<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
March 30, 1996 0-23234
L.A. T SPORTSWEAR, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1724902
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Airport Road, Ball Ground, Georgia 30107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 479-1877
-----------------------------
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- --------
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Common Stock, without par value 4,200,001 shares
- - ------------------------------------- --------------------------------
Class Outstanding at May 5, 1996
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
L.A. T SPORTSWEAR, INC.
BALANCE SHEETS
(Dollars in thousands)
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<TABLE>
<CAPTION>
March 30, December 30,
ASSETS 1996 1995
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,867 $2,784
Accounts receivable, net 12,294 11,948
Inventories 30,689 33,104
Other current assets 4,415 3,513
------- -------
Total current assets 49,265 51,349
PROPERTY, PLANT, AND EQUIPMENT 5,643 5,841
OTHER ASSETS 291 192
------- -------
$55,199 $57,382
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,135 $ 8,354
Restructuring reserve 1,559 2,050
Current portion of long-term debt 42 30,328
Accrued expenses 1,886 1,606
------- -------
Total current liabilities 11,622 42,338
LONG-TERM DEBT 29,780 821
DEFERRED INCOME TAXES 578 578
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized;
no shares issued
Common stock, no par value; 25,000,000
shares authorized; 4,200,001 shares
issued and outstanding 10,825 10,825
Paid-in capital 3,304 3,304
Accumulated deficit (910) (484)
------- -------
Total stockholders' equity 13,219 13,645
------- -------
$55,199 $57,382
======= =======
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 3
L.A. T SPORTSWEAR, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
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<TABLE>
<CAPTION>
Quarter Ended
-------------------
March 30, April 1,
1996 1995
<S> <C> <C>
NET SALES $23,344 $25,232
COST OF GOODS SOLD 19,361 19,863
------- -------
Gross profit 3,983 5,369
OPERATING EXPENSES 4,056 4,408
------- -------
OPERATING PROFIT (LOSS) (73) 961
INTEREST EXPENSE 605 419
------- -------
INCOME (LOSS) BEFORE INCOME TAXES (678) 542
PROVISION (BENEFIT) FOR INCOME TAXES (252) 226
------- -------
NET INCOME (LOSS) $ (426) $ 316
======= =======
NET INCOME (LOSS) PER SHARE $ (0.10) $ 0.08
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 4,200 4,200
======= =======
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 4
L.A. T SPORTSWEAR, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended
------------------
March 30, April 1,
1996 1995
<S> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (426) $ 316
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 217 181
Net loss on disposal of assets 65 1
Changes in assets and liabilities providing
(using) cash:
Accounts receivable (346) (3,172)
Inventories 2,415 (19,021)
Other assets (998) (447)
Accounts payable (219) 16,698
Accrued expenses 280 (249)
Restructuring reserve (491)
------ -------
Net cash provided by (used in) operating
activities 497 (5,693)
INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (106) (917)
Proceeds from sale of assets 22
------ -------
Net cash used in investing activities (84) (917)
FINANCING ACTIVITIES:
Net (payments) borrowings under lines of credit (1,119) 9,185
Payments of long-term borrowings (211) (95)
------ -------
Net cash (used in) provided by financing
activities (1,330) 9,090
------ -------
NET CHANGE IN CASH (917) 2,480
CASH, BEGINNING OF PERIOD 2,784 395
------ -------
CASH, END OF PERIOD $1,867 $ 2,875
====== =======
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 5
L.A. T SPORTSWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
L.A. T Sportswear, Inc. (the "Company") manufactures imprintable and
decorable sportswear and distributes undecorated garments for the imprinted
garment industry. The Company also purchases merchandise from several
national sportswear manufacturers for distribution through seven
distribution facilities located across the United States. The Company's
customers consist principally of single location retailers in the
imprintable and decorable sportswear industry. Such customers operate
principally within North America.
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions for Form 10-Q.
Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 30,
1995. In the opinion of management, all adjustments (which include only
normal recurring adjustments) considered necessary for a fair presentation
of interim results have been included. The results of operations for the
three months ended March 30, 1996 are not necessarily indicative of the
operating results for the full year.
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<PAGE> 6
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 30, December 30
1996 1995
<S> <C> <C>
Raw materials $ 1,212 $ 1,099
Work-in-process 519 1,170
Finished goods 28,958 30,835
------- -------
$30,689 $33,104
======= =======
</TABLE>
3. LONG-TERM DEBT
As of December 30, 1995, the Company was not in compliance with certain
financial covenants contained within its line of credit agreement and term
loan facility. As a result of this noncompliance, the bank had the right to
declare the entire amount of such indebtedness due and immediately payable.
Consequently, all amounts outstanding under the line of credit and term loan
facility were classified as current in the December 30, 1995 balance sheet.
On April 29, 1996, the Company entered into a $35 million credit
facility ("new facility") with a new financial institution. The new
facility (i) provides for maximum borrowings of $35 million which decline to
$30 million after July 31, 1996 (subject to certain collateral restrictions
based on eligible receivables, inventories and fixed assets), (ii) expires
in the second quarter of 1999, (iii) bears interest at prime plus 1/2%, (iv)
is secured by principally all the Company's assets, (v) requires the payment
of certain fees, and (vi) contains covenants which (among other things)
require compliance with certain financial tests and restrict corporate
activities. This new facility replaced the previous line of credit and term
loan facility (and all borrowings thereunder were consequently repaid).
Accordingly all amounts outstanding under the former line of credit and term
loan facility have been classified as long-term in the accompanying March 30,
1996 balance sheet.
4. PENDING LITIGATION
The Company (including certain of its officers and directors) are defendants
in class action suits concerning certain alleged omissions in its January
1994 initial public offering documents. The plaintiffs seek
unspecified amounts of damages. The Company intends to defend these matters
vigorously. The ultimate outcome of these matters cannot presently be
determined. Accordingly, no provision for any loss that may result from
their resolution has been made in the accompanying financial statements.
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<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
components of the Company's statements of operations expressed as a percentage
of net sales.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------
MARCH 30, APRIL 2,
1996 1995
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 82.9 78.7
------ -----
Gross profit 17.1 21.3
Operating expenses 17.4 17.5
------ -----
Operating profit (loss) (.3) 3.8
Interest expense (2.6) (1.7)
------ -----
Income (loss) before income taxes (2.9) 2.1
(Provision) benefit for income taxes 1.1 (0.9)
------ -----
Net income (loss) (1.8)% 1.2%
====== =====
</TABLE>
Comparison of First Quarter 1996 to First Quarter 1995
The Company's net sales decreased approximately $1.9 million, or 7.5%,
to $23.3 million in the first quarter of 1996 from $25.2 million in the first
quarter of 1995. The decrease in net sales was primarily attributable to
sluggishness in the industry combined with the closing of two distribution
locations in the fourth quarter of 1995 which were operating in the first
quarter of 1995.
The Company's gross profit decreased approximately $1.4 million, or
26.0%, to $4.0 million for the first quarter of 1996 from $5.4 million in the
first quarter of 1995. Gross profit margin decreased to 17.1% in the first
quarter of 1996 from 21.3% in the first quarter of 1995, primarily due to high
levels of price competitiveness. Also, gross profit margins in the first
quarter of 1995 had been favorably impacted by increases in selling prices
slightly in advance of supplier price increases.
Operating expenses decreased approximately $352,000, or 8.0%, to $4.1
million in the first quarter of 1996 from $4.4 million in the first quarter of
1995 due to the Company's closing of two distribution locations. Savings
resulting from these closures were partially offset by increased operating
expenses resulting from the second quarter 1995 expansion of several of its
existing distribution locations. As a percentage of net sales, operating
expenses decreased slightly to 17.4% in the first quarter of 1996 from 17.5% in
the first quarter of 1995.
Operating profit (loss) decreased approximately $1.0 million, or
107.6%, to a loss of ($73,000) in the first quarter of 1996 from a profit of
$961,000 in the first quarter of 1995, as a result of the factors discussed
above. Operating profit margin decreased to (0.3)% in the first quarter of
1996 from 3.8% in the first quarter of 1995.
Interest expense increased approximately $186,000, or 44.4%, to
$605,000 in the first quarter of 1996 from $419,000 in the first quarter of
1995, primarily due to higher borrowings under the Company's line of credit.
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<PAGE> 8
Income (loss) before income taxes decreased approximately $1.2
million, or 225% to a loss of ($678,000) in the first quarter of 1996 from
income of $542,000 in the first quarter of 1995. Income (loss) before income
taxes as a percentage of net sales decreased to (2.9)% in the first quarter of
1996 from 2.1% in the first quarter of 1995.
Net income (loss) decreased approximately $742,000, or 235% to a loss
of ($426,000) in the first quarter of 1996 from a profit of $316,000 in the
first quarter of 1995. Net income (loss) as a percentage of net sales
decreased to (1.8)% in the first quarter of 1996 from 1.2% in the first quarter
of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was approximately $500,000 for the
first quarter of 1996 compared to net cash used by operations of $5.7 million
for the first quarter of 1995.
As of December 30, 1995, the Company was not in compliance with certain
financial covenants contained within its line of credit agreement and term loan
facility. As a result of this noncompliance, the bank had the right to declare
the entire amount of such indebtedness due and immediately payable.
Consequently, all amounts outstanding under the line of credit and term loan
facility were classified as current in the December 30, 1995 balance sheet.
On April 29, 1996, the Company entered into a $35 million credit
facility ("new facility") with a new financial institution. The new facility
(i) provides for maximum borrowings of $35 million which decline to $30 million
after July 31, 1996 (subject to certain collateral restrictions based on
eligible receivables, inventories and fixed assets), (ii) expires in the second
quarter of 1999, (iii) bears interest at prime plus 1/2%, (iv) is secured by
principally all the Company's assets, (v) requires the payment of certain fees,
and (vi) contains covenants which (among other things) require compliance with
certain financial tests and restrict corporate activities. This new facility
replaced the previous line of credit and term loan facility (and all borrowings
thereunder were consequently repaid). Accordingly, all amounts outstanding
under the former line of credit and term loan facility have been classified as
long-term in the accompanying March 30, 1996 balance sheet. As of May 5, 1996,
the Company had $2.1 million of additional borrowing available under the new
facility.
The Company's ability to fund its working capital and capital
expenditure requirements, make interest payments and meet its other cash
requirements depends, among other things, on internally generated funds and the
continued availability of and compliance with the terms of its credit facility.
Management believes that internally generated funds and funds available from
the Company's line of credit will be sufficient to meet the Company's capital
requirements and operating needs in fiscal 1996. However, if there is a
significant reduction of internally generated funds, the Company may require
additional funds from outside financing sources. In such event, there can be
no assurance that the Company will be able to obtain such funding as and when
required or on acceptable terms.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are filed with this report:
10.39 Employment Agreement dated January 25, 1996
between the Company and Robert C. Aldworth
10.40 Loan and Security Agreement, dated April 29,
1996, by and among the Company, Mellon Bank,
N.A., as Agent, and Mellon Bank, N.A., as
Lender.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed
during the quarter ended March 30, 1996.
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<PAGE> 9
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.
L.A. T SPORTSWEAR, INC.
Dated: May 10, 1996 By: /s/ Isador E. Mitzner
------------------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: May 10, 1996 By: /s/ David L. Shelton
------------------------------------
David L. Shelton, Vice President
and Chief Financial Officer
(principal accounting officer)
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page Number
- - ------ ---------------------- -----------
<S> <C>
10.39 Employment Agreement dated January 25, 1996
between the Company and Robert C. Aldworth
10.40 Loan and Security Agreement, dated April 29,
1996, by and among the Company, Mellon Bank, N.A.,
as Agent, and Mellon Bank, N.A., as Lender.
27 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 10.39
<PAGE> 2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into as
of the 25th day of January, 1996, by and between ROBERT C. ALDWORTH (the
"Employee") and L.A. T SPORTSWEAR, INC., a Georgia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Employee desires to become an employee of the Company, and the
Company desires to employ Employee, all in accordance with the terms and
conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements hereinafter set forth and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. Employment and Duties.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company shall employ Employee, and Employee shall serve the
Company, as Executive Vice President and Chief Operating Officer ("COO").
(b) At all times during the term hereof, Employee shall,
for the benefit of the Company, use his skills, knowledge and specialized
training to perform the duties and exercise the powers, functions and
discretions incident to his then current position as Executive Vice President
and COO, or which from time to time consistent with such positions may be
assigned to or vested in him by the Company's Chief Executive Officer ("CEO")
or the Board of Directors (the "Board"), in an efficient and competent manner
and on such terms and subject to such restrictions as the CEO or the Board may
from time to time impose.
(c) At all times during the term hereof, Employee shall
comply with all reasonable requests, instructions and regulations made by the
CEO or the Board and give to the Company such explanations, information and
assistance as the CEO or the Board may reasonably require.
(d) At all times during the term hereof, Employee shall
faithfully serve the Company to the best of his ability and use his best
efforts to promote the interests of the Company.
(e) During the term of this Agreement, Employee agrees to
be a full-time employee of the Company and to devote substantially all of his
time, energy and skill to the business of the Company, and to the fulfillment
of Employee's obligations under this Agreement. In addition to the foregoing
and not in limitation thereof, during the term of this Agreement, Employee
shall not carry on, engage in, or otherwise be interested in, directly or
indirectly, any other business or activity that is competitive with the
activities and business of the Company, that is of a nature similar to the
Company's business, that would result in a conflict of interest with the
Company's business, or that would materially affect Employee's ability to
perform his duties as set forth in this Agreement. Moreover, Employee shall
not take part in any activities detrimental in any material respect to the
Company's best interest.
2. Term.
The initial term of this Agreement shall begin as of the 25th
day of January, 1996 (the "Commencement Date") and shall, unless earlier
terminated as set forth herein, end on the second anniversary thereof.
3. Compensation.
(a) Subject to the terms of this Agreement, as basic
compensation for Employee's services, the Company shall pay Employee so long as
he shall be employed under this Agreement a base salary of $250,000 per year.
It being agreed, however, that Employee's salary shall be subject to all
withholdings pursuant to applicable
<PAGE> 3
law or regulation. Employee's base salary shall be payable to Employee on the
regularly reoccurring pay period established by the Company, but in no event in
less than monthly installments.
(b) In addition to the base salary provided in subsection
(a) above, the Company may pay Employee a bonus not to exceed 40% of Employee's
Base Salary from time to time in such amounts, at such times, and under such
terms and conditions as Employee and the CEO agree upon based on the financial
performance of the Company and subject to all withholdings pursuant to
applicable law or regulations. In no event shall bonuses accrue until the date
a bonus is earned and Employee is notified of the same.
(c) In addition to the compensation described in this
Agreement, Employee shall be entitled to reimbursement by the Company for all
actual, reasonable and direct expenses incurred by him in the performance of
his duties hereunder, provided such expenses are properly characterized as
being business expenses that are properly tax deductible for the Company, and
further provided that such expenses were incurred only in accordance with the
policies and procedures established by the Company from time to time. Employee
shall provide the Company with written documentation of such expenses in form
complying with the records required of the Company by the Internal Revenue
Service and appropriate state authorities for tax deductibility purposes in
such cases, and reimbursement for each item of approved expense shall be made
within a reasonable time after receipt by Company of the written documentation
thereof.
4. Employment Benefits.
(a) Employee shall have the right to participate in any and
all employee benefit programs established or maintained by the Company from
time to time, in accordance with the terms and conditions of such employee
benefit programs, including, without limitation, such medical or dental plans
as may be established from time to time by the Company. To the extent Employee
participates in such programs, Employee shall be subject to the terms and
conditions set forth therein. The Company's current employee benefit programs
are described in Exhibit A attached hereto, but the Company reserves the right,
in its sole discretion, to alter, amend or discontinue any of such employee
benefit programs at any time.
(b) Employee shall be entitled to purchase two hundred
thousand (200,000) shares of the Company's common stock in accordance with the
terms and conditions of the stock option set forth in Exhibit B attached hereto
(the "Stock Option").
5. Illness, Incapacity or Death During Employment.
(a) If by reason of illness or incapacity, Employee is
unable to perform his services or discharge his duties hereunder for ninety
(90) or more consecutive days within the term hereof, then upon ten (10) days'
prior notice, Company may terminate the employment of Employee, and thereupon,
Employee shall be paid his base salary from the date of termination through the
10-day notice period.
(b) In the event of Employee's death, all obligations of
the Company under this Agreement shall terminate other than Employee's rights
with respect to his Stock Option, as set forth in Exhibit B, and the payment of
that portion of the base salary earned by Employee to the date of death, plus
reimbursement of all expenses that were incurred by Employee in performing his
responsibilities and duties for the Company prior to and including such date
and are properly reimbursable pursuant to Section 3(c) above.
6. Insurance.
Employee agrees that the Company may, from time to time, apply
for and take out in its own name and at its own expense, such life, health,
accident and other insurance upon Employee as the Company may deem necessary or
advisable to protect its interests hereunder. Employee agrees to submit to any
medical or other examination necessary for such purpose and to assist and
cooperate with the Company in procuring such insurance, and Employee further
agrees that he shall have no right, title or interest in or to such insurance
or the proceeds thereof, unless the Company shall otherwise agree in writing.
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<PAGE> 4
7. Termination of Employment.
(a) Subject to the provisions of subsection (c) below, if
the Company terminates Employee's employment hereunder With Cause (as
hereinafter defined), all obligations of Company to provide compensation and
benefits under this Agreement shall cease, and Employee shall have no claim
against the Company for damages or otherwise by reason of such termination.
Company's election to terminate Employee's employment With Cause shall be
without prejudice to any remedy the Company may have against Employee for the
breach or non-performance of any of the provisions of this Agreement.
(b) Subject to the provisions of subsection (c) below, if
the Company should terminate the Employee's employment Without Cause (as
hereinafter defined), the Company shall pay the Employee severance compensation
equal to the sum of three (3) months' base salary (the "Termination Payment").
The amount payable under this subsection (b) shall represent liquidated damages
for the premature termination of the Employee's employment, and shall not be
reduced by any compensation or remuneration earned by Employee as a result of
employment by another employer or self-employment, or as a partner with
respect to services performed for such partnership, after the date of
termination.
(c) Notwithstanding the terms of subsections (a) and (b)
above, if the Company should terminate Employee's employment hereunder Without
Cause subsequent to a Change of Control (as hereinafter defined), or a
Potential Change of Control (as hereinafter defined), the Company shall pay
Employee over the remaining term of this Agreement all amounts due Employee
pursuant to Sections 3 and 4 of this Agreement on such dates and in such
amounts as if this Agreement had not been so terminated.
(d) "With Cause" means the termination of employment
resulting from:
(i) any act or omission which constitutes a material breach
by Employee of his obligations under this Agreement;
(ii) the commission by Employee of a felony involving moral
turpitude, fraud or dishonesty; or
(iii) the knowing or intentional perpetration by Employee of
any act of material dishonesty relating to the Company
or the Company's employees.
(e) "Without Cause" means the termination of employment
resulting from any reason other than those enumerated in subsection (c) above
or Section 5 of this Agreement.
(f) For purpose of paragraph (c) of this Section 7, a
"Change of Control means the happening of any of the following:
(i) when any "person," as such term is used in Section
13(d) and 14(d) of the Exchange Act (other than Isador
E. Mitzner, David Keller or Nathan Koenigsberg, the
Company or a Subsidiary or any Company employee benefit
plan (including its trustee)), is or becomes the
"beneficial owner" as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly of securities of
the Company representing 20 percent or more of the
combined voting power of the Company's then outstanding
securities.
(ii) when, during any period of two consecutive years, the
individuals who, at the beginning of such period,
constitute the Board cease, for any reason other than
death, to constitute at least a majority thereof,
unless each director who was not a director at the
beginning of such period was elected by, or on the
recommendation of, at least two-thirds of the remaining
directors at the beginning of such period; or
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<PAGE> 5
(iii) the consummation of a transaction requiring
stockholder approval for the acquisition of the
Company by an entity other than the Company or
a Subsidiary through purchase of assets, or by
merger, or otherwise.
(g) For purposes of paragraph (c) of this Section 7, a
"Potential Change of Control" means the happening of any of the following:
(i) the entering into an agreement by the Company, the
consummation of which would result in a Change of
Control of the Company as defined in paragraph (f) of
this Section 7; or
(ii) the acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than
the Company or a Subsidiary or any Company employee
benefit plan (including its trustee)) of securities of
the Company representing 5 percent or more of the
combined voting power of the Company's outstanding
securities and the adoption by the Board of Directors
of a resolution to the effect that a Potential Change
of Control of the Company has occurred.
8. Employee's Obligations upon Termination of Employment.
Upon the termination of his employment hereunder for whatever
reason Employee shall:
(a) Forthwith tender his resignation from any directorship
or office he may hold in the Company; and
(b) Not at any time represent himself still to be connected
or to have any connection with the Company.
9. Effect of Termination.
The provisions of this Agreement shall survive the termination
of this Agreement and the termination of Employee's employment with the Company
to the extent required to give full effect to the covenants and agreements
contained herein.
10. Confidentiality.
(a) Employee agrees that, both during the term of this
Agreement and after the termination of this Agreement, Employee will hold in a
fiduciary capacity for the benefit of the Company, and shall not directly or
indirectly use or disclose, except as authorized by the Company in connection
with the performance of Employee's duties, any Confidential Information, as
defined hereinafter, that Employee may have or acquire (whether or not
developed or compiled by Employee and whether or not Employee has been
authorized to have access to such Confidential Information) during the term of
this Agreement. The term "Confidential Information" as used in this Agreement
shall mean and include any information, data and know-how relating to the
business of the Company that is disclosed to Employee by the Company or known
by him as a result of his relationship with the Company and not generally
within the public domain (whether constituting a trade secret or not),
including without limitation, the following: financial information, supply and
service information, marketing information, personnel information, customer
information and information with respect to any corporate affairs that the
Company agreed to treat as confidential.
The term "Confidential Information" does not include information that has
become generally available to the public by the act of one who has the right to
disclose such information without violating any right of the Company or the
client to which such information pertains.
(b) The covenant contained in this Section 10 shall survive
the termination of Employee's employment with the Company for any reason for a
period of two (2) years; provided, however, that with respect
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<PAGE> 6
to those items of Confidential Information which constitute trade secrets
under applicable law, Employee's obligations of confidentiality and
non-disclosure as set forth in this Section 10 shall continue to survive after
said two (2) year period to the greatest extent permitted by applicable law.
These rights of the Company are in addition to those rights the Company has
under the common law or applicable statutes for the protection of trade secrets.
11. Non-Competition.
(a) So long as Employee is employed by the Company, and for
a period of twelve (12) months after termination of his employment for any
reason, Employee agrees not to engage in any "Competitive Activity" within the
"Noncompete Territory" (as those terms are defined in subsection (b) below).
(b) As used herein, the term "Noncompete Territory" shall
mean any geographic area in which the Company has business or operations which
were performed, supervised by or assisted in by the Employee, or in which the
Company has customers or actively sought prospective customers with whom
Employee had material contact while employed by the Company. As used herein,
the term "Competitive Activity" shall mean any activity in which the Employee
directly or indirectly owns, manages, operates, controls, is employed by
(either as an employee or independent contractor) or participates in the
ownership, management, operation or control of, any business that is engaged in
the manufacture or distribution of imprintable and decorable knitted sportswear
that are the same as or substantially similar to the imprintable and decorable
knitted sportswear manufactured or distributed by the Company.
(c) For purposes of this Agreement, the determination of
whether a particular geographic area is within the Noncompete Territory or
whether a particular activity is a Competitive Activity shall be made at the
earlier of 1) the time that enforcement of this covenant is sought, or 2) the
date the Employee ceases, for any reason, to be an employee of the Company.
(d) The Company and Employee acknowledge and agree, based
upon the current activities of the Company and a good faith projection of its
future activities, that the Noncompete Territory shall be presumed to be the
entire United States; provided, however, that in the event this presumption is
in conflict at the time of determination with the definition contained in
subsection (b) above, then the Noncompete Territory shall comprise only that
portion of the United States as falls within such definition.
12. Non-Solicitation of Employees.
Employee agrees that he will, for so long as he is employed
hereunder and for a period of twelve (12) months after termination of his
employment, refrain from recruiting or hiring, or attempting to recruit or
hire, directly or by assisting others, any other employee of the Company who is
employed by the Company or any successor or affiliate of the Company if the
Company or its successor or affiliate is then engaged in the business of
manufacturing or distributing imprintable and decorable knitted sportswear.
13. Material Contact.
For the purposes of Section 11 of this Agreement, "material
contact" exists between Employee and each customer or potential customer: (i)
with whom Employee dealt; (ii) whose dealings with the Company were coordinated
or supervised by Employee; (iii) about whom Employee obtained confidential
information in the ordinary course of business as a result of Employee's
association with the Company; or (iv) who receives products or services
authorized by the Company, the sale or provision of which results or resulted
in compensation, commissions, or earnings for Employee within two (2) years
prior to the date of termination of Employee's employment with the Company.
14. Tolling of Period of Restraint.
Employee hereby expressly agrees that any violation of the
restraints set forth in Sections 10 through 12 automatically toll and suspend
the period of the restraint for the amount of time that the violation
continues.
-5-
<PAGE> 7
15. Acknowledgments.
Employee hereby acknowledges and agrees that the restrictions
contained in Section 11 are fair and reasonable and necessary for the
protection of the legitimate business interests of the Company.
16. Rights to Materials.
All records, files, memoranda, reports, price lists, customer
lists, drawings, plans, sketches, documents and the like (together with all
copies thereof) relating to the business of the Company, which Employee shall
use or prepare or come in contact with in the course of, or as a result of, his
employment shall, as between the parties hereto, remain the sole property of
the Company. Upon the termination of his employment or upon the prior demand
of the Company, he shall immediately return all such materials and shall not
thereafter cause removal thereof from the premises of the Company.
17. Inventions.
Employee will promptly disclose to the Company and to no other,
any Invention (as hereinafter defined) which Employee may conceive or make
either alone or in conjunction with others during his employment by the Company
or which Employee may conceive or make within six (6) months after termination
of his employment with the Company for any reason. Moreover, Employee will
execute all papers deemed proper by Company to enable it, at its expense, to
prepare and file any and all original, divisional, continuation,
continuation-in-part, refile, renewal, reissue and other applications for
Letters Patent of the United States and of other countries covering such
Inventions, to establish and maintain the Company's title to and obtain for the
Company or its designee patents on said applications or any other patent owned
or claimed by the Company, all at the option and expense of the Company, and to
vest the Employee's entire right, title and interest in and to said Inventions,
patent applications and patents in the Company or its designee. Employee will
also execute all such proper and necessary papers to perfect or otherwise
protect the Company's rights in such Inventions as may be presented to the
Employee at any time during or after the termination of his employment with the
Company. For purposes of this provision, the term "Invention" shall mean and
include any invention or technical information related to the business of the
Company in the nature of a new design, art, machine, process, formula,
procedure, computer program, method of manufacture, composition matter or any
new or useable improvements thereof, whether or not patentable.
18. Works Made for Hire.
All Works (as hereinafter defined) and all copyrights and other
rights, titles and interests whatsoever in and to the Works, belong solely,
irrevocably and exclusively throughout the world to the Company as "works made
for hire." Moreover, if and to the extent any court or agency should conclude
that the Works (or any of them) do not constitute or qualify as a "work made
for hire" the Employee hereby assigns, grants and delivers, solely,
irrevocably, and exclusively throughout the world unto the Company, all
copyrights and other rights, titles and interests whatsoever in and to Works.
Employee shall execute (whether or not any court or agency has concluded that
the Works, or any of them, do not constitute or qualify as "works made for
hire") such further grants and assignments of all rights which the Company from
time to time reasonably may request for the purpose of evidencing, enforcing,
registering or defending its complete, exclusive, perpetual and worldwide
ownership of the Works. Without limiting the preceding provisions of this
Section, I acknowledge and agree that the Company may edit and otherwise
modify, and use, publish and otherwise exploit, the Works (and any of them or
part of them) in any media and in such manner as the Company in its sole
discretion may determine. For purposes of this provision, the term "Works"
shall mean and include all writings, tapes, recordings, computer programs and
other works in any tangible medium of expression, regardless of the form of the
medium, which have been or are prepared by the Employee, or to which the
Employee contributes, in connection with his employment by the Company, whether
created within or without the Company's facilities and whether created before,
during or after normal business hours.
-6-
<PAGE> 8
19. Attorney-In-Fact.
The Employee hereby irrevocably constitutes and appoints the
Company as his agent and attorney-in-fact, with full power of substitution, in
the Employee's name, place and stead, to execute and deliver any and all such
assignments or other instruments which the Employee shall fail or refuse
promptly to execute, and deliver as required pursuant to Section 17 or 18
above, this power and agency being coupled with an interest and being
irrevocable.
20. Severability
Except as noted below, should any provision of this Agreement be
declared or determined by any court of competent jurisdiction to be
unenforceable or invalid for any reason, the validity of the remaining parts,
terms or provisions of this Agreement shall not be affected thereby and the
invalid or unenforceable part, term or provision shall be deemed not to be a
part of this Agreement. The covenants set forth in this Agreement are to be
reformed pursuant to Section 21 if held to be unreasonable or enforceable, in
whole or in part, and, as written and as reformed, shall be deemed to be part
of this Agreement.
21. Reformation.
If any of the covenants or promises of this Agreement are
determined by any court of law or equity, with jurisdiction over this matter,
to be unreasonable or unenforceable, in whole or in part, as written, Employee
hereby consents to and affirmatively requests that said court reform the
covenant or promise so as to be reasonable and enforceable and that said court
enforce the covenant or promise as so reformed.
22. Injunctive Relief.
Employee understands, acknowledges and agrees that in the event
of a breach or threatened breach of any of the covenants and promises contained
in Sections 10, 11, 12, 16, 17 and 18, the Company will suffer irreparable
injury for which there is no adequate remedy at law and the Company will
therefore be entitled to injunctive relief enjoining said breach or threatened
breach. Employee further acknowledges, however, that the Company shall have
the right to seek a remedy at law as well as or in lieu of equitable relief in
the event of any such breach.
23. Assignment.
The terms and provisions of this Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns, and
upon Employee and his heirs and personal representatives. The term "Company"
as used in this Agreement shall be deemed to include the successors and assigns
of the original or any subsequent entity constituting the Company as well as
any and all divisions, subsidiaries, or affiliates thereof.
24. Waiver.
The waiver by any party to this Agreement of a breach of any of
the provisions of this Agreement shall not operate or be construed as a waiver
of any subsequent or simultaneous breach.
25. Applicable Law.
This Agreement has been entered into in and shall be governed by
and construed under the laws of the State of Georgia.
26. Headings and Captions.
The headings and captions used in this Agreement are for
convenience of reference only, and shall in no way define, limit, expand or
otherwise affect the meaning or construction of any provision of this
Agreement.
-7-
<PAGE> 9
27. Notice.
Any notice required or permitted to be given pursuant to this
Agreement shall be deemed sufficiently given when delivered in person or when
deposited in the United States mail, first class postage prepaid.
28. Gender.
All pronouns or any variations thereof contained in this
Agreement refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person or persons may require.
29. Entire Agreement.
This Agreement, together with any exhibits attached hereto,
constitutes the entire agreement between the Company and Employee with respect
to the subject matter of this Agreement and supersedes any prior agreements or
understandings between the Company and Employee with respect to such subject
matter. No amendment or waiver of this Agreement or any provision hereof shall
be effective unless in writing signed by both of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, under seal, as of the day and year first above written.
"COMPANY"
L.A. T SPORTSWEAR, INC.
By: /s/ Isador E. Mitzner
---------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
[CORPORATE SEAL]
"EMPLOYEE"
/s/ Robert C. Aldworth (SEAL)
-------------------------------------------
ROBERT C. ALDWORTH
-8-
<PAGE> 10
EXHIBIT A
DESCRIPTION OF COMPANY'S
CURRENT EMPLOYEE BENEFIT PROGRAMS
<PAGE> 11
EXHIBIT B
<PAGE> 1
EXHIBIT 10.40
<PAGE> 2
LOAN AND SECURITY AGREEMENT
L.A. T Sportswear, Inc.
with
Mellon Bank, N.A., as Agent and Issuing Bank
and
Each of the Financial Institutions Now
or Hereafter a Party Hereto
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
1.2 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------------
SECTION 2. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Revolving Credit - Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
------------------------------
2.2 Letters of Credit: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----------------
2.3 Advances, Conversions, Renewals and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------------------------------------------
2.4 Revolving Credit Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------------------
2.5 Additional Interest Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------------------
2.6 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
----
2.7 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------
2.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------
2.9 Indemnity/Loss of Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
------------------------
2.10 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------
SECTION 3. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1 Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------
3.2 Lien Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------------
3.3 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
3.4 Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------
3.5 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------
3.6 Management Support Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------------
3.7 Filing Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------------
3.8 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------
3.9 Verifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1 Resolutions, Opinions, and Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------------------------------
4.2 Absence of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------------
4.3 Warranties and Representations at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------------------------------
4.4 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
------------------------------
4.5 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
---------------------
4.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-------
4.7 Non-Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------------------
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1 Corporate Organization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-----------------------------------
5.2 Places of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
------------------
5.3 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
------------------
5.4 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-------------------
5.5 Governmental Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--------------------
5.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-----
5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--------------------
</TABLE>
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<TABLE>
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5.8 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
---------------
5.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------
5.10 Guarantees, Contracts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
---------------------------
5.11 Government Regulations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
----------------------------
5.12 Business Interruptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------------------
5.13 Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----
5.14 Other Associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------------
5.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
---------------------
5.16 Regulation O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
------------
5.17 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-------------
5.18 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------
5.19 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-------------------------
5.20 Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
------------------
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
---------------------------
6.2 Maintenance of Properties and Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-------------------------------------------------
6.3 Business Conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
------------------
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
----------
6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-----
6.6 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-------------
6.7 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------------
6.8 Warranties for Future Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------------------------------
6.9 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-------------------
6.10 Financial and Business Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
----------------------------------
6.11 Officers' and Accountant's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
---------------------------------------
6.12 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
----------
6.13 Tax Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------------
6.14 Information to Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------------------------
6.16 Name Changes, Places of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------------------
6.17 Replacement of Management Support Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------------------------------
SECTION 7. NEGATIVE COVENANTS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Merger, Consolidation, Dissolution or Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-------------------------------------------------
7.2 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
------------
7.3 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
----------------------
7.4 Transactions With Affiliates or Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--------------------------------------------
7.5 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
----------
7.6 Distributions, Redemptions and Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 52
-------------------------------------------------
7.7 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
---------------------
7.8 Use of Lenders' Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--------------------
7.9 Miscellaneous Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
-----------------------
7.10 Change of Ownership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
-----------------------------
7.11 Change of Executive Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
---------------------------
SECTION 8. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-----------------
8.2 Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
----
8.3 Rights and Remedies on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
------------------------------
8.4 Nature of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
------------------
</TABLE>
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<TABLE>
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8.5 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-------
SECTION 9. AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----------------------------
9.2 General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
----------------
9.3 Consultation with Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-------------------------
9.4 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
---------
9.5 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
------------------
9.6 Responsibility of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-----------------------
9.7 Collections and Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-----------------------------
9.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
---------------
9.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------
9.10 No Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-----------
9.11 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------
9.12 Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
----------------
9.13 Action on Instructions of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------------------------------
9.14 Several Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------------------
9.15 Consent of Lenders to Agent's Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
------------------------------------
9.16 Participations and Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
------------------------------
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.1 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------------
10.2 Integrated Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
--------------------
10.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------
10.4 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
----
10.5 Expenses of Agent and Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-----------------------------
10.6 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
---------
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
-------
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
--------
10.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
--------
10.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
----------------------
10.11 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------------------
10.12 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
------------
10.13 Signatories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-----------
10.14 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-------------
10.15 Discharge of Taxes, Borrowers' Obligations,Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-----------------------------------------------
10.16 Withholding and Other Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-------------------------------------
10.17 CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
-----------------------
10.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
--------------------
</TABLE>
-iii-
<PAGE> 6
EXHIBIT LIST
<TABLE>
<S> <C> <C>
Exhibit 1 -- Form of Borrowing Authorization
Exhibit 2.1(d) -- Form of Borrowing Base Certificate
Exhibit 2.2 -- Form of Letter of Credit Agreement
Exhibit 5.1 -- Borrower's States of Qualifications
Exhibit 5.2 -- Places of Business
Exhibit 5.3 -- Judgments, Proceedings, Litigation and
Orders
Exhibit 5.4 -- Existing Liens and Claims
Exhibit 5.9 -- Subsidiary and Affiliates
Exhibit 5.10 -- Existing Guaranties, Investments and Borrowings, Leases and Employment Agreements
Exhibit 5.11 -- Employee Pension Plans
Exhibit 5.12 -- Business Interruptions
Exhibit 5.13(a) -- Schedule of Names
Exhibit 5.13(b) -- Trademarks, Patents and Copyrights
Exhibit 5.14 -- Other Associations
Exhibit 5.15 -- Environmental Disclosure
Exhibit 5.17 -- Capital Stock
Exhibit 5.19 -- Required Licenses
Exhibit 6.11 -- Form of Compliance Certificate
Exhibit 10.7 -- Restructuring Program
</TABLE>
-iv-
<PAGE> 7
SCHEDULES
Schedule A -- Schedule of Lenders
Schedule B -- Address of Lenders
Schedule C -- Inventory Locations
-v-
<PAGE> 8
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated as of the 29th
day of April, 1996, by and among L.A. T Sportswear, Inc. ( "Borrower"), Mellon
Bank, N.A., a national banking association, in its capacity as agent, ("Agent")
and Mellon Bank, N.A. ("Mellon") and the financial institutions now or
hereafter a party hereto and listed on Schedule "A" attached hereto and made a
part of this Agreement (as such Schedule may be amended, modified or replaced
from time to time), in their capacity as lenders (Mellon and the other
financial institutions, individually each being a "Lender" and collectively all
being "Lenders").
BACKGROUND
A. Borrower desires to establish financing arrangements with Lenders to
permit its uninterrupted and continuous business operations. Lenders are
willing to make loans and grant extensions of credit to Borrower, under the
terms and provisions hereinafter set forth.
B. The parties desire to define the terms and conditions of their
relationship and reduce them to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms
have the following respective meanings:
Account - Any right to payment for goods sold or leased or for
services rendered which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance.
Account Debtor - Any Person obligated on any Account owing to
Borrower.
Advance(s) - Any monies advanced or credit extended to Borrower
by any Lender under the Revolving Credit, including without limitation cash
advances and the issuance of Letters of Credit.
Affiliate - Section 7.4.
<PAGE> 9
Agreement - This Loan and Security Agreement, as it may
hereafter be amended, supplemented or replaced from time to time.
Applicable Base Rate Margin - One half of one percent (.50%) per
annum provided, however, that upon receipt of Borrower's fiscal year end
audited financial statements, commencing with the fiscal year ending December
28, 1996, and provided that no Event of Default has occurred, the Applicable
Base Rate Margin shall be determined in accordance with the ratio of Borrower's
EBITDA to interest expense as set forth in the following matrix:
Ratio of EBITDA to
Interest Expense Base Rate plus:
---------------- ---------------
[S] [C]
Greater than or equal to 2.00:1 .50%
Greater than or equal to 2.50:1 .25%
Greater than or equal to 3.0:1 0%
The above pricing index shall be measured annually and shall be
effective upon receipt of the fiscal year end audited financial
statements referenced above.
Applicable LIBOR Rate Margin - Two and three quarters percent
(2.75%) per annum provided, however, that, upon receipt of Borrower's fiscal
year end audited financial statements, commencing with the fiscal year ending
December 28, 1996, and provided that no Event of Default has occurred, the
Applicable LIBOR Rate Margin shall be determined in accordance with the ratio
of Borrower's EBITDA to interest expense as set forth in the following matrix:
Ratio of EBITDA to
Interest Expense LIBOR Rate plus:
---------------- ----------------
Greater than or equal to 2.00:1 2.75%
Greater than or equal to 2.5:1 2.50%
Greater than or equal to 3.00:1 2.25%
Greater than or equal to 3.50:1 2.00%
Greater than 4.0:1 1.75%
The above pricing index shall be measured annually and shall be
effective upon receipt of the fiscal year end audited financial
statements referenced above.
Authorized Officer - Any officer or employee of Borrower
authorized by Borrower to request Advances as set forth in a Borrowing
Authorization.
Base Rate - The higher of (i) the Prime Rate or (ii) the
effective Federal Funds Rate plus .50% per annum.
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<PAGE> 10
Base Rate Loan - That portion of the Loans on which interest
accrues at the Base Rate plus the Applicable Base Rate Margin.
Base Rate Option - Section 2.4(a).
Blocked Account Agreements - Those certain blocked account
agreements in favor of Agent from each of the banks where Borrower maintains a
bank account.
Borrowing Authorization - A document, in the form of Exhibit 1
attached hereto and made part hereof, signed and delivered to Agent by an
Authorized Officer of Borrower.
Borrowing Base - As of any date of determination, an amount
equal to the (a) sum of (i) 80% of Eligible Accounts, plus (ii) 60% of Eligible
Inventory, not to exceed the Inventory Sublimit, plus (iii) the Fixed Asset
Sublimit, plus (iv) the lesser of $50,000 or 50% of the Accounts due from
T-Shirt Brokerage, Inc. which are not more than thirty (30) days past the
invoice date and except as provided in clause (ix) of the definition of
Eligible Receivables would otherwise constitute Eligible Receivables, minus (b)
the L/C Reserve amount; provided however, that as of July 31, 1996 the
percentage of Eligible Inventory referred to in clause (a)(ii) above shall be
reduced to 50% and that as of the one year anniversary date of this Agreement,
the Fixed Asset Sublimit shall be deleted from the calculation of the Borrowing
Base.
Borrowing Base Certificate - Section 2.1(d).
Business Day - Any day that is not a Saturday or Sunday or day
on which Agent or any Lender is required or permitted to close, and solely with
respect to LIBOR Rate Loans requested by Borrower, shall mean any day on which
the Agent is able to determine the LIBOR Rate for such requested LIBOR Rate
Loan.
Capital Expenditures - Any expenditure that would be classified
as a capital expenditure on a statement of cash flow of Borrower prepared in
accordance with GAAP, consistently applied.
Cash Collateral Account - Section 2.3(b).
Closing - Section 4.6.
Closing Date - Section 4.6.
Collateral - Section 3.1.
-3-
<PAGE> 11
Collateral Management Fee - Section 2.6(e).
Current Assets - All assets that should be classified as current
assets on a balance sheet of Borrower prepared in accordance with GAAP.
Current Liabilities - All liabilities that should be classified
as current liabilities on a balance sheet of Borrower prepared in accordance
with GAAP, including without limitation, in any event for covenant purposes
only, the Loans.
Current Ratio - The ratio of (i) Current Assets to (ii) Current
Liabilities.
Debt to Tangible Net Worth Ratio - The ratio of (i) total
Liabilities to (ii) Tangible Net Worth.
Default Rate - Section 2.5(c).
Distribution -
(1) Dividends or other distributions of any kind on capital
stock of Borrower;
(2) The redemption, repurchase or acquisition of such stock
or interests or of warrants, rights or other options to purchase such stock or
interests.
EBITDA to Interest Expense - For the period from the first day
of the then current fiscal year through the last day of the fiscal period for
which such calculation is made (i) the sum of Net Income before interest,
taxes, depreciation and amortization, divided by (ii) the sum of cash interest
expense, all of the foregoing as would be shown on a statement of earnings and
cash flow of Borrower prepared in accordance with GAAP.
Eligible Accounts - All Accounts of Borrower meeting all of the
following specifications: (i) the Account is lawfully and exclusively owned by
Borrower and subject to no Lien other than Liens of Agent for the benefit of
Lenders, and Borrower has the right of assignment thereof and the power to
grant a security interest therein; (ii) the Account is valid and enforceable
representing the indebtedness of an Account Debtor not more than 90 days past
the original invoice date provided that an otherwise Eligible Account subject
to an invoice with extended terms shall be deemed eligible so long as it is not
outstanding more than the lesser of 120 days past the invoice date or 30 days
past the due date; (iii) the Account is not subject to any defense, set-off,
counterclaim, dispute, deduction, discount, credit, chargeback, freight claim,
allowance or adjustment of any kind; (iv) no part
-4-
<PAGE> 12
of any goods, the sale or lease of which has given rise to the Account, has
been returned, rejected, lost or damaged; (v) if the Account arises from the
sale of goods by Borrower, such sale was an absolute sale and not on
consignment or on approval or on a sale-or-return basis or subject to any other
repurchase or return agreement, and such goods have been shipped to the Account
Debtor or its designee; (vi) if the Account arises from the performance of
services, such services have actually been performed; (vii) the Account arose
in the ordinary course of Borrower's business; (viii) no notice of the
bankruptcy, receivership, reorganization, liquidation, dissolution, or
insolvency of the Account Debtor has been received by Agent or Borrower; (ix)
the Account Debtor is not a Subsidiary, Affiliate or employee of Borrower and
does not control Borrower and is not under the control of or under common
control with Borrower with the exception of Accounts owing from T-Shirt
Brokerage Inc. as limited through the Borrowing Base definition; (x) it is not
an Account of an Account Debtor having its principal place of business or
executive office outside of the United States unless such Account is guaranteed
in full by an irrevocable letter of credit satisfactory to Agent and assigned
and delivered to Agent; (xi) the Account does not represent a sale to the
government of the United States or any subdivision thereof unless Borrower has
complied, for the benefit of Agent, with the Federal Assignment of Claims Act;
(xii) the Account, together with all other Accounts owing from the same Account
Debtor, represents no more than ten percent (10%) of all of the Accounts of
Borrower; (xiii) not more than twenty-five percent (25%) of the aggregate
balance of all Accounts owing from the Account Debtor obligated on the Account
are outstanding more than ninety (90) days past their invoice date; (xiv) the
Account is payable in lawful money of the United States; and (xv) the Account
meets such other reasonable specifications and requirements which may from time
to time be established by Agent. Eligible Accounts shall not include that
portion of an Account representing interest or late charges for past due
balances, debit memos, or retainage.
Eligible Inventory - All raw materials and finished goods
Inventory of Borrower valued on a first-in, first-out, lower of cost or market
basis, in accordance with GAAP, meeting all of the following specifications:
(i) it is located at a place of business listed on Schedule "C" attached hereto
and made a part hereof; (ii) it is not subject to any Lien other than Liens of
Agent for the benefit of Lenders (which shall be a properly perfected, first
Lien), and Borrower has the right of assignment thereof and the power to grant
a security interest therein; (iii) it is not being held by Borrower for sale
on consignment; (iv) it is not slow moving, discontinued, foreign or obsolete
Inventory; (v) it is not work in process; (vi) it is not packaging, production
supplies, tooling or any other supplies or
-5-
<PAGE> 13
spare parts; and (vii) it meets such other reasonable specifications and
requirements which may from time to time be established by Agent.
ERISA - The Employee Retirement Income Security Act of 1974, as
the same may be amended, from time to time.
Event of Default - Section 8.1.
Expenses - Section 10.5.
Facility Fee - Section 2.6(a).
Federal Funds Rate - The daily rate of interest announced from
time to time by the Board of Governors of the Federal Reserve System in
publication H.15 as the "Federal Funds Rate."
Fiscal Month End - The Saturday closest to the last day of each
respective calendar month.
Fiscal Quarter - The quarterly periods ending on the Saturday
closest to the last day of each March 31, June 30 and September 30, as
applicable, during each fiscal year.
Fiscal Year End - The Saturday closest to December 31 for the
applicable fiscal year.
Fixed Asset Sublimit - An amount equal to the lesser of (i) 75%
of the fair market value appraisal for Borrower's real property located at 1200
Airport Road, Ball Ground, Georgia or (ii) $1,000,000.
Fixed Asset Sublimit Fee - Section 2.6(f).
GAAP - Generally accepted accounting principles applied in a
manner consistent with the most recent audited financial statements of Borrower
referred to in Section 5.7 herein.
Good Business Day - Any Business Day when banks in Philadelphia,
Pennsylvania, New York, New York and London, England are open for business.
Inventory - As defined in the UCC.
Inventory Sublimit - $17,500,000, reducing to $15,000,000 as of
July 31, 1996.
IRS - Section 6.7.
-6-
<PAGE> 14
Issuing Bank - Section 2.2(a).
Letters of Credit - Section 2.2(a).
L/C Fees - Section 2.6(c).
L/C Reserve - Section 2.2(d).
L/C Sublimit - $2,000,000.
Liabilities - All liabilities of every kind as would be shown on
a balance sheet of Borrower prepared in accordance with GAAP.
LIBOR Based Rate - The LIBOR Rate plus the Applicable LIBOR Rate
Margin.
LIBOR Based Rate Loan - That portion of the Loans on which
interest accrues at the LIBOR Based Rate.
LIBOR Interest Period - Section 2.4(b)(ii).
LIBOR Rate - An annual rate of interest determined by Agent as
being the rate available to Agent at approximately 11:00 a.m. London time in
the London Interbank Market, as referenced by Reuters Screen "LIBO", in
accordance with the usual practice in such market, for the LIBOR Interest
Period elected by Borrower, in effect two Good Business Days prior to the
funding date for a requested LIBOR Based Rate Loan (including those requested
in connection with the conversion of a Base Rate Loan to a LIBOR Based Rate
Loan in accordance with Section 2.4 hereof), or for a LIBOR Based Rate Loan
which Borrower has elected to continue as a LIBOR Based Rate Loan beyond the
expiration of the then current LIBOR Interest Period with respect thereto, for
deposits of dollars in amounts equal (as nearly as may be estimated) to the
amount of the LIBOR Based Rate Loan which shall then be loaned by the Lenders
to Borrower as of the time of such determination, as such rate may be adjusted
by the reserve percentage applicable during the LIBOR Interest Period in effect
(or if more than one such percentage shall be applicable, the daily average of
such percentages for those days in such LIBOR Interest Period during which any
such percentage shall be so applicable) under regulations issued from
-7-
<PAGE> 15
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including without
limitation, any emergency, supplemental or other marginal reserve requirement)
for the Agent with respect to liabilities or assets consisting of or including
"Eurocurrency Liabilities" as such term is defined in Regulation D of the Board
of Governors of the Federal Reserve System, as in effect from time to time,
having a term equal to such LIBOR Interest Period ("Eurocurrency Reserve
Requirement"), as reasonably applied to loans of this type generally by the
asset based loan department of Agent. Such adjustment shall be effectuated by
calculating, and the LIBOR Rate shall be equal to, the quotient of (i) the
offered rate divided by (ii) one minus the Eurocurrency Reserve Requirement.
Lien - Any interest of any kind or nature in property securing
an obligation owed to, or a claim of any kind or nature in property by, a
Person other than the owner of the Property, whether such interest is based on
the common law, statute, regulation or contract, and including, but not limited
to, a security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt, a capitalized lease, consignment or bailment
for security purposes, a trust, or an assignment, or as a result of the
issuance of any execution or distraint process against Borrower. The term
"Lien" shall include without limitation, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property other
than those which would not materially interfere with Borrower's use of the
Property and would not materially detract from the value of the Property. For
the purposes of this Agreement, Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.
Loans - The unpaid balance of Advances under the Revolving
Credit (including without limitation the undrawn amounts under all issued and
outstanding Letters of Credit and all unreimbursed draws on Letters of Credit,
unless expressly stated otherwise).
Loan Documents - This Agreement, the Revolving Credit Notes,
Management Support Agreements, and all agreements, instruments and documents
executed and/or delivered from time to time pursuant to this Agreement or in
connection therewith, as amended or replaced from time to time.
Lockbox Agreement - That certain Lockbox Agreement(s) between
Borrower and Agent executed and delivered by Borrower to Agent as it or they
may be amended, supplemented or replaced from time to time.
Lockbox - Section 2.3(b).
-8-
<PAGE> 16
Majority Lenders - At any time, Lenders holding Revolving Credit
Pro Rata Percentages aggregating at least Fifty-One (51%) percent of the total
Revolving Credit Pro Rata Shares at such time.
Management Support Agreements - Those certain Management Support
and Validity Guaranty Agreements from Isador Mitzner, David Shelton and Robert
Aldworth, officers of Borrower, to Agent, for the benefit of Lenders, in form
and substance satisfactory to Agent.
Material Adverse Effect - Any material adverse effect on the
Borrower's financial condition, assets, operating status or projected financial
condition or any fact or circumstance that, singly or in the aggregate with any
fact or circumstance, has a reasonable likelihood of resulting in or leading to
the inability of Borrower to perform in any material respect its obligations
under this Agreement or under any Loan Document or the inability of Agent
and/or Lenders to enforce in any material respect the rights purported to be
granted to them under this Agreement or any Loan Document or which might have a
material adverse effect on the ability of Borrower to effectuate (including
hindering or unduly delaying) the transactions contemplated by this Agreement
and the Loan Documents on the terms contemplated hereby and thereby.
Net Income - Net income after taxes as such would appear on a
statement of income of Borrower, prepared in accordance with GAAP.
Obligations - All existing and future liabilities and
obligations of every kind or nature at any time owing by Borrower to Lenders,
Issuing Bank, and/or to Agent in connection with the Loan Documents (including,
without limitation, this Agreement and the Revolving Credit Notes) and the
transactions contemplated hereby and thereby, whether joint or several, related
or unrelated, primary or secondary, matured or contingent, direct or indirect,
due or to become due, and whether principal, interest, fees or Expenses,
including, without limitation, Obligations in respect of the Revolving Credit
whether related to cash Advances or Letters of Credit (whether drawn or
undrawn) and any extensions, modifications, substitutions, increases and
renewals thereof, and the payment of all reasonable amounts advanced by Agent,
on behalf of Lenders, to preserve, protect and enforce rights hereunder and in
the Collateral and all Expenses incurred in connection therewith and herewith.
Overadvances - Any amounts by which the outstanding Loans
(including, without limitation, drawn and undrawn amounts under Letters of
Credit) at any time exceed the Borrowing Base.
-9-
<PAGE> 17
Permitted Investments - (a) Investments in direct or indirect
obligations of, or obligations unconditionally guaranteed by, the United States
of America and maturing within twelve (12) months from the date of acquisition;
(b) investments in commercial paper of Agent or commercial paper rated
"Prime-1" by Moody's Investors Services or "A-1" by Standard & Poor's
Corporation, or with an equivalent rating by another rating agency of
nationally recognized standing, maturing within twelve (12) months from the
date of acquisition; and (c) certificates of deposit maturing within twelve
(12) months from the date of acquisition and issued by Agent.
PBGC - Section 6.7.
Permitted Liens - Section 7.3.
Person - An individual, partnership, corporation, trust,
unincorporated association or organization, joint venture or any other entity.
Prime Rate - That per annum rate designated or announced by
Agent at its principal office from time to time as its prime rate of interest,
which may be greater or less than other interest rates charged by Agent to
other borrowers and is not solely based or dependent upon the interest rate
which Agent may charge any particular borrower or class of borrowers.
Property - Any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Regulation D - Regulation D of the Board of Governors of the
Federal Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
Revolving Credit - Section 2.1(a).
Revolving Credit Limit - $35,000,000, reducing to $30,000,000 as
of July 31, 1996.
Revolving Credit Maturity Date - March 31, 1999.
Revolving Credit Notes - Those notes described in Section
2.1(b), as they may be amended, supplemented, replaced or restated from time to
time.
Revolving Credit Pro Rata Percentage - Section 2.1(a)(ii).
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<PAGE> 18
Revolving Credit Pro Rata Share - Section 2.1(a)(ii).
Revolving Credit Term - Section 2.1(c).
Settlement Date - Section 2.3(c)(iii).
Subsidiary - Any corporation more than fifty percent (50%) of
whose voting stock is legally and beneficially owned directly or indirectly by
Borrower or owned by a corporation more than fifty percent (50%) of whose
voting stock is legally and beneficially owned directly or indirectly by
Borrower.
Tangible Net Worth - The amount by which the assets (excluding
trademarks, goodwill, covenants not to compete, deferred closing costs and all
other assets as would be characterized as intangible assets under GAAP) exceed
all Liabilities as would be shown on a balance sheet of Borrower, prepared in
accordance with GAAP.
Termination Fee - Section 2.6(d).
UCC - The Uniform Commercial Code as adopted in the Commonwealth
of Pennsylvania at 13 Pa.C.S.A. Section 1101 et seq.
Unfunded Capital Expenditures - Capital Expenditures made with
(i) use of cash Advances or (ii) Borrower's own funds obtained other than (A)
through equity contributed subsequent to the Closing or (B) purchase money or
other financing or lease transactions.
Unused Revolver - means the Revolving Credit Limit minus the
Loans.
Usage Fee - Section 2.6(b).
Working Capital - Current Assets minus Current Liabilities.
1.2 Accounting Principles: Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, this shall be done in accordance with GAAP, to
the extent applicable, except as otherwise expressly provided in this
Agreement.
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SECTION 2. THE LOANS
2.1 Revolving Credit - Description:
(a) (i) Subject to the terms and conditions of this
Agreement, Lenders hereby establish for the benefit of Borrower a revolving
credit facility (collectively, the "Revolving Credit") which shall include
Advances extended by Lenders to or for the benefit of Borrower from time to
time hereunder. The aggregate principal amount of all Loans, shall not, at any
time, exceed the lesser of the Revolving Credit Limit or the Borrowing Base.
Subject to such limitation, the outstanding balance of Loans under the
Revolving Credit may fluctuate from time to time, to be reduced by repayments
made by Borrower, to be increased by future Advances which may be made by
Lenders and, subject to the provisions of Section 8 below, shall be due and
payable on the Revolving Credit Maturity Date. If the aggregate principal
amount of all Loans at any time exceeds the lesser of the Revolving Credit
Limit or the Borrowing Base, Borrower shall immediately repay such excess in
full. Agent has the right at any time and from time to time, in its reasonable
discretion, to create and set aside reasonable reserves against availability
under the Borrowing Base in such amounts as it may deem appropriate based upon
Agent's evaluation of the quality, value, collectibility or Lien status of any
Collateral.
(ii) Subject to Section 8.3(a) below and the terms
of this Agreement, each Lender agrees to lend to Borrower an amount equal to
such Lender's respective percentage (as to each Lender, the percentage of the
Revolving Credit set forth opposite its name on Schedule "A" attached hereto
and made a part hereof and referred to as its "Revolving Credit Pro Rata
Percentage") of the Advance requested by Borrower. The outstanding Loans of
each Lender shall not exceed the respective amount ("Revolving Credit Pro Rata
Shares") set forth opposite its name on Schedule "A".
(b) At Closing, Borrower shall execute and deliver its
promissory note to each Lender for the total principal amount of such Lender's
Revolving Credit Pro Rata Share (collectively, as amended, modified or replaced
from time to time, the "Revolving Credit Notes"). Each Revolving Credit Note
shall evidence Borrower's unconditional obligation to repay such Lender for all
outstanding Loans owed to such Lender under the Revolving Credit, with interest
as herein and therein provided. Each and every Advance under the Revolving
Credit shall be deemed evidenced by the Revolving Credit Notes, which are
deemed incorporated herein by reference and made a part hereof.
(c) The term ("Revolving Credit Term") of the Revolving
Credit shall expire on the Revolving Credit Maturity Date.
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On such date, unless having been sooner accelerated by Agent or sooner
terminated by Borrower pursuant to Section 2.6(d) hereof, all Obligations shall
be due and payable in full, and after such date no further Advances shall be
available from Lenders.
(d) Borrower shall deliver, with each request for an
Advance but in any event, at least once each week (unless following the
occurrence of an Event of Default. Agent requests more frequent delivery), a
borrowing base certificate in the form of Exhibit 2.1(d) attached hereto and
made a part hereof ("Borrowing Base Certificate"), executed by an Authorized
Officer, prepared as of the close of business on the Business Day immediately
preceding Borrower's transmittal thereof.
2.2 Letters of Credit:
(a) As a part of the Revolving Credit and subject to its
terms and conditions (including, without limitation, the Borrowing Base) Mellon
in its capacity as a Lender ("Issuing Bank"), shall, on behalf of and for the
benefit of all Lenders, make available to Borrower documentary/merchandise
letters of credit and standby letters of credit (collectively "Letters of
Credit"), the outstanding undrawn amount of which shall not exceed, in the
aggregate at any one time the L/C Sublimit. Notwithstanding the foregoing, all
Letters of Credit shall be in form and substance satisfactory to Issuing Bank
and Agent. No documentary/merchandise letter of credit shall be issued with an
expiry of greater than 90 days from the date of issuance and no standby letter
of credit shall be issued with an expiry date later than one year from the date
of issuance, but in no event shall any Letter of Credit carry an expiry date
later than the Revolving Credit Maturity Date. Borrower shall execute and
deliver to Issuing Bank all letter of credit agreements, including an agreement
in the form attached hereto as Exhibit 2.2 and other documents required by
Issuing Bank for such purposes, all such documents to be in form and substance
satisfactory to Issuing Bank in its sole discretion.
(b) Immediately upon the issuance of any Letter of Credit,
Issuing Bank is deemed to have granted to each other Lender, and each other
Lender is hereby deemed to have acquired, an undivided participating interest
(without recourse or warranty), in accordance with each such other Lender's
respective Revolving Credit Pro Rata Percentage, in all of Issuing Bank's
rights and liabilities with respect to such Letter of Credit. Each Lender
shall be directly and unconditionally obligated without deduction or setoff of
any kind, to Issuing Bank, according to its Revolving Credit Pro Rata
Percentage, to reimburse Issuing Bank on demand for any draws made at any time
(including, without limitation, following the commencement of any
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bankruptcy, reorganization, receivership, liquidation or dissolution proceeding
with respect to Borrower) under any Letter of Credit.
(c) Issuing Bank shall be immediately, absolutely and
unconditionally reimbursed, without offset or deduction of any kind, by
Borrower for draws made under a Letter of Credit. Such reimbursement shall be
made, at the option of Agent, by either a cash payment by Borrower or by
Lenders automatically making or having deemed made (without further request or
approval of Borrower or Lenders), a cash Advance under the Revolving Credit
(regardless of whether availability then exists under the Borrowing Base). All
cash Advances made by Agent which constitute a reimbursement to Issuing Bank
for a draw under a Letter of Credit shall be repaid to Agent by Lenders,
without deduction or setoff of any kind, in accordance with their respective
Revolving Credit Pro Rata Percentages in accordance with Section 2.3(c).
(d) The sum of (A) one hundred percent (100%) of the face
amount of standby Letters of Credit issued and outstanding, plus (B) fifty
percent (50%) of the face amount of documentary/merchandise Letters of Credit
issued and outstanding, shall constitute reserves against the Borrowing Base
("L/C Reserve").
2.3 Advances, Conversions, Renewals and Payments:
(a) Except to the extent otherwise set forth in this Agreement,
all payments of principal and of interest on the Revolving Credit, the Facility
Fee, the Expenses, the Usage Fee, the L/C Fees, and all other charges and any
other Obligations of Borrower hereunder, shall be made to Agent at its main
Philadelphia banking office, Mellon Bank Center, 1735 Market Street,
Philadelphia, Pennsylvania, in United States dollars, in immediately available
funds. Agent, on behalf of all Lenders, shall have the unconditional right and
discretion to make a cash Advance under the Revolving Credit to pay, and/or to
charge Borrower's operating account with Agent or any Lender for, all of
Borrower's Obligations as they become due from time to time under this
Agreement including without limitation, interest, principal, fees and
reimbursement of Expenses.
(b) Borrower shall maintain a lockbox and/or blocked
account(s) (collectively "Lockbox") with Agent and/or other financial
institutions acceptable to Agent, and a non-interest bearing depository
account(s) ("Cash Collateral Account") with Agent (subject to the provisions of
this subparagraph, and the Lockbox Agreement). Borrower has agreed with Agent
that all collections of Accounts will be paid directly from Account
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Debtors into the Lockbox. Funds shall then be transferred to the Cash
Collateral Account, which funds, upon becoming collected funds, shall be
applied by Agent, to reduce the outstanding indebtedness under the Revolving
Credit, with future Advances considered by Agent under the conditions set forth
in this Section 2; provided, however, that if (a) no Event of Default has
occurred and is continuing, (b) there are no Obligations outstanding or the
only Loans outstanding are LIBOR Based Rate Loans, and (c) no Overadvances are
outstanding, funds in the Cash Collateral Account shall, if requested by
Borrower, be deposited into Borrower's deposit account with Agent. All
collections of Accounts and proceeds of other Collateral received by Borrower
shall be held in trust for the benefit of Lenders and immediately remitted, in
specie, to Agent for deposit in the Cash Collateral Account. Except as
provided in the proviso to the third sentence of this subsection (b), Borrower
shall have no right of access to or withdrawal from the Lockbox or the Cash
Collateral Account; provided that if there are no outstanding Obligations, then
all collections of Accounts shall be transferred to Borrower's operating
account with Agent at such time as such collections have become collected
funds. All funds transferred from the Cash Collateral Account for application
to Borrower's Obligations shall be subject to a one day funds clearance charge
calculated and applied in accordance with the funds clearance procedures of the
Asset Based Department of the Agent.
(c) (i) Cash Advances which may be made by Lenders from
time to time under the Revolving Credit shall be made available for the use and
benefit of Borrower by crediting such proceeds to Borrower's operating account
with Agent.
(ii) All cash Advances subject to the Base Rate
Option requested by Borrower under the Revolving Credit must be requested by
11:00 A.M., Philadelphia time, on the date such Advance is to be made, which
must be a Business Day. All cash Advances subject to the LIBOR Rate Option or
conversions from cash Advances subject to the Base Rate Option to the LIBOR
Rate Option, requested by Borrower must be requested by 11:00 A.M. Philadelphia
time, three Good Business Days prior to the date of such requested cash
Advance. If Borrower does not have the required availability for such
requested Advance under the Borrowing Base on the date any such LIBOR Based
Rate Loan is to be made, then Lenders shall not be required to make such
Advance. All remittances at any time among Lenders and Agent under this
Agreement shall be made in immediately available funds by federal funds wire
transfer. All requests for a cash Advance may be made either by telephone or
in writing, provided that all telephonic requests are, upon Agent's request, to
be confirmed by Borrower in writing on the same day, and further provided that
such written confirmation may be sent by telecopy or facsimile
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transmission. No Lender shall be obligated, for any reason whatsoever, to
advance or reimburse Agent for the share of any other Lender.
(iii) A. Between each Settlement Date, Agent, in its
capacity as a Lender, shall have the discretion (without any duty or obligation
regardless of any prior practice or procedures) to make all cash Advances for
the account and on behalf of the Lenders in accordance with each Lender's
Revolving Credit Pro Rata Percentage. Periodically but not less frequently
than once every week on the same day of each week, unless such day is not a
Business Day, in which event such determination shall be made the next Business
Day ("Settlement Date"), Agent shall make a determination of the appropriate
dollar amount of each Lender's Loans based upon each such Lender's Revolving
Credit Pro Rata Percentage of all then outstanding Loans, which amounts shall
be calculated as of the close of the Business Day immediately preceding each
respective Settlement Date. Amounts of principal paid to Agent by Borrower
from time to time, between Settlement Dates, shall be applied to the
outstanding balance of Loans made by Agent, as a Lender pursuant hereto, with
the outstanding balance of Loans made by each other Lender to be adjusted on
the next Settlement Date. Interest shall accrue and each Lender shall be
entitled to receive interest at the applicable rate only on the actual
outstanding dollar amount of its respective outstanding Loans without regard to
a prospective settlement. On each Settlement Date, Agent shall then issue to
each Lender a settlement schedule containing information with respect to the
status of the Loans and the relevant net positions of the Lenders and the
outstanding balances of their respective Loans as of the close of the Business
Day preceding such Settlement Date. Each settlement schedule shall show the
net amount then owing by each Lender to Agent or by Agent to each such Lender
based upon the aggregate cash Advances made and collections received since the
most recent Settlement Date and settlement among the Lenders and the Agent
shall be made in accordance with the direction of Agent no later than 11:00
A.M. Philadelphia time, on each Settlement Date. To the extent Agent is not
reimbursed by any Lender on a Settlement Date in accordance with Agent's
direction, Borrower shall immediately repay Agent on demand the amount of any
reimbursement not so made by any Lender.
B. Each Lender is absolutely and
unconditionally obligated without setoff or deduction of any kind, to remit to
Agent on the Settlement Date any amount showing to be owing to Agent by such
Lender on the settlement schedule for such date. Agent shall also be entitled
to recover any and all actual losses and damages (including without limitation,
reasonable attorneys' fees) from any party failing to remit
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payment on the Settlement Date in accordance with this Agreement. Agent may
set off the obligations of such party under this paragraph against any
distributions or payments of the Obligations which such party would otherwise
make available at any time.
(iv) A. In lieu of the procedure set forth in the
preceding subparagraph (iii), Agent may provide the Lenders with notice that
the Borrower has requested a cash Advance, on the same Business Day as such
request, and request each Lender to provide Agent with such Lender's Revolving
Credit Pro Rata Percentage of such requested cash Advance prior to Agent's
making such cash Advance. Upon receipt of such notice from Agent prior to
12:00 p.m., Philadelphia time, each Lender shall remit to Agent its respective
Revolving Credit Pro Rata Percentage of such requested cash Advance, prior to
1:00 P.M. Philadelphia time, on the Business Day Agent is scheduled to make
such cash Advance in accordance with Section 2.3(c)(ii) hereof. Neither Agent
nor any other Lender shall be obligated, for any reason whatsoever, to remit or
advance the share of any other Lender. Agent shall not be required to make the
full amount of the requested cash Advance unless and until it receives funds
representing each other Lender's Revolving Credit Pro Rata Percentage of such
requested cash Advance, but Agent shall advance to Borrower that portion of the
requested cash Advance equal to the Revolving Credit Pro Rata Percentages of
such requested cash Advance which it has received from the Lenders.
B. If Agent does not receive each other
Lender's Revolving Credit Pro Rata Percentage of such requested cash Advance,
and Agent elects, in its sole discretion, to make the requested cash Advance on
behalf of Lenders or any of them, Agent shall be entitled to recover each
Lender's Revolving Credit Pro Rata Percentage of each cash Advance together
with interest at a per annum rate equal to the Federal Funds Rate during the
period commencing on the date such cash Advance is made and ending on (but
excluding) the date Agent recovers such amount. Each Lender is absolutely and
unconditionally obligated, without deduction or setoff of any kind, to forward
to Agent its Revolving Credit Pro Rata Percentage of each cash Advance made
pursuant to the terms of this Agreement. To the extent Agent is not reimbursed
by such Lender, Borrower shall repay Agent immediately on demand, such amount.
Agent shall also be entitled to recover any and all actual losses and damages
(including, without limitation, reasonable attorneys' fees) from any Lender
failing to so advance upon demand of Agent. Agent may set off the obligations
of a Lender under this paragraph against any distributions or payments of the
Obligations which Agent would otherwise make available to such Lender at any
time.
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(v) To the extent and during the time period in
which any Lender fails to provide or delays providing its respective payment to
Agent pursuant to clause (iii) or (iv) above, such Lender's percentage of all
payments of the Obligations (but not its Revolving Credit Pro Rata Percentage
of future Advances required to be funded by such Lender) shall decrease to
reflect the actual percentage which its actual outstanding Loans bears to the
total outstanding Loans of all Lenders.
2.4 Revolving Credit Interest:
(a) Base Rate Option - The unpaid principal balance of
Loans under the Revolving Credit, unless subject to the LIBOR Rate Option,
shall bear interest, subject to the terms hereof, at the per annum rate equal
to the Base Rate plus the Applicable Base Rate Margin ("Base Rate Option").
Changes in the Base Rate shall become effective on the same day as Agent
announces a change in its Prime Rate. Interest on Base Rate Loans shall be due
and payable in arrears on the first day of each calendar month commencing the
first day of the first full month following the Closing Date.
(b) LIBOR Rate Option:
(i) Provided that Borrower has at least $5,000,000
in Base Rate Loans outstanding, and so long as no Event of Default has
occurred, Borrower shall have the option to have the unpaid principal balance
of Loans (in excess of $5,000,000) under the Revolving Credit bear interest at
the LIBOR Based Rate ("LIBOR Rate Option"), provided that LIBOR Rate Loans
shall be in $1,000,000 increments and in a minimum amount of Five Million
Dollars ($5,000,000.00).
(ii) LIBOR Based Rate Loans shall be selected for a
period of either one month, two months, three months or six months duration, as
the Borrower may elect, during which the LIBOR Based Rate is applicable ("LIBOR
Interest Period"); provided, however, that (a) if the LIBOR Interest Period
would otherwise end on a day which shall not be a Good Business Day, such LIBOR
Interest Period shall be extended to the next succeeding Good Business Day,
unless such Good Business Day falls in another calendar month, in which case
such LIBOR Interest Period shall end on the next preceding Good Business Day
subject to clause (c) below; (b) interest shall accrue from and including the
first day of each LIBOR Interest Period to, but excluding the day on which any
LIBOR Interest Period expires; and (c) with respect to any LIBOR Interest
Period which begins on the last Good Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month
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at the end of such LIBOR Interest Period), the LIBOR Interest Period shall end
on the last Good Business Day of a calendar month. Interest on a LIBOR Based
Rate Loan shall be due and payable in arrears on the last day of the applicable
LIBOR Interest Period, except with respect to six month LIBOR Interest Periods,
in which case interest shall be paid as if such LIBOR Interest Period were 2
three-month LIBOR Interest Periods. No LIBOR Interest Period may end after the
Revolving Credit Maturity Date. Subject to all of the terms and conditions
applicable to a request that a new cash Advance be a LIBOR Based Rate Loan,
Borrower may extend a LIBOR Based Rate Loan as of the last day of the LIBOR
Interest Period to a new LIBOR Based Rate Loan or may convert all or a portion
of the Loans subject to the Base Rate Option to a LIBOR Based Rate Loan. If
the Borrower fails to notify the Agent of the LIBOR Interest Period for a
subsequent LIBOR Based Rate Loan at least three Good Business Days prior to the
last day of the then current LIBOR Interest Period of an outstanding LIBOR
Based Rate Loan, then such outstanding LIBOR Based Rate Loan shall become a
loan subject to the Base Rate Option at the end of the current LIBOR Interest
Period for such outstanding LIBOR Based Rate Loan and shall accrue interest in
accordance with Section 2.4(a) above.
(iii) The LIBOR Rate may be automatically adjusted by
Agent on a prospective basis to take into account the additional or increased
cost of maintaining any necessary reserves for Eurodollar deposits or increased
costs due to changes in applicable law or regulation or the interpretation
thereof occurring subsequent to the commencement of the then applicable LIBOR
Interest Period, including but not limited to changes in tax laws (except
changes of general applicability in corporate income tax laws as they affect
financial institutions) and changes in the reserve requirements imposed by the
Board of Governors of the Federal Reserve System (or any successor), excluding
any such changes that have resulted in a payment pursuant to Section 2.10
hereof, that increase the cost to Lenders of funding the LIBOR Based Rate Loan.
Agent shall promptly give the Borrower and each Lender notice of such a
determination and adjustment, which determination shall be conclusive as to the
correctness of the fact and the amount of such adjustment, absent manifest
error. The Borrower may, by written notice to Agent, (A) request Agent to
furnish to the Borrower a statement setting forth the basis for adjusting such
LIBOR Based Rate and the method for determining the amount of such adjustment;
and/or (B) prepay the LIBOR Based Rate Loan with respect to which such
adjustment is made, subject to the requirements of Section 2.9 below.
(iv) In the event that the Borrower shall have
requested the LIBOR Rate Option in accordance with Section 2.4(b)
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and Agent shall have reasonably determined that Eurodollar deposits equal to
the amount of the principal of the requested LIBOR Based Rate Loan and for the
LIBOR Interest Period specified are unavailable, impractical or unlawful, or
that the rate based on the LIBOR Rate will not adequately and fairly reflect
the cost of funds of the LIBOR Based Rate applicable to the specified LIBOR
Interest Period, of making or maintaining the principal amount of the requested
LIBOR Based Rate Loan specified by the Borrower during the LIBOR Interest
Period specified, or that by reason of circumstances affecting Eurodollar
markets, adequate and reasonable means do not exist for ascertaining the rate
based on the LIBOR Rate applicable to the specified LIBOR Interest Period,
Agent shall promptly give notice of such determination to the Borrower that the
rate based on the LIBOR Rate is not available. A determination by Agent
hereunder shall be prima facie evidence of the correctness of the fact and
amount of such additional costs or unavailability. Upon such a determination,
(A) the right of Borrower to select, convert to, or maintain a LIBOR Based Rate
Loan at the rate based on the LIBOR Rate shall be suspended until Agent shall
have notified the Borrower that such conditions shall have ceased to exist, and
(B) the Loans subject to the requested LIBOR Rate Option shall accrue interest
in accordance with Section 2.4(a) above.
(v) In the event that, as a result of any changes
in applicable law or regulation or the interpretation thereof, it becomes
unlawful for a Lender to make or to continue to fund or maintain LIBOR Based
Rate Loans or to maintain Eurodollar liabilities sufficient to fund any LIBOR
Based Rate Loan subject to the LIBOR Based Rate, then such Lender shall
immediately notify Agent who shall immediately notify the other Lenders and
Borrower thereof and such Lender's obligations to make, convert to, or maintain
a LIBOR Based Rate Loan at the LIBOR Based Rate shall be suspended until such
time as such Lender may again cause the LIBOR Based Rate to be applicable to
its share of any LIBOR Based Rate Loans and such Lender's share of the Loans
subject to the LIBOR Based Rate shall accrue interest in accordance with
Section 2.4(a) above. Promptly after becoming aware that it is no longer
unlawful for such Lender to maintain such Eurodollar liabilities, such Lender
shall notify Agent who will notify Borrower thereof and such suspension shall
cease to exist.
2.5 Additional Interest Provisions.
(a) Calculation of Interest: Interest on the Loans,
regardless of the rate option, shall be based on a three hundred sixty (360)
day year and charged for the actual number of days elapsed.
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(b) Limitation on LIBOR Based Rate Loans: Upon the
occurrence and continuance of an Event of Default, Agent may in its sole
discretion eliminate the availability of LIBOR Based Rate Loans.
(c) Default Rate: After the occurrence and during the
continuance of an Event of Default hereunder, Agent may, and shall at the
direction of the Majority Lenders, increase the per annum effective rate of
interest on all Loans outstanding under the Revolving Credit, including amounts
drawn and not yet reimbursed under Letters of Credit, regardless of the rate
option, to a rate equal to two (2%) percentage points in excess of the
applicable interest rate (the "Default Rate").
(d) Conversion: Following the occurrence of an Event of
Default and written notice from Agent that the Obligations have been
accelerated, all LIBOR Based Rate Loans shall convert to a Base Rate Loan,
which conversion is independent of Agent's rights under Section 2.5(c).
(e) Continuation of Interest Charges: All contractual
rates of interest chargeable on outstanding Loans, regardless of the rate
option, shall continue to accrue and be paid even after default, maturity,
acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the
happening of any event or occurrence similar or dissimilar.
(f) Applicable Interest Limitations: In no contingency or
event whatsoever shall the aggregate of all amounts deemed interest hereunder
and charged or collected pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that
such court determines Lenders have charged or received interest hereunder in
excess of the highest applicable rate, Agent, on behalf of Lenders, shall in
its sole discretion, apply and set off such excess interest received by Lenders
against other Obligations due or to become due and such rate shall
automatically be reduced to the maximum rate permitted by such law.
2.6 Fees:
(a) Facility Fee: As of the Closing, Borrower shall have
paid to Agent, for the benefit of Lenders, a non-refundable facility fee in the
amount of $80,000.00 ("Facility Fee").
(b) Usage Fee: So long as the Revolving Credit is
outstanding and has not been terminated pursuant to the terms hereof, Borrower
shall unconditionally pay to Agent, for the
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benefit of Lenders in accordance with their Revolving Credit Pro Rata
Percentage, a non-refundable fee ("Usage Fee") equal to one-fifth of one
percent (.20%) per annum of the average daily Unused Revolver. The Usage Fee
shall be computed and paid on a monthly basis, in arrears, on the first day of
each calendar month, beginning on the first day of the first calendar month
after the initial Advance hereunder.
(c) Letter of Credit Fees: Borrower shall pay to Agent,
for the benefit of Lenders in accordance with their Revolving Credit Pro Rata
Percentage, letter of credit fees equal to: two percent (2%) per annum of the
face amount of documentary/merchandise letters of credit upon and as a
condition of the issuance thereof, and two percent (2%) per annum of the face
amount of each standby letter of credit on the first day of each calendar
quarter in arrears. Borrower shall also pay to Issuing Bank all of Issuing
Bank's standard charges (including without limitation all cable and wire
transfer charges) for the account of Issuing Bank for the issuance, amendment,
negotiation/payment, extension and cancellation of each such Letter of Credit.
All such fees are collectively, the "L/C Fees".
(d) Termination Fee: In the event there occurs any
termination of the Revolving Credit for any reason whatsoever prior to the
Revolving Credit Maturity Date, Borrower, if initiating such termination, may
only effect such termination on at least ninety (90) days prior written notice
to Agent and in all events Borrower shall pay to Agent for the benefit of
Lenders in accordance with their Revolving Credit Pro Rata Percentage, a
prepayment premium (the "Termination Fee") in an amount equal to three percent
(3%) of the Revolving Credit Limit if such termination occurs during the first
year of the Revolving Credit Term, two percent (2%) of the Revolving Credit
Limit if the termination occurs during the second year of the Revolving Credit
Term and one percent (1%) of the Revolving Credit Limit if such termination
occurs at any time thereafter prior to the Revolving Credit Maturity Date, as
well as make full payment of all outstanding Obligations, in which case any and
all commitments of Lenders and Agent hereunder shall cease as of such date of
termination.
(e) Collateral Management Fee: So long as the Revolving
Credit is outstanding and has not been terminated pursuant to the terms hereof,
Borrower shall unconditionally pay to Agent, for its sole benefit, a non-
refundable audit and collateral management fee in the amount of $5,000 per
month payable in advance ("Collateral Management Fee"). The Collateral
Management Fee is subject to reduction upon receipt of Borrower's fiscal year
end audited financial statements commencing with the
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fiscal year ending December 28, 1996 and provided that no Event of Default has
occurred, based on the ratio of Borrower's EBITDA to interest expense as set
forth below:
Ratio of EBITDA to
Interest Expense Monthly Fee:
---------------- ------------
Greater than or equal to 2.00:1 $5,000.00
Greater than or equal to 2.50:1 $4,000.00
Greater than or equal to 3.00:1 $3,000.00
(f) Fixed Asset Sublimit Fee: As of the Closing, Borrower
shall have paid to Agent, for the benefit of Lenders, a non-refundable fee for
the establishment of the Fixed Asset Sublimit in the amount of $20,000.00
("Fixed Asset Sublimit Fee").
(g) Calculation of Fees: All fees provided for in this
Section 2.6 shall be based on a three hundred sixty (360) day year and charged
for the actual number of days elapsed.
2.7 Prepayments:
(a) LIBOR Based Rate Loans: Apart from the provisions of
Section 2.6(d) above, if applicable, no portion of any LIBOR Based Rate Loan
may be prepaid at any time unless Borrower first satisfies in full its
obligations under Section 2.9 below arising from such prepayment.
(b) Base Rate Loans: Subject to Sections 2.6(b) and (d),
Base Rate Loans may be prepaid at any time and from time to time in whole or in
part without premium or penalty.
(c) Proceeds of Collateral: Borrower shall, upon the
receipt of proceeds of any Collateral, hold such proceeds in trust for Lenders
and immediately remit in specie, all such proceeds to Agent, which funds,
unless the only outstanding Loans are LIBOR Based Rate Loans, no Overadvances
are outstanding and no Event of Default exists, shall be applied against the
Obligations; provided however that so long as no Event of Default has occurred
and if there are no Obligations outstanding, such funds shall be deposited into
Borrower's deposit account with Agent.
2.8 Use of Proceeds: The extensions of credit under and proceeds of
the Revolving Credit shall be used for (i) refinancing Borrower's existing
borrowed indebtedness, and (ii) working capital and any other lawful purpose
not otherwise prohibited under this Agreement.
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2.9 Indemnity/Loss of Margin:
(a) Borrower shall indemnify, defend and hold harmless
Agent and Lenders against any and all loss, liability, cost or expense which
Agent and any Lender or Lenders may sustain or incur as a consequence of (i)
any failure of Borrower to obtain, convert or extend any LIBOR Based Rate Loan
after notice thereof has been given to Agent; (ii) any payment, prepayment,
termination or conversion of a LIBOR Based Rate Loan made for any reason on a
date other than the last day of the applicable LIBOR Interest Period; or (iii)
any failure of Borrower to have the required availability under the Borrowing
Base for a requested Advance subject to the LIBOR Rate Option. Borrower shall
pay the full amount thereof to Agent, for the ratable benefit of Lenders, on
demand by Agent.
(b) In the event that any present or future law, rule,
regulation, treaty or official directive or the interpretation or application
thereof by any central bank, monetary authority or governmental authority, or
the compliance with any guideline or request of any central bank, monetary
authority or governmental authority (whether or not having the force of law)
imposes, modifies or deems applicable any deposit insurance, reserve, special
deposit, or other similar requirement with respect to deposits in or for the
account of, or loans or advances or commitment to make loans or advances by, or
letters of credit issued or commitment to issue letters of credit by a Lender
and the result of any of the foregoing is to increase the costs of a Lender,
reduce the income receivable by or return on equity of Lender or impose any
expense upon Lender with respect to any advances or extensions of credit or
commitments to make advances or extensions of credit under this Agreement, such
Lender shall so notify Agent in writing. Upon notice from Agent, Borrower
agrees to either (i) pay such Lender the amount of such increase in cost,
reduction in income, reduced return on equity or capital, or additional expense
after presentation by such Lender of a statement concerning such increase in
cost, reduction in income, reduced return on equity or capital, or additional
expense, or (ii) within fifteen (15) days from the date of such notice, notify
Agent in writing of its intent to terminate the Revolving Credit, which notice
shall be irrevocable, and Borrower shall obtain new financing with an interest
rate lower than the then applicable rate being charged under this Agreement
(taking into account the amount Borrower would otherwise be required to pay
pursuant to clause (i) above) and within ninety (90) days from the date of such
notice of termination make full payment of all outstanding Obligations
(exclusive of any otherwise applicable Termination Fee which shall not be
payable if a termination occurs pursuant to this clause (ii)). Any such
statement delivered pursuant to clause (i) above shall set forth
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a brief explanation of the amount and such Lender's calculation of the amount
(in determining such amount such Lender may use any reasonable averaging and
attribution methods), which statement shall be conclusively deemed correct
absent manifest error.
2.10 Capital Adequacy: If any present or future law, governmental
rule, regulation, policy, guideline, directive or similar requirement (whether
or not having the force of law) imposes, modifies, or deems applicable any
capital adequacy, capital maintenance or similar requirement which affects the
manner in which any Lender allocates capital resources to its commitments
(including any commitments hereunder), and as a result thereof, in the opinion
of such Lender, the rate of return on such Lender's capital with regard to the
Loans and/or its obligations hereunder is reduced to a level below that which
such Lender could have achieved but for such circumstances taking into account
such Lender's policies regarding capital adequacy, then in such case and upon
notice from Agent to Borrower, from time to time, Borrower shall either (i) pay
such Lender such additional amount or amounts as shall compensate such Lender
for such reduction in its rate of return, or (ii) if such Lender is Mellon,
within fifteen (15) days from the date of such notice, notify Agent in writing
of it intent to terminate the Revolving Credit, which notice shall be
irrevocable, and Borrower shall obtain new financing with an interest rate
lower than the then applicable rate being charged under this Agreement (taking
into account the compensation which would otherwise be required by clause (i)
above) and within ninety (90) days from the date of such notice of termination
make full payment of all outstanding Obligations (exclusive of any otherwise
applicable Termination Fee which shall not be payable if termination occurs
pursuant to this clause (ii)), or (iii) if such Lender is a Lender, other than
Mellon, Borrower shall have the option to replace such Lender with another
financial institution (acceptable to Agent) who will purchase all (but not
part) of such Lender's Revolving Credit Pro Rata Share, and such Lender shall
be required to assign and transfer to the financial institution obtained by
Borrower, pursuant to an agreement reasonably satisfactory to such Lender and
without representation, warranty or recourse, its respective Revolving Credit
Pro Rata Share in exchange for full payment of the outstanding balance thereof,
with accrued interest and unpaid fees. Any such notice delivered by Agent as
referenced above, shall contain the statement of such Lender with regard to any
such amount or amounts which shall, in the absence of manifest error, be
binding upon Borrower. In determining such amount, such Lender may use any
reasonable method of averaging and attribution that it deems applicable.
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SECTION 3. COLLATERAL
3.1 Description: As security for the payment of the Obligations,
and satisfaction by Borrower of all covenants and undertakings contained in
this Agreement and the other Loan Documents:
(a) Borrower hereby assigns and grants to Agent, on behalf
of Lenders and Issuing Bank, a continuing first lien on and security interest
in, upon and to all of its following described Property ("Collateral"):
(i) Accounts, Contract Rights, Etc. - All now owned
and hereafter acquired, created, or arising Accounts, accounts receivable,
notes receivable, contract rights, chattel paper, documents (including
documents of title), instruments and letters of credit;
(ii) Inventory - All now owned or hereafter acquired
Inventory of every nature and kind, wherever located;
(iii) Equipment - All now owned or hereafter acquired
equipment, including without limitation machinery, vehicles, furniture and
fixtures, wherever located, and all replacements, parts, accessories,
substitutions and additions thereto;
(iv) General Intangibles - All now owned and hereafter
acquired, created or arising general intangibles of every kind and description,
including, but not limited, to all existing and future customer lists, choses
in action, loans, claims, books, records, patents and patent applications,
copyrights, trademarks, tradenames, tradestyles, trademark applications,
blueprints, drawings, designs and plans, trade secrets, contracts, contract
rights, distributorship agreements, licenses, license agreements, formulae, tax
and any other types of refunds, rights to or in employee or other pension,
retirement or similar plans and any assets thereof, or any portion thereof,
including without limitation refunds for overpayments, distributions upon
termination, reversion of any surplus assets or otherwise, returned and
unearned insurance premiums, rights and claims under insurance policies
relating to the Collateral, and computer information, software, records and
data;
(v) Deposit Accounts - All now existing and hereafter
acquired or arising deposit and investment accounts, commercial paper,
investment securities and certificates of deposit, of every nature, wherever
located, and all documents and records associated therewith;
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(vi) Property in Lender's Possession - All Property,
now or hereafter in Agent's or any Lender's possession; and
(vii) Proceeds - The proceeds (including, without
limitation, insurance proceeds), whether cash or non-cash, of all of the
foregoing.
(b) Agent (for the benefit of Lenders) shall receive a deed
to secure debt on the real property owned by Borrower located at 1200 Airport
Road, Ball Ground, Georgia.
3.2 Lien Documents: At Closing and thereafter as Agent deems
necessary, Borrower shall execute and deliver to Agent, or have executed and
delivered (all in form and substance reasonably satisfactory to Agent):
(a) Financing Statements - Financing statements pursuant to
the UCC, which Agent, on behalf of Lenders, may file in any jurisdiction where
any Collateral is or may be located and in any other jurisdiction that Agent
deems appropriate; and
(b) Other Agreements - Any other agreements, documents,
instruments and writings, including, without limitation, patent and trademark
security agreements, reasonably required by Agent to evidence, perfect or
protect Lenders' liens and security interest in the Collateral or as Agent may
reasonably request from time to time.
3.3 Other Actions: In addition to the foregoing, Borrower shall do
anything further that may be lawfully and reasonably required by Agent to
secure Lenders and effectuate the intentions and objects of this Agreement,
including, but not limited to, the execution and delivery of lockbox
agreements, continuation statements, amendments to financing statements,
security agreements, contracts and any other documents required hereunder. At
Agent's request, Borrower shall also immediately deliver (with execution by
Borrower of all necessary documents or forms to reflect Agent's Lien thereon)
to Agent as bailee for Lenders, all items for which Lenders must receive
possession to obtain a perfected security interest, including without
limitation, all notes, letters of credit, documents of title, chattel paper,
warehouse receipts, instruments, and any other similar instruments constituting
Collateral.
3.4 Searches: Agent shall, prior to or at Closing, and thereafter
as Agent or Majority Lenders acting through Agent may reasonably determine from
time to time, at Borrower's expense, obtain the following searches (the results
of which are to be
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consistent with the warranties made by Borrower in this Agreement):
(a) UCC Searches: UCC searches with the Secretary of State
and local filing office of each state where Borrower maintains its executive
office, a place of business, or assets;
(b) Judgments, Etc.: Judgment, federal tax lien and
corporate tax lien searches, in all applicable filing offices of each state
searched under subparagraph (a) above.
Borrower shall, prior to or at Closing and at its expense,
obtain and deliver to Agent good standing certificates showing Borrower to be
in good standing in its state of incorporation and in each other state or
foreign country in which it is doing and presently intends to do business
except any such jurisdiction for which such failure to be so qualified will not
have a Material Adverse Effect or adversely effect Agent's and/or Lenders'
rights hereunder.
3.5 Landlord's Waivers: Borrower will cause each landlord,
mortgagee and/or warehouseman of all premises occupied by Borrower or to be
occupied by Borrower, or where Collateral at any time is held, to execute and
deliver to Agent an instrument, in form and substance reasonably satisfactory
to Agent, under which such landlord, mortgagee or warehouseman waives
its/his/their right to distrain on or foreclose against the Collateral and
agrees to allow Agent to remain on such premises to dispose of or deal with any
Collateral located thereon.
3.6 Management Support Agreements: On or before the Closing Date,
the Management Support Agreements shall have been executed and delivered.
3.7 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.8 Power of Attorney: Each of the officers of Agent is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring any of them to act as such) with full power of
substitution to do the following: (a) endorse the name of Borrower upon any
and all checks, drafts, money orders and other instruments for the payment of
monies that are payable to Borrower and constitute collections on Borrower's
Accounts or proceeds of other Collateral; (b) execute in the name of Borrower
any financing statements, schedules, assignments, instruments, documents and
statements that Borrower is obligated to give Agent hereunder or is necessary
to perfect Agent's security interest or lien in the Collateral; (c) to
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verify validity, amount or any other matter relating to the Collateral by mail,
telephone, telecopy or otherwise in accordance with the customary procedures of
Agent's asset based lending department; and (d) following an Event of Default,
do such other and further acts and deeds in the name of any such entity that
Agent may reasonably deem necessary or desirable to enforce any Account or
realize upon any other Collateral. This power of attorney is coupled with an
interest, and is irrevocable until the Obligations are indefeasibly paid in
full.
3.9 Verifications: Agent, on behalf of Lenders, shall be entitled
to verify validity, amount, or any other matter relating to the Collateral by
mail, telephone, telecopy or otherwise in accordance with the customary
procedures of Agent's asset-based lending department.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all documents to be in form and substance satisfactory to Agent and
Agent's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrower shall have
delivered to Agent the following:
(a) this Agreement and the Revolving Credit Notes all
properly executed;
(b) each Loan Document;
(c) certified copies of (i) resolutions of the board of
directors of Borrower authorizing the execution of this Agreement, and the
Revolving Credit Notes to be issued hereunder and each document required to be
delivered by any Section hereof and (ii) Borrower's Articles or Certificate of
Incorporation and By-laws;
(d) an incumbency certificate for Borrower identifying all
Authorized Officers, with specimen signatures;
(e) a written opinion of Borrower's independent counsel
addressed to Agent for the benefit of all Lenders and opinions of such other
counsel as Agent deems necessary;
(f) certification by the chief financial officer of
Borrower that there has not occurred any material adverse change in the
operations and condition (financial or otherwise) of Borrower since December
30, 1995 and February 28, 1996.
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(g) payment by Borrower of all fees including, without
limitation, the Facility Fee owing to Agent and/or Lenders and Expenses
associated with the Revolving Credit incurred to the Closing Date;
(h) The Management Support Agreements;
(i) Uniform Commercial Code, judgment, federal and state
tax lien searches against Borrower, at Borrower's expense, showing that the
Property of Borrower is not subject to any Liens except for Permitted Liens,
together with Good Standing and Corporate Tax Lien Search Certificates showing
no Liens on Borrower's Property and showing Borrower to be in good standing in
each jurisdiction as required by Section 3.4 above;
(j) An initial Borrowing Base Certificate dated the Closing
Date evidencing that, after taking into account (i) all closing payments,
costs, and Expenses; (ii) all of Borrower's current obligations consistent with
past customs and practices of Borrower (without deferral thereof); and (iii)
all initial Advances under the Revolving Credit, Borrower has a minimum
borrowing availability of at least $2,000,000 under the Borrowing Base; and
(k) Assignment of bank accounts and Blocked Account
Agreements, along with a Lockbox Agreement, all in form and substance
satisfactory to Agent.
(l) A mortgage on Borrower's real property located at 1200
Airport Road, Ball Ground, Georgia and title insurance with respect thereto,
along with flood insurance or an appropriate certification that the mortgaged
property is not located in a flood zone.
(m) Appraisals on Borrower's real property located at Ball
Ground, Georgia, from an appraiser acceptable to Agent.
4.2 Absence of Certain Events: At the Closing Date, no Event of
Default hereunder shall have occurred and be continuing, and no event shall
have occurred and be continuing which, with the passage of time, or the giving
of notice, or both, would constitute an Event of Default hereunder.
4.3 Warranties and Representations at Closing: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all material respects on the Closing
Date with the same effect as though made on and as of that date. Borrower
shall not have taken any action or permitted any condition to exist which would
have been prohibited by any Section hereof.
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4.4 Compliance with this Agreement: Borrower shall have performed
and complied in all material respects, with all agreements, covenants and
conditions contained herein including, without limitation, the provisions of
Sections 6 and 7 hereof, which are required to be performed or complied with by
Borrower before or at the Closing Date.
4.5 Officer's Certificate: Agent shall have received a certificate
dated the Closing Date and signed by the chief financial officer or a senior
financial executive of Borrower certifying that all of the conditions specified
in this Section have been fulfilled.
4.6 Closing: Subject to the conditions of this Section 4, the
Revolving Credit shall be made available on the date ("Closing Date") this
Agreement is executed and all of the conditions contained in Section 4.1 hereof
are completed (the "Closing").
4.7 Non-Waiver of Rights: By completing the Closing hereunder, or
by making advances hereunder, Agent and Lenders do not thereby waive a breach
of any warranty or representation made by Borrower hereunder or any agreement,
document, or instrument delivered to Agent or any Lender, or otherwise referred
to herein, and any claims and rights of Agent or any Lender resulting from any
breach or misrepresentation by Borrower are specifically reserved by Agent and
Lenders.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lenders to complete the Closing and make the initial Advances
under the Revolving Credit to Borrower, Borrower warrants and represents to
Agent and Lenders that:
5.1 Corporate Organization and Validity:
(a) Borrower is a corporation duly organized and validly
existing under the laws of its state of incorporation, is duly qualified, is
validly existing and in good standing and has lawful power and authority to
engage in the business it conducts in each state where the nature and extent of
its business requires qualification, except where the failure to so qualify
will not have a Material Adverse Effect. A list of all states and other
jurisdictions where Borrower is qualified to do business is attached hereto as
Exhibit "5.1" and made a part hereof.
(b) The making and performance of this Agreement and the
other Loan Documents will not violate or result in a default
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(immediately or with the passage of time) under any law, government rule or
regulation, or the charter, minutes or bylaw provisions of Borrower, or any
material contract, agreement or instrument to which Borrower is a party, or by
which it is bound. Borrower is not in violation of and has not knowingly
caused any Person to violate any term of any material agreement or instrument
to which it or such Person is a party or by which it may be bound or of its
charter, minutes or its bylaws.
(c) Borrower has all requisite corporate power and
authority to enter into and perform this Agreement and to incur the obligations
herein provided for, and has taken all proper and necessary corporate action to
authorize the execution, delivery and performance of this Agreement, and the
documents and related agreements required hereby.
(d) This Agreement, the Revolving Credit Notes to be issued
hereunder, and all related agreements and documents required to be executed and
delivered by Borrower hereunder, when delivered, will be valid and binding upon
Borrower, and enforceable in accordance with their respective terms subject to
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally.
5.2 Places of Business: The only places of business of Borrower,
and the places where it keeps and intends to keep its Property and records
concerning its Property, are at the addresses listed in Exhibit "5.2" attached
hereto and made a part hereof.
5.3 Pending Litigation: There are, to the best of Borrower's
knowledge, no judgments or judicial or administrative orders, proceedings,
litigation or investigations (civil or criminal) pending, or threatened,
against Borrower in any court or before any governmental authority or
arbitration board or tribunal except as shown in Exhibit "5.3", none of which
are reasonably likely to have a Material Adverse Effect. Borrower is not in
default with respect to any order of any court, governmental authority,
regulatory agency or arbitration board or tribunal. Neither Borrower nor any
executive officer of Borrower has been indicted or convicted in connection with
or is engaging in any criminal conduct, or is currently subject to any lawsuit
or proceeding or, to Borrower's knowledge, under investigation in connection
with any anti-racketeering or criminal conduct or activity.
5.4 Title to Properties: Borrower has good and marketable title to
all the Property constituting Collateral, free from Liens, except those of
Agent and/or Lenders, and free from the claims of any other Person, except for
Permitted Liens and those
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Liens set forth on Exhibit "5.4", attached hereto and made a part hereof.
5.5 Governmental Consent: Neither the nature of Borrower or of its
business or Property, nor any relationship between Borrower and any other
Person, nor any circumstance affecting Borrower in connection with the issuance
or delivery of this Agreement or the other Loan Documents, is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of Borrower in
connection with the execution and delivery of this Agreement or the issuance or
delivery of the other Loan Documents.
5.6 Taxes: All tax returns required to be filed by Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon Borrower, or upon any of its respective
Property, income or franchises, which are shown to be due and payable on such
returns have been paid, except for those taxes being contested in good faith
with due diligence by appropriate proceedings for which appropriate reserves
have been maintained under GAAP. Borrower is not aware of any proposed
additional tax assessment or tax to be assessed against or applicable to
Borrower that would be reasonably likely to have a Material Adverse Effect.
5.7 Financial Statements: Borrower's annual audited balance sheet
as of December 30, 1995 and the related income statement and statement of cash
flow as of such date, accompanied, by the unqualified report thereon, by
Borrower's independent certified public accountants, (complete copies of which
have been delivered to Agent), have been prepared in accordance with GAAP and
present fairly, the financial position of Borrower as of such date and the
results of its operations for such period. Borrower's fiscal year ends on the
Saturday nearest December 31 of each calendar year. Borrower's federal tax
identification number is 58-1724902.
5.8 Full Disclosure: Neither the financial statements referred to
in Section 5.7, nor this Agreement nor any other Loan Document or any financial
projections, written reports or certificates regarding Accounts or Inventory,
or other financial statements or reports furnished by Borrower to Agent or any
Lender in connection with the negotiation of the Revolving Credit or contained
in any financial statements or documents relating to Borrower, as of the time
they were furnished, contained any untrue statement of a material fact or omit
a material fact necessary to make the statements contained therein or herein
not misleading. There is no fact known to Borrower which has not
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been disclosed in writing to Agent which has or could have a Material Adverse
Effect.
5.9 Subsidiaries and Affiliates: Borrower has no Subsidiaries or
Affiliates, except as listed on Exhibit "5.9" attached hereto and made a part
hereof.
5.10 Guarantees, Contracts, etc.:
(a) Borrower does not own or hold equity or long term debt
investments in, have any outstanding advances to, or serve as guarantor, surety
or accommodation maker for the obligations of, or have any outstanding
borrowings from, any Person, or has entered into any leases for real or
personal property (whether as landlord or tenant), except as described in
Exhibit "5.10", attached hereto and a made part hereof.
(b) Borrower is not a party to any contract or agreement,
or subject to any charter or other corporate restriction, which has or could
have a Material Adverse Effect.
(c) Except as otherwise specifically provided in this
Agreement, Borrower has not agreed or consented to cause or permit any of its
Property whether now owned or hereafter acquired to be subject in the future
(upon the happening of a contingency or otherwise) to a Lien not permitted by
this Agreement.
5.11 Government Regulations, etc.:
(a) The use of the proceeds of and Borrower's issuance of the
Revolving Credit Notes will not directly or indirectly violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended,
Regulations U, T, G and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. Borrower neither owns nor intends to carry or
purchase any "margin stock" within the meaning of said Regulation U.
(b) Borrower has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership of its Property
and for the conduct of its business, except those which, if not obtained, would
have or could have a Material Adverse Effect.
(c) As of the date hereof, no employee benefit plan ("Pension
Plan"), as defined in Section 3(2) of ERISA, maintained by Borrower or under
which Borrower could have any liability under ERISA (i) has failed to meet the
minimum funding standards established in Section 302 of ERISA, except for any
such failure corrected in full prior to the date hereof, and described on
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Exhibit "5.11", attached hereto and made a part hereof; (ii) has failed to
comply with all applicable requirements of ERISA and of the Internal Revenue
Code, including all applicable rulings and regulations thereunder, (iii) has
engaged in or been involved in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Internal Revenue Code which would subject Borrower
to any material liability, or (iv) has been terminated if such termination
would subject Borrower to any material liability. Borrower has not assumed, or
received notice of a claim asserted against Borrower for, withdrawal liability
(as defined in Section 4207 of ERISA) with respect to any multi-employer
pension plan and is not a member of any Controlled Group (as defined in ERISA).
Borrower has timely made all contributions when due with respect to any
multi-employer pension plan in which it participates and no event has occurred
triggering a claim against Borrower for withdrawal liability with respect to
any multi-employer pension plan in which Borrower participates. All Pension
Plans and multi-employer pension plans to which Borrower participates are
listed on Exhibit "5.11" attached hereto and made a part hereof.
(d) Borrower is not in violation of, and has not received
written notice that it is in violation of, or has knowingly caused any Person
to violate any applicable statute, regulation or ordinance of the United States
of America, or of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency, or department thereof, (including without
limitation, environmental laws and regulations).
5.12 Business Interruptions: Except as set forth in Exhibit "5.12"
hereof, within five (5) years prior to the date hereof, none of the business,
Property or operations of Borrower have been materially and adversely affected
in any way by any casualty, strike, lockout, combination of workers, order of
the United States of America, or any state or local government, or any
political subdivision or agency thereof, directed against Borrower. There are
no pending or threatened labor disputes, strikes, lockouts or similar
occurrences or grievances affecting the business being operated by Borrower.
5.13 Names:
(a) Within five (5) years prior to the Closing Date,
Borrower has not conducted business under or used any other name (whether
corporate or assumed) except for the names shown on Exhibit "5.13(a)",
attached hereto and made a part hereof. Borrower is the sole owner of all
names listed on such Exhibit "5.13(a)" and any and all business done and all
invoices issued in such trade names are Borrower's sales, business and
invoices. Each trade name of Borrower represents a division or trading
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style of Borrower and not a separate corporate subsidiary or affiliate or
independent entity.
(b) All registered trademarks, patents or copyrights, or
such as to which applications for registration have been submitted, which
Borrower uses, plans to use or has a right to use are listed on Exhibit
"5.13(b)" attached hereto and made a part hereof. The Borrower is the sole
owner of such Property except to the extent any other Person has claims or
rights in such Property, as such claims and rights are described on such
Exhibit "5.13(b)". To the best of Borrower's knowledge, Borrower is not in
violation of any rights of any other Person with respect to such Property.
5.14 Other Associations: Borrower is not engaged or does not have an
interest in any joint venture or partnership with any other Person except as
described on Exhibit "5.14" hereto and made a part hereof.
5.15 Environmental Matters: Borrower has no knowledge except as
disclosed on Exhibit 5.15 attached hereto and made part hereof:
(a) of the presence of any Hazardous Substances on any of
the real property on which the Collateral is located including, without
limitation, 1200 Airport Road, Ball Ground, Georgia, or
(b) of any on-site spills, releases, discharges, disposal
or storage of Hazardous Substances that have occurred or are presently
occurring on any of such real property, or
(c) of any spills, releases, discharges or disposal of
Hazardous Substances that have occurred or are presently occurring at other
real properties as a result of the activities or omissions of Borrower or for
which Borrower is reasonably likely to be held responsible, or
(d) of any notice, summons, citation or other communication
sent to Borrower from any state or federal agency concerning any intentional or
unintentional action or conduct, inaction or omission, past or present which is
or may be in violation of any state or federal environmental law, rule or
regulation.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of
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any governmental entity presently in effect and applicable to such real
property.
5.16 Regulation O: No director, executive officer or principal
shareholder of Borrower is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director" (when
used with reference to a Lender), "executive officer" and "principal
shareholder" have the respective meanings assigned thereto in Regulation O
issued by the Board of Governors of the Federal Reserve System.
5.17 Capital Stock: The authorized and outstanding capital stock of
Borrower is as set forth on Exhibit "5.17" attached hereto and made a part
hereof. All of the outstanding capital stock of Borrower has been duly and
validly authorized and issued and is fully paid and non-assessable and has been
sold and delivered to the holders thereof in compliance with, or under valid
exemption from, all Federal and state laws and the rules and regulations of all
regulatory bodies thereof governing the sale and delivery of securities.
Except for the rights and obligations set forth in Exhibit "5.17", there are
no subscriptions, warrants, options, calls, commitments, rights or agreements
by which Borrower or any of its shareholders is bound relating to the issuance,
transfer, voting or redemption of shares of its capital stock or any
pre-emptive rights held by any Person with respect to the shares of Borrower's
capital stock. Except as set forth in Exhibit "5.17", Borrower has not issued
any securities convertible into or exchangeable for shares of its capital stock
or any options, warrants or other rights to acquire such shares or securities
convertible into or exchangeable for such shares.
5.18 Solvency: Borrower is solvent, able to pay its debts as they
become due, and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns Property having a value
both at fair valuation and at present fair salable value greater than the
amount required to pay its debts. Borrower will not be rendered insolvent by
the execution and delivery of this Agreement or any of the other documents
executed in connection with this Agreement or by the transactions contemplated
hereunder or thereunder.
5.19 Patents, Trademarks, Etc.: Except as set forth on Exhibit 5.19
attached hereto and made a part hereof, (a) Borrower does not require any
patents, trademarks or other intellectual property, or any license(s) to use
any patents, trademarks or other intellectual property in order to sell
Inventory in the ordinary course of business; and (b) Agent will not require
any patents, trademarks or other intellectual property or any
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licenses to use the same in order to sell any of such Inventory after the
occurrence of an Event of Default.
5.20 Investment Company: Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is Borrower controlled by such a company.
SECTION 6. AFFIRMATIVE COVENANTS
Borrower covenants that until all of the Obligations to Lenders are paid
and satisfied in full and the Revolving Credit has been terminated:
6.1 Payment of Taxes and Claims: Borrower shall pay, before they
become delinquent,
(a) all taxes, assessments and governmental charges or
levies imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons entitled to the benefit of
statutory or common law Liens,
which, if unpaid, would result in the imposition of a Lien upon its Property;
provided, however, that Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim or demand if the amount, applicability or
validity thereof shall at the time be contested in good faith and by
appropriate proceedings by Borrower, and if Borrower shall have set aside on
its books adequate reserves in respect thereof, in accordance with GAAP; which
deferment of payment is permissible so long as no Lien other than a Permitted
Lien has been entered and Borrower's title to, and its right to use, its
Property are not materially adversely affected thereby.
6.2 Maintenance of Properties and Corporate Existence:
(a) Property - Borrower shall maintain its Property in good
condition and make all renewals, replacements, additions, betterments and
improvements thereto in the ordinary course of business, as Borrower deems
reasonably necessary in good faith in the exercise of its business judgment,
and will pay and discharge when due the cost of repairs and maintenance to its
Property.
(b) Property Insurance - Borrower shall maintain insurance
on all insurable tangible Property against fire, flood, casualty and such other
hazards (including, without limitation, extended coverage, workmen's
compensation, boiler and machinery) in such amounts, with such deductibles and
with such insurers as
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are customarily used by companies operating in the same industry as Borrower
and reasonably acceptable to Agent. At or prior to Closing, Borrower shall
furnish Agent with a schedule of all such insurance prepared by its insurance
broker, and certificates of insurance with respect thereto (including the text
of the Lender's Loss Payable Clause in favor of Agent required below), or such
other evidence of insurance as Agent may require. Borrower shall furnish Agent
with a copy of such policy within thirty (30) days after Closing. In the event
Borrower fails to procure or cause to be procured any such insurance or to
timely pay or cause to be paid the premium(s) on any such insurance, Agent (on
behalf of Lenders) may do so for Borrower, but Borrower shall continue to be
liable for the same. The policies of all casualty insurance with respect to
the Inventory shall contain standard Lender's Loss Payable Clauses issued in
favor of Agent (on behalf of Lenders) indicating that Agent is sole Lender Loss
Payee, under which all losses thereunder with respect to the Inventory shall be
paid to Agent (on behalf of Lenders) as Agent's interest may appear. Such
policies shall expressly provide that the requisite insurance cannot be altered
or canceled without thirty (30) days prior written notice to Agent and shall
insure Lenders notwithstanding the act or neglect of Borrower. Borrower hereby
appoints Agent as its attorney-in-fact, exercisable at Agent's option (without
any obligation to do so), to endorse any check which may be payable to
Borrower, and to file proofs of loss with respect to any insurance claims, in
order to collect the proceeds of such insurance and any amount or amounts
collected by Agent pursuant to the provisions of this paragraph may be applied
by Agent to the Obligations. Borrower further covenants that all insurance
premiums due and owing under their current casualty policies have been paid.
Borrower also agrees to notify Agent, promptly, upon any receipt of a notice of
termination, cancellation, or non-renewal from its insurance company of any
such policy.
(c) Public and Products Liability Insurance - Borrower
shall maintain, and shall deliver to Agent upon Agent's request evidence of,
public liability, products liability and business interruption insurance in
such amounts as are reasonably acceptable to Agent, but in any event not more
than are customary for companies in the same or similar businesses located in
the same or similar area.
(d) Financial Records - Consistent with the existing
practice of Borrower, it shall keep current and accurate books of records and
accounts in which full and correct entries will be made of all of its business
transactions, and will reflect in its financial statements adequate accruals
and appropriations to reserves, all in accordance with GAAP. Borrower shall
not change its fiscal year end date without providing Agent thirty (30) days
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prior written notice thereof, provided that Borrower may make such change only
once prior to the Revolving Credit Termination Date.
(e) Corporate Existence and Rights - Borrower shall do (or
cause to be done) all things necessary to preserve and keep in full force and
effect its existence, good standing in all jurisdictions where its failure to
be in good standing might result in a Material Adverse Effect, and all of its
rights, licenses and franchises, the absence of which might result in a
Material Adverse Effect.
(f) Compliance with Laws - Borrower shall (i) be in
compliance with any and all laws, ordinances, governmental rules and
regulations, and court or administrative orders or decrees to which it is
subject, whether federal, state or local, (including, without limitation,
environmental or environmental-related laws, statutes, ordinances, rules,
regulations and notices); (ii) shall obtain and maintain any and all licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its Property or to the conduct of its business, which violation or
failure to obtain or maintain causes or might cause a Material Adverse Effect.
Borrower shall timely satisfy all assessments, fines, costs and penalties
imposed by any governmental body against Borrower or any Property of Borrower
subject to the provisions of Section 6.1 above.
6.3 Business Conducted: Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any material
respect in any line of business substantially different from the business
conducted by the Borrower immediately prior to the Closing Date, unless such
line of business is reasonably related to such business so conducted prior to
the Closing Date.
6.4 Litigation: Borrower, upon having knowledge thereof, shall give
prompt notice to Agent of (a) the commencement against Borrower of any
litigation claiming from Borrower more than $250,000 in excess of any available
insurance coverage Borrower may have for such claim, and (b) any other claims
made against Borrower, or investigations or proceedings commenced against
Borrower the existence of which or adverse disposition of which might have a
Material Adverse Effect.
6.5 Taxes:
(a) Notwithstanding any other provision of this Agreement
other than 6.5(f) and (g), any and all payments by Borrower hereunder shall be
made free and clear of and without
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deduction for any and all present or future taxes, levies, imposts or
withholding taxes, and all liabilities with respect thereto, excluding taxes
imposed on Agent's or any Lender's net income and franchise taxes imposed on
Agent or any Lender by the United States or any jurisdiction under the laws of
which it is organized or in which an office is located or any political
subdivision thereof (all such non-excluded taxes, levies, imports, withholding
taxes and liabilities being hereinafter referred to as "Taxes"). If Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender or Agent (i) the sum payable shall be increased
by the amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 6.5) such
Lender or Agent shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) Borrower shall make such deductions and
(iii) Borrower shall pay the full amount deducted to the relevant taxing
authority or other governmental authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or
future stamp or documentary taxes or any other general intangible, excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) Borrower will indemnify each Lender and Agent for the
full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 6.5) paid by
such Lender or Agent in respect of any and all payments made by Borrower
hereunder, as the case may be, and any liability (including penalties, interest
and expenses other than those resulting from the failure of a Lender or Agent
to pay any Taxes or Other Taxes for which it shall have received an indemnity
payment hereunder) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Such
indemnification shall be made promptly after the date any Lender or Agent, as
the case may be, makes written demand therefor. If a Lender or Agent shall
become aware that it is entitled to receive a refund it shall notify Borrower
and shall, promptly after receipt of a request by Borrower, apply for and
pursue such a refund at Borrower's expense. If any Lender or Agent receives a
refund in respect of any Taxes or Other Taxes for which such Lender or Agent
has received payment from Borrower hereunder it shall promptly upon receipt
repay such refund to Borrower without interest, except to the extent interest
shall have accompanied such refund, provided that Borrower, upon the request of
such Lender or Agent, agrees to
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return such refund (plus penalties, interest or other charges) to such Lender
or Agent in the event such Lender or Agent is required to repay such refund.
(d) Within 45 days after the date of any payment of Taxes
or Other Taxes withheld by Borrower in respect of any payment to any Lender or
Agent, Borrower will furnish to the Agent, the original or a certified copy of
a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement contained herein, the agreements and obligations contained in this
Section 6.5 shall survive the payment in full of principal and interest
hereunder.
(f) On or prior to the date it becomes a party to this
Agreement, each Lender that is organized outside of the United States shall
deliver to Borrower such certificates, documents or other evidence, as required
by the Code or Treasury Regulations issued pursuant thereto, including Internal
Revenue Service Form 4224 or 1001 and any other certificate or statement or
exemption required by Treasury Regulation Section 1.1441-4(a) or Section
1.1441-6(c) or any subsequent version thereof, properly completed and duly
executed by such Lender establishing that such payment is (i) not subject to
withholding under the Code because such payment is effectively connected with
the conduct by such Lender of a trade or business in the United States or (ii)
totally exempt from United States Federal withholding tax under a provision of
an applicable tax treaty. In addition, each such Lender shall, if legally able
to do so, thereafter deliver such certificates, documents or other evidence
from time to time, including, without limitation, Internal Revenue Service Form
W-8, establishing that payments received hereunder are not subject to such
withholding upon receipt of a written request therefor from Borrower or Agent.
Unless Borrower and Agent have received forms or other documents satisfactory
to them indicating that payments hereunder or under the Revolving Credit Notes
are not subject to United States Federal withholding tax under an applicable
tax treaty, Borrower or Agent shall withhold taxes from such payments at the
applicable statutory rate.
(g) Borrower shall not be required to pay any additional
amounts to any Lender in respect of United States Federal withholding tax
pursuant to this Section 6.5 if the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to deliver the
certificate, documents or other evidence specified in this Section 6.5 unless
such failure is attributable to (i) a change in applicable law, regulation or
official interpretation thereof or (ii) an amendment or modification to or a
revocation of any applicable
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tax treaty or a change in official position regarding the application or
interpretation thereof, in each case on or after the date such Lender becomes a
party to this Agreement, provided, however, that such Lender shall promptly
notify Borrower of any such matter described in clause (i) or (ii) above upon
its learning of the same and shall thereafter take all reasonable actions
resulting from such matter including delivering certificates, documents or
other evidence as may be necessary to eliminate or reduce the amount of tax
required to be withheld.
(h) Any Lender claiming any additional amounts payable
pursuant to this Section 6.5 shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document
requested by Borrower or to change the jurisdiction of its applicable lending
office if the making of such filing or change would avoid the need for or
reduce the amount of any such additional amounts which may thereafter accrue
and would not result in the incurrence by such Lender of any cost for which
Borrower does not provide such security or indemnity as may be reasonably
required by the Lender to indemnify it in full for such cost and would not in
the judgment of such Lender be otherwise disadvantageous to it. Each Lender
agrees with reasonable promptness to notify Borrower of any determination which
it shall make to make any claim for additional amounts payable pursuant to this
Section 6.5.
6.6 Bank Accounts: Borrower shall maintain its principal depository
and disbursement account(s) with Agent.
6.7 Employee Benefit Plans: Borrower will (a) fund all its Pension
Plan(s) in a manner that will satisfy the minimum funding standards of Section
302 of ERISA, or will promptly satisfy any accumulated funding deficiency that
arises under Section 302 of ERISA, (b) furnish Agent, promptly upon Agent's
request of the same, with copies of all reports or other statements filed with
the United States Department of Labor, the Pension Benefit Guaranty Corporation
("PBGC") or the Internal Revenue Service ("IRS") with respect to all Pension
Plan(s), or which Borrower, or any member of a Controlled Group, may receive
from the United States Department of Labor, the IRS or the PBGC, with respect
to all such Pension Plan(s), and (c) promptly advise Agent of the occurrence of
any reportable event (as defined in Section 4043 of ERISA, other than a
reportable event for which the thirty (30) day notice requirement has been
waived by the PBGC) or prohibited transaction (under Section 406 of ERISA or
Section 4975 of the Internal Revenue Code) with respect to any such Pension
Plan(s) and the action which Borrower proposes to take with respect thereto.
Borrower will make all contributions when due with respect to any
multi-employer pension plan in which it participates and will promptly advise
Agent (i) upon its receipt
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of notice of the assertion against it of a claim for withdrawal liability, (ii)
upon the occurrence of any event which, to the best of Borrower's knowledge,
would trigger the assertion of a claim for withdrawal liability against
Borrower, and (iii) upon the occurrence of any event which, to the best of
Borrower's knowledge upon its learning of the same, would place Borrower in a
Controlled Group as a result of which any member (including Borrower) thereof
may be subject to a claim for withdrawal liability, whether liquidated or
contingent.
6.8 Warranties for Future Advances: Each request by Borrower for an
Advance under the Revolving Credit in any form following the Closing Date shall
constitute an automatic representation and warranty, the truth and accuracy of
such representation and warranty of which shall be a further condition to the
funding of each Advance, by Borrower to the effect that (without waiving,
impairing or limiting the rights of Agent and the Lenders under Section 8
below):
(a) There has not occurred any event or occurrence since
the date of delivery of Borrower's most recent financial statements which has
resulted in, or has had, a Material Adverse Effect.
(b) No Event of Default then exists, and no event or
condition which with the giving of notice or passage of time, or both, would
constitute an Event of Default, then exists;
(c) Each Advance is within and complies with the terms and
conditions of this Agreement including without limitation the notice provisions
contained in Section 2.3 hereof; and
(d) Each representation and warranty set forth in Section 5
of this Agreement is then true and correct in all material respects; provided
that Borrower may update all Exhibits and prepare additional Exhibits so that
all such Exhibits and the representations and warranties, taken together,
accurately reflect the state of Borrower's affairs as of the date of a request
for an Advance by giving written notice thereof to Agent, and further provided
that such updated and additional Exhibits do not reflect events or conditions
which constitute violations of Section 6 or 7 hereof or otherwise reflect
material adverse developments.
6.9 Financial Covenants: Borrower shall maintain and comply with
the following financial covenants (calculated on the basis of GAAP):
(a) Working Capital: Borrower shall have and maintain
Working Capital, measured quarterly at the end of each Fiscal
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Quarter, of not less than: $8,250,000 as of Fiscal Quarter end March, 1996;
$8,500,000 as of Fiscal Quarter end June, 1996; $9,500,000 as of Fiscal Quarter
end September, 1996; $10,000,000 as of December 28, 1996 and for each of the
next three Fiscal Quarters; $11,000,000 as of Borrower's Fiscal Year End 1997
and for each of the next three Fiscal Quarters; and $11,500,000 as of the last
day of Borrower's Fiscal Year End 1998 and for each Fiscal Quarter thereafter;
(b) Tangible Net Worth: Borrower shall have and maintain a
Tangible Net Worth, on a consolidated basis, measured monthly at each Fiscal
Month End, of not less than:
$12,800,000 as of and March, 1996,
$12,900,000 as of April, 1996,
$12,950,000 as of May, 1996 through July, 1996,
$13,800,000 as of August, 1996,
$14,000,000 as of September, 1996,
$14,200,000 as of October, 1996,
$14,450,000 as of November, 1996,
$14,641,000 as of December 28, 1996 through May, 1997,
$15,066,000 as of June, 1997 through August, 1997,
$15,491,000 as of September, 1997 through November, 1997,
$16,391,000 as of Borrower's Fiscal Year End 1997 through
May, 1998,
$16,891,000 as of June, 1998 through August, 1998,
$17,391,000 as of September, 1998 through November, 1998,
and
$18,391,000 as of Borrower's Fiscal Year End 1998 and as of
each Fiscal Month End thereafter.
(c) Net Income: Borrower shall have and maintain Net
Income on a consolidated basis, measured annually, of not less than $1,000,000
as of the close of Borrower's Fiscal Year End
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1996; $1,750,000 as of the close of Borrower's Fiscal Year End 1997; and
$2,000,000 as of the close of Borrower's Fiscal Year End 1998 and for each
Fiscal Year End thereafter.
(d) Current Ratio: Borrower shall have and maintain a
Current Ratio on a consolidated basis measured monthly at each Fiscal Month
End, of not less than: 1.05:1 as of March, 1996 and through August, 1996;
1.10:1 as of September, 1996 through November, 1996; 1.15:1 as of December 28,
1996 through November, 1997; 1.25:1 as of Borrower's Fiscal Year End 1997
through November, 1998; and 1.35:1 as of Borrower's Fiscal Year End 1998 and as
of each Fiscal Month End thereafter.
(e) Debt to Tangible Net Worth Ratio: Borrower shall have
and maintain a Debt to Tangible Net Worth Ratio on a consolidated basis
measured quarterly at the end of Fiscal Quarter, not to exceed: 3.6 as of
Fiscal Quarter end March, 1996 and Fiscal Quarter end June, 1996; 3.5:1 as of
Fiscal Quarter end September, 1996; 3.0:1 as of December 28, 1996 and for each
of Borrower's next three Fiscal Quarters; 2.60:1 as of Borrower's Fiscal Year
End December 1997 and for each of Borrower's next three Fiscal Quarters; and
2.50:1 as of Borrower's Fiscal Year End 1998 and for each Fiscal Quarter
thereafter.
(f) Capital Expenditures: Borrower shall not expend for
Unfunded Capital Expenditures in excess of $350,000 during the fiscal year
ending December, 1996, $600,000 during the fiscal year ending December, 1997,
and $1,000,000 during the fiscal year ending December, 1998, all on a
noncumulative basis, except that Borrower may carryover no more than $250,000
of permitted but unused Unfunded Capital Expenditures for the Fiscal Year End
1997 to the next fiscal year.
(g) Calculation and Establishment of Financial Covenants:
Borrower shall not include the reversal of asset reserves established as of
December 30, 1995 in the calculation of, and for the purposes of meeting, the
financial covenants set forth above and for determining the EBIDTA to Interest
Expense calculations referred to in this Agreement. Borrower agrees that Agent
may establish new and/or modify the existing financial covenants on terms
mutually acceptable to Agent and Borrower (which shall only be deemed
unacceptable to Borrower through its exercise of its good faith and reasonable
participation in the covenant establishing process) for the second and third
years of the Revolving Credit Term, following receipt of, and based upon,
Borrower's annual projections to be delivered in accordance with Section
6.10(a)(vii) below and that Borrower shall comply with such new or modified
covenants.
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6.10 Financial and Business Information: Borrower shall deliver to
Agent the following:
(a) Financial Statements and Collateral Reports: such
data, reports, statements and information, financial or otherwise, as Agent may
reasonably request, including, without limitation:
(i) within ninety (90) days after the end of each
fiscal year of Borrower, financial statements of Borrower for such year on a
consolidated and consolidating basis, eliminating inter-company transactions,
including the balance sheet as at the end of such fiscal year and a statement
of cash flows and income statement for such fiscal year, setting forth in the
consolidated statements in comparative form, the corresponding figures as at
the end of and for the previous fiscal year, all in reasonable detail,
including all supporting schedules, and audited and certified on an unqualified
basis by independent public accountants of recognized standing, selected by
Borrower and reasonably satisfactory to the Agent, to have been prepared in
accordance with GAAP, along with Borrower's Form 10K Report filed with the
Securities and Exchange Commission.
(ii) within fifteen (15) days of the end of each
calendar month, Borrower's accounts receivable aging report, accounts payable
aging report, inventory certificates and such other reports as Agent deems
reasonably necessary.
(iii) within forty-five (45) days after the end of
each fiscal quarter, internally prepared financial statements for Borrower,
including balance sheet, income statement and statements of cash flows,
prepared in accordance with GAAP, and Borrower's Form 10Q Report filed with the
Securities and Exchange Commission, all in form and substance reasonably
satisfactory to Agent.
(iv) within thirty (30) days after the end of each
calendar month which is not the end of a fiscal quarter, internally prepared
financial statements for Borrower, including balance sheet, income statement
and statements of cash flows, prepared in accordance with GAAP, without
footnotes and subject to normal year end adjustments, all in form and substance
reasonably satisfactory to Agent.
(v) at least once every week, Borrower's weekly
reports of sales, collections, credit adjustments and all other information
pertaining to Accounts, along with a Borrowing Base Certificate, all in form
and substance reasonably satisfactory to Agent.
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(vi) within fifteen (15) days after the end of each
month, a report identifying the aggregate amount of Inventory at each Inventory
location, all in form and substance reasonably satisfactory to Agent.
(vii) at least 60 days prior to the end of each fiscal
year, annual projections of profit and loss, cash flows and balance sheets
prepared on a monthly basis in a manner consistent with the prior year's
financial statements, all in form and substance reasonably satisfactory to
Agent.
(b) Notice of Event of Default - promptly upon becoming
aware of the existence of any condition or event which constitutes an Event of
Default under this Agreement, or which with the passage of time or the giving
of notice, or both, could become an Event of Default hereunder, a written
notice specifying the nature and period of existence thereof and what action
Borrower is taking (and proposes to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by
Borrower, notice of default, oral or written, given to Borrower by any creditor
for borrowed money in excess of $250,000;
(d) Securities and Other Reports - if Borrower shall be
required to file reports with the Securities and Exchange Commission pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
promptly upon its becoming available, one copy of each financial statement,
report, notice or proxy statement sent by Borrower to stockholders generally,
and, a copy of each regular or periodic report, and any registration statement,
or prospectus in respect thereof, filed by Borrower with any securities
exchange or with federal or state securities and exchange commissions or any
successor agency.
6.11 Officers' and Accountant's Certificates: Along with the set of
financial statements and other reports delivered to Agent and each Lender at
the end of each month, fiscal quarter and fiscal year, as applicable, pursuant
to Section 6.10(a) hereof, Borrower shall (a) deliver to Agent a certificate
(in the form of Exhibit "6.11(a)" attached hereto and made a part hereof) from
the chief financial officer of Borrower; and (b) with respect to the annual
statements of Borrower, use its best efforts to cause Borrower's independent
certified public accountant to issue a letter or report verifying the covenant
calculations contained in Section 6.9 as of the date of the corresponding
financial statements and, if obtained, deliver such letter or report to Agent.
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6.12 Inspection: So long as Borrower is indebted to Lenders,
Borrower will permit any of Agent's officers or other representatives to visit
and inspect any of the locations of Borrower at any time during normal business
hours, provided that prior to the occurrence of any Event of Default or an
event which with the passage of time, the giving of notice or both would become
an Event of Default, Agent shall give Borrower at least 48 hours prior notice
of each visit, to examine and audit all of Borrower's books of account,
records, reports and other papers, to make copies and extracts therefrom and to
discuss its affairs, finances and accounts with its officers, employees and
independent certified public accountants. Borrower hereby irrevocably
authorizes and directs all such accountants and auditors to exhibit and deliver
to Agent copies of any and all of Borrower's financial statements or other
accounting records of any sort in the accountant's or auditor's possession.
Prior to an Event of Default, normal and customary expenses associated with the
inspection shall be covered by the Collateral Management Fee. Following an
Event of Default, all such inspections shall be at Borrower's expense (in
addition to the Collateral Management Fee) at the standard rates charged by
Agent for such activities (plus Agent's reasonable out-of-pocket expenses).
6.13 Tax Returns and Reports: At Agent's request from time to time,
Borrower shall promptly furnish Agent with copies of its annual federal and
state income tax returns. Borrower further agrees that, if requested by Agent,
it shall promptly furnish Agent with copies of all reports filed by it with any
federal, state or local governmental authority or agency, board or commission.
6.14 Information to Participant: Each Lender may divulge to any
participant, co-lender or assignee or prospective participant, co-lender or
assignee it is permitted to obtain in the Revolving Credit, or any portion
thereof, all information, and furnish to such Person copies of any reports,
financial statements, certificates, and documents obtained under any provision
of this Agreement, or related agreements and documents.
6.15 Material Adverse Developments: Borrower agrees that immediately
upon becoming aware of any development or other information which would
reasonably be expected to have or cause a Material Adverse Effect, it shall
give to Agent telephonic or telegraphic notice specifying the nature of such
development or information and such anticipated effect. In addition, such
verbal communication shall be confirmed by written notice thereof to Agent on
the next business day after such verbal notice is given.
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6.16 Name Changes, Places of Business: Borrower shall give thirty
(30) days prior written notice to Agent of any name change or change in the
location of any of its respective places of business, of the places where
records concerning its Accounts are kept, or the establishment of any new, or
the discontinuance of any existing place of business.
6.17 Replacement of Management Support Agreements: In the event that
any person executing a Management Support Agreement ceases to be employed by,
or serve as an officer of Borrower, Borrower shall cause his/her replacement to
execute a Management Support Agreement with terms substantially identical to
those Management Support Agreements executed in conjunction with the Closing
hereunder.
SECTION 7. NEGATIVE COVENANTS:
Borrower covenants that until all of the Obligations to Lenders are paid
and satisfied in full and the Revolving Credit has been terminated, that:
7.1 Merger, Consolidation, Dissolution or Liquidation:
(a) Borrower shall not sell, lease, license, transfer or
otherwise dispose of its Property, other than Inventory, equipment or real
estate sold in the ordinary course of Borrower's business and pursuant to the
restructuring program described on Exhibit 7.1(a) attached hereto and made a
part hereof.
(b) Borrower shall not merge or consolidate with any other
Person, or commence a dissolution or liquidation.
7.2 Acquisitions: Borrower shall not acquire all or a material
portion of the stock, securities or assets of any Person in any transaction or
in any series of related transactions or enter into any sale and leaseback
transaction.
7.3 Liens and Encumbrances: Borrower shall not: (i) execute a
negative pledge agreement with any Person other than Agent and/or Lenders
covering any of its Property or (ii) cause or permit or agree or consent to
cause or permit in the future (upon the happening of a contingency or
otherwise), its Property (including, without limitation, the Collateral),
whether now owned or hereafter acquired, to be subject to a Lien or be subject
to any claim except for Permitted Liens. As used herein, "Permitted Liens"
means:
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(a) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like persons, provided the payment thereof
is not at the time required by Section 6.1;
(b) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment, insurance,
social security and other like laws;
(c) Liens described in Exhibit 5.4;
(d) Liens constituting purchase money security interests,
capitalized leases or finance leases hereafter created by Borrower to Persons
providing financing for Capital Expenditures permitted under this Agreement so
long as each obligation secured by a Lien permitted by this subparagraph (d)
does not exceed 100% of the total cost (including interest) to acquire and
install such Property and such Lien extends only to the Property actually
acquired with such financing.
7.4 Transactions With Affiliates or Subsidiaries:
(a) Borrower shall not enter into any transaction with any
Affiliate or Subsidiary including, without limitation, the purchase, sale, or
exchange of Property, or the loaning or giving of funds to any Affiliate or any
Subsidiary, unless (i) such Subsidiary or Affiliate is engaged in a business
substantially related to the business conducted by Borrower, and the
transaction is in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon terms substantially the same and
no less favorable to Borrower as it would obtain in a comparable arm's-length
transactions with any Person not an Affiliate or a Subsidiary, and (ii) such
transaction is not otherwise prohibited hereunder. (An "Affiliate" means any
entity which directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with Borrower. Control may be
by ownership, contract, or otherwise.)
(b) Borrower shall not create or acquire any Subsidiary.
7.5 Guarantees: Excepting the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection, Borrower shall
not become or be liable, directly or indirectly, primary or secondary, matured
or contingent, in any manner, whether as guarantor, surety, accommodation
maker, or otherwise, for the existing or future indebtedness of any kind of any
Person.
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7.6 Distributions, Redemptions and Other Indebtedness: Borrower
shall not: (a) declare or pay or make any forms of Distribution to its
shareholders, their successors or assigns; (b) make any prepayments on any
existing or future indebtedness for borrowed money to any Person; or (c)
hereafter borrow money other than from Lenders hereunder except in connection
with borrowed money giving rise to a Permitted Lien under Section 7.3(d).
7.7 Loans and Investments: Borrower shall not make or have
outstanding loans, advances, extensions of credit or capital contributions to,
or investments in, any Person other than advances made to employees for travel,
expenses and other business related activities, in the ordinary course of
Borrower's business, in an aggregate amount not to exceed $50,000.
7.8 Use of Lenders' Name: Borrower shall not use any Lender's name
(or the name of any of any Lender's affiliates) or Agent's name in connection
with any of its business operations except to identify the existence of the
Revolving Credit and the names of the Lenders and Agent in the ordinary course
of Borrower's business. Nothing herein contained is intended to permit or
authorize Borrower to make any commitment or contract on behalf of any Lender
or Agent.
7.9 Miscellaneous Covenants:
(a) Borrower shall not become or be a party to any contract
or agreement which at the time of becoming a party to such contract or
agreement materially impairs Borrower's ability to perform under this
Agreement, or under any other instrument, agreement or document to which
Borrower is a party or by which it is or may be bound.
(b) Borrower shall not carry or purchase any "margin stock"
within the meaning of Regulations U, G, T or X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II.
7.10 Change of Ownership Interests: Isador Mitzner shall at all
times own directly or indirectly (which may include ownership by one or more
trusts controlled by him), at least 35% of the capital stock of Borrower owned
by him as of the Closing Date.
7.11 Change of Executive Control: Isador Mitzner shall remain at all
time as the Chairman of the Board of Borrower.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall
constitute an event of default ("Event of Default") and Agent shall thereupon
have the option, and the Majority Lenders shall have the option to cause Agent,
to declare the Obligations
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immediately due and payable, all without demand, notice, presentment or protest
or further action of any kind (it also being understood that the occurrence of
any of the events or conditions set forth in subparagraphs (j), (k) or (l)
shall automatically cause an acceleration of the Obligations):
(a) Payments - if Borrower fails to make any payment of
principal or interest, including any Overadvance, or any fees, under the
Revolving Credit on the due date of such payment; or
(b) Other Charges - if Borrower fails to pay any other charges,
Expenses or other monetary obligations owing to any Lender or Agent arising out
of or incurred in connection with this Agreement within five (5) days after
notice that such payment was not made when due or demanded, as applicable; or
(c) Covenant Defaults - if Borrower fails to perform,
comply with or observe any affirmative or negative covenant or undertaking
contained in this Agreement; provided however that with respect to Borrower's
failure to perform or comply with the covenants contained in Section 6.1 above,
Borrower shall have five (5) Business Days from the occurrence thereof to
perform and/or comply with such covenant; or
(d) Financial Information - if any statement, report,
financial statement, or certificate made or delivered at any time by Borrower
or any of its officers, employees or agents, to Agent or any Lender is not true
and correct, in all material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured
damage to or loss, theft, or destruction with respect to any portion of any
Property of Borrower which (a) is in excess of $250,000 with respect to any
portion of any Property of Borrower, or (b) is reasonably likely to result in a
Material Adverse Effect; or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of Borrower contained in or
pursuant to this Agreement, or in any document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement,
is false, erroneous, or misleading in any material respect when made or deemed
made; or
(g) Agreements with Others - if there shall be any default
by Borrower beyond any grace period under any agreement with any other creditor
for borrowed money in excess of $250,000, and (i) such default consists of the
failure to pay any principal, premium or interest with respect to such
indebtedness, or (ii) such default consists of the failure to perform any
covenant or agreement with respect to such indebtedness, if the effect of such
default is to cause or to permit the relevant creditor to cause Borrower's
obligations which are the subject
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thereof to become due prior to their maturity date or prior to their regularly
scheduled date of payment;
(h) Other Agreements with Lenders - if Borrower breaches or
violates the terms of, or if a default or an Event of Default, occurs under,
any other existing or future agreement (related or unrelated) between Borrower
or among Borrower or Agent or any Lender or all Lenders (subject to any
applicable grace or cure period which may be contained in such other
agreement); or
(i) Judgments - if any final judgment is entered against
Borrower for the payment of money in excess of $250,000 which shall not be
satisfied, dismissed or bonded pending appeal within 30 days after the entry
thereof; or
(j) Assignment for Benefit of Creditors, etc. - if Borrower
makes or proposes an assignment for the benefit of creditors generally, offers
a composition or extension to creditors, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter owned or
conducted by Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of
any action for the dissolution or liquidation of Borrower, or the commencement
of any case or proceeding for reorganization or liquidation of Borrower's debts
under the Bankruptcy Code or any other state or federal law, now or hereafter
enacted for the relief of debtors, whether instituted by or against Borrower;
provided, however, that Borrower shall have sixty (60) days to obtain the
dismissal or discharge of any involuntary proceeding filed against it, it being
understood that during such sixty (60) day period, no Lender shall be obligated
to make Advances hereunder and Agent may seek adequate protection in any
bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower or for a
material portion of Borrower's Property; or
(m) Execution Process, Seizure, etc. - if any Property of
Borrower, with a cost in excess of $250,000 is seized by any governmental
entity (federal, state or local), landlord or other Person without Borrower's
consent; or
(n) Termination of Business - if Borrower ceases any material
portion of its business operations as presently conducted; or
(o) Pension Benefits, etc. - if Borrower fails to comply with
ERISA, so that grounds exist to permit the appointment of a trustee under ERISA
to administer Borrower's employee plans or to allow the Pension Benefit
Guaranty Corporation to institute proceedings to appoint a trustee to
administer such
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plan(s), or to permit the entry of a Lien to secure any deficiency or claim; or
(p) Criminal Conduct and Investigations - if Borrower commits
or is indicted for committing any crime or if any proceeding or investigation
by any governmental body is pending an adverse disposition of which would be
reasonably likely to result in the forfeiture of any material Property of
Borrower to any governmental entity, federal, state or local; or
(q) Management Support Agreements - if any Management
Support Agreement shall for any reason cease to be a valid, binding and
enforceable agreement of the maker thereof, or the maker disputes the validity
or existence thereof, or if a default shall occur thereunder.
8.2 Cure - Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Agent and/or Lenders to accept a cure of any Event of
Default hereunder.
8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies
granted or available to Agent or Lenders under this Agreement or the Loan
Documents, or otherwise available at law or in equity, upon or at any time
after the occurrence and during the continuance of an Event of Default, or any
event which with the giving of notice or the passage of time, or both, would
become an Event of Default, Agent may, in its discretion, direct Lenders, and
the Majority Lenders shall have the option to instruct Agent to direct Lenders,
to, withhold or cease making Advances under the Revolving Credit.
(b) In addition to all other rights, options and remedies
granted or available to Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, in its discretion, upon
or at any time after the occurrence and during the continuance of an Event of
Default, terminate the Revolving Credit.
(c) In addition to all other rights, options and remedies
granted or available to Agent, under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), upon or at any time after the
occurrence and during the continuance of an Event of Default Borrower shall be
obligated to deliver and pledge to Agent, on behalf of all Lenders, cash
collateral in the amount of all outstanding Letters of Credit.
(d) In addition to all other rights, options and remedies
granted or available to Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, upon or at any time
following the occurrence of an Event of Default exercise all rights under the
UCC and any
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other applicable law or in equity, and under all Loan Documents permitted to be
exercised after the occurrence of an Event of Default, including the following
rights and remedies (which list is given by way of example and is not intended
to be an exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices
regarding and collect directly the Collateral, with or without judicial process
(including without limitation the right to notify the United States postal
authorities to redirect mail addressed to Borrower to an address designated by
Agent); or
(ii) By its own means or with judicial assistance,
enter Borrower's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on such premises in compliance with
subsection (e) below, without any liability for rent, storage, utilities or
other sums, and Borrower shall not resist or interfere with such action; or
(iii) Require Borrower at Borrower's expense to
assemble all or any part of the Collateral and make it available to Agent at
any place designated by Agent;
(iv) The right to reduce the Revolving Credit Limit
or the advance rates, or to reduce, modify, take additional reserves under the
Borrowing Base or any portion thereof for the benefit of Lenders or to modify
the terms and conditions upon which Agent, on behalf of Lenders, or Lenders may
be willing to consider making Advances under the Revolving Credit.
(e) Borrower hereby agrees that a notice received by it at
least ten (10) days before the time of any intended public sale or of the time
after which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other
disposition. If permitted by applicable law, any perishable inventory or
Collateral which threatens to speedily decline in value or which is sold on a
recognized market may be sold immediately by Agent without prior notice to
Borrower. Borrower covenants and agrees not to interfere with or impose any
obstacle to Agent's exercise of its rights and remedies with respect to the
Collateral, after the occurrence of an Event of Default hereunder.
8.4 Nature of Remedies: All rights and remedies granted Agent or
Lenders hereunder and under the Loan Documents, or otherwise available at law
or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Agent may proceed with any number of remedies at the same time
until all Obligations are satisfied in full. The exercise of any one right or
remedy shall not be deemed a waiver or release of any other right or remedy,
and Agent, upon or at any time after the occurrence of an Event of Default, may
proceed against Borrower or any of the Collateral, at any time, under any
agreement, with any available remedy and in any order.
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8.5 Set-Off: If any bank account of Borrower with Agent, any Lender
or any participant is attached or otherwise liened or levied upon by any third
party, such Lender (and such participant) as agent for Lenders shall have and
be deemed to have, without notice to Borrower, the immediate right of set-off
and may apply the funds or amount thus set-off against any of the Obligations
hereunder.
SECTION 9. AGENT
9.1 Appointment and Authorization. Each Lender, and each subsequent
holder of any of the Revolving Credit Notes by its acceptance thereof, hereby
irrevocably appoints and authorizes the Agent to take such action on its behalf
and to exercise such powers under this Agreement as are delegated to the Agent
by the terms hereof, together with such powers as are reasonably incidental
thereto. Except as may be otherwise expressly provided herein, Borrower is
hereby authorized by the Lenders to deal solely with the Agent in all
transactions which affect the Lenders under this Agreement and the Loan
Documents. The rights, privileges and remedies accorded to the Agent hereunder
shall be exercised by the Agent on behalf of all of the Lenders.
9.2 General Immunity. Subject to the provisions of this Agreement,
the Agent will handle all transactions relating to the Loans and all other
Obligations, including, without limitation, all transactions with respect to
Letters of Credit, this Agreement, the Loan Documents and all related documents
in accordance with its usual banking practices. In performing its duties as
Agent hereunder, the Agent will take the same care as it takes in connection
with loans in which it alone is interested. However, neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them hereunder or in connection herewith
except for its or their own gross negligence or willful misconduct.
9.3 Consultation with Counsel. The Agent may consult with legal
counsel and any other professional advisors or consultants deemed necessary or
appropriate and selected by Agent and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
9.4 Documents. The Agent shall not be under a duty to examine into
or pass upon the effectiveness, genuineness or validity of this Agreement or
any of the Revolving Credit Notes or any other instrument or document
furnished pursuant hereto or in connection herewith, and the Agent shall be
entitled to assume that the same are valid, effective and genuine and what they
purport to be. In addition the Agent shall not be liable for failing to make
any inquiry concerning the accuracy, performance or observance of any of the
terms, provisions or conditions of such instrument or document.
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9.5 Rights as a Lender. With respect to its applicable Revolving
Credit Pro Rata Percentage of the Revolving Credit, the Agent shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not the Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. Subject to the provisions of this Agreement, the Agent may accept
deposits from, lend money to and generally engage in any kind of banking or
trust business with Borrower and its Affiliates as if it were not the Agent.
9.6 Responsibility of Agent. It is expressly understood and agreed
that the obligations of the Agent hereunder are only those expressly set forth
in this Agreement and that the Agent shall be entitled to assume that no Event
of Default, and no event which with the passage of time, or the giving of
notice, would constitute an Event of Default, has occurred and is continuing,
unless the Agent has actual knowledge of such fact. Except to the extent Agent
is required by the Lenders pursuant to the express terms hereof to take a
specific action, the Agent shall be entitled to use its discretion with respect
to exercising or refraining from exercising any rights which may be vested in
it by, or with respect to taking or refraining from taking any action or
actions that it may be able to take under or in respect of, this Agreement and
the Loan Documents. The Agent shall incur no liability under or in respect of
this Agreement and the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or instrument believed by it to be genuine
or authentic or to be signed by the proper party or parties, or with respect to
anything that it may do or refrain from doing in the reasonable exercise of its
judgment, or that may seem to it to be necessary or desirable under the
circumstances. The relationship between the Agent and each Lender is and shall
be that of agent and principal only and nothing herein shall be construed to
constitute the Agent a joint venturer with any Lender, a trustee or fiduciary
for any of the Lenders or for the holder of a participation therein nor impose
on the Agent duties and obligations other than those set forth herein.
9.7 Collections and Disbursements.
(a) The Agent will have the right to collect and receive all
payments of the Obligations, and to collect and receive all reimbursements for
draws made under the Letters of Credit, together with all fees, charges or
other amounts due under this Agreement and the Loan Documents. On each
Settlement Date, Agent shall make a determination of the actual outstanding
dollar amount of each Lender's Loans based upon its Revolving Credit Pro Rata
Percentage (or such lesser percentage if such Lender has failed to remit a
required payment to Agent hereunder) of the outstanding principal amount of all
Loans.
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(b) Agent shall pay to each Lender, on each Settlement
Date, from the interest actually received by Agent from Borrowers, a sum equal
to the interest calculated for the actual number of days elapsed on the basis
of a year of 360 days, on each Lender's outstanding balance of its Loans at the
rate equal to the applicable rate of interest chosen by Borrower with respect
to such Lender's Revolving Credit Pro Rata Percentage of the Advances
outstanding. If Agent should for any reason receive less than the full amount
of the interest or other compensation due under the Loan Documents, each
Lender's share of such interest or compensation shall decrease in proportion to
each Lender's Revolving Credit Pro Rata Percentage.
(c) If any such payment received by the Agent is rescinded,
determined to be unenforceable or invalid or is otherwise required to be
returned for any reason at any time, whether before or after termination of
this Agreement and the Loan Documents, each Lender will, upon written notice
from the Agent, promptly pay over to the Agent its Revolving Credit Pro Rata
Percentage of the amount so rescinded, held unenforceable or invalid or
required to be returned, together with interest and other fees thereon if also
required to be rescinded or returned.
(d) All payments by the Agent and the Lenders to each other
hereunder shall be in immediately available funds. The Agent will at all times
maintain proper books of account and records reflecting the interest of each
Lender in the Revolving Credit and the Letters of Credit, in a manner customary
to the Agent's keeping of such records, which books and records shall be
available for inspection by each Lender at reasonable times during normal
business hours, at such Lender's sole expense. In the event that any Lender
shall receive any payments in reduction of the Obligations in an amount greater
than its applicable Revolving Credit Pro Rata Percentage in respect of
indebtedness to the Lenders evidenced hereby (including, without limitation
amounts obtained by reason of setoffs), such Lender shall hold such excess in
trust (to the extent such Lender is lawfully able to do so) for Agent (on
behalf of all other Lenders) and shall promptly remit to the Agent such excess
amount so that the amounts received by each Lender hereunder shall at all times
be in accordance with its applicable Revolving Credit Pro Rata Percentage. To
the extent necessary for each Lender's actual percentage of all outstanding
Loans to equal its applicable Revolving Credit Pro Rata Percentage, the Lender
having a greater share of any payment(s) than its applicable Revolving Credit
Pro Rata Percentage shall acquire a participation in the applicable outstanding
balances of the Revolving Credit Pro Rata Shares of the other Lenders as
determined by Agent.
(e) The proceeds from the sale or disposition of any
Collateral shall be applied first to Expenses incurred by Agent, then to
accrued but unpaid interest, then to unpaid fees owing to Lenders and/or Agent,
then on the next Settlement Date to the principal balance of Loans in
accordance with percentage which
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each Lender's respective outstanding Loans bears to the aggregate outstanding
Loans.
9.8 Indemnification. To the extent not promptly paid by Borrower,
the Lenders hereby each indemnify the Agent (and Issuing Bank with respect to
Letters of Credit) ratably according to their respective Revolving Credit Pro
Rata Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by or asserted against the Agent (or Issuing Bank, as the case may be) in any
way relating to or arising out of this Agreement or any other Loan Document or
any action taken or omitted by the Agent (or Issuing Bank, as the case may be)
under or related to this Agreement or the other Loan Documents or the Loans,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's (or Issuing Bank's,
as the case may be) gross negligence or wilful misconduct. Agent shall have
the right to deduct, from any amounts to be paid by Agent to any Lender
hereunder, any amounts owing to Agent by such Lender by virtue of this
paragraph.
9.9 Expenses.
(a) All reasonable out-of-pocket costs and out-of-pocket
expenses incurred by Agent in connection with the creation, amendment,
administration, termination and enforcement of the Loans (including, without
limitation, audit expenses, counsel fees and expenditures to protect, preserve
and defend Agent's and each Lender's rights and interest under the Loan
Documents) shall be shared and paid on demand by Lenders pro rata based on
their applicable Revolving Credit Pro Rata Percentage.
(b) Agent may deduct from payments or distributions to be
made to Lenders such funds as may be necessary to pay or reimburse Agent for
such costs or expenses.
(c) In connection with reimbursement of expenses set forth
in this Section 9.9 and indemnification obligations set forth in Section 9.8,
Agent shall provide a written statement to Lenders describing such expenses or
indemnification obligations.
9.10 No Reliance. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent. Each Lender
shall continue to make its own analysis and evaluation of Borrower. Agent
makes no representation or warranty and assumes no responsibility with respect
to the financial condition or Property of Borrower, any obligor or any account
debtor of Borrower; the accuracy, sufficiency or currency of any information
concerning the
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financial condition, prospects or results of operations of Borrower; or for
sufficiency, authenticity, legal effect, validity or enforceability of the Loan
Documents. Agent assumes no responsibility or liability with respect to the
collectibility of the Obligations or the performance by Borrower of any
obligation under the Loan Documents.
9.11 Reporting. During the term of this Agreement, Agent will
promptly furnish each Lender or make available to each Lender at Agent's office
in Philadelphia, Pennsylvania, such financial statements, reports and other
materials actually received by Agent, as any Lender may reasonably request.
Agent will notify Lenders within a reasonable period of time (not to exceed ten
(10) Business Days) after it receives actual knowledge of any Event of Default
under the Loan Documents.
9.12 Removal of Agent. The Agent may resign at any time upon thirty
(30) days prior written notice thereof to Lenders and Borrower and upon receipt
from Borrower of its written consent to such resignation, which consent shall
not be unreasonably withheld. The Agent may be removed as Agent hereunder by
the written direction of Lenders (exclusive of Mellon) upon the following (i)
willful misconduct in the performance of Agent's duties or responsibilities
under this Agreement; or (ii) if a receiver, trustee or conservator is
appointed for Agent or any state or federal regulatory authority assumes
management or control of Agent or, if under applicable law, the administrative
discretionary duties and responsibilities of Agent hereunder become controlled
by or subject to the approval of any state or federal regulatory authority.
Upon any such removal, the Majority Lenders shall, with Borrower's consent,
which will not be unreasonably withheld, have the right to appoint a successor
Agent, provided that following the occurrence of an Event of Default,
Borrower's consent shall not be required. Upon the acceptance of the
appointment as a successor Agent hereunder by such successor Agent, such
successor Agent shall thereupon succeed to and become vested with all rights,
powers, obligations and duties of the retiring Agent and the retiring Agent
shall be discharged from its duties and obligations hereunder.
9.13 Action on Instructions of Lenders. With respect to any
provision of this Agreement, or any issue arising thereunder, concerning which
the Agent is authorized to act or withhold action by direction of Lenders (or
as the case may be under this Agreement, the Majority Lenders), the Agent shall
in all cases be fully protected in so acting, or in so refraining from acting,
hereunder in accordance with written instructions signed by Lenders. Such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all Lenders and on all holders of the Revolving Credit Notes.
9.14 Several Obligations. The obligation of each Lender is several,
and neither the Agent nor any other Lender shall be
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responsible for any obligation or commitment hereunder of any other Lender.
9.15 Consent of Lenders to Agent's Rights.
(a) Agent shall have the sole and exclusive right to
service, administer and monitor the Loans and the Loan Documents, including
without limitation, the right to exercise all rights, remedies, privileges and
options under the Loan Documents, including without limitation the credit
judgment with respect to the making of Advances and the determination as to the
basis on which and extent to which Advances may be made and the determination
as to whether Letters of Credit should be issued, amended, extended or whether
draws should be honored for Letters of Credit.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
all Lenders: (i) extend the Revolving Credit Term or the Revolving Credit
Maturity Date, (ii) decrease any interest rate on the Revolving Credit or any
fee owing to Lenders, (iii) compromise or settle all or any material portion of
the Obligations, (iv) release any obligor from the Obligations except in
connection with termination of the Revolving Credit and full payment and
satisfaction of all Obligations, (v) modify this Section 9.15(b) or the
definition of Majority Lenders, (vi) release any material portion of the
Collateral except in connection with a sale in the ordinary course or other
permitted disposition or upon full payment of the Obligations; or (vii)
increase the Revolving Credit Limit or the Revolving Credit Pro Rata Share of
any Lender; and, except as expressly provided in this Section 9.15(b) Agent
shall not, without the prior written consent of the Majority Lenders, modify,
amend or waive any provision of this Agreement or the other Loan Documents
unless expressly permitted herein.
(c) Notwithstanding anything to the contrary contained in
subparagraph (b) above, Agent may in its discretion waive a violation of any
provision of Section 6.9 above or withhold enforcement of action as a result of
a violation thereof, for an indefinite period without the consent of any
Lenders if the then most recent financial statements indicate that the
deviation from the financial covenant required to be maintained as of that date
is less than 5% from the required level.
(d) After an acceleration of the Obligations, Agent shall
have the sole and exclusive right, with communication (to the extent reasonably
practicable under the circumstances) with all Lenders, to exercise or refrain
from exercising any and all right, remedies, privileges and options under the
Loan Documents and available at law or in equity to protect and enforce the
rights of the Lenders and collect the Obligations, including, without
limitation, instituting and pursuing all legal actions against Borrower or to
collect the Obligations, or defending any
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and all actions brought by Borrower or other Person; or incurring Expenses or
otherwise making expenditures to protect the Loans, the Collateral or Lenders'
rights or remedies.
(e) To the extent Agent is required to obtain or otherwise
elects to seek the consent of Lenders to an action Agent desires to take, if
any Lender fails to notify Agent, in writing, of its consent or dissent to any
request of Agent hereunder within five (5) Business Days of such Lender's
receipt of such request, such Lender shall be deemed to have given its consent
thereto.
(f) Notwithstanding any other provision of this Section
9.15 and without impairing Agent's discretionary rights under Section 8, to the
extent that there occurs any redetermination of which Accounts constitute
Eligible Accounts or which Inventory constitutes Eligible Inventory which
redetermination results in the creation of an Overadvance, to the extent
Overadvances outstanding at any time as permitted under this Section 9.15(f) do
not exceed $[2,000,000], Agent shall, in its sole discretion, without right of
disapproval by any or all of the Lenders, be entitled in its discretion to
permit Borrower a period not to exceed thirty (30) days to repay or remove such
Overadvance. During such thirty (30) day period, the amount of Loans
constituting such Overadvance shall be excluded in the determination of whether
availability exists within the Borrowing Base for future Advances.
(g) Any amendment to Section 9 of this Agreement shall not
require Borrower's consent.
9.16 Participations and Assignments: Each Lender may at any time:
(a) grant participations of its Revolving Credit Pro Rata Percentage of Loans
or in and to its interests under this Agreement (collectively,
"Participations") to any other lending office of such Lender or to any other
bank, lending institution or other entity which such Lender determines has the
requisite sophistication to evaluate the merits and risks of investments in
Participations ("Participants"); provided however that: all amounts payable by
the Borrower to such Lender hereunder and voting rights of such Lender
hereunder shall be determined as if such Lender had not granted such
Participation; and (iii) any agreement pursuant to which such Lender may grant
a Participation (A) shall provide that such Lender is not delegating and
therefor shall retain the sole right and responsibility to exercise its rights
and privileges including, without limitation, the right to approve any
amendment, modification or waiver of any provisions of this Agreement,
provided, however that as between such Lender and its Participant such Lender
may agree to consult with and obtain the approval of its Participant regarding
any amendment, modification or waiver of any provision set forth in Section
9.15(b); and (B) shall not release or discharge such Lender from its duties and
obligations, which shall remain absolute, to make Advances hereunder; and (b)
assign all or any portion of its
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<PAGE> 71
Revolving Credit Pro Rata Percentage of Loans and its right, title and interest
therein or in and to this Agreement to a Lender or any affiliate of a Lender,
or to any other bank or financial institution, with the prior written consent
of the Agent and Borrower provided that Borrower's consent shall not be
required after the occurrence and during the continuance of an Event of
Default; and provided further that Mellon's Revolving Credit Pro Rata
Percentage shall, unless Borrower consents otherwise, always be greater than
51%. Notwithstanding anything to the contrary contained herein, each Lender
may at any time collaterally assign all or any portion of its rights under this
Agreement and its Revolving Credit Note to any Federal Reserve Bank to secure
overnight deposits, provided that no such assignment shall release the assignor
Lender from its obligations hereunder.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS
REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR
UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING
PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
10.2 Integrated Agreement: The Revolving Credit Notes, the other
Loan Documents, all related agreements, and this Agreement shall be construed
as integrated and complementary of each other, and as augmenting and not
restricting Lenders' and Agent's rights and remedies. If, after applying the
foregoing, an inconsistency still exists, the provisions of this Agreement
shall constitute an amendment thereto and shall control.
10.3 Waiver:
(a) No omission or delay by Agent or Lenders in exercising
any right or power under this Agreement or any related agreements and documents
will impair such right or power or be construed to be a waiver of any default,
or Event of Default or an acquiescence therein, and any single or partial
exercise of any such right or power will not preclude other or further exercise
thereof or the exercise of any other right, and as to Borrowers no waiver will
be valid unless in writing and signed by Agent and then only to the extent
specified.
(b) Borrower releases and shall indemnify, defend and hold
harmless Agent and Lenders, and their respective officers, employees and
agents, of and from any claims, demands, liabilities, obligations, judgments,
injuries, losses, damages and costs and expenses (including, without
limitation, reasonable
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<PAGE> 72
legal fees) resulting from (i) acts or conduct of Borrower under, pursuant or
related to this Agreement and the other Loan Documents, (ii) Borrower's breach
or violation of any representation, warranty, covenant or undertaking contained
in this Agreement or the other Loan Documents, and (iii) Borrower's failure to
comply with any or all laws, statutes, ordinances, governmental rules,
regulations or standards, whether federal, state or local, or court or
administrative orders or decrees, (including without limitation environmental
laws, etc.) and all costs, expenses, fines, penalties or other damages
resulting therefrom, unless resulting from acts or conduct of Lenders
constituting wilful misconduct or gross negligence. The obligations of
Borrower under this Section 10.3(b) shall survive the occurrence of any and all
events whatsoever, including without limitation, payment of the Obligations or
investigation by or knowledge of Lenders.
10.4 Time: Whenever Borrower shall be required to make any payment,
or perform any act, on a day which is not a Business Day, such payment may be
made, or such act may be performed, on the next succeeding Business Day except
with respect to the repayment of LIBOR Based Loans as set forth in Section
2.4(b)(ii). Time is of the essence in the performance under all provisions of
this Agreement and all related agreements and documents.
10.5 Expenses of Agent and Lenders: At Closing and from time to time
thereafter, subject to the terms of Section 6.12 above, Borrower will pay all
reasonable expenses of Agent on demand (including, without limitation, search
costs, audit fees, and the reasonable fees and expenses of legal counsel for
Agent) relating to this Agreement, and all related agreements and documents,
including, without limitation, expenses incurred in the analysis, negotiation,
preparation, closing, administration, enforcement of this Agreement and the
other Loan Documents, the enforcement, protection and defense of the rights of
Agent and Lenders in and to the Loans and Collateral or otherwise hereunder,
and any expenses relating to extensions, amendments, waivers or consents
pursuant to the provisions hereof, or any related agreements and documents or
relating to agreements with other creditors, or termination of this Agreement.
Borrower further agrees to pay, or reimburse Lenders for, all reasonable
out-of-pocket costs and expenses, including without limitation attorneys' fees,
incurred in connection with the enforcement, protection and defense of their
rights in and to the Loans and the Collateral or otherwise hereunder, following
acceleration of the Obligations after the occurrence of an Event of Default
hereunder. Collectively all of the foregoing are referred to as the
"Expenses." Notwithstanding the foregoing, Borrower shall not be obligated to
pay legal fees of Blank Rome Comisky & McCauley (excluding out-of- pocket costs
and expenses and the fees, costs and expenses of local counsel engaged in
conjunction with the deed to secure debt granted on the real property located
at 1200 Airport Road, Ball Ground, Georgia) in conjunction with
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<PAGE> 73
the analysis, negotiation, preparation and closing of this Agreement, in excess
of $25,000, provided that the negotiations, preparation and closing are limited
to a reasonable level and that the closing occurs without unexpected issues or
problems.
10.6 Brokerage: This transaction was brought about and entered into
by Agent, Lenders and Borrower acting as principals and without any brokers,
agents or finders being the effective procuring cause hereof. Borrower
represents that it has not committed Agent or any Lender to the payment of any
brokerage fee, commission or charge in connection with this transaction. If
any such claim is made on Agent or any Lender by any broker, finder or agent or
other person, Borrower hereby indemnifies, defends and saves such party
harmless against such claim and further will defend, with counsel satisfactory
to Agent, any action or actions to recover on such claim, at Borrower's own
cost and expense, including such party's reasonable counsel fees. Borrower
further agrees that until any such claim or demand is adjudicated in such
party's favor, the amount demanded shall be deemed a liability of Borrower
under this Agreement.
10.7 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person
or if sent by telecopy or by nationally recognized overnight courier, or via
first class, Certified or Registered mail, postage prepaid, as follows, unless
such address is changed by written notice hereunder:
If to Agent to: Mellon Bank, N.A.
Mellon Bank Center
1735 Market Street
Philadelphia, PA 19101
Attn: George Cole, Vice President
Telecopy No.: 215/553-0201
With copies to: Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Lawrence F. Flick, II, Esquire
Telecopy No.: 215/569-5555
If to Borrower to: L.A.T Sportswear, Inc.
1200 Airport Road
Ball Ground, Georgia 30107
Attn:
Telecopy No.:
With copies to: Smith, Gambrell & Russell
Suite 1800
3343 Peachtree Road, N.E.
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<PAGE> 74
Atlanta, GA 30326-1010
Attn: A. Jay Schwartz, Esquire
Telecopy No.: 404/264-2652
If to Lenders:
to the addresses set forth on Schedule
"B"
(b) Any notice sent by Agent, any Lender or Borrower by any
of the above methods shall be deemed to be given when so received.
(c) Agent shall be fully entitled to rely upon any
facsimile transmission or other writing purported to be sent by any Authorized
Officer (whether requesting an Advance or otherwise) as being genuine and
authorized.
10.8 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
10.9 Survival: All warranties, representations, and covenants made by
Borrower herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by it or on its behalf under this
Agreement, shall be considered to have been relied upon by Agent and Lenders,
and shall survive the delivery to Lenders of the Revolving Credit Notes,
regardless of any investigation made by Lenders or on their behalf. All
statements in any such certificate or other instrument prepared and/or
delivered for the benefit of Agent and any and all Lenders shall constitute
warranties and representations by Borrower hereunder. Except as otherwise
expressly provided herein, all covenants made by Borrower hereunder or under
any other agreement or instrument shall be deemed continuing until all
Obligations are satisfied in full.
10.10 Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. Borrower may not transfer, assign or delegate any of its duties or
obligations hereunder.
10.11 Duplicate Originals: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed document.
10.12 Modification: No modification hereof or any agreement referred
to herein shall be binding or enforceable unless in writing and signed by
Borrower, Agent and the Lenders except as provided in Section 9 hereof. Any
modification in accordance
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<PAGE> 75
with the terms hereof shall be binding on all parties hereto, whether or not
each is a signatory thereto.
10.13 Signatories: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
10.14 Third Parties: No rights are intended to be created hereunder,
or under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Agent or any Lender of
Borrower's duty of performance, including, without limitation, Borrower's
duties under any account or contract with any other Person.
10.15 Discharge of Taxes, Borrowers' Obligations, Etc.: Agent, in its
sole discretion, shall have the right at any time, and from time to time, if
Borrower fails to timely perform, to: (a) pay for the performance of any of
Borrower's Obligations hereunder, and (b) discharge taxes or Liens, at any time
levied or placed on any of Borrower's Property in violation of this Agreement
unless such entity is in good faith with due diligence by appropriate
proceedings contesting such taxes or Liens and maintaining proper reserves
therefor in accordance with GAAP. Expenses and advances shall be added to the
Revolving Credit, bear interest at the same rate applied to the Revolving
Credit, until reimbursed to Agent. Such payments and advances made by Agent
shall not be construed as a waiver by Agent or Lenders of an Event of Default
under this Agreement.
10.16 Withholding and Other Tax Liabilities: Each Lender shall have
the right to refuse to make any Advances from time to time unless Borrower
shall, at Agent's request, have given to Agent evidence, reasonably
satisfactory to Agent, that they have properly deposited or paid, as required
by law, all withholding taxes and all federal, state, city, county or other
taxes due up to and including the date of the requested Advance. Copies of
deposit slips showing payment shall likewise constitute satisfactory evidence
for such purpose. In the event that any lien, assessment or tax liability
against Borrower shall arise in favor of any taxing authority, whether or not
notice thereof shall be filed or recorded as may be required by law, Agent
shall have the right (but shall not be obligated, nor shall Agent or any Lender
hereby assume the duty) to pay any such lien, assessment or tax liability by
virtue of which such charge shall have arisen; provided, however, that Agent
shall not pay any such tax, assessment or lien if the amount, applicability or
validity thereof is being contested in good faith and by appropriate
proceedings by such entity. In order to pay any such lien, assessment or tax
liability, Agent shall not be obliged to wait until said lien, assessment or
tax liability is filed before taking such action as hereinabove set forth. Any
sum or sums
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<PAGE> 76
which Agent (shared ratably by Lenders) shall have paid for the discharge of
any such lien shall be added to the Revolving Credit and shall be paid by
Borrower to Agent with interest thereon, upon demand, and Agent shall be
subrogated to all rights of such taxing authority against Borrower.
10.17 CONSENT TO JURISDICTION: BORROWER AND EACH LENDER HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF COMMON PLEAS OF
PHILADELPHIA, COMMONWEALTH OF PENNSYLVANIA OR THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA IN ANY AND ALL ACTIONS AND PROCEEDINGS
WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING AND
IRREVOCABLY AGREE TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY SET FORTH HEREIN.
10.18 Waiver of Jury Trial: AS AN INDEPENDENT COVENANT, EACH OF AGENT,
EACH LENDER AND BORROWER HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A JURY
TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST ANY OF THEM
WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN
DOCUMENTS WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
BORROWER: L.A. T SPORTSWEAR, INC.
By: /s/ Robert C. Aldworth
------------------------------------
Title: Executive Vice President
Attest: /s/ David L. Shelton
--------------------------------
(Corporate Seal)
AGENT: MELLON BANK, N.A., as Agent
By: /s/ R.D. Attix
------------------------------------
Title: Vice President
LENDERS: MELLON BANK, N.A., as Lender
By: /s/ R.D. Attix
------------------------------------
Title: Vice President
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<PAGE> 77
SCHEDULE A
Revolving Credit Revolving Credit
Lenders Pro Rata Share Pro Rata Percentage
------- ---------------- -------------------
Mellon Bank, N.A. $ 35,000,000.00 100%
TOTAL COMMITMENT $35,000,000.00 100.00
============== =========
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<PAGE> 78
SCHEDULE B
Addresses of Lenders
Mellon Bank, N.A.
Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103
Attention: George Cole, VP
Telecopy: 215-553-0201
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<PAGE> 79
The Agreement contained the following Exhibits and Schedules:
Schedule A Schedule of Lenders
Schedule B Address of Lenders
Schedule C Inventory Location
Exhibit 5.1 Borrower's Stocks of Qualification
5.2 Places of Business
5.3 Judgments, Proceedings, Litigation and Orders
5.4 Existing Liens and Claims
5.9 Subsidiaries and Affiliates
5.10 Existing Guaranties, Investments and Borrowings,
and Leases
5.11 Employee Pension Plans
5.12 Business Interruptions
5.13(a) Schedule of Names
(b) Trademarks, Patents and Copyrights
5.14 Other Associates
5.15 Environmental Disclosure
5.17 Capital Stock
5.19 Required Patents, Trademarks or Licenses
7.1(a) Restructuring Program
-72-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF L.A.T. SPORTSWEAR FOR THE THREE MONTHS ENDED MARCH 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 1,867
<SECURITIES> 0
<RECEIVABLES> 14,625
<ALLOWANCES> 2,331
<INVENTORY> 30,689
<CURRENT-ASSETS> 49,265
<PP&E> 8,678
<DEPRECIATION> 3,035
<TOTAL-ASSETS> 55,199
<CURRENT-LIABILITIES> 11,622
<BONDS> 0
0
0
<COMMON> 10,825
<OTHER-SE> 2,394
<TOTAL-LIABILITY-AND-EQUITY> 55,199
<SALES> 23,344
<TOTAL-REVENUES> 23,344
<CGS> 19,361
<TOTAL-COSTS> 19,361
<OTHER-EXPENSES> 3,846
<LOSS-PROVISION> 210
<INTEREST-EXPENSE> 605
<INCOME-PRETAX> (678)
<INCOME-TAX> (252)
<INCOME-CONTINUING> (426)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (426)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
