the date of such payment, prepayment, Conversion or failure
to borrow to the last day of the then current Interest Period for such Loan (or,
in the case of a failure to borrow, the Interest Period for such Loan that would
have commenced on the date specified for such borrowing) at the applicable rate
of interest for such Loan provided for herein plus such Lender's normal
administrative charges, if any, associated with such payment, prepayment,
Conversion or failure to borrow over (ii) the amount of interest that otherwise
would have accrued on such principal amount at a rate per annum equal to the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender). Any determination of the amount of such
loss, cost or expense shall be conclusive absent manifest error.
Section 2.10. Voluntary Reductions of the Revolving Commitment.
The Borrower shall have the right to terminate or reduce the amount of
the Revolving Commitment at any time and from time to time without penalty or
premium upon not less than five Business Days prior written notice to the
Administrative Agent of each such termination or reduction, which notice shall
specify the effective date thereof and the amount of any such reduction (which
in the case of any partial reduction of the Revolving Commitment shall not be
less than $10,000,000 and integral multiples of $5,000,000 in excess of that
amount) and shall be irrevocable once given and effective only upon receipt by
the Administrative Agent. The Administrative Agent will promptly transmit such
notice to each Lender. The Revolving Commitment, once reduced pursuant to this
Section, shall not be increased. The Borrower shall pay all interest and Fees on
the Loans accrued to the date of such reduction or termination of the Revolving
Commitment to the Administrative Agent for the account of the Lenders.
ARTICLE 3. OTHER LOAN AND PAYMENT PROVISIONS
Section 3.1. Maximum Amount of Obligations.
In no event shall the Outstanding Credit at any time exceed the
Revolving Commitment in effect at such time. Further, the Borrower shall not
request any Borrowing which would result in a violation of this Section.
Section 3.2. Mandatory Prepayment of Loans.
If at any time the Outstanding Credit exceeds the Revolving Commitment
in effect at such time, the Borrower shall immediately pay to the Administrative
Agent for the respective accounts of the Lenders the amount of such excess;
provided, however, that any payments to be applied shall first be applied to
Base Rate Loans and then to LIBOR Loans in direct order of Interest Period
maturities. If the Borrower is required to pay any outstanding LIBOR Loans by
reason of this Section prior to the end of the applicable Interest Period
therefor, the Borrower shall indemnify each Lender against the losses, costs and
expenses described in Section 2.9. incurred by such Lender.
Section 3.3. Voluntary Prepayment of Loans.
The Borrower may voluntarily prepay any Loan at any time; provided,
however, that: (i) any prepayment shall be in an aggregate principal amount of
$5,000,000 and in integral multiples of $1,000,000 in excess of that amount and
(ii) in the event the Borrower prepays any LIBOR Loan prior to the end of the
applicable Interest Period therefor, the Borrower shall pay the applicable
Lender(s) any amounts due under Section 2.9. Subject to the foregoing, the
Borrower may prepay any Base Rate Loan at any time without penalty or premium.
Section 3.4. Maximum Number of Interest Periods for Loans.
There may be no more than four different Interest Periods for LIBOR
Loans outstanding at the same time. There may be no more than an aggregate of
eight separate Interest Periods for all Loans outstanding at the same time.
Section 3.5. Rates and Payment of Interest on Loans.
(a) Interest on LIBOR Loans. Subject to the provisions of Section 3.6.,
interest on each LIBOR Loan shall accrue at an interest rate per annum during
the Interest Period for such Loan equal to the Adjusted LIBO Rate for the
Interest Period in effect for such LIBOR Loan plus the Applicable Margin. All
such accrued interest shall be payable (i) on the last day of each Interest
Period with respect thereto and, if such Interest Period is longer than three
months, at three-month intervals following the first day of such Interest
Period, (ii) on the date of Conversion of such LIBOR Loan (or a portion thereof)
to another Type of Loan, (iii) upon any prepayment of such LIBOR Loan (but only
on the principal amount so prepaid) and (iv) at maturity of such Loan (and after
maturity of such Loan (whether by acceleration or otherwise) upon demand). The
Administrative Agent upon determining the Adjusted LIBO Rate and the interest
rate applicable to the Syndicate Loans hereunder for any Interest Period shall
promptly notify the Borrower and the Lenders by telephone or in writing thereof
via facsimile transmission. Each determination by the Administrative Agent of an
interest rate hereunder shall be conclusive and binding on the Lenders and the
Borrower for all purposes, absent manifest error.
(b) Interest on Base Rate Loans. Subject to the provisions of Section
3.6., interest on each Base Rate Loan shall accrue at an interest rate per annum
equal to the Base Rate then in effect plus the Applicable Margin. All such
accrued interest shall be payable (i) monthly on the last day of each month,
(ii) upon any prepayment of such Base Rate Loan (but only on the principal
amount so prepaid) and (iii) at maturity of such Base Rate Loan (and after
maturity (whether by acceleration or otherwise) upon demand).
Section 3.6. Interest Upon Event of Default.
If an Event of Default has occurred and is continuing, all Loans and
all other Obligations shall bear interest until paid in full at a rate per annum
that is two percent (2.0%) in excess of the Base Rate. If this Agreement or the
other Loan Documents do not specify an interest rate for a particular
Obligation, such Obligation shall, for purposes of this Section 3.6., be deemed
to be a Base Rate Loan.
Section 3.7. Notes.
The obligation of the Borrower to repay the principal of and accrued
interest on the Syndicate Loans shall be evidenced by promissory notes (each a
"Syndicate Note") in substantially the form of Exhibit D. Each Syndicate Note
delivered to a Lender shall be dated the Agreement Date, payable to the order of
such Lender and shall be in a face amount equal to such Lender's Credit
Percentage of the Revolving Commitment as originally in effect.
Section 3.8. Computations.
Unless otherwise expressly set forth herein, any accrued interest on
any Loan and any Fees due hereunder shall be computed on the basis of a year of
360 days and the actual number of days elapsed.
Section 3.9. Usury.
In no event shall the amount of interest due or payable on the Loans
exceed the maximum rate of interest allowed by Applicable Law and, if any such
payment is paid by the Borrower or received by any Lender, then such excess sum
shall be credited as a payment of principal, unless the Borrower shall notify
the respective Lender in writing that the Borrower elects to have such excess
sum returned to it forthwith. It is the express intent of the parties hereto
that the Borrower not pay and the Lenders not receive, directly or indirectly,
in any manner whatsoever, interest in excess of that which may be lawfully paid
by the Borrower under Applicable Law.
Section 3.10. Agreement Regarding Interest and Charges.
The parties hereto hereby agree and stipulate that the only charge
imposed upon the Borrower for the use of money in connection with this Agreement
is and shall be the interest described in Section 3.5. The parties hereto
further agree and stipulate that all agency fees, syndication fees, facility
fees, letter of credit fees, underwriting fees, default charges, late charges,
funding or "breakage" charges, increased cost charges, attorneys' fees and
reimbursement for costs and expenses paid by the Administrative Agent or any
Lender to third parties or for damages incurred by the Administrative Agent or
any Lender, are charges made to compensate the Administrative Agent or any such
Lender for underwriting or administrative services and costs or losses performed
or incurred, and to be performed or incurred, by the Administrative Agent and
the Lenders in connection with this Agreement and shall under no circumstances
be deemed to be charges for the use of money pursuant to Official Code of
Georgia Annotated Sections 7-4-2 and 7-4-18. All charges other than charges for
the use of money shall be fully earned and nonrefundable when due.
Section 3.11. Payments.
Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this
Agreement, the Notes or any other Loan Document shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to the
Administrative Agent at its Principal Office, not later than 2:00 p.m. on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day) and shall be made in accordance with the wiring instructions set
forth for the Administrative Agent on Annex I attached hereto or as otherwise
directed by the Administrative Agent. Subject to Sections 3.12. and 3.13., the
Administrative Agent or any Lender for whose account any such payment is made,
may (but shall not be obligated to) debit the amount of any such payment which
is not made by such time from any special or general deposit account of the
Borrower with the Administrative Agent or such Lender, as the case may be (with
notice to the Borrower, the other Lenders and the Administrative Agent). The
Borrower shall, at the time of making each payment under this Agreement or any
Note, specify to the Administrative Agent the amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that it fails
to so specify, or an Event of Default has occurred and is continuing, the
Administrative Agent may apply such payment to the Loans or any other obligation
of the Borrower under the Loan Documents in accordance with the direction of the
Requisite Lenders). Each payment received by the Administrative Agent for the
account of the Lenders under this Agreement or any Note shall be paid promptly
to such Lender, by wire transfer of same day funds in accordance with the wiring
instructions set forth for such Lender on the Annex I attached hereto, for the
account of such Lender at the applicable Lending Office of such Lender. In the
event the Administrative Agent fails to pay such amounts to the Lenders as
provided in the previous sentence, the Administrative Agent shall pay interest
on such amount at a rate per annum equal to the Federal Funds Rate from time to
time in effect. If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Business Day such date shall be
extended to the next succeeding Business Day and interest shall be payable for
the period of such extension. The Borrower agrees that all of its payment
obligations hereunder shall be absolute, unconditional and, for the purposes of
making payments hereunder, the Borrower hereby waives any right to assert any
setoff, counterclaim or cross-claim.
Section 3.12. Pro Rata Treatment.
Unless set forth to the contrary herein, (a) each Borrowing of
Syndicate Loans, (b) each payment by the Borrower with respect to any Syndicate
Loan, (c) each other payment to be made by the Borrower or any Loan Party
hereunder or under any Loan Document in respect of the Syndicate Loans, and (d)
each voluntary reduction of the Commitments pursuant to Section 2.10., shall be
made by, or credited to the account of, the Lenders pro rata in accordance with
their respective Credit Percentages. Each payment of interest on the Syndicate
Loans made by the Borrower shall be made for the account of the Lenders pro rata
in accordance with the amounts of interest due and payable to the respective
Lenders. The fees referred to in Section 3.15. shall be for the account of only
the Administrative Agent.
Section 3.13. Sharing of Payments, Etc.
The Borrower agrees that, in addition to (and without limitation of)
any right of set-off, banker's lien or counterclaim a Lender or the
Administrative Agent may otherwise have, each Lender and the Administrative
Agent shall be entitled, at its option, to offset balances held by it for the
account of the Borrower at any of such Lender's (or the Administrative Agent's)
offices, in Dollars or in any other currency, against any principal of, or
interest on, any of such Lender's Loans hereunder (or other Obligations owing to
such Lender or the Administrative Agent hereunder) which is not paid when due
(regardless of whether such balances are then due to the Borrower), in which
case such Lender or the Administrative Agent (as the case may be) shall promptly
notify the Borrower, all other Lenders and the Administrative Agent thereof;
provided, however, the failure of such Lender or the Administrative Agent (as
the case may be) to give such notice shall not affect the validity of such
offset. If a Lender shall obtain payment of any principal of, or interest on,
any Loan made by it to the Borrower under this Agreement, or shall obtain
payment on any other Obligation owing by the Borrower or a Loan Party through
the exercise of any right of set-off, banker's lien or counterclaim or similar
right or otherwise or through voluntary prepayments directly to a Lender or
other payments made by the Borrower to a Lender not in accordance with the terms
of this Agreement and such payment, pursuant to Section 3.12., should be
distributed to the Lenders pro rata in accordance with their respective Credit
Percentages, such Lender shall promptly purchase from the other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Syndicate Loans made by the other Lenders or other Obligations
owed to such other Lenders in such amounts, and make such other adjustments from
time to time as shall be equitable, to the end that all the Lenders shall share
the benefit of such payment (net of any reasonable expenses which may be
incurred by such Lender in obtaining or preserving such benefit) pro rata in
accordance with their respective Credit Percentages. To such end, all the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. The Borrower agrees that any Lender so purchasing a participation
(or direct interest) in the Syndicate Loans or other Obligations owed to such
other Lenders made by other Lenders may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower.
Section 3.14. Facility Fee.
The Borrower agrees to pay to the Administrative Agent for the account
of each Lender a facility fee for the period from the Effective Date through and
including the Termination Date on the amount of the Revolving Commitment from
time to time in effect and regardless of whether and to the extent the Revolving
Commitment is utilized hereunder. The facility fee shall be calculated on a
percentage per annum basis using the percentage rates set forth below
corresponding to the Consolidated Funded Debt/EBITDA Ratio in effect at such
time:
<TABLE>
<CAPTION>
<S> <C>
- - --------------------------------------------------------------------------------- --------------------------
Facility Fee Percentage
Consolidated Funded Debt/EBITDA Ratio
--------------------------
- - ---------------------------------------------------------------------------------
Greater than 3.50 to 1.00 0.225%
- - --------------------------------------------------------------------------------- --------------------------
--------------------------
Less than or equal to 3.50 to 1.00 but greater than 3.00 to 1.00 0.175%
- - --------------------------------------------------------------------------------- --------------------------
Less than or equal to 3.00 to 1.00 but greater than 2.50 to 1.00 0.150%
- - --------------------------------------------------------------------------------- --------------------------
- - --------------------------------------------------------------------------------- --------------------------
Less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00 0.125%
- - --------------------------------------------------------------------------------- --------------------------
- - --------------------------------------------------------------------------------- --------------------------
Less than or equal to 2.00 to 1.00 0.075%
- - --------------------------------------------------------------------------------- --------------------------
</TABLE>
The facility fee shall be determined by the Administrative Agent on a quarterly
basis in accordance with the following provisions. The Consolidated Funded
Debt/EBITDA Ratio shall be determined by the Administrative Agent promptly upon
receipt of the financial statements required to be delivered by the Borrower to
the Administrative Agent and the Lenders pursuant to Section 7.1. or 7.2., as
applicable. Any adjustment to the facility fee shall be effective as of the
first day of the fiscal quarter in which the quarterly (or annual) financial
statements are required to be delivered to the Administrative Agent and the
Lenders. Notwithstanding the foregoing, for the period from the Effective Date
through and including November 16, 1998, the facility fee shall equal .175% per
annum. Thereafter, the facility fee shall be adjusted from time to time as set
forth above. The facility fee hereunder shall be payable in arrears on (a) each
Quarterly Date, (b) the date of each reduction in the Revolving Commitment (but
only on the amount of the reduction), (c) on the Termination Date, (d) on the
date the Commitments are otherwise terminated or reduced to zero and (e)
thereafter from time to time on demand of the Administrative Agent.
Section 3.15. Administrative Agent Fees.
The Borrower agrees to pay, on the Effective Date, the administrative
and other fees of the Administrative Agent and the Arranger as set forth in the
letter dated October 8, 1998 from the Administrative Agent to the Borrower (the
"Fee Letter").
Section 3.16. Increased Costs/Capital Adequacy.
(a) If, after the Agreement Date, the adoption of any Applicable Law or
any change in any Applicable Law or any change in the interpretation or
administration thereof by any Governmental Authority or compliance by any Lender
(or its Lending Office) with any request or directive (whether or not having the
force of law) of any such Governmental Authority:
(i) shall subject such Lender (or its Lending Office) to any
tax, duty, or other charge with respect to any LIBOR Loans, such
Lender's Note, or the obligation of such Lender to make LIBOR Loans, or
change the basis of taxation of any amounts payable to such Lender (or
its Lending Office) under this Agreement or such Lender's Note in
respect of any LIBOR Loans (other than taxes imposed on the overall net
income of such Lender by the jurisdiction in which such Lender has its
principal office or such Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Adjusted LIBO
Rate) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities or commitments of, such Lender (or
its Lending Office), including the Commitment of such Lender hereunder;
or
(iii) shall impose on such Lender (or its Lending Office) or
the London interbank market any other condition affecting this
Agreement or such Lender's Note or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of making, Converting into, Continuing, or maintaining
any LIBOR Loans or to reduce any sum received or receivable by such Lender (or
its Lending Office) under this Agreement or such Lender's Note with respect to
any LIBOR Loans, then the Borrower shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by the Borrower under this
Section 3.16., the Borrower may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender to make or Continue
LIBOR Loans or to Convert Base Rate Loans into LIBOR Loans, until the event or
condition giving rise to such request ceases to be in effect (in which case the
provisions of Section 3.16. shall be applicable); provided that such suspension
shall not affect the right of such Lender to receive the compensation so
requested.
(b) If, after the Agreement Date, any Lender shall have determined that
the adoption of any Applicable Law regarding capital adequacy or any change
therein or in the interpretation or administration thereof by any Governmental
Authority, or any request or directive regarding capital adequacy (whether or
not having the force of law) of any such Governmental Authority, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of such Lender's
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) Each Lender shall promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
Agreement Date, which will entitle such Lender to compensation pursuant to this
Section. Any Lender claiming compensation under this Section shall furnish to
the Borrower and the Administrative Agent a statement setting forth the
additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
Section 3.17. Statements of Account.
The Administrative Agent will account to the Borrower quarterly with a
statement of Loans, accrued interest and Fees, charges and payments made
pursuant to this Agreement and the other Loan Documents, and such account
rendered by the Administrative Agent shall be deemed binding upon Borrower
unless the Borrower notifies the Administrative Agent in writing within fifteen
days after the date each statement is delivered to Borrower that the Borrower
objects to the information, calculations or items therein contained and
identifies such objections. The failure of the Administrative Agent to deliver
such a statement of accounts shall not relieve or discharge the Borrower from
its obligations hereunder.
Section 3.18. Defaulting Lender's Status.
Notwithstanding anything contained herein to the contrary, but in
addition to provisions regarding the failure of a Lender to perform its
obligations hereunder set forth elsewhere in this Agreement, so long as any
Lender shall be in default in its obligation to fund a Loan or shall have
rejected its Commitment, then such Lender shall not be entitled to receive any
payments of principal of, or interest on, its Commitment or the Loans or its
share of any commitment or other fees payable hereunder, and for purposes of
voting or consenting to matters with respect to the Loan Documents, such Lender
shall be deemed not to be a "Lender" hereunder and such Lender's Commitment
shall be deemed to be zero ($0), unless and until (a) all other Obligations have
been paid in full, (b) such failure to fulfill its obligation to fund is cured
and such Lender shall have paid, as and to the extent provided in this
Agreement, to the applicable party, such amount then owing together with
interest on the amount of funds that such Lender failed to timely fund or (c)
the Obligations under this Agreement shall have been declared or shall have
become immediately due and payable. No Commitment of any Lender shall be
increased or otherwise affected by any such failure or rejection by any Lender.
Any payments of principal or interest which would, but for this subsection, be
paid to any Lender, shall be paid to the Lenders who shall not be in default
under their respective Commitments and who shall not have rejected any
Commitment, for application to the Loans or to provide cash collateral in such
manner and order as shall be determined by the Administrative Agent.
Section 3.19. Administrative Agent's Reliance.
Neither the Administrative Agent nor any Lender shall incur any
liability to the Borrower (nor shall the Administrative Agent incur any
liability to the Lenders) for acting upon any telephonic notice referred to in
this Agreement which the Administrative Agent believes in good faith to have
been given by a person authorized to deliver such notice or for otherwise acting
in good faith hereunder.
Section 3.20. Taxes.
(a) Any and all payments by the Borrower to or for the account of any
Lender or the Administrative Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all penalties, interest and other liabilities with respect thereto, excluding,
in the case of each Lender and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender (or its Lending Office) or the Administrative Agent (as the
case may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other Loan Document to any Lender or the
Administrative Agent, (i) the sum payable hereunder or under such other Loan
Document shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.20.) such Lender or the Administrative Agent receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with Applicable Law, and (iv) the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 11.1., the original
or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise, privilege, intangible,
registration, recordation or property taxes or charges or similar levies, taxes
and charges which arise from any payment made under this Agreement or any other
Loan Document or from the execution, delivery, performance and enforcement of,
or otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.20.) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
Payment of this indemnification shall be made within 30 days from the date such
Lender or the Administrative Agent delivers a certificate to the Borrower
certifying and setting forth in reasonable detail the calculation thereof as to
the amount and type of such Taxes or Other Taxes. Any such certificate submitted
by the Lender or the Administrative Agent in good faith to the Borrower shall,
absent manifest error, be final, conclusive and binding on all parties.
(d) Each Foreign Lender, on or prior to the Agreement Date in the case
of each Lender listed on the signature pages hereof, and on or prior to the date
on which it becomes a Lender, in the case of each other Lender, and from time to
time thereafter if requested in writing by the Borrower or the Administrative
Agent (but only so long as such Lender remains lawfully able to do so), shall
provide the Borrower and the Administrative Agent with (i) Internal Revenue
Service Form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is entitled to
benefits under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying that
the income receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States, (ii) Internal Revenue
Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) any other form or certificate required by
any taxing authority (including any certificate required by Sections 871(h) and
881(c) of the Internal Revenue Code), certifying that such Lender is entitled to
an exemption from or a reduced rate of tax on payments pursuant to this
Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Foreign Lender has failed to
provide the Borrower and the Administrative Agent with the appropriate form
pursuant to subsection (d) above (unless such failure is due to a change in
treaty, law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be entitled to
indemnification under subsection (a) or (b) above with respect to Taxes imposed
by the United States; provided, however, that should a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding tax, become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
(f) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes, the Borrower shall furnish to the Administrative Agent the original
or a certified copy of a receipt evidencing such payment.
(g) Without prejudice to the survival of any other covenant or
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 3.20. shall survive the termination of the
Commitments and the payment in full of the Notes and other Obligations.
Section 3.21. Affected Lenders.
If the Borrower is obligated to pay to any Lender any amount under
Sections 3.16. or 3.20., the Borrower may, if (i) no Default or Event of Default
then exists and (ii) Requisite Lenders have not made a claim for indemnification
under such Section(s), replace such Lender with another lender acceptable to the
Administrative Agent, and such Lender hereby agrees to be so replaced subject to
the following:
(a) The obligations of the Borrower hereunder to the Lender to be
replaced (including such increased or additional costs incurred from the date of
notice to the Borrower of such increase or additional costs through the date
such Lender is replaced hereunder) shall be paid in full to such Lender
concurrently with such replacement;
(b) The replacement Lender shall be a bank or other financial
institution that is not subject to the increased costs arising under such
section(s) which may have effectuated the Borrower's election to replace any
Lender hereunder, and each such replacement Lender shall execute and deliver to
the Administrative Agent such documentation satisfactory to the Administrative
Agent pursuant to which such replacement Lender is to become a party hereto,
conforming to the provisions of Section 11.5., with a Commitment equal to that
of the Lender being replaced and shall make Loans in the aggregate principal
amount equal to the aggregate outstanding principal amount of the Loans of the
Lender being replaced;
(c) Upon such execution of such documents referred to in clause (b) and
repayment of the amounts referred to in clause (a), the replacement lender shall
be a "Lender" with a Commitment as specified hereinabove and the Lender being
replaced shall cease to be a "Lender" hereunder, except with respect to
indemnification provisions under this Agreement, which shall survive as to such
replaced Lender;
(d) The Administrative Agent shall reasonably cooperate in effectuating
the replacement of any Lender under this Section, but at no time shall the
Administrative Agent be obligated to initiate any such replacement; and
(e) Any Lender replaced under this Section shall be replaced at the
Borrower's sole cost and expenses and at no cost or expense to the
Administrative Agent or any of the Lenders.
Section 3.22. Change of Lending Office.
Each Lender agrees that it will use reasonable efforts to designate an
alternate Lending Office with respect to any of its Loans affected by the
matters or circumstances described in Sections 3.16. and 3.20. to reduce the
liability of Borrower or avoid the results provided thereunder, so long as such
designation is not disadvantageous to such Lender as determined by such Lender
in its sole discretion.
ARTICLE 4. CONDITIONS PRECEDENT
Section 4.1. Conditions Precedent to Initial Loan.
This Agreement, and the obligation of the Lenders to make any Syndicate
Loans to the Borrower in accordance with the terms hereof, is subject to the
condition precedent that the Borrower deliver to the Administrative Agent each
of the following, each of which shall be satisfactory in form and substance to
the Administrative Agent:
(a) Corporate Diligence
(i) Certified copies (certified by the respective Secretary or
Assistant Secretary of each Loan Party (each such Person shall be the
"Authenticating Person" with respect to such Loan Party)) of all
corporate or other necessary action taken by each Loan Party to
authorize the execution, delivery and performance of the Loan Documents
to which it is a party;
(ii)(A) With respect to each Loan Party, the articles or
certificate of incorporation (certified by the applicable Secretary of
State) and by-laws of such Person; (B) with respect to each Loan Party,
a certificate of existence or other good standing certificate issued by
the Secretary of State of the jurisdiction in which such Person was
formed; (C) with respect to the Borrower, a certificate of
qualification to transact business or other comparable certificate
issued by the Secretary of State (and any state department of taxation,
as applicable) of each state in which the Borrower operates a plant or
distribution facility; and (D) certificates of incumbency and specimen
signatures signed by the appropriate Authenticating Person with respect
to each of the officers or other Persons of each Loan Party who are
authorized to execute and deliver the Loan Documents to which such Loan
Party is a party;
(iii) An opinion of Bennie M. Laughter, the Vice President and
General Counsel of the Borrower and the other Loan Parties, addressed
to the Administrative Agent and the Lenders in substantially the form
of Exhibit E;
(iv) Copies of all Governmental Approvals, if any, required to
be made or obtained by each Loan Party in connection with the execution
and delivery of this Agreement and the other Loan Documents and the
consummation of the transactions contemplated hereby;
(v) a certificate executed by the chief executive officer,
chief financial officer or treasurer of the Borrower, stating that: (a)
on such date, and after giving effect to the transactions contemplated
hereby, no Default or Event of Default has occurred and is continuing;
(b) no material adverse change in the condition (financial or
otherwise), operations, business or assets of the Borrower or any of
its Subsidiaries, taken as a whole, has occurred since January 3, 1998
except as disclosed in public filings with the Securities and Exchange
Commission since such date; (c) the representations and warranties of
the Loan Parties set forth herein and in the other Loan Documents are
true and correct in all material respects on and as of such date with
the same effect as though made on and as of such date; and (d) on such
date each Loan Party is in compliance with all the terms and provisions
set forth in this Agreement and the other Loan Documents on its part to
be observed and performed.
(b) Supplemental Closing Documents.
(i) Notes executed by the Borrower, payable to the order of
the Lenders and complying with the terms of Section 3.7.;
(ii) a Guaranty executed by each Material Subsidiary and/or
each Subsidiary comprising the Material Subsidiary Group;
(iii) favorable UCC, tax, judgment and lien search reports
with respect to the Borrower, any appropriate Subsidiary and any
appropriate Loan Party in all necessary or appropriate jurisdictions
and under all legal and appropriate trade names indicating that there
are no Liens on any assets of such Person other than Permitted Liens;
(c) Other Documents
(i) evidence that all Fees and other amounts due the
Administrative Agent and the Lenders hereunder and under the other Loan
Documents have been paid; and
(ii) such other documents and instruments as the
Administrative Agent or a Lender may reasonably request.
Section 4.2. Conditions Precedent to All Syndicate Loans.
The obligation of the Lenders to make Syndicate Loans is subject to the
further condition precedent that, as of the date of each such Loan and after
giving effect thereto: (a) no Default or Event of Default shall have occurred
and be continuing; (b) the representations and warranties made or deemed made by
the Borrower in this Agreement and the other Loan Documents to which it is a
party and by each other Loan Party in the Loan Documents to which it is a party,
shall be true and correct on and as of the date of the making of such Loan with
the same force and effect as if made on and as of such date except to the extent
that (i) such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date) and (ii) except for changes in
factual circumstances specifically and expressly permitted hereunder; (c) no
Material Adverse Change with respect to the Borrower and its Subsidiaries, taken
as a whole, shall have occurred since the Effective Date; (d) there is no
pending or threatened suit, cause of action or proceeding against any Loan Party
that could reasonably have a Material Adverse Effect on the Borrower or any of
its Subsidiaries taken as a whole; and (e) if any suit, action, arbitration,
investigation or other proceeding is then pending against any Loan Party, no
event or circumstance has occurred with relation to such suit, action,
arbitration, investigation or other proceeding which could reasonably be
expected to have a Material Adverse Effect on the Borrower or any of its
Subsidiaries taken as a whole. Each Credit Event shall constitute a
certification by the Borrower to the effect set forth in the preceding sentence
(both as of the date of the giving of notice relating to such Credit Event and,
unless the Borrower otherwise notifies the Administrative Agent prior to the
date of Credit Event, as of the date of such Credit Event).
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations and Warranties.
In order to induce the Administrative Agent and each Lender to enter
into this Agreement and to make Loans hereunder, the Borrower represents and
warrants to the Administrative Agent and each Lender as follows:
(a) Organization; Power; Qualification. Each of the Loan Parties is a
corporation, duly organized, validly existing and in good standing under the
jurisdiction of its incorporation, has the power and authority to own or lease
its respective properties and to carry on its respective business as now being
and hereafter proposed to be conducted and is duly qualified and is in good
standing as a foreign corporation, and authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization and where the failure to
be so qualified or authorized would have a Material Adverse Effect.
(b) Ownership Structure; Subsidiaries. Schedule 5.1.(b) correctly sets
forth, as of the Agreement Date, the corporate structure and ownership interests
(including percentage ownership) of the Borrower and all of its Affiliates
including the correct legal name of the Borrower and each Affiliate, and, in the
case of Affiliates, the partners or shareholders, as applicable, or other
Persons holding equity interests in such Affiliates and their percentage equity
or voting interest in such Affiliates. As of the Agreement Date, Schedule 5.1(b)
correctly sets forth (i) each Material Subsidiary and (ii) each Subsidiary
comprising the Material Subsidiary Group.
(c) Authorization and Enforceability. The Borrower and each other Loan
Party has the right and power, and has taken all necessary action to authorize
it, to borrow hereunder and to execute, deliver and perform this Agreement, the
Notes and the other Loan Documents to which it is a party in accordance with
their respective terms and to consummate the transactions contemplated hereby.
This Agreement, the Notes and each of the other Loan Documents to which the
Borrower or other Loan Party is a party have been duly executed and delivered by
such Person and each is a legal, valid and binding obligation of such Person
enforceable against such Person in accordance with its respective terms.
(d) Compliance of Agreement, Notes, Loan Documents and Borrowing with
Laws, etc. The execution, delivery and performance of this Agreement, the Notes
and the other Loan Documents to which the Borrower or any other Loan Party is a
party in accordance with their respective terms and the Borrowings hereunder do
not and will not, by the passage of time, the giving of notice, a determination
of materiality, the satisfaction of any condition, any combination of the
foregoing, or otherwise: (i) require any Governmental Approval or violate any
Applicable Law relating to the Borrower or any other Loan Party; (ii) conflict
with, result in a breach of or constitute a default under (A) the articles of
incorporation or the bylaws of the Borrower or the organizational documents of
any other Loan Party, or (B) any indenture, agreement or other instrument to
which the Borrower or any other Loan Party is a party or by which it or any of
its properties may be bound the violation of which could have a Material Adverse
Effect and, in any event, any agreement, indenture or instrument evidencing any
Consolidated Funded Debt; or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower or any other Loan Party other than in favor
of the Administrative Agent for the benefit of the Lenders. Neither the making
of the Loans nor the use of proceeds thereof will violate, or be inconsistent
with, the provisions of Regulations T, U or X of the Board of Governors of the
Federal Reserve System.
(e) Compliance with Law; Governmental Approvals. The Borrower, each
Subsidiary and each other Loan Party is in compliance with each Governmental
Approval applicable to it and in compliance with all other Applicable Law
relating to the Borrower, a Subsidiary or such Loan Party except for
noncompliances which, and Governmental Approvals the failure to possess which,
would not, singly or in the aggregate, cause a Default or Event of Default or
have a Material Adverse Effect.
(f) Titles to Properties; No Liens. The Borrower, its Subsidiaries and
the other Loan Parties have good, marketable and legal title to, or a valid
leasehold interest in, its respective properties and assets including, but not
limited to, those reflected on the consolidated balance sheet of the Borrower as
at January 3, 1998, except those which have been disposed of by the Borrower
subsequent to such date in the ordinary course of business or in other
transactions disclosed in filings by the Borrower with the Securities and
Exchange Commission so long as copies thereof have been provided to the Lenders
pursuant to Section 7.6 or otherwise. None of the assets of the Borrower or any
of its Subsidiaries is subject to any Lien other than Permitted Liens.
(g) Indebtedness and Guarantees. Schedule 1.1.(a) is a complete and
correct listing of all (i) Existing Consolidated Funded Debt of the Borrower and
its Subsidiaries and the other Loan Parties, (ii) Guarantees of the Borrower and
its Subsidiaries and the other Loan Parties of any Indebtedness and (iii) all
letters of credit and acceptance facilities extended to the Borrower and/or any
Subsidiary or other Loan Parties. Schedule 1.1.(b) sets forth all Liens on any
property of the Borrower and its Subsidiaries securing any Indebtedness. No
default or event of default, or event or condition which with the giving of
notice, the lapse of time, a determination of materiality, the satisfaction of
any other condition or any combination of the foregoing, would constitute such a
default or event of default, exists with respect to any such Indebtedness or
Guaranty.
(h) Litigation. Except as set forth on Schedule 5.1.(h), there are no
actions, suits or proceedings pending (nor, to the knowledge of the Borrower,
are there any actions, suits or proceedings threatened, nor is there any basis
therefor) against or in any other way relating adversely to or affecting the
Borrower, any Subsidiary or any other Loan Party or any of its respective
property before or by any Governmental Authority which, if adversely determined,
could have a Material Adverse Effect, and there are no strikes, slow downs, work
stoppages or walkouts or other labor disputes in progress or threatened relating
to the Borrower, any Subsidiary or any other Loan Party.
(i) Taxes. All federal, state and other tax returns of the Borrower and
any Subsidiary or Loan Party required by Applicable Law to be filed have been
filed, and all federal, state and other taxes, assessments and other
governmental charges or levies upon the Borrower, any Subsidiary and each Loan
Party and its properties, income, profits and assets which are due and payable
have been paid, except any such nonpayment which is at the time permitted under
Section 6.6. None of the United States income tax returns of the Borrower, its
Subsidiaries or any Loan Party are under audit. All charges, accruals and
reserves on the books of the Borrower and each of its Subsidiaries in respect of
any taxes or other governmental charges are in accordance with GAAP.
(j) Financial Statements and Condition; Solvency. The Borrower has
heretofore furnished to each of the Lenders (i) the consolidated balance sheet
of the Borrower and its Subsidiaries as at January 3, 1998 and the related
consolidated statements of income, retained earnings and cash flow of the
Borrower and its Subsidiaries for the fiscal year ended on said date, with the
opinion thereon of Arthur Andersen LLP (collectively, the "Audited Financial
Statements"); and (ii) the consolidated unaudited balance sheet of the Borrower
and its Subsidiaries as at July 4, 1998 and the related consolidated statements
of income, retained earnings and cash flow of the Borrower and its Subsidiaries
for the fiscal quarter ended on said date (collectively, the "Unaudited
Financial Statements"; the Audited Financial Statements and the Unaudited
Financial Statements are collectively referred to as the "Financial
Statements"). The Financial Statements fairly present the consolidated financial
condition of the Borrower and its Subsidiaries as at said dates and the
consolidated results of their operations for the fiscal year ended on said
dates, all in accordance with GAAP. None of the Borrower nor any of its
Subsidiaries has on the Agreement Date any material contingent liabilities,
liabilities for taxes, unusual or long-term commitments or unrealized or forward
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements. Since January 3, 1998, no
Material Adverse Change has occurred except as may have been disclosed in
filings by the Borrower with the Securities and Exchange Commission so long as
copies thereof have been provided to the Lenders pursuant to Section 7.6 or
otherwise. Each of the Borrower, the Loan Parties and the other Subsidiaries is
Solvent.
(k) ERISA. Each Plan, and, to the knowledge of the Borrower, each
Multiemployer Plan, is in compliance in all respects with, and has been
administered in all respects in compliance with, the applicable provisions of
ERISA, the Internal Revenue Code and any other Applicable Law except where
failure to be so in compliance or to be so administered could not result in a
Material Adverse Effect, and, on and as of the Agreement Date, no event or
condition has occurred and is continuing as to which the Borrower would be under
an obligation to furnish a report to the Lenders under Section 7.5.
(l) Absence of Defaults. Neither the Borrower, any Subsidiary thereof
nor any Loan Party is in violation of its articles or certificate of
incorporation or its bylaws, and no event has occurred, which has not been
remedied, cured or waived: (i) which constitutes a Default or an Event of
Default; or (ii) which constitutes, or which with the passage of time, the
giving of notice, a determination of materiality, the satisfaction of any
condition, or any combination of the foregoing, would constitute, a default or
event of default by the Borrower, any Subsidiary or any Loan Party under any
agreement (other than this Agreement) or judgment, decree or order to which the
Borrower or any Subsidiary or Loan Party is a party or by which the Borrower or
any Subsidiary or Loan Party or any of their respective properties may be bound
where such default would, individually or in the aggregate, have a Material
Adverse Effect.
(m) Environmental Laws. Except as set forth on Schedule 5.1.(m) hereof,
the Borrower, its Subsidiaries and each other Loan Party are in compliance with
all Environmental Laws, the failure with which to comply would have a Material
Adverse Effect. The Borrower is not aware of, and has not received notice of,
any past, present, or future events, conditions, circumstances, activities,
practices, incidents, actions, or plans which, with respect to the Borrower, its
Subsidiaries and each other Loan Party, may interfere with or prevent compliance
or continued compliance with Environmental Laws, or may give rise to any
common-law or legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study, or investigation, based on or related
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic, or other Hazardous Material; and there is no civil, criminal, or
administrative action, suit, demand, claim, hearing, notice, or demand letter,
notice or violation, investigation, or proceeding pending or, to the Borrower's
knowledge, threatened, against the Borrower, its Subsidiaries and each other
Loan Party relating in any way to Environmental Laws.
(n) Use of Proceeds. All proceeds of the Loans will be used only in
accordance with Sections 6.8. and 8.11.
(o) Investment Company; Public Utility Holding Company. Neither the
Borrower nor any of the Subsidiaries or Loan Parties is (i) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject
to any other law which purports to regulate or restrict its ability to borrow
money or to consummate the transactions contemplated by this Agreement or the
other Loan Documents or to perform its obligations hereunder or thereunder.
(p) Margin Stock. Neither the Company, any Subsidiary nor any Loan
Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying "margin stock" within the meaning of Regulations
U and X of the Board of Governors of the Federal Reserve System.
(q) Affiliate Transactions. Except as set forth on Schedule 5.1.(q) or
as permitted by Section 8.7., neither the Borrower nor any Subsidiary or Loan
Party is a party to or bound by any agreement or arrangement (whether oral or
written) to which any Affiliate of the Borrower or any Subsidiary is a party
except (i) in the ordinary course of and pursuant to the reasonable requirements
of the Borrower's or such Subsidiary's business and (ii) upon fair and
reasonable terms no less favorable to the Borrower and such Subsidiary than it
could obtain in a comparable arm's-length transaction with an unaffiliated
Person. Neither the Borrower nor any Subsidiary is a party to any agreement or
arrangement which restricts or prohibits the payment of dividends or the
repayment of inter-company loans by a Subsidiary to the Borrower.
(r) Intellectual Property. The Borrower and its Subsidiaries own or
have the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to the conduct of their
businesses as now conducted, without known conflict with any patent, license,
franchise, trademark, trade secrets and confidential commercial or proprietary
information, trade name, copyright, rights to trade secrets or other proprietary
rights of any other Person.
(s) Year 2000. (i) The Borrower has (A) undertaken a detailed review
and assessment of all areas within its and its Subsidiaries' business and
operations that could be adversely affected by the "Year 2000 problem" (that is,
the risk that computer applications used by the Borrower or its Subsidiaries,
may be unable to recognize and perform properly date sensitive functions
involving certain dates prior to and any date after December 31, 1999), (B)
developed a plan and timeline for addressing any Year 2000 problem on a timely
basis, and (C) implemented such plan in accordance with such timetable. The
Borrower reasonably anticipates that all computer applications that are material
to its and its Subsidiaries' business and operations will on a timely basis be
able to perform property date-sensitive functions for all dates before and after
January 1, 2000 (i.e., be "Year 2000 compliant"); and (ii) the Borrower has
inquired of each of its and its Subsidiaries material suppliers, vendors and
customers as to whether such Persons will on a timely basis be Year 2000
compliant in all material respects and taken appropriate remedial action with
respect to any of such Persons who are not expected to be so complaint. For
purposes hereof "material suppliers, vendors and customers" refers to those
suppliers, vendors and customers of the Borrower or its Subsidiaries, the
business failure of which would with reasonable probability result in a Material
Adverse Effect.
(t) Accuracy and Completeness of Information. All written information,
reports and other papers and data furnished to the Administrative Agent or any
Lender by, on behalf of, or at the direction of, the Borrower, any Subsidiary or
any other Loan Party were, at the time the same were so furnished, complete and
correct in all material respects, to the extent necessary to give the recipient
a true and accurate knowledge of the subject matter, or, in the case of
financial statements, present fairly, in accordance with GAAP consistently
applied throughout the periods involved, the financial position of the Persons
involved as at the date thereof and the results of operations for such periods.
All financial projections and other pro forma financial information delivered to
the Administrative Agent and/or the Lenders have been and will be based on good
faith estimates and assumptions believed by the Borrower and its Subsidiaries to
be reasonable at the time made and at the time furnished to the Administrative
Agent and/or the Lenders. No fact is known to the Borrower which has had, or may
in the future have (so far as the Borrower can reasonably foresee), a Material
Adverse Effect which has not been set forth in the financial statements referred
to in Section 5.1.(j) or in such information, reports or other papers or data or
otherwise disclosed in writing to the Administrative Agent and the Lenders prior
to the Agreement Date. No document furnished or written statement made to the
Administrative Agent or any Lender in connection with the negotiation,
preparation or execution of this Agreement or any of the other Loan Documents
contains or will contain any untrue statement of a fact material to the
creditworthiness of the Borrower, any Subsidiary or any other Loan Party or
omits or will omit to state a material fact necessary in order to make the
statements contained therein not misleading.
Section 5.2. Survival of Representations and Warranties, Etc.
All statements contained in any certificate, financial statement or
other instrument delivered by or on behalf of the Borrower or any Loan Party to
the Administrative Agent or any Lender pursuant to or in connection with this
Agreement or any of the other Loan Documents (including any statement contained
in any certificate, financial statement or other instrument delivered by or on
behalf of the Borrower prior to the Agreement Date and delivered to the
Administrative Agent or the Lenders in connection with closing the transactions
contemplated hereby) shall constitute representations and warranties made by the
Borrower under this Agreement. All representations and warranties made under
this Agreement shall be deemed to be made at and as of the Agreement Date, the
Effective Date and at and as of the date of any Credit Event, except to the
extent that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date) and except for changes in
factual circumstances specifically permitted hereunder.
ARTICLE 6. AFFIRMATIVE COVENANTS
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, the Borrower shall, and shall cause
each Subsidiary and the other Loan Parties to:
Section 6.1. Preservation of Existence and Similar Matters.
Preserve and maintain its respective existence, rights, franchises,
licenses and privileges in the jurisdiction of its formation and qualify and
remain qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification and authorization and where the failure to be so authorized and
qualified would have a Material Adverse Effect.
Section 6.2. Compliance with Applicable Law.
Comply with all Applicable Law, including the obtaining of all
Governmental Approvals, if the failure to comply with which would have a
Material Adverse Effect.
Section 6.3. Maintenance of Property.
In addition to, and not in derogation of, the requirements of any of
the other Loan Documents, (a) protect and preserve all of its material
properties, including, but not limited to, copyrights, patents, trade names and
trademarks, and maintain in good repair, working order and condition all
tangible properties, and (b) maintain all of its properties used or useful in
its business in good working order and condition, ordinary wear and tear
excepted.
Section 6.4. Conduct of Business.
At all times carry on its respective businesses in the same fields as
engaged in on the Agreement Date and not enter into any field of business not
otherwise engaged in as of the Agreement Date or otherwise reasonably related
thereto.
Section 6.5. Insurance.
In addition to, and not in derogation of, the requirements of any of
the other Loan Documents, maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as is
customarily maintained by similar businesses or as may be required by Applicable
Law.
Section 6.6. Payment of Taxes and Claims.
Pay or discharge when due (a) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any
properties belonging to it, and (b) all lawful claims of materialmen, mechanics,
carriers, warehousemen and landlords for labor, materials, supplies and rentals
which, if unpaid, might become a Lien on any properties of such Person;
provided, however, that this Section shall not require the payment or discharge
of any such tax, assessment, charge, levy or claim which is being contested in
good faith by appropriate proceedings which operate to suspend the collection
thereof and for which adequate reserves have been established on the books of
the Borrower or Subsidiary, as appropriate, in accordance with GAAP.
Section 6.7. Visits and Inspections.
Permit representatives or agents of any Lender or the Administrative
Agent, from time to time, as often as may be reasonably requested to: (a) visit
and inspect all properties of the Borrower or any Material Subsidiary; (b)
inspect and make extracts from their respective books and records; and (c)
discuss with its principal officers, and its independent accountants, business,
assets, liabilities, financial conditions, results of operations and business
prospects.
Section 6.8. Use of Proceeds.
Use the proceeds of all Loans only for (i) working capital, capital
expenditures and other general corporate purposes, (ii) stock repurchases to the
extent permitted under Section 8.11. and (iii) acquisitions to the extent
permitted under Section 8.3.
Section 6.9. Material Subsidiaries.
Upon (a) the acquisition, incorporation or other creation of a Material
Subsidiary, (b) becoming a Material Subsidiary or (c) the existence of a
Material Subsidiary Group, the Borrower shall cause such Material Subsidiary (or
the Subsidiaries comprising the Material Subsidiary Group, as the case may be)
to execute and deliver in favor of the Administrative Agent for the benefit of
the Lenders within 10 Business Days of such acquisition, incorporation, creation
or coming into existence a Guaranty in the form of Exhibit F. The delivery of
any such Guaranty to the Administrative Agent shall be accompanied by an opinion
of counsel to the Borrower and such Material Subsidiary (or Subsidiaries, as the
case may be) as to matters regarding due authorization, execution and delivery
and enforceability of such Guaranty and to such other matters as the
Administrative Agent or its counsel shall reasonably request.
Section 6.10. Environmental Matters.
Except as described in Schedule 5.1.(m) hereof, comply in all respects
with all Environmental Laws the failure with which to comply would have a
Material Adverse Effect. If the Borrower or any of the Subsidiaries shall (a)
receive notice that any violation of any Environmental Law may have been
committed or is about to be committed by the Borrower or any of the
Subsidiaries, (b) receive notice that any administrative or judicial complaint
or order has been filed or is about to be filed against the Borrower or any of
the Subsidiaries alleging violations of any Environmental Law or requiring the
Borrower or any of the Subsidiaries to take any action in connection with the
release of Hazardous Materials or (c) receive any notice from a Governmental
Authority or private party alleging that the Borrower or any of the Subsidiaries
may be liable or responsible for costs associated with a response to or cleanup
of a release of a Hazardous Material or any damages caused thereby, and such
notices, individually or in the aggregate, could have a Material Adverse Effect,
then the Borrower shall provide the Administrative Agent and each Lender with a
copy of such notice within 10 Business Days after the receipt thereof by the
Borrower or any of the Subsidiaries. Within thirty days after the Borrower
learns of the enactment or promulgation of any Environmental Law which could
have a Material Adverse Effect, the Borrower shall provide the Administrative
Agent and each Lender with notice thereof. The Borrower shall, and shall cause
its Subsidiaries and the other Loan Parties to, promptly take all actions
necessary to prevent the imposition of any Liens on any of their respective
properties arising out of or related to any Environmental Laws.
Section 6.11. Performance of Obligations.
Perform in all material respects all of its obligations under the terms
of all agreements, indentures, security documents or other debt instruments to
which it is a party or by which it may be bound.
ARTICLE 7. INFORMATION
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, the Borrower shall furnish to the
Administrative Agent at its Principal Office and to each Lender at its Lending
Office:
Section 7.1. Quarterly Financial Statements.
As soon as available and in any event within 45 days after the close of
each of the first, second and third fiscal quarters of the Borrower, the
consolidated balance sheets of the Borrower and its Subsidiaries as at the end
of such period and the related consolidated statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for such period,
setting forth in each case in comparative form the figures for the corresponding
periods of the previous fiscal year, all of which shall be certified by the
chief financial officer or the treasurer of the Borrower, in his or her opinion,
to present fairly, in accordance with GAAP, the consolidated financial position
of the Borrower and its Subsidiaries as at the date thereof and the results of
operations for such period (subject to normal year-end audit adjustments).
Section 7.2. Year-End Statements.
As soon as available and in any event within 90 days after the end of
each fiscal year of the Borrower, the consolidated balance sheets of the
Borrower and its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for such fiscal year, setting forth in comparative
form the figures as at the end of and for the previous fiscal year, all of which
shall be certified by the chief financial officer or the treasurer of the
Borrower, in his or her opinion, to present fairly, in accordance with GAAP, the
financial position of the Borrower as at the date thereof and the result of
operations for such period and by Arthur Andersen LLP or another independent
certified public accountants of recognized national standing acceptable to the
Administrative Agent and the Requisite Lenders, whose certificate shall be in
scope and substance satisfactory to the Administrative Agent and the Requisite
Lenders and who shall have authorized the Borrower to deliver such financial
statements and certification thereof to the Administrative Agent and the Lenders
pursuant to this Agreement.
Section 7.3. Compliance Certificate.
At the time the financial statements are furnished pursuant to Sections
7.1. and 7.2., in the case of the Borrower's interim quarterly financial
statements, a certificate executed by the chief financial officer or the
treasurer substantially in the form of Exhibit H attached hereto, or in the case
of the audited annual financial statements, a certificate executed by the
independent public accountants performing the audit of such statements:
(a) setting forth as at the end of such quarterly accounting period or
fiscal year, as the case may be, the calculations required to establish whether
or not the Borrower, and when appropriate its Subsidiaries, were in compliance
with the covenants contained in Article 8.; and
(b) stating that, to the best of his or their knowledge, information
and belief, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default and its nature, when it occurred
and, in the case of the certificate executed by the chief financial officer or
the treasurer, whether it is continuing and the steps being taken by the
Borrower with respect to such event, condition or failure.
Section 7.4. Notice of Litigation and Other Matters.
Prompt notice of:
(a) to the extent the Borrower is aware of the same, the commencement
of all proceedings and investigations by or before any Governmental Authority
and all actions and proceedings in any court or other tribunal or before any
arbitrator against or in any other way relating adversely to, or adversely
affecting, the Borrower, any Subsidiary or any other Loan Party or any of their
respective properties, assets or businesses which, if adversely determined or
resolved, would have a Material Adverse Effect;
(b) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower, any
Subsidiary or any other Loan Party which has had or may have Material Adverse
Effect;
(c) the occurrence of any Default or Event of Default;
(d) any order, judgment or decree in excess of $5,000,000 having been
entered against the Borrower, any of the Subsidiaries or any other Loan Party or
any of their respective properties or assets;
(e) the acquisition, incorporation or other creation of any Subsidiary
and the purpose therefor and the amount and nature of the assets to be owned
thereby;
(f) the proposed sale, transfer or other disposition of any material
assets of the Borrower or any Subsidiary to any Subsidiary, Affiliate or other
Person; or
(g) any strikes, slow downs, work stoppages or walkouts or other labor
disputes in progress or threatened relating to the Borrower, any Subsidiary or
any other Loan Party.
Section 7.5. ERISA Reporting.
The Borrower shall deliver to the Administrative Agent and each Lender,
at the Borrower's expense, the following information at the times specified
below:
(a) within ten Business Days after the Borrower, any Subsidiary or any
ERISA Affiliate knows or has reason to know that a Termination Event has
occurred, a written statement of the chief financial officer or the treasurer of
the Borrower describing such Termination Event and the action, if any, which the
Borrower or other such entities have taken, are taking or propose to take with
respect thereto, and when known, any action taken or threatened by the Internal
Revenue Service, Department of Labor or PBGC with respect thereto;
(b) within ten Business Days after the Borrower, any Subsidiary or any
ERISA Affiliate knows or has reason to know that a non-exempt prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Internal
Revenue Code) has occurred with respect to a Plan, a statement of the chief
financial officer of the Borrower describing such transaction and the action
which the Borrower or other such entities have taken, are taking or propose to
take with respect thereto, except where the liability resulting therefrom could
not reasonably exceed $1,000,000;
(c) within ten Business Days after the request by Administrative Agent
therefor, after the filing thereof with the Department of Labor, Internal
Revenue Service or PBGC, copies of each annual report (form 5500 series),
including Schedule B thereto, filed with respect to each Plan which is a defined
benefit plan as defined in ERISA ss.3(35);
(d) within ten Business Days after the request by Administrative Agent
therefor, after receipt by the Borrower, any Subsidiary or any ERISA Affiliate
of each actuarial report for any Plan which is a defined benefit plan as defined
in ERISA ss.3(35) or Multiemployer Plan and each annual report for any
Multiemployer Plan, copies of each such report;
(e) within ten Business Days upon the occurrence thereof, notification
of any increase in the benefits of any existing Plan (other than payroll
practices) or the establishment of any new Plan (other than payroll practices)
or the commencement of contributions to any Plan (other than payroll practices)
to which the Borrower, any Subsidiary or any ERISA Affiliate was not previously
contributing, except where the increased liability resulting therefrom could not
reasonably exceed $1,000,000;
(f) within ten Business Days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice;
(g) within ten Business Days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of any unfavorable determination letter from
the Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Internal Revenue Code, copies of each such letter;
(h) within ten Business Days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of a notice regarding the imposition of
withdrawal liability under a Multiemployer Plan, copies of each such notice;
(i) within three Business Days after the Borrower, any Subsidiary or
any ERISA Affiliate fail to make a required installment payment in excess of
$100,000 or any other required payment under Section 412 of the Internal Revenue
Code (as calculated by the Plan actuary or as reflected in any Plan actuarial
report available before the due date for such payment) to a Plan on or before
the due date for such payment, a notification of such failure; and
(j) within three Business Days after the Borrower, any Subsidiary or
any ERISA Affiliate knows (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan, in each case
where liability resulting therefrom could reasonably be expected to exceed
$1,000,000, a written statement setting forth any such event or information.
For purposes of this Section 7.5., the Borrower, any Subsidiary and any
ERISA Affiliate shall be deemed to know all facts known by the administrator of
any Plan of which such entity is the plan sponsor.
The Borrower shall establish, maintain and operate all Plans to comply
in all material respects with the provisions of ERISA, Internal Revenue Code,
and all other Applicable Laws, and the regulations and interpretations
thereunder other than to the extent that Borrower is in good faith contesting by
appropriate proceedings the validity or implication of any such provision, law,
rule, regulation or interpretation.
Section 7.6. Copies of Other Reports.
(a) Promptly upon their becoming available, copies of all registration
statements and other periodic or special reports containing material information
or developments regarding the Borrower and its Subsidiaries which the Borrower
shall file with the Securities and Exchange Commission (or any Governmental
Authority substituted therefor) or any national securities exchange; and
(b) Promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed.
Section 7.7. Other Information.
(a) A statement or statements in conformity with the requirements of
Federal Reserve Forms G-3 and/or U-1 referred to in Regulations U of the Board
of Governors of the Federal Reserve System and other documents evidencing its
compliance with the margin regulations.
(b) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the business, assets, liabilities, financial condition, results of operations or
business prospects of the Borrower, its Subsidiaries and the other Loan Parties
as any Lender or the Administrative Agent may reasonably request. The rights of
the Lenders and the Administrative Agent under this Section are in addition to
and not in limitation of their rights under any other provision of this
Agreement or any of the other Loan Documents.
ARTICLE 8. NEGATIVE COVENANTS
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, the Borrower shall not, directly or
indirectly:
Section 8.1. Financial Covenants.
(a) EBIT to Interest Ratio. Permit, as at the end of each fiscal
quarter of the Borrower, the Consolidated EBIT/Interest Ratio to be less than
2.25 to 1.00.
(b) Minimum Net Worth. Permit as at the end of each fiscal quarter of
the Borrower, its Consolidated Net Worth to be less than the sum of: (i)
$510,000,000 plus (ii) 50% of the cumulative positive Consolidated Net Income of
the Borrower earned after January 3, 1998 plus (iii) the aggregate net proceeds
received by the Borrower and its Subsidiaries from any sale or issuance of any
shares, interests, warrants, participations or other equity instruments of the
Borrower or its Subsidiaries occurring after January 3, 1998 minus (iv) the
aggregate amount of all cash and non-cash consideration paid by the Borrower and
its Subsidiaries in connection with any purchase, redemption, retirement or
other acquisition of any shares, interests, warrants, participations or other
equity instruments of the Borrower and its Subsidiaries occurring after January
3, 1998 in an amount up to, but not to exceed, $150,000,000; it being understood
that (1) any equity issuance net proceeds received by, or purchase, redemption,
retirement or other acquisition consideration paid to, a Subsidiary from the
Borrower or vice-versa shall not be included in determining the amounts
described in items (iii) and (iv) above; and (2) for purposes of determining the
amount of non-cash consideration paid by Borrower and its Subsidiaries in
connection with any purchase, redemption, retirement or other acquisition of any
equity instruments, the fair market value of such consideration shall be used
or, if such non-cash consideration is in the form of a note or other debt
security, the amount of non-cash consideration shall be deemed to be the
original principal amount of the note or debt security.
(c) Funded Debt to EBITDA Ratio. Permit, as of the end of each fiscal
quarter of the Borrower, the Consolidated Funded Debt/EBITDA Ratio to be greater
than 4.00 to 1.00.
Section 8.2. Indebtedness.
Create, assume or suffer to exist or be created, or permit any
Subsidiary to create, assume or suffer to exist or be created, any Indebtedness
other than the following:
(a) the Obligations;
(b) Existing Consolidated Funded Debt and any extensions, renewals,
replacements or refinancings thereof; provided, however, that (i) the principal
amount of any Consolidated Funded Debt incurred by the Borrower, the purpose of
which is to replace or refinance Existing Consolidated Funded Debt, may not
exceed the then outstanding amount of the Existing Consolidated Funded Debt to
be refinanced without the prior written consent of the Requisite Lenders unless
such Consolidated Funded Debt would otherwise be permitted under paragraph (f)
below and (ii) the principal amount of any Consolidated Funded Debt incurred by
a Subsidiary, the purpose of which is to replace or refinance the Existing
Consolidated Funded Debt of such Subsidiary, may not exceed the then outstanding
amount of the Existing Consolidated Funded Debt to be replaced or refinanced
unless the Borrower or such Subsidiary shall give the Administrative Agent prior
written notice of such increase;
(c) trade payables and other accrued liabilities arising in the
ordinary course of business;
(d) Indebtedness secured by Purchase Money Liens and Indebtedness
constituting Capitalized Lease Obligations; provided, however, that the
aggregate principal amount of the Indebtedness described in this subsection at
any one time outstanding and owing by the Borrower and its Subsidiaries may not
exceed $50,000,000;
(e) Indebtedness owing to the Borrower by its Subsidiaries;
(f) (i) Consolidated Funded Debt incurred by the Borrower after the
Effective Date and (ii) Indebtedness owing by Nylon Polymer Company, L.L.C., a
Georgia limited liability company ("Nylon Polymer") to SunTrust Bank, Atlanta,
N.A. and Wachovia Bank, N.A., as lenders (the "Nylon Polymers Lenders"), in the
original principal amounts of $22,500,000 ("Nylon Polymer Term Loan A") and
$7,500,000 ("Nylon Polymer Term Loan B"), respectively, pursuant to that certain
Term Loan Agreement dated as of September 12, 1997, as amended from time to
time, by and among Nylon Polymer, as borrower, the Nylon Polymer Lenders and
SunTrust Bank, Atlanta, as Agent; provided, however that the amount of
Indebtedness permitted under this subsection (f) shall not (1) at any time
exceed 20% of Total Assets and (2) be secured by a Lien on any property or other
asset of the Borrower or any of its Subsidiaries;
(g) any Hedging Obligations;
(h) (i) Guaranties in existence as of the Agreement Date and disclosed
on Schedule 1.1(a) hereof; (ii) Guaranties by the Borrower (and in the case of
Nylon Polymer Term Loan A, also by Shaw Contract Flooring Services, Inc. "Shaw
Contract")) of any of the foregoing Indebtedness; provided that such Guaranteed
Indebtedness is permitted under this Section 8.2.; and (iii) Guaranties by the
Borrower and Shaw Contract of Indebtedness of La Mirada Realty, L.L.C., a
Georgia limited liability company ("La Mirada") pursuant to that certain Amended
and Restated Guaranty Agreement dated as of October 6, 1998 (the "La Mirada
Guaranty"), executed by the Borrower and Shaw Contract, relating to a term loan
facility in the maximum principal amount of $12,200,000, made pursuant to that
certain Term Loan Agreement dated as of October 8, 1997, as amended from time to
time (provided that the principal amount thereof is not increased), by and among
La Mirada, as borrower, SunTrust Bank, Atlanta, and Wachovia Bank, N.A., as
lenders, and SunTrust Bank, Atlanta, as Agent; provided, however, that amount of
Indebtedness so Guaranteed pursuant to this clause (iii) and then outstanding
shall reduce (in an equal amount) the amount of Indebtedness permitted to be
incurred and outstanding under subsection (f) above;
(i) [Reserved]; and
(j) Sold Receivables Indebtedness in an aggregate amount at any time
outstanding not to exceed $325,000,000.
Section 8.3. Investments/Acquisitions.
(a) Acquire or purchase, or permit any Subsidiary to acquire or
purchase, any Business Unit or (b) acquire, make or purchase, or permit any
Subsidiary to acquire, make or purchase, any Investment or (c) permit any
Investment of the Borrower or any Subsidiary to be outstanding other than the
following:
(i) Investments in (A) Subsidiaries in existence on the
Agreement Date and disclosed on Schedule 5.1.(b); (B) Subsidiaries
created or acquired after the Agreement Date so long as the Borrower
complies with Section 6.9. (to the extent applicable) and, if the
creation or acquisition of such Subsidiary is in connection with the
acquisition or purchase of assets or capital stock of another Person,
such transaction is permitted by subparagraph (vi) below; and (C) a
Receivables Subsidiary;
(ii) Investments (other than in Subsidiaries) in existence on
the Agreement Date in excess of $100,000 and set forth on Schedule
8.3.(a) attached hereto;
(iii) Investments in Cash Equivalents;
(iv) Indebtedness permitted under Section 8.2.(e);
(v) Loans and advances to employees for moving, entertainment,
travel and other similar expenses in the ordinary course of business
consistent with past practices;
(vi) The Borrower, or any of its Subsidiaries, may acquire or
purchase all or a portion of the assets or properties of another Person
or any Business Unit of another Person and may acquire or purchase all
or a controlling interest of the capital stock of another Person so
long as the following conditions are satisfied: (A) that immediately
prior to, and immediately after, the consummation of such acquisition
or purchase, no Default or Event of Default has occurred and is
continuing; (B) the assets or Person so purchased or acquired relate
directly to a line or lines of business in which the Borrower is
engaged on the Agreement Date; (C) if the Borrower creates a Subsidiary
to effect such acquisition or purchase, the Borrower and such
Subsidiary (if it becomes a Material Subsidiary) shall comply with the
provisions of Section 6.9. hereof; (D) the Board of Directors (or other
similar management body) of the Person to be acquired recommends to its
shareholders (or other similar equity holders) that the shareholders
(or other similar equity holders) approve such acquisition; (E) if such
acquisition or purchase is consummated through a merger or
consolidation, the Borrower (or, after giving effect to the merger, a
Subsidiary of the Borrower including the acquired entity if it is the
survivor of the merger) shall be the surviving corporation; and (F)
immediately after giving effect to such acquisition or purchase, the
Borrower would, on a pro forma basis, be in compliance with the
financial covenants set forth in Section 8.1.; provided, however, that,
in the event the fair market value of the assets, properties, Business
Unit or capital stock so purchased or acquired exceeds $100,000,000,
the Borrower shall provide the Administrative Agent, at the time of
such purchase or acquisition, a certificate executed by the chief
financial officer of the Borrower certifying that each of the foregoing
conditions in this clause (vi) have been satisfied;
(vii) other Investments in Persons made by the Borrower and
the Subsidiaries from time to time; provided, however, that the
aggregate amount of all cash and non-cash consideration (determined on
a fair market value basis and net of all Transaction Costs) paid by the
Borrower and its Subsidiaries in such Investments shall not exceed
$50,000,000 in any fiscal year;
(viii) Investments permitted under Section 8.2.(h); and
(ix) Investments in The Maxim Group, Inc. ("Maxim") in the
form of: (A) 3,150,000 shares of common stock of Maxim and (B) a
certain Subordinated Promissory Note in the principal amount of
$18,048,000 executed by Maxim in favor of the Borrower.
Section 8.4. Liens/Agreements Regarding Liens/Other Matters.
(a) Create, assume, incur or permit or suffer to exist or to be
created, assumed or incurred, or permit any Subsidiary to create, assume or
suffer to exist or be created, any Lien upon any of its properties whether now
owned or hereafter acquired, other than Permitted Liens; provided, however, that
this clause (a) shall not be effective until such time as that certain Amended
and Restated Credit Agreement dated as of March 16, 1998, as amended (the
"Existing Credit Agreement"), among the Borrower, the Lenders from time to time
a party thereto, NationsBank, N.A., as Issuing Bank and Administrative Agent,
SunTrust Bank, Atlanta, as Documentation Agent and Wachovia Bank, N.A., as
Managing Agent shall have been terminated or otherwise ceases to exist; or
(b) Enter into or assume any agreement (other than any Loan Document),
or permit any Subsidiary (other than a Receivables Subsidiary) to enter into or
assume any agreement (other than any Loan Document), prohibiting the creation or
assumption of any Lien upon its properties, whether now owned or hereafter
acquired; provided, however, that this clause (b) shall not be effective until
such time as the Existing Credit Agreement shall have been terminated or
otherwise ceases to exist; or
(c) Create or otherwise cause or suffer to exist or become effective,
or permit any Subsidiary (other than a Receivables Subsidiary) to create or
otherwise cause or suffer to exist or become effective, any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to: (i)
pay dividends or make any other distribution on any of such Subsidiary's capital
stock owned by the Borrower or any Subsidiary of the Borrower; (ii) pay any
Indebtedness owed to the Borrower or any other Subsidiary; (iii) make loans or
advances to the Borrower or any other Subsidiary; or (iv) transfer any of its
property or assets to the Borrower or any other Subsidiary.
Section 8.5. Merger, Consolidation, Sales of Assets and Other
Arrangements.
(a) Enter into, or permit any Subsidiary to enter into, any transaction
of merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution) or permit any Subsidiary to do any of the
foregoing; or (c) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any part of its
business or assets, or the capital stock of or other equity interests in any of
its Subsidiaries, whether now owned or hereafter acquired or permit any
Subsidiary to do any of the foregoing; provided, however, that:
(i) Subsidiaries of the Borrower (other than the Receivables
Subsidiary) may merge or consolidate with other Subsidiaries of the
Borrower; provided further, however, that if the surviving Person of
such merger or consolidation is a Material Subsidiary, such Person
shall execute a Guaranty as provided in Section 6.9.;
(ii) a Subsidiary may sell, transfer or dispose of its assets
to the Borrower or another Subsidiary of the Borrower; provided
further, however, that if such transferee becomes a Material Subsidiary
as a result of such sale, transfer or other disposition, such
transferee (other than a Receivables Subsidiary) shall execute a
Guaranty as provided in Section 6.9.;
(iii) the Borrower or any Subsidiary may sell inventory in the
ordinary course of business;
(iv) the Borrower and its Subsidiaries may sell property in
transactions permitted under Section 8.6.;
(v) the Borrower and its Subsidiaries may, during the period
this Agreement is in effect, sell, transfer or dispose of up to 15%
(determined on a consolidated basis) of the book value of their
respective assets (including the capital stock of any Subsidiary);
provided, however, that sales, transfers or dispositions of assets
already permitted by subparagraphs (ii), (iii) and (iv) shall not count
against such 15% test;
(vi) [reserved];
(vii) the Receivables Subsidiary may sell or otherwise
transfer accounts receivable (and related general intangibles) to
another Person under or pursuant to a Permitted Receivables Facility;
and
(viii) the Borrower may merge or consolidate with any other
corporation, provided that (A) the Borrower shall be the continuing or
surviving corporation; (B) immediately prior to such merger or
consolidation and immediately after such merger or consolidation and
after giving effect thereto, no Default or Event of Default is or would
be in existence; and (C) the line or lines business conducted by the
Person merging into the Borrower shall be similar to or consistent with
the line or lines of business conducted by the Borrower, as reasonably
determined by the Administrative Agent and the Requisite Lenders; (D)
the Board of Directors (or other similar management body) of the Person
to be merged or consolidated with or into the Borrower recommends to
its shareholders (or other similar equity holders) that such
shareholders (or other similar equity holders) approve such merger or
consolidation; and (E) immediately after giving effect to such merger
or consolidation, the Borrower would, on a pro forma basis, be in
compliance with the financial covenants set forth in Section 8.1.;
provided, further, that, in the event the fair market value of the
assets of the Person to be merged or consolidated with or into the
Borrower exceeds $100,000,000, the Borrower shall provide the
Administrative Agent, at the time of such merger or consolidation, a
certificate executed by the chief financial officer of the Borrower
certifying that each of the foregoing conditions in this clause (viii)
have been satisfied.
Section 8.6. Sale-Leasebacks.
Enter into, or permit any Subsidiary to enter into, any sale and
leaseback transaction covering any fixed or capital property, except for sale
and leaseback transactions which collectively cover property the aggregate fair
market value of which, as determined for each item of property as at the time
such property became the subject of such a transaction, does not exceed 10% of
Consolidated Net Worth, as determined on the date of the most recent sale and
leaseback transaction.
Section 8.7. Transactions with Affiliates.
Enter into, or permit any Subsidiary to enter into, any transaction
including, without limitation, the purchase, sale, leasing or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Borrower or with any officer, director or employee of the Borrower or any
Subsidiary, except (a) the transactions and agreements described on Schedule
5.1.(q) and any renewals, replacements or extensions thereof, (b) that such
Persons may render services to the Borrower or its Subsidiaries for compensation
at the same rates generally paid by Persons engaged in the same or similar
businesses for the same or similar services and (c) in the ordinary course of
and pursuant to the reasonable requirements of the Borrower's (or any
Subsidiary's) business consistent with past practice of the Borrower and its
Subsidiaries and upon fair and reasonable terms no less favorable to the
Borrower (or any Subsidiary) than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 8.8. Operating Leases.
Enter into or remain or become liable upon, or permit any Subsidiary to
enter into or remain or become liable upon, any operating lease (other than
intercompany leases between the Borrower and its Subsidiaries) if the aggregate
amount of all rents paid by the Borrower and its Subsidiaries under all such
leases would exceed $100,000,000 in any fiscal year.
Section 8.9. Plans.
Neither Borrower nor any Subsidiary of Borrower shall:
(a) permit the occurrence of any Termination Event which would result
in a liability to any Loan Party or ERISA Affiliate in excess of $10,000,000;
(b) permit the present value of all benefit liabilities under all Plans
to exceed the current value of the assets of such Plans allocable to such
benefit liabilities by more than $10,000,000;
(c) permit any accumulated funding deficiency in excess of $10,000,000
(as defined in Section 302 of ERISA and Section 412 of the Internal Revenue
Code) with respect to any Plan, whether or not waived;
(d) fail to make any contribution or payment to any Multiemployer Plan
which any Loan Party or ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining thereto
which results in or is likely to result in a liability in excess of $10,000,000;
(e) engage, or permit any Loan Party or ERISA Affiliate to engage, in
any prohibited transaction under Section 406 of ERISA or Section 4975 of the
Internal Revenue Code for which a civil penalty pursuant to Section 502(i) of
ERISA or a tax pursuant to Section 4975 of the Internal Revenue Code in excess
of $10,000,000 is imposed;
(f) permit the establishment of any Plan providing post-retirement
welfare benefits or establish or amend any Plan which establishment or amendment
could result in liability to any Loan Party or ERISA Affiliate or increase the
obligation of any Loan Party or ERISA Affiliate to a Multiemployer Plan which
liability or increase, individually or together with all similar liabilities and
increases, is material to any Loan Party or ERISA Affiliate; or
(g) fail, or permit any Loan Party or ERISA Affiliate to fail, to
establish, maintain and operate each Plan in compliance in all material respects
with the provisions of ERISA, the Internal Revenue Code and all other applicable
laws and the regulations and interpretations thereof.
Section 8.10. Fiscal Year.
Change its fiscal year from that in effect as of the Agreement Date.
Section 8.11. Margin Regulations.
Use, or permit any Subsidiary to use, directly or indirectly, the
proceeds of any Loan hereunder for the purpose of purchasing or carrying any
"margin stock" or "margin security" as defined in Regulations U and X (12 C.F.R.
Parts 221 and 224) of the Board of Governors of the Federal Reserve System
(herein called "margin stock") or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry stock or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of such Regulations U and X. Further, neither the Borrower nor any
bank acting on its behalf shall take any action which might cause this Agreement
or the Notes to violate Regulations U or X or any other regulation of the Board
of Governors of the Federal Reserve System, as now in effect or as the same may
hereafter be in effect.
ARTICLE 9. DEFAULT
Section 9.1. Events of Default.
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of Applicable Law or pursuant to any judgment or order of
any Governmental Authority:
(a) Default in Payment. (i) The Borrower shall fail to pay when due
(whether upon demand, at maturity, by reason of acceleration or otherwise) the
principal of any of the Loans, (ii) the Borrower shall fail to pay when due any
interest or any of the other Obligations owing by the Borrower under this
Agreement or any other Loan Document and such failure shall continue for a
period of five days or (iii) any other Loan Party shall fail to pay when due any
Obligation owing by such Loan Party under any Loan Document to which it is a
party and such failure shall continue for a period of five days.
(b) Misrepresentations. Any statement, representation or warranty made
or deemed made by or on behalf of the Borrower or any other Loan Party under
this Agreement or under any other Loan Document, or any amendment hereto or
thereto, or in any other writing or statement at any time furnished or made or
deemed made by or on behalf of the Borrower or any other Loan Party to the
Administrative Agent or any Lender, shall at any time prove to have been
incorrect or misleading in any material respect when furnished or made.
(c) Default in Performance. (i) The Borrower shall fail to perform or
observe Section 6.8. hereof or any term, covenant, condition or agreement
contained in Article 8. or (ii) the Borrower or any Loan Party shall fail to
perform or observe any term, covenant, condition or agreement contained in this
Agreement or any other Loan Document to which it is a party and not otherwise
mentioned in this Section 9.1. and such failure shall continue for a period of
thirty days after the earlier of (x) the date upon which the Borrower or such
Loan Party obtains knowledge of such failure or (y) the date upon which the
Borrower has received written notice of such failure from the Administrative
Agent sent at the request of any Lender.
(d) Indebtedness Cross-Default. The occurrence of any event specified
in any agreement, note, indenture or other document or instrument evidencing or
relating to any Indebtedness to which the Borrower or any other Loan Party is a
party (other than Indebtedness hereunder or under the other Loan Documents)
having a principal amount of $20,000,000 or more if the effect of such event is
to cause, or (with the giving of any notice or the lapse of time or satisfaction
of a condition or any combination of the foregoing) would permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in full
(whether by redemption, purchase, offer to purchase or otherwise) or otherwise
accelerated, prior to its stated maturity.
(e) Voluntary Bankruptcy Proceeding. The Borrower, any Subsidiary or
any other Loan Party shall: (i) commence a voluntary case under the Bankruptcy
Code of 1978, as amended or other federal bankruptcy laws (as now or hereafter
in effect); (ii) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts; (iii) consent to, or fail to
contest in a timely and appropriate manner, any petition filed against it in an
involuntary case under such bankruptcy laws or other laws or consent to any
proceeding or action described in the immediately following subsection; (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign; (v) admit in writing its inability to pay its debts as they
become due; (vi) make a general assignment for the benefit of creditors; (vii)
make a conveyance fraudulent as to creditors under any Applicable Law; or (viii)
take any corporate or partnership action for the purpose of effecting any of the
foregoing.
(f) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against the Borrower, any Subsidiary or any other Loan Party, in
any court of competent jurisdiction seeking: (i) relief under the Bankruptcy
Code of 1978, as amended or other federal bankruptcy laws (as now or hereafter
in effect) or under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts;
or (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of such Person, or of all or any substantial part of the assets, domestic
or foreign, of such Person; and such case or other proceeding shall continue and
shall not be discharged or dismissed for a period of thirty days.
(g) Judgment. A final judgment or order for the payment of money in
excess of $10,000,000 in the aggregate (exclusive of judgment amounts to the
extent covered by insurance where the Borrower has submitted a claim and the
insurer has acknowledged liability in respect of such judgment) or in excess of
$25,000,000 in the aggregate (regardless of insurance coverage) or that has a
Material Adverse Effect shall be rendered by a one or more Governmental
Authorities having jurisdiction and such judgment or order shall continue for a
period of thirty days without being stayed or dismissed through appropriate
appellate proceedings.
(h) Attachment. A warrant or writ of attachment or execution or similar
process shall be issued against any property of the Borrower, a Subsidiary or
any Loan Party which exceeds, individually or together with all other such
warrants, writs and processes, $10,000,000 in amount and such warrant, writ or
process shall not be discharged, vacated, stayed or bonded for a period of 30
days; provided, however, that in the event a bond has been issued in favor of
the claimant or other Person obtaining such attachment or writ, the issuer of
such bond shall execute a waiver or subordination agreement in form and
substance satisfactory to the Administrative Agent pursuant to which the issuer
of such bond subordinates its right of reimbursement, contribution or
subrogation to the Obligations and waives or subordinates any Lien it may have
on the assets of any Loan Party.
(i) Loan Documents. An Event of Default (as defined therein) shall
occur under any of the other Loan Documents.
(j) Change of Control/Change in Management. (i) If any Person (or two
or more Persons acting in concert) shall acquire "beneficial ownership" within
the meaning of Rule 13d-3 of the Securities and Exchange Act of 1934, as
amended, directly or indirectly, capital stock or securities of the Borrower
representing 20% or more of the aggregate voting power of all classes of capital
stock and securities of the Borrower entitled to vote for the election of
directors or (ii) during any twelve-month period (commencing both before and
after the Agreement Date), individuals who at the beginning of such period were
directors of the Borrower shall cease for any reason (other than death or mental
or physical disability) to constitute a majority of the board of directors of
the Borrower.
(k) Injunction. The Borrower or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any Governmental Authority
from conducting all or any material part of its business and such order
continues for more than thirty days.
(l) Default Under Hedging Obligations. The failure of the Borrower or
its Subsidiaries to pay or perform when due any Hedging Obligations and the
continuance of such failure for a period of ten days after receipt of a notice
of such failure from the Person to whom such Hedging Obligations are owed.
(m) Permitted Receivables Facility. There shall occur any event which
shall permit or require the Person(s) purchasing, or financing the purchase of,
the accounts receivable of the Borrower and/or its Subsidiaries under the
Permitted Receivables Facility to cease to purchase or finance such accounts
receivable, other than by reason of the occurrence of the stated expiry date of
the Permitted Receivables Facility; provided, that any notices or cure periods
that are conditions to the rights of such Persons to cease purchasing, or
financing the purchase of, such accounts receivable have been given or have
expired, as the case may be.
Section 9.2. Remedies.
Upon the occurrence of an Event of Default the following provisions
shall apply:
(a) Acceleration; Termination of Facilities.
(i) Automatic. Upon the occurrence of an Event of Default
specified in Sections 9.1.(e) or 9.1.(f), (A)(1) the principal of, and
all accrued interest on, the Loans and the Notes at the time
outstanding; and (2) all of the other Obligations of the Borrower,
including, but not limited to, the other amounts owed to the Lenders
and the Administrative Agent under this Agreement or any of the other
Loan Documents shall become immediately and automatically due and
payable by the Borrower without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived by the Borrower
and (B) the Commitments and the Revolving Credit Facility shall
immediately and automatically terminate.
(ii) Optional. If any other Event of Default shall have
occurred and be continuing, the Requisite Lenders may direct the
Administrative Agent to, and the Administrative Agent if so directed
shall: (A) declare (1) the principal of, and accrued interest on, the
Loans and the Notes at the time outstanding; and (2) all of the other
Obligations, including, but not limited to, the other amounts owed to
the Lenders and the Administrative Agent under this Agreement, the
Notes or any of the other Loan Documents to be forthwith due and
payable, whereupon the same shall immediately become due and payable
without presentment, demand, protest or other notice of any kind, all
of which are expressly waived by the Borrower and (B) terminate the
Commitments and the Revolving Credit Facility.
(b) Loan Documents. The Requisite Lenders may direct the Administrative
Agent to, and, subject to the terms hereof, the Administrative Agent if so
directed shall, exercise any and all of its rights under any and all of the
other Loan Documents.
(c) Applicable Law. The Administrative Agent may, at the direction of
the Requisite Lenders, exercise all other rights and remedies it may have under
any Applicable Law.
(d) Appointment of Receiver. To the extent permitted by Applicable Law,
the Lenders shall be entitled to the appointment of a receiver for the assets
and properties of the Borrower and its Subsidiaries, without notice of any kind
whatsoever and without regard to the adequacy of any security for the
Obligations or the solvency of any party bound for its payment, to take
possession of all or any portion of the Collateral and/or the business
operations of the Borrower and its Subsidiaries and to exercise such power as
the court shall confer upon such receiver.
Section 9.3. Rights Cumulative.
The rights and remedies of the Administrative Agent and the Lenders
under this Agreement and each of the other Loan Documents shall be cumulative
and not exclusive of any rights or remedies which any of them may otherwise have
under Applicable Law. In exercising their respective rights and remedies the
Administrative Agent and the Lenders may be selective and no failure or delay by
the Administrative Agent or any of the Lenders in exercising any right shall
operate as a waiver of it, nor shall any single or partial exercise of any power
or right preclude its other or further exercise or the exercise of any other
power or right.
If at any time after acceleration of the maturity of the Loans, the
Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Defaults (other than nonpayment of principal of and accrued interest
on the Loans and other Obligations due and payable solely by virtue of
acceleration) shall be remedied or waived, then by written notice to the
Borrower, the Requisite Lenders may elect, in the sole discretion of such
Requisite Lenders, to rescind and annul the acceleration and its consequences;
but such action shall not affect any subsequent Default or Event of Default or
impair any right or remedy consequent thereon. The provisions of the preceding
sentence are intended merely to bind the Lenders to a decision which may be made
at the election of the Requisite Lenders; they are not intended to benefit the
Borrower and do not give the Borrower the right to require the Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth
herein are satisfied.
ARTICLE 10. THE AGENT
Section 10.1. Authorization and Action.
Each Lender hereby irrevocably appoints and authorizes the
Administrative Agent to act as agent on such Lender's behalf under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Administrative Agent by the terms hereof and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The power of attorney set forth hereinabove shall be
irrevocable and coupled with an interest. The relationship between the
Administrative Agent and the Lenders shall be that of principal and agent only
and nothing herein shall be construed to deem the Administrative Agent a trustee
or fiduciary for any Lender nor to impose on the Administrative Agent duties or
obligations other than those expressly provided for herein. At the request of a
Lender, the Administrative Agent will forward to each Lender copies or, where
appropriate, originals of the documents delivered to the Administrative Agent
pursuant to this Agreement or the other Loan Documents. The Administrative Agent
will also furnish to any Lender, upon the request of such Lender, a copy of any
certificate or notice furnished to the Administrative Agent by the Borrower, any
Loan Party or any other Affiliate of the Borrower, pursuant to this Agreement or
any other Loan Document not already delivered to such Lender pursuant to the
terms of this Agreement or any such other Loan Document. As to any matters not
expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of any of the Obligations), the Administrative Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Requisite
Lenders, and such instructions shall be binding upon all Lenders and all holders
of any of the Obligations; provided, however, that, notwithstanding anything in
this Agreement to the contrary, the Administrative Agent shall not be required
to take any action which exposes the Administrative Agent to personal liability
or which is contrary to this Agreement or any other Loan Document or Applicable
Law or unless 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 any such action. Not in limitation of the foregoing, the
Administrative Agent shall not exercise any right or remedy it or the Lenders
may have under any Loan Document upon the occurrence of a Default or an Event of
Default unless the Requisite Lenders have so directed the Administrative Agent
to exercise such right or remedy.
Section 10.2. Administrative Agent's Reliance, Etc.
Neither the Administrative Agent nor any of its directors, officers,
agents, employees or counsel shall be liable for any action taken or omitted to
be taken by it or any of them under or in connection with this Agreement, except
for its or their own gross negligence or willful misconduct. The Administrative
Agent may employ agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
the Administrative Agent with reasonable care. Without limiting the generality
of the foregoing, the Administrative Agent: (a) may deem and treat the payee of
any Note as the holder thereof for all purposes until the Administrative Agent
receives and accepts an Assignment Agreement executed in accordance with Section
11.5.; (b) may consult with and rely upon legal counsel (including its own
counsel or counsel for the Borrower or any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender or any other Person and shall not be responsible to
any Lender or any other Person for any statements, warranties or representations
made by any Person in or in connection with this Agreement or any other Loan
Document; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any of
this Agreement or any other Loan Document or the satisfaction of any conditions
precedent under this Agreement or any Loan Document on the part of the Borrower
or other Persons or inspect the property, books or records of the Borrower or
any other Person; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other Loan Document, any other instrument or document
furnished pursuant thereto or any Collateral covered thereby or the perfection
or priority of any Lien in favor of the Administrative Agent on behalf of the
Lenders in any such Collateral; and (f) shall incur no liability under or in
respect of this Agreement or any other Loan Document by acting upon (and shall
be entitled to rely upon) any notice, consent, certificate, instrument, writing
or other communication (which may be by telephone or telecopy) believed by it to
be genuine and correct and signed, sent or given by or on behalf of the proper
Person or Persons.
Section 10.3. NationsBank as Lender.
NationsBank, as a Lender, shall have the same rights and powers under
this Agreement and any other Loan Document as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include NationsBank in
each case in its individual capacity. NationsBank and its Affiliates may each
accept deposits from, maintain deposits or credit balances for, invest in,
provide services to, lend money or otherwise provide credit to, act as trustee
under indentures of, serve as financial advisor to, and generally engage in any
kind of business with the Borrower, any Loan Party or any other Affiliate
thereof as if it were any other bank and without any duty to account therefor to
the other Lenders. Further, the Administrative Agent and any Affiliate may
accept fees and other consideration from the Borrower for services in connection
with this Agreement and otherwise without having to account for the same to the
other Lenders.
Section 10.4. Lender Credit Decision, Etc.
Each Lender expressly acknowledges and agrees that neither the Administrative
Agent, the Arranger, nor any of their respective officers, directors, employees,
agents, counsel, attorneys-in-fact or other affiliates has made any
representations or warranties as to the financial condition, operations,
creditworthiness, solvency or other information concerning the business or
affairs of the Borrower, any Loan Party, any Subsidiary or other Person to such
Lender and that no act by the Administrative Agent or the Arranger hereinafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any such representation or warranty by the Administrative Agent or
the Arranger to any Lender. Each Lender acknowledges that it has, independently
and without reliance upon the Administrative Agent, the Arranger, any other
Lender or counsel to the Administrative Agent, or any of their respective
officers, directors, employees and agents, and based on the financial statements
of the Borrower, the Subsidiaries, the other Loan Parties or any other Affiliate
thereof, and inquiries of such Persons, its independent due diligence of the
business and affairs of the Borrower, the other Loan Parties, the Subsidiaries
and other Persons, its review of the Loan Documents, the legal opinions required
to be delivered to it hereunder, the advice of its own counsel and such other
documents and information as it has deemed appropriate, made its own credit and
legal analysis and decision to enter into this Agreement and the transaction
contemplated hereby. Each Lender also acknowledges that it will, independently
and without reliance upon the Administrative Agent, the Arranger, any other
Lender or counsel to the Administrative Agent or any of their respective
officers, directors, employees and agents, and based on such review, advice,
documents and information as it shall deem appropriate at the time, continue to
make its own decisions in taking or not taking action under the Loan Documents.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall have no duty or responsibility to provide any Lender
with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrower, any
Loan Party or any other Affiliate thereof which may come into possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or other affiliates.
Section 10.5. Knowledge of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless the
Administrative Agent has received written notice from a Lender or the Borrower
specifying such Default or Event of Default and stating that such notice is a
"Notice of Default". In the event that the Administrative Agent receives such a
notice of the occurrence of a Default or Event of Default, the Administrative
Agent shall give prompt notice thereof to the Lenders. The Administrative Agent
shall (subject to Sections 10.1. and 10.2. hereof) take such action with respect
to such Default or Event of Default as shall reasonably be directed by the
Requisite Lenders; provided, that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as the Administrative Agent shall
deem advisable in the best interest of the Lenders.
Section 10.6. Indemnification.
Each Lender agrees to indemnify the Administrative Agent (to the extent
not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so) pro rata in accordance with such Lender's respective Credit
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees) or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by, or asserted against the Administrative
Agent (including by any Lender) in any way relating to or arising out of the
Loan Documents, the transactions contemplated thereby or any action taken or
omitted by the Administrative Agent under the Loan Documents; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements to the extent resulting from the Administrative Agent's gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including fees
of the counsel(s) of the Administrative Agent's own choosing) incurred by the
Administrative Agent in connection with the preparation, execution,
administration, or enforcement of, or legal advice with respect to the rights or
responsibilities of the parties under, the Loan Documents, any suit or action
brought by the Administrative Agent to enforce the terms of the Loan Documents
and/or collect any Obligations, any "lender liability" suit or claim brought
against the Administrative Agent and/or the Lenders, and any claim or suit
brought against the Administrative Agent and/or the Lenders arising under any
Environmental Laws, to the extent that the Administrative Agent is not
reimbursed for such expenses by the Borrower. Such out-of-pocket expenses
(including counsel fees) shall be advanced by the Lenders on the request of the
Administrative Agent notwithstanding any claim or assertion that the
Administrative Agent is not entitled to indemnification hereunder upon receipt
of an undertaking by the Administrative Agent that the Administrative Agent will
reimburse the Lenders if it is actually and finally determined by a court of
competent jurisdiction that the Administrative Agent is not so entitled to
indemnification. The agreements in this Section shall survive the payment of the
Loans and all other amounts payable hereunder or under the other Loan Documents
and the termination of this Agreement.
Section 10.7. Successor Administrative Agent.
The Administrative Agent may resign at any time as Administrative Agent
under the Loan Documents by giving notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Requisite Lenders shall have the right,
with the consent of the Borrower, such consent not to be unreasonably withheld,
to appoint a successor Administrative Agent. If no successor Administrative
Agent shall have been so appointed by the Requisite Lenders and the Borrower,
and shall have accepted such appointment, within thirty days after the
Administrative Agent's giving of notice of resignation, then the resigning
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized under the laws
of the United States of America having combined capital and unimpaired surplus
in excess of $100,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor agent, such successor agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the former Administrative Agent, and the former Administrative
Agent shall be discharged from its duties and obligations under the Loan
Documents. After any Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent under the Loan Documents.
ARTICLE 11. MISCELLANEOUS
Section 11.1. Notices.
Unless otherwise provided herein, all notices, requests and other
communications provided for hereunder shall be in writing (including without
limitation, by telecopy) and shall be mailed, telecopied or delivered as
follows:
If to the Borrower:
Shaw Industries, Inc.
Post Office Drawer 2128
Dalton, Georgia 30722-2128
Attention: Kenneth G. Jackson
Telecopy Number: (706) 275-1985
Telephone Number: (706) 275-1010
with a copy to:
Shaw Industries, Inc.
Mail Drop 061-18
Post Office Drawer 2128
Dalton, Georgia 30722-2128
Telecopy Number: (706) 275-1442
Telephone Number: (706) 275-1018
If to the Administrative Agent or NationsBank:
NationsBank, N.A.
600 Peachtree Street, 9th Floor
Atlanta, Georgia 30308
Attention: Kathryn W. Robinson
Telecopy Number: (404) 607-6467
Telephone Number: (404) 607-5887
with a copy to:
NationsBank, N.A.
Independence Center
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255-0001
Attention: Margaret Rhodes, Agency Services
Telecopy Number: (704) 386-9923
Telephone Number: (704) 386-2881
with a copy to:
Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Rick D. Blumen, Esq.
Telecopy number: (404) 881-4777
Telephone number: (404) 881-7895
If to a Lender, to such Lender's address or telecopy number, as
applicable, set forth on the then current Annex I attached hereto.
or as to each party at such other address as shall be designated by such party
in a written notice to the other parties delivered in compliance with this
Section. All such notices, requests and other communications shall be effective
(a) if mailed, when received; (b) if telecopied, when transmitted; or (c) if
hand delivered, when delivered. Notwithstanding the immediately preceding
sentence, all notices or communications to the Administrative Agent or any
Lender under Articles 2. shall be effective only when actually received.
Section 11.2. Expenses.
The Borrower agrees to pay on demand all costs and expenses of the
Administrative Agent in connection with the syndication, negotiation,
preparation, execution, delivery and administration (including out-of-pocket
costs and expenses incurred in connection with the assignment of Commitments
pursuant to Section 11.5.) of this Agreement, the Notes and each of the other
Loan Documents, whenever the same shall be executed and delivered, including the
fees and disbursements of counsel retained by the Administrative Agent (and the
cost of internal counsel). Further, the Borrower agrees to pay on demand all
future costs and expenses of the Administrative Agent and each of the Lenders
(including, without limitation, the fees and disbursements of counsel to the
Administrative Agent and the Lenders and the cost of their internal counsel) in
connection with: (a) the negotiation, preparation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent or any Lender relating
to this Agreement, the Notes or any of the other Loan Documents; (b) any
restructuring, refinancing or "workout" of the transactions contemplated by this
Agreement, the Notes and the other Loan Documents, or any material amendment to
the terms of this Agreement or any other Loan Document; (c) consulting with one
or more Persons engaged by the Administrative Agent, including appraisers,
accountants and lawyers, concerning or related to the servicing of this
Agreement or the nature, scope or value of any right or remedy of the
Administrative Agent or any of the Lenders hereunder, under the Notes or under
any of the other Loan Documents, including any review of factual matters in
connection therewith; (d) the collection or enforcement of the Obligations; (e)
prosecuting or defending any claim in any way arising out of, related to, or
connected with this Agreement, the Notes or any of the other Loan Documents; (f)
the exercise by the Administrative Agent or any Lender of any right or remedy
granted to it under this Agreement, the Notes or any of the other Loan
Documents; and (g) to the extent not already covered by any of the preceding
subsections, any bankruptcy or other proceeding of the type described in
Sections 9.1.(e) or 9.1.(f), and the fees and disbursements of counsel to the
Administrative Agent and any Lender incurred in connection with the
representation of the Administrative Agent or such Lender in any matter relating
to or arising out of any such proceeding including, without limitation (i) any
motion for relief from any stay or similar order, (ii) the negotiation,
preparation, execution and delivery of any document relating to the Obligations
and (iii) the negotiation and preparation of any debtor-in-possession financing
or any plan of reorganization of the Borrower, whether proposed by the Borrower,
the Lenders or any other Person, and whether such fees and expenses are incurred
prior to, during or after the commencement of such proceeding or the
confirmation or conclusion of any such proceeding.
Section 11.3. Setoff.
Subject to Section 3.13. and in addition to, and not in limitation of,
any rights now or hereafter granted under Applicable Law, the Administrative
Agent and each Lender is hereby authorized by the Borrower, at any time or from
time to time, without notice to the Borrower or to any other Person, any such
notice being hereby expressly waived, to set-off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by the Administrative Agent
or such Lender or any affiliate of such Lender, to or for the credit or the
account of the Borrower against and on account of any of the Obligations,
irrespective of whether or not the Requisite Lenders shall have declared any or
all of the Loans and all other Obligations to be due and payable as permitted by
Section 9.2., and although such obligations shall be contingent or unmatured.
Section 11.4. Litigation/Jurisdiction/Other Matters/Waivers.
EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY BETWEEN
OR AMONG THE BORROWER, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS WOULD BE
BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT. ACCORDINGLY, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE LENDERS, THE ADMINISTRATIVE
AGENT AND THE BORROWER HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE
BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE FEDERAL DISTRICT COURT OF THE NORTHERN
DISTRICT OF GEORGIA AND ANY STATE COURT LOCATED IN FULTON COUNTY, GEORGIA FOR
THE PURPOSE OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY HERETO WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH PROCEEDING IN ANY SUCH COURT OR THAT SUCH PROCEEDING WAS BROUGHT IN
AN INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME. THE CHOICE
OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING
OF ANY ACTION BY THE ADMINISTRATIVE AGENT OR ANY LENDER OR THE ENFORCEMENT BY
THE ADMINISTRATIVE AGENT OR ANY LENDER OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN
ANY OTHER APPROPRIATE JURISDICTION. THE FOREGOING WAIVERS HAVE BEEN MADE WITH
THE ADVICE OF COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES
THEREOF, AND SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER OBLIGATIONS
AND THE TERMINATION OF THIS AGREEMENT.
Section 11.5. Assignability and Participations.
(a) The Borrower shall not have the right to assign this Agreement or
any interest therein or obligations hereunder except with the prior written
consent of the Administrative Agent and all of the Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an affiliate of such
Lender except to the extent such transfer would result in increased costs to the
Borrower.
(c) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Note and its Commitment);
provided, however, that (i) each such assignment shall be to an Eligible
Assignee; (ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this Agreement, any
such partial assignment shall, unless the Borrower and the Administrative Agent
otherwise agree, be in an amount at least equal to $10,000,000 or an integral
multiple of $1,000,000 in excess thereof; (iii) each such assignment by a Lender
shall be of a constant (and not a varying) percentage of all of its rights and
obligations under this Agreement and the other Loan Documents; and (iv) each
such assignment shall be effected by means of an Assignment and Assumption
Agreement substantially in the form of Exhibit G (an "Assignment Agreement")
executed by the parties and delivered to the Administrative Agent for its
acceptance, together with any Note subject to such assignment and a processing
fee of $3,500. Upon the execution, delivery and acceptance of the Assignment
Agreement as provided therein, from and after the date specified as the
effective date in the Assignment Agreement (the "Acceptance Date"), (x) the
assignee thereunder shall be deemed to be a party hereto, and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, such assignee shall have the rights and obligations of a
"Lender" hereunder and (y) the assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights it may have
pursuant to Sections 3.2., 3.20., 11.2., and 11.9. which will survive such
assignment) and be released from its obligations under this Agreement (and, in
the case of an Assignment Agreement covering all of an assigning Lender's rights
and obligations under this Agreement, the Notes and the other Loan Documents,
such Lender shall cease to be a party hereto). If the assignee is not
incorporated under the laws of the United States of America or a State thereof,
it shall deliver to the Borrower and the Administrative Agent certification as
to exemption from deduction or withholding of Taxes in accordance with Section
3.20.
(d) The Administrative Agent shall maintain at the Principal Office a
copy of each Assignment Agreement delivered to and accepted by it and a register
for the recording of the names and addresses of the Lenders and the Commitments
of, and principal amounts of the Loans owing to, each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Administrative
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
and copies of each Assignment Agreement shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice to the Administrative Agent.
(e) Upon its receipt of an Assignment Agreement executed by an
assigning Lender, together with the Syndicate Note subject to such assignment
(the "Surrendered Note"), the Administrative Agent shall, if such Assignment
Agreement has been completed and the Administrative Agent receives the
processing and recording fee described in the immediately preceding subsection
(c), (i) accept such Assignment Agreement, (ii) record the information contained
therein in the Register, (iii) give prompt notice thereof to the parties thereto
and (iv) revise the information set forth on Annex I to reflect the effect of
such Assignment Agreement and promptly provide a copy of such revised Annex I to
the Borrower. Failure of the Administrative Agent to so distribute a revised
Annex I shall not relieve or modify the obligations of the Borrower, the Loan
Parties or the Lenders owing hereunder. Within five Business Days after its
receipt of such notice, the Borrower shall acknowledge such Assignment Agreement
and shall execute and deliver to the Administrative Agent in exchange for the
Surrendered Note, a new Syndicate Note or Notes to the order of the assignee in
an amount equal to the Commitment assumed by it pursuant to such Assignment
Agreement and, if the assigning Lender has retained a Commitment hereunder, a
new Syndicate Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall
re-evidence the indebtedness outstanding under the old Note or Notes and shall
be in an aggregate principal amount equal to the aggregate principal amount of
such Surrendered Note or Surrendered Notes, shall be dated the Acceptance Date
and shall otherwise be in substantially the form, of the Note or Notes subject
to such assignments. The assignment by a Lender of a Commitment or portion
thereof to another Person and the execution and delivery of a new Note or Notes
shall not constitute a novation of the indebtedness evidenced by the Surrendered
Note or Surrendered Notes and incurred in connection with such assigned
Commitment.
(f) Each Lender may sell participations (without the consent of the
Administrative Agent, the Borrower or any other Lender) to one or more Persons
(each a "Participant") in all or a portion of its rights, obligations or rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Loans owing to it and the Note or Notes held by
it); provided, however, that: (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment hereunder) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Participant shall be
entitled to the benefit of the yield protection provisions contained in Sections
3.16. and 3.20. and the right of set-off contained in Section 11.3.; (iv) the
Borrower shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to its Loans and its Note(s) and to approve any amendment,
modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing the amount of principal of or
the rate at which interest is payable on such Loans or Note(s), extending any
scheduled principal payment date or date fixed for the payment of interest on
such Loans or Note(s) or extending its Commitment).
(g) In connection with the efforts of any Lender to assign its rights
or obligations or to participate interests, such Lender may disclose any
information in its possession regarding the Borrower or any Loan Party.
(h) In addition to the other assignments and participations permitted
under the foregoing provisions of this Section, any Lender may assign and pledge
all or any portion of its Loans and its Note(s) to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank, and such Loans and Note(s) shall be fully
transferable as provided therein. No such assignment shall release the assigning
Lender from its obligations hereunder.
Section 11.6. Amendments.
Except as otherwise expressly provided in this Agreement, any consent
or approval required or permitted by this Agreement or in any Loan Document to
be given by the Lenders may be given, and any term of this Agreement or of any
other Loan Document may be amended, and the performance or observance by the
Borrower or any Loan Party or Subsidiary of any terms of this Agreement or such
other Loan Document or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Requisite Lenders
(and, in the case of an amendment to any Loan Document, the written consent of
the Borrower). Notwithstanding the foregoing, no amendment, waiver or consent
shall, unless in writing, and signed by all of the Lenders, do any of the
following: (i) increase the Commitments of the Lenders or subject the Lenders to
any additional obligations; (ii) reduce the principal of, or interest rates that
have accrued or that will be charged on the outstanding principal amount of, any
Loans or other Obligations; (iii) reduce the amount of any Fees payable
hereunder; (iv) postpone any date fixed to any payment of any principal of,
interest on, or Fees with respect to, any Loans or any other Obligations; (v)
change the Credit Percentages (or any minimum requirement necessary for the
Lenders or Requisite Lenders to take action hereunder); or (vi) amend this
Section or amend the definitions of the terms used in this Agreement or the
other Loan Documents insofar as such definitions affect the substance of this
Section. Further, no amendment, waiver or consent unless in writing and signed
by the Administrative Agent, in addition to the Lenders required hereinabove to
take such action, shall affect the rights or duties of the Administrative Agent
under this Agreement or any of the other Loan Documents. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon and any amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose set forth therein. No course of
dealing or delay or omission on the part of any Lender or the Administrative
Agent in exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. Except as otherwise explicitly provided for herein or in
any other Loan Document, no notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances. Notwithstanding any of the foregoing to the contrary, the consent
of the Borrower shall not be required for any amendment, modification or waiver
of the provisions of Article 10. (other than the provisions of Section 10.7.).
In addition, the Borrower and the Lenders hereby authorize the Administrative
Agent to modify this Agreement by unilaterally amending or supplementing Annex I
from time to time in the manner requested by the Borrower, the Administrative
Agent or any Lender in order to reflect any assignments or transfers of the
Commitments as provided for hereunder; provided, however, that the
Administrative Agent shall promptly deliver a copy of any such modification to
the Borrower and each Lender as requested by such party.
Section 11.7. Nonliability of Administrative Agent, Documentation
Agent, Arranger and Lenders.
The relationship between the Borrower and the Lenders shall be solely
that of borrower and lender. Neither the Administrative Agent, the Arranger, the
Documentation Agent nor any Lender shall have any fiduciary responsibilities to
the Borrower. Neither the Administrative Agent, the Arranger, the Documentation
Agent nor any Lender undertakes any responsibility to the Borrower to review or
inform the Borrower of any matter in connection with any phase of the Borrower's
business or operations. Without limiting any of the provisions in this Section
and/or Sections 11.17. and 11.18., the parties hereto acknowledge and agree that
the Arranger and the Documentation Agent shall have no obligations, duties or
liabilities under this Agreement or the other Loan Documents.
Section 11.8. Information.
Except as otherwise provided by Applicable Law, the Administrative
Agent and each Lender shall utilize all non-public information obtained pursuant
to the requirements of this Agreement which has been identified as confidential
or proprietary by the Borrower in accordance with customary procedure of the
Administrative Agent or such Lender, as the case may be, for handling
confidential information of this nature and in accordance with safe and sound
banking practices but in any event the Administrative Agent and the Lenders may
make disclosure: (a) to any of their respective affiliates (provided such
affiliates shall agree to keep such information confidential in accordance with
the terms of this Section); (b) as reasonably required by any bona fide
transferee or participant in connection with the contemplated transfer of any
Commitment or participations therein as permitted hereunder; (c) as required by
any Governmental Authority or representative thereof or pursuant to legal
process; (d) to the Administrative Agent's or such Lender's independent auditors
and other professional advisors (provided they shall be notified of the
confidential nature of the information); and (e) after the happening and during
the continuance of an Event of Default, to any other Person, in connection with
the exercise of the Lender's rights hereunder or under any of the other Loan
Documents.
Section 11.9. Indemnification.
(a) The Borrower shall and hereby agrees to indemnify, defend and hold
harmless the Administrative Agent, the Arranger, the Documentation Agent, any
affiliate of the foregoing Persons and each of the Lenders and their respective
directors, officers, shareholders, agents, employees and counsel (each referred
to herein as an "Indemnified Party") from and against any and all losses,
claims, damages, liabilities, deficiencies, judgments, costs and expenses of
every kind and nature (including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any litigation, investigation, claim or proceeding or any advice
rendered in connection therewith) (the foregoing items referred to herein as
"Claims and Expenses") that may be incurred by or asserted or awarded against an
Indemnified Party, in each case arising out of or by reason of any suit, cause
of action, claim, arbitration, investigation or settlement, consent decree or
other proceeding (the foregoing referred to herein as an "Indemnity Proceeding")
which arise out of, or are in any way related directly or indirectly to: (i)
this Agreement or any other Loan Document or the transactions contemplated
thereby; (ii) the making of any Loans hereunder; (iii) any actual or proposed
use by the Borrower of the proceeds of the Loans; (iv) the Administrative
Agent's, the Documentation Agent's or any Lender's entering into this Agreement;
(v) the fact that the Administrative Agent and the Lenders have established the
credit facility evidenced hereby in favor of the Borrower and the Subsidiaries;
(vi) the fact that the Administrative Agent and the Lenders are creditors of the
Borrower and have or are alleged to have information regarding the financial
condition, strategic plans or business operations of the Borrower and the
Subsidiaries; (vii) the fact that the Administrative Agent and the Lenders are
material creditors of the Borrower and the Subsidiaries and are alleged to
influence directly or indirectly the business decisions or affairs of the
Borrower and the Subsidiaries or their financial condition; (viii) the exercise
of any right or remedy the Administrative Agent or the Lenders may have under
this Agreement or the other Loan Documents including, but not limited to, the
foreclosure upon, or seizure of, any Collateral or the exercise of any other
rights of a secured party; provided, however, that the Borrower shall not be
obligated to indemnify any Indemnified Party for any acts or omissions of such
Indemnified Party in connection with matters described in this subparagraph
(viii) that are found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct; (ix) any violation or non-compliance by the
Borrower or any Subsidiary of any Applicable Law (including any Environmental
Law) including, but not limited to, any Indemnity Proceeding commenced by the
Internal Revenue Service or state taxing authority or any Indemnity Proceeding
commenced by any Governmental Authority or other Person under any Environmental
Law including any Indemnity Proceeding commenced by a Governmental Authority or
other Person seeking remedial or other action to cause the Borrower or its
Subsidiaries (or its respective properties) (or the Administrative Agent and/or
the Lenders as successors to the Borrower) to be in compliance with such
Environmental Laws.
(b) This indemnification shall apply to all Indemnity Proceedings
arising out of, or related to, the foregoing whether or not an Indemnified Party
is a named party in such Indemnity Proceeding. In this connection, this
indemnification shall cover all costs and expenses of any Indemnified Party in
connection with any deposition of any Indemnified Party or compliance with any
subpoena (including any subpoena requesting the production of documents). This
indemnification shall, among other things, apply to any Indemnity Proceeding
commenced by the Borrower, other creditors of the Borrower or any Subsidiary,
any shareholder or director of the Borrower or any Subsidiary (whether such
shareholder(s) or director(s) are prosecuting such Indemnity Proceeding in their
individual capacity or derivatively on behalf of the Borrower), any account
debtor of the Borrower or any Subsidiary or by any Governmental Authority or any
other Person and whether or not the transactions contemplated hereby are
consummated.
(c) This indemnification shall apply to any Indemnity Proceeding
arising during the pendency of any bankruptcy proceeding filed by or against the
Borrower and/or any Subsidiary.
(d) All out-of-pocket fees and expenses of, and all amounts paid to
third-persons by, an Indemnified Party shall be advanced by the Borrower at the
request of such Indemnified Party notwithstanding any claim or assertion by the
Borrower that such Indemnified Party is not entitled to indemnification
hereunder upon receipt of an undertaking by such Indemnified Party that such
Indemnified Party will reimburse the Borrower if it is actually and finally
determined by a court of competent jurisdiction that such Indemnified Party is
not so entitled to indemnification hereunder.
(e) An Indemnified Party may engage its own counsel and conduct its own
investigation and defense of, and may formulate its own strategy with respect
to, any Indemnified Proceeding covered by this Section and, as provided above,
all costs and expenses incurred by the Indemnified Party shall be reimbursed by
the Borrower; provided, however, that the Borrower shall not be liable for the
fees and disbursements of more than one separate firm for all Indemnified
Parties hereunder in connection with any one Indemnity Proceeding or separate
but substantially similar Indemnity Proceeding(s) in the same jurisdiction;
provided further, however, that if (i) the engagement of a single counsel would
present a conflict of interest which would prevent such counsel from effectively
defending such action on behalf of the Indemnified Parties or (ii) Indemnified
Party reasonably concludes that there may be legal defenses available to it that
are different from or in addition to those available to any other Indemnified
Party, then the Indemnified Parties or any one of them may employ separate
counsel to represent or defend them or it in any such action or proceeding and
the Borrower shall pay the fees and disbursements of such counsel. No action
taken by legal counsel chosen by an Indemnified Party in investigating or
defending against any such Indemnified Proceeding shall vitiate or in any way
impair the obligations and duties of the Borrower hereunder to indemnify and
hold harmless each such Indemnified Party; provided, however, that (i) if the
Borrower is required to indemnify an Indemnified Party pursuant hereto and (ii)
the Borrower has provided evidence reasonably satisfactory to such Indemnified
Party that the Borrower has the financial wherewithal to reimburse such
Indemnified Party for any amount paid by such Indemnified Party with respect to
such Indemnified Proceeding, such Indemnified Party shall not settle or
compromise any such Indemnified Proceeding without the prior written consent of
the Borrower (which consent shall not be unreasonably withheld or delayed).
(f) If and to the extent that the obligations of the Borrower hereunder
are unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under Applicable Law.
(g) The Borrower's obligations hereunder shall survive any termination
of this Agreement and the other Loan Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their obligations set forth in this Agreement.
Section 11.10. Survival.
Notwithstanding any termination of this Agreement, or of the other Loan
Documents, the indemnities and other reimbursement obligations to which the
Administrative Agent, the Documentation Agent and the Lenders are entitled under
the provisions of Sections 3.2., 3.20., 11.2., and 11.9. and any other provision
of this Agreement and the other Loan Documents, the waivers of jury trial and
submissions to jurisdiction contained in Section 11.4., shall continue in full
force and effect and shall protect the Administrative Agent, the Documentation
Agent and the Lenders against events arising after such termination as well as
before.
Section 11.11. Titles and Captions.
Titles and captions of Articles, Sections, subsections and clauses in
this Agreement are for convenience only, and neither limit nor amplify the
provisions of this Agreement. Except as expressly provided for herein
(including, without limitation, the indemnities and limitations on liability set
forth in Sections 11.9. and 11.18.), neither the Documentation Agent nor the
Arranger shall have any right or benefit under this Agreement or the other Loan
Documents.
Section 11.12. Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 11.13. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF GEORGIA.
Section 11.14. Counterparts.
This Agreement and any amendments, waivers, consents or supplements may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
Section 11.15. Obligations with Respect to Loan Parties.
The obligations of the Borrower to direct or prohibit the taking of
certain actions by the other Loan Parties as specified herein shall be absolute
and not subject to any defense the Borrower may have that the Borrower does not
control such Loan Parties.
Section 11.16. Independent Nature of Lenders' Rights.
Nothing contained in any Loan Document and no action taken by
Administrative Agent or any Lender or the Borrower or any Loan Party pursuant
hereto or thereto shall be deemed to constitute Lenders and/or the
Administrative Agent and/or any Loan Party to be a partnership, an association,
a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent debt, and each
Lender shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
Section 11.17. No Fiduciary Relationship.
No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty (a) by the Administrative Agent or any Lender to the Borrower or
any other Loan Party or (b) by the Administrative Agent to any Lender.
Section 11.18. Limitation of Liability.
Neither the Administrative Agent, the Documentation Agent, the
Arranger, any Lender, any affiliate, officer, director, employee, attorney, or
agent of such Persons shall have any liability with respect to, and the Borrower
hereby waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental, or consequential damages suffered or incurred
by the Borrower in connection with, arising out of, or in any way related to,
this Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The Borrower
hereby waives, releases, and agrees not to sue the Administrative Agent, the
Documentation Agent, the Arranger, or any Lender or any of their respective
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or financed hereby.
Section 11.19. Entire Agreement.
This Agreement, the Notes, and the other Loan Documents referred to
herein embody the final, entire agreement among the parties hereto and supersede
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto.
Section 11.20. Construction.
The Administrative Agent, the Borrower and each Lender acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan Documents
with its legal counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by the Administrative Agent, the
Borrower and each Lender.
[Signatures on Next Page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their authorized officers all as of the day and year
first above written.
THE BORROWER:
SHAW INDUSTRIES, INC.
By: /s/
Title:
THE ADMINISTRATIVE AGENT:
NATIONSBANK, N.A.
By: /s/
Title:
THE DOCUMENTATION AGENT:
SUNTRUST BANK, ATLANTA
By: /s/
Title:
By: /s/
Title:
<PAGE>
[Signature Page to Shaw Credit Agreement dated
as of October 28, 1998]
THE LENDERS:
NATIONSBANK, N.A.
By: /s/
Title:
SUNTRUST BANK, ATLANTA
By: /s/
Title:
By: /s/
Title:
FIRST UNION NATIONAL BANK
By: /s/
Title:
WACHOVIA BANK, N.A.
By: /s/
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/
Title:
<PAGE>
C-3
ANNEX I TO CREDIT AGREEMENT
LIST OF LENDERS, COMMITMENTS, CREDIT
PERCENTAGES AND LENDING OFFICES
Administrative Agent:
NationsBank, N.A.
Independence Center
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255-0001
Attention: Laura Schultz, Agency Services
Telecopy Number: (704) 386-9923
Telephone Number: (704) 386-2881
Wiring Instructions for Disbursements and Payments of Loans:
NationsBank, N.A.
Atlanta, Georgia
ABA #061000052
Account #136621-01019970
Attn: CCS/Agency Services Unit
Reference: Shaw Industries, Inc.
Lenders:
NationsBank, N.A.
Lending Office (All Types of Loans): Initial Commitment Amount:
600 Peachtree Street, 9th Floor $30,000,000
Atlanta, Georgia 30308
Attn: Kathryn W. Robinson Initial Credit Percentage: 20%
Telecopier: (404) 607-6467
Telephone: (404) 607-5887
Wiring Instructions: Same as above
<PAGE>
SunTrust Bank, Atlanta
Lending Office (All Types of Loans): Initial Commitment Amount:
303 Peachtree Street $30,000,000
24th Floor
Atlanta, Georgia 30308 Initial Credit Percentage: 20%
Attn: Laura Kahn
Telecopier: (404) 575-2594
Telephone: (404) 588-7705
Wiring Instructions:
SunTrust Bank, Atlanta, Georgia
ABA #061000104
Account #9088000112 - Wire Clearing
Attn: Corporate Bank Operations Support,
Patricia Ransom
Reference: Shaw Industries, Inc.
First Union National Bank
Lending Office (All Types of Loans): Initial Commitment Amount:
301 South College Street, DC-5 $30,000,000
NC0737
Charlotte, North Carolina 28288-0737 Initial Credit Percentage: 20%
Attn: David Silander
Telecopier: (704) 374-4793
Telephone: (704) 383-5124
Wiring Instructions:
First Union National Bank
ABA #053-000-219
Account #465906-0001805 General Ledger
Reference: Shaw Industries, Inc.
Attention: Callie Moses
<PAGE>
Wachovia Bank, N.A.
Lending Office (All Types of Loans): Initial Commitment Amount:
191 Peachtree Street, 30th Floor $30,000,000
Atlanta, Georgia 30303
Attn: Brad Marcus Initial Credit Percentage: 20%
Telecopier: (404) 332-5016
Telephone: (404) 332-6483
Wiring Instructions:
Wachovia Bank, N.A.
ABA #06100010
Account #18-171-498
Attention: Jay Corbett
Telecopier: (404) 332-6408
The First National Bank of Chicago
Lending Office (All Types of Loans): Initial Commitment Amount:
One First National Plaza $30,000,000
Suite 0324
Chicago, Illinois 60670 Initial Credit Percentage: 20%
Attn: Judy Cornwell
Telecopier: (312) 732-5296
Telephone: (312) 732-6274
Wiring Instructions:
The First National Bank of Chicago
ABA #071000013
A/C # 4811-5286-00000
A/C Name: Loan Processing DP
Reference: Shaw Industries, Inc.
Attn: Kathy Murphy
Total Commitments = $150,000,000
<PAGE>
E-2
EXHIBIT D
FORM OF SYNDICATE NOTE
$________________ October __, 1998
FOR VALUE RECEIVED, the undersigned, SHAW INDUSTRIES, INC., a
corporation organized under the laws of the State of Georgia (the "Borrower"),
promises to pay to the order of ___________________ [Payee Lender] (the
"Lender") in c/o NationsBank, N.A., as Administrative Agent, 101 North Tryon
Street, 15th Floor, Charlotte, North Carolina 28255-0001, Attention: Margaret
Rhodes, Agency Services, in lawful money of the United States of America and in
immediately available funds, the principal amount of ________________ Dollars
($_____________), or such lesser principal amount, as may then constitute the
unpaid aggregate principal amount of the Syndicate Loans made by the Lender to
the Borrower pursuant to the Credit Agreement (as defined below) on the
Termination Date.
The Borrower further agrees to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time on the
dates and at the rates and at the times specified in Section 3.5. of the Credit
Agreement.
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is one of the Syndicate Notes referred to in that certain
Credit Agreement dated as of October 28, 1998 (as it may be amended, modified,
restated or supplemented from time to time, the "Credit Agreement") among the
Borrower, the Lenders named therein (the "Lenders"), NationsBank, N.A., as
Administrative Agent (the "Administrative Agent") and SunTrust Bank, Atlanta, as
Documentation Agent, and is subject to, and entitled to, all provisions and
benefits thereof (including all indemnities contained therein) and is subject to
optional and mandatory prepayment in whole or in part as provided therein.
Capitalized terms used herein and not defined herein shall have the respective
meanings given to such terms in the Credit Agreement. The Credit Agreement,
among other things, provides [after giving effect to the Assignment and
Assumption Agreement executed by the Lender and [name of assigning Lender] as of
date hereof]1 for the making of Syndicate Loans by the Lender to Borrower from
time to time in an aggregate amount not to exceed at any time outstanding the
U.S. Dollar amount first above mentioned.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement which have not been waived by the
Administrative Agent at the direction of the Requisite Lenders, the
Administrative Agent shall, upon the written request of the Requisite Lenders,
and by delivery of written notice to the Borrower from the Administrative Agent,
take any and all of the following actions, without prejudice to the rights of
the Administrative Agent, the Lenders or any holder of this Note to enforce its
claims against Borrower: (a) declare all Obligations (including all amounts
outstanding hereunder) to be immediately due and payable (except with respect to
any Event of Default set forth in Section 9.1.(e) or (f) of the Credit
Agreement, in which case all Obligations due hereunder shall automatically
become immediately due and payable without the necessity of any notice or other
demand) without presentment, demand, protest or any other action or obligation
of the Administrative Agent or the Lenders; (b) immediately terminate the
Revolving Credit Facility and the obligation of the Lenders to make Syndicate
Loans under the Revolving Credit Facility (and, in the case of an Event of
Default set forth in Section 9.1(e) or (f) of the Credit Agreement, such
termination shall occur automatically).
The holder hereof shall be entitled to the benefits of the Credit
Agreement and to the other Loan Documents (to the extent and with the effect as
therein provided) [and this Note re-evidences the indebtedness outstanding on
the date hereof with respect to the Syndicate Loans made on the date hereof
which indebtedness has been assigned to the Lender pursuant to Section 11.5. of
the Credit Agreement.]2
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS PROMISSORY NOTE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORGIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
THE PROVISIONS OF SECTIONS 11.4. AND 11.9. OF THE CREDIT AGREEMENT ARE
HEREBY EXPRESSLY INCORPORATED BY REFERENCE HEREIN.
Attest: SHAW INDUSTRIES, INC.
By: _________ By:
Title:_______ Title:
(CORPORATE SEAL)
<PAGE>
F-9
EXHIBIT F
FORM OF GUARANTY
THIS GUARANTY dated as of ______________, ____ executed and delivered
by ______________________________ (the "Guarantor") in favor of NationsBank,
N.A., as Administrative Agent (the "Administrative Agent") for the Lenders (the
"Lenders") under the Credit Agreement (as hereinafter defined) (the
Administrative Agent and the Lenders being collectively referred to herein as
the "Guaranteed Parties").
WHEREAS, pursuant to that certain Credit Agreement dated as of October
28, 1998 (as the same may be amended, modified, supplemented or extended from
time to time, the "Credit Agreement"; terms used herein and not defined herein
have their respective defined meanings as set forth in the Credit Agreement) by
and among Shaw Industries, Inc. (the "Borrower"), the Lenders named therein,
NationsBank, N.A., as Administrative Agent and SunTrust Bank, Atlanta, as
Documentation Agent, the Lenders have made available to the Borrower certain
financial accommodations on the terms and conditions set forth in the Credit
Agreement;
WHEREAS, the Guarantor is a [Material Subsidiary][a Subsidiary
comprising the Material Subsidiary Group] of the Borrower and is required,
pursuant to Section 6.9 of the Credit Agreement, to execute and deliver this
Guaranty;
WHEREAS, as a [Material Subsidiary ][a Subsidiary comprising the
Material Subsidiary Group] of the Borrower, the Guarantor has and will benefit
from the financial accommodations provided by the Administrative Agent and the
Lenders to the Borrower under the Credit Agreement as such financial
accommodations will enable the Borrower to provide the Guarantor with sufficient
capital to operate the Guarantor's operations; and
WHEREAS, the Guarantor is therefore willing to guarantee the payment in
full of the principal of, and interest on, all Guaranteed Obligations (as
defined below) owing by the Borrower to the Administrative Agent and the other
Guaranteed Parties under the Credit Agreement and otherwise.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
Section 1. Guaranty. The Guarantor hereby, irrevocably and
unconditionally, guarantees the due and punctual payment and performance when
due, whether at stated maturity, by acceleration or otherwise, of the following
(the following collectively referred to as the "Guaranteed Obligations"): (a)
all Obligations (as defined in the Credit Agreement); and (b) any and all
extensions, renewals, modifications, amendments or substitutions of the
foregoing.
Section 2. Guaranty of Payment and Not of Collection. This Guaranty is
a guaranty of payment, and not of collection, and a debt of the Guarantor for
its own account. Accordingly, the Guaranteed Parties shall not be obligated or
required before enforcing this Guaranty against the Guarantor: (a) to pursue any
right or remedy any Guaranteed Party may have against the Borrower, any Loan
Party or any other guarantor of the Guaranteed Obligations or commence any suit
or other proceeding against the Borrower, any Loan Party or any other guarantor
of the Guaranteed Obligations in any court or other tribunal; (b) to make any
claim in a liquidation or bankruptcy of the Borrower, any Loan Party or any
other guarantor of the Guaranteed Obligations; or (c) to make demand of the
Borrower or any other guarantor of the Guaranteed Obligations or to enforce or
seek to enforce or realize upon any collateral security held by the
Administrative Agent or any Lender which may secure any of the Guaranteed
Obligations. In this connection, the Guarantor hereby waives the right of the
Guarantor to require any holder of the Guaranteed Obligations to take action
against the Borrower as provided in Official Code of Georgia Annotated
ss.10-7-24.
Section 3. Guaranty Absolute. The Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Guaranteed Party with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute and unconditional in accordance
with its terms and shall remain in full force and effect without regard to, and
shall not be released, suspended, discharged, terminated or otherwise affected
by, any circumstance or occurrence whatsoever, including, without limitation,
the following (whether or not the Guarantor consents thereto or has notice
thereof):
(a)______(i) any change in the amount, interest rate or due date or
other term of any Guaranteed Obligations, or (ii) any change in the time, place
or manner of payment of all or any portion of the Guaranteed Obligations, or
(iii) any amendment or waiver of, or consent to the departure from or other
indulgence with respect to, the Credit Agreement, any other Loan Document, or
any other document or instrument evidencing any Guaranteed Obligations, or (iv)
any waiver, renewal, extension, addition, or supplement to, or deletion from, or
any other action or inaction under or in respect of, the Credit Agreement, the
other Loan Documents, or any other documents, instruments or agreements relating
to the Guaranteed Obligations or any other instrument or agreement referred to
therein or evidencing any Guaranteed Obligations or any assignment or transfer
of any of the foregoing;
(b)______any lack of validity or enforceability of the Credit
Agreement, the other Loan Documents, or any other document, instrument or
agreement referred to therein or evidencing any Guaranteed Obligations or any
assignment or transfer of any of the foregoing;
(c)______any furnishing to the Guaranteed Parties of any security for
the Guaranteed Obligations, or any sale, exchange, release or surrender of, or
realization on, any collateral security for the Guaranteed Obligations;
(d)______any settlement or compromise of any of the Guaranteed
Obligations, any security therefor, or any liability of any other party with
respect to the Guaranteed Obligations, or any subordination of the payment of
the Guaranteed Obligations to the payment of any other liability of the
Borrower;
(e)______any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Guarantor or the Borrower or any other Loan Party or any other Person, or any
action taken with respect to this Guaranty by any trustee or receiver, or by any
court, in any such proceeding;
(f)______any nonperfection of any security interest or lien on any
collateral securing any of the Guaranteed Obligations;
(g)______any application of sums paid by the Borrower or any other
Person with respect to the liabilities of the Borrower to the Guaranteed
Parties, regardless of what liabilities of the Borrower remain unpaid;
(h)______any defect, limitation or insufficiency in the borrowing
powers of the Borrower or in the exercise thereof;
(i)______any act or failure to act by any Guaranteed Party which may
adversely affect the Guarantor's subrogation rights, if any, against the
Borrower to recover payments made under this Guaranty; or
(k)______any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Guarantor.
Section 4. Action with Respect to Guaranteed Obligations. The
Administrative Agent or any other Guaranteed Party may, at any time and from
time to time, without the consent of, or notice to, the Guarantor, and without
discharging the Guarantor from its obligations hereunder take any and all
actions described in Section 3 above and may otherwise: (a) amend, modify, alter
or supplement the terms of any of the Guaranteed Obligations, including, but not
limited to, extending or shortening the time of payment of any of the Guaranteed
Obligations or increasing, decreasing or otherwise changing the interest rate or
fees that may accrue on any of the Guaranteed Obligations; (b) amend, modify,
alter or supplement the Credit Agreement or any other Loan Document or any other
document evidencing any Guaranteed Obligations; (c) sell, exchange, release or
otherwise deal with all, or any part, of any Collateral; (d) release any Person
liable in any manner for the payment or collection of the Guaranteed
Obligations; (e) exercise, or refrain from exercising, any rights against the
Borrower or any other Person (including, without limitation, any other guarantor
of the Guaranteed Obligations); and (f) apply any sum, by whomsoever paid or
however realized, to the Guaranteed Obligations in such order as such Guaranteed
Party shall elect.
Section 5. Waiver. The Guarantor, to the fullest extent permitted by
law, hereby waives notice of acceptance hereof or any presentment, demand,
protest or notice of any kind, and any other act or thing, or omission or delay
to do any other act or thing, which in any manner or to any extent might vary
the risk of the Guarantor or which otherwise might operate to discharge the
Guarantor from its obligations hereunder.
Section 6. Inability to Accelerate Loan. If any Guaranteed Party or the
holder of any of the Guaranteed Obligations is prevented under Applicable Law or
otherwise from demanding or accelerating payment thereof by reason of any
automatic stay or otherwise, the Guaranteed Party or such holder shall be
entitled to receive from the Guarantor, upon demand therefor, the sums which
otherwise would have been due had such demand or acceleration occurred.
Section 7. Reinstatement of Guaranteed Obligations. If claim is ever
made upon any Guaranteed Party for repayment or recovery of any amount or
amounts received in payment or on account of any of the Guaranteed Obligations,
and any Guaranteed Party repays all or part of said amount by reason of (a) any
judgment, decree or order of any court or administrative body having
jurisdiction over the Guaranteed Party or any of its property, or (b) any
settlement or compromise of any such claim effected by the Guaranteed Party with
any such claimant (including the Borrower or a trustee in bankruptcy for the
Borrower), then, and in such event, the Guarantor agrees that any such judgment,
decree, order, settlement or compromise shall be binding on it, notwithstanding
any revocation hereof or the cancellation of the Credit Agreement, the other
Loan Documents, or any other instrument evidencing any liability of the
Borrower, and the Guarantor shall be and remain liable to the Guaranteed Party
for the amounts so repaid or recovered to the same extent as if such amount had
never originally been paid to the Guaranteed Party.
Section 8. Waiver of Subrogation. The Guarantor hereby forever waives
and releases any and all claims or causes of action the Guarantor may have
against the Borrower or any other Loan Party or any other Person arising by
reason of any payment by the Guarantor to any other Guaranteed Party pursuant to
this Guaranty, whether such claim or cause of action arises by way of any
common-law right of subrogation, by way of any other applicable law or statutes,
or by way of any written or oral agreement between the Guarantor and the
Borrower or Loan Party or Person. This waiver of subrogation is for the benefit
of the Borrower and the Guaranteed Parties and the foregoing waiver may not be
revoked by the Guarantor without the prior, written consent of the
Administrative Agent and the Requisite Lenders on behalf of the other Guaranteed
Parties.
Section 9. Payments Free and Clear. All sums payable by the Guarantor
hereunder, whether of principal, interest, fees, expenses, premiums or
otherwise, shall be paid in full, without set-off or counterclaim or any
deduction or withholding whatsoever (including any withholding tax or liability
imposed by any governmental agency or authority, wherever located, or any
statute, rule or regulation promulgated thereby), and in the event that the
Guarantor is required by such applicable law or by such governmental agency or
authority to make any such deduction or withholding, the Guarantor shall pay to
the Guaranteed Parties such additional amount as will result in the receipt by
the Administrative Agent on behalf of the Guaranteed Parties of the full amount
payable hereunder had such deduction or withholding not occurred or been
required.
Section 10. Set-off. The Guarantor authorizes the Administrative Agent
and the other Guaranteed Parties at any time and from time to time, without
notice to the Guarantor, which notice the Guarantor hereby expressly waives, to
set off and apply any and all deposits (whether general or special, time or
demand, provisional or final, including any negotiable or non-negotiable
certificate of deposit now or hereafter issued by the Administrative Agent or
the other Guaranteed Parties to the Guarantor) or other indebtedness owing by
such Administrative Agent or Guaranteed Party to the Guarantor, to the then
outstanding Guaranteed Obligations then due and payable. The Administrative
Agent or any other Guaranteed Party may exercise this right of setoff whether or
not such Administrative Agent or Guaranteed Party has made demand for, or
accelerated, any Guaranteed Obligations. The rights of the Administrative Agent
and the other Guaranteed Parties under this Section are in addition to, and not
in limitation or substitution of, other rights and remedies (including, but not
limited to, other rights of set-off) that the Administrative Agent and the other
Guaranteed Parties may have.
Section 11. Subordination Of the Borrower's Obligations To the
Guarantor. As an independent covenant, the Guarantor hereby expressly covenants
and agrees for the benefit of the Guaranteed Parties that all obligations and
liabilities owing by the Borrower to the Guarantor of whatsoever description
including, without limitation, all intercompany receivables owing to the
Guarantor from the Borrower ("Junior Claims") shall be subordinate and junior in
right of payment to all obligations of the Borrower to the Administrative Agent
and other Guaranteed Parties under the terms of the Credit Agreement and the
other Loan Documents ("Senior Claims").
If an Event of Default shall occur, then, unless and until such Event
of Default shall have been cured, waived, or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities by setoff or
otherwise) shall be made by the Borrower to the Guarantor on account of or in
any manner in respect of any Junior Claim and the Guarantor shall not receive or
accept any such direct or indirect payment.
In the event of a Proceeding (as hereinafter defined), all Senior
Claims shall first be paid in full before any direct or indirect payment or
distribution (in cash, property, securities by setoff or otherwise) shall be
made to any Guarantor on account of or in any manner in respect of any Junior
Claim. For the purposes of the previous sentence, "Proceeding" means the
Borrower or the Guarantor shall commence a voluntary case concerning itself
under the Bankruptcy Code of 1978, as amended (the "Bankruptcy Code") or any
other applicable bankruptcy laws; or any involuntary case is commenced against
the Borrower or the Guarantor; or a custodian (as defined in the Bankruptcy Code
or any other applicable bankruptcy laws) is appointed for, or takes charge of,
all or any substantial part of the property of the Borrower or the Guarantor, or
the Borrower or the Guarantor commences any other proceedings under any
reorganization arrangement, adjustment of debt, relief of debtor, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower or the Guarantor, or any such
proceeding is commenced against the Borrower or the Guarantor, or the Borrower
or the Guarantor is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Borrower or
the Guarantor suffers any appointment of any custodian or the like for it or any
substantial part of its property; or the Borrower or the Guarantor makes a
general assignment for the benefit of creditors; or the Borrower or the
Guarantor shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or the Borrower or the
Guarantor shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Borrower or the Guarantor shall
by any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate action shall be taken by
the Borrower or the Guarantor for the purpose of effecting any of the foregoing.
In the event any direct or indirect payment or distribution is made to
the Guarantor in contravention of this Section 11, such payment or distribution
shall be deemed received in trust for the benefit of the Administrative Agent
and other Guaranteed Parties and shall be immediately paid over to the
Administrative Agent for application against the Guaranteed Obligations in
accordance with the terms of the Credit Agreement.
The Guarantor agrees to execute such additional documents as the
Administrative Agent may reasonably request to evidence the subordination
provided for in this Section 11.
Section 12. Automatic Acceleration in Certain Events. Upon the
occurrence of an Event of Default specified in Section 9.1.(e) or 9.1.(f) of the
Credit Agreement, all Guaranteed Obligations shall automatically become
immediately due and payable by the Guarantor, without notice or other action on
the part of the Administrative Agent or other Guaranteed Parties, and regardless
of whether payment of the Guaranteed Obligations by the Borrower has then been
accelerated. In addition, if any event described in Section 9.1.(e) or 9.1.(f)
of the Credit Agreement should occur with respect to the Guarantor, then the
Guaranteed Obligations shall automatically become immediately due and payable by
the Guarantor, without notice or other action on the part of the Administrative
Agent or other Guaranteed Parties, and regardless of whether payment of the
Guaranteed Obligations by the Borrower has then been accelerated.
Section 13. Savings Clause. (a) It is the intent of the Guarantor and
the Guaranteed Parties that the Guarantor's maximum liability hereunder shall
be, but not in excess of:
(i) in a Proceeding commenced by or against the Guarantor
under the Bankruptcy Code on or within one year from the date on which
any of the Guaranteed Obligations are incurred, the maximum amount
which would not otherwise cause the Guaranteed Obligations (or any
other obligations of the Guarantor to the Guaranteed Parties) to be
avoidable or unenforceable against the Guarantor under (A) Section 548
of the Bankruptcy Code or (B) any state fraudulent transfer or
fraudulent conveyance act or statute applied in such case or proceeding
by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a Proceeding commenced by or against the Guarantor
under the Bankruptcy Code subsequent to one year from the date on which
any of the Guaranteed Obligations are incurred, the maximum amount
which would not otherwise cause the Guaranteed Obligations (or any
other obligations of the Guarantor to the Guaranteed Parties) to be
avoidable or unenforceable against the Guarantor under any state
fraudulent transfer or fraudulent conveyance act or statute applied in
any such case or proceeding by virtue of Section 544 of the Bankruptcy
Code; or
(iii) in a Proceeding commenced by or against the Guarantor
under any law, statute or regulation other than the Bankruptcy Code
(including, without limitation, any other bankruptcy, reorganization,
arrangement, moratorium, readjustment of debt, dissolution, liquidation
or similar debtor relief laws), the maximum amount which would not
otherwise cause the Guaranteed Obligations (or any other obligations of
the Guarantor to the Guaranteed Parties) to be avoidable or
unenforceable against the Guarantor under such law, statute or
regulation including, without limitation, any state fraudulent transfer
or fraudulent conveyance act or statute applied in any such case or
proceeding.
(The substantive laws under which the possible avoidance or unenforceability of
the Guaranteed Obligations (or any other obligations of the Guarantor to the
Guaranteed Parties) shall be determined in any such case or proceeding shall
hereinafter be referred to as the "Avoidance Provisions").
(b)______To the end set forth in Section 13(a), but only to the extent
that the Guaranteed Obligations would otherwise be subject to avoidance under
the Avoidance Provisions if the Guarantor is not deemed to have received
valuable consideration, fair value or reasonably equivalent value for the
Guaranteed Obligations, or if the Guaranteed Obligations would render the
Guarantor insolvent, or leave the Guarantor with an unreasonably small capital
to conduct its business, or cause the Guarantor to have incurred debts (or to
have intended to have incurred debts) beyond its ability to pay such debts as
they mature, in each case as of the time any of the Guaranteed Obligations are
deemed to have been incurred under the Avoidance Provisions, the maximum
Guaranteed Obligations for which the Guarantor shall be liable hereunder shall
be reduced to that amount which, after giving effect thereto, would not cause
the Guaranteed Obligations (or any other obligations of the Guarantor to the
Guaranteed Parties), as so reduced, to be subject to avoidance under the
Avoidance Provisions.
(c)______This Section 13 shall be applicable only in connection with a
Proceeding brought by or against the Guarantor and is intended solely to
preserve the rights of the Guaranteed Parties hereunder to the maximum extent
that would not cause the Guaranteed Obligations of the Guarantor to be subject
to avoidance under the Avoidance Provisions in connection with any such
Proceeding. Neither the Guarantor nor any other Person shall have any right or
claim under this Section 13 as against the Guaranteed Parties that would not
otherwise be available to the Guarantor or such other Person outside of any
Proceeding.
Section 14. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
the Guarantor assumes and incurs hereunder, and agrees that none of the
Guaranteed Parties will have any duty to advise the Guarantor of information
known to it or any of them regarding such circumstances or risks.
Section 15. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of GEORGIA.
Section 16. Jurisdiction/JURY TRIAL WAIVER/OTHER MATTERS. (a) EACH OF
THE GUARANTEED PARTIES AND THE GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS GUARANTY OR THE RELATIONSHIP OF THE
GUARANTOR AND THE GUARANTEED PARTIES ESTABLISHED HEREBY, WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES. ACCORDINGLY, TO THE FULLEST EXTENT PERMITTED BY
LAW, EACH OF THE GUARANTOR AND THE GUARANTEED PARTIES HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN
ACTION MAY BE COMMENCED BY OR AGAINST THE GUARANTOR ARISING OUT OF THIS GUARANTY
OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE GUARANTOR AND
ANY GUARANTEED PARTY OF ANY KIND OR NATURE.
(b)______EACH OF THE GUARANTOR AND THE GUARANTEED PARTIES AGREES THAT
THE FEDERAL COURT OF THE NORTHERN DISTRICT OF GEORGIA OR ANY STATE COURT LOCATED
IN FULTON COUNTY, GEORGIA SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN THE GUARANTOR AND ANY GUARANTEED PARTY PERTAINING
DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR TO ANY MATTER ARISING HEREFROM. THE
GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED IN SUCH COURT. THE GUARANTOR AND THE GUARANTEED
PARTIES WAIVE ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
ANY PROCEEDING IN ANY SUCH COURT OR THAT SUCH PROCEEDING WAS BROUGHT IN AN
INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME.
(c)______THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE
DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY THE AGENT OR ANY OTHER
GUARANTEED PARTY OR THE ENFORCEMENT BY THE AGENT OR ANY OTHER GUARANTEED PARTY
OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION.
(d)______THE GUARANTOR AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS
HEREUNDER SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES OF MAKING
PAYMENTS HEREUNDER, THE GUARANTOR HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF,
COUNTERCLAIM OR CROSS-CLAIM.
(e)______THE GUARANTOR ACKNOWLEDGES THAT ALL OF THE WAIVERS IN THIS
SECTION HAVE BEEN MADE WILLINGLY, WITH THE ADVICE OF LEGAL COUNSEL AND WITH A
FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
Section 17. Loan Accounts. The Administrative Agent on behalf of the
other Guaranteed Parties may maintain books and accounts setting forth the
amounts of principal, interest and other sums paid and payable with respect to
the Guaranteed Obligations, and in the case of any dispute relating to any
Guaranteed Obligation, the entries in such account shall be binding upon the
Guarantor as to the outstanding amount of such Guaranteed Obligations and the
amounts paid and payable with respect thereto absent manifest error. The failure
of the Administrative Agent to maintain such books and accounts shall not in any
way relieve or discharge the Guarantor of any of its obligations hereunder.
Section 18. Waiver of Remedies. No delay or failure on the part of the
Administrative Agent or any other Guaranteed Party in the exercise of any right
or remedy it may have against the Guarantor hereunder or otherwise shall operate
as a waiver thereof, and no single or partial exercise by the Lender of any such
right or remedy shall preclude other or further exercise thereof or the exercise
of any other such right or remedy.
Section 19. Successors and Assigns. Each reference herein to the
Administrative Agent or any other Guaranteed Party shall be deemed to include
the Administrative Agent's and such other Guaranteed Party's successors and
assigns (including, but not limited to, any holder of the Guaranteed
Obligations) in whose favor the provisions of this Guaranty also shall inure,
and each reference herein to the Guarantor shall be deemed to include the
Guarantor's executors, administrators, successors and assigns, upon whom this
Guaranty also shall be binding. The Administrative Agent and any other
Guaranteed Party may assign, transfer or sell any Guaranteed Obligation, or
grant or sell participation in any Guaranteed Obligations, pursuant to the terms
of the Loan Documents, to any Person or entity without the consent of, or notice
to, the Guarantor and without releasing, discharging or modifying the
Guarantor's obligations hereunder. The Guarantor hereby consents to the delivery
by the Administrative Agent or any other Guaranteed Party to any assignee,
transferee or participant of any financial or other information regarding the
Borrower or the Guarantor. The Guarantor may not assign or transfer its
obligations hereunder to any Person.
Section 20. Survival of Agreement. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Guaranty
and the Credit Agreement, the making of the Loans and the execution and delivery
of the other Loan Documents.
Section 21. Amendments. This Guaranty may not be amended except in
writing signed by the Administrative Agent and the Guarantor.
Section 22. Payments/Expenses. All payments made by the Guarantor
pursuant to this Guaranty shall be made in the lawful currency of the United
States of America, in immediately available funds to the office of the
Administrative Agent set forth on Annex I to the Credit Agreement not later than
11:00 a.m., Atlanta time, on the date one Business Day after demand therefor.
The Guarantor shall pay, on demand, all costs and expenses incurred by the
Guaranteed Parties in the collection and enforcement of this Guaranty including
the reasonable fees and disbursements of counsel to the Guaranteed Parties if
collection and/or enforcement is sought by or through an attorney.
Section 23. Notices. All notices, demands or other communications to
the Guarantor hereunder shall be in writing and shall be mailed or hand
delivered or sent via facsimile transmission to the address for the Guarantor
set forth below its signature hereto. All such notices, demands and
communications shall be deemed received by the Guarantor (a) if personally
delivered or by messenger or overnight courier or delivered via facsimile
transmission, on the date of delivery thereof or (b) if through the United
States mail, on the earlier of (i) the date three days after the posting thereof
and (ii) the date of actual receipt by the Guarantor.
Section 24. Severability. In case any provision of this Guaranty shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 25. Headings. Section headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.
Section 26. Review of Credit Agreement/Loan Documents. The Guarantor
acknowledges that, prior to the execution and delivery of this Guaranty, the
Guarantor has had the opportunity to review and ask questions regarding the
Credit Agreement and the other Loan Documents referred to therein and to discuss
the same and this Guaranty with its counsel.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty as of the date and year first written above.
_________ [GUARANTOR]
By:________________________________________________
Title:_______________________________________
Address for Notices:
===================================
-----------------------------------
Attention:___________________________
Telephone Number:____________________
Telecopy Number:_____________________
<PAGE>
H-1
EXHIBIT G
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to that certain Credit Agreement dated as of October
28, 1998 (as it may be amended, modified, restated or supplemented from time to
time, the "Credit Agreement") among Shaw Industries, Inc., a Georgia corporation
(the "Borrower"), the Lenders named therein, NationsBank, N.A., as
Administrative Agent (the "Administrative Agent") and SunTrust Bank, Atlanta, as
Documentation Agent. Capitalized terms defined in the Credit Agreement are used
herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 attached
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 attached hereto of all outstanding
rights and obligations under the Credit Agreement and the other Loan Documents.
After giving effect to such sale and assignment, the Assignee's Commitment and
the amount of the Loans owing to the Assignee will be as set forth on Schedule 1
attached hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under the
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Syndicate Note held by the Assignor and requests that the
Administrative Agent exchange such Note for new Syndicate Notes payable to the
order of the Assignee in an amount equal to the Commitment assumed by the
Assignee pursuant hereto and to the Assignor in an amount equal to the
Commitment retained by the Assignor, if any, as specified on Schedule 1 attached
hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Sections 7.1. and 7.2. thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Assumption Agreement; (ii) agrees that it will,
independently and without reliance upon the Administrative Agent, the Assignor
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 the Credit Agreement; (iii) confirms that it is an
Eligible Assignee; (iv) appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement as are delegated to the Administrative Agent by the
terms thereof, together with such powers and discretion as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (vi) attaches any U.S. Internal
Revenue Service or other forms required under Section 3.20.
4. Following the execution of this Assignment and Assumption Agreement,
it will be delivered to the Administrative Agent for acceptance and recording by
the Administrative Agent. The effective date for this Assignment and Assumption
Agreement (the "Effective Date") shall be the date of acceptance hereof by the
Administrative Agent, unless otherwise specified on Schedule 1 attached hereto.
5. Upon such acceptance and recording by the Administrative Agent, as
of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Assumption Agreement, have
the rights and obligations of a Lender thereunder and (ii) the Assignor shall,
to the extent provided in this Assignment and Assumption Agreement, relinquish
its rights and be released from its obligations under the Credit Agreement and
the other Loan Documents.
6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the Credit Agreement and the Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
Fees with respect thereto) to the Assignee. The Assignor and Assignee shall make
all appropriate adjustments in payments under the Credit Agreement and the Notes
for periods prior to the Effective Date directly between themselves.
7. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
8. This Assignment and Assumption Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Assumption Agreement
by telecopier shall be effective as delivery of a manually executed counterpart
of this Assignment and Assumption Agreement.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Assumption Agreement to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ASSUMPTION AGREEMENT
Percentage interest assigned: ________%
Assignee's Commitment: $_______
Aggregate outstanding principal amount
of Syndicate Loans assigned: $_______
Principal amount of Syndicate Note payable to Assignee: $_______
Principal amount of Syndicate Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Administrative Agent): *_______, ____
[NAME OF ASSIGNOR], as Assignor
By:
Title:
Dated: _________, ___
[NAME OF ASSIGNEE], as Assignee
By:
Title:
Lending Office:
Accepted [and Approved]**
this ___ day of ___________, ___
NATIONSBANK, N.A., as Administrative Agent
By:
Title:
[Approved** this ____ day
of ____________, ____
SHAW INDUSTRIES, INC.
By:
Title:
<PAGE>
================================================================================
CREDIT AGREEMENT
Dated as of October 28, 1998
by and among
Shaw Industries, Inc., as Borrower,
the Lenders named herein,
NATIONSBANK, N.A., as Administrative Agent,
and
SUNTRUST BANK, ATLANTA, as Documentation Agent
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Arranger
================================================================================
<PAGE>
-i-
<TABLE>
<CAPTION>
<S> <C>
10074471
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS..........................................................................1
Section 1.1. Definitions.............................................................1
Section 1.2. General.................................................................18
ARTICLE 2. SYNDICATE LOAN CREDIT FACILITY.......................................................18
Section 2.1. Syndicate Loans.........................................................18
Section 2.2. Borrowings of Syndicate Loans...........................................18
Section 2.3. Disbursements of Syndicate Loans........................................19
Section 2.4. Repayment of Syndicate Loans............................................20
Section 2.5. Several Obligations.....................................................20
Section 2.6. Continuation and Conversion of Syndicate Loans..........................21
Section 2.7. Unavailability of Certain Loans; Illegality.............................22
Section 2.8. Treatment of Affected Loans.............................................22
Section 2.9. Compensation............................................................23
Section 2.10. Voluntary Reductions of the Revolving Commitment........................24
ARTICLE 3. OTHER LOAN AND PAYMENT PROVISIONS....................................................24
Section 3.1. Maximum Amount of Obligations...........................................24
Section 3.2. Mandatory Prepayment of Loans...........................................24
Section 3.3. Voluntary Prepayment of Loans...........................................25
Section 3.4. Maximum Number of Interest Periods for Loans............................25
Section 3.5. Rates and Payment of Interest on Loans..................................25
Section 3.6. Interest Upon Event of Default..........................................25
Section 3.7. Notes...................................................................26
Section 3.8. Computations............................................................26
Section 3.9. Usury...................................................................26
Section 3.10. Agreement Regarding Interest and Charges................................26
Section 3.11. Payments................................................................27
Section 3.12. Pro Rata Treatment......................................................27
Section 3.13. Sharing of Payments, Etc................................................28
Section 3.14. Facility Fee............................................................28
Section 3.15. Administrative Agent Fees...............................................29
Section 3.16. Increased Costs/Capital Adequacy........................................29
Section 3.17. Statements of Account...................................................31
Section 3.18. Defaulting Lender's Status..............................................31
Section 3.19. Administrative Agent's Reliance.........................................32
Section 3.20. Taxes...................................................................32
Section 3.21. Affected Lenders........................................................34
Section 3.22. Change of Lending Office................................................34
ARTICLE 4. CONDITIONS PRECEDENT.................................................................35
Section 4.1. Conditions Precedent to Initial Loan....................................35
Section 4.2. Conditions Precedent to All Syndicate Loans.............................36
ARTICLE 5. REPRESENTATIONS AND WARRANTIES.......................................................37
Section 5.1. Representations and Warranties..........................................37
Section 5.2. Survival of Representations and Warranties, Etc.........................42
ARTICLE 6. AFFIRMATIVE COVENANTS................................................................43
Section 6.1. Preservation of Existence and Similar Matters...........................43
Section 6.2. Compliance with Applicable Law..........................................43
Section 6.3. Maintenance of Property.................................................43
Section 6.4. Conduct of Business.....................................................43
Section 6.5. Insurance...............................................................43
Section 6.6. Payment of Taxes and Claims.............................................44
Section 6.7. Visits and Inspections..................................................44
Section 6.8. Use of Proceeds.........................................................44
Section 6.9. Material Subsidiaries...................................................44
Section 6.10. Environmental Matters...................................................44
Section 6.11. Performance of Obligations..............................................45
ARTICLE 7. INFORMATION..........................................................................45
Section 7.1. Quarterly Financial Statements..........................................45
Section 7.2. Year-End Statements.....................................................46
Section 7.3. Compliance Certificate..................................................46
Section 7.4. Notice of Litigation and Other Matters..................................46
Section 7.5. ERISA Reporting.........................................................47
Section 7.6. Copies of Other Reports.................................................49
Section 7.7. Other Information.......................................................49
ARTICLE 8. NEGATIVE COVENANTS...................................................................49
Section 8.1. Financial Covenants.....................................................50
Section 8.2. Indebtedness............................................................50
Section 8.3. Investments/Acquisitions................................................52
Section 8.4. Liens/Agreements Regarding Liens/Other Matters..........................53
Section 8.5. Merger, Consolidation, Sales of Assets and Other Arrangements...........54
Section 8.6. Sale-Leasebacks.........................................................55
Section 8.7. Transactions with Affiliates............................................55
Section 8.8. Operating Leases........................................................56
Section 8.9. Plans...................................................................56
Section 8.10. Fiscal Year.............................................................57
Section 8.11. Margin Regulations......................................................57
ARTICLE 9. DEFAULT..............................................................................57
Section 9.1. Events of Default.......................................................57
Section 9.2. Remedies................................................................60
Section 9.3. Rights Cumulative.......................................................61
ARTICLE 10. THE AGENT...........................................................................61
Section 10.1. Authorization and Action................................................61
Section 10.2. Administrative Agent's Reliance, Etc....................................62
Section 10.3. NationsBank as Lender...................................................63
Section 10.4. Lender Credit Decision, Etc.............................................63
Section 10.5. Knowledge of Default....................................................64
Section 10.6. Indemnification.........................................................64
Section 10.7. Successor Administrative Agent..........................................65
ARTICLE 11. MISCELLANEOUS.......................................................................66
Section 11.1. Notices.................................................................66
Section 11.2. Expenses................................................................67
Section 11.3. Setoff..................................................................68
Section 11.4. Litigation/Jurisdiction/Other Matters/Waivers...........................68
Section 11.5. Assignability and Participations........................................69
Section 11.6. Amendments..............................................................71
Section 11.7. Nonliability of Administrative Agent, Documentation Agent, Arranger and Lenders.72
Section 11.8. Information.............................................................73
Section 11.9. Indemnification.........................................................73
Section 11.10. Survival................................................................75
Section 11.11. Titles and Captions.....................................................76
Section 11.12. Severability of Provisions..............................................76
Section 11.13. Governing Law...........................................................76
Section 11.14. Counterparts............................................................76
Section 11.15. Obligations with Respect to Loan Parties................................76
Section 11.16. Independent Nature of Lenders' Rights...................................77
Section 11.17. No Fiduciary Relationship...............................................77
Section 11.18. Limitation of Liability.................................................77
Section 11.19. Entire Agreement........................................................77
Section 11.20. Construction............................................................78
Annex I List of Lenders, Commitments, Credit Percentages and Lending Offices
Schedule 1.1.(a) Existing Consolidated Funded Debt
Schedule 1.1.(b) Existing Liens
Schedule 5.1.(b) Ownership Structure
Schedule 5.1.(h) Litigation
Schedule 5.1.(m) Environmental Non-Compliance
Schedule 5.1.(q) Affiliate Transactions
Schedule 8.3.(a) Existing Investments
Exhibit A Form of Notice of Syndicate Borrowing
Exhibit B Form of Notice of Continuation
Exhibit C Form of Notice of Conversion
Exhibit D Form of Syndicate Note
Exhibit E Form of Opinion of Counsel to the Borrower and the other Loan Parties
Exhibit F Form of Guaranty
Exhibit G Form of Assignment and Assumption Agreement
Exhibit H Form of Compliance Certificate
</TABLE>
::ODMA\PCDOCS\ATL\255840\1
- - --------
1 To be used for replacement of Surrendered Notes. 2 To be used for replacement
of Surrendered Notes.
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Assumption Agreement to the Administrative Agent.
** Required if the Assignee is an Eligible Assignee solely by reason of clause
(iii) of the definition of "Eligible Assignee".
