<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
Form 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 28, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission file number 33-70442
DAN RIVER INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1854637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2291 Memorial Drive 24541
Danville, Virginia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 799-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
Aggregate market value of voting stock held by non-affiliates of the registrant
as of February 21, 1997: $31,076,000
Number of shares of common stock outstanding as of February 21, 1997:
Class A: 726,454 shares
Class B: 82,413 shares
Documents Incorporated by Reference: None
There are 173 pages in the sequentially numbered, manually signed original of
this report.
Exhibit Index: Page 56<PAGE>
<PAGE> 2
PART I
Item 1. Business
Founded in 1882, Dan River Inc. (the "Company" or "Dan River") is a
manufacturer and marketer of textile products for the home fashions and apparel
fabrics markets. The Company manufactures a coordinated line of home fashions
products consisting of packaged bedroom furnishings such as comforters, sheets,
pillowcases, shams, bedskirts, decorative pillows and draperies. Dan River
also manufactures a broad range of woven cotton and cotton-blend apparel
fabrics and is a leading domestic supplier of men's dress shirting fabrics,
primarily oxford and pinpoint oxford cloth.
On February 3, 1997 the Company acquired substantially all of the assets of The
New Cherokee Corporation ("TNCC"), a Delaware corporation, which was a supplier
of men's and women's yarn-dyed fabrics to shirting manufacturers and of
sportswear fabrics to the converting trade. The assets purchased consisted
primarily of two woven fabrics manufacturing facilities located in Spindale,
North Carolina and Sevierville, Tennessee and a finishing facility located in
Harris, North Carolina together with associated real property, machinery and
equipment, inventories and receivables. The Company presently intends to
continue the current operations of all three facilities.
The following table sets forth for the periods indicated the dollar amount and
percentage of total net sales of the Company attributable to home fashions
products and apparel fabrics:
<TABLE>
<CAPTION>
Fiscal Year
------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
(Dollars in millions)
Dollar amount:
Home fashions
products.................. $213.3 $231.8 $243.2
Apparel fabrics............. 158.2 153.0 136.4
------ ------ ------
Total..................... $371.5 $384.8 $379.6
====== ====== ======
Percentage:
Home fashions
products.................. 57.4% 60.2% 64.1%
Apparel fabrics............. 42.6 39.8 35.9
------ ------ ------
Total..................... 100.0% 100.0% 100.0%
======= ======= =======
</TABLE>
<PAGE>
<PAGE> 3
Products
Home Fashions Products
The Company's home fashions products include packaged bedroom furnishings such
as comforters, sheets, pillowcases, shams, bedskirts, decorative pillows and
draperies, which are marketed under the "Dan River" and "Bed-in-a-Bag" brand
names, as well as various other trademarks and under licenses from, among
others: "Colours by Alexander Julian", "D. Porthault", "John Wilman" and
"Liberty". In addition, in 1997 the Company intends to introduce a line of
home fashions products under license from "Nautica". Home fashions products
are offered in a wide variety of styles and patterns, including fashion designs
and, to a lesser extent, solid colors. Products range from 120 thread count
muslin products of blended polyester and cotton to 250 thread count 100% cotton
percale products.
The Company distributes home fashions products through a full range of domestic
distribution channels, including department stores, specialty home fashion
stores, direct marketers, national chains, mass merchants and regional
discounters. As a supplement to these primary distribution channels, a Dan
River subsidiary operates factory outlet stores, which sell home fashions
products directly to consumers.
Apparel Fabrics
The Company's yarn-dyed and piece-dyed woven apparel fabrics include oxford
cloth, pinpoint oxford cloth, fancy broad cloth, seer-suckers, mid and light
weight denim and twills and chambrays. The Company distributes its apparel
fabrics primarily to domestic manufacturers of men's, women's and children's
clothing which, in turn, operate sewing plants throughout the United States and
the Caribbean. The Company's customers market clothing manufactured from its
apparel fabrics under such brand names as "Arrow", "Brooks Brothers",
"Hathaway", "Levi Strauss", "Liz Claiborne", "L. L. Bean", "Manhattan", "Osh
Kosh B'Gosh" and "Van Heusen", as well as under private labels through
retailers such as J. C. Penny and Sears. The Company also manufactures apparel
fabrics for the career apparel market for sale to customers such as Cintas
Corp. and Red Kap and distributes apparel fabrics to home sewing retailers such
as WalMart, Fabric-Centers of America, and through various wholesale
distributors, for use in decorating and crafts, as well as garment sewing. The
Company also manufactures and markets 100% cotton fabrics for the furniture
market and greige fabrics for the converter trade.
The Company believes that it is a leader in wrinkle resistant technology for
shirting fabrics. The Company markets Dri-Don blended easy care fabrics and
100% cotton Wrinkl-Shed fabrics.
Sales and Marketing
Dan River employs a sales and marketing staff of approximately 180 persons,
including administrative and support personnel. The staff is divided into two
groups, focusing on home fashions products and apparel fabrics, respectively.
Dan River's sales and marketing offices are headquartered in New York, with
satellite offices in Atlanta, Boston, Charlotte, Chicago, Dallas, High Point
(North Carolina), Los Angeles and San Francisco.
<PAGE>
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The Company markets its home fashions products and apparel fabrics to over
2,000 customers, none of whom accounted for more than 10% of the Company's net
sales in fiscal 1996. The top five home fashions products customers and
apparel fabrics customers accounted for 44.5% and 24.4%, respectively, of the
Company's net sales of home fashions products and apparel fabrics. The
Company's largest home fashions products customer and apparel fabrics customer
accounted for 8.7%, and 3.9% respectively, of the Company's total net sales in
fiscal 1996. Sales of home fashions products are generally stronger in the
second half of the year.
Manufacturing and Raw Materials
Dan River is a vertically integrated manufacturer of textile fabrics and
products. The manufacturing process starts with raw cotton and synthetic
fibers and involves the spinning of the raw fibers into yarns, the weaving of
the yarns into fabrics, the dyeing and finishing of the fabrics, and in the
case of home fashions products, fabric printing and sewing of finished
products, which are then packaged and shipped to Dan River's customers. Dan
River's manufacturing facilities are located in Danville, Virginia and
Wetumpka, Alabama, and with the acquisition of TNCC, in Rutherford County,
North Carolina and Sevierville, Tennessee.
Dan River uses substantial quantities of cotton in its manufacturing
operations. By law, U.S. textile companies are generally prohibited from
importing cotton, subject to certain exceptions which take effect primarily
when the U.S. price of cotton exceeds the world price. Cotton is an
agricultural product subject to weather conditions and other factors affecting
agricultural markets. Accordingly, the price of cotton is subject to
considerable fluctuation.
Dan River purchases cotton primarily in the domestic market directly from
merchants or through brokers. Generally, the Company seeks to purchase
sufficient amounts of cotton to cover existing order commitments; however, the
Company may purchase cotton in advance of orders on terms that it deems
advantageous, and while the Company does not speculate on the price of cotton,
it may hedge prices from time to time through forward contracts and the futures
and options market. The Company also uses significant quantities of polyester,
which is available from several sources.
Although the Company has always been able to obtain sufficient supplies of both
cotton and polyester, any shortage or interruption in the supply or variations
in the quality of either could have a material adverse effect on the Company's
business. Additionally, fluctuations in cotton and polyester prices can
significantly affect the Company's profitability, particularly on a short term
basis, since Dan River and other textile manufacturers cannot always mirror
such fluctuations in the pricing of their products.
The Company also uses various other raw materials, such as dyes and chemicals,
in its manufacturing operations. The Company believes these materials are
readily available from a number of sources. Dan River also supplements its
internal manufacturing capabilities by purchasing yarn and unfinished fabrics
from outside sources and by contracting with third parties for various
manufacturing services, including certain printing and sewing operations.
<PAGE>
<PAGE> 5
Capital Improvement Program
In keeping with the Company's commitment to being a low cost producer of high
quality textile products, the Company continued during 1996 an aggressive
capital expenditure program begun in 1990. The Company invested over $35
million in equipment and other manufacturing improvements during the 1996
fiscal year to modernize its manufacturing processes and enhance its
information systems, and during fiscal 1997 the Company plans to invest an
additional $29 million in capital improvements to further reduce its
manufacturing costs, enhance manufacturing flexibility and improve product
quality and responsiveness to customers.
The Company has completed construction of a new 258,000 sq. ft. home fashions
finished goods warehouse and distribution center, which is located adjacent to
its new home fashions accessory sewing plant in Danville, Virginia. The
Company believes the new warehouse will enable it to better and more
efficiently service its home fashions customers and accommodate further growth
of its home fashions business.
Competition
The Company's competitive position varies by product line. Competitive factors
include price, product styling and differentiation, quality, flexibility of
production and finishing, delivery time and customer service. The Company
sells its products primarily to domestic customers and competes with both
large, integrated textile companies and numerous smaller companies specializing
in limited segments of the market. Some competitors have significantly greater
financial resources than Dan River.
The Company is one of several domestic manufacturers of home fashions products.
Certain of the Company's competitors have a significantly greater share of the
domestic market than the Company, including WestPoint Stevens Inc., Springs
Industries, Inc. and Fieldcrest Cannon, Inc., which management believes hold
collectively over 50% of the home fashions bedding products market.
With the acquisition of TNCC the Company believes that it is the leading
producer of lightweight yarn-dyed woven cotton and cotton-blend apparel fabrics
in the Western Hemisphere. With respect to men's shirtings, management
believes the Company is the largest domestic producer of oxford cloth and pima
cotton pinpoint oxford cloth and the leading domestic producer of lightweight
yarn-dyed dress shirting fabrics. In the sportswear fabrics market, the
Company is one of a number of domestic producers.
The Company is subject to foreign competition. The Company believes that over
half of the apparel fabrics (much in the form of imported garments) and
approximately 15% of the home fashions products sold in the U.S. are
manufactured overseas. One of the Company's business strategies is to seek
niche apparel fabrics markets that are less susceptible to foreign competition.
The Company believes that its domestic manufacturing base and emphasis on
shortening production and delivery times allow the Company to respond more
quickly than foreign producers to changing fashion trends and to its domestic
customers' delivery schedules.
The Company benefits from protections afforded to apparel manufacturers based
in certain Caribbean and Central American countries which ship finished
garments into the U.S. under Section 807 of the Harmonized Tariff Schedule of
<PAGE>
<PAGE> 6
the U.S. as authorized by the Caribbean Basin Recovery Act ("Section 807").
Section 807 reduces certain tariffs which would otherwise apply to apparel
garments manufactured outside the U.S. and shipped into the U.S., provided that
the garments are manufactured from fabric produced and cut domestically.
Because Section 807 creates an attractive manufacturing base for apparel in
proximity to the U.S., it is beneficial for Dan River and other domestic
producers of apparel fabrics.
The North American Free Trade Agreement between the U.S., Canada and Mexico
("NAFTA") has created the world's largest free trade zone. NAFTA generally
requires textiles to be made from yarns and fabrics originating in North
America in order to avoid trade restrictions within the three countries which
are party to the agreement. The Company believes it may benefit from NAFTA and
preliminary indications are encouraging; however, it will be some time before
the real impact of NAFTA can be finally determined.
Under the Uruguay Round of the General Agreement on Tariffs and Trade ("GATT"),
restrictions on imports of textiles and apparel generally will be eliminated
over a ten year period. As with NAFTA, it is impossible at this time to
predict with certainty the long-term impact of GATT on the domestic textile and
apparel industries, although it is likely that GATT will result in increased
imports of textiles and apparel, particularly in commodity lines of products.
Governmental Regulation
Dan River is subject to various federal, state and local environmental laws and
regulations limiting the discharge of pollutants and the storage, handling and
disposal of a variety of substances. In particular, the Company's dyeing and
finishing operations result in the discharge of substantial quantities of
wastewater and in emissions to the atmosphere.
The Company is subject to the federal Clean Water and Clean Air Acts, and
related state and local laws and regulations. The Company's operations also
are governed by laws and regulations relating to workplace safety and worker
health, principally the Occupational Safety and Health Act and regulations
thereunder, which, among other things, establish cotton dust, formaldehyde,
asbestos and noise standards, and regulate the use of hazardous chemicals in
the workplace. The Company believes that it is currently in compliance in all
material respects with the foregoing environmental or health and safety laws
and regulations and does not believe that future compliance with such laws or
regulations will have a material adverse effect on its results of operations or
financial condition. However, there can be no assurance that environmental
requirements will not become more stringent in the future or that the Company
will not incur significant costs to comply with such requirements.
In 1994 the Company was advised that underground heating oil tanks had leaked
at its idle Benton, Alabama plant, which was sold in January 1996. The tanks
have been removed, and the Company has agreed with the purchaser of the plant
to continue remediation of the heating oil contamination. The Company believes
that it has established adequate reserves to cover the expected cost of cleanup
and that cleanup of the Benton site will not have a material adverse effect on
its results of operations or financial condition.
<PAGE>
<PAGE> 7
The property formerly owned by TNCC at Spindale, North Carolina has experienced
groundwater contamination consisting of diesel fuel, for which the owner of an
adjoining property has acknowledged responsibility. The neighboring landowner
is engaged in cleanup operations under the direction of the North Carolina
Department of Health, Environment and Natural Resources. Prior to purchasing
the Spindale property, the Company identified additional contamination,
consisting primarily of benzene, that the Company's environmental consultant
has indicated may also originate on the adjoining property, which the Company
believes would render the adjoining landowner liable for cleanup. The
Company's environmental advisors have also indicated that they believe cleanup
of the benzene contamination may not be required under current North Carolina
policy, and that in the event the Company is required to clean up the
contamination, it may be eligible to apply for funding from a North Carolina
underground storage tank trust fund. The Company excluded liability associated
with environmental contamination in connection with its purchase of TNCC's
assets and believes, based on information provided by its environmental
consultant, that if it were required to clean up the contamination due to its
ownership of the property, the cost of such cleanup would not have a material
adverse effect on its results of operations or financial condition.
Trademarks and Licenses
Management believes that the failure of the Company to continue to hold any one
of its licenses or trademarks (other than "Dan River") would not have a
material adverse effect on the Company's business.
Order Backlog and Employees
The Company's order backlog was approximately $71.9 million at December 28,
1996, as compared to approximately $80.2 million at December 30, 1995.
Substantially all orders on hand at December 28, 1996 are expected to be filled
within four months of that date. At December 28, 1996, the Company employed
approximately 4,700 people.
Item 2. Properties
On February 3, 1997 the Company acquired substantially all of the assets of
TNCC, including greige manufacturing facilities in Spindale, North Carolina and
Sevierville, Tennessee, and a new (construction completed in 1994) finishing
plant in Harris, North Carolina. The Company owns the North Carolina
facilities, totaling approximately 588,000 square feet of manufacturing space.
The Company leases the Sevierville, Tennessee facility (consisting of
approximately 384,000 feet of manufacturing space) with an option to purchase
the facility for nominal consideration in 2018. The North Carolina real estate
and the machinery and equipment at all of these facilities are subject to liens
securing borrowings by the Company in connection with the acquisition of TNCC.
Substantially all of Dan River's other apparel fabrics facilities, and
substantially all of its home fashions and corporate facilities are located in
Danville, Virginia. Most of the Danville facilities are owned by the Company.
The owned facilities occupy a total of approximately 5,848,000 square feet,
with approximately 3,252,000 square feet of manufacturing space. The Company's
116,000 square foot accessory sewing plant and new 258,000 square foot
distribution center are leased, with an option to purchase for nominal
consideration upon repayment of debt incurred in the construction of these
facilities. The Company leases approximately 973,000 square feet of additional
warehouse and manufacturing space in Danville. <PAGE>
<PAGE> 8
Dan River also owns a yarn mill in Alabama. The Company leases each of its
marketing and sales offices and, through its subsidiary, Dan River Factory
Stores, Inc., the Company leases eight factory outlet stores in Georgia,
Illinois, Maryland, Ohio, Pennsylvania, South Carolina and Tennessee, each of
which averages approximately 6,200 square feet of total space. The Company
owns its factory outlet store in Danville, Virginia.
Item 3. Legal Proceedings
From time to time, the Company is a party to litigation arising in the ordinary
course of its business. The Company is not currently a party to any litigation
that management believes will have a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Braelan Corp. (the "Holding Company"), which owned all of the common stock of
Dan River, was merged with and into Dan River on December 29, 1995. The
Company's voting Class A Common Stock ("Class A Common Stock") and non-voting
Class B Common Stock ("Class B Common Stock") (collectively, the "Common
Stock") are not publicly traded. As of February 21, 1997, there were 25
holders of the Class A Common Stock and six holders of the Class B Common
Stock. No dividends were declared or paid by the Holding Company or the
Company during the last two fiscal years. The Company's credit agreement and
the indenture (the "Indenture") under which its 10 1/8% Senior Subordinated
Notes due 2003 (the "Notes") were issued both limit the Company's ability to
pay dividends on the Common Stock, based primarily upon the Company's
compliance with certain financial ratios and other financial requirements.
<PAGE>
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Item 6. Selected Financial Data <F1>
<TABLE>
<CAPTION>
Fiscal Year
____________________________________________________
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Statement of Income Data:
Net sales................... $333,033 $317,566 $371,534 $384,801 $379,567
Cost of sales............... 268,605 259,148 297,460 306,879 307,383
Gross profit................ 64,428 58,418 74,074 77,922 72,184
Selling, general and administrative
expenses.................. 39,083 38,550 43,908 44,860 45,673
Other operating costs, net.. -- 3,039 1,534 8,972 (428)
Operating income............ 25,345 16,829 28,632 24,090 26,939
Other income................ 724 505 144 241 485
Interest expense............ 12,966 12,691 20,419 21,941 18,168
Income before income
taxes and extraordinary item 13,103 4,643 8,357 2,390 9,256
Provision for income
taxes.................... 4,937 2,472 4,832 2,132 3,570
Income from continuing
operations before extraordinary
item..................... 8,166 2,171 3,525 258 5,686
Extraordinary item <F2>.... -- 348 -- -- --
Net income................. 8,166 2,519 3,525 258 5,686
Redeemable preferred
stock dividends.......... 2,782 2,091 -- -- --
Net income applicable to common
stock.................... 5,384 428 3,525 258 5,686
Balance Sheet Data (at end of
period):
Working capital............ $ 98,954 $ 94,040 $103,973 $109,763 $ 93,291
Total assets............... 282,668 289,384 329,902 330,944 321,050
Convertible junior subordinated
notes.................... -- 21,485 25,220 -- --
Total debt................. 145,182 170,066 196,436 179,703 169,468
Common stock subject to put
rights................... 7,000 7,000 7,000 7,000 9,726
Redeemable preferred stock 18,577 -- -- -- --
Shareholders' equity....... 42,065 42,493 46,810 73,702 77,898
Other Financial Data and Ratios:
EBITDA <F3>................ $ 40,413 $ 36,314 $ 48,353 $ 52,599 $ 47,306
Cash interest expense <F4> 8,924 9,581 15,562 17,831 17,002
Depreciation and amortization of
property, plant and equipmen 15,068 16,446 18,187 19,537 20,795
Capital expenditures, gross 9,914 27,690 44,112 28,004 34,515
Capital expenditures, net <F5> 9,821 12,839 26,885 20,801 28,564
Ratio of EBITDA to interest
expense................. 3.12x 2.86x 2.37x 2.40x 2.60x
Ratio of EBITDA to cash interest
expense................. 4.53x 3.79x 3.11x 2.95x 2.78x
Ratio of total debt to
EBITDA.................. 3.59x 4.68x 4.06x 3.42x 3.58x
<PAGE>
<PAGE> 10
<FN>
<F1>
On December 29, 1995, the Holding Company was merged with and into Dan River.
Selected Financial Data for periods prior to the merger have been restated to
reflect the combination. See Note 2 to the Consolidated Financial Statements.
</FN>
<FN>
<F2>
The extraordinary item for 1993 represents the gain, net of related income
taxes, from the early retirement of certain of the Company's credit facilities
and term loans out of the proceeds from issuance of the Notes.
</FN>
<FN>
<F3>
EBITDA represents operating income before depreciation and amortization. For
purposes of computing EBITDA, operating income has been adjusted to exclude
other operating costs, net. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations" and Note
7 to the Consolidated Financial Statements. EBITDA is presented not as an
alternative measure of operating results or cash flow (as determined in
accordance with generally accepted accounting principles), but rather to
provide additional information related to the debt servicing ability of Dan
River.
</FN>
<FN>
<F4>
Cash interest expense is defined as interest expense accrued during the period
that either has been or will be paid in cash, and therefore excludes interest
on the Company's 16.35% Convertible Junior Subordinated Notes, amortization of
debt issuance costs and other noncash charges.
</FN>
<FN>
<F5>
Represents capital expenditures, net of amounts acquired in exchange for debt.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Comparison of 52 Weeks Ended December 28, 1996 ("fiscal 1996") to 52 Weeks
Ended December 30, 1995 ("fiscal 1995").
Net sales for the 52 weeks in fiscal 1996 were $379.6 million, a decrease of
$5.2 million or 1.4% compared to the 52 weeks in fiscal 1995. Net sales of
home fashions products were $243.2 million in 1996, an increase of $11.3
million or 4.9% when compared to fiscal 1995. Net sales of apparel fabrics
were $136.4 million, a decrease of $16.6 million or 10.8% compared to fiscal
1995. The increase in sales of home fashions products was due to higher unit
volume partially offset by lower average pricing reflecting a competitive
pricing environment. The decrease in sales of apparel fabrics reflects lower
unit volume of shirting fabrics, particularly commodity white and blue oxfords,
due to a sluggish retail environment for these products during the first half
of the year.
<PAGE>
<PAGE> 11
Gross profit for fiscal 1996 was $72.2 million or 19.0% of sales. This
represents a decrease of $5.7 million or 7.4% when compared to fiscal 1995
gross profit of $77.9 million (20.2% of sales). The decrease in gross profit
was due to lower sales of apparel fabrics, higher cotton costs and poor
manufacturing performance associated with abbreviated running schedules during
the first half of the year because of the weak order position for apparel
fabrics during that period.
Other operating costs, net, reflects a net credit of $0.4 million in fiscal
1996, compared to $9.0 million of net charges in fiscal 1995. Fiscal 1995
charges include $4.4 million in writedowns of fixed assets relating to the
Company's ongoing modernization program, $3.0 million of costs associated with
the Company's decision to discontinue manufacturing and marketing a line of
apparel fabrics, and $1.6 million of costs associated with relocation of the
Company's design, merchandising and marketing staff from office space at 111
West 40th Street to new offices at 1325 Avenue of the Americas in New York
City. Fiscal 1996 reflects the reversal of a portion of the 1995 charges
principally relating to the discontinued line of apparel fabrics ($0.9 million)
offset by $0.5 million of net charges for equipment writedowns associated with
the Company's modernization program.
Selling, general and administrative expenses for fiscal 1996 were $45.7 million
(12.0% of sales) an increase of $0.8 million or 1.8% from fiscal 1995 during
which selling, general and administrative expenses represented 11.7% of sales.
The increase in these expenses relates primarily to higher rent expense for the
Company's New York office and showrooms and higher incentive compensation,
offset by lower costs from the operation of fewer factory stores and lower
general and administrative expense for the year.
Operating income for fiscal 1996 was $26.9 million, an increase of $2.8 million
or 11.8% from fiscal 1995. The increase was caused by the favorable comparison
created by the absence in fiscal 1996 of the one-time charges that were taken
in fiscal 1995 and which are described above. Excluding these charges,
operating income for fiscal 1996 would have been lower than fiscal 1995 by $6.6
million or 19.8% due to the lower sales of apparel fabrics, higher cotton
costs, and poor manufacturing performance associated with abbreviated running
schedules during the first half of the year because of the weak order position
for apparel fabrics during that period.
Interest expense was $18.2 million for fiscal 1996, a decrease of $3.8 million
or 17.2% from fiscal 1995. The reduction in interest expense was due primarily
to the conversion from debt to equity of the Company's 16.35% Convertible
Subordinated Junior Notes (the "Junior Notes") in September 1995 and to a
lesser extent because of lower rates and levels for the Company's remaining
debt. The decrease in those debt levels was due to lower levels of working
capital during the year.
The income tax provision was $3.6 million for fiscal 1996, or 38.6% of pre-tax
income. This represents an increase of $1.4 million or 67.4% from the $2.1
million (89.2% of pre-tax income) recorded for fiscal 1995. The high effective
tax rate for 1995 reflects the nondeductibility of interest on the Junior Notes
that were outstanding during the first eight months of 1995.
For the reasons described above, net income in fiscal 1996 was $5.7 million, an
increase of $5.4 million from 1995 levels.
<PAGE>
<PAGE> 12
Comparison of 52 Weeks Ended December 30, 1995 ("fiscal 1995") to 52 Weeks
Ended December 31, 1994 ("fiscal 1994").
Net Sales for the 52 weeks in fiscal 1995 were $384.8 million, an increase of
$13.3 million or 3.6% compared to the 52 weeks in fiscal 1994. Net sales of
home fashions products were $231.8 million in fiscal 1995, an increase of $18.5
million or 8.7% when compared to fiscal 1994. Net sales of apparel fabrics
were $153.0 million, a decrease of $5.3 million or 3.3% compared to fiscal
1994. The increase in sales of home fashions products was due to higher unit
volume, the sale of a better mix of products and higher average selling prices.
The improved product mix consisted of more accessory items, ensembles and high
thread count sheeting in fiscal 1995 as compared to 1994. The decrease in
sales of apparel fabrics was entirely due to lower unit volume, primarily in
shirting fabrics.
Gross profit for fiscal 1995 was $77.9 million or 20.2% of sales. This
represents an increase of $3.8 million or 5.2% when compared to fiscal 1994
gross profit of $74.1 million (19.9% of sales). The increase in gross profit
in fiscal 1995 reflects lower costs resulting from the Company's capital
improvement program offset somewhat by higher costs for raw materials and
manufacturing materials.
The Company incurred one-time charges in both 1995 and 1994. Reflected under
other operating costs, net, are $9.0 million of charges in fiscal 1995 and $1.5
million in fiscal 1994. The charges in fiscal 1995 relate to $4.4 million in
writedowns of certain fixed assets that have become obsolete as a result of the
Company's ongoing modernization program, the $3.0 million of costs associated
with the Company's decision to discontinue manufacturing and marketing a line
of apparel fabrics, and $1.6 million of costs associated with relocation of the
Company's design, merchandising and marketing staff from office space at 111
West 40th Street to new offices at 1325 Avenue of the Americas in New York
City. The one-time charges in fiscal 1994 include $0.7 million for writedowns
of equipment that became obsolete as a result of the Company's modernization
program and $0.8 million which relates to the noncash portion of certain
compensation expense associated with the transfer of stock and the granting of
stock options by a principal shareholder to certain management employees.
Selling, general and administrative expenses for fiscal 1995 were $44.9 million
(11.7% of sales), an increase of $952,000 or 2.2% from fiscal 1994 during which
selling, general and administrative expenses represented 11.8% of sales. The
increase in fiscal 1995 selling, general and administrative expense relates
primarily to higher expenses associated with operating the Company's factory
stores and an increase in bad debt expense.
Operating income for fiscal 1995 was $24.1 million, a decrease of $4.5 million
(15.9%) from fiscal 1994. All of the decrease was caused by the one-time
charges described above. Absent those charges, operating income would have
been $33.1 million in fiscal 1995, an increase of $2.9 million or 9.6% from
fiscal 1994 levels. The better operating performance in 1995 was due to lower
manufacturing cost associated with the Company's modernization program offset
by cost increases for raw material and manufacturing materials.
Interest expense was $21.9 million for fiscal 1995, an increase of $1.5 million
(7.5%) from fiscal 1994. Included in interest expense during fiscal 1995 and
fiscal 1994 was $2.9 million and $3.8 million, respectively, of noncash
<PAGE>
<PAGE> 13
interest associated with the Junior Notes which were converted into 158,867
shares of the Company's Class A Common Stock as of September 3, 1995.
Excluding the interest on the Junior Notes, interest expense would have been
$19.0 million and $16.6 million in fiscal 1995 and fiscal 1994, respectively.
The increase was due to higher debt levels, and was offset to a certain extent
by slightly lower interest rates. The increase in debt levels was caused by
the Company's capital spending with respect to its ongoing modernization
program and increased levels of working capital during the year.
The income tax provision for fiscal 1995 was $2.1 million or 89.2% of pre-tax
income. This compares to $4.8 million or 57.8% of pre-tax income in fiscal
1994. The high effective tax rates in both fiscal years reflects the
nondeductibility of interest on the Junior Notes.
For the reasons described above, net income in fiscal 1995 was $0.3 million, a
decrease of 92.7% from fiscal 1994 levels.
Liquidity and Capital Resources
General
The Company believes that internally generated cash flow, supplemented by
borrowings under its revolving credit facility and vendor financing, will be
sufficient to meet its foreseeable debt service requirements, capital
expenditures, and working capital needs. The Company is considered highly
leveraged, with a debt to total capital ratio of 65.9% at December 28, 1996.
Working Capital
The Company's operations are working capital intensive. The Company's
operating working capital (accounts receivable and inventories less accounts
payable and accrued expenses) typically increases or decreases in relation to
sales and operating activity levels.
Operating working capital decreased $17.3 million (16.7%) during fiscal 1996
reflecting improved inventory management and to a lesser extent the 1.4%
decrease in sales from fiscal 1995. Net income plus noncash expense items
(net) provided $28.4 million in cash during the year. Additionally, cash was
provided by a $16.7 million reduction in operating assets and liabilities.
This reduction was made up of a $24.6 million reduction in inventories offset
by items totalling $7.8 million, principally a reduction in accounts payable
and accrued expenses of $6.6 million. Accordingly, net cash of $45.1 million
was generated from operating activities.
Operating working capital increased $5.7 million (5.8%) in fiscal 1995
reflecting the 3.6% increase in sales. Net income plus noncash expense items
(net) provided $29.6 million in cash during the year, which provided funding
for $7.0 million used by changes in operating assets and liabilities. Those
changes were a $1.8 million reduction in other liabilities, a $0.5 million
reduction in prepaid expenses and other assets, as well as the $5.7 million
increase in operating working capital mentioned above. As a result, $22.5
million in net cash was provided by operating activities in fiscal 1995.
During fiscal 1994, operating working capital increased $17.1 million (20.3%)
reflecting the 17.0% increase in net sales from fiscal 1993. Net income plus
<PAGE>
<PAGE>14
noncash expense items provided $30.0 million in cash during the year. This was
used to fund the $18.1 million change in operating assets and liabilities.
That change was made up of $17.1 million of cash used for operating working
capital described above and a $1.0 million use of cash resulting from a
decrease in other liabilities, offset by a decrease in prepaid expenses and
other assets. Accordingly, operating activities generated $11.9 million of net
cash in fiscal 1994.
As a risk management practice, the Company buys cotton with forward purchase
contracts and in the spot market and uses futures and options contracts to
hedge its exposure to cotton price fluctuations in amounts related to its
anticipated manufacturing requirements. Since these contracts are used to
reduce the risk of future price increases, they are accounted for as hedges
and, accordingly, any gains or losses are deferred and reflected in the cost of
goods sold as a cost component of finished goods.
Acquisition of The New Cherokee Corporation Assets
The Company acquired substantially all of the assets and assumed certain
operating liabilities of TNCC on February 3, 1997 for $65 million subject to a
reduction of up to $6.5 million if a minimum working capital level (as defined)
was not maintained by TNCC at the time of the purchase. See "Business" for a
description of this yarn-dyed apparel fabrics business. The total cash
requirement on February 3, 1997 to consummate the acquisition was $67 million
including an escrow deposit of $6.5 million and approximately $2 million for
fees, expenses and certain closing items. The funds were provided by using
$12.1 million of cash on hand and borrowings of $19.9 million and $35 million,
respectively, under a new working capital credit line and term loan which are
described below.
Although the manufacturing facilities acquired will receive certain equipment
upgrades and modernization, the Company does not expect to materially increase
its capital expenditure program solely for this purpose. As part of the
Company's effort to employ only those manufacturing facilities and capacities
it deems appropriate, it may reevaluate certain apparel fabrics facilities and
may recognize charges, largely noncash, for any obsolete or excess
manufacturing equipment or facilities. Any such action should not materially
affect the Company's liquidity.
Credit Facilities and Vendor Financing
On February 3, 1997, in order to finance the purchase of substantially all of
the assets of TNCC, the Company replaced its $60 million revolving credit
facility with a new four year $90 million working capital line of credit and a
$35 million four year term loan. The working capital line of credit is tied to
a borrowing base formula, and both this facility and the $35 million term loan
are secured by the Company's accounts receivable and inventories, the personal
property located at the three former TNCC manufacturing facilities, and the
real property of the TNCC North Carolina manufacturing facilities.
The working capital line of credit bears interest at the Base Rate, as defined
(8.25% as of February 14, 1997) or LIBOR plus 2% (7.51% as of February 14,
1997), for periods of one, three or six months, at the Company's option. The
working capital line is non-amortizing and any amounts outstanding are due at
the final maturity of February 3, 2001. The initial borrowing under the line
was $19.9 million on February 3, 1997. <PAGE>
<PAGE>15
The $35 million term loan bears interest at the Base Rate or LIBOR plus 2.50%,
(8.01% as of February 14, 1997), for periods of one, three or six months, at
the Company's option. Principal payments are required in the following amounts
for each fiscal year: 1997, $1.75 million; 1998, $4.25 million, 1999, $5.0
million, and 2000, $24.0 million, of which $20.25 million is due November 2000.
Both of the above-described facilities are provided pursuant to a Loan and
Security Agreement which contains certain covenants including requirements for
the maintenance of a certain cash interest coverage ratio and a minimum net
worth. The amount available to be borrowed under the working capital line of
credit is tied to a borrowing base formula which is dependent on the level of
eligible accounts receivable and inventories, less $10 million. On February 3,
1997, $19.9 million was borrowed, $2.6 million of Letters of Credit were
outstanding, and $54.8 million was unused and available to the Company.
As of December 28 1996, the Company's $60 million secured working capital
facility, which was replaced by the above-described facilities, had no
borrowings outstanding, but did have $2.6 million of Letters of Credit
outstanding, and $57.4 million was unused and available to the Company. This
facility had been scheduled to terminate on January 5, 1999. In addition, the
Company finances certain capital expenditures through vendors of the capital
equipment. It will continue to utilize this method of financing where it deems
appropriate.
At December 28, 1996, the Company's required principal amortization payments
for fiscal 1997, 1998, and 1999 were as follows: $7.0 million, $6.8 million and
$7.0 million, respectively.
Capital Improvements
Between fiscal 1990 and fiscal 1996, the Company purchased or leased almost
$200 million of equipment and other manufacturing improvements to modernize its
manufacturing processes and enhance its information systems. These capital
improvements have been financed through a variety of sources, including (i)
internally generated funds and borrowings under existing credit facilities,
(ii) vendor financing and (iii) operating leases.
The table below sets forth the amount of capital improvements made through each
of these methods during the past three fiscal years:
<TABLE>
<CAPTION>
Fiscal Year
Financed By 1994 1995 1996
---- ---- ----
(Dollars in Millions)
<S> <C> <C> <C>
Internally generated funds
and borrowings $26.9 $20.8 $28.5
Vendor financing <F1> 17.2 7.2 6.0
Operating Leases <F2> 1.4 1.3 .9
Total Capital Improvements $45.5 $29.3 $35.4
- -------------------
<PAGE>
<PAGE> 16
<FN>
<F1>
The financings provided by vendors for machinery and equipment typically have
maturities ranging from three to seven years and carry floating rates of
interest similar to the Company's credit agreement. The 1994, 1995, and 1996
amounts also include $2.8 million, $1.0 million and $3.6 million, respectively,
of financing from an Industrial Development Authority for a home fashions
accessory sewing plant and warehouse and distribution center.
</FN>
<FN>
<F2>
Amounts reflect the fair market value of machinery and equipment which was
leased during the applicable period.
</FN>
</TABLE>
Capital improvements in fiscal 1995 and 1996 were for (i) the installation of
open-end spinning and associated opening and carding equipment, (ii) the
purchase of various manufacturing equipment subject to certain leases, (iii)
the installation of dyeing, printing and finishing equipment, (iv) the
construction of a home fashions bedding accessory sewing plant, (v) the
construction of a home fashions warehouse and distribution center, and (vi) the
normal upgrading, replacement and maintenance of the Company's equipment and
facilities.
The Company expects capital improvements to be approximately $29 million in
fiscal 1997 for the normal upgrading, replacement and maintenance of equipment
and facilities. The Company expects to finance these expenditures through
internally generated funds, vendor financing and borrowings under the Company's
credit agreement.
Rental expense for fiscal 1994, 1995, and 1996 amounted to approximately $14.2
million, $13.0 million and $10.3 million, respectively, net of rental income on
noncancellable leases and subleases of approximately $1.7 million, $1.5 million
and $0.1 million, respectively. At December 28, 1996, the Company's future
minimum lease payments due under operating leases with noncancellable terms in
excess of one year, were as follows: 1997-$5.3 million, 1998-$4.2 million,
1999-$2.8 million, 2000-$2.0 million and 2001 and later-$18.3 million.
Approximately 9% of future rental payments relate to operating leases for
machinery and equipment used to produce the Company's products.
Net Operating Loss and Credit Carryforwards
On September 3, 1991 the Company completed a financial restructuring (the
"Restructuring") which involved issuing common and preferred stock to various
parties. Management believes that the Restructuring did not result in a
"change in ownership" as such term is used in Section 382 of the Internal
Revenue Code. However, Section 382 and related regulations promulgated by the
Internal Revenue Service ("IRS") are extremely complex, and Management's
assessment of whether or not a "change in ownership" occurred involves
judgments as to certain factual issues and interpretations as to certain legal
issues for which there is little guidance. There can be no assurance that the
IRS will not challenge the Company's conclusion that no "change in ownership"
has occurred under Section 382. The utilization of the Company's pre-
Restructuring net operating loss and credit carryforwards could be
significantly restricted or eliminated if the Restructuring is deemed to
constitute a "change in ownership." From the date of the Restructuring through
<PAGE>
<PAGE> 17
December 28, 1996, the Company utilized an aggregate of $16.9 million in net
operating loss carryforwards and $1.7 million in general business credit
carryforwards for federal income tax purposes that are subject to review by the
IRS. At December 28, 1996, the Company has unused net operating loss
carryforwards of $0.9 million (expiring in 2005), a minimum tax credit
carryforward of $8.1 million, and investment credit and other general business
credit carryforwards of $5.3 million (the majority of which expire in 1997
through 2000).
Item 8. Financial Statements and Supplementary Data
See following pages.
<PAGE>
<PAGE> 18
Report of Independent Auditors
The Board of Directors and Shareholders
Dan River Inc.
We have audited the accompanying consolidated balance sheets of Dan River Inc.
as of December 30, 1995 and December 28, 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
fiscal years in the period ended December 28, 1996. Our audits also included
the financial statement schedules listed in the Index at Item 14 (a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dan River Inc. at
December 30, 1995 and December 28, 1996, and the consolidated results of its
operations and its cash flows for each of the three fiscal years in the period
ended December 28, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Charlotte, North Carolina
February 7, 1997
<PAGE>
<PAGE> 19
<TABLE>
<CAPTION>
DAN RIVER INC.
CONSOLIDATED BALANCE SHEETS
December 30, 1995 and December 28, 1996
Assets 1995 1996
------ ---- ----
Dollars in thousands
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 9) $ 1,540 $ 5,042
Accounts receivable - trade (less allowance of
$5,140,000 at December 30, 1995 and $4,631,000
at December 28, 1996) (Notes 3 and 9) 54,848 55,782
Inventories (Notes 2 and 3) 96,204 72,493
Prepaid expenses and other current assets 2,481 1,275
Deferred income taxes (Note 5) 7,231 5,643
-------- --------
Total current assets 162,304 140,235
Property, plant and equipment (Note 3):
Land 6,529 6,526
Buildings and improvements 41,288 43,363
Machinery and equipment 186,019 209,568
Construction in progress 7,455 15,241
-------- --------
241,291 274,698
Less accumulated depreciation and amortization 79,311 99,348
-------- --------
Net property, plant and equipment 161,980 175,350
Other assets 6,660 5,465
--------- ---------
$ 330,944 $ 321,050
========= =========
</TABLE>
See accompanying notes.<PAGE>
<PAGE> 20
<TABLE>
<CAPTION>
DAN RIVER INC.
CONSOLIDATED BALANCE SHEETS
December 30, 1995 and December 28, 1996
Liabilities and Shareholders' Equity 1995 1996
------------------------------------ ---- ----
Dollars in thousands
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (Note 3) $ 5,138 $ 6,990
Accounts payable 23,776 21,531
Accrued compensation and related benefits 14,857 13,652
Other accrued expenses 8,770 4,771
--------- ---------
Total current liabilities 52,541 46,944
Long-term debt (Note 3) 174,565 162,478
Deferred income taxes (Note 5) 16,795 17,857
Other liabilities 6,341 6,147
Commitments and contingencies (Notes 4, 5 and 8)
Common stock subject to put rights (Note 4) 7,000 9,726
Shareholders' equity (Notes 3, 4, and 6):
Common stock, Class A, $.01 par value; authorized
1,500,000 shares; issued and outstanding
726,454 shares 7 7
Common stock, Class B, $.01 par value; authorized
1,500,000 shares; issued and outstanding
82,413 shares 1 1
Additional paid-in capital 67,527 64,801
Retained earnings 8,012 13,698
Pension liability adjustment (1,845) (609)
--------- ---------
Total shareholders' equity 73,702 77,898
--------- ---------
$ 330,944 $ 321,050
========= =========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 21
<TABLE>
<CAPTION>
DAN RIVER INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1994, December 30, 1995
and December 28, 1996
1994 1995 1996
---- ---- ----
Dollars in thousands
<S> <C> <C> <C>
Net sales $ 371,534 $ 384,801 $ 379,567
Costs and expenses:
Cost of sales 297,460 306,879 307,383
Selling, general and administrative
expenses 43,908 44,860 45,673
Other operating costs, net (Note 7) 1,534 8,972 (428)
--------- --------- ---------
Operating income 28,632 24,090 26,939
Other income 144 241 485
Interest expense (20,419) (21,941) (18,168)
--------- --------- ---------
Income before income taxes 8,357 2,390 9,256
Provision for income taxes (Note 5) 4,832 2,132 3,570
--------- --------- ---------
Net income $ 3,525 $ 258 $ 5,686
========= ========= =========
</TABLE>
See accompanying notes.<PAGE>
<PAGE> 22
<TABLE>
<CAPTION>
DAN RIVER INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1994, December 30, 1995
and December 28, 1996
Class A Class B Additional Pension
Common Common Paid-In Retained Liability
Stock Stock Capital Earnings Adjustment Total
------- ------ --------- ------- ---------- -----
Dollars in thousands
<S> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1994 $ 6 $ 1 $ 38,257 $ 4,229 $ - $ 42,493
Net income - - - 3,525 - 3,525
Capital
contribution - - 792 - - 792
------- ------ -------- -------- --------- --------
Balance at Decem-
ber 31, 1994 6 1 39,049 7,754 - 46,810
Net income - - - 258 - 258
Pension liability
adjustment - - - - (1,845) (1,845)
Conversion of junior
subordinated
notes 1 - 28,478 - - 28,479
------- ------ -------- -------- --------- --------
Balance at Decem-
ber 30, 1995 7 1 67,527 8,012 (1,845) 73,702
Net income - - - 5,686 - 5,686
Change in common
stock subject to
put rights - - (2,726) - - (2,726)
Pension liability
adjustment - - - - 1,236 1,236
------- ------ -------- -------- --------- --------
Balance at Decem-
ber 28, 1996 $ 7 $ 1 $ 64,801 $ 13,698 $ (609) $ 77,898
======= ====== ======== ======== ========== ========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 23
<TABLE>
<CAPTION>
DAN RIVER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, December 30, 1995 and December 28, 1996
1994 1995 1996
---- ---- ----
Dollars in thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,525 $ 258 $ 5,686
Adjustments to reconcile net income to
net cash provided by operating activities:
Noncash interest expense 4,857 4,110 1,166
Noncash compensation expense 792 - -
Depreciation and amortization 18,187 19,537 20,795
Deferred income taxes 1,847 (1,379) 1,842
Writedown/disposal of equipment 742 4,040 (280)
Writedown - discontinued product line - 3,005 (849)
Changes in operating assets and liabilities:
Accounts receivable (16,209) 6,578 (691)
Inventories (6,690) (8,423) 24,554
Prepaid expenses and other assets 942 512 (396)
Accounts payable and accrued expenses 5,791 (3,904) (6,555)
Other liabilities (1,897) (1,796) (194)
-------- ------- --------
Net cash provided by operating
activities 11,887 22,538 45,078
Cash flows from investing activities:
Total capital expenditures (44,112) (28,004) (34,515)
Plant and equipment acquired in exchange
for debt 17,227 7,203 5,951
Accrued equipment purchases 2,092 (3,515) 982
-------- ------- --------
Capital expenditures in cash (24,793) (24,316) (27,582)
Proceeds from sale of assets 380 322 2,385
Proceeds from insurance claim 540 - -
-------- ------- --------
Net cash used by investing activities (23,873) (23,994) (25,197)
Cash flows from financing activities:
Payments of long-term debt (8,611) (8,453) (18,566)
Net proceeds from issuance of long-term debt - 700 25,313
Net borrowings (payments) - working capital
facility 14,000 9,000 (23,000)
Other - - (126)
-------- ------- --------
Net cash provided (used) by
financing activities 5,389 1,247 (16,379)
-------- ------- --------
Net increase (decrease) in cash and
cash equivalents (6,597) (209) 3,502
Cash and cash equivalents at beginning of year 8,346 1,749 1,540
-------- ------- --------
Cash and cash equivalents at end of year $ 1,749 $ 1,540 $ 5,042
======== ======= ========
See accompanying notes.
/TABLE
<PAGE>
<PAGE> 24
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
1. Description of business
-----------------------
Dan River Inc. and its parent and sole shareholder, Braelan Corp. (Braelan)
were organized in 1989 to acquire and operate Dan River Holding Company and
its subsidiaries (the Predecessor). Dan River Inc. is a manufacturer and
marketer of a variety of textile products, primarily home fashions and
apparel fabrics. Home fashions products, which accounted for approximately
64 percent of sales for the latest fiscal year, consist mostly of packaged
bedroom furnishings which are sold to domestic retailers. Apparel products
which include a broad range of woven cotton and cotton-blend fabrics, are
distributed primarily to domestic clothing manufacturers.
2. Significant accounting policies and other matters
-------------------------------------------------
Basis of presentation
---------------------
On December 29, 1995, Braelan was merged with and into Dan River Inc. The
consolidated balance sheets as of December 30, 1995 and December 28, 1996,
and the consolidated statements of income, shareholders' equity and cash
flows for the fiscal year ended December 28, 1996, represent the
consolidated financial position, results of operations and cash flows of
Dan River Inc. and its wholly-owned subsidiary, Dan River Factory Stores
Inc. The consolidated statements of income, shareholders' equity and
cash flows for each of the two fiscal years in the period ended December
30, 1995, represent the consolidated results of operations and cash
flows of Braelan and its subsidiaries. All significant intercompany
balances have been eliminated. Braelan and its subsidiaries, and Dan
River Inc. and its subsidiary are collectively referred to as the Company.
Fiscal year
-----------
The Company's fiscal year ends on the Saturday nearest to December 31. All
references to 1994, 1995 and 1996 mean the 52-week fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, respectively.
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
<PAGE>
<PAGE> 25
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
2. Significant accounting policies and other matters (continued)
-------------------------------------------------
Cash equivalents
----------------
All highly liquid cash investments purchased with an initial maturity of
three months or less are considered to be cash equivalents.
Inventories
-----------
Inventories are stated at the lower of cost or market, with cost determined
under the first-in, first-out method. Inventories at December 30, 1995 and
December 28, 1996, respectively, by component are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
Dollars in thousands
<S> <C> <C>
Finished goods $ 34,463 $ 24,558
Work in process 51,452 38,274
Raw materials 3,483 2,679
Supplies 6,806 6,982
-------- --------
Total inventories $ 96,204 $ 72,493
======== ========
</TABLE>
Property, plant and equipment
-----------------------------
Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the estimated useful lives of the related
assets, ranging from 10 to 35 years for buildings and improvements, and 3
to 14 years for machinery and equipment. Leasehold improvements are
amortized on a straight-line basis over the lease term or estimated
useful life, whichever is less.
In 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." The adoption did not have a material
effect on the Company's financial statements because the Company was
generally in conformance with this standard prior to adoption.
<PAGE>
<PAGE> 26
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
2. Significant accounting policies and other matters (continued)
-------------------------------------------------
Deferred financing fees
-----------------------
Debt financing fees are amortized over the term of the related debt.
Revenue recognition
-------------------
The Company generally recognizes revenues from product sales when goods are
shipped.
Income taxes
------------
Deferred income taxes are accounted for under the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
Cotton futures contracts
------------------------
In connection with the purchasing of cotton for anticipated manufacturing
requirements, the Company may enter into cotton futures and option
contracts in order to reduce the risk associated with future price
fluctuations. These contracts are accounted for as hedges and,
accordingly, gains or losses are deferred and reflected in cost of sales as
an element of the cost of the finished product. Transactions related to
cotton futures and option contracts during the three year period ended
December 28, 1996 were not material.
<PAGE>
<PAGE> 27
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
3. Long-term debt
--------------
Long-term debt at December 30, 1995 and December 28, 1996, consists of the
following:
<TABLE>
<CAPTION>
1995 1996
---- ----
Dollars in thousands
<S> <C> <C>
Senior subordinated notes $120,000 $120,000
Working capital facility 23,000 -
Term loan - 23,545
Notes payable to equipment vendors 27,010 13,081
Other borrowings with various rates
and maturities 9,693 12,842
-------- --------
179,703 169,468
Less current maturities 5,138 6,990
-------- --------
Total long-term debt $174,565 $162,478
======== ========
</TABLE>
The senior subordinated notes (the Notes) consist of $120,000,000 in
nonamortizing ten-year notes issued pursuant to an indenture dated December
15, 1993, bearing interest at 10 1/8%, payable semi-annually.
The working capital facility at December 28, 1996 consists of a long-term
$60 million working capital line of credit, the availability of which is
tied to a defined borrowing base formula. The working capital facility
also provides for the issuance of letters of credit up to $8,500,000
outstanding, of which $2,563,000 was outstanding at December 28, 1996.
This facility was terminated on February 3, 1997 in connection with the
Company's establishment of a new $90 million working capital facility
(see below).
The working capital facility and the Notes contain certain restrictive
covenants which, among other things, require the Company to meet minimum
net worth and earnings ratios, impose limitations on debt incurrence and
restrict certain payments, including dividends and payments for the
repurchase of capital stock (see Note 4).
<PAGE>
<PAGE> 28
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
3. Long-term debt (continued)
--------------
The term loan consists of a $25 million amortizing note due in 2001,
bearing interest at LIBOR plus 1.75% (7.34% at December 28, 1996). The
Company has a fixed rate option until June 30, 1998, whereby the rate
may be fixed based on the yield of the June 1999, 6.75% US Treasury
Notes plus 1.85%. Payments on the term loan are made quarterly with a
30% balloon payment at maturity. The term loan is secured by various
machinery and equipment of the Company.
Notes payable to vendors for machinery and equipment purchases are secured
by the related assets. The notes payable to vendors mature on various
dates between 1997 and 2002 and bear interest at various fixed and variable
interest rates averaging 7.96% at December 28, 1996.
Other borrowings consist primarily of various industrial development,
revenue and pollution control obligations.
On February 3, 1997, in connection with the acquisition of the assets of
The New Cherokee Corporation (the Acquisition, Note 10), the Company
established a new $90 million working capital facility and a new $35
million term loan. Initial borrowings on that date were $19.9 million on
the working capital facility and $35 million on the term loan, which
proceeds together with $12 million cash on hand were used to consummate
the Acquisition, including associated fees and expenses.
The $90 million working capital facility (the New Working Capital Facility)
consists of a long-term working capital line of credit, the availability of
which is tied to a defined borrowing base formula. As of February 3, 1997,
$54,781,000 was unused and available. Borrowings under the New Working
Capital Facility are non-amortizing and are due February 3, 2001. The
borrowings bear interest at a Base Rate, as defined, or LIBOR plus 2%, as
defined, at the option of the Company. The Company pays a commitment
fee of .25% per annum on the unused portion of the $90 million working
capital line of credit. The New Working Capital Facility also provides
for the issuance of letters of credit up to $7,500,000 outstanding, of
which $2,563,000 was outstanding at February 3, 1997. The obligations
of the Company under the New Working Capital Facility are secured by a
lien on substantially all accounts receivable and inventory.
<PAGE>
<PAGE> 29
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
3. Long-term debt (continued)
--------------
The $35 million term loan facility (the New Term Loan) bears interest at a
Base Rate, as defined, or LIBOR plus 2.5%, as defined, at the Company's
option. Scheduled principal payments are: 1997, $1,750,000; 1998,
$4,250,000; 1999, $5,000,000 and 2000, $24,000,000. The New Term Loan is
secured by the assets of certain manufacturing facilities purchased by the
Company in connection with the Acquisition.
The New Working Capital Facility and New Term Loan contain certain
restrictive covenants not materially different from the prior working
capital facility and the Notes described above.
The aggregate annual scheduled principal repayments of long-term debt
outstanding as of December 28, 1996 are: 1997, $6,990,000; 1998,
$6,838,000; 1999, $6,982,000; 2000, $7,310,000 and 2001, $11,442,000.
Cash payments of interest on debt were $15,319,000, $17,742,000 and
$17,854,000 for 1994, 1995 and 1996, respectively.
4. Capital stock
-------------
Holders of Class A common stock are entitled to vote on all matters to be
voted on by the shareholders of the Company. Class B common stock is non-
voting, except that holders of Class B common stock are entitled to vote on
certain mergers or reorganizations. All holders of common stock will
share equally in dividends and distributions, except that any distributions
payable in shares or other rights to acquire shares will be made in the
same class of common stock as the shareholder then owns. Upon
liquidation, all shares of common stock are entitled to share equally in
the assets of the Company available for distribution to holders of such
shares. Shares of Class A common stock are convertible at any time for
a like number of Class B common shares, and Class B common shares are
convertible for a like number of Class A common shares.
<PAGE>
<PAGE> 30
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
4. Capital stock (continued)
-------------
Until the earlier of September 2001 or a public offering of the Company's
common stock, certain shareholders may require the Company to repurchase
annually a portion of their shares at the then fair market value, as
defined. The these put rights, which apply to 454,665 of the common shares
outstanding as of December 28, 1996, may only be exercised once during any
12-month period and only if the Company is able to obtain financing on
commercially reasonable terms for such repurchase. Furthermore, the
Company's obligation to repurchase shares is limited by certain financial
and other covenants contained in the put agreement and the Company's debt
agreements. The Company will not be required to repurchase shares in 1997
because of an indebtedness limitation set forth in the put agreement. Such
limitation provides that the Company does not have to accept a put to the
extent that the ratio of its debt as of the prior year-end plus debt
incurred to finance the put exceeds 3.0 times the Company's "earnings
before interest, taxes, depreciation and amortization," as defined, for the
previous fiscal year. In addition, the exercise of puts will be further
limited by a restricted payment provision contained in the indenture under
the Notes, which prevents certain payments, including dividends and
payments to shareholders for the repurchase of capital stock, from
reducing the Company's shareholders' equity below certain levels. Under
this provision, cumulative restricted payments over the term of the put
rights generally cannot exceed the greater of $7,000,000 or the sum of
$1,000,000 plus 50% of the Company's cumulative post-1993 net income (or
minus 100% of net losses), as defined, as of the year ending prior to
the restricted payment. Cumulative post-1993 net income for this purpose
was $17,453,000 as of December 28, 1996. Based on the minimum levels of
shareholders' equity required by the restricted payment provision, the
accompanying consolidated balance sheets reflect the reclassification of
$7,000,000 and $9,726,000 from shareholders' equity to "common stock
subject to put rights" as of December 30, 1995 and December 28, 1996,
respectively.
Through September 2001, the Company has the option to purchase the common
shares held by certain shareholders at a price equal to the then fair
market value, as defined. The Company's call option is generally
subject to the same financial covenants and other restrictions as the
put rights described above. A certain shareholder has a similar call
option on certain issued and outstanding common shares, which has
priority to the Company's call option. In addition, certain
shareholders have the right to require the Company to register, at its
expense, their shares under the Securities Act of 1933.
<PAGE>
<PAGE> 31
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
4. Capital stock (continued)
-------------
On September 3, 1995 the Company's convertible junior subordinated notes
(the Junior Notes) with an outstanding balance of $28,479,000 were
converted into 158,867 shares of Class A common stock. The Junior Notes
were nonamortizing, and bore interest at 16.35%, which accrued quarterly
and was automatically capitalized and added to principal.
5. Income taxes
------------
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Dollars in thousands
<S> <C> <C> <C>
Current:
Federal $ 2,420 $ 3,123 $ 1,645
State 565 388 83
------- ------- -------
2,985 3,511 1,728
Deferred:
Federal 1,563 (1,365) 1,278
State 284 (14) 564
------- ------- -------
1,847 (1,379) 1,842
------- ------- -------
Provision for income taxes $ 4,832 $ 2,132 $ 3,570
======= ======= =======
</TABLE>
A reconciliation of the differences between the provision for income taxes
and income taxes computed using the statutory federal income tax rate of
35% follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Dollars in thousands
<S> <C> <C> <C>
Amount computed using the statutory rate $2,925 $ 837 $3,240
Increase (decrease) in taxes resulting from:
State taxes 552 243 421
Nondeductible interest 1,321 1,018 80
Other, net 34 34 (171)
------ ------ ------
Provision for income taxes $4,832 $2,132 $3,570
====== ====== ======
/TABLE
<PAGE>
<PAGE> 32
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
5. Income taxes (continued)
------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
at December 30, 1995 and December 28, 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
Dollars in thousands
<S> <C> <C>
Deferred tax liabilities:
Book carrying value in excess of tax
basis of property, plant and equipment $27,930 $29,389
Other 1,417 1,376
------- -------
Total deferred tax liabilities 29,347 30,765
Deferred tax assets:
Net operating loss and credit
carryforwards 12,507 13,712
Nondeductible reserves and accruals 10,108 8,437
Minimum pension liability adjustment 1,207 399
Other 1,231 770
------- -------
Total deferred tax assets 25,053 23,318
Valuation allowance for deferred
tax assets (5,270) (4,767)
------- -------
Net deferred tax assets 19,783 18,551
------- -------
Net deferred tax liabilities $ 9,564 $12,214
======= =======
</TABLE>
At December 28, 1996, the Company had net operating loss carryforwards of
$900,000, which expire in 2005. In addition, the Company had available a
minimum tax credit carryforward of $8,100,000, and investment credit and
other general business credit carryforwards of $5,300,000. If not used,
$4,300,000 of the investment credit and other general business credit
carryforwards will expire in the years 1997 through 2000, and the remainder
will expire in various years through 2010.
Because the acquisition of the Predecessor in 1989 constituted a "change in
ownership" under Section 382 of the Internal Revenue Code, the utilization
of net operating loss and credit carryforwards existing as of the
acquisition date are subject to certain restrictions. These restrictions
have not impacted the utilization of pre-acquisition net operating losses,
none of which remain as of December 28, 1996, and are not expected to
materially impact the future utilization of credit carryforwards.<PAGE>
<PAGE> 33
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
5. Income taxes (continued)
------------
On September 3, 1991, the Company completed a financial restructuring (the
Restructuring) which involved issuing common and preferred stock to various
parties. The Company believes that the Restructuring did not result in a
"change in ownership" and thus did not cause further restrictions in the
utilization of carryforwards. However, Section 382 and related regulations
promulgated by the Internal Revenue Service (IRS) are extremely complex,
and the Company's assessment of whether or not a "change in ownership"
occurred involves judgments as to certain factual issues and
interpretations as to certain legal issues for which there is little
guidance. There can be no assurance that the IRS will not challenge the
Company's conclusion that no "change in ownership" has occurred under
Section 382. The utilization of the Company's pre-Restructuring
carryforwards could be significantly restricted or eliminated if the
Restructuring is deemed to constitute a "change in ownership." From the
date of the Restructuring through December 28, 1996, the Company utilized
an aggregate of $16,876,000 in net operating loss carryforwards and
$1,723,000 in general business credit carryforwards for federal income
tax purposes that are subject to review by the IRS.
For financial reporting purposes, valuation allowances of $5,270,000 and
$4,767,000 are reflected at December 30, 1995 and December 28, 1996,
respectively, to offset a portion of the deferred tax assets.
The Company made income tax payments of $1,482,000, $3,625,000, and
$1,180,000 during 1994, 1995 and 1996, respectively.
6. Benefit plans
-------------
Hourly and Salary Retirement Plans
----------------------------------
The Company sponsors the Dan River Inc. Hourly Retirement Plan (the Hourly
Plan) and the Dan River Inc. Salary Retirement Plan (the Salary Plan).
These plans are noncontributory and cover substantially all of the
Company's full-time employees. Funding for the Hourly and Salary Plans
is through employer cash contributions.
<PAGE>
<PAGE> 34
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, and December 30, 1995
and December 28, 1996
6. Benefit plans (continued)
-------------
Participants are generally eligible for full benefits at age 65 or upon
completion of five years of vesting service, if later. Vesting service is
defined generally as years of service from hire. Benefits of the Hourly
Plan are determined based upon years of service while benefits of the
Salary Plan are determined based upon years of service and career
average earnings.
The following sets forth the funded status of the plans at December 30,
1995 and December 28, 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
Dollars in thousands
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $15,174,000 at
December 30, 1995 and $16,079,000 at
December 28, 1996 $(16,267) $(17,069)
======== ========
Projected benefit obligation for service
rendered to date $(17,558) $(18,591)
Plan assets at fair value 13,043 16,218
-------- --------
Projected benefit obligation in excess of
plan assets (4,515) (2,373)
Unrecognized net loss 4,343 1,896
Minimum liability adjustment (3,052) (1,008)
-------- --------
Accrued pension cost included in the
consolidated balance sheets $ (3,224) $ (1,485)
======== ========
</TABLE>
The Company's practice is to fund amounts which are required by statute and
applicable regulations and which are tax deductible. The minimum liability
adjustment at December 30, 1995 and December 28, 1996, represents the
excess of unfunded accumulated benefit obligations over previously recorded
liabilities. A corresponding reduction is reflected in shareholders'
equity, net of the related income tax effect of $1,207,000 and $399,000 at
December 30, 1995 and December 28, 1996, respectively.<PAGE>
<PAGE> 35
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, December 30, 1995
and December 28, 1996
6. Benefit plans (continued)
-------------
Net pension cost for the plans included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Dollars in thousands
<S> <C> <C> <C>
Service cost $ 1,639 $ 1,452 $ 1,728
Interest cost 999 1,181 1,401
Actual return on assets 317 (2,193) (1,919)
Other, net (1,159) 1,204 951
------- ------- -------
Net periodic pension cost $ 1,796 $ 1,644 $ 2,161
======= ======= =======
</TABLE>
The projected benefit obligations were determined using an assumed discount
rate of 7.25% at December 30, 1995 and 7.90% at December 28, 1996. An
assumed long-term rate of increase in compensation of 4.25% was used at
December 30, 1995 and 4.90% at December 28, 1996. The assumed long-term
rate of return on plan assets was 9.5% at December 31, 1994, December 30,
1995 and December 28, 1996. Assets of the plans consist of various
institutional investment funds and money market accounts.
Supplemental retirement plan
----------------------------
The Company sponsors an unfunded supplemental retirement plan for certain
former employees that provides for payments upon retirement, death or
disability over the longer of the employee's life or ten years. The
projected benefit obligations of $3,182,000 and $2,960,000 at December 30,
1995 and December 28, 1996, respectively, are accrued in the accompanying
consolidated balance sheets. The Company is a beneficiary of life
insurance policies on certain participants in this plan.
<PAGE>
<PAGE> 36
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, December 30, 1995
and December 28, 1996
6. Benefit plans (continued)
-------------
Stock option plan
-----------------
The Company sponsors a nonqualified stock option plan under which
directors, officers and key management employees of the Company may be
granted options to purchase shares of the Company's Class A common stock.
The Company has reserved 37,000 shares of its authorized but unissued
common stock for this plan. All options to purchase unissued shares
granted through December 28, 1996 have an exercise price of $120 per
share, generally vest on December 31, 1999, and expire on December 31,
2001. None of these options were exercisable at December 28, 1996.
Prior to December 30, 1994, the plan also provided for the granting of
options to purchase shares of the Company's Class A common stock from a
certain principal shareholder at an exercise price of $10 per share. All
of these options were exercisable at December 28, 1996, and expire on
December 31, 1999.
The Company has adopted the disclosure-only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation," but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for its plan. No compensation expense was recorded in 1995 or 1996. If
the Company had elected to recognize compensation expense for the stock
option plan based on the fair value at the grant dates for awards under
the plan, consistent with the method prescribed by SFAS No. 123, the pro
forma effect on net income would be immaterial for both years.
The following table summarizes activity under the stock option plan:
<TABLE>
<CAPTION>
Options outstanding against:
---------------------------
Authorized Shares held by
but unissued principal
shares shareholder
----------- -----------
<S> <C> <C>
Outstanding at 12/31/94 34,500 29,960
Granted 1,150 -
Forfeited (1,650) (600)
------ ------
Outstanding at 12/30/95 34,000 29,360
Granted 750 -
Exercised - (2,960)
Forfeited (760) (300)
------ ------
Outstanding at 12/28/96 33,990 26,100
====== ======
</TABLE>
<PAGE>
<PAGE> 37
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, December 30, 1995
and December 28, 1996
6. Benefit plans (continued)
-------------
The weighted average fair value of options granted during the year ended
December 28, 1996 is $27.93. For this purpose, fair value was determined
under the minimum value method, assuming a dividend yield of 0%, a risk
free interest rate of 5.3% and an expected holding period of five years.
7. Other operating costs, net
--------------------------
During 1994 charges totaling $742,000 were recognized for writedowns and
disposals of equipment rendered obsolete by the Company's ongoing
modernization program. The Company also recorded a $792,000 charge in
1994 for stock based compensation associated with shares of the Company's
common stock deemed contributed to capital by a principal shareholder.
Charges in 1995 relating to the modernization program totaled $4,391,000.
Also in 1995, the Company recorded a $1,576,000 loss for the writedown of
a leasehold and other costs related to the relocation of the Company's
marketing headquarters in New York, and a $3,005,000 charge for the
writedown of assets associated with the Company's decision to discontinue
one of its apparel fabrics product lines. In 1996 the Company reversed
$849,000 of the prior year charge relating to the discontinued product
line and $84,000 of the loss for the marketing headquarters relocation.
This was offset in part by net charges of $505,000 relating to the
modernization program.
8. Commitments and contingencies
-----------------------------
The Company leases certain manufacturing equipment, warehouses and office
facilities under operating leases that expire at various dates through
2011. Rental expense for 1994, 1995 and 1996 amounted to approximately
$14,247,000, $13,032,000 and $10,296,000, respectively, net of rental
income on noncancelable leases and subleases of approximately $1,697,000,
$1,544,000 and $76,000, respectively.
<PAGE>
<PAGE> 38
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, December 30, 1995
and December 28, 1996
8. Commitments and contingencies (continued)
-----------------------------
The future minimum lease payments at December 28, 1996 due under
operating leases with noncancelable terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
Dollars in thousands
<S> <C>
1997 $ 5,310
1998 4,243
1999 2,817
2000 2,044
2001 2,001
Later 16,283
--------
$ 32,698
========
</TABLE>
Commitments for additions to plant and equipment amounted to
approximately $6,673,000 at December 28, 1996. Certain manufacturing and
warehouse leases contain renewal options at their fair rental values.
The Company is subject to various legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. It is impossible at this time for the Company to predict
with any certainty the outcome of such litigation. However, management
is of the opinion, based upon information presently available, that it is
unlikely that any such liability, to the extent not provided for through
insurance or otherwise, would be material in relation to the Company's
consolidated financial position.
9. Financial instruments
---------------------
Off balance sheet risk
----------------------
In connection with the purchase of cotton for anticipated manufacturing
requirements, the Company enters into cotton forward purchase
commitments, futures and option contracts in order to reduce the risk
associated with future price fluctuations. The Company does not engage
in speculation. There were no material cotton futures or options
contracts outstanding at December 30, 1995 or December 28, 1996. See
Note 2 for information on the Company's accounting policy with respect to
cotton futures and option contracts.<PAGE>
<PAGE> 39
DAN RIVER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, December 30, 1995
and December 28, 1996
9. Financial instruments (continued)
---------------------
Concentrations of credit risk
-----------------------------
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of temporary cash
investments and trade accounts receivable. The Company places its
temporary cash investments with high credit quality financial
institutions. Concentration of credit risk with respect to trade accounts
receivable is managed by an in-house professional credit staff. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
Fair values
-----------
The carrying values of cash and cash equivalents, accounts receivable and
accounts payable approximate fair values due to the short-term nature of
these instruments. The fair value of the Company's senior subordinated
notes, based on quoted market prices, was $109,200,000 and $120,600,000
at December 30, 1995 and December 28, 1996, respectively, compared to a
carrying value of $120,000,000. Based on rates available for similar
types of borrowings, the carrying values of the Company's other debt
approximated fair value at December 30, 1995 and December 28, 1996.
10.Subsequent event
----------------
On February 3, 1997 the Company acquired substantially all of the assets
of The New Cherokee Corporation, a manufacturer of yarn-dyed shirting and
sportswear fabrics, for approximately $65 million in cash, subject to a
working capital adjustment, and the assumption of certain operating
liabilities. See Note 3 concerning the financing of the acquisition.
<PAGE>
<PAGE> 40
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company, who are elected annually,
are as follows:
<TABLE>
<CAPTION>
Name Age Position with Dan River
---- --- -----------------------
<S> <C> <C> <C>
Joseph L. Lanier, Jr......... 65 Chairman, Chief Executive Officer
and Director
Richard L. Williams.......... 63 President, Chief Operating Officer and
Director
Paul R. Crotty............... 47 Director
John F. Maypole.............. 57 Director
Barry F. Shea................ 48 Vice President-Chief Financial Officer
Scott D. Batson.............. 40 Vice President-Finance
Anthony J. Bender............ 39 Vice President-Information Systems
Gregory R. Boozer............ 41 Vice President-Manufacturing Services
Edward E. Carroll............ 57 Vice President-Industrial Relations
Harry L. Goodrich............ 46 Vice President, Secretary and General
Counsel
George R. Herron............. 56 Vice President-Cotton Procurement
Larry W. Van de Visser....... 60 Vice President-Administration
Gary D. Waldman.............. 40 Controller
Joseph L. Lanier, Jr. has been Chairman of the Board of Directors and Chief
Executive Officer of Dan River since 1989 and of the Holding Company from 1989
until 1995.<F1> Mr. Lanier is also a director of SunTrust Bank, Inc. (a bank
holding company), Flowers Industries, Inc. (a food company), Torchmark
Corporation (an insurance company) and Dimon Incorporated (a tobacco products
company and distributor of cut flowers).
Richard L. Williams has been President and Chief Operating Officer of Dan River
since 1989 and President, Chief Operating Officer and a director of the Holding
Company from 1989 until 1995.<F1> Mr. Williams has been a director of Dan
River since 1993.
Paul R. Crotty served as a director of the Holding Company from 1991 until
1995.<F1> Mr. Crotty has been a director of Dan River since 1993. He is
presently a consultant to Metropolitan Life Insurance Company and was a Senior
Vice President of Metropolitan Life Insurance Company from 1991 until 1996 and
Vice President of Metropolitan Life Insurance Company from 1982 to 1991. Mr.
Crotty has over the past five years served as a director of various other
corporations.
<PAGE>
<PAGE> 41
John F. Maypole served as a director of the Holding Company from 1992 until
1995.<F1> He has been a director of Dan River since 1993. Mr. Maypole is
presently a consultant to Metropolitan Life Insurance Company and
has over the past five years served as a consultant to and/or director of
various other corporations and providers of financial services. Mr. Maypole
also serves as a director of Bell Atlantic Corporation (a telecommunications
company) and Massachusetts Mutual Life Insurance Company.
Barry F. Shea was Vice President-Finance, Chief Financial Officer and Assistant
Secretary of the Holding Company from 1989 until 1995<F1>, and a director of
the Holding Company from 1989 to 1991. He was Vice President-Finance, Chief
Financial Officer and Assistant Secretary of Dan River from 1989 until 1995,
Vice President-Chief Financial Officer and Assistant Secretary from 1995 to
1996 and has been Vice President-Chief Financial Officer from 1996 to the
present.
Scott D. Batson was elected Vice President-Finance of Dan River in 1995 and was
Director of Finance from 1990 to 1995. Mr. Batson was also Treasurer of the
Holding Company from 1990 to 1995.<F1>
Anthony J. Bender has been Vice President-Information Systems of Dan River
since 1995. Mr. Bender was Director Systems Development of Springs Industries,
Inc. (a manufacturer and distributor of textile products) from 1993 until 1995,
and held a number of management consulting positions with Price Waterhouse, LLP
from 1985 to 1993.
Gregory R. Boozer has been Vice President-Manufacturing Services of Dan River
since 1989.
Edward E. Carroll was elected Vice President-Industrial Relations of Dan River
in 1995. He was Director of Employee Relations of Dan River from 1984 until
1995.
Harry L. Goodrich was Secretary and General Counsel of the Holding Company from
1989 until 1995.<F1> He has been Secretary and General Counsel of Dan River
since 1989 and was elected Vice President of Dan River in 1995.
George R. Herron has been Vice President-Cotton Procurement of Dan River since
1987.
Larry W. Van de Visser was Controller of Dan River from 1990 until 1995 and
Vice President-Controller of Dan River from 1995-1996. He was elected Vice
President-Administration in 1996.
Gary D. Waldman was elected Controller of Dan River in 1996. He was Assistant
Controller for Dan River from 1992 until 1996, and Director of Taxes from 1990
until 1992.
Other significant employees of the Company are James E. Martin and Thomas L.
Muscalino.
Mr. Martin has been President of Dan River's apparel fabrics division since
1990. He is 47 years old.
Mr. Muscalino has been President of Dan River's home fashions division since
1993. From 1975 until 1992, he held a number of marketing positions with West
Point-Pepperell, Inc. (a textile company), including President of its Consumer
Products Division in 1992. He is 46 years old.<PAGE>
<PAGE> 42
<FN>
<F1>
Dan River was a wholly-owned subsidiary of the Holding Company until December
29, 1995, when the Holding Company was merged with and into Dan River.
</FN>
</TABLE>
The Amended and Restated Articles of Incorporation of Dan River provide that
the holders of the Class A Common Stock are entitled to one vote per share in
order to elect the directors. Under the terms of a Stockholders' Agreement,
which are described in more detail below, Management Stockholders and Mezzanine
Investment Limited Partnership-BDR ("MILP," an affiliate of Metropolitan Life
Insurance Company) each nominated two of the four directors of the Company.
"Management Stockholders" include Messrs. Lanier and Williams (and certain
members of their families), Mr. Shea, and recipients of Class A Common Stock
pursuant to the Company's Amended and Restated Stock Option Plan (the "Option
Plan"). Mr. Lanier and Mr. Williams are currently serving as directors
nominated by the Management Stockholders. Mr. Crotty and Mr. Maypole are
currently serving as directors nominated by MILP.
Messrs. Lanier, Williams and Shea are parties to Executive Employment
Agreements which are described in detail below.
Item 11. Executive Compensation
The following table sets forth the annual compensation paid by Dan River to or
for the account of the chief executive officer of Dan River and each of the
other four most highly compensated executive officers of Dan River in 1996
(collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards
------------------------------------------- --------------
Securities
Other Under-
Name and Annual lying All Other
Principal Compen- Options/ Compensa-
Position Year Salary($) Bonus($)<F1> sation SARs (#) tion($)<F3>
- -------- ---- --------- -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Joseph L. Lanier, Jr.1996 $422,424 $169,650 -0- -0- $1,500
Chairman and Chief 1995 404,193 128,050 -0- -0- 1,500
Executive Officer 1994 388,435 213,330 -0- 5,000 1,500
Richard L. Williams 1996 352,118 141,410 -0- -0- 1,500
President and Chief1995 338,558 107,260 -0- -0- 1,500
Operating Officer 1994 325,500 178,760 $543,000<F2> 4,000 1,500
Barry F. Shea 1996 201,815 81,050 -0- -0- 1,500
Vice President- 1995 193,389 61,270 -0- -0- 1,500
Chief Financial 1994 185,866 102,080 259,000<F2> 1,500 1,500
Officer
Gregory R. Boozer 1996 145,385 58,390 -0- -0- 1,454
Vice President- 1995 133,077 42,160 -0- -0- 1,331
Manufacturing Services1994 113,462 62,310 -0- 1,250 1,135
Harry L. Goodrich 1996 120,723 48,480 -0- -0- 1,207
Vice President- 1995 116,037 36,760 -0- -0- 1,160
Secretary and 1994 111,516 61,240 -0- 750 1,115
General Counsel
__________________<PAGE>
<PAGE> 43
<FN>
<F1>
For information relating to the determination of bonus amounts, see
"Compensation Committee Interlocks and Insider Participation."
<FN2>
During 1994 Mr. Lanier transferred 6,940 and 3,370 shares of his Class A Common
Stock of the Holding Company to Messrs. Williams and Shea, respectively, for no
consideration. Under applicable Internal Revenue Service regulations, the
transfer is deemed to be compensation paid by the Holding Company to Messrs.
Williams and Shea equal to the fair market value of the securities transferred,
which amount is deductible by the Company and taxable to the recipients. The
amounts set forth in the Compensation Table reflect the noncash compensation
deemed to have been paid to Messrs. Williams and Shea, plus $196,000 and
$90,500 in cash paid by the Company to each of them, respectively, in partial
reimbursement to Messrs. Williams and Shea of taxes payable by them as a result
of the stock transfer. The Class A Common Stock transferred was valued at $50
per share.
<F3>
Represents amounts accrued during applicable fiscal years to each Named
Executive Officer pursuant to the Dan River Salary Retirement Plan.
</FN>
</TABLE>
The table below sets forth certain information with respect to options to
purchase Class A Common Stock of the Company held at the end of fiscal 1996 by
each Named Executive Officer:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercise In Last Fiscal Year and FY-End Option/SAR Values<F1>
Number of
Securities
Underlying
Unexercised Value of
Options/SARs at Unexercised
Shares Fiscal Year-End in-the-Money
Acquired on Value (#) Options/SARs
Exercise Realized Exercisable/ at Fiscal Year-
Name (#) ($) Unexercisable End($)
- ---- ----------- -------- -------------- ---------------
<S> <C> <C> <C> <C>
Joseph L. Lanier, Jr. -- -- 0/5,000 $ 90,000
Richard L. Williams -- -- 0/4,000 72,000
Barry F. Shea -- -- 0/1,500 27,000
Gregory R. Boozer -- -- 1,500/1,250 214,500
Harry L. Goodrich -- -- 1,500/750 205,500
__________________
<FN>
<F1>
Each of the Named Executive Officers holds options granted in 1994 which vest
in increments of 20% of the grant on December 31 of each year from 1995 through
1999; provided, however, if cumulative Consolidated EBITDA (as defined in the
Indenture and based on internal growth of the Company) commencing January 1,
1995 and continuing through the end of the Company's 1997 fiscal year equals or
exceeds $188 million, or $274 million through the end of the Company's 1998<PAGE>
<PAGE> 44
fiscal year, the options will become fully vested as of December 31, 1997 or
1998, as the case may be. The options also vest early in the event there is a
Change of Control as defined in the Indenture. The options are exercisable, at
an exercise price of $120 per share, only at the time at which such options are
100% vested, as provided above, and are automatically revoked if the optionee
voluntarily leaves the Company or is terminated for cause prior to exercise of
the options. To the extent vested at the time of an optionee's death,
disability, retirement or involuntary termination without cause, the optionee
or his estate will be entitled to exercise the options within six months after
the later of the date of the event resulting in termination of employment or
the earliest permissible exercise date as described above. Messrs. Boozer and
Goodrich hold options, granted September 3, 1991, to purchase 1,500 shares each
of the Company's Class A Common Stock at an exercise price of $10 per share.
These options are fully vested and exercisable. For purposes of determining
the value of unexercised options, the Class A Common Stock has been valued at
$138 per share, based upon last 12 months EBITDA times a market multiple based
upon market multiples of comparable publicly traded companies, less debt net of
cash equivalents and a discount relating to the fact that the Class A Common
Stock is not publicly traded.
</FN>
</TABLE>
Director Compensation
Messrs. Maypole and Crotty each receives a retainer of $20,000 per year for his
services as a director. In 1994 Mr. Maypole was granted an option to purchase
650 shares of Class A Common Stock pursuant to the Option Plan. The terms of
Mr. Maypole's option are identical to the terms of other options granted in
1994 to executive officers and key employees of the Company. See Note 1 to
"Aggregated Option/SAR Exercise in Last Fiscal Year and FY-End Option/SAR
Values." The other directors of Dan River are not compensated for their
services as directors.
Executive Employment Agreements
The Company is party to employment agreements with Joseph L. Lanier, Jr.,
Richard L. Williams and Barry F. Shea, each dated September 3, 1996 and
terminating September 3, 1999, unless earlier terminated as described below
(the "Employment Agreements"). Each Employment Agreement provides for the
employee to be retained in certain specified capacities by the Company and to
devote his full business time and attention to the business of the Company.
Each of the Employment Agreements provides that the Company shall pay the
employee a bonus under the Dan River Management Incentive Plan and reimburse
certain business related expenses.
Mr. Lanier's employment agreement (the "Lanier Agreement") provides that he
will serve as the Chief Executive Officer and Chairman of the Board of
Directors of the Company. The Lanier Agreement provides for a base salary of
$420,116.32 per year which may be increased in the discretion of the Board of
Directors of the Company, subject to certain cost of living adjustments.
The Employment Agreements with Messrs. Williams and Shea provide for their
employment as President and Chief Operating Officer and Chief Financial Officer
of the Company, respectively. Each agreement provides that the employee shall
receive a base salary determined by the Chief Executive Officer of the Company
in consultation with its Board of Directors.<PAGE>
<PAGE> 45
The Employment Agreements are terminable upon the death or disability of the
employee, by the Company for good cause (as defined in the Employment
Agreements), by the Company without cause, by the employee for good reason (as
defined in the Employment Agreements), by the employee without good reason or
upon the occurrence of a change in control (as defined in the Employment
Agreements). Each Employment Agreement provides that, in the event the
employee's employment is terminated for no cause, a change in control or for
good reason (all as defined in the Employment Agreements), such employee is to
be paid an amount equal to two times his annual base salary in effect at the
time of termination, plus any incentive bonus prorated to the date on which
employment is terminated. The employee would also be entitled to participate
for a period of up to 24 months after termination of his employment in various
welfare, pension and savings plans and programs offered by the Company.
Post-Employment Agreements
The Company has entered into agreements with Messrs. Batson, Bender, Boozer,
Carroll, Goodrich, Herron, Martin, Muscalino and Van de Visser as well as ten
other key employees. These agreements provide certain assurances to the
employee in the event Mr. Lanier ceases for any reason to be Chief Executive
Officer of the Company (an "Employment Event"), including an agreement not to
arbitrarily reduce the salary of or relocate the employee and to allow the
employee to participate in certain incentive and other benefit plans at a level
commensurate with his level of participation at the time the Employment Event
occurred. These agreements are automatically renewed unless a two-year notice
of non-renewal is tendered by the Company. In the event employment of the
employee is terminated by the Company without good cause (as defined) or by the
employee upon breach of the agreement by the Company, the employee is entitled
to a severance payment of up to two years salary, plus any bonus otherwise
earned for the year in which the termination occurs, and to continue to
participate for a period of up to two years in certain welfare, retirement and
savings plans and policies afforded by the Company.
Retirement Plan
The Dan River Salary Retirement Plan (the "Retirement Plan") provides
noncontributory defined benefits based on both years of service and the
employee's career average monthly earnings ("Average Compensation"). Average
Compensation includes salary and commissions but excludes bonuses. Estimated
annual benefits payable upon retirement at age 65 for each of the Named
Executive Officers are as follows, based upon a single life annuity: Joseph L.
Lanier, Jr.--$11,835; Richard L. Williams--$14,824; Barry F. Shea--$36,712;
Gregory R. Boozer $40,479; and Harry L. Goodrich $29,286.
Compensation Committee Interlocks and Insider Participation
Messrs. Crotty and Maypole serve on a Senior Management Committee of the
Company's Board of Directors which is responsible for determining Mr. Lanier's
base salary and whether or not to terminate Mr. Lanier's employment. Mr.
Lanier consults with the Senior Management Committee in determining the
compensation of Mr. Williams and Mr. Shea. Within merit budget guidelines
approved by the Board of Directors for each fiscal year, and in consultation
with a management compensation committee consisting of Messrs. Williams, Shea
and Carroll, Mr. Lanier determines the compensation of all other executive
officers. Targets and participation levels in bonus programs are based on
<PAGE>
<PAGE> 46
certain financial objectives and are recommended by the management compensation
committee and approved by Mr. Lanier, in consultation with the Senior
Management Committee.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock, as of the date hereof, by (i)
each person who is known to the Company to be the beneficial owner of more than
5% of the outstanding Class A Common Stock, (ii) each of the directors of the
Company who holds Class A Common Stock, (iii) each of the Named Executive
Officers, and (iv) all directors and executive officers of the Company as a
group. Except as set forth below, the stockholders named below have sole voting
and investment power with respect to all shares of Class A Common Stock shown
as beneficially owned by them.
<TABLE>
<CAPTION>
Named Executive Officers, Class A Common Stock<F1>
Directors, Executive Number Percent
Officers and Directors as of of
a Group and 5% Stockholders Shares Class
- --------------------------- ------ -------
<S> <C> <C>
Joseph L. Lanier, Jr.<F2> <F3> <F5> 117,907 16.2%
Richard L. Williams<F2> <F4> <F5> 26,628 3.7%
Barry F. Shea<F2> <F4> 9,995 1.4%
Mezzanine Investment Limited Partnership-BDR 383,356 52.8%
One Madison Avenue
New York, New York 10010
Bank of America National Trust
& Savings Association 76,543 10.5%
Investment Administration #15027
315 Montgomery Street, 13/F
San Francisco, California 94104
Executive Officers and
Directors as a Group (12 persons)<F6> 117,907 16.2%
__________________
<FN>
<F1>
This table contains information only with respect to the ownership of the Class
A Common Stock and does not include information with respect to the 82,413
outstanding shares of Class B Common Stock. The Class B Common Stock is non-
voting, except that holders of Class B Common Stock are entitled to vote on
certain mergers or reorganizations. The Class B Common Stock is convertible
into Class A Common Stock at any time, with limited exceptions, at the option
of the holder. Assuming the conversion of all shares of Class B Common Stock
into Class A Common Stock, one holder of Class B Common Stock, First Chicago
Investment Corporation, would hold 70,018 shares of Class A Common Stock, which
would constitute 8.7% of the then outstanding Class A Common Stock. No
director or officer holds Class B Common Stock.
<F2>
The business address of Messrs. Lanier, Williams and Shea is 2291 Memorial
Drive, Danville, Virginia, 24541.
<PAGE>
<PAGE> 47
<F3>
Includes 30,000 shares of Class A Common Stock which Mr. Lanier is
contractually obligated to surrender to the Company from time to time upon
exercise of certain stock options issued pursuant to the Option Plan. Upon
surrender of shares of stock, the Company is required to pay to Mr. Lanier an
amount equal to the exercise price of the option in respect of which the shares
were surrendered. Options in respect of 29,060 shares are exercisable or have
been exercised. Also includes 3,746, 5,500, 21,128 and 9,995 shares of Class A
Common Stock beneficially owned by Mrs. Ann Lanier and Mrs. Suzanne S.
Williams, and Messrs. Richard L. Williams and Barry F. Shea, respectively.
With respect to all of the above-described shares, Mr. Lanier has sole voting
power in the election of directors pursuant to the terms of a Voting Agreement
among the Company, Mr. Lanier, and certain other parties, dated September 3,
1991, whereby Mr. Lanier has been granted a proxy to vote any and all shares of
Class A Common Stock beneficially owned by the above-described stockholders.
<F4>
Mr. Lanier has sole voting power over these shares in the election of directors
pursuant to the terms of the Voting Agreement described above.
<F5>
Messrs. Lanier and Williams disclaim beneficial ownership of the Class A Common
Stock held by their wives, Mrs. Ann Lanier and Mrs. Suzanne S. Williams,
respectively.
<F6>
Neither Mr. Crotty nor Mr. Maypole beneficially owns any of the Company's Class
A Common Stock.
</FN>
</TABLE>
Item 13. Certain Relationships and Other Transactions
Stockholders' Agreement
Pursuant to the Stockholders' Agreement, the Board of Directors of the Company
currently consists of four directors (subject to increase or decrease under
certain circumstances), two of whom are nominated by the Management
Stockholders holding a majority of the shares of Company's Class A Common Stock
held by such individuals or their permitted transferees. The other two
directors are nominated by MILP (or permitted transferees holding a majority of
the Common Stock currently held by MILP (the "MILP Shares")). The Management
Stockholders and MILP have each agreed to vote all shares of Common Stock owned
by them in favor of the election of directors nominated pursuant to the
Stockholders' Agreement. Pursuant to the Stockholders' Agreement, so long as
the Board consists of four directors, any action requiring Board of Directors
approval requires the approval of at least three of the four directors. Upon
the occurrence of certain events of default or an acceleration under the
Company's revolving credit agreement, or in the event the Company fails to meet
certain financial covenants, holders of a majority of the MILP Shares
(including permitted transferees of MILP) would be entitled to elect an
additional director, who would serve so long as the condition giving rise to
the right to appoint the additional director continued to exist. Pursuant to
the Stockholders' Agreement, the Management Stockholders and MILP may not
<PAGE>
<PAGE> 48
transfer their Common Stock unless the transfer is pursuant to an effective
registration statement under the Securities Act, pursuant to Rule 144 under the
Securities Act, pursuant to certain provisions of the Registration Rights
Agreement (as described below) and the transferee agrees in writing to be bound
by the terms of the Stockholders' Agreement (except that, at any time at which
MILP and its affiliates hold less than 10% of the Common Stock, it may transfer
all or any portion thereof without regard to the foregoing provisions so long
as no "Change of Control" as defined under the Indenture would occur). The
Stockholders' Agreement also establishes certain requirements for Board
approval of various transactions and corporate matters. The Stockholders'
Agreement terminates on the earliest of (i) September 3, 2001, (ii) the first
anniversary of the date on which MILP and its affiliates hold less than 10% of
the Common Stock, (iii) the date on which the parties to the Stockholders'
Agreement and their permitted transferees hold less than 50% of the Class A
Common Stock or (iv) the consummation of an underwritten public offering of the
Class A Common Stock by the Company for an aggregate amount equal to at least
$25 million (a "Qualified Public Offering").
Registration Rights Agreement
The Company, the Management Stockholders, MILP, and all other holders of the
Company's securities are parties to a Registration Rights Agreement, dated
September 3, 1991 (the "Registration Rights Agreement"). Unless otherwise set
forth below, all provisions of the Registration Rights Agreement terminate on
the earlier of (i) September 3, 2006 or (ii) the date when shares of Class A
Common Stock which are held by holders other than Management Stockholders
constitute less than 10% of the outstanding Common Stock, subject to limited
exceptions. The Registration Rights Agreement contains, among others, the
following provisions:
Put Rights
MILP has the right to sell up to 222,433 shares of its Common Stock to the
Company. Bank of America National Trust and Savings Association and certain
other holders have a similar right with respect to all of their Common Stock.
In either case, the purchase price will be an amount equal to (i) the fair
market value (as defined) of all of the Common Stock, (ii) multiplied by the
number of shares of Common Stock to be put to the Company, and (iii) divided by
the total number of shares of Common Stock outstanding immediately prior to the
exercise of the put. The Company is required to purchase putable securities
only once during any 12-month period and only if, after giving effect to the
put, the Company is in compliance with certain financial and other covenants,
the Company is able to obtain financing on commercially reasonable terms for
such purchase, and certain other conditions are satisfied. These put rights
terminate on the earlier of (i) the filing of a registration statement in
respect of a Qualified Public Offering (as defined, provided such offering is
consummated within 180 days after such filing) and (ii) September 4, 2001.
The Company's and Mr. Lanier's Call Rights
Joseph L. Lanier, Jr. has the right to purchase certain of the Common Stock
(the "Lanier Call"). The Company has a similar call right (the "Company
Call"). The Company Call applies to Common Stock held by the lenders under a
credit agreement to which the Company and Bank of America and certain other
lenders were party immediately following the 1991 Restructuring. The Lanier
<PAGE>
<PAGE> 49
Call is limited to such institutions' Common Stock issued in the 1991
Restructuring. In the case of a Company Call, the call price is the fair
market value (as defined) of the Common Stock. In the case of a Lanier Call,
the call price is 105% of the fair market value. The Company may not exercise
the Company Call during any period in which Mr. Lanier has previously delivered
a call notice. In addition, Mr. Lanier may request that the Company exercise
the Company Call, and if the Company does not do so within 90 days of such
request, the Company Call must be assigned to Mr. Lanier. Mr. Lanier may also
preempt any Company Call by delivering a Lanier Call notice within 30 days
after delivery of a Company Call Notice. In addition, Mr. Lanier has a first
offer right to purchase any Common Stock offered for sale by certain of the
Company's stockholders. The rights of each of the Company and Mr. Lanier under
the call provisions of the Registration Rights Agreement terminate on September
3, 2001 or, in the case of a Lanier Call, if earlier, Mr. Lanier's death or
total disability or termination of employment for good cause (as defined in the
Lanier Agreement).
Demand and Piggyback Registration Rights
The holders (not including the Management Stockholders) of at least 20% of the
Common Stock held by such holders may, on seven occasions, demand that the
Company prepare and file a registration statement under the Securities Act of
1933, as amended, with respect to such number of shares of Common Stock as are
designated by the holders of a majority of the Common Stock held by such
holders after consultation with the book running lead underwriter of any such
offering and the demanding holders. Once every 12 months, the Company may
delay the filing of any such registration statement for up to 60 days if the
Company would be required, in the opinion of counsel, to disclose information
in the registration statement that it would not otherwise be required to
publicly disclose and the Board determines in good faith that such disclosure
is not in the Company's best interest. In addition, such holders of Common
Stock are entitled to offer and sell their Common Stock in any underwritten
public offering by the Company or any subsidiary of the Company, subject to
certain limitations. The Company may also offer and sell its Common Stock in
any underwritten public offering effected at the request of holders of Common
Stock, subject to certain limitations.
Purchase and Sale Rights
At least 30 days prior to any sale by any holder of Common Stock (not including
the Management Stockholders), such holder must deliver a written notice to each
other holder of Common Stock providing each such holder with the right to
participate in such sale on the same terms and conditions as the original
holder. In addition, if (i) the holders (not including the Management
Stockholders) of 66 2/3% of the Common Stock held by such holders (provided
such holders also hold a majority of Company's voting securities (the
"Requisite Holders")) propose any sale (as defined in the Registration Rights
Agreement and including certain qualified sales to Mr. Lanier and other than to
any such holder, or an affiliate of any such holder or the Company) of all of
their Common Stock and (ii) each such holder and Management Stockholder has
received a fairness opinion relating to such sale in accordance with the
Registration Rights Agreement, then each such party shall be obligated to
participate in, to vote in favor of and take all reasonable actions to effect
such sale. Until September 3, 2001, Mr. Lanier has the right to preempt any
such sale proposed by the Requisite Holders by making a Qualifying Offer (as
<PAGE>
<PAGE> 50
defined in the Registration Rights Agreement) and delivering a letter of intent
to such Requisite Holders within 30 days of receiving notice of their intention
to pursue a Sale and satisfying certain other conditions.
Preemptive Rights
Subject to certain exceptions, the Company has granted each holder of its
Common Stock the right to subscribe for certain equity securities issued by the
Company.
<PAGE>
<PAGE> 51
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a)
1. Financial Statements
The following Financial Statements are filed under Item 8 of this
Report:
Dan River Inc. Consolidated Balance Sheets as of December 30, 1995
and December 28, 1996.
Dan River Inc. Consolidated Statements of Income for the fiscal
years ended December 31, 1994, December 30, 1995 and December 28,
1996.
Dan River Inc. Consolidated Statements of Shareholders' Equity for
the fiscal years ended December 31, 1994, December 30, 1995 and
December 28, 1996.
Dan River Inc. Consolidated Statements of Cash Flows for the fiscal
years ended December 31, 1994, December 30, 1995 and December 28,
1996.
Dan River Inc. Notes to Consolidated Financial Statements for the
fiscal years ended December 31, 1994, December 30, 1995 and
December 28, 1996.
Report of Independent Auditors.
2. The following Financial Statement Schedules are filed as part of
this Report:
Schedule II - Valuation and Qualifying Accounts
Other schedules are omitted because, under applicable rules, the
omitted Schedules are not required, are inapplicable, or the
information required is included in the Financial Statements or in
the Notes thereto.
3. Exhibits.
The Exhibits listed on the accompanying Index to Exhibits are filed
as a part of this Report.
(b) Reports on Form 8-K.
None.
<PAGE>
<PAGE> 52
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- -----------------------
<S> <C>
(c) Exhibits.
2.1 Plan and Agreement of Merger of Braelan Corp.
with and into Dan River Inc. (the "Registrant").<F1>
2.2 Asset Purchase Agreement dated January 10, 1997
by and between Dan River Inc. and The New Cherokee
Corporation.<F2>
2.3 First Amendment to Asset Purchase Agreement
between Dan River Inc. and The New Cherokee
Corporation dated as of February 2, 1997.<F2>
3.1 Amended and Restated Articles of Incorporation of
the Registrant.<F1>
3.2 Bylaws of the Registrant effective as of December 29,
1995.<F1>
4 Form of Indenture between the Registrant and Marine
Midland Bank, N.A., as Trustee (including Form of
Note).<F3>
10.1 Loan and Security Agreement dated February 3, 1997
among the Registrant and Fleet Capital Corporation.
10.2 Conversion and Restructuring Agreement, dated as of
September 3, 1991, among the Holding Company and
American Security Bank, N.A., Bank of America
National Trust and Savings Association, Crestar
Bank, Pilgrim Prime Rate Trust, Societe Generale,
Sovran Bank, N.A., Mezzanine Investment Limited
Partnership-BDR, First Chicago Investment Corporation,
Madison Dearborn Partners VI, Madison Dearborn
Partners, V, David K. Beecken, Frederic D. Floberg,
William C. Steinmetz, Taylor & Mathis Investments,
Susan C. LeCraw, Camille T. McDuffie, Susan M. Hawkins,
Ms. Ann M. Lanier, Joseph L. Lanier, III, Mrs. Ann M.
Lanier, Joseph L. Lanier, Jr., John A. Morgan, Harry L.
Philpott, Barry F. Shea, Trust Company Bank as IRA
Trustee for Barry F. Shea and Richard L. Williams
(collectively, the "Investors").<F4>
10.3 Voting Agreement dated as of September 3, 1991, among
the Holding Company, Ms. Ann M. Lanier, Joseph L.
Lanier, III, Mrs. Ann M. Lanier, Joseph L. Lanier, Jr.,
Barry F. Shea, Trust Company Bank as IRA Trustee for
Barry F. Shea and Richard L. Williams.<F4>
<PAGE>
<PAGE> 53
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.4 Registration Rights Agreement, dated as of September 3,
1991, among the Holding Company and the Investors.<F4>
10.5 Stockholders' Agreement, dated as of September 3,
1991 (the "Stockholders' Agreement"), among the
Holding Company, Mezzanine Investment Limited
Partnership--BDR, Joseph L. Lanier, Jr., Ms. Ann
M. Lanier, Joseph L. Lanier, III, Mrs. Ann M.
Lanier, Richard L. Williams, Barry F. Shea and
Trust Company Bank, as IRA Trustee for Barry F.
Shea.<F4>
10.5.1 Form of Amendment to Stockholders' Agreement.<F4>
10.7 Employment Agreement, dated as of September 3,
1996, between Dan River Inc. and Joseph L.
Lanier, Jr.<F5>
10.8 Employment Agreement, dated as of September 3,
1996, between Dan River Inc. and Richard L.
Williams.<F5>
10.9 Employment Agreement, dated as of September 3,
1996, between Dan River Inc. and Barry F.
Shea.<F5>
10.10 Form of Post-employment Agreement between the
Registrant and certain officers of the
Registrant.<F4>
10.12 Post-employment Agreement between the Registrant
and Gregory R. Boozer.<F6>
10.13 Post-employment Agreement between the Registrant
and Harry L. Goodrich.<F7>
10.14 Holding Company Amended and Restated Stock Option
Plan and form of option agreement; in effect
prior to December 30, 1994.<F4>
10.14.1 Holding Company Amended and Restated Stock Option
Plan and form of option agreement; as amended
as of December 30, 1994.<F6>
10.15 Dan River Management Incentive Plan.<F4>
10.21 Equipment Lease Agreement No. 2891-0, dated as
of December 29, 1989, as amended, between MDFC
Equipment Leasing Corporation and the
Registrant.<F4>
21 List of Subsidiaries<F4>
27 Financial Data Schedule<PAGE>
<PAGE> 54
___________________
<FN>
<F1>
Exhibits 2.1, 3.1 and 3.2 incorporated by reference to corresponding exhibit
numbers and Registrant's Report on Form 10-K (No. 33-70442) for the fiscal year
ended December 30, 1995.
<F2>
Exhibit Nos. 2.2 and 2.3 incorporated by reference to Exhibit Nos. 2.1 and 2.2
in Registrant's Current Report on Form 8-K (No. 33-70442) dated February 3,
1997.
<F3>
Exhibit 4 incorporated by reference to corresponding exhibit number in
Registrant's Report on Form 10-K (No. 33-70442) for the fiscal year ended
January 1, 1994.
<F4>
Incorporated by reference to corresponding exhibit number in Registrant's
Registration Statement on Form S-1 (No. 33-70442) (the "Form S-1") filed on
October 15, 1993, except exhibit 10.5.1 incorporated by reference to
corresponding exhibit number in Amendment No. 3 to the Form S-1, filed on
December 8, 1993.
<F5>
Exhibits 10.7, 10.8 and 10.9 incorporated by reference to corresponding exhibit
numbers in Registrant's Report on Form 10-Q (No. 33-70442) for the quarterly
period ended September 28, 1996.
<F6>
Exhibits 10.12 and 10.14.1 incorporated by reference to corresponding exhibit
numbers in Registrant's Report on Form 10-K (No. 33-70442) for the fiscal year
ended December 31, 1994.
<F7>
Exhibit 10.13 incorporated by reference to exhibit number 10.12 in the Form S-
1.
</FN>
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
No annual report or proxy material has been or will be sent to the security
holders of the Registrant. <PAGE>
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DAN RIVER INC.
By: /s/ Joseph L. Lanier, Jr.
-------------------------
Joseph L. Lanier, Jr.
Chairman and Chief Executive Officer
Date: March 5, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By: /s/ Paul R. Crotty By: /s/ Barry F. Shea
-------------------------- --------------------------
Paul R. Crotty, Director Barry F. Shea, Vice President-
Chief Financial Officer (Principal
Financial and Accounting Officer)
Date: March 5, 1997 Date: March 5, 1997
By: /s/ Joseph L. Lanier, Jr. By: /s/ Richard L. Williams
-------------------------- --------------------------
Joseph L. Lanier, Jr., Richard L. Williams, President
Chairman and Chief Executive and Chief Operating Officer and
Officer and Director Director
(Principal Executive Officer)
Date: March 5, 1997 Date: March 5, 1997
By: /s/ John F. Maypole
-------------------------
John F. Maypole, Director
Date: March 5, 1997
/TABLE
<PAGE>
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
<S> <C> <C>
2.1 Plan and Agreement of Merger of Braelan
Corp. with and into Dan River Inc.
(the "Registrant").<F1>
2.2 Asset Purchase Agreement dated
January 10, 1997 by and between
Dan River Inc. and The New Cherokee
Corporation.<F2>
2.3 First Amendment to Asset Purchase
Agreement between Dan River Inc.
and The New Cherokee Corporation
dated as of February 2, 1997.<F2>
3.1 Amended and Restated Articles of
Incorporation of the Registrant.<F1>
3.2 Bylaws of the Registrant effective
as of December 29, 1995.<F1>
4 Form of Indenture between the
Registrant and Marine Midland Bank,
N.A., as Trustee (including Form
of Note).<F3>
10.1 Loan and Security Agreement dated
February 3, 1997 among the Registrant
and Fleet Capital Corporation.
10.2 Conversion and Restructuring
Agreement, dated as of September 3,
1991, among the Holding Company and
American Security Bank, N.A., Bank
of America National Trust and
Savings Association, Crestar Bank,
Pilgrim Prime Rate Trust, Societe
Generale, Sovran Bank, N.A.,
Mezzanine Investment Limited
<PAGE>
<PAGE> 57
Partnership-BDR, First Chicago
Investment Corporation, Madison
Dearborn Partners VI, Madison
Dearborn Partners, V, David K.
Beecken, Frederic D. Floberg,
William C. Steinmetz, Taylor &
Mathis Investments, Susan C.
LeCraw, Camille T. McDuffie,
Susan M. Hawkins, Ms. Ann M.
Lanier, Joseph L. Lanier, III,
Mrs. Ann M. Lanier, Joseph L.
Lanier, Jr., John A. Morgan,
Harry L. Philpott, Barry F. Shea,
Trust Company Bank as IRA
Trustee for Barry F. Shea and
Richard L. Williams (collectively,
the "Investors").<F4>
10.3 Voting Agreement dated as of
September 3, 1991, among the
Holding Company, Ms. Ann M.
Lanier, Joseph L. Lanier, III,
Mrs. Ann M. Lanier, Joseph L.
Lanier, Jr., Barry F. Shea,
Trust Company Bank as IRA Trustee
for Barry F. Shea and Richard L.
Williams.<F4>
10.4 Registration Rights Agreement,
dated as of September 3, 1991,
among the Holding Company and
the Investors.<F4>
10.5 Stockholders' Agreement, dated
as of September 3, 1991 (the
"Stockholders' Agreement"), among
the Holding Company, Mezzanine
Investment Limited Partnership--BDR,
Joseph L. Lanier, Jr., Ms. Ann M.
Lanier, Joseph L. Lanier, III, Mrs.
Ann M. Lanier, Richard L. Williams,
Barry F. Shea and Trust Company Bank,
as IRA Trustee for Barry F. Shea.<F4>
10.5.1 Form of Amendment to Stockholders'
Agreement.<F4>
10.7 Employment Agreement, dated as of
September 3, 1996, between Dan
River Inc. and Joseph L. Lanier, Jr.<F5>
<PAGE>
<PAGE> 58
10.8 Employment Agreement, dated as of
September 3, 1996, between Dan River
Inc. and Richard L. Williams.<F5>
10.9 Employment Agreement, dated as of
September 3, 1996, between Dan
River Inc. and Barry F. Shea.<F5>
10.10 Form of Post-employment Agreement
between the Registrant and certain
officers of the Registrant.<F4>
10.12 Post-employment Agreement between
the Registrant and Gregory R.
Boozer.<F6>
10.13 Post-employment Agreement between
the Registrant and Harry L.
Goodrich.<F7>
10.14 Holding Company Amended and
Restated Stock Option Plan and
form of option agreement; in
effect prior to December 30,
1994.<F4>
10.14.1 Holding Company Amended and
Restated Stock Option Plan and
form of option agreement; as
amended as of December 30,
1994.<F6>
10.15 Dan River Management Incentive Plan.<F4>
10.21 Equipment Lease Agreement No.
2891-0, dated as of December 29,
1989, as amended, between MDFC
Equipment Leasing Corporation
and the Registrant.<F4>
21 List of Subsidiaries<F4>
27 Financial Data Schedule
___________________
<FN>
<F1>
Exhibits 2.1, 3.1 and 3.2 incorporated by reference to corresponding exhibit
numbers and Registrant's Report on Form 10-K (No. 33-70442) for the fiscal year
ended December 30, 1995.
<PAGE>
<PAGE> 59
<F2>
Exhibit Nos. 2.2 and 2.3 incorporated by reference to Exhibit Nos. 2.1 and 2.2
in Registrant's Current Report on Form 8-K (No. 33-70442) dated February 3,
1997.
<F3>
Exhibit 4 incorporated by reference to corresponding exhibit number in
Registrant's Report on Form 10-K (No. 33-70442) for the fiscal year ended
January 1, 1994.
<F4>
Incorporated by reference to corresponding exhibit number in Registrant's
Registration Statement on Form S-1 (No. 33-70442) (the "Form S-1") filed on
October 15, 1993, except exhibit 10.5.1 incorporated by reference to
corresponding exhibit number in Amendment No. 3 to the Form S-1, filed on
December 8, 1993.
<F5>
Exhibits 10.7, 10.8 and 10.9 incorporated by reference to corresponding exhibit
numbers in Registrant's Report on Form 10-Q (No. 33-70442) for the quarterly
period ended September 28, 1996.
<F6>
Exhibits 10.12 and 10.14.1 incorporated by reference to corresponding exhibit
numbers in Registrant's Report on Form 10-K (No. 33-70442) for the fiscal year
ended December 31, 1994.
<F7>
Exhibit 10.13 incorporated by reference to exhibit number 10.12 in the Form S-
1.
</FN>
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
No annual report or proxy material has been or will be sent to the security
holders of the Registrant.
<PAGE>
<PAGE> 60
Schedule II
<TABLE>
<CAPTION>
DAN RIVER INC.
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, December 30, 1995 and December 28, 1996
Additions
----------------------
Balance at Charged to Balance at
Beginning Costs and End
Description of Year Expenses Other Deductions of Year
----------- ------- -------- ----- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Year ended
December 31,
1994 Allow-
ance for
uncollectible
accounts,
discounts
and claims $ 6,340 7,557 21 (A) 8,026 (B) 5,892
------- ------ ----- -------- -------
Totals $ 6,340 7,557 21 8,026 5,892
======= ====== ===== ========== =========
Year ended
December 30,
1995 Allow-
ance for
uncollectible
accounts,
discounts and
claims $ 5,892 7,060 19 (A) 7,831 (B) 5,140
------- ------ ----- -------- -------
Totals $ 5,892 7,060 19 7,831 5,140
======= ====== ===== ======== =======
Year ended
December 28,
1996 Allow-
ance for
uncollectible
accounts,
discounts
and claims $ 5,140 6,937 145 7,591 (B) 4,631
------- ------ ----- ------- ------
Totals $ 5,140 6,937 145 7,591 4,631
======= ====== ===== ======= =======
Notes:
(A) Recoveries of amounts previously written off.
(B) Includes writeoff of receivables and claims allowed.
</TABLE>
<PAGE> 61
_________________________________________
DAN RIVER INC.,
as Borrower
_________________________________________
__________________________________________
__________________________________________
LOAN AND SECURITY AGREEMENT
Date: February 3, 1997
$125,000,000
__________________________________________
__________________________________________
__________________________________________
THE FINANCIAL INSTITUTIONS
PARTIES HERETO FROM TIME TO TIME,
as Lenders
and
FLEET CAPITAL CORPORATION,
as Agent
__________________________________________
<PAGE>
<PAGE> 62
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C> <C>
SECTION 1. CREDIT FACILITY -1-
1.1 Revolver Facility -1-
1.2 Term Loan Facility -2-
1.3 Letters of Credit; Letter of Credit Guaranties -2-
1.4 Use of Proceeds of Loans -6-
SECTION 2. INTEREST, FEES AND CHARGES -6-
2.1 Interest -6-
2.2 Fees -10-
2.3 Computation of Interest and Fees -11-
2.4 Reimbursement of Expenses -11-
2.5 Bank Charges -12-
2.6 Illegality -13-
2.7 Increased Costs -13-
2.8 Capital Adequacy -14-
2.9 Funding Losses -15-
2.10 Maximum Interest. -15-
SECTION 3. LOAN ADMINISTRATION -16-
3.1 Manner of Borrowing and Funding Revolver Loans -16-
3.2. Defaulting Lender -20-
3.3 Special Provisions Governing LIBOR Rate Loans -20-
SECTION 4. PAYMENTS -21-
4.1 General Payment Provisions -21-
4.2 Payment of Principal of Loans -21-
4.3 Payment of Interest -22-
4.4 Payment of Other Obligations -22-
4.5 Mandatory Prepayments of Term Loan -23-
4.6 Optional Prepayments of Term Loan -23-
4.7 Application of Payments and Collateral Proceeds -24-
4.8 Allocation of Payments Among Agent and Lenders -24-
4.9 Marshaling; Payments Set Aside -24-
4.10 Loan Accounts; the Register; Account Stated -25-
4.11 Gross Up for Taxes -25-
4.12 Withholding Tax Exemption -26-
SECTION 5. TERM AND TERMINATION OF COMMITMENTS -26-
5.1 Original Term of Commitments -26-
5.2 Termination -26-
SECTION 6. SECURITY INTERESTS -27-
6.1 Security Interest in Collateral -27-
6.2 Other Collateral -28-
6.3 Lien Perfection; Further Assurances -28-
6.4 Lien on Owned Real Property -29-
6.5 Release of Liens in Equipment Collateral and
Owned Real Property -29-
<PAGE>
<PAGE> 63
Page
----
SECTION 7. COLLATERAL ADMINISTRATION -29-
7.1 General Provisions -29-
7.2 Administration of Accounts -31-
7.3 Administration of Inventory -33-
7.4 Administration of Equipment Collateral -33-
7.5 Payment of Charges -34-
SECTION 8. REPRESENTATIONS AND WARRANTIES -34-
8.1 General Representations and Warranties -34-
8.2 Reaffirmation -41-
8.3 Survival of Representations and Warranties -41-
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS -41-
9.1 Affirmative Covenants -41-
9.2 Negative Covenants -45-
9.3 Specific Financial Covenants -50-
SECTION 10. CONDITIONS PRECEDENT -51-
10.1 Conditions Precedent to Term Loan and Initial Revolver Loan
on Closing Date -51-
10.2 Conditions Precedent to All Loans and Letters of Credit and
Letter of Credit Guaranties -55-
10.3 Waiver of Conditions Precedent -56-
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT -56-
11.1 Events of Default -56-
11.2 Acceleration of the Obligations -58-
11.3 Other Remedies -58-
11.4 Setoff -60-
11.5 Remedies Cumulative; No Waiver -60-
SECTION 12. AGENT -61-
12.1 Appointment, Authority and Duties of Agent -61-
12.2 Agreements Regarding Collateral -63-
12.3 Reliance By Agent -63-
12.4 Action Upon Default -63-
12.5 Ratable Sharing -64-
12.6 Indemnification of Agent -64-
12.7 Limitation on Responsibilities of Agent -65-
12.8 Successor Agent and Co-Agents -66-
12.9 Consents, Amendments and Waivers. -67-
12.10 Due Diligence and Non-Reliance-69-
12.11 Representations and Warranties of Lenders -70-
12.12 The Required Lenders -70-
12.13 Several Obligations -70-
12.14 Agent in its Individual Capacity -70-
12.15 Third Party Beneficiaries -71-
12.16 Notice of Transfer -71-
12.17 Replacement of Certain Lenders -71-
12.18 Remittance of Payments and Collections -72-
<PAGE>
<PAGE> 64
Page
----
SECTION 13 BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS -72-
13.1 Successors and Assigns -72-
13.2 Participations -73-
13.3 Assignments -74-
13.4 Certain Restrictions on Assignments and Participations -75-
13.5 Tax Treatment -75-
SECTION 14 MISCELLANEOUS -75-
14.1 Power of Attorney -75-
14.2 Indemnity -76-
14.3 Survival of Indemnities -77-
14.4 Modification of Agreement -77-
14.5 Severability -77-
14.6 Cumulative Effect; Conflict of Terms -77-
14.7 Execution in Counterparts -77-
14.8 Agent's or Required Lender's Consent -77-
14.9 Notice -78-
14.10 Credit Inquiries -78-
14.11 Time of Essence -78-
14.12 Entire Agreement -78-
14.13 Interpretation -78-
14.14 Confidentiality -78-
14.15 GOVERNING LAW; CONSENT TO FORUM -79-
14.16 WAIVERS -79-
</TABLE>
<PAGE>
<PAGE> 65
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made on February 3, 1997, by and
among DAN RIVER INC.("Borrower"), a Georgia corporation with its chief
executive office and principal place of business at 2291 Memorial Drive,
Danville, Virginia 24541; the various financial institutions listed on the
signature pages hereof and their respective successors and assigns which
become "Lenders" as provided herein (such financial institutions and their
respective successors and assigns referred to collectively herein as
"Lenders," and, individually, as a "Lender"); and FLEET CAPITAL CORPORATION,
a Rhode Island corporation with an office at 6060 J. A. Jones Drive, Suite
200, Charlotte, North Carolina 28287, in its capacity as collateral and
administrative agent for the Lenders pursuant to Section 12 hereof (together
with its successors in such capacity, "Agent"). Capitalized terms used in
this Agreement have the meanings assigned to them in Appendix A, General
Definitions.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders severally agree to the extent and in the manner
hereinafter set forth, to make their respective Pro Rata shares of the
Commitments available to Borrower, in an aggregate amount of $125,000,000, as
follows:
1.1 Revolver Facility.
1.1.1 Revolver Loans. Each Lender agrees, severally to the
extent of its Revolver Commitment and not jointly with the other Lenders,
upon the terms and subject to the conditions set forth herein, to make
Revolver Loans to Borrower on any Business Day during the period from the
date hereof through the day before the Commitment Termination Date, not to
exceed in aggregate principal amount outstanding at any time such Lender's
Revolver Commitment at such time, which Revolver Loans may be repaid and
reborrowed in accordance with the provisions of this Agreement; provided,
however, that Lenders shall have no obligation to Borrower whatsoever to make
any Revolver Loan if at the time of the proposed funding thereof the
aggregate principal amount of all of the Revolver Loans and Pending Revolver
Loans then outstanding exceeds, or would exceed after the funding of such
Revolver Loan, the Borrowing Base. Each Borrowing of Revolver Loans shall be
funded by Lenders on a Pro Rata basis in accordance with their respective
Revolver Commitments (except for Fleet with respect to Settlement Loans).
The Revolver Loans shall bear interest as set forth in Section 2.1 hereof.
Each Revolver Loan shall, at the option of Borrower, be made or continued as,
or converted into, part of one or more Borrowings that, unless specifically
provided herein, shall consist entirely of Base Rate Loans or LIBOR Loans.
1.1.2 Revolver Notes. Borrower shall execute and deliver to
Agent on behalf of each Lender, on the Closing Date, a promissory note
substantially in the form of Exhibit A-1 attached hereto and made a part
hereof (such promissory note, together with any new notes issued pursuant to
Section 13.3.2 upon the assignment of any portion of any Lender's Revolver
Commitment, being hereinafter referred to collectively as the "Revolver
Notes" and each of such promissory notes being hereinafter referred to
individually as a "Revolver Note"), to evidence such Lender's Revolver Loans
<PAGE>
<PAGE> 66
to Borrower, in original principal amounts equal to the amount of such
Lender's Revolver Commitment. Each Revolver Note shall be dated the Closing
Date and shall provide for payment of the Revolver Loans evidenced thereby as
specified in Section 4 hereof.
1.2 Term Loan Facility.
1.2.1 Term Loan. Subject to and upon the terms and conditions
herein set forth, each Lender severally agrees to make to Borrower its Term
Loan Advance in an amount equal to such Lender's Term Loan Commitment. The
Term Loan shall be comprised of Term Loan Advances in the aggregate principal
amount of $35,000,000 and shall be funded by Lenders on the Closing Date,
concurrently with Lenders' funding of their initial Revolver Loans. The
proceeds of the Term Loan Advances shall be used by Borrower solely for
purposes for which the proceeds of the Revolver Loans are authorized to be
used. The Term Loan Commitment of each Lender shall expire on the funding by
such Lender of its Term Loan Advance. Borrower shall not be entitled to
reborrow any amounts repaid with respect to the Term Loan Advances. All of
the Term Loan Advances shall initially be Base Rate Loans. Each Lender shall
make its Term Loan Advance available to Agent in immediately available funds,
to such account of Agent as Agent may designate, not later than 12:00 noon on
the Closing Date. After the Agent's receipt of the proceeds of such Term
Loan Advance, and upon satisfaction of the conditions precedent set forth in
Section 10 hereof, Agent shall make the proceeds of all such Term Loan
Advances available to Borrower on the Closing Date by transferring same day
funds equal to the proceeds of such Term Loan Advances received by Agent to
an account designated by Borrower in writing.
1.2.2 Term Notes. Borrower shall execute and deliver to Agent
on behalf of each Lender, on the Closing Date, a promissory note
substantially in the form of Exhibit A-2 attached hereto and made a part
hereof (such promissory note, together with any new notes issued pursuant to
Section 13.3.2 upon the assignment of any portion of any Lender's Term Loan
Advance, being hereinafter referred to collectively as the "Term Notes" and
each of such promissory notes being hereinafter referred to individually as a
"Term Note"), to evidence such Lender's Term Loan Advance to Borrower, in
original principal amounts equal to the amount of such Lender's Term Loan
Commitment. Each Term Note shall be dated the Closing Date and shall provide
for payment of the Term Loan Advance evidenced thereby as specified in
Section 4 hereof.
1.3 Letters of Credit; Letter of Credit Guaranties.
1.3.1 Issuance of Letters of Credit and Letter of Credit
Guaranties. Subject to and upon the terms and conditions herein set forth,
Agent agrees, for so long as no Default or Event of Default exists and
subject to the provisions of Section 10 below, to issue its, or cause to be
issued its Affiliate's Letters of Credit and Letter of Credit Guaranties, as
requested by Borrower, provided that the Letter of Credit Amount at any time
shall not exceed $7,500,000 and no Letter of Credit or Letter of Credit
Guaranty may have an expiration date that is after the last day of the
Original Term or the then applicable Renewal Term. Any amounts paid by Agent
under any Letter of Credit Guaranty or in connection with any Letter of
Credit shall be treated as a Revolver Loan (or as Settlement Loan), shall be
secured by all of the Collateral and shall bear interest and be payable at
the same rate and in the same manner as Revolver Loans that are Base Rate
Loans.<PAGE>
<PAGE> 67
1.3.2 Rights and Remedies of Agent. In the event that,
coincident with or subsequent to the occurrence of, and during the
continuance of, a Default or an Event of Default, Agent becomes aware of the
possibility of a draw, or enforcement of Agent's obligations, under a Letter
of Credit or Letter of Credit Guaranty, Agent, at its option, may, but shall
not be required to, pay Borrower's obligations to the beneficiary or holder
of such Letter of Credit or Letter of Credit Guaranty directly to such
beneficiary or holder, and, in such event, the amount of any such payment
made by Agent shall be treated for all purposes and shall have the same force
and effect as if such amount had been loaned by Agent to Borrower as a
Revolver Loan (or a Settlement Loan), shall be secured by all of the
Collateral and shall bear interest and be payable at the same rate and in the
same manner as Revolver Loans that are Base Rate Loans. Additionally, in the
event of Borrower's failure to reimburse Agent for the total amount of all
sums paid by Agent on Borrower's behalf under the terms of any Letter of
Credit or Letter of Credit Guaranty, any drawing or demand under any Letter
of Credit or Letter of Credit Guaranty or any additional or further liability
which may accrue against Agent in connection therewith, Agent, in addition to
its rights under the Code and under this Agreement, shall be fully subrogated
to the rights and remedies of the issuer of the Letter of Credit under any
agreement made with Borrower relating to the issuance of such Letter of
Credit, each such agreement being incorporated herein by reference, and Agent
shall be entitled to exercise all such rights and remedies thereunder and
under law in such regard as fully as if it were the issuer of the Letter of
Credit. If any Letter of Credit is drawn upon to discharge any obligation of
Borrower to the beneficiary of such Letter of Credit, in whole or in part,
Agent shall be fully subrogated to the rights of such beneficiary with
respect to the obligation of Borrower to such beneficiary discharged with the
proceeds of such Letter of Credit.
1.3.3 Indemnification. Borrower hereby unconditionally agrees
to indemnify Agent and each Lender and hold Agent and each Lender harmless
from any and all losses, claims or liabilities arising from any transactions
or occurrences relating to Letters of Credit or Letter of Credit Guaranties
issued, established, opened or accepted for Borrower's account, and any
drafts or acceptances thereunder, and all Letter of Credit Obligations
incurred in connection therewith; provided, however, the foregoing shall not
apply to losses, claims or liabilities arising out of Agent's or any Lender's
gross negligence or willful misconduct.
1.3.4 Participation. Each Lender other than Agent, with
respect to the Existing Letters of Credit and Existing Letter of Credit
Guaranties, hereby purchases without recourse a risk participation interest
(such participation interest of each Lender being herein referred to as its
"Letter of Credit Participation") in each Existing Letter of Credit and
Existing Letter of Credit Guaranty, each drawing thereunder and the Letter of
Credit Obligations arising thereunder, and, with respect to Letters of Credit
and Letter of Credit Guaranties issued on and after the Closing Date, each
Lender other than Agent shall be deemed to, and hereby agrees to, have
irrevocably purchased from Agent a Letter of Credit Participation in such
Letter of Credit and Letter of Credit Guaranty, each drawing thereunder and
the Letter of Obligations arising thereunder, in each case in an amount
equal to such Lender's Pro Rata share (determined on the basis of such
Lender's Revolver Commitment) of the maximum amount which is or at any time
may become available to be drawn thereunder, and shall absolutely,
<PAGE>
<PAGE> 68
unconditionally and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to the Agent therefor and discharge when due, its Pro
Rata share of the Letter of Credit Obligations arising under such Letter of
Credit and Letter of Credit Guaranty. Without limiting the scope and nature
of each Lender's Letter of Credit Participation, to the extent that Agent has
not been reimbursed as required hereunder, each Lender shall pay to Agent
its Pro Rata share of such unreimbursed drawing in same day funds on the day
of notification by Agent of an unreimbursed drawing pursuant to the
provisions of Section 1.3.2 hereof. The obligation of each Lender to so
reimburse Agent shall be absolute and unconditional and shall not be affected
by the existence of a Default, Event of Default or Overadvance Condition or
any other occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of Borrower to reimburse Agent under any
Letter of Credit or Letter of Credit Guaranty as provided herein.
1.3.5 Reimbursement Obligations. In the event of a drawing
under any Letter of Credit or Letter of Credit Guaranty, Agent will promptly
notify Borrower. Borrower shall reimburse Agent on the day of drawing under
any Letter of Credit or Letter of Credit Guaranty (either with the proceeds
of a Revolver Loan obtained hereunder or otherwise) in same day funds as
provided herein. If Borrower shall fail to reimburse Agent as provided
herein, the unreimbursed amount of such drawing shall bear interest at a per
annum rate equal to the interest rate applicable to Revolver Loans that are
Base Rate Loans. Unless Borrower shall immediately notify Agent of its
intent to otherwise reimburse Agent, Borrower shall be deemed to have
requested a Revolver Loan in the amount of the drawing as provided in Section
1.3.3 hereof, the proceeds of which will be used to satisfy the reimbursement
obligations. Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any rights
of set-off, counterclaim or defense to payment Borrower may claim or have
against Agent, Lenders, the beneficiary of the Letter of Credit or Letter of
Credit Guaranty drawn upon or any other Person, including, without
limitation, any defense based on any failure of Borrower to receive
consideration or the legality, validity, regularity or unenforceability of
the Letter of Credit or Letter of Credit Guaranty; provided, however, the
foregoing shall not apply to protect the Agent or any Lender for the
consequences of its gross negligence or willful misconduct. Agent will
promptly notify the other Lenders of the amount of any unreimbursed drawing
and each Lender shall promptly pay to Agent in Dollars and in immediately
funds, the amount of such Lender's Pro Rata share of such unreimbursed
drawing based upon such Lender's Revolver Commitment (without giving effect
to any termination of the Commitments pursuant to the provisions hereof).
Such payment shall be made on the day such notice is received by such Lender
from Agent, if such notice is received at or before 12:00 noon, otherwise
such payment shall be made at or before 12:00 noon on the Business Day next
succeeding the day such notice is received. If such Lender does not pay such
amount to Agent in full upon such request, such Lender shall, on demand, pay
to Agent interest on the unpaid amount during the period from the date of
such drawing until such Lender pays such amount to Agent in full at a rate
per annum equal to the Federal Funds Rate. Each Lender's obligation to make
such payment to Agent, and the right of Agent to receive the same, shall be
absolute and unconditional, shall not be affected by any circumstance
whatsoever and without regard to the termination of the Commitments
hereunder, the existence of a Default, Event of Default or Overadvance
Condition or the acceleration of the Loans hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
<PAGE>
<PAGE> 69
1.3.6 Repayment With Revolver Loans. On any day on which
Borrower shall have requested, or been deemed to have requested, a Revolver
Loan to reimburse a drawing under a Letter of Credit, Agent shall give notice
to Lenders that a Revolver Loan has been requested or deemed requested in
connection with a drawing under a Letter of Credit or Letter of Credit
Guaranty, in which case a Borrowing comprised entirely of Base Rate Loans
(each such Borrowing, a "Mandatory Borrowing") shall be immediately made
(without giving effect to any termination of the Commitments pursuant to the
provisions hereof) on a Pro Rata basis based upon each Lender's Revolver
Commitment (without giving effect to any termination of the Commitments
pursuant to the provisions hereof), and the proceeds thereof shall be paid
directly to Agent for application to the respective Letter of Credit
Obligations. Each Lender hereby irrevocably agrees to make such Revolver
Loans immediately upon any such request or deemed request on account of such
Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the same such date notwithstanding (i) the amount
of the Mandatory Borrowing may not comply with any of the conditions to a
Borrowing specified in Section 10 or any other provision of this Agreement,
(ii) whether a Default, Event of Default or Overadvance Condition then
exists, (iii) failure for any such request or deemed request for Revolver
Loans to be made by the time otherwise required in Section 3.1.2, (iv) the
date of the Mandatory Borrowing, or (v) any reduction in the Letter of Credit
Amount or the Revolver Commitments after any such Letter of Credit or Letter
of Credit Guaranty may have been drawn upon. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to Borrower), then each
Lender hereby agrees that it shall forthwith fund (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from Borrower on or after such date and prior to such
purchase) its Letter of Credit Participation in the outstanding Letter of
Credit Obligations; provided, however, in the event any Lender shall fail to
fund its Letter of Credit Participation on the day the Mandatory Borrowing
would otherwise have occurred, then the amount of such Lender's unfunded
Letter of Credit Participation therein shall bear interest payable to Agent
upon demand, at the rate equal to the Federal Funds Rate.
1.3.7 Termination. In the event that the Commitments are
terminated for any reason as herein provided, in addition to Agent's other
rights under this Agreement, unless all outstanding Letters of Credit and
Letter of Credit Guaranties are terminated or canceled and Agent and its
Affiliates released from all liability thereunder, Agent shall be entitled to
pay and discharge all Letter of Credit Obligations with respect to all
outstanding Letters of Credit and Letter of Credit Guaranties which are not
terminated or canceled, and, as between Agent and Lenders, such payment shall
be treated in all respects as a drawing under such outstanding Letters of
Credit and Letter of Credit Guaranties for which Agent is entitled to be
reimbursed or paid pursuant to the provisions of Sections 1.3.4 or 1.3.5
hereof.
1.4 Use of Proceeds of Loans. The Borrower shall use the proceeds
of the Loans as follows:
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(i) On the Closing Date, the proceeds of the initial Revolver Loan
and the Term Loan, together with other funds then available to Borrower,
shall be used solely for the purposes of (i) paying and satisfying in full
the Indebtedness owing to Fleet under that certain Loan and Security
Agreement, dated December 15, 1993, as amended, between Fleet and Borrower,
and (ii) to the extent of the balance, paying and satisfying in full the
payment of the purchase price for the Acquisition as set forth in Section 2.2
of the Purchase Agreement; and
(ii) All Revolver Loans made after the Closing Date shall be used
solely for Borrower's general working capital needs in a manner consistent
with the provisions of this Agreement and Applicable Law and for any other
purposes not inconsistent with this Agreement.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest - Revolver Loans. Subject to the
provisions of Sections 2.1.7, 2.1.8 and 2.1.9 of this Agreement, Borrower
agrees to pay interest on the unpaid principal amount of the Revolver Loans
outstanding from the respective dates such principal amounts are advanced
until paid (whether at stated maturity, on acceleration, or otherwise) at a
variable rate per annum equal to the applicable rate indicated below:
(i) For Revolver Loans made or outstanding as Base Rate Loans,
the Base Rate in effect from time to time; or
(ii) For Revolver Loans made or outstanding as LIBOR Rate Loans,
the relevant Adjusted LIBOR Rate for the applicable Interest Period selected
by Borrower in conformity with this Agreement plus two percent (2%).
2.1.2 Rates of Interest - Term Loan. Subject to the provisions
of Sections 2.1.7, 2.1.8 and 2.1.9 of this Agreement, Borrower agrees to pay
interest on the unpaid principal amount of the Term Loan outstanding from the
date the Term Loan is advanced until paid (whether at stated maturity, on
acceleration, or otherwise) at a variable rate per annum equal to the
applicable rate indicated below:
(i) For that portion of the Term Loan made or outstanding as a
Base Rate Loan, the Base Rate in effect from time to time; or
(ii) For that portion of the Term Loan made or outstanding as a
LIBOR Rate Loan, the relevant Adjusted LIBOR Rate for the applicable Interest
Period selected by Borrower in conformity with this Agreement plus two and
one-half percent (2.5%).
2.1.3 Computation of Interest. Upon determining the Adjusted
LIBOR Rate for any Interest Period requested by Borrower, Agent shall
promptly notify Borrower thereof by telephone or in writing, and such
Adjusted LIBOR Rate shall remain in effect throughout the applicable Interest
Period. Such determination shall, absent manifest error, be final,
conclusive and binding on all parties and for all purposes. The applicable
rates of interest with respect to all Base Rate Loans shall be increased or
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decreased, as the case may be, by an amount equal to any increase or decrease
in the Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective.
Interest on each Loan shall accrue from and including the date of such Loan
to but excluding the date of any repayment thereof; provided, however, that
if a Loan is repaid on the same day made, one day's interest shall be paid on
such Loan.
2.1.4 Conversions and Continuations.
(i) Borrower may on any Business Day, subject to the giving of
a proper Notice of Conversion/Continuation, elect to (a) continue all or any
part of the principal amount of a LIBOR Rate Loan by selecting a new Interest
Period therefor, to commence on the last day of the immediately preceding
Interest Period, or (b) convert all or any part of a Loan of one Type into a
Loan of another Type; provided, however, that no outstanding Loans may be
converted into or continued as LIBOR Rate Loans when any Default or Event of
Default has occurred and is continuing, and no conversion of any LIBOR Rate
Loans into Base Rate Loans shall be made except on the last day of the
Interest Period for such LIBOR Rate Loans. Any conversion or continuation
made with respect to less than the entire outstanding balance of the Loans
must be allocated among Lenders on a Pro Rata basis, and the Interest Period
for each Loan converted into or continued as a LIBOR Rate Loan shall be the
same for all Lenders.
(ii) Whenever Borrower desires to convert or to continue Loans
under Section 2.1.4(i) hereof, Borrower shall give Agent written notice (or
telephonic notice promptly confirmed in writing), substantially in the form
of Exhibit B attached hereto (a "Notice of Conversion/Continuation"), signed
by an authorized officer of Borrower, at least two (2) Business Days before
the requested conversion or continuation date. Promptly after receipt of a
Notice of Conversion/Continuation, Agent shall notify each Lender in writing
of the proposed conversion or continuation. Each such Notice of
Conversion/Continuation shall be irrevocable and shall specify the aggregate
principal amount of the Loans to be converted or continued, the date of such
conversion or continuation (which shall be a Business Day), and whether the
Loans are being converted into or continued as LIBOR Rate Loans (and, if so,
the duration of the Interest Period to be applicable thereto) or Base Rate
Loans. If, upon the expiration of any Interest Period in respect of any
LIBOR Rate Loans, Borrower shall have failed to deliver a Notice of
Conversion/Continuation, Borrower shall be deemed to have elected to convert
such LIBOR Rate Loans to Base Rate Loans.
2.1.5 Interest Periods. In connection with the making or
continuation of, or conversion into, each Borrowing of LIBOR Rate Loans,
Borrower shall select an interest period (each an "Interest Period") to be
applicable to such LIBOR Rate Loan, which interest period shall commence on
the date such LIBOR Rate Loan is made and shall end on a numerically
corresponding day in the 1st, 2nd, 3rd, or 6th month thereafter; provided,
however, that:
(i) The initial Interest Period for a LIBOR Rate Loan shall
commence on the date of such Borrowing (including the date of any conversion
from an Interest Period occurring thereafter in respect of a Loan of another
Type) and each such Loan shall commence on the date on which the next
preceding Interest Period expires;<PAGE>
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(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
LIBOR Rate Loans would otherwise expire on a day which is not a Business Day
but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business Day;
(iii) Any Interest Period which begins on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period shall expire on the last Business Day of such calendar month;
(iv) No Interest Period shall extend beyond the last day of the
Original Term or the last day of any Renewal Term; and
(v) No Interest Period with respect to any portion of principal
of a Loan shall extend beyond a date on which Borrower is required to make a
scheduled payment of such portion of principal.
2.1.6 Interest Rate Not Ascertainable. If Agent shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) that on any date for determining the
Adjusted LIBOR Rate for any Interest Period, by reason of any changes
affecting the London interbank market or a Lender's or Bank's position in
such market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
Adjusted LIBOR Rate, then, and in any such event, Agent shall forthwith give
notice (by telephone confirmed in writing) to Borrower of such determination.
Until Agent notifies Borrower that the circumstances giving rise to the
suspension described herein no longer exist, the obligation of Lenders to
make LIBOR Rate Loans shall be suspended, and such affected Loans then
outstanding shall, at the end of the then applicable Interest Period or at
such earlier time as may be required by Applicable Law, bear the same
interest as Base Rate Loans.
2.1.7 Adjustment in Rates of Interest. Provided no Default or
Event of Default then exists, the rates of interest set forth in Sections
2.1.1 and 2.1.2 shall be decreased if (i) for the fiscal year of Borrower and
its Subsidiaries ending December 31, 1997 by (x) one-tenth of one percent
(0.10%) if Consolidated EBITDA is equal to or greater than $68,800,000, and
(y) twenty-five one-hundredths of one percent (0.25%) if Consolidated EBITDA
is equal to or greater than $72,100,000, and (ii) for the fiscal year of
Borrower and its Subsidiaries ending December 31, 1998, provided Borrower has
not paid Restricted Payments in excess of $10,000,000 during the period from
the Closing Date through the date of receipt of the audited financial
statements of Borrower and its Subsidiaries required to be delivered to Agent
and Lenders pursuant to Section 9.1.9(i) hereof for such fiscal year by an
additional twenty-five one- hundredths of one percent (0.25%) if Consolidated
EBITDA is equal to or greater than $80,100,000, all as reflected on such
audited financial statements of Borrower and its Subsidiaries; provided,
however, in the event Consolidated EBITDA for the fiscal year ending December
31, 1998 is (a) less than $68,800,000, the rates of interest set forth in
Sections 2.1.1 and 2.1.2 shall be increased by the amount such rates were
decreased pursuant to clause (i) above, and (b) equal to or greater than
$68,800,000 but less than $72,100,000, the rates of interest set forth in
Sections 2.1.1 and 2.1.2 shall be increased by fifteen one-hundredths of one
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percent (0.15%). Any decrease or increase of the interest rates pursuant to
this Section 2.1.7 shall become effective, in the case of Base Rate Loans, on
the first day of the calendar month next following the month in which Agent
and Lenders receive the audited financial statements of Borrower and its
Subsidiaries required to be delivered to Agent and Lenders pursuant to
Section 9.1.9(i) hereof, and, in the case of LIBOR Rate Loans, at such time
thereafter as the applicable Interest Period for any portion of the Loans
then outstanding as LIBOR Rate Loans shall end.
2.1.8 Default Rate of Interest. Interest shall accrue at the
Default Rate (i) with respect to the principal amount of any portion of the
Obligations (and, the extent permitted by Applicable Law, all past due
interest) that is not paid on the due date thereof (whether due at stated
maturity, on demand, upon acceleration or otherwise) until paid in full, and
(ii) with respect to the principal amount of all of the Obligations (and, to
the extent permitted by Applicable Law, all past due interest) upon the
earliest to occur of (x) Borrower's receipt of notice from Agent of Lenders'
election to charge the Default Rate based upon the existence of any Event of
Default (which notice Agent shall send only with the consent or at the
direction of the Required Lenders) or (y) the commencement by or against
Borrower of an Insolvency Proceeding, whether or not under the circumstances
described in either clause (i) or (ii) hereof Agent or Lenders elect to
accelerate the maturity or demand payment of any of the Obligations. To the
fullest extent permitted by Applicable Law, the Default Rate shall apply and
accrue on any judgment entered with respect to any of the Obligations and to
the unpaid principal amount of the Obligations during any Insolvency
Proceeding of Borrower. Each Borrower acknowledges that the costs and
expenses to Agent and each Lender attendant upon the occurrence of an Event
of Default are difficult to ascertain or estimate and that the Default Rate
is a fair and reasonable estimate to compensate Agent and each Lender for
such added costs and expenses.
2.1.9 Minimum Interest Rate. At no time shall the rate of
interest applicable to the Loans or any part thereof be less than five
percent (5%) per annum.
2.2 Fees.
2.2.1 Closing Fee. Borrower shall pay to Agent, for the
benefit of those Lenders who are parties to this Agreement on the Closing
Date, a closing fee of $375,000, which shall be fully earned and non-
refundable on the Closing Date and shall be paid concurrently with and from
the proceeds of the initial Loan hereunder. The $375,000 closing fee shall be
in addition to the $250,000 commitment fee paid by Borrower to Fleet upon
Borrower's acceptance of the Commitment Letter, which, as more fully set
forth therein, has been fully earned and is non-refundable.
2.2.2 Unused Line Fee. Borrower shall pay to Agent for the Pro
Rata benefit of Lenders based upon each Lender's Revolver Commitment a fee
equal to one quarter of one percent (0.25%) per annum of the amount by which
the aggregate of the Revolver Commitments exceeds the Average Monthly
Revolver Loan Balance. The unused line fee shall begin to accrue on the
Closing Date and shall be payable monthly in arrears on the first day of each
calendar month after the Closing Date and upon the termination of this
Agreement.
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2.2.3 Letter of Credit and Letter of Credit Guaranty Fees.
Borrower shall pay fees for each Letter of Credit and Letter of Credit
Guaranty issued from time to time pursuant to Section 1.3 of this Agreement
(excluding the Existing Letters of Credit and Existing Letter of Credit
Guaranties as to which no additional fees shall be payable) as follows:
(i) To Agent, for its own account and without sharing with any
of the other Lenders, a fee equal to the sum of (i) $150 plus (ii) three
eighths percent (0.375%) per annum of the undrawn face amount of each Letter
of Credit and Letter of Credit Guaranty; and
(ii) To Agent, for the Pro Rata benefit of Lenders based upon
each Lender's Revolver Commitment, a fee equal to one and seven-eighths
percent (1.875%) per annum of the undrawn face amount of each Letter of
Credit and Letter of Credit Guaranty.
All fees payable under this Section 2.2.3 shall be deemed fully earned
upon issuance of each Letter of Credit and Letter of Credit Guaranty, shall
be due and payable in advance upon the issuance of each Letter of Credit or
Letter of Credit Guaranty and shall not be subject to rebate or proration
upon the termination of the Commitments for any reason. Additionally,
Borrower shall pay to Agent, for its own account and without sharing by the
other Lenders, a fee of $100 for each amendment to a Letter of Credit or
Letter of Credit Guaranty upon the issuance thereof.
2.2.4 Audit and Appraisal Fees. Borrower shall reimburse Agent
for all reasonable out-of-pocket costs and expenses from time to time
incurred by Agent in connection with all audits and appraisals of Borrower's
books and records and of the Collateral and such other matters related
thereto as Agent shall reasonably deem appropriate. On the Closing Date,
Borrower shall pay to Fleet all out-of-pocket expenses incurred by Fleet in
connection with the audit and appraisal of Borrower's business and the
Collateral prior to the Closing Date, less the sum of $75,000 which has been
paid to Agent with respect thereto.
2.2.5 Annual Collateral Monitoring Fee. Borrower shall pay to
Agent an annual collateral monitoring fee of $75,000 per year, which fee
shall be payable on the Closing Date and on each anniversary of the Closing
Date and shall not be subject to rebate or proration upon the termination of
the Commitments for any reason, less the sum of $50,000 which has been paid
to Agent with respect thereto.
2.3 Computation of Interest and Fees. All interest, fees and other
charges provided for in this Agreement shall be calculated daily and shall be
computed on the actual number of days elapsed over a year of 360 days. For
the purpose of computing interest hereunder, all Payment Items and other
forms of payment received by Agent shall be deemed applied by Agent on
account of the Obligations (subject to final payment of such items) on the
first (1st) Business Day after receipt by Agent of such items in immediately
available funds in Agent's account located at Harris Trust & Savings Bank in
Chicago, Illinois, and Agent shall be deemed to have received such Payment
Item on the date specified in Section 4.7 hereof; provided, however, for so
long as no Payment Direction Notice shall have been given by Agent, payments
received directly by Agent from Borrower by federal funds bank wire transfer
shall be applied to the Obligations on the date specified in Section 4.7
hereof without being subject to such one (1) Business Day clearance.
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2.4 Reimbursement of Expenses. Borrower agrees to pay or reimburse:
(i) Agent for all reasonable legal or accounting expenses or
any other reasonable costs or out-of-pocket expenses incurred by Agent in
connection with (a) the negotiation and preparation of this Agreement or any
of the other Loan Documents, or any amendment of or modification of this
Agreement or any of the other Loan Documents; (b) the administration of this
Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby, including reasonable charges for appraisers,
examiners, auditors or similar Persons (but specifically excluding any
overhead costs of Agent) whom Agent may engage from time to time to audit,
inspect or render opinions concerning the books, records and financial
condition of Borrower and its Subsidiaries and the condition and value of the
Collateral; (c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, Borrower or any other Person) in
any way relating to the Collateral, this Agreement or any of the other Loan
Documents; (d) any attempt to enforce any rights of Agent or any Lender
against Borrower or any other Person which may be obligated to Agent or any
Lender by virtue of this Agreement or any of the other Loan Documents; (e)
any attempt to enforce any rights of Agent or any Lender against Borrower or
any other Person which may be obligated to Agent or any Lender by virtue of
this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; (f) any attempt by Agent to inspect, verify,
protect, preserve, restore, collect, sell, liquidate or otherwise dispose of
or realize upon the Collateral; or (g) the filing and recording of the
Mortgage and the financing statements and all other documents required by
Agent to perfect Agent's Lien in the Collateral, and the conducting of
searches in all filing offices at such intervals as Agent may reasonably
determine to confirm the priority of Agent's Lien in the Collateral;
(ii) each Lender for all reasonable legal expenses or any other
reasonable costs or out-of-pocket expenses incurred by Agent in connection
with (a) any attempt to enforce any rights of such Lender against Borrower
or any other Person which may be obligated to such Lender by virtue of this
Agreement or any of the other Loan Documents; or (b) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by Agent,
any Lender, Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents; and
(iii) Agent and each Lender for any documentary stamp tax or any
other taxes incurred by Agent or any Lender because of the filing or
recording of the Mortgage or the financing statements or the other documents
required by Agent to perfect Agent's Lien in the Collateral.
All amounts payable by Borrower under this Section 2.4 shall be
Obligations secured by all of the Collateral, shall be payable on demand to
Agent or Lenders, as the case may be, and shall bear interest from the date
such demand is made until paid in full at the rate applicable to Revolver
Loans constituting Base Rate Loans from time to time. Borrower shall also
reimburse Agent for expenses incurred by Lender in its administration of the
Collateral to the extent and in the manner provided in Section 7 hereof or in
any of the Loan Documents.
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2.5 Bank Charges. Borrower shall pay to Agent, on demand, any and
all fees, costs or expenses which Agent pays to a bank or other similar
institution arising out of or in connection with (i) the forwarding to
Borrower or any other Person on behalf of Borrower by Agent of proceeds of
Loans made by Lenders to Borrower pursuant to this Agreement and (ii) the
depositing for collection, by Agent, of any Payment Item received or
delivered to Agent on account of the Obligations. Borrower acknowledges and
agrees that Agent may charge such costs, fees and expenses to Borrower based
upon Agent's good faith estimate of such costs, fees and expenses as they are
incurred by Agent.
2.6 Illegality. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful for a Lender to make or
maintain a LIBOR Rate Loan or to give effect to its obligations as
contemplated hereby with respect to a LIBOR Rate Loan or (ii) at any time a
Lender reasonably determines that the making or continuance of any LIBOR Rate
Loan has become impracticable as a result of a contingency occurring after
the date hereof which materially and adversely affects the London interbank
market or the position of such Lender in such market, then, by written notice
to Agent and Borrower, such Lender may (a) declare that LIBOR Rate Loans will
not thereafter be made by such Lender, whereupon any request by Borrower for
a LIBOR Rate Loan shall be deemed a request for a Base Rate Loan unless
Lender's declaration shall be subsequently withdrawn; and (b) require that
all outstanding LIBOR Rate Loans made by such Lender be converted to Base
Rate Loans, in which event all such LIBOR Rate Loans shall be automatically
converted to Base Rate Loans as of the date of Borrower's receipt of the
aforesaid notice from such Lender.
2.7 Increased Costs. If, by reason of (i) after the date hereof,
the introduction of or any change (including, without limitation, any change
by way of imposition or increase of Statutory Reserves or other reserve
requirements) in or in the interpretation of any law or regulation, or (ii)
the compliance with any guideline or request from any central bank or other
governmental authority or quasi-governmental authority exercising control
over banks or financial institutions generally (whether or not having the
force of law):
(a) a Lender shall be subject to any Tax, duty or other charge
with respect to any LIBOR Rate Loan or its obligation to make LIBOR Rate
Loans, or shall change the basis of taxation of payment to such Lender of the
principal of or interest on its LIBOR Rate Loans or its obligation to make
LIBOR Rate Loans (except for changes in the rate of Tax on the overall net
income of such Lender); or
(b) any reserve (including, without limitation, any imposed by
the Board of Governors), special deposits or similar requirement against
assets of, deposits with or for the account of, or credit extended by, a
Lender shall be imposed or deemed applicable or any other condition affecting
its LIBOR Rate Loans or its obligation to make LIBOR Rate Loans shall be
imposed on such Lender or the London interbank market; and as a result
thereof there shall be any increase in the actual cost to such Lender of
agreeing to make or making, funding or maintaining LIBOR Rate Loans (except
to the extent already included in the determination of the <PAGE>
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applicable Adjusted LIBOR Rate for LIBOR Rate Loans), or there shall be a
reduction in the amount received or receivable by such Lender, then Borrower
shall from time to time, upon written notice from and demand by such Lender
(with a copy of such notice and demand being delivered to Agent), pay to
Agent, for the account of such Lender, within fifteen (15) Business Days
after the date specified in such notice and demand, an additional amount
sufficient to indemnify such Lender against such increased cost (unless
within such notice period such Lender is replaced pursuant to Section 12.17
of this Agreement). A certificate as to the amount of such increased cost,
submitted to Borrower by such Lender, shall, except for manifest error, be
final, conclusive and binding for all purposes. Such certificate will set
forth the nature of the occurrence giving rise to such compensation, the
additional amount of amounts to be paid to such Lender, and the method by
which such amounts were determined. In determining such amount, a Lender may
use any reasonable averaging and attribution method.
If a Lender shall advise Agent at any time that, because of the
circumstances described in this Section 2.7 or any other circumstances
arising after the date of this Agreement affecting such Lender or the London
interbank market or such Lender's position in such market, the Adjusted LIBOR
Rate, as determined by Agent, will not adequately and fairly reflect the cost
to such Lender of funding LIBOR Rate Loans, then, and in any such event:
(1) Agent shall forthwith give notice (by telephone confirmed
in writing) to Borrower and Lenders of such advice;
(2) Borrower's right to request and such Lender's obligation to
make LIBOR Rate Loans shall be immediately suspended and Borrower's right to
continue a LIBOR Rate Loan as such beyond the then applicable Interest Period
shall also be suspended, until each condition giving rise to such suspension
no longer exists; and
(3) Such Lender shall make a Base Rate Loan as part of the
requested Borrowing of LIBOR Rate Loans, which Base Rate Loan shall, for all
purposes, be considered part of such Borrowing.
For purposes of this Section 2.7, all references to a Lender shall be
deemed to include any bank holding company or bank parent of such Lender
which provides funds to such Lender.
2.8 Capital Adequacy. In the event that Agent or any Lender shall
have determined that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or in the interpretation of
application thereof or compliance by Agent or such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any central bank or governmental authority, does or shall have the
effect of reducing the rate of return on Agent's or any Lender's capital as a
consequence of its obligations to make LIBOR Rate Loans hereunder to a level
below that which Agent or such Lender could have achieved but for such
adoption, change or compliance (taking into consideration Agent's or such
Lender's policies with respect to capital adequacy) by an amount deemed by
Agent or such Lender, in its reasonable determination, to be material, then
from time to time, after submission by Agent to Borrower of a written demand
therefor, Borrower shall pay to Agent, for the account of such Lender, such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. A certificate of a Lender claiming entitlement to payment as set
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forth above shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to such
payment, the additional amount or amounts to be paid to such Lender, and the
method by which such amounts were determined. In determining such amount,
such Lender may use any reasonable averaging and attribution method.
2.9 Funding Losses. Borrower shall reimburse each Lender for any
loss, cost, expense or liability (including, without limitation, any interest
paid by a Lender to lenders of funds borrowed by a Lender to make or carry
the LIBOR Rate Loans to the extent not recovered by such Lender in connection
with the re-employment of such funds) sustained or incurred by a Lender if
for any reason (other than a default by such Lender): (i) a Borrowing of, or
conversion to or continuation of, a LIBOR Rate Loan does not occur on the
date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation (whether or not withdrawn); (ii) any repayment
(including any conversions pursuant to Section 2.1.4 hereof) of any LIBOR
Rate Loans occurs on a date that is not the last day of an Interest Period
applicable thereto; or (iii) Borrower defaults in its obligation to repay
LIBOR Rate Loans when required by the terms of this Agreement. Agent shall
promptly, after its receipt of a certificate from a Lender setting forth such
Lender's determination of the amount owing to such Lender pursuant to this
Section 2.9 and such Lender's calculation thereof, give notice thereof to
Borrower and Lenders, and Borrower shall pay to Agent, for the account of
such Lender, within five (5) Business Days after Agent's demand therefor, the
amount such Lender certifies to be the amount that will reimburse such Lender
for such loss, cost, expense or liability. A certificate of a Lender
claiming entitlement to amounts under this Section 2.9 shall, except for
manifest error, be final, conclusive and binding. Such certificate will set
forth the amount to be paid to such Lender and the basis on which such amount
was determined. For purposes of this Section 2.9, all references to a Lender
shall be deemed to include any bank holding company or bank parent of a
Lender.
2.10 Maximum Interest. Regardless of any provision contained in
this Agreement or any of the other Loan Documents, in no contingency or event
whatsoever shall the aggregate of all amounts that are contracted for,
charged or collected pursuant to the terms of this Agreement or any of the
other Loan Documents and that are deemed interest under Applicable Law exceed
the highest rate permissible under any Applicable Law. No agreements,
conditions, provisions or stipulations contained in this Agreement or any of
the other Loan Documents, or the exercise by Agent of the right to accelerate
the payment or the maturity of all or any portion of the Obligations, or the
exercise of any option whatsoever contained in any of the Loan Documents, or
the prepayment by Borrower of any of the Obligations, or the occurrence of
any contingency whatsoever, shall entitle Agent or any Lender to charge or
receive in any event, interest or any charges, amounts, premiums or fees
deemed interest by Applicable Law (such interest, charges, amounts, premiums
and fees referred to herein collectively as "Interest") in excess of the
Maximum Rate and in no event shall Borrower be obligated to pay Interest
exceeding such Maximum Rate, and all agreements, conditions or stipulations,
if any, which may in any event or contingency whatsoever operate to bind,
obligate or compel Borrower to pay Interest exceeding the Maximum Rate shall
be without binding force or effect, at law or in equity, to the extent only
of the excess of Interest over such Maximum Rate. If any Interest is charged
or received in excess of the Maximum Rate ("Excess"), Borrower acknowledges
and stipulates that any such charge or receipt shall be the result of an
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accident and bona fide error, and such Excess, to the extent received, shall
be applied first to reduce the principal Obligations and the balance, if any,
returned to Borrower, it being the intent of the parties hereto not to enter
into a usurious or otherwise illegal relationship. The right to accelerate
the maturity of any of the Obligations does not include the right to
accelerate any interest that has not otherwise accrued on the date of such
acceleration, and Agent and Lenders do not intend to collect any unearned
interest in the event of any such acceleration. Borrower recognizes that,
with fluctuations in the rates of interest set forth in Section 2.1.1 of this
Agreement, and in the Maximum Rate, such an unintentional result could
inadvertently occur. All monies paid to Agent or any Lender hereunder or
under any of the other Loan Documents, whether at maturity or by prepayment,
shall be subject to any rebate of unearned interest as and to the extent
required by Applicable Law. By the execution of this Agreement, Borrower
covenants that (i) the credit or return of any Excess shall constitute the
acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Agent or any Lender,
based in whole or in part upon contracting for, charging or receiving any
Interest in excess of the Maximum Rate. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by
Agent or any Lender, all interest at any time contracted for, charged or
received from Borrower in connection with any of the Loan Documents shall, to
the extent permitted by Applicable Law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the Obligations. Borrower,
Agent and Lenders shall, to the maximum extent permitted under Applicable
Law, (i) characterize any non-principal payment as an expense, fee or premium
rather than as Interest and (ii) exclude voluntary prepayments and the
effects thereof. The provisions of this Section shall be deemed to be
incorporated into every Loan Document (whether or not any provision of this
subsection is referred to therein). All such Loan Documents and
communications relating to any Interest owed by Borrower and all figures set
forth therein shall, for the sole purpose of computing the extent of
Obligations, be automatically recomputed by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required
by this Section 2.10.
SECTION 3. LOAN ADMINISTRATION.
3.1 Manner of Borrowing and Funding Revolver Loans. Borrowings
under the Commitments established pursuant to Section 1.1 hereof shall be
made and funded as follows:
3.1.1 Notice of Borrowing.
(i) Whenever Borrower desires to make a Borrowing under Section
1.1 of this Agreement (other than a Borrowing resulting from a conversion or
continuation pursuant to Section 2.1.4), Borrower shall give Agent prior
written notice (or telephonic notice promptly confirmed in writing) of such
Borrowing request (a "Notice of Borrowing"), which shall be in the form of
Exhibit C annexed hereto and signed by an authorized officer of Borrower.
Such Notice of Borrowing shall be given by Borrower no later than 11:00 a.m.,
Charlotte, North Carolina time, at the office of Agent designated by Agent
from time to time (a) on the Business Day of the requested funding date of
such Borrowing, in the case of Base Rate Loans, and (b) at least two (2)
Business Days prior to the requested funding date of such Borrowing, in the
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case of LIBOR Rate Loans. Notices received after 11:00 a.m., Charlotte,
North Carolina time, shall be deemed received on the next Business Day.
The Revolver Loans made by each Lender on the Closing Date shall be made as
Base Rate Loans and thereafter may be made or continued as or converted into
Base Rate Loans or LIBOR Loans. Each Notice of Borrowing (or telephonic
notice thereof) shall be irrevocable and shall specify (a) the principal
amount of the Borrowing, (b) the date of Borrowing (which shall be a Business
Day), (c) whether the Borrowing is to consist of Base Rate Loans or LIBOR
Loans, (d) in the case of LIBOR Loans, the duration of the Interest Period to
be applicable thereto, and (e) the account of Borrower to which the proceeds
of such Borrowing are to be disbursed. Borrower may not request any LIBOR
Loans if a Default or Event of Default exists.
(ii) Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement or any of
the other Loan Documents as principal, accrued interest, fees or other
charges (including the repayment to Agent of any drawings under a Letter of
Credit or Letter of Credit Guaranty or any other Letter of Credit
Obligations) shall be deemed irrevocably to be a request for Revolver Loans
on the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges, and the proceeds of such
Revolver Loans may be disbursed by way of direct payment of the relevant
Obligation and shall bear interest as Base Rate Loans. Neither Agent nor any
Lender shall have any obligation to Borrower to honor any deemed request for
a Revolver Loan, but may do so in their discretion and without regard to the
existence of, and without being deemed to have waived, any Default or Event
of Default or Overadvance Condition.
(iii) As an accommodation to Borrower, Agent and Lenders may
permit telephonic requests for Borrowings and electronic transmittal of
instructions, authorizations, agreements or reports to Agent by Borrower;
provided, however, that Borrower shall confirm each such telephonic request
for a Borrowing of LIBOR Rate Loans by delivery of the required Notice of
Borrowing to Agent by facsimile transmission promptly, but in no event later
than 5:00 p.m., Charlotte, North Carolina time, on the same day. Unless
Borrower specifically directs Agent and Lenders in writing not to accept or
act upon telephonic or electronic communications from Borrower, neither Agent
nor any Lender shall have any liability to Borrower for any loss or damage
suffered by such Borrower as a result of Agent's or any Lender's honoring of
any requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to it telephonically or electronically
and purporting to have been sent to Agent or Lenders by Borrower (except to
the extent that such loss or damage results as a consequence of the gross
negligence or willful misconduct of Agent or any Lender) and neither Agent
nor any Lender shall have any duty to verify the origin of any such
communication or the identity or authority of the Person sending it.
3.1.2 Fundings By Lenders. Subject to its receipt of notice
from Agent of a Notice of Borrowing as provided in Section 3.1.1, each Lender
shall timely honor its Revolver Commitment by funding its Pro Rata share of
each Borrowing of Revolver Loans that is properly requested by Borrower and
that Borrower is entitled to receive under the Loan Agreement. Agent shall
notify Lenders of each Notice of Borrowing by 12:00 noon, Charlotte, North
Carolina time, on the proposed funding date (in the case of Base Rate Loans
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and, with respect to Revolver Loans that are Base Rate Loans, subject to
Section 3.1.3 hereof) or by 12:00 noon, Charlotte, North Carolina time, at
least two (2) Business Days before the proposed funding date (in the case of
LIBOR Rate Loans). Each Lender shall deposit with Agent an amount equal to
its Pro Rata share of the Borrowing requested by Borrower at Agent's
designated bank in immediately available funds not later than 2:00 p.m.,
Charlotte, North Carolina time, on the date of funding of such Borrowing,
unless Agent's notice to Lenders is received after 12:00 noon, Charlotte,
North Carolina time, on the proposed funding date of a Base Rate Loan, in
which event Lenders shall deposit with Agent their respective Pro Rata shares
of the requested Borrowing on or before 11:00 a.m., Charlotte, North Carolina
time, of the next Business Day. Subject to its receipt of such amounts from
Lenders and provided each of the applicable conditions set forth in Section
10 is satisfied, Agent shall make the proceeds of the Revolver Loans received
by it available to Borrower by disbursing such proceeds in accordance with
Borrower's disbursement instructions set forth in the applicable Notice of
Borrowing. Unless Agent shall have been notified in writing by a Lender
prior to the proposed time of funding that such Lender does not intend to
deposit with Agent an amount equal to such Lender's Pro Rata share of the
requested Borrowing, Agent may assume that such Lender has deposited or
promptly will deposit its share with Agent and Agent may in its discretion
disburse a corresponding amount to Borrower on the applicable funding date.
If a Lender's Pro Rata share of such Borrowing is not in fact deposited with
Agent, then, if Agent has disbursed to Borrower an amount corresponding to
such share, such Lender agrees to pay, and in addition Borrower agrees to
repay, to Agent forthwith on demand such corresponding amount, together with
interest thereon, for each day from the date such amount is disbursed by
Agent to or for the benefit of Borrower until the date such amount is paid or
repaid to Agent, (a) in the case of Borrower, at the interest rate applicable
to such Borrowing and (b) in the case of such Lender, at the Federal Funds
Rate. If such Lender repays to Agent such corresponding amount, such amount
so repaid shall constitute a Revolver Loan, and if both such Lender and
Borrower shall have repaid such corresponding amount, Agent shall promptly
return to Borrower such corresponding amount in same day funds.
3.1.3 Settlement and Settlement Loans.
(i) In order to facilitate the administration of the Revolver
Loans under this Agreement, Lenders agree (which agreement shall not be for
the benefit of or enforceable by Borrower) that settlement among them with
respect to the Revolver Loans may take place on a periodic basis on dates
determined from time to time by Agent (each a "Settlement Date"), which may
occur before or after the occurrence or during the continuance of a Default
or Event of Default and whether or not all of the conditions set forth in
Section 10 of this Agreement have been met. On each Settlement Date, payment
shall be made by or to each Lender in the manner provided herein and in
accordance with the Settlement Report delivered by Agent to Lenders with
respect to such Settlement Date so that, as of each Settlement Date and after
giving effect to the transaction to take place on such Settlement Date, each
Lender shall hold its Pro Rata share of all Revolving Loans then outstanding.
Agent shall request settlement with the Lenders on a basis not less
frequently than once every five (5) Business Days.
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(ii) Between Settlement Dates, Agent may request Fleet to
advance, and Fleet may, but shall in no event be obligated to, advance to
Borrower out of Fleet's own funds the entire principal amount of any
Borrowing of Revolver Loans that are Base Rate Loans requested or deemed
requested pursuant to this Agreement (any such Revolver Loan funded
exclusively by Fleet being referred to as a "Settlement Loan"). Each
Settlement Loan shall constitute a Revolver Loan hereunder and shall be
subject to all of the terms, conditions and security applicable to other
Revolver Loans, except that all payments thereon shall be payable to Fleet
solely for its own account. The obligation of Borrower to repay such
Settlement Loans to Fleet shall be evidenced by the records of Fleet and need
not be evidenced by any promissory note. Agent shall not request Fleet to
make any Settlement Loan if (a) Agent shall have received written notice from
any Lender that one or more of the applicable conditions precedent set forth
in Section 10 hereof will not be satisfied on the requested funding date for
the applicable Borrowing or (b) the requested Borrowing would exceed the
amount of Availability on the funding date. Fleet shall not otherwise be
required to determine whether the applicable conditions precedent set forth
in Section 10 hereof have been satisfied or the requested Borrowing would
exceed the amount of Availability on the funding date applicable thereto
prior to making, in its sole discretion, any Settlement Loan. On each
Settlement Date, or, if earlier, upon demand by Agent for payment thereof,
the then outstanding Settlement Loans shall be immediately due and payable.
Borrower shall be deemed to have requested Revolver Loans to be made on each
Settlement Date in the amount of all outstanding Settlement Loans and the
proceeds of such Revolver Loans shall be applied to the repayment of such
Settlement Loans. Agent shall notify the Lenders of the outstanding balance
of Revolver Loans prior to 12:00 noon, Charlotte, North Carolina time, on
the funding dates for such Revolver Loans and each Lender shall deposit with
Agent an amount equal to its Pro Rata share of the amount of Revolver Loans
deemed requested in immediately available funds not later than 2:00 p.m.,
Charlotte, North Carolina time, on such funding date. The proceeds of
Settlement Loans may be used solely for purposes for which Revolver Loans
generally may be used in accordance with Section 1.4 hereof. If any amounts
received by Fleet in respect of any Settlement Loans are later required to be
returned or repaid by Fleet to Borrower or any other Obligor or their
respective representatives or successors-in-interest, whether by court order,
settlement or otherwise, the other Lenders shall, upon demand by Fleet with
notice to Agent, pay to Agent for the account of Fleet, an amount equal to
each other Lender's Pro Rata share of all such amounts required to be
returned by Fleet.
3.1.4 Disbursement Authorization. Borrower hereby irrevocably
authorizes Agent to disburse the proceeds of each Revolver Loan requested, or
deemed to be requested pursuant to Section 3.1.1, as follows: (i) the
proceeds of each Revolver Loan requested under Section 3.1.1(i) shall be
disbursed by Agent in accordance with the terms of the written disbursement
letter from Borrower in the case of the initial Borrowing, and, in the case
of each subsequent Borrowing, by wire transfer to such bank account as may be
agreed upon by Borrower and Agent from time to time or elsewhere if pursuant
to a written direction from Borrower; and (ii) the proceeds of each Revolver
Loan requested under Section 3.1.1(ii) shall be disbursed by Agent by way of
direct payment of the relevant interest or other Obligation.
3.2 Defaulting Lender. If any Lender shall, at any time, fail to
make any payment to Agent or Fleet that is required hereunder, Agent may, but
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shall not be required to, retain payments that would otherwise be made to
such defaulting Lender hereunder and apply such payments to such defaulting
Lender's defaulted obligations hereunder, at such time, and in such order, as
Agent may elect in its sole discretion. With respect to the payment of any
funds from Agent to a Lender or from a Lender to Agent, the party failing to
make the full payment when due pursuant to the terms hereof shall, upon
demand by the other party, pay such amount together with interest on such
amount at the Federal Funds Rate. The failure of any Lender to fund its
portion of any Loan shall not relieve any other Lender of its obligation, if
any, to fund its portion of the Loan on the date of Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make any Loan to
be made by such Lender on the date of any Borrowing. Solely for purposes of
voting or consenting to matters with respect to any of the Loan Documents,
Collateral or any Obligations and determining a defaulting Lender's Pro Rata
share of payments and proceeds of Collateral, a defaulting Lender shall not
be deemed to be a "Lender" and such Lender's Commitment shall be deemed to be
zero (0).
3.3 Special Provisions Governing LIBOR Rate Loans.
3.3.1 Number of LIBOR Rate Loans. In no event may the number
of LIBOR Rate Loans outstanding in respect of the Revolver Loans at any time
exceed four (4) or in respect of the Term Loan at any time exceed four (4).
3.3.2 Minimum Amount of each LIBOR Rate Loan. Each election of
a LIBOR Rate Loan pursuant to Section 3.1.1(i), and each continuation of or
conversion into a LIBOR Rate Loan pursuant to Section 2.1.4 hereof, shall be
in a minimum amount of $1,000,000 and integral multiples of $1,000,000 in
excess of that amount.
3.3.3 LIBOR Lending Office. Each Lender's initial LIBOR
Lending Office is set forth opposite its name on the signature pages hereof.
Each Lender shall have the right at any time and from time to time to
designate a different office of itself or any Affiliate as such Lender's
LIBOR Lending Office, and to transfer any outstanding LIBOR Loans to such
LIBOR Lending Office. No such designation or transfer shall result in any
liability on the part of Borrower for increased costs or expenses resulting
solely from such designation or transfer (except any such transfer that is
made by a Lender pursuant to Sections 2.6 or 2.7 hereof, or otherwise for the
purpose of complying with Applicable Law). Increased costs for expenses
resulting from a change in Applicable Law occurring subsequent to any such
designation or transfer shall be deemed not to result solely from such
designation or transfer.
SECTION 4. PAYMENTS
4.1 General Payment Provisions. All payments (including all
prepayments) of the principal of, and interest on, the Loans and all of the
other Obligations that are payable to Agent or any Lender shall be made to
Agent in Dollars without any offset or counterclaim and free and clear of
(and without deduction for) any present or future Taxes, and, with respect to
payments made other than by application of balances in the Payment Account,
in immediately available funds no later than 12:00 o'clock noon, Charlotte,
North Carolina time, on the due date (and payment made after such time, on
the due date shall be deemed to have been made on the next succeeding
Business Day). All payments received by Agent shall be distributed by Agent
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Agreement or the other Loan Documents shall be specified to be made upon a
day which is not a Business Day, it shall be made on the next succeeding day
which is a Business Day, and such extension of time shall in such case be
included in computing interest and fees, if any, in connection with such
payment.
4.2 Payment of Principal of Loans.
4.2.1 Payment of Principal of Revolver Loans. The outstanding
principal amounts of the Revolver Loans shall be due and payable as follows:
(i) Any portion of the Revolver Loans consisting of the
principal amount of Base Rate Loans shall be paid by Borrower to Agent, for
the Pro Rata benefit of Lenders (or, in the case of Settlement Loans, for the
sole benefit of Fleet), unless converted to a LIBOR Rate Loan in accordance
with this Agreement, immediately upon the earlier of (a) effective
immediately upon Agent's giving of a Payment Direction Notice, the receipt by
Agent or Borrower of any proceeds of any of the Collateral (other than
proceeds of Equipment Collateral or real Property that are only applied to
the Term Loan), to the extent of such proceeds, (b) the Commitment
Termination Date, or (c) each Settlement Date in the case of all Settlement
Loans outstanding on such date.
(ii) Any portion of the Revolver Loans consisting of the
principal amount of LIBOR Rate Loans shall be paid by Borrower to Agent, for
the Pro Rata benefit of Lenders, unless converted to a Base Rate Loan or
continued as a LIBOR Rate Loan in accordance with the terms of this
Agreement, upon the earlier of (a) the last day of the Interest Period
applicable thereto or (b) the Commitment Termination Date. In no event shall
Borrower be authorized to pay any LIBOR Rate Loan prior to the last day of
the Interest Period applicable thereto unless otherwise agreed in writing by
Agent or Borrower is otherwise expressly authorized or required by any other
provision of this Agreement to pay any LIBOR Rate Loan outstanding on a date
other than the last day of the Interest Period applicable thereto, and
Borrower pays to Agent for the Pro Rata Benefit of Lenders concurrently with
any prepayment of a LIBOR Rate Loan the amount due Agent and Lenders under
Section 2.9 hereof as a result of such prepayment.
(iii) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if an Overadvance Condition shall exist,
Borrower shall, without the necessity of a demand, repay the outstanding
Revolver Loans that are Base Rate Loans in an amount sufficient to reduce the
aggregate unpaid principal amount of all such Revolver Loans by an amount
equal to such excess; and, if such payment of Base Rate Loans is not
sufficient to cure the Overadvance Condition, then Borrower shall immediately
either (a) deposit with Agent, for the benefit of Lenders, for application
to any outstanding Revolver Loans bearing interest as LIBOR Rate Loans as the
same become due and payable at the end of the applicable Interest Periods,
cash in an amount sufficient to cure such Overadvance Condition to be held by
Agent in the Cash Collateral Account, pending disbursement of same to
Lenders, but subject to Agent's Lien therein and rights of offset with
respect thereto, or (b) pay the Revolver Loans that are LIBOR Rate Loans to
the extent necessary to cure such Overadvance Condition and also pay to Agent
for the benefit of Lenders any and all amounts required by Section 2.9
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hereof to be paid by reason of the prepayment of a LIBOR Rate Loan prior to
the last day of the Interest Period applicable thereto.
4.2.2 Payment of Principal of Term Loan. Borrower shall repay
the principal balance of the Term Loan in fourteen (14) consecutive
quarterly installments of principal, commencing on August 1, 1997 and
continuing on the first (1st) day of each third month thereafter, with the
first four (4) quarterly installments of principal to be in the amount of
$875,000 each, the next nine (9) quarterly installments of principal to be in
the amount of $1,250,000 each, and the last and final quarterly installment
of principal to be in the amount of $20,250,000
4.3 Payment of Interest. Interest accrued on all of the Loans shall
be paid upon the earlier of (i) the first calendar day of each month for the
immediately preceding month, computed through the last calendar day of the
preceding month, or (ii) the termination of this Agreement by Borrower or
Lender pursuant to Section 5 hereof.
4.4 Payment of Other Obligations. Borrower shall pay all costs,
fees and charges pursuant to this Agreement as and when provided in Section
2.2 hereof, to Agent, or to any other Person designated by Agent in writing.
The balance of the Obligations requiring the payment of money shall be
payable by Borrower to Agent for the Pro Rata benefit of Lenders as and when
provided in this Agreement, the Other Agreements or the Security Documents,
or, if no date of payment is otherwise specified in the Loan Documents, on
demand.
4.5 Mandatory Prepayments of Term Loan. In addition to the payments
on the Term Loan set forth in Section 4.2.2 hereof and in the Term Notes,
Borrower shall make mandatory payments of principal on the Term Loan as
follows:
(i) Upon the Commitment Termination Date, Borrower shall
prepay the Term Loan in full; and
(ii) If Borrower receives any Net Proceeds, Borrower shall pay
to Agent for the Pro Rata benefit of Lenders, unless otherwise agreed by the
Required Lenders or unless otherwise provided in this Agreement, as and when
received by Borrower, a sum equal to such Net Proceeds; provided, however,
notwithstanding the foregoing, Borrower shall not be obligated to make such
mandatory payments of the Net Proceeds until such time as the aggregate Net
Proceeds received by Borrower in any consecutive twelve-month period equals
or exceeds Five Hundred Thousand Dollars ($500,000).
Each mandatory prepayment applied to the Term Loan pursuant to this
Section 4.5 shall be applied first to Base Rate Loans to the full extent
thereof before application to any LIBOR Rate Loans; provided, however, that,
so long as no Default or Event of Default has occurred and is continuing, in
lieu of application of such prepayment to LIBOR Rate Loans prior to the
expiration of the respective Interest Periods with respect thereto and the
resulting requirement to pay the charges provided for in Section 2.9 hereof,
Borrower may, at its option, deposit with Agent cash funds equal to such
prepayment to be held by Agent in the Cash Collateral Account for
disbursement to Lenders and application to the Term Loan on the sooner to
occur of the expiration of the Interest Period applicable thereto or the
Commitment Termination Date. Each such prepayment shall be applied to the
installments of principal due on the Term Loan and under the Term Notes in
the inverse order of their maturities until payment thereof in full.
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4.6 Optional Prepayments of Term Loan. Borrower may, at its option,
prepay the principal owing on the Term Loan at any time in whole and from
time to time in part in amounts aggregating $500,000 or any greater multiple
of $100,000, and if such prepayment is made of a LIBOR Rate Loan and on a
date other than the last day of any applicable Interest Period, by paying all
charges as set forth in Section 2.9 hereof. Any such optional prepayment
shall be applied to the installments of principal due on the Term Loan and
under the Term Notes in the inverse order of their maturities until payment
thereof in full. Borrower shall give written notice (or telephonic notice
confirmed in writing) to Agent of any intended prepayment not less than one
(1) Business Day prior to any prepayment of Base Rate Loans and not less than
two (2) Business Days prior to any prepayment of LIBOR Rate Loans. Such
notice, once given, shall be irrevocable.
4.7 Application of Payments and Collateral Proceeds. All Payment
Items or other forms of payment received by Agent by 12:00 noon, Charlotte,
North Carolina, on any Business Day shall be deemed received on that Business
Day. All Payment Items or other forms of payment received by Agent after
12:00 noon, Charlotte, North Carolina, time on any Business Day shall be
deemed received on the following Business Day. Except to the extent that the
manner of application to the Obligations of payments or proceeds of
Collateral is expressly governed by other provisions of this Agreement,
Borrower irrevocably waives the right to direct the application of any and
all payments and Collateral proceeds at any time or times hereafter received
by Agent or any Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Agent shall have the continuing exclusive right
to apply and reapply any and all such payments and Collateral proceeds
received at any time or times hereafter by Agent or its agent against the
Obligations, in such manner as Agent may deem advisable, notwithstanding any
entry by Agent or Lenders upon any of their respective books and records.
4.8 Allocation of Payments Among Agent and Lenders. All monies to
be applied to the Obligations, whether such monies represent voluntary
payments by Borrower or any other Obligor or are received pursuant to demand
for payment or realized from any disposition of Collateral, shall be
allocated among Agent and such of the Lenders as are entitled thereto (and,
with respect to monies allocated to Lenders, on a Pro Rata basis unless
otherwise provided herein): (i) first, to Agent to pay principal and accrued
interest on any portion of the Revolver Loans which Agent may have advanced
on behalf of any Lender and for which Agent has not be reimbursed by such
Lender or Borrower; (ii) second, to Fleet to pay the principal and accrued
interest on any portion of the Settlement Loans outstanding; (iii) third, to
Agent and Fleet to pay the amount of Extraordinary Expenses that have not
been reimbursed to Agent or Fleet by Borrower or Lenders, together with
interest accrued thereon; (iv) fourth, to Agent to pay an Indemnified Amount
that has not been paid to Agent by Borrower or Lenders, together with
interest accrued thereon; (v) fifth, to Agent to pay any fees due and payable
to Agent; (vi) sixth, to Lenders for any Indemnified Amount that they have
paid to Agent and for any Extraordinary Expenses that they have reimbursed to
Agent; and (vii) seventh, to Lenders in payment of the unpaid principal and
accrued interest in respect of the Loans and any other Obligations then
outstanding to be shared among Lenders on a Pro Rata basis, or on such other
basis as may be agreed upon in writing by Lenders (which agreement or
agreements may be entered into without notice to or the consent or approval
of Borrower). The allocations set forth in this Section 4.5 are solely to
determine the rights and priorities of Agent and Lenders as among themselves
and may be changed by Agent and Lenders without notice to or the consent of
approval of Borrower or any other Person.<PAGE>
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4.9 Marshaling; Payments Set Aside. Neither Agent nor any Lender
shall be under any obligation to marshall any assets in favor of Borrower or
any other Person or against or in payment of any or all of the Obligations.
To the extent that Borrower makes a payment or payments to Agent or any
Lender or Agent or any Lender receives payment from the proceeds of any
Collateral or exercises its right of setoff, and such payment or payments or
the proceeds of such setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other party, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred. The provisions of the immediately
preceding sentence of this Section 4.9 shall survive any termination of the
Commitments and payment in full of the Obligations.
4.10 Loan Accounts; the Register; Account Stated.
4.10.1. Loan Accounts. Each Lender shall maintain in
accordance with its usual and customary practices an account or accounts (a
"Loan Account") evidencing the Indebtedness of Borrower to such Lender
resulting from each Loan owing to such Lender from time to time, including
the amount of principal and interest payable to such Lender from time to time
hereunder and under each Note payable to such Lender.
4.10.2. The Register. Agent shall maintain a register (the
"Register") which shall include a master account and a subsidiary account for
each Lender and in which accounts (taken together) shall be recorded (i) the
date and amount of each Borrowing made hereunder, the Type of each Loan
comprising such Borrowing and any Interest Period applicable thereto, (ii)
the effective date and amount of each Assignment and Acceptance delivered to
and accepted by it and the parties thereto, (iii) the amount of any principal
or interest due and payable or to become due and payable from Borrower to
each Lender hereunder or under the Notes, and (iv) the amount of any sum
received by Agent from Borrower or any other Obligor and each Lender's share
thereof. The Register shall be available for inspection by Borrower or any
Lender at the offices of Agent at any reasonable time and from time to time
upon reasonable prior notice.
4.10.3. Entries Binding. The entries made in the Register and
each Loan Account shall constitute rebuttably presumptive evidence of the
information contained therein; provided, however, that if a copy of
information contained in the Register or any Loan Account is provided to any
Person, or any Person inspects the Register or any Loan Account, at any time
or from time to time, then the information contained in the Register or the
Loan Account, as applicable shall be conclusive and binding on such Person
for all purposes absent manifest error, unless such Person notifies Agent in
writing within 30 days after such Person's receipt of such copy or such
Person's inspection of the Register or Loan Account of its intention to
dispute the information contained therein.
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4.11 Gross Up for Taxes. If Borrower shall be required by
Applicable Law to withhold or deduct any Taxes from or in respect of any sum
payable under this Agreement or any of the other Loan Documents, (a) the sum
payable to Agent or such Lender shall be increased as may be necessary so
that, after making all required withholding or deductions, Agent or such
Lender (as the case may be) receives an amount equal to the sum it would have
received had no withholding or deductions been made, (b) Borrower shall make
such withholding or deductions, and (c) Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with Applicable Law.
4.12 Withholding Tax Exemption. Each Lender that is not
incorporated under the laws of the United States or any state thereof agrees
that it will deliver to Borrower and Agent two (2) duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Lender is entitled to receive payment under this
Agreement and its Notes without deduction or withholding of any United States
federal income taxes. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to Borrower and Agent two (2) additional copies
of such form (or a successor form) on or before the date that such form
expires (currently, three (3) successive calendar years for Form 1001 and one
calendar year for Form 4224) or becomes obsolete or after the occurrence of
any event requiring a change in the most form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by Borrower or Agent, in each case, certifying that such Lender is
entitled to receive payments under this Agreement and its Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required that
renders all such forms inapplicable or that would prevent such Lender from
duly completing and delivering any such form with respect to it and such
Lender advises Borrower and Agent that it is not capable or receiving
payments without any deduction or withholding of United States federal income
taxes.
SECTION 5. TERM AND TERMINATION OF COMMITMENTS
5.1 Original Term of Commitments. Subject to each Lender's right to
cease making Loans to Borrower when any Default or Event of Default exists or
the Commitments are terminated pursuant to Section 5.2 hereof, the
Commitments shall be in effect for a period of four (4) years from the last
day of the month hereof, through and including February 28, 2001 (the
"Original Term"), and the Commitments shall automatically renew for one (1)
year periods thereafter (each a "Renewal Term"), unless terminated as
provided in Section 5.2 hereof.
5.2 Termination.
5.2.1 Termination by Agent or Lenders. Agent may (and upon the
direction of the Required Lenders, shall) terminate the Commitments as of the
last day of the Original Term or any Renewal Term upon at least ninety (90)
days prior written notice to Borrower, but Agent may (and shall upon the
direction of the Required Lenders) terminate the Commitments without notice
at any time that an Event of Default exists. Any Lender may terminate its
Commitment as of the last day of the Original Term or any Renewal Term upon
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at least one hundred (120) days prior written notice to Borrower, Agent and
each of the other Lenders, and each of the other Lenders shall thereupon have
the right to terminate its Commitment as of the last day of the Original Term
or any Renewal Term upon at least ninety (90) days prior written notice to
Borrower and each of the other Lenders. The Commitments shall automatically
terminate as provided in Section 11.2 hereof.
5.2.2 Termination by Borrower. Upon at least one hundred
twenty (120) days prior written notice to Agent, Borrower may, at its option,
terminate the Commitments; provided, however, no such termination by Borrower
shall be effective until Borrower has satisfied all of the Obligations. For
purposes hereof, the Obligations shall not be deemed to have been satisfied
until all Obligations for the payment of money have been paid to Agent in
same day funds and all Obligations that are at the time in question
contingent have been fully cash securitized in favor and to the satisfaction
of Agent or Agent has received as beneficiary a direct pay letter of credit
in form and from an issuing bank reasonably acceptable to Agent and providing
for direct payment to Agent of all such contingent Obligations at the time
they become fixed. Any notice of termination given by Borrower shall be
irrevocable unless Agent otherwise agrees in writing. Borrower may elect to
terminate the Commitments in their entirety only. No section of this
Agreement, type of Loan available hereunder or Commitment may be terminated
by Borrower singly.
5.2.3 Effect of Termination. On the effective date of
termination by Agent or by Borrower, all of the Obligations shall be
immediately due and payable and Lenders shall have no obligation to make any
Loans. All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive any
such termination and Agent shall retain its Liens in the Collateral and all
of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has satisfied the Obligations to Agent and Lender,
in full, in the manner set forth in Section 5.2.2. Notwithstanding the
payment in full of the Obligations, Agent shall not be required to terminate
its Liens in the Collateral unless, with respect to any loss or damage Agent
may incur as a result of the dishonor or return of any Payment Item applied
to the Obligations, Agent shall, at its option, (i) have received a written
agreement, executed by Borrower and by any Person whose loans or other
advances to Borrower are used in whole or in part to satisfy the Obligations,
indemnifying Agent and Lenders from any such loss or damage, or (ii) such
monetary reserves and Liens on the Collateral for such period of time as
Agent, in its reasonable discretion, may deem necessary to protect Agent and
Lenders from any such loss or damage. All obligations of Borrower to
indemnify Agent and Lenders pursuant to this Agreement shall survive any
termination of the Commitments. Subject to the provisions of this Section
5.2.3, the termination of the Commitments shall constitute a termination of
all Loan Documents; provided, however, that any and all provisions of such
Loan Documents that are intended to survive payment in full of the
Obligations shall survive such termination of the Commitments and such Loan
Documents as and to the extent provided in such Loan Documents; provided,
however, that such Obligations shall constitute unsecured Obligations.
SECTION 6. SECURITY INTERESTS
6.1 Security Interest in Collateral. To secure the prompt payment
and performance of all of the Obligations, Borrower hereby grants to Agent, <PAGE>
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for the benefit of itself as Agent and for the Pro Rata benefit of Lenders, a
continuing Lien upon all of the following Property and interests in Property
of Borrower, whether now owned or existing or hereafter created, acquired or
arising and, except as set forth in Section 6.1(iii) below, wheresoever
located:
a. All Accounts;
b. All Inventory;
c. All Equipment Collateral;
d. All General Intangibles;
e. All Documents;
f. All Instruments;
g. All Chattel Paper;
(viii) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Agent or a
bailee or Affiliate of Agent;
(ix) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (viii) above,
including, without limitation, proceeds of and unearned premiums with respect
to insurance policies insuring any of the Collateral; and
(x) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i) through
(ix) above.
6.2 Other Collateral. In addition to the items of Property referred
to in Section 6.1 above, the Obligations shall also be secured by the Cash
Collateral to the extent provided herein and all of the other items of
Property from time to time described in any of the Security Documents as
security for any of the Obligations.
6.3 Lien Perfection; Further Assurances. Borrower shall execute,
and shall cause each of its Subsidiaries to execute, such UCC-1 financing
statements as are required by the Code and such other instruments,
assignments or documents as are necessary to perfect Agent's Lien upon any of
the Collateral and shall take such other action as may be reasonably required
to perfect or to continue the perfection of Agent's Lien upon the Collateral;
provided, however, Borrower and its Subsidiaries shall not be required to
deliver possession of the original of any Instrument to Agent unless (i) an
Event of Default exists and is continuing or (ii) the face amount of such
Instrument either (a) exceeds $100,000 or (b) when added to the face amount
of all other Instruments owned by Borrower and its Subsidiaries, exceeds
$500,000, in which event Borrower and its Subsidiaries shall be required to
deliver possession of the originals of all Instruments to Agent. Unless
prohibited by Applicable Law, Borrower hereby authorizes Agent to execute and
file any such financing statement on behalf of Borrower or any of its
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Subsidiaries if Borrower or any of its Subsidiaries fails to execute and
deliver any such financing statement within ten (10) days after Agent's
written request therefor. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof. At
Agent's request, Borrower shall also promptly execute or cause to be executed
and shall deliver to Agent any and all documents, instruments and agreements
reasonably deemed necessary by Agent to give effect to or carry out the terms
or intent of the Loan Documents.
6.4 Lien on Owned Real Property. The due and punctual payment and
performance of all of the Obligations shall also be secured by the Lien
created by the Mortgage upon all of the Owned Real Property. The Mortgage
shall be executed by Borrower in favor of Agent and shall be duly recorded,
at Borrower's expense, in each office where such recording is required to
constitute a fully perfected Lien on the Owned Real Property. Borrower shall
deliver to Agent, at Borrower's expense, mortgagee title insurance policies
issued by a title insurance company satisfactory to Agent, which policies
shall be in form and substance satisfactory to Agent and shall insure a valid
first Lien in favor of Agent on the Owned Real Property, subject only to
those exceptions acceptable to Agent and its counsel. Borrower shall deliver
to Agent such other documents, including, without limitation, as-built survey
prints of the Owned Real Property, as Agent and its counsel may reasonably
request relating to the Owned Real Property.
6.5 Release of Liens in Equipment Collateral and Owned Real
Property. At such time as the Term Loan shall have been paid in full and
provided no Default or Event of Default shall then exist, Agent, for and on
behalf of Lenders, will promptly release its Liens in the Equipment
Collateral and the Owned Real Property. All reasonable costs and expenses
incurred by Agent in connection with such release shall be paid by Borrower.
SECTION 7. COLLATERAL ADMINISTRATION
7.1 General Provisions
7.1.1 Location of Collateral. All Collateral consisting of
Inventory of Borrower and its Subsidiaries, other than Inventory in transit,
shall at all times be kept by Borrower and its Subsidiaries at one or more
of the business locations set forth in Schedule 7.1.1 hereto, and all of the
Equipment Collateral, other than motor vehicles, shall at all times be kept
by Borrower at the Real Property or as permitted pursuant to this Section
7.1.1(vi), and shall not, without the prior written approval of Agent, be
moved therefrom, except, prior to an Event of Default, for: (i) sales of
Inventory in the ordinary course of business; (ii) Inventory delivered to
processors in the ordinary course of business having a value of no more than
$500,000 in the possession of any single processor at any one time; (iii)
Inventory having a value of no more than $500,000 stored at any one time in a
temporary storage or warehouse facility for less than thirty (30) days; (iv)
removals in connection with dispositions of Equipment Collateral that are
authorized by Section 7.4.2 hereof; (v) movement of Equipment Collateral from
one facility included within the Real Property to another facility included
within the Real Property; and (vi) the storage of Collateral consisting of
Inventory at locations within the continental United States other than those
shown in Schedule 7.1.1 hereto and the relocation of Collateral consisting of
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Equipment Collateral at locations other than at the Real Property if (a)
Borrower gives Agent written notice of such a location at least thirty (30)
days prior to storing Inventory or Equipment Collateral at such location, and
(b) Agent's Lien in such Inventory or Equipment Collateral is and continues
to be a duly perfected Lien thereon (and Borrower shall have taken such
action as may be required pursuant to Section 6.3 hereof to perfect Agent's
Lien thereon) subject to no other Lien thereon except for Permitted Liens.
7.1.2 Insurance of Collateral. Borrower shall maintain and pay
for insurance upon all tangible Collateral wherever located and with respect
to Borrower's business, covering casualty, hazard, public liability and such
other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Agent, and with deductibles not in excess of
$250,000. Borrower shall deliver the originals or copies (which copies shall
be certified if requested by Agent) of such policies to Agent with
satisfactory lender's loss payable endorsements naming Agent as sole loss
payee, assignee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than thirty (30) days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Agent shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrower fails to provide and pay for such insurance, Agent may, at its
option, but shall not be required to, procure the same and charge Borrower
therefor. Borrower agrees to deliver to Agent, promptly, if requested by
Agent, true copies of all reports made in any reporting forms to insurance
companies. In addition to the insurance required herein with respect to the
Collateral, Borrower shall maintain, with financially sound and reputable
insurers, insurance with respect to its Properties and business against such
casualties and contingencies of such type (including product liability,
business interruption, larceny, embezzlement, or other criminal
misappropriation insurance) and in such amounts as is customary in the
business of Borrower, or as otherwise may be reasonably required by Agent.
All proceeds of insurance received by Borrower or Agent on account of any
casualty to the Collateral or other insured risk shall be applied as follows:
(i) if an Event of Default exists, all such insurance proceeds
shall, at Agent's option, be deemed Net Proceeds and paid to Agent as a
mandatory prepayment of the Loans pursuant to Section 4.4 hereof; and
(ii) if no Event of Default exists, all such insurance proceeds
of any claim of less than $1,000,000 shall be released to Borrower for the
purpose of Borrower's repairing, replacing or restoring the damaged or
destroyed Collateral (and, if replaced, the replacement Collateral shall be
subject to Lender's duly perfected first priority Lien therein subject to no
other Lien other than Permitted Liens), and all such insurance proceeds of
any claim of more than $1,000,000 shall be remitted to Agent and added to the
Cash Collateral Account and released to Borrower from time to time, but not
more often than monthly, against such evidence of repair, replacement or
restoration as Agent may reasonably require (subject, as aforesaid, in the
case of replacement Collateral).
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7.1.3 Protection of Collateral. All reasonable expenses of
protecting, storing, warehousing, insuring, handling, maintaining and
shipping the Collateral, all Taxes imposed by any Applicable Law on any of
the Collateral or in respect of the sale thereof, and all other payments
required to be made by Agent to any Person to realize upon the Collateral,
shall be borne and paid by Borrower. If Borrower fails to promptly pay any
portion thereof when due, Agent may, at its option, but shall not be required
to, pay the same and charge Borrower therefor. Agent shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for
any loss or damage thereto (except for reasonable care in the custody thereof
while any Collateral is in Agent's actual possession) or for any diminution
in the value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other person whomsoever, but the same shall be at
Borrower's sole risk.
7.2 Administration of Accounts.
7.2.1 Records and Schedules of Accounts. Borrower shall keep
accurate and complete records of all Accounts of Borrower and each of its
Subsidiaries and all payments and collections thereon and shall submit to
Agent the following reports:
(i) A Borrowing Base Certificate dated as of the last day of
the preceding fiscal month, or more frequently if reasonably requested by
Agent, reflecting the amount of Eligible Accounts of Borrower and its
Subsidiaries, the amount of the Factoring Credit Balances, and the amount of
Revolver Loans and Letters of Credit and Letter of Credit Guaranties
outstanding as of the end of the period for which such Borrowing Base
Certificate is rendered, and such other information relating thereto as Agent
may reasonably request;
(ii) On or before the fifteenth (15th) day of each fiscal
month, a summary (or, if requested by Agent, a detailed) aged trial balance,
in form reasonably acceptable to Agent, of all Accounts of Borrower and each
of its Subsidiaries existing as of the last day of the preceding fiscal
month, specifying the names and addresses of each Account Debtor, and the
face value, dates of invoices and the due dates for each invoice so listed
("Schedule of Accounts"); and
(iii) At any time while Availability is less than $5,000,000 or a
Default or Event of Default exists, upon Agent's reasonable request therefor,
copies of proof of delivery and the original copy of all documents,
including, without limitation, repayment histories and present status reports
relating to all Accounts listed on any Borrowing Base Certificate and such
other matters and information relating to the status of the Accounts of
Borrower and each of its Subsidiaries as Agent shall reasonably request.
7.2.2 Discounts, Allowances, Disputes. Upon the granting of
any discounts, allowances or credits by Borrower or any of its Subsidiaries
in excess of $100,000 or not in the ordinary course of business which in
either case are not shown on the face of the invoice for the Account
involved, Borrower shall promptly report such discounts, allowances or
credits, as the case may be, to Agent and in no event later than the time of
its submission to Agent of the next Schedule of Accounts as provided in
Section 7.2.1(ii).
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In the event any amounts due and owing in excess of $100,000 are in dispute
between Borrower or any of its Subsidiaries and any Account Debtor, Borrower
shall provide Agent, at its request, with a report thereon, explaining in
detail the reason for the dispute, all claims related thereto and the amount
in controversy.
7.2.3 Taxes. Subject to the provisions of Section 9.1.1, if an
Account of Borrower or any of its Subsidiaries includes a charge for any Tax
payable to any governmental taxing authority, Agent is authorized, in its
sole discretion, to pay the amount thereof to the proper taxing authority for
the account of Borrower. Borrower shall notify Agent if any Account of
Borrower or any of its Subsidiaries includes any Tax due to any governmental
taxing authority and, in the absence of such notice, after Agent's giving of
a Payment Direction Notice, the full amount of such Account shall be applied
to the Obligations and neither Agent nor any Lender shall be liable for any
Taxes to any governmental taxing authority that may be due by Borrower or any
of its Subsidiaries by reason of the sale and delivery creating such Account.
7.2.4 Account Verification. Whether or not a Default or an
Event of Default exists, any of Agent's officers, employees or agents shall
have the right, at any time or times hereafter, in the name of Agent, or any
designee of Agent, to verify the validity, amount or any other matter
relating to any Accounts of Borrower or any of its Subsidiaries by mail,
telephone, telegraph or otherwise. Borrower shall cooperate, and shall cause
each Subsidiary to cooperate, fully with Agent in an effort to facilitate and
promptly conclude any such verification process.
7.2.5 Maintenance of Dominion Account. Borrower shall at all
times maintain a lockbox or lockboxes ("Lockboxes") with a bank or banks
("Lockbox Banks") selected by Borrower and reasonably acceptable to Agent and
shall direct, and shall cause each of its Subsidiaries to direct, all Account
Debtors of Borrower and each of its Subsidiaries to remit payments of
Accounts of Borrower and each of its Subsidiaries to the Lockboxes. For so
long as Availability equals or exceeds $5,000,000 and no Default or Event of
Default exists, Borrower shall be permitted to receive from the Lockbox Banks
all payments or other remittances of Accounts and other proceeds of the
Collateral received in the Lockboxes, and to receive from each Factor the
Factoring Credit Balances. If, at any time, (i) Availability is less than
$5,000,000 or (ii) a Default or Event of Default exists, Agent may in its
sole discretion (and, at the written direction of the Required Lenders,
shall) give to Borrower, the Lockbox Banks and each factor a written payment
direction notice ("Payment Direction Notice") directing that all such
payments or other remittances received in the Lockboxes shall be deposited by
the Lockbox Banks in the Dominion Account, and all Factoring Credit Balances
shall be remitted to Agent, in each case for application to the Obligations
which, in the case of the foregoing clause (i), may be reborrowed as a
Revolver Loan subject to the provisions of Section 1.1 hereof and the other
terms of this Agreement and the other Loan Documents. Borrower shall issue
to the Lockbox Banks, and the Lockbox Banks shall agree and undertake, upon
receipt of a Payment Direction Notice, to deposit all payments or other
remittances received in the Lockboxes to the Dominion Account. All funds
deposited in the Dominion Account after Agent's giving of a Payment Direction
Notice shall immediately become the property of Agent and Borrower shall
obtain the agreement by the Lockbox Banks to waive any offset rights against
the funds so deposited. Agent assumes no responsibility for such lockbox
arrangement, including, without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by the Lockbox
Banks thereunder.<PAGE>
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7.2.6 Collection of Accounts, Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of all Accounts of Borrower and each of its Subsidiaries which are
not Factored Accounts for Agent for the Pro Rata benefit of Lenders. After
Agent's giving of a Payment Direction Notice, all remittances received by
Borrower and each of its Subsidiaries on account of its respective Accounts
(including Factored Accounts), together with the proceeds of any other
Collateral, shall be held as Agent's property by Borrower and each Subsidiary
as trustee of an express trust for Agent's benefit and Borrower shall
immediately deposit the same in kind in the Dominion Account. Agent retains
the right at all times during the existence and continuance of an Event of
Default to notify Account Debtors that Accounts have been assigned to Agent
and to collect Accounts directly in its own name and to charge the collection
costs and expenses, including reasonable attorneys' fees, to Borrower.
7.3 Administration of Inventory.
7.3.1 Records and Reports of Inventory. Borrower agrees to
furnish Agent with Inventory reports at such times as Agent may reasonably
request, but at least once each month to be delivered to Agent no later than
the twentieth (20th) day of each month for Inventory existing as of the last
day of the preceding fiscal month. Such reports shall be in form and detail
reasonably satisfactory to Agent. Borrower shall conduct, and cause each of
its Subsidiaries to conduct, a physical inventory no less frequently than
annually and shall provide to Agent a report of such physical inventory
promptly thereafter, together with such supporting information as Agent shall
reasonably request.
7.3.2 Returns of Inventory by Account Debtor. If at any time
or times hereafter any Account Debtor returns any Inventory of Borrower or
any of its Subsidiaries the shipment of which generated an Account on which
such Account Debtor is obligated in excess of $100,000, Borrower shall notify
Agent of the same immediately, specifying the reason for such return and the
location and condition of the returned Inventory.
7.4 Administration of Equipment Collateral.
7.4.1 Records and Schedules of Equipment Collateral. Borrower
shall keep accurate records itemizing and describing the kind, type, quantity
and value of the Equipment Collateral and all dispositions made in accordance
with subsection 7.4.2 hereof, and shall furnish Agent with a current schedule
containing the foregoing information on at least an annual basis and more
often if reasonably requested by Agent.
7.4.2 Dispositions of Equipment Collateral. Borrower will not
sell, lease or otherwise dispose of or transfer ownership of any of the
Equipment Collateral or any part thereof without the prior written consent
of Agent; provided, however, that the foregoing restriction shall not apply,
for so long as no Default or Event of Default exists, to (i) dispositions of
Equipment Collateral which, in the aggregate during any consecutive
twelve-month period, has a fair market value or book value, whichever is
more, of $1,000,000 or less, provided that all Net Proceeds thereof are
remitted to Agent and applied as a mandatory prepayment of the Term Loan
pursuant to and in accordance with Section 4.5 of this Agreement, or (ii)
replacements of Equipment Collateral that is substantially worn, damaged or
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obsolete with Equipment Collateral of like kind, function and value, provided
that the replacement Equipment Collateral shall be acquired prior to or
concurrently with any disposition of the Equipment Collateral that is to be
replaced, the replacement Equipment Collateral shall be subject to the first
priority perfected Lien of Agent, subject to no other Liens other than
Permitted Liens applicable thereto, and Agent shall have been given at least
five (5) days prior written notice of such disposition.
7.4.3 Condition of Equipment Collateral. The Equipment
Collateral is in good operating condition and repair, reasonable wear and
tear excepted and all necessary replacements of and repairs thereto shall be
made so that the value and operating efficiency of the Equipment Collateral
shall be maintained and preserved, reasonable wear and tear excepted.
7.5 Payment of Charges. All amounts chargeable to Borrower under
Section 7 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand and shall bear interest from the date such advance was
made until paid in full at the rate applicable to Revolver Loans that are
Base Rate Loans from time to time.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 General Representations and Warranties. To induce Agent and
Lenders to enter into this Agreement and to make available the Commitments,
Borrower warrants and represents to Agent and Lenders that:
8.1.1 Organization and Qualification. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each state or
jurisdiction listed on Schedule 8.1.1 hereto and in all other states and
jurisdictions where the character of its Properties or the nature of its
activities make such qualification necessary or in which the failure of
Borrower or any of its Subsidiaries to be so qualified would have a Material
Adverse Effect.
8.1.2 Corporate Power and Authority. Each of Borrower and its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it
is a party. The execution, delivery and performance of this Agreement and
each of the other Loan Documents by Borrower and its Subsidiaries that are
parties thereto have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the
shareholders of Borrower or any of its Subsidiaries which has not been
obtained; (ii) contravene Borrower's or any of its Subsidiaries' charter,
articles or certificate of incorporation or by-laws; (iii) violate, or cause
Borrower or any of its Subsidiaries to be in default under, any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award in effect having applicability to Borrower or any of
its Subsidiaries; (iv) result in a breach of or constitute a default under
the Senior Subordinated Notes Indenture or any other indenture or loan or
credit agreement or any other agreement, lease or instrument to which
Borrower or any of its Subsidiaries is a party or by which it or its
Properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than Permitted Liens) upon or with <PAGE>
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respect to any of the Properties now owned or hereafter acquired by Borrower
or any of its Subsidiaries.
8.1.3 Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
a legal, valid and binding obligation of each of Borrower and its
Subsidiaries enforceable against it in accordance with its respective terms.
8.1.4 Capital Structure. As of the date hereof, Schedule 8.1.4
hereto states (i) the correct name of each of the Subsidiaries of Borrower,
its jurisdiction of incorporation and the percentage of its Capital Stock
owned by Borrower, (ii) the name of each of Borrower's Affiliates and the
nature of the affiliation, (iii) the number, nature and holder of all Capital
Stock of Borrower and each Subsidiary of Borrower, and (iv) the number of
authorized, issued and treasury shares of Borrower and each Subsidiary of
Borrower. Borrower has good title to all of the shares it purports to own of
the Capital Stock of each of its Subsidiaries, free and clear in each case of
any Lien other than Permitted Liens. All such shares have been duly issued
and are fully paid and non-assessable.
8.1.5 Corporate Names. Neither Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade
names during the past five (5) years except those listed on Schedule 8.1.5
hereto. Except as set forth on Schedule 8.1.5, neither Borrower nor any of
its Subsidiaries has been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any
Person.
8.1.6 Business Locations; Agent for Process. Each of
Borrower's and its Subsidiaries' chief executive office and other places of
business are as listed on Schedule 7.1.1 hereto. During the preceding one
(1) year period, neither Borrower nor any of its Subsidiaries has had an
office, place of business or agent for service of process other than as
listed on Schedule 7.1.1 hereto.
8.1.7 Title to Properties; Priority of Liens. Each of Borrower
and its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its
other Property, in each case, free and clear of all Liens except Permitted
Liens. Borrower has paid or discharged all lawful claims which, if unpaid,
might become a Lien against any of Borrower's Properties that is not a
Permitted Lien. The Liens granted to Agent under Section 6 hereof are first
priority Liens, subject only to those Permitted Liens that are expressly
stated to have priority over the Liens of Agent.
8.1.8 Accounts. With respect to all Account of Borrower and
its Subsidiaries which Borrower includes in a Borrowing Base Certificate,
Borrower represents and warrants to Agent and Lenders that Agent may rely, in
determining which of such Accounts are Eligible Accounts, on all statements
and representations made by Borrower with respect to such Accounts, and,
unless otherwise indicated in writing to Agent, that with respect to each
such Account:
(i) It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment, Instrument, Document or Chattel Paper;
<PAGE>
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(ii) It arises out of a completed, bona fide sale and delivery of
goods by Borrower or any of its Subsidiaries in the ordinary course of its
business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part of
the contract between Borrower or any of its Subsidiaries and the Account
Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale, a copy of which has been furnished or
is available to Agent;
(iv) To the best knowledge of Borrower, such Account, and
Agent's Lien therein, is not, and will not (by voluntary act or omission of
Borrower or any of its Subsidiaries) be in the future, subject to any offset,
deduction, defense, dispute, counterclaim or any other adverse condition
except for disputes which may result in returned goods;
(v) Such Account is absolutely owing to Borrower or any of its
Subsidiaries and is not contingent in any respect or for any reason;
(vi) Neither Borrower nor any of its Subsidiaries has made any
agreement with any Account Debtor thereunder for any deduction therefrom,
except discounts or allowances which are granted by Borrower and such
Subsidiary in the ordinary course of its respective business for prompt
payment and which are reflected in the calculation of the net amount of each
respective invoice related thereto and are reflected in the Schedules of
Accounts submitted to Agent pursuant to Section 7.2.1 hereof;
(vii) To the best knowledge of Borrower, there are no facts,
events or occurrences which in any way impair the validity or enforceability
of any Accounts or tend to reduce the amount payable thereunder from the face
amount of the invoice and statements delivered to Agent with respect thereto;
(viii) To the best of Borrower's knowledge, the Account Debtor
thereunder (a) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (b) such Account Debtor
is Solvent;
(ix) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which are reasonably likely to result in any material
adverse change in such Account Debtor's financial condition or the
collectibility of such Account; and
(x) Any contract under which such Account arose does not
condition or restrict the right of Borrower or any of its Subsidiaries to
assign to Agent the right to payment thereunder unless Borrower and its
Subsidiaries have obtained the Account Debtor's consent to such collateral
assignment or complied with conditions to such assignment (regardless of
whether under the Code or other Applicable Law any such restrictions are
ineffective to prevent the grant of a Lien upon such Account in favor of
Agent).
<PAGE>
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8.1.9 Financial Statements; Fiscal Year.
(i) The Consolidated balances sheets of Borrower and its
Subsidiaries, as of December 31, 1994, December 30, 1995 and November 30,
1996, and those which are from time to time delivered by Borrower to Agent
and Lenders pursuant to Section 9.1.9 of this Agreement, and the related
statements of income, changes in stockholder's equity and cash flow for the
periods ended on such dates, fairly present the financial position of
Borrower and its Subsidiaries at such dates and the results of the operations
of Borrower and its Subsidiaries for the respective periods then ended.
Since November 30, 1996, there has been no material change in the condition,
financial or otherwise, of Borrower and its Subsidiaries, or any event,
condition or state of fact which would have a Material Adverse Effect;
(ii) The pro-forma Consolidated balance sheet of Borrower and
its Subsidiaries delivered to Agent pursuant to Section 10.1.1(xxi) of this
Agreement was prepared in accordance with GAAP (except as otherwise described
therein) and fairly presents the assets, liabilities and financial condition
of Borrower and its Subsidiaries as of the date thereof, giving effect to the
consummation of the transactions contemplated by this Agreement and the
Acquisition; and
(iii) The fiscal year of Borrower and each of Borrower's
Subsidiaries ends on the Saturday closest to December 31 of each year.
8.1.10 Full Disclosure. The financial statements referred to
in Section 8.1.9 hereof do not, nor does this Agreement or any other written
statement of Borrower or its Subsidiaries delivered to Agent, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading. To the best of
Borrower's knowledge, there is no fact which Borrower has failed to disclose
to Agent and each Lender in writing which materially affects adversely or, so
far as Borrower can now foresee, will materially affect adversely the
Properties, business, prospects, profits or condition (financial or
otherwise) of Borrower or any of its Subsidiaries or the ability of Borrower
or its Subsidiaries to perform this Agreement or the other Loan Documents.
8.1.11 Solvent Financial Condition. Each of Borrower and its
Subsidiaries is now and, after giving effect to the Loans to be made
hereunder, at all times will be, Solvent.
8.1.12 Surety Obligations. Except as shown on Schedule 8.1.12
hereto, neither Borrower nor any of its Subsidiaries is obligated as surety
or indemnitor under any surety or similar bond or other contract issued or
entered into to assure payment, performance or completion of performance of
any undertaking or obligation of any Person.
8.1.13 Taxes. The federal tax identification number of
Borrower and each of its Subsidiaries is shown on Schedule 8.1.13 hereto.
Borrower and each of its Subsidiaries have filed all federal, state and local
tax returns and other reports it is required by law to file and has paid, or
made provision for the payment of, all Taxes that are reflected on such
returns. The provision for Taxes on the books of Borrower and each of its
Subsidiaries is adequate for all years not closed by applicable statutes, and
for its current fiscal year.<PAGE>
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8.1.14 Brokers. There are no claims against Borrower for
brokerage commissions, finder's fees or investment banking fees in connection
with the transactions contemplated by this Agreement.
8.1.15 Patents, Trademarks, Copyrights and Licenses. Each of
Borrower and its Subsidiaries owns or possesses all the patents, trademarks,
service marks, trade names, copyrights and licenses necessary for the present
and, to the best of Borrower's knowledge, planned future conduct of its
business, without any known conflict with the rights of others. All such
patents, trademarks, service marks, tradenames, copyrights, licenses and
other similar rights to the extent material in Borrower's reasonable judgment
to the conduct of Borrower's business are listed on Schedule 8.1.15 hereto.
8.1.16 Governmental Consents. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct in all material
respects its respective business as heretofore or proposed to be conducted by
it and to own or lease and operate in all material respects its Properties as
now owned or leased by it.
8.1.17 Compliance with Laws. Each of Borrower and its
Subsidiaries has duly complied with, and its Properties, business operations
and leaseholds are in compliance in all material respects with, the
provisions of all Applicable Law and there have been no citations, notices or
orders of noncompliance issued to Borrower or any of its Subsidiaries under
any such law, rule or regulation where such non-compliance could reasonably
be expected to have a Material Adverse Effect. Each of Borrower and its
Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in compliance with all federal, state and local laws,
rules and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. Section 201 et seq.), as
amended.
8.1.18 Restrictions. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which materially and adversely affects its
business or the use or ownership of any of its Properties. Except as set
forth on Schedule 8.1.18 hereto, neither Borrower nor any of its Subsidiaries
is a party or subject to any contract or agreement which restricts its right
or ability to incur Indebtedness, none of which prohibit the execution of or
compliance with this Agreement or the other Loan Documents by Borrower or any
of its Subsidiaries, as applicable.
8.1.19 Litigation. Except as set forth on Schedule 8.1.19
hereto, there are no actions, suits, proceedings or investigations pending on
the date hereof, or to the knowledge of Borrower, threatened on the date
hereof, against or affecting Borrower or any of its Subsidiaries, or the
business, operations, Properties, prospects, profits or condition of Borrower
or any of its Subsidiaries, which in any case, seek the recovery of monetary
damages in excess of $100,000 and no such action, suit or proceeding will, if
decided adversely, have a Material Adverse Effect. Neither Borrower nor any
of its Subsidiaries is in default on the date hereof with respect to any
order, writ, injunction, judgment, decree or rule of any court, governmental
authority or arbitration board or tribunal.
<PAGE>
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8.1.20 No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this
Agreement or Borrower's performance hereunder, constitute a Default or an
Event of Default. Neither Borrower nor any of its Subsidiaries is in
default, and no event has occurred and no condition exists which constitutes,
or which with the passage of time or the giving of notice or both would
constitute, a default in the payment of any Indebtedness to any Person.
8.1.21 Leases. Schedule 8.1.21 hereto is a complete listing of
all capitalized and operating leases of Borrower and its Subsidiaries on the
date hereof which, in the case of capital leases, has a Capital Lease
Obligation of more than $500,000 and, in the case of operating leases, is
deemed material by Borrower. Each of Borrower and its Subsidiaries is in
compliance in all material respects with all of the terms of each of its
respective capitalized and operating leases.
8.1.22 Pension Plans. Except as disclosed on Schedule 8.1.22
hereto, neither Borrower nor any of its Subsidiaries has any Plan on the date
hereof. Borrower and each ofits Subsidiaries is in full compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect
to each Plan. No fact or situation that is reasonably likely to result in a
Material Adverse Effect exists in connection with any Plan. Neither Borrower
nor any of its Subsidiaries has any withdrawal liability in connection with a
Multi employer Plan.
8.1.23 Trade Relations. There exists no present condition or
state of facts or circumstances which would materially affect adversely
Borrower or any of its Subsidiaries or prevent Borrower or any of its
Subsidiaries from conducting its business after the consummation of the
transactions contemplated by this Agreement and the Purchase Documents in
substantially the same manner in which it has heretofore been conducted, and,
to the best of Borrower's knowledge, there exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower or any of its Subsidiaries and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower or any of its
Subsidiaries, or with any material supplier.
8.1.24 Labor Relations. Except as described on Schedule 8.1.24
hereto, neither Borrower nor any of its Subsidiaries is a party on the date
hereof to any collective bargaining agreement. To the best of Borrower's
knowledge, there does not exist on the date hereof any material grievances,
disputes or controversies with any union or any other organization of
Borrower's or any of its Subsidiaries' employees, which, if decided
adversely, would have a Material Adverse Effect, or threats of strikes, work
stoppages or any asserted pending demands for collective bargaining by any
union or organization.
8.1.25 Investment Company Act; Public Utility Holding Company
Act. Borrower is not an "investment company" or "person directly or
indirectly controlled by or acting on behalf of an investment company" within
the meaning of the Investment Company Act of 1940, or a "holding company" or
a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935.
<PAGE>
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8.1.26 Margin Stock. Neither Borrower nor any of its
Subsidiaries is engaged, principally or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
any Margin Stock.
8.1.27 Acquisition; Transactions Contemplated by Purchase
Documents. The Purchase Documents are in full force and effect as of the
date hereof and have not been amended or waived by any party thereto in any
material respect. All representations and warranties of the parties to the
Purchase Documents are, to the best of Borrower's knowledge, true and correct
in all material respects as of the date hereof with the same effect as though
made on and as of the date hereof. All requisite approvals by governmental
authorities and regulatory bodies having jurisdiction over Borrower or its
shareholders in connection with the Acquisition contemplated by the Purchase
Documents have been duly obtained and no such approvals impose any conditions
to the consummation of the transactions contemplated by the Purchase
Documents or to the conduct of the business of Borrower in the same manner as
heretofore conducted. Borrower has not been notified that legal proceedings
adverse to the transaction contemplated by the Purchase Documents are
contemplated by any Person, including any governmental body or agency.
8.1.28 Senior Subordinated Notes. The Obligations, as and when
incurred, shall be senior in right of payment to all of the principal of,
interest on, and all other amounts payable in respect of, the Senior
Subordinated Notes and shall be entitled to the benefit of the subordination
provisions set forth in the Senior Subordinated Notes Indenture.
8.2 Reaffirmation. Each request for a Revolver Loan made by
Borrower pursuant to this Agreement shall constitute (i) an automatic
representation and warranty by Borrower to Agent and each Lender that there
does not then exist any Default or Event of Default and (ii) a reaffirmation
as of the date of such request that all of the representations and warranties
of Borrower and its Subsidiaries contained in this Agreement and the other
Loan Documents are true in all material respects except for any changes in
the nature of the business or operations of Borrower and its Subsidiaries
that would render the information contained in any Schedule or Exhibit
attached hereto either inaccurate or incomplete, so long as Agent has
consented to such changes or such changes are not prohibited by this
Agreement.
8.3. Survival of Representations and Warranties. Borrower
covenants, warrants and represents to Agent and each Lender that all
representations and warranties of Borrower and its Subsidiaries contained in
this Agreement or any of the other Loan Documents shall be true at the time
of the execution of this Agreement and the other Loan Documents, and shall
survive the execution, delivery and acceptance thereof by Agent and the
parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1 Affirmative Covenants. For so long as there are any Commitments
outstanding and thereafter until payment in full of the Obligations, Borrower
covenants that, unless otherwise consented to by Agent in writing, it shall:
9.1.1 Taxes and Liens. Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, all taxes, assessments and<PAGE>
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governmental charges upon it, its income and Property as and when such taxes,
assessments and charges are due and payable, except and to the extent only
that (i) such taxes, assessments and charges are being actively contested in
good faith and by appropriate proceedings, (ii) Borrower maintains adequate
reserves on its books therefor in accordance with GAAP and (iii) the
nonpayment of such taxes, assessments and charges does not result in a Lien
upon any Property of Borrower or any of its Subsidiaries other than a
Permitted Lien. Borrower shall also pay and discharge, and cause each of its
Subsidiaries to pay and discharge, any lawful claims which, if unpaid, would
become a Lien against any Property of Borrower or any of its Subsidiaries
that is not a Permitted Lien.
9.1.2 Tax Returns. File, and cause each of its Subsidiaries to
file, all federal, state and local tax returns and other reports Borrower and
each of its Subsidiaries is required by law to file and maintain adequate
reserves in accordance with GAAP for the payment of all taxes, assessments,
governmental charges, and levies imposed upon it, its income, or its profits,
or upon any Property belonging to it.
9.1.3 Business and Existence. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its separate corporate
existence and all rights, privileges and franchises in connection therewith,
and maintain, and cause each of its Subsidiaries to maintain, its
qualification and good standing in all states in which the failure to be so
qualified would have a Material Adverse Effect.
9.1.4 Maintain Property. Maintain, and cause each of its
Subsidiaries to maintain, its Property in good condition and make, and cause
each of its Subsidiaries to make, all necessary renewals, repairs,
replacements, additions and improvements thereto which are material to its
respective financial condition or business operations in accordance with the
business practices of Borrower and its Subsidiaries as presently conducted.
9.1.5 Compliance with Laws. Comply, and cause each of its
Subsidiaries to comply, with all laws, ordinances, governmental rules and
regulations to which it is subject, including, without limitation, all
Environmental Laws, and obtain and keep in force 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 keep in force would have a Material Adverse Effect.
9.1.6 ERISA Compliance. (i) At all times make prompt payment
of contributions required to meet the minimum funding standards set forth in
ERISA with respect to each Plan; (ii) promptly after the filing thereof,
furnish to Agent copies of any annual report required to be filed pursuant to
ERISA in connection with each Plan and any other employee benefit plan of it
and its Affiliates subject to said Section; (iii) notify Agent as soon as
practicable of any Reportable Event and of any additional act or condition
arising in connection with any Plan which Borrower believes might constitute
grounds for the termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States district
court of a trustee to administer the Plan; and (iv) furnish to Agent,
promptly upon Agent's request therefor, such additional information
concerning any Plan or any other such employee benefit plan as may be
reasonably requested.
9.1.7 Business Records. Keep, and cause each of its <PAGE>
<PAGE> 104
Subsidiaries to keep, adequate records and books of account with respect to
its business activities in which proper entries are made in accordance with
GAAP reflecting all its financial transactions.
9.1.8 Visits and Inspections. Permit representatives of Agent
and each Lender, from time to time, as often as may be reasonably requested,
but only during normal business hours, to visit and inspect the Property of
Borrower and each of its Subsidiaries, inspect and make extracts from its
books and records, and discuss with its officers, its employees and, upon
advance notice to Borrower, its independent accountants, the business,
assets, liabilities, financial condition, business prospects and results of
operations of Borrower and each of its Subsidiaries.
9.1.9 Financial Statements. Cause to be prepared and furnished
to Agent and each Lender the following (all to be kept and prepared in
accordance with GAAP applied on a consistent basis, unless Borrower's
certified public accountants concur in any change therein and such change is
disclosed to Agent and each Lender and is consistent with GAAP):
(i) As soon as possible, but not later than ninety (90) days
after the close of each fiscal year of Borrower, unqualified audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a Consolidated basis, certified by Ernst and Young or other
certified public accountants of recognized national standing selected by
Borrower and reasonably acceptable to Agent (except for a qualification for a
change in accounting principles with which the independent public accountant
concurs);
(ii) As soon as possible, but not later than thirty (30) days
after the end of each month hereafter, unaudited interim Consolidated
financial statements of Borrower and its Subsidiaries as of the end of such
month and of the portion of Borrower's fiscal year then elapsed, on a
Consolidated basis, certified by one of the principal financial officers of
Borrower as prepared in accordance with GAAP and fairly presenting the
Consolidated financial position and results of operations of Borrower and its
Subsidiaries for such month and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
(iii) Promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower files
with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or any national securities exchange; and
(iv) Such other data and information (financial and otherwise)
as Agent, from time to time, may reasonably request, bearing upon or related
to the Collateral, or the financial condition or results of operations of
Borrower and its Subsidiaries, including, without limitation, federal income
tax returns of Borrower and its Subsidiaries, accounts payable ledgers, and
bank statements, for inspection and copying by Agent.
Concurrently with the delivery of the financial statements described in
clause (i) of this Section 9.1.9, Borrower shall forward to Agent and each
Lender a copy of the accountants' letter to Borrower's management that is<PAGE>
<PAGE> 105
prepared in connection with such financial statements and also shall cause to
be prepared and shall furnish to Agent and each Lender a certificate of the
aforesaid certified public accountants certifying to Agent and each Lender
that, based upon their examination of the financial statements of Borrower
and its Subsidiaries performed in connection with their examination of said
financial statements, they are not aware of any Default or Event of Default,
or, if they are aware of such Default or Event of Default, specifying the
nature thereof. Concurrently with the delivery of the financial statements
described in clauses (i) and (ii) of this Section 9.1.9, Borrower shall cause
to be prepared and furnished to Agent and each Lender a certificate from one
of the principal financial officers of Borrower certifying to Agent and each
Lender that, to the best of his knowledge, no Default or Event of Default has
occurred, or, if such Default or Event of Default has occurred, specifying
the nature thereof, and a Compliance Certificate in the form of Exhibit D
attached hereto, with appropriate insertions from one of the principal
financial officers of Borrower.
9.1.10 Notices to Agent. Notify Agent in writing:
(i) promptly after Borrower's learning thereof, of (a) the commencement of
any litigation affecting Borrower or any of its Subsidiaries or any of its
respective Property, whether or not the claim is considered by Borrower to be
covered by insurance, and (b) the institution of any administrative
proceeding which in either case of clause (a) or (b), if decided adversely,
would have a Material Adverse Effect; (ii) at least thirty (30) days prior
thereto, of the opening of any new office or place of business of Borrower or
any of its Subsidiaries or the closing of any existing office or place of
business of Borrower or any of its Subsidiaries; (iii) promptly after
Borrower's learning thereof, of any labor dispute to which Borrower or any of
its Subsidiaries may become a party, or any strikes or walkouts relating to
any of its plants or other facilities, which in either case will have a
Material Adverse Effect, and the expiration of any labor contract to which it
is a party or by which it is bound; (iv) promptly after Borrower's learning
thereof, of any default by Borrower or any of its Subsidiaries under the
Senior Subordinated Notes Indenture or of any material default under any
note, indenture, loan agreement, mortgage, lease, deed, guaranty or other
similar agreement relating to any Indebtedness of Borrower or any of its
Subsidiaries exceeding $500,000; (v) promptly upon the execution thereof, of
any amendment to the Senior Subordinated Notes Indenture entered into by
Borrower, and Borrower shall send Agent a copy thereof promptly thereafter;
(vi) after the occurrence thereof, of any Default or Event of Default; (vii)
promptly after the occurrence thereof, of any default by any obligor under
any note or other evidence of Indebtedness payable to Borrower or any of its
Subsidiaries exceeding $500,000; and (viii) promptly after the rendition
thereof, of any judgment in an amount exceeding $500,000 rendered against
Borrower or any of its Subsidiaries.
9.1.11 Further Assurances. At Agent's request, promptly
execute or cause to be executed and deliver to Agent any and all documents,
instruments and agreements deemed reasonably necessary by Agent to give
effect to or carry out the terms or intent of this Agreement or any of the
other Loan Documents.
9.1.12 Projections. As soon as available, and in any event no
later than the end of each fiscal year of Borrower, deliver to Agent and each
Lender Projections of Borrower and its Subsidiaries for the forthcoming
fiscal year, fiscal quarter by fiscal quarter.<PAGE>
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9.1.13 Environmental Events. Notify Agent in writing promptly
after learning thereof (i) of any violation of any Environmental Law, (ii) of
any inquiry, proceeding, investigation or other action, involving a request
for information or a notice of potential environmental liability from any
foreign, federal, state or local environmental agency or board, or (iii) of
the discovery of the release of any Hazardous Material at, on, under or from
any real Property owned or leased by Borrower or any of its Subsidiaries or
any facility or equipment thereat in excess of reportable or reliable
standards or levels under any Environmental Law, or in a manner and/or amount
which could reasonably be expected to result in liability under any
Environmental Law, in each case which would have a Material Adverse Effect.
In the event of the presence of any Hazardous Materials on any real Property
owned or leased by Borrower or any of its Subsidiaries which is in violation
of, or which could reasonably be expected to result in liability under, any
Environmental Law, in each case which would have a Material Adverse Effect,
Borrower or any of its Subsidiaries, upon discovery thereof, shall take all
necessary steps to initiate and expeditiously complete all remedial,
corrective and other action to mitigate and eliminate any such adverse
effect, and shall keep Agent informed of their actions and the results.
9.1.14 Environmental Matters.
(i) Within one (1) year of the Closing Date, evaluate all
matters set forth by Borrower's environmental consultant, Conestoga-Rovers &
Associates, in the following January, 1997 reports of environmental site
assessment: (a) "Phase I and Phase II Environmental Site Assessment" for
Spindale, North Carolina; (b) "Phase I and Phase II Environmental Site
Assessment" for Sevierville, Tennessee; and (c) "Phase I Environmental Site
Assessment" for Harris, North Carolina.
(ii) In the event of promulgation of risk-based assessment
guidelines by the North Carolina Department of Environmental Management
("NCDEM") further assess the contamination found at the Real Property located
at Spindale, North Carolina in monitoring well 5 and the surrounding area and
to implement all actions to remediate the contamination that may be required
by NCDEM.
9.2 Negative Covenants. For so long as there are any Commitments
outstanding and thereafter until payment in full of the Obligations, Borrower
covenants that, unless Agent has first consented thereto in writing, it will
not:
9.2.1 Mergers and Consolidations. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with any Person,
except for (i) a merger or consolidation between Subsidiaries of Borrower or
involving only Borrower and one or more of its Subsidiaries in which Borrower
is the surviving entity or (ii) a merger or consolidation in which Borrower
is the surviving entity, if (a) immediately after giving effect to such
merger or consolidation, no Default or Event of Default shall have occurred
and be continuing, (b) immediately after giving effect to such merger or
consolidation on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
merger or consolidation), Borrower would be able to incur at least $1.00 of
additional Indebtedness under Section 9.2.2(i) hereof (other than as
Permitted Indebtedness), and (c) immediately after giving effect to such
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merger or consolidation on a pro forma basis, Borrower shall have a
Consolidated Net Worth equal to or greater than its Consolidated Net Worth
immediately prior to such merger or consolidation.
9.2.2 Limitation on Indebtedness. Incur, directly or
indirectly, or permit any of its Subsidiaries to Incur, directly or
indirectly, any Indebtedness other than Permitted Indebtedness, except that,
Borrower may Incur Indebtedness if (i) after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the Consolidated Fixed Charge Coverage Ratio exceeds 2.25
to 1 or (ii) such Indebtedness is Permitted Indebtedness. For the purposes
of determining compliance with this Section 9.2.2, in the event that an item
of Indebtedness is described in more than one clause of the definition of
Permitted Indebtedness, Borrower, in its sole discretion, shall classify such
item of Indebtedness and only be required to include the amount and type of
such Indebtedness in one of such clauses.
9.2.3 Transactions with Affiliates. Enter into, directly or
indirectly, or be a party to, or permit any of its Subsidiaries to enter
into, directly or indirectly, or be a party to, any transaction or series of
related transactions (including, but not limited to, the sale, transfer,
disposition, purchase, exchange or lease of assets or Property, the making of
any Investment, the giving of any guarantee or the rendering of any service)
with or for the benefit of any Affiliate of Borrower, unless (i) such
transaction or series of related transactions is in the best interest of
Borrower or such Subsidiary, (ii) such transaction or series of related
transactions is on terms no less favorable to Borrower or such Subsidiary
than those that could be obtained in a comparable arm's-length transaction
with a Person that is not an Affiliate of Borrower, and (iii) (a) with
respect to a transaction or series of related transactions involving
aggregate payments or Fair Market Value in excess of $1,000,000, Borrower
delivers an Officer's Certificate to Agent to the effect that such
transaction or series of related transactions complies with clauses (i) and
(ii) of this Section 9.2.3, (b) with respect to a transaction or series of
related transactions involving aggregate payments or Fair Market Value in
excess of $5,000,000, the Board of Directors, including a majority of the
disinterested members of the Board of Directors, of Borrower approves such
transaction or series of related transactions and, in its good faith
judgment, believes that such transaction or series of related transactions
complies with clauses (i) and (ii) above, as evidenced by a Board Resolution,
and (c) with respect to a transaction or series of related transactions
involving aggregate payments or Fair Market Value in excess of $10,000,000
or, with respect to a transaction or a series of related transactions
involving aggregate payments or Fair Market Value in excess of $5,000,000 as
to which no member of the Board of Directors of Borrower is disinterested,
Borrower shall receive the written opinion of a nationally recognized firm of
investment bankers, accountants, industry consultants or other appropriately
qualified experts that such transaction or series of related transactions is
fair to Borrower or to such Subsidiary. Notwithstanding the foregoing, the
purchase by Borrower or any of its Subsidiaries of insurance from an
Affiliate of Borrower, in the ordinary course of business of Borrower or such
Subsidiary, need only comply with clauses (i) and (ii) above. For purposes
of this Section 9.2.3, Borrower and its wholly-owned Subsidiaries shall be
deemed not to be Affiliates.
9.2.4 Name. Use, or permit any of its Subsidiaries to use, any
corporate name (other than its own) or any fictitious name or "d/b/a" except <PAGE>
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for the names disclosed on Schedule 8.1.5 attached hereto.
9.2.5 Limitation on Liens. Incur, directly or indirectly, or
permit any of its Subsidiaries to Incur, directly or indirectly, any Lien on
or with respect to any of the Collateral, or any interest therein or income
or profits therefrom, or any other Property of Borrower or such Subsidiary,
or any interest therein or any income or profits therefrom, except for: (i)
any Lien existing on any Property of a Person at the time such Person is
merged or consolidated with or into Borrower or any Subsidiary of Borrower or
becomes a Subsidiary of Borrower (and not Incurred concurrently with or in
anticipation of such transaction) in a transaction permitted by this
Agreement, provided that such Liens do not extend to the Collateral of
Borrower and its Subsidiaries; (ii) any Lien existing on any Property of
Borrower and its Subsidiaries (other than any Collateral) at the time of the
acquisition thereof (and not Incurred concurrently with or in anticipation of
such transaction); (iii) any Lien Incurred to secure the performance of
statutory obligations, performance bonds or other obligations of a like
nature Incurred in the ordinary course of business; (iv) any Lien to secure a
Capitalized Lease Obligation or Capital Expenditure Indebtedness permitted by
clause (i) of the definition of Permitted Indebtedness; (v) Liens for taxes
not yet due or which are being contested in good faith by appropriate
proceedings, so long as reserves have been established to the extent required
by GAAP; (vi) Liens existing as of the date of this Agreement other than with
respect to the Collateral; (vii) Liens on any Property of Borrower or its
Subsidiaries other than the Collateral to secure Permitted Indebtedness;
(viii) Liens to secure any permitted extension, renewal, refinancing,
refunding or exchange, in whole or in part, of or for any Indebtedness
secured by Liens referred to in the foregoing clauses (i) through (vii),
provided that such Liens do not extend to any other Property and that the
principal amount of the Indebtedness secured by such Liens is not increased;
(ix) Liens of the Factors in the Factored Accounts arising pursuant to the
Factoring Agreements provided such Factors have executed a Factor Assignment
and Intercreditor Agreement; and (x) Liens of Fleet in the Collateral (except
for the Equipment Collateral) as security for the Project Loan Obligations
provided such Liens are subject at all times to the Intercreditor Agreement
and are junior and subordinate to the Liens of Agent in such Collateral as
security for the Obligations.
9.2.5 Limitation on Restricted Payments.
(i) Make, directly or indirectly, or permit any of its
Subsidiaries to make, directly or indirectly, any Restricted Payment if, at
the time of and after giving effect to the proposed Restricted Payment:
(a) any Default or Event of Default has occurred and is
continuing; or
(b) Borrower could not Incur at least $1.00 of additional
Indebtedness pursuant to Section 9.2.2(i) hereof (other than as Permitted
Indebtedness); or
(c) the aggregate amount expended or declared for all
Restricted Payments from December 15, 1993 exceeds the sum of (1) the
aggregate net proceeds (including the Fair Market Value of Property other
than cash) from sales of Capital Stock of Borrower (other than to a
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Subsidiary of Borrower) and cash capital contributions to Borrower from its
stockholders, plus (2) fifty percent (50%) of the aggregate cumulative
Consolidated Adjusted Net Earnings of Borrower (or, if Consolidated Adjusted
Net Earnings shall be a deficit, minus one hundred percent (100%) of such
deficit) beginning on January 2, 1994 and ending on the last day of the
fiscal quarter immediately preceding the date of such Restricted Payment,
plus (3) $1,000,000.
(ii) The foregoing shall not prohibit any of the following (and
none of the following shall be included in calculating the amount of
Restricted Payments made or available to be made pursuant to Section
9.2.6(i)(c));
(a) Any purchase or redemption of Capital Stock or Subordinated
Debt out of the proceeds from the substantially concurrent sale of Capital
Stock; and
(b) Any purchase or redemption of Subordinated Debt out of the
proceeds from the substantially concurrent sale of Subordinated Debt which is
subordinated to the same extent as, or to a greater extent than, the
Subordinated Debt which is being paid from such proceeds.
(iii) So long as no Default or Event of Default shall have
occurred and be continuing (or would result therefrom), the foregoing shall
not prohibit any of the following (but the following shall be included in
calculating the amount of Restricted Payments made and available to be made
pursuant to Section 9.2.6(i)(c)):
(a) Dividends paid by Borrower within sixty (60) days after
declaration if they were permitted at the time of declaration;
(b) Repurchases or redemptions of Capital Stock of employees
and management of Borrower, at the Fair Market Value thereof, in an aggregate
amount not to exceed $500,000 in any twelve-month period, upon any such
individual's death, disability or termination of employment; and
(c) Restricted Payments not otherwise permitted to be made by
Section 9.2.6(i) made on or after December 15, 1996, in an aggregate amount
not to exceed $7,000,000.
9.2.7 Subsidiaries. Hereafter create or acquire any Subsidiary
or divest itself of any material assets by transferring them to any
Subsidiary to whose existence Agent has consented. In the event that, with
Agent's consent, Borrower acquires or creates any Subsidiary, then, promptly
upon the acquisition or creation thereof, Borrower shall cause such
Subsidiary to execute and deliver to Agent the Guaranty Agreement and
Security Documents granting Agent a first priority perfected Lien in all of
the Collateral of such Subsidiary subject only to Permitted Liens. Any
guarantee of a Subsidiary of the Obligations in favor of Agent shall be
released upon any sale, exchange or transfer, to any Person not an Affiliate
of Borrower, of all of Borrower's Capital Stock in, or all or substantially
all of the assets of, such Subsidiary, provided that (i) such sale, exchange
or transfer is not prohibited by this Agreement, (ii) no Default or Event of
Default then exists, (iii) after giving effect to any such sale of a
Subsidiary on a pro forma basis (and the resulting elimination of such <PAGE>
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Subsidiary's Accounts and Inventory from the Borrowing Base), Availability is
$1.00 or more.
9.2.8 Limitation on Sale and Leaseback Transactions. Enter
into, assume, guarantee or otherwise become liable with respect to, directly
or indirectly, or permit any of its Subsidiaries to enter into, assume,
guarantee or otherwise become liable with respect to, directly or indirectly,
any Sale and Leaseback Transaction, except that the foregoing restriction
shall not apply to any Sale and Leaseback Transaction involving Property of
Borrower or any of its Subsidiaries which is not included in the Collateral,
if the net proceeds from such transaction are at least equal to the Fair
Market Value of the Property (other than the Collateral) being transferred
and, at Borrower's option, (i) the obligations of Borrower or such Subsidiary
with respect thereto are included as Indebtedness under Section 9.2.2 hereof
and would be permitted thereunder and Borrower or such Subsidiary would be
permitted to Incur a Lien to secure such Indebtedness under Section 9.2.5
hereof, or (ii) Borrower treats such transaction as an asset disposition
permitted by Section 9.2.9 hereof.
9.2.9 Limitation on Disposition of Assets. Sell, lease or
otherwise dispose of any of the Collateral or permit any of its Subsidiaries
to sell, lease or otherwise dispose of any of the Collateral, except as
permitted by Section 7.4.2 of this Agreement and for sales of Inventory in
the ordinary course of business of Borrower and each of its Subsidiaries for
so long as no Default or Event of Default exists; or sell, lease or otherwise
dispose of any of its other Property, or permit any of its Subsidiaries to
sell, lease or otherwise dispose of any of its other Property, unless: (i)
Borrower or such Subsidiary, as the case may be, receives consideration at
the time of such sale at least equal to the Fair Market Value of the Property
(other than the Collateral) disposed of and (ii) at least seventy-five
percent (75%) of the consideration received by Borrower or such Subsidiary
for such Property (other than the Collateral) is in the form of cash or Cash
Equivalents.
9.2.10 Margin Securities. Own, purchase or acquire (or enter
into any contract to purchase or acquire), or permit any of its Subsidiaries
to own, purchase or acquire, any Margin Stock unless, prior to any such
purchase or acquisition or entering into any such contract, Agent shall have
received an opinion of counsel satisfactory to Agent to the effect that such
purchase or acquisition will not cause this Agreement to violate
Regulations G or U or any other regulation of the Federal Reserve Board then
in effect; provided, however, the foregoing restriction shall not prohibit
Borrower or any of its Subsidiaries from receiving ownership of, or holding a
Lien in, any Margin Stock from an Account Debtor in settlement of, or as
security for, an Account owing from such Account Debtor.
9.2.11 Fiscal Year. Change, or permit any Subsidiary to
change, its fiscal year, or permit any Subsidiary to have a fiscal year
different from that of Borrower.
9.2.12 Limitation on Issuance and Sale of Capital Stock of
Subsidiaries. Permit any wholly-owned Subsidiary to issue any Capital Stock
other than to Borrower or one of its wholly-owned Subsidiaries or permit any
Person other than Borrower or one of its wholly-owned Subsidiaries to own any
Capital Stock of a wholly-owned Subsidiary (other than directors' qualifying
shares); or sell any of the Capital Stock of a Subsidiary of Borrower, or
permit any Subsidiary of Borrower to sell any of the Capital Stock of any <PAGE>
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other Subsidiary, unless (i) Borrower or such Subsidiary, as the case may be,
receives consideration at the time of such sale at least equal to the Fair
Market Value of the Capital Stock disposed of and at least seventy-five
percent (75%) of the consideration received by Borrower or such Subsidiary
for such Capital Stock is in the form of cash or cash equivalents, (ii) no
Default or Event of Default then exists, (iii) after giving effect to any
such sale of Capital Stock on a pro forma basis (and the resulting
elimination of such Subsidiary's Accounts and Inventory from the Borrowing
Base), Availability is $1.00 or more, and (iv) the aggregate book value of
the Accounts and Inventory of such Subsidiary does not exceed $1,000,000.
9.2.13 Subordinated Debt. Make any payment of principal or
interest on any Subordinated Debt except as may be permitted by the terms of
the instrument subordinating the payment of such Subordinated Debt to the
Obligations; or prepay in whole or in part or otherwise repurchase, redeem or
retire any of the Senior Subordinated Notes or other Subordinated Debt prior
to the maturity date thereof except from the proceeds realized by Borrower
from the issuance of any Capital Stock of Borrower after the Closing Date.
9.3 Specific Financial Covenants. For so long as there are any
Commitments outstanding and thereafter until payment in full of the
Obligations, Borrower covenants that, unless Agent has first consented
thereto in writing, it shall comply with the following financial covenants:
9.3.1 Consolidated Cash Interest Coverage Ratio. Borrower
shall Maintain a Consolidated Cash Interest Coverage Ratio for each
consecutive twelve-month period of at least 1.5 to 1.0.
9.3.2 Consolidated Net Worth. Borrower shall maintain at all
times a Consolidated Net Worth equal to the sum of (i) $67,264,000, plus (ii)
one hundred percent (100%) of the net income after taxes of Borrower and its
Subsidiaries for the fiscal year in which the Closing Date shall occur and
each fiscal year thereafter (but shall not decrease by any net losses), minus
(iii) the write-down in the value of Borrower's assets as a result of the
Acquisition for the purpose of gaining the advantages of the Acquisition
provided such reduction shall not occur later than one (1) year after the
date of this Agreement and shall not exceed $5,400,000 on an after-tax basis,
all as calculated in accordance with GAAP and reflected on the audited
financial statements of Borrower and its Subsidiaries delivered to Agent and
Lenders pursuant to Section 9.1.9 hereof.
SECTION 10. CONDITIONS PRECEDENT
10.1 Conditions Precedent to Term Loan and Initial Revolver Loan on
Closing Date. Notwithstanding any other provision of this Agreement or any
of the other Loan Documents, and without affecting in any manner the rights
of Agent and Lenders under the other sections of this Agreement, Lenders will
have no obligation to make the Term Loan or the initial Revolver Loan under
Section 1 of this Agreement on the Closing Date unless and until, in addition
to each of the conditions set forth in Section 10.2 hereof, each of the
following conditions has been satisfied:
10.2 Documentation. Agent shall have received the following
documents, each to be in form and substance satisfactory to Agent and its
counsel:
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(i) Copies of casualty insurance policies of Borrower, together
with loss payable endorsements on Agent's standard form of Loss Payee
Endorsement naming Agent as loss payee as its interests may appear, and
certified copies of the liability insurance policies of Borrower and its
Subsidiaries, together with endorsements naming Agent as a coinsured;
(ii) Copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Agent in the Collateral and evidence in a form
acceptable to Agent that such Liens constitute valid and perfected first
priority security interests and Liens, subject only to those Permitted Liens
which are expressly stated to have priority over the Liens of Agent;
(iii) Copies of the Articles of Incorporation of Borrower and
each of its Subsidiaries, and all amendments thereto, certified by the
Secretary of State or other appropriate official of its jurisdiction of
incorporation;
(iv) Good standing certificates for Borrower and each of its
Subsidiaries issued by the Secretary of State or other appropriate official
of Borrower's and each of its Subsidiaries' jurisdiction of incorporation and
each jurisdiction where the conduct of Borrower's and such Subsidiary's
business activities necessitates qualification and in which the failure of
Borrower and such Subsidiary's to be so qualified would have a Material
Adverse Effect;
(v) A closing certificate signed by one of the principal
financial officers of Borrower, dated as of the Closing Date, stating that
(a) the representations and warranties set forth in Section 8 hereof are true
and correct in all material respects on and as of such date, (b) Borrower and
its Subsidiaries are on such date in compliance in all material respects
with all the terms and provisions set forth in this Agreement and the other
Loan Documents, and (c) on such date no Default or Event of Default exists;
(vi) The Security Documents duly executed, accepted and
acknowledged by or on behalf of each of the signatories thereto;
(vii) The Other Agreements duly executed and delivered by
Borrower;
(viii) The favorable, written opinion of counsel to Borrower and
its Subsidiaries as to the transactions contemplated by this Agreement and
the other Loan Documents;
(ix) Written instructions from Borrower directing the
application of proceeds of the Term Loan and of the initial Revolver Loan
made to Borrower pursuant to this Agreement on the Closing Date;
(x) Certificates of the Secretary or an Assistant Secretary of
Borrower and each of its Subsidiaries certifying (a) that attached thereto is
a true and complete copy of the Bylaws of Borrower or such Subsidiary, as in
effect on the date of such certification, (b) that attached thereto is a true
and complete copy of the resolutions adopted <PAGE>
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by the Board of Directors of Borrower or such Subsidiary, authorizing the
execution, delivery and performance of this Agreement and the other Loan
Documents to which Borrower or such Subsidiary is a party and the
consummation of the transactions contemplated hereby and thereby, and (c) as
to the incumbency and genuineness of the signature of each officer of
Borrower or such Subsidiary executing this Agreement or any of the Loan
Documents;
(xi) Duly executed agreement for the establishment of the
Dominion Account and a payment direction agreement with each Lockbox Bank
providing for the establishment of the Dominion Account and instructions to
each Lockbox Bank as to the application of Payment Items received in the
Lockbox upon receipt of a Payment Direction Notice;
(xii) Fully paid mortgagee title insurance policies (or binding
commitments to issue title insurance policies, marked to Agent's satisfaction
to evidence the form of such policy to be delivered after the Closing Date),
in standard ALTA form (including a revolving credit endorsement,
comprehensive endorsement, tie-in endorsement and such other endorsements as
Agent may request), issued by a title insurance company satisfactory to
Agent, in an aggregate amount as specified by Agent, insuring the Mortgage to
create a valid Lien on the Owned Real Property with no exceptions which Agent
shall not have approved in writing and no general survey exceptions;
(xiii) As-built surveys with respect to each tract of the Owned
Real Property, which surveys shall indicate the following: (a) an accurate
metes and bounds or lot, block and parcel description of the Owned Real
Property; (b) the correct location of all buildings, structures and other
improvements on the Owned Real Property, including, without limitation, all
streets, easements, rights of way and utility lines; (c) the location of
ingress and egress from the Owned Real Property, and the location of any set-
back or other building lines affecting the Owned Real Property; and (d) a
certificate by a registered land surveyor in form and substance acceptable to
Agent, certifying to Agent the accuracy and completeness of such survey and
to such other matters relating to the Owned Real Property and surveys as
Agent shall require;
(xiv) Copies of Phase I assessments and other environmental
reports with respect to each tract of the Owned Real Property conducted at
the expense of Borrower by an environmental engineer selected by Borrower and
reasonably acceptable to Agent each in form and substance satisfactory to
Agent, together with a letter from such environmental engineer addressed to
Agent advising Agent that it is entitled to rely on such environmental
reports in extending the credit contemplated by this Agreement;
(xv) Zoning letters for each parcel of the Owned Real Property,
issued by the appropriate authority in form and substance satisfactory to
Agent, certifying as to the zoning of each parcel of the Owned Real Property
and the permitted uses under such zoning classification and that the Owned
Real Property is not being operated in violation of any such zoning
ordinances;
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(xvi) Written confirmations from all Persons which have been
granted Liens (other than Permitted Liens) in any Collateral of the balance
due on the Indebtedness owed to them as of the Closing Date and that
simultaneously with the receipt thereof such Persons will execute and deliver
to Agent such releases and terminations as may be necessary to release and
cancel of record their Liens in any Collateral;
(xvii) Copies of the Purchase Documents, accompanied by the
certificate of one of the principal financial officers of Borrower as to
certain representations and warranties contained therein and the consummation
of the Acquisition contemplated thereby;
(xviii) Good standing certificates for Seller issued by the
Secretary of State or other appropriate official of Seller's jurisdiction of
incorporation;
(xix) Certificates of the Secretary or an Assistant Secretary
of Borrower and Seller certifying (a) that attached thereto is a true and
complete copy of the resolutions adopted by the Board of Directors of each of
Borrower and Seller authorizing the execution, delivery and performance of
the Purchase Documents and the consummation of the transactions contemplated
thereby, and (b) as to the incumbency and genuineness of the signature of
each officer of Borrower and Seller executing the Purchase Documents and the
other documents executed in connection therewith;
(xx) Copies of the opinions of counsel to Borrower and Seller
issued pursuant to the Purchase Documents, in each case accompanied by a
letter from such counsel addressed to Agent and Lenders advising Agent and
Lenders that they are entitled to rely on such opinions in extending the
credit contemplated by this Agreement;
(xxi) A pro-forma Consolidated balance sheet of Borrower and its
Subsidiaries, as of the fiscal month ended closest to December 31, 1996,
prepared in accordance with GAAP on a pro forma basis, setting forth the
assumptions on which such balance sheet was prepared, accompanied by an
agreed procedure report containing findings of Borrower's independent
certified public accountants addressed to Agent, in form and substance
satisfactory to Agent and its counsel with respect thereto, and forecasted
financial statements for at least the three (3) fiscal years following the
Closing Date, consisting of Consolidated balance sheets and income statements
of Borrower and its Subsidiaries, in each case giving effect to the
consummation of the Acquisition and the transactions contemplated hereby and
certified by the chief financial officer of Borrower and its Subsidiaries;
(xxii) A certificate from one of the principal financial officers
of Borrower certifying to the estimated Consolidated Net Worth of Borrower
and its Subsidiaries as of the Closing Date, after giving effect to the
Acquisition and the transactions contemplated by this Agreement, the
calculation of the Consolidated Fixed Charge Coverage Ratio and the
assumptions made in calculating such ratio; and
(xxiii) Such other documents, instruments and agreements as Agent
shall reasonably request in connection with the foregoing matters.
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10.1.2 No Injunction, etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any court, governmental agency or legislative
body to enjoin, restrain or prohibit, or to obtain damages in respect of, or
which is related to or arises out of this Agreement or the Loan Documents or
the consummation of the Acquisition or the transactions contemplated hereby
or which, in Agent's sole judgment, would make it inadvisable to consummate
the transactions contemplated by this Agreement or any of the other Loan
Documents.
10.1.3 Consents. All approvals, licenses, consents and filings
necessary to permit the Acquisition and the transactions contemplated by this
Agreement shall have been obtained and made.
10.1.4 Material Adverse Change. There shall not have occurred
any material adverse change in the financial condition, results of operations
or business of Borrower or the value of the Collateral from November 30, 1996
to the Closing Date, or any event, condition or state of facts which would
reasonably be expected to have a Material Adverse Effect, as reasonably
determined by Agent.
10.1.5 No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing.
10.1.6 Availability. On the Closing Date, after giving effect
to the Term Loan and the initial Revolver Loan necessary to consummate the
Acquisition and the transactions contemplated by this Agreement and the other
Loan Documents, and to pay or provide reserves for the payment of all
transactional costs, Borrower shall have Availability of not less than
$30,000,000.
10.1.7 Liens. Agent shall be satisfied that this Agreement and
the other Loan Documents create or will create, as security for the
Obligations, a valid and enforceable perfected first priority security
interest in and Lien upon all of the Collateral in favor of Agent, subject to
no other Liens other than Permitted Liens which are expressly stated to have
priority over the Liens of Agent.
10.1.8 Acquisition. Simultaneously with the transactions
contemplated by this Agreement, the Acquisition shall be consummated in
accordance with the terms of the Purchase Documents.
10.1.9 Labor Contracts. Borrower shall have entered into
extensions of its existing collective bargaining agreements upon terms
reasonably acceptable to Agent.
10.2 Conditions Precedent to All Loans and Letters of Credit and
Letter of Credit Guaranties. Notwithstanding any of the provisions of this
Agreement or the other Loan Documents, and without affecting in any manner
the rights of Agent and Lenders under the other sections of this Agreement,
it is understood and agreed that Lenders will have no obligation to make any
Loan (including the Term Loan and the initial Revolver Loan) and Agent will
have no obligation to issue any Letter of Credit or Letter of Credit Guaranty
unless and until, in addition to the conditions set forth in Section 10.1,
each of the following conditions has been and continues to be satisfied:
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10.2.1 Events of Default. No Default, Event of Default or
Over advance Condition shall exist.
10.2.2 Delivery of Documents. Agent and Lenders shall have
received copies of all documents, reports and information required to be
delivered to Agent and Lenders hereunder.
10.2.3 Representations and Warranties. The representations and
warranties contained in Section 8 of this Agreement and in the Loan Documents
shall be true and correct in all material respects except for changes in the
nature of Borrower's or any of its Subsidiary's business or operations after
the date of this Agreement, so long as Agent has consented to such changes or
such changes are not prohibited by this Agreement.
10.2.4 Performance of Agreement. All covenants and agreements
on the part of Borrower and its Subsidiaries to be performed under this
Agreement and the other Loan Documents shall have been performed and, unless
otherwise expressly agreed, any conditions precedent set forth in
Section 10.1 hereof shall have been fulfilled.
10.2.5 Subordinated Debt. The Loan, if made, would enjoy the
benefits and privileges of being senior in right of payment to all of the
Senior Subordinated Notes and all other Subordinated Debt then outstanding.
10.3 Waiver of Conditions Precedent. If Lenders make any Loan or
Agent issues any Letter of Credit or Letter of Credit Guaranty prior to the
fulfillment of any of the conditions precedent set forth in Sections 10.1 and
10.2 hereof, the making of such Loan or the issuance of such Letter of Credit
or Letter of Credit Guaranty shall constitute only an extension of time for
the fulfillment of such condition and not a waiver thereof, and Borrower
shall thereafter use its best efforts to fulfill such condition promptly.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1 Events of Default. The occurrence of one or more of the
following events shall constitute an "Event of Default":
11.1.1 Payment of Obligations; Failure to Remit or Deposit
Funds. Borrower or any of its Subsidiaries shall (i) fail to pay any of the
Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise), and such failure shall continue for
a period of three (3) days after Agent's giving Borrower written notice
thereof, or (ii) fail to remit or deposit funds as required by this Agreement
or the other Loan Documents.
11.1.2 Misrepresentations. Any warranty, representation or
other statement made or furnished to Agent or any Lender by or on behalf of
Borrower or any of its Subsidiaries in this Agreement or any of the other
Loan Documents or in any instrument, certificate or financial statement
furnished in compliance with or in reference to this Agreement or any of the
other Loan Documents proves to have been false or misleading in any material
respect when made or furnished.
11.1.3 Breach of Covenants. Borrower or any of its
Subsidiaries shall fail or neglect to perform, keep or observe (i) any
covenant contained in Sections 6.3, 7.1.2, 9.2 or 9.3 of this Agreement, or
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(ii) any other covenant contained in this Agreement or the other Loan
Documents (other than a covenant default in the performance or observance of
which is dealt with specifically elsewhere in this Section 11.1) and such
failure shall continue uncured for a period of thirty (30) days after Agent's
giving Borrower written notice thereof.
11.1.4 Default Under Indebtedness. Borrower or any
Subsidiaries shall default in the performance or observance of (i) any term,
covenant, condition or agreement contained in the Senior Subordinated Notes
Indenture or any document executed in connection therewith or (ii) any other
agreements, documents or instruments to which Borrower or any of its
Subsidiaries is a party or by which Borrower or any of its Subsidiaries or
any of its respective Property is bound, creating or relating to any
Indebtedness in the aggregate principal amount of $1,000,000 or more (other
than the Obligations and the Senior Subordinated Notes), and the maturity of
the Senior Subordinated Notes or such Indebtedness is accelerated in
consequence thereof.
11.1.5 Judgments. One or more final judgments or orders for
the payment of money are entered by a court of competent jurisdiction (other
than judgments or orders which are fully and effectively covered by
insurance) against Borrower or any of its Subsidiaries which require the
payment of money in an aggregate amount in excess of $1,000,000 and such
final judgment or order is not discharged, stayed, released or bonded within
thirty (30) days after the date such judgment or order is entered.
11.1.6 Bankruptcy, etc. Borrower or any of its Subsidiaries
shall suffer the appointment of a receiver, trustee, custodian or similar
fiduciary, or shall make an assignment for the benefit of creditors, or any
petition for an order for relief shall be filed by or against Borrower or any
of its Subsidiaries under the Bankruptcy Code or any similar state insolvency
proceeding (if against Borrower or any of its Subsidiaries, the earlier of
the entry of an order for relief against Borrower or such Subsidiary or the
continuation of such proceeding for more than sixty (60) days).
11.1.7 Change of Control. A Change of Control shall occur.
11.1.8 Litigation. Borrower or any Affiliate of Borrower shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any of the Liens granted to Agent under this Agreement or any of
the other Loan Documents.
11.1.9 Project Loan Documents. A default or event of default
shall occur under any of the Project Loan Documents and the maturity of the
Project Obligations is accelerated in consequence thereof.
11.2 Acceleration of the Obligations. Without in any way limiting
the right of Agent to demand payment of any portion of the Obligations
payable on demand in accordance with Section 4.4 hereof, upon or at any time
after the occurrence of an Event of Default and for so long as such Event of
Default shall exist, Agent may in its discretion (and, upon receipt of
written instructions to do so from the Required Lenders, shall) declare the
principal of and any accrued interest on the Loans and all other Obligations
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owing under any of the Loan Documents to be, whereupon the same shall become
without further notice or demand (all of which notice and demand Borrower
expressly waives), forthwith due and payable and Borrower shall forthwith pay
to Agent the entire principal of and accrued and unpaid interest on the Loans
and other Obligations plus reasonable attorneys' fees and expenses if such
principal and interest are collected by or through an attorney-at-law.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
specified in Section 11.1.6 hereof, all of the Obligations shall become
automatically due and payable without declaration, notice or demand by Agent
and the Commitments shall automatically terminate as if terminated by Agent
pursuant to Section 5.2.1 hereof and with the effects specified in Section
5.2.3 hereof.
11.3 Other Remedies. During the existence of an Event of Default,
Agent may in its discretion (and, upon receipt of written direction of the
Required Lenders, shall) exercise from time to time the following rights and
remedies:
11.3.1 All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable
rights to which Agent may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies
contained in this Agreement or any of the other Loan Documents, and none of
which shall be exclusive.
11.3.2 The right to terminate the Commitments as provided in
Section 5.2.1 hereof.
11.3.3 The right to notify Account Debtors to make remittance
to Agent of all sums due on Accounts of Borrower and its Subsidiaries,
collect such Accounts directly from the Account Debtors, and take such other
and further action with respect thereto as set forth in Section 14.1.2
hereof.
11.3.4 The right to take immediate possession of the
Collateral, and to (i) require Borrower and its Subsidiaries to assemble the
Collateral, at Borrower's expense, and make it available to Agent at a place
designated by Agent which is reasonably convenient to both parties, and (ii)
enter any premises where any of the Collateral shall be located and to keep
and store the Collateral on said premises until sold (and if said premises be
the Property of Borrower or any of its Subsidiaries, Borrower agrees not to
charge Agent for storage thereof).
11.3.5 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as
Agent, in its sole discretion, may deem advisable. Borrower agrees that five
(5) days written notice to Borrower of any public or private sale or other
disposition of Collateral shall be reasonable notice thereof, and such sale
shall be at such locations as Agent may designate in said notice. Agent
shall have the right to conduct such sales on the premises of Borrower and
its Subsidiaries, without charge therefor, and such sales may be adjourned
from time to time in accordance with applicable law. Agent shall have the
right to sell, lease or otherwise dispose of the Collateral, or any part
thereof, for cash, credit or any combination thereof, and Agent or any Lender<PAGE>
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may purchase all or any part of the Collateral at public or, if permitted by
law, private sale and, in lieu of actual payment of such purchase price, may
set off the amount of such price against the Obligations. The proceeds
realized from the sale of any Collateral shall be applied to the Obligations,
after allowing one (1) Business Day for collection, first, to any
Extraordinary Expenses incurred by Agent and all other reasonable costs,
expenses and attorneys' fees incurred by Lenders in collecting the
Obligations, in enforcing the rights of Lenders under the Loan Documents;
second, to the interest due upon any of the Obligations; and third, to the
principal of the Obligations. If any deficiency shall arise, Borrower shall
remain liable to Agent and Lenders therefor.
11.3.6 Agent is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral, and Borrower's rights under
all licenses and all franchise agreements shall inure to Agent's benefit.
11.3.7 With respect to the face amount of all Letters of Credit
and Letter of Credit Guaranties then outstanding, Agent may, at its option,
require Borrower to deposit with Agent funds equal to such undrawn face
amount, and if Borrower fails promptly to make such deposit, Agent or any
Lender may advance such amount as a Revolver Loan. Any such deposit or
advance shall be held by Agent in the Cash Collateral Account as a reserve to
fund future payments on such Letters of Credit or Letter of Credit
Guaranties. At such time as all Letters of Credit and Letter of Credit
Guaranties have expired or have been canceled or terminated and Agent and its
Affiliates released from all liability thereunder, any amounts remaining in
such reserves shall be applied against any outstanding Obligations, or, to
the extent all Obligations have been indefeasibly paid and satisfied in full,
returned to Borrower.
11.4 Setoff. In addition to any Liens granted under any of the Loan
Documents and any rights now or hereafter available under Applicable Law,
Agent and each Lender (and each of their respective Affiliates) is hereby
authorized by Borrower at any time that an Event of Default exists, without
notice to Borrower or any other Person (any such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
deposits, general or special (including Indebtedness evidenced by
certificates of deposit whether matured or unmatured (but not including trust
accounts)) and any other Indebtedness at any time held or owing by Agent,
such Lender or any of their Affiliates to or for the credit or the account of
Borrower against and on account of the Obligations of Borrower arising under
the Loan Documents to Agent, such Lender or any of their Affiliates,
including all Loans and Letter of Credit Obligations and all claims of any
nature or description arising out of or in connection with this Agreement,
irrespective of whether or not (i) Agent or such Lender shall have made any
demand hereunder or (ii) Agent, at the request or with the consent of the
Required Lenders, shall have declared the principal of and interest on the
Loans and other amounts due hereunder to be due and payable as permitted by
this Agreement and even though such Obligations may be contingent or
unmatured. Notwithstanding the foregoing, each of Agent and Lenders agree
with each other that it shall not, without the express consent of the
Required Lenders, and that it shall (to the extent that it is lawfully
entitled to do so) upon the request of the Required Lenders, exercise its
setoff rights hereunder against any accounts of Borrower now or hereafter <PAGE>
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maintained with Agent, such Lender or any Affiliate of any of them, but
Borrower shall have no claim or cause of action against Agent or any Lender
for any setoff made without the consent of the Required Lenders and the
validity of any such setoff shall not be impaired by the absence of such
consent. If any party (or its Affiliate) exercises the right of setoff
provided for hereunder, such party shall be obligated to share any such
setoff in the manner and to the extent required by Section 12.5.
11.5 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower and its Subsidiaries contained in this Agreement and the other Loan
Documents, or in any document referred to herein or contained in any
agreement supplementary hereto or in any schedule or contained in any other
agreement between Agent, any Lender and Borrower, heretofore, concurrently,
or hereafter entered into, shall be deemed cumulative to and not in
derogation or substitution of any of the terms, covenants, conditions, or
agreements of Borrower herein contained. The failure or delay of Agent or
any Lender to require strict performance by Borrower or any of its
Subsidiaries of any provision of this Agreement or the other Loan Documents
or to exercise or enforce any rights, Liens, powers, or remedies hereunder or
thereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans
and all other Obligations owing or to become owing from Borrower to Agent and
Lenders shall have been fully satisfied. None of the undertakings,
agreements, warranties, covenants and representations of Borrower or any of
its Subsidiaries contained in this Agreement or any of the other Loan
Documents and no Event of Default under this Agreement or any other Loan
Documents shall be deemed to have been suspended or waived by Agent, unless
such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of
Agent and directed to Borrower.
SECTION 12. AGENT
12.1 Appointment, Authority and Duties of Agent.
12.1.1 Each Lender hereby irrevocably appoints and designates
Fleet as Agent to act as herein specified. Agent may, and each Lender by its
acceptance of a Note shall be deemed irrevocably to have authorized Agent to,
enter into all Loan Documents to which Agent is to be a party on the Closing
Date and all amendments hereto and all Security Documents thereafter executed
by Borrower, for its benefit and the Pro Rata benefit of Lenders and, except
as otherwise provided in this Section 12, to exercise such rights and powers
under this Agreement and the other Loan Documents as are specifically
delegated to Agent by the terms hereof and thereof, together with such other
rights and powers as are reasonably incidental thereto. Each Lender agrees
that any action taken by Agent or the Required Lenders in accordance with the
provisions of this Agreement or the other Loan Documents, and the exercise by
Agent or the Required Lenders of any of the powers set forth herein or
therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders. Without limiting
the generality of the foregoing, Agent shall have the sole and exclusive
right and authority to (a) act as the disbursing and collecting agent for
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with this Agreement and the other Loan Documents; (b) execute and deliver as
Agent each Loan Document and accept delivery of each such agreement delivered
by Borrower or any other Obligor; (c) act as collateral agent for Lenders for
purposes of the perfection of all security interests and Liens created by
this Agreement or the Security Documents with respect to all material items
of the Collateral and, subject to the direction of the Required Lenders, for
all other purposes stated therein; (d) subject to the direction of the
Required Lenders, manage, supervise or otherwise deal with the Collateral;
and (e) except as may be otherwise specifically restricted by the terms of
this Agreement and subject to the direction of the Required Lenders, exercise
all remedies given to Agent or Lenders with respect to any of the Collateral
under the Loan Documents relating thereto, Applicable Law or otherwise. The
duties of Agent shall be ministerial and administrative in nature, and Agent
shall not have by reason of this Agreement or any other Loan Document a
fiduciary relationship with any Lender (or any Lender's participants).
Unless and until its authority to do so is revoked in writing by Required
Lenders, Agent alone shall be authorized to determine whether any Accounts or
Inventory of Borrower and its Subsidiaries constitute Eligible Accounts or
Eligible Inventory (basing such determination in each case upon the meanings
given to such terms in Appendix A), or whether to impose or release any
reserve, and to exercise its own credit judgment in connection therewith,
which determinations and judgments, if exercised in good faith, shall
exonerate Agent from any liability to Lenders or any other Person for any
errors in judgment.
12.1.2 Agent (which term, as used in this sentence, shall
include reference to Agent's Affiliates and to the officers, directors,
employees and agents of Agent's Affiliates) shall not: (a) have any duties
or responsibilities except those expressly set forth in this Agreement and
the other Loan Documents or (b) be required to initiate or conduct any
litigation, foreclosure or collection proceedings hereunder or under any of
the other Loan Documents except to the extent directed to do so by the
Required Lenders during the continuance of any Event of Default. The
conferral upon Agent of any right hereunder shall not imply a duty on Agent's
part to exercise any such right unless instructed to do so by the Required
Lenders in accordance with this Agreement.
12.1.3 Agent may perform any of its duties by or through its
agents and employees and may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Borrower shall
promptly (and in any event, on demand) reimburse Agent for all reasonable
expenses (including all Extraordinary Expenses) incurred by Agent pursuant to
any of the provisions hereof or of any of the other Loan Documents or in the
execution of any of Agent's duties hereby or thereby created or in the
exercise of any right or power herein or therein imposed or conferred upon it
or Lenders (excluding, however, general overhead expenses), and each Lender
agrees promptly to pay to Agent, on demand, such Lender's Pro Rata share of
any such reimbursement for expenses (including Extraordinary Expenses) that
is not timely made by Borrower to Agent.
12.1.4 The rights, remedies, powers and privileges conferred
upon Agent hereunder and under the other Loan Documents may be exercised by
Agent without the necessity of the joinder of any other parties unless
otherwise required by Applicable Law. If Agent shall request instructions
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from the Required Lenders with respect to any act or action (including the
failure to act) in connection with this Agreement or any of the other Loan
Documents, Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from the
Required Lenders; and Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Lender shall have any
right of action whatsoever against Agent as a result of Agent acting or
refraining from acting hereunder or under any of the Loan Documents in
accordance with the instructions of the Required Lenders.
12.1.5 Agent shall promptly, upon receipt thereof, forward to
each Lender (i) copies of any significant written notices, reports,
certificates and other information received by Agent from any Obligor (but
only if and to the extent such Obligor is not required by the terms of the
Loan Documents to supply such information directly to Lenders) and (ii)
copies of the results of any field audits by Agent with respect to Borrower.
Agent shall conduct field audits of Borrower at any time or times reasonably
requested in writing by any Lender (but in no event shall Agent be obliged to
honor such requests more frequently than once a calendar year unless a
Default or Event of Default exists). Agent shall have no liability to any
Lender for any errors in or omissions from any field audit or other
examination of Borrower or the Collateral, unless such error or omission was
the direct result of Agent's willful misconduct.
12.2 Agreements Regarding Collateral. Each Lender shall have a Pro
Rata interest in the security interests and Liens in and to the Collateral
and any other Property granted and assigned to Agent under the Loan
Documents. Lenders hereby irrevocably authorize Agent, at its option and in
its discretion, to release any Lien upon any Collateral (i) as authorized by
this Agreement or any of the other Loan Documents, (ii) upon the termination
of the Commitments and payment or satisfaction of all of the Obligations, or
(iii) constituting Equipment Collateral sold or disposed of in accordance
with the terms of this Agreement if Borrower certifies to Agent that the
disposition is made in compliance with the terms of this Agreement (and Agent
may rely conclusively on any such certificate, without further inquiry).
Except as expressly authorized or required by this Agreement or Applicable
Law, Agent shall not execute any release or termination of any Lien upon any
of the Collateral without the prior written authorization of all Lenders.
Agent shall have no obligation whatsoever to any of the Lenders to assure
that any of the Collateral exists or is owned by Borrower or any of its
Subsidiaries or is cared for, protected or insured or has been encumbered,
or that Agent's Liens have been properly or sufficiently or lawfully created,
perfected, protected or enforced or entitled to any particular priority or to
exercise at all or in any manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights or powers granted or
available to Agent pursuant to this Agreement or any of the other Loan
Documents, it being understood and agreed that in respect of the Collateral,
or any act, omission or event related thereto, Agent may act in any manner it
may deem appropriate, in its discretion, given Agent's own interests in the
Collateral in its capacity as one of the Lenders.
12.3 Reliance By Agent. Agent shall be entitled to rely, and shall
be fully protected in so relying, upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram,
telecopier message or cable) believed by it to be genuine and correct and to
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have been signed, sent or made by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not
expressly provided for by this Agreement or any of the other Loan Documents,
Agent shall in all cases be fully protected in acting or refraining from
acting hereunder and thereunder in accordance with the instructions of the
Required Lenders, and such instructions of the Required Lenders and any
action taken or failure to act pursuant thereto shall be binding upon
Lenders.
12.4 Action Upon Default. Agent shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than
nonpayment when due of an amount required to be repaid with respect to the
Loans) unless it has received written notice from a Lender or Borrower
specifying the occurrence of such Default or Event of Default. If Agent
shall receive such a notice of the occurrence of a Default or an Event of
Default or shall otherwise acquire actual knowledge of any written Default or
Event of Default, Agent shall promptly notify Lenders in writing and Agent
shall take such action and assert such rights under this Agreement and the
other Loan Documents, or shall refrain from taking such action and asserting
such rights, as the Required Lenders shall direct from time to time;
provided, however, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) continue making
Settlement Loans and Revolver Loans To Borrower on behalf of the Lenders in
reliance on the provisions of Section 3.1.2 and take such other action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable and in the best interests of the Lenders.
If any Lender shall receive a notice of the occurrence of a Default or an
Event of Default or shall otherwise acquire actual knowledge of any Default
or Event of Default, such Lender shall promptly notify Agent and the other
Lenders in writing. As provided in Section 12.3 hereof, Agent shall not be
subject to any liability by reason of acting or refraining to act pursuant to
any request of the Required Lenders except for its own willful misconduct or
gross negligence. Before directing Agent to take or refrain from taking any
action or asserting any rights under this Agreement and the other Loan
Documents, the Required Lenders shall consult with and seek the advice of
(but without having to obtain the consent of) each other Lender, and promptly
after directing Agent to take or refrain from taking any such action or
asserting any such rights, the Required Lenders will so advise each other
Lender of the action taken or refrained from being taken and, upon request of
any Lender, will supply information concerning actions taken or not taken.
In no event shall the Required Lenders, without the prior written consent of
each Lender, direct Agent to accelerate and demand payment of the Loans held
by one Lender without accelerating and demanding payment of all other Loans.
Each Lender agrees that without the prior written consent of the Required
Lenders, it will not take any legal action or institute any action or
proceeding against any Obligor with respect to any of the Obligations or
Collateral, or accelerate or otherwise enforce its portion of the
Obligations.
12.5 Ratable Sharing. If any Lender shall obtain any payment or
reduction (including any amounts received as adequate protection of a bank
account deposit treated as cash collateral under the Bankruptcy Code) of any
Obligation of Borrower hereunder (whether voluntary, involuntary, through the
exercise of any right of set-off or otherwise) in excess of its Pro Rata
share of payments or reductions on account of such Obligations obtained by <PAGE>
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all of the Lenders, such Lender shall forthwith (i) notify the other Lenders
and Agent of such receipt and (ii) purchase from the other Lenders such
participations in the affected Obligations as shall be necessary to cause
such purchasing Lender to share the excess payment or reduction, net of costs
incurred in connection therewith, on a Pro Rata basis, provided that if all
or any portion of such excess payment or reduction is thereafter recovered
from such purchasing Lender or additional costs are incurred, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery or such additional costs, but without interest. Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section 12.5 may, to the fullest extent permitted by Applicable Law,
exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of Borrower in the amount of such participation.
12.6 Indemnification of Agent.
12.6.1 Each Lender severally agrees to indemnify and defend the
Agent Indemnitees (to the extent not reimbursed by Borrower under this
Agreement, but without limiting the indemnification obligation of Borrower
under this Agreement), on a Pro Rata basis, and to hold each of the Agent
Indemnitees harmless from and against, any and all Claims which may be
imposed on, incurred by or asserted against any of the Agent Indemnitees in
any way related to or arising out of this Agreement or any of the other Loan
Documents or any other document contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including the
costs and expenses which Borrower is obligated to pay under Section 14.2
hereof or amounts Agent may be called upon to pay in connection with any
lockbox or Dominion Account arrangement contemplated hereby) or the
enforcement of any of the terms hereof or thereof or of any such other
documents, provided that no Lender shall be liable to any Agent Indemnitee
for any of the foregoing to the extent that they result solely from the
willful misconduct or gross negligence of such Agent Indemnitee.
12.6.2 Without limiting the generality of the foregoing
provisions of this Section 12.6, if Agent should be sued by any receiver,
trustee in bankruptcy, debtor-in-possession or other Person on account of any
alleged preference or fraudulent transfer received or alleged to have been
received from Borrower or any other Obligor as the result of any transaction
under the Loan Documents, then in such event any monies paid by Agent in
settlement or satisfaction of such suit, together with all Extraordinary
Expenses incurred by Agent in the defense of same, shall be promptly
reimbursed to Agent by Lenders to the extent of each Lender's Pro Rata share.
12.6.3 Without limiting the generality of the foregoing
provisions of this Section 12.6, if at any time (whether prior to or after
the Commitment Termination Date) any action or proceeding shall be brought
against any of the Agent Indemnitees by an Obligor or by any other Person
claiming by, through or under an Obligor, to recover damages for any act
taken or omitted by Agent under any of the Loan Documents or in the
performance of any rights, powers or remedies of Agent against Obligor, any
Account Debtor, the Collateral or with respect to any Revolver Loans, or to
obtain any other relief of any kind on account of any transaction involving
any Agent Indemnitees under or in relation to any of the Loan Documents,
Lenders agree to indemnify, defend and hold the Agent Indemnitees harmless
with respect thereto and to pay to the Agent Indemnitees their respective Pro<PAGE>
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Rata shares of such amount as the Agent Indemnitees shall be required to pay
by reason of a judgment, decree, or other order entered in such action or
proceeding or by reason of any compromise or settlement agreed to by the
Agent Indemnitees, including all interest and costs assessed against the
Agent Indemnitees in defending or compromising such action, together with
attorneys' fees and other legal expenses paid or incurred by the Agent
Indemnitees in connection therewith; provided, however, that no Lender shall
be liable to any Agent Indemnitee for any of the foregoing to the extent that
they arise solely from the willful misconduct or gross negligence of such
Agent Indemnitee. In Agent's discretion, Agent may also reserve for or
satisfy any such judgment, decree or order from proceeds of Collateral prior
to any distributions therefrom to or for the account of Lenders.
12.7 Limitation on Responsibilities of Agent. Agent shall in all
cases be fully justified in failing or refusing to act hereunder unless it
shall have received further assurances to its satisfaction from Lenders of
their indemnification obligations under Section 12.6 hereof against any and
all Claims which may be incurred by Agent by reason of taking or continuing
to take any such action. Agent shall not be liable to Lenders (or any
Lender's participants) for any action lawfully taken or omitted to be taken
under or in connection with this Agreement or the other Loan Documents except
as a result of actual gross negligence or willful misconduct on the part of
Agent. Agent does not assume any responsibility for any failure or delay in
performance or breach by any Obligor or any Lender of its obligations under
this Agreement or any of the other Loan Documents. Agent does not make to
Lenders, and no Lender makes to Agent or the other Lenders, any express or
implied warranty, representation or guarantee with respect to the Loans, the
Collateral, the Loan Documents or any Obligor. Agent shall not be
responsible to Lenders, and no Lender shall be responsible to Agent or the
other Lenders, for: (i) any recitals, statements, information,
representations or warranties contained in any of the Loan Documents or in
any certificate or other document furnished pursuant to the terms hereof;
(ii) the execution, validity, genuineness, effectiveness or enforceability
of, any of the Loan Documents; (iii) the validity, genuineness,
enforceability, collectibility, value, sufficiency or existence of any
Collateral, or the perfection or priority of any Lien therein; or (iv) the
assets, liabilities, financial condition, results of operations, business,
creditworthiness or legal status of any Obligor or any Account Debtor. Agent
shall have no obligation to any Lender to ascertain or inquire into the
existence of any Default or Event of Default, the observance or performance
by any Obligor of any of the duties or agreements of such Obligor under any
of the Loan Documents or the satisfaction of any conditions precedent
contained in any of the Loan Documents. Agent may consult with and employ
legal counsel, accountants and other experts and shall be entitled to act
upon, and shall be fully protected in any action taken in good faith reliance
upon, any advice given by such experts.
12.8 Successor Agent and Co-Agents.
12.8.1 Subject to the appointment and acceptance of a successor
Agent as provided below, Agent may resign at any time by giving written
notice thereof to each Lender and Borrower. Upon any such resignation, the
Required Lenders, after prior consultation with (but without having to obtain
consent of) each Lender, shall have the right to appoint a successor Agent
which shall be either a Lender or a financial institution that is organized
under the laws of the United States or of any State thereof, has a combined <PAGE>
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capital surplus of at least $100,000,000 and, provided no Event of Default
then exists, is reasonably acceptable to Borrower (and for purposes hereof,
any successor to Fleet shall be deemed acceptable to Borrower). Upon the
acceptance by a successor Agent of an appointment as an Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent without further
act, deed or conveyance, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 12 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent. Notwithstanding anything to the contrary
contained in this Agreement, any successor by merger or acquisition of the
stock or assets of Fleet shall continue to be Agent hereunder unless such
successor shall resign in accordance with the provisions hereof.
12.8.2 It is the purpose of this Agreement that there shall be
no violation of any Applicable Law denying or restricting the right of
financial institutions to transact business as agent in any jurisdiction. It
is recognized that, in case of litigation under any of the Loan Documents, or
in case Agent deems that by reason of present or future laws of any
jurisdiction Agent might be prohibited from exercising any of the powers,
rights or remedies granted to Agent or Lenders hereunder or under any of the
Loan Documents or from holding title to or a Lien upon any Collateral or from
taking any other action which may be necessary hereunder or under any of the
Loan Documents, Agent may appoint an additional Person as a separate
collateral agent or co-collateral agent which is not so prohibited from
taking any of such actions or exercising any of such powers, rights or
remedies. If Agent shall appoint an additional Person as a separate
collateral agent or co-collateral agent as provided above, each and every
remedy, power, right, claim, demand or cause of action intended by any of the
Loan Documents to be exercised by or vested in or conveyed to Agent with
respect thereto shall be exercisable by and vested in such separate
collateral agent or co-collateral agent, but only to the extent necessary to
enable such separate collateral agent or co-collateral agent to exercise such
powers, rights and remedies, and every covenant and obligation necessary to
the exercise thereof by such separate collateral agent or co-collateral agent
shall run to and be enforceable by either of them. Should any instrument
from Lenders be required by the separate collateral agent or co-collateral
agent so appointed by Agent in order more fully and certainly to vest in and
confirm to him or it such rights, powers, duties and obligations, any and all
of such instruments shall, on request, be executed, acknowledged and
delivered by Lenders whether or not a Default or Event of Default then
exists. In case any separate collateral agent or co-collateral agent, or a
successor to either, shall die, become incapable of acting, resign or be
removed, all the estates, properties, rights, powers, duties and obligations
of such separate collateral agent or co-collateral agent, so far as permitted
by Applicable Law, shall vest in and be exercised by the Agent until the
appointment of a new collateral agent or successor to such separate
collateral agent or co-collateral agent.
12.9 Consents, Amendments and Waivers.
12.9.1 Except to the extent an amendment or modification of any
provision of this Agreement may be amended by Agent and Borrower without the
consent of the Required Lenders as set forth below, no amendment or
modification of any provision of this Agreement shall be effective without<PAGE>
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the prior written agreement of the Required Lenders and Borrower, and no
waiver of any Default or Event of Default shall be effective without the
prior written consent of the Required Lenders; provided, however, that,
without the prior consent of all Lenders, no waiver of any Default or Event
of Default shall be effective if the Default or Event of Default relates to
Borrower's failure to observe or perform any covenant that may not be amended
without the unanimous written consent of Lenders as hereinafter set forth in
this Section 12.9.1; and, provided, further, Lenders may amend the provisions
of this Section 12.9 without the written consent of Borrower.
Notwithstanding the immediately preceding sentence, the written agreement of
all Lenders shall be required to effectuate any amendment, modification or
waiver that would:
(i) alter the provisions of Sections 2.6, 2.7, 2.8, 2.9, 4.8,
4.11, 5.1, 11, 12, 14.2 or 14.3, the definitions of "Borrowing Base" and the
other defined terms used in such definition, "Eligible Assignee," "Lenders,"
"Pro Rata," "Required Lenders" or any provision of this Agreement obligating
Agent to take certain actions at the direction of the Required Lenders, or
any provision of this Agreement regarding the Pro Rata treatment or
obligations of Lenders;
(ii) increase or otherwise modify any of the Commitments (other
than to reduce proportionately each Lender's Commitment in connection with
any overall reduction in the amount of the Commitments);
(iii) extend the originally scheduled time or times of payment of
the principal of any of the Loans, or alter the time or times of payment of
interest on any Loan or of any fees payable for the account of Lenders, or
alter the amount of the principal of any Loan or the rate of interest
thereon, or alter the amount of any commitment fee or other fee payable
hereunder for the account of Lenders, in each case except as may be expressly
authorized by the Loan Documents or as may be necessary, in Agent's
judgement, to comply with Applicable Law;
(iv) subordinate the payment of any of the Obligations to any
other Indebtedness or the priority of any Liens granted to Agent under any of
the Loan Documents to Liens granted to any other Person, except as currently
provided in or contemplated by the Loan Documents, and except for Liens
granted by an Obligor to financial institutions with respect to amounts on
deposit with such financial institutions to cover returned items, processing
and analysis charges and other charges in the ordinary course of business
that relate to deposit accounts with such financial institutions;
(v) forgive any of the Obligations, except any portion of the
Obligations held by a Lender who consents in writing to such forgiveness;
(vi) release any Obligor or, during any time when Agent is not
entitled to exercise remedies hereunder upon an Event of Default, Agent's
Lien in any Collateral having an aggregate value greater than $100,000 in any
12-month period, except for the release of the Liens of Agent in the
Equipment Collateral and the Owned Real Property pursuant to Section 6.5 and
Section 7.4.2 of this Agreement and any other release that may be expressly
authorized or permitted by this Agreement or the other Loan Documents;<PAGE>
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(vii) terminate any of the provisions of the Intercreditor
Agreement or change any of its provisions; or
(viii) consent to any amendment to or waiver of the
subordination provisions of any Subordinated Debt or any other instrument or
agreement evidencing or relating to obligations of Borrower that are
expressly subordinate to any of the Obligations if such amendment or waiver
would be adverse to Lenders in their capacities as Lenders hereunder.
In no event shall any amendment to the provisions of Sections 1.3 or
3.1.3 be effective without the prior written consent of Fleet. No Lender
shall be authorized to amend or modify any Note held by it, unless such
amendment or modification is consented to in writing by all Lenders;
provided, however, that the foregoing shall not be construed to prohibit an
amendment or modification to any provision of this Agreement that may be
effected pursuant to this Section 12.9.1 by agreement of Borrower and the
Required Lenders even though such an amendment or modification results in an
amount or modification of the Notes by virtue of the incorporation by
reference in each of the Notes of this Agreement. The making of any Loans
hereunder by any Lender during the existence of a Default or Event of Default
shall not be deemed to constitute a waiver of such Default or Event of
Default. Any waiver or consent granted by Lenders hereunder shall be
effective only if in writing and then only in the specific instance and for
the specific purpose for which it was given.
12.9.2 In connection with any proposed amendment to any of the
Loan Documents or waiver of any of the terms thereof or any Default or Event
of Default thereunder, Borrower shall not solicit, request or negotiate for
or with respect to any such proposed amendment or waiver of any of the
provisions of this Agreement or any of the other Loan Documents unless each
Lender shall be informed thereof by Borrower or Agent (to the extent known by
Agent) and shall be afforded an opportunity of considering the same and
supplied by Borrower with sufficient information to enable it to make an
informed decision with respect thereto. Borrower will not, directly or
indirectly, pay or cause to be paid any remuneration or other thing of value,
whether by way of supplemental or additional interest, fee or otherwise, to
any Lender (in its capacity as a Lender hereunder) as consideration for or as
an inducement to the consent to or agreement by such Lender with any waiver
or amendment of any of the terms and provisions of this Agreement or any of
the other Loan Documents unless such remuneration or thing of value is
concurrently paid, on the same terms, on a Pro Rata basis to all Lenders.
12.10 Due Diligence and Non-Reliance. Each Lender hereby
acknowledges and represents that it has, independently and without reliance
upon Agent or the other Lenders, and based upon such documents, information
and analyses as it has deemed appropriate, made its own credit analysis of
each Obligor and its own decision to enter into this Agreement, to fund the
Loans to be made by it hereunder and to purchase Letter of Credit
Participations, and each Lender has made such inquiries concerning the Loan
Documents, the Collateral and each Obligor as such Lender feels necessary and
appropriate, and has taken such care on its own behalf as would have been the
case had it entered into the other Loan Documents without the intervention or
participation of the other Lenders or Agent. Each Lender hereby further
acknowledges and represents that the other Lenders and Agent have not made
any representations or warranties to it concerning any Obligor, any of the
Collateral or with respect to the legality, validity, sufficiency or <PAGE>
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enforceability of any of the Loan Documents. Each Lender also hereby
acknowledges that it will, independently and without reliance upon the other
Lenders or Agent, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely
upon its own credit decisions in making Loans and in taking or refraining to
take any other action under this Agreement or any of the other Loan
Documents. Except for notices, reports and other information expressly
required to be furnished to Lenders by Agent hereunder, Agent shall not have
any duty or responsibility to provide any Lender with any notices, reports or
certificates furnished to Agent by any Obligor or any credit or other
information concerning the affairs, financial condition, business or
Properties of any Obligor (or any of its Affiliates) which may come into
possession of Agent or any of Agent's Affiliates.
12.11 Representations and Warranties of Lenders. By its execution
of this Agreement, each Lender hereby represents and warrants to Borrower and
the other Lenders that it has the power to enter into and perform its
obligations under this Agreement and the other Loan Documents, and that it
has taken all necessary and appropriate action to authorize its execution and
performance of this Agreement and the other Loan Documents will be binding
upon it and the obligations imposed upon it herein or therein will be
enforceable against it in accordance with the respective terms of such
documents.
12.12 The Required Lenders. As to any provisions of this Agreement
or the other Loan Documents under which action may or is required to be taken
upon direction or approval of the Required Lenders, the direction or approval
of the Required Lenders shall be binding upon each Lender to the same extent
and with the same effect as if each Lender had joined therein.
Notwithstanding anything to the contrary contained in this Agreement,
Borrower shall not be deemed to be a beneficiary of, or be entitled to
enforce, sue upon or assert as a defense to any of the Obligations, any
provisions of this Agreement that requires Agent or any Lender to act, or
conditions their authority to act, upon the direction or consent of the
Required Lenders; and any action taken by Agent or any Lender that requires
the consent or direction of the Required Lenders as a condition to taking
such action shall, insofar as Borrower is concerned, be presumed to have been
taken with the requisite consent or direction of the Required Lenders.
12.13 Several Obligations. The obligations and commitments of each
Lender under this Agreement and the other Loan Documents are several and
neither Agent nor any Lender shall be responsible for the performance by the
other Lenders of its obligations or commitments hereunder or thereunder.
Notwithstanding any liability of Lenders stated to be joint and several to
third Persons under any of the Loan Documents, such liability shall be
shared, as among Lenders, Pro Rata according to the respective Commitments of
Lenders. Nothing contained in this Agreement and no action taken by Lenders
pursuant hereto shall be deemed to constitute the Lenders to be a
partnership, association, joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled, to the extent not
otherwise restricted hereunder, to protect and enforce its rights arising out
of this Agreement and any of the other Loan Documents and it shall not be
necessary for Agent or any other Lender to be joined as an additional party
in any proceeding for such purpose.
<PAGE>
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12.14 Agent in its Individual Capacity. With respect to its
obligation to lend under this Agreement, the Loans made by it and each Note
issued to it, Agent shall have the same rights and powers hereunder and under
the other Loan Documents as any other Lender or holder of a Note and may
exercise the same as though it were not performing the duties specified
herein; and the terms "Lenders," "Required Lenders," or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
capacity as a Lender. Agent and its Affiliates may each accept deposits,
maintain deposits or credit balances for, invest in, lend money to, act as
trustee under indentures of, serve as financial advisor to, and generally
engage in any kind of business with Borrower or any other Obligor, or any
affiliate of Borrower or any other Obligor, as if it were any other bank and
without any duty to account therefor to the other Lenders. Without limiting
the generality of the foregoing, each Lender hereby (i) acknowledges and
agrees that Fleet has made the Project Loan to the Authority which has been
guaranteed by Borrower pursuant to the Project Loan Guaranty, and, subject to
the terms of the Intercreditor Agreement, Fleet has a Lien upon all of the
Collateral of Borrower (with the exception of the Equipment Collateral) as
security for the Project Loan Obligations, and (ii) grants its consent
thereto and specifically authorizes and directs Agent to enter into the
Intercreditor Agreement with Fleet.
12.15 Third Party Beneficiaries. This Section 12 is not intended to
confer any rights or benefits upon Borrower or any other Person except
Lenders and Agent, and no Person (including Borrower) other than Lenders and
Agent shall have any right to enforce any of the provisions of this Section
12 except as expressly provided in Section 12.17 hereof. As between Borrower
and Agent, any action that Agent may take or purport to take on behalf of
Lenders under any of the Loan Documents shall be conclusively presumed to
have been authorized and approved by Lenders as herein provided.
12.16 Notice of Transfer. Agent may deem and treat a Lender party
to this Agreement as the owner of such Lender's portion of the Revolver Loans
for all purposes, unless and until a written notice of the assignment or
transfer thereof executed by such Lender has been received by Agent.
12.17 Replacement of Certain Lenders. If a Lender ("Affected
Lender") shall have (i) failed to fund its Pro Rata share of any Loan
requested by Borrower which such Lender is obligated to fund under the terms
of this Agreement and which such failure has not been cured, (ii) requested
compensation from Borrower under Section 2.7 or Section 2.8 to recover
increased costs incurred by such Lender (or its parent or holding company)
which are not being incurred generally by the other Lenders (or their
respective parents or holding companies), or (iii) delivered a notice
pursuant to Section 2.6 hereof claiming that such Lender is unable to extend
LIBOR Rate Loans to Borrower for reasons not generally applicable to the
other Lenders, then, in any such case and in addition to any other rights and
remedies that Agent, any other Lender or Borrower may have against such
Affected Lender, Borrower or Agent may make written demand on such Affected
Lender (with a copy to Agent in the case of a demand by Borrower and a copy
to Borrower in the case of a demand by Agent) for the Affected Lender to
assign, and such Affected Lender shall assign pursuant to one or more duly
executed Assignment and Acceptances within five (5) Business Days after the
date of such demand, to one or more Lenders willing to accept such assignment
or assignments, or to one or more Eligible Assignees designated by Agent, all
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of such Affected Lender's rights and obligations under this Agreement
(including its Commitments and all Loans owing to it) in accordance with
Section 13 hereof; provided, however Agent shall have no duty to locate an
Eligible Assignee for the purposes of accepting such assignment. Agent is
hereby irrevocably authorized to execute one or more Assignment and
Acceptances as attorney-in-fact for any Affected Lender which fails or
refuses to execute and deliver the same within five (5) Business Days after
the date of such demand. The Affected Lender shall be entitled to receive,
in cash and concurrently with execution and delivery of each such Assignment
and Acceptance, all amounts owed to the Affected Lender hereunder or under
any other Loan Document, including the aggregate outstanding principal amount
of the Loans owed to such Lender, together with accrued interest thereon
through the date of such assignment. Upon the replacement of any Affected
Lender pursuant to this Section 12.17, such Affected Lender shall cease to
have any participation in, entitlement to, or other right to share in the
Liens of Agent in any Collateral and such Affected Lender shall have no
further liability to Agent, any Lender or any other Person under any of the
Loan Documents (except as provided in Section 12.6 hereof as to events or
transactions which occur prior to the replacement of such Affected Lender),
including any commitment to make Loans or purchase any Letter of Credit
Participations.
12.18 Remittance of Payments and Collections.
12.18.1 All payments by any Lender to Agent shall be made not
later than the time set forth elsewhere in this Agreement on the Business Day
such payment is due; provided, however, that if such payment is due on demand
by Agent and such demand is made on the paying Lender after 11:00 a.m.,
Charlotte, North Carolina time, on such Business Day, then payment shall be
made by 11:00 a.m., Charlotte, North Carolina time, on the next Business Day.
Payment by Agent to any Lender shall be made by wire transfer, promptly
following Agent's receipt of funds for the account of such Lender and in the
type of funds received by Agent; provided, however, that if Agent receives
such funds at or prior to 1:00 p.m., Charlotte, North Carolina time, Agent
shall pay such funds to such Lender by 2:00 p.m., Charlotte, North Carolina
time, on such Business Day, but if Agent receives such funds after 1:00 p.m.,
Charlotte, North Carolina time, Agent shall pay such funds to such Lender by
2:00 p.m., Charlotte, North Carolina time, on the next Business Day.
12.18.2 With respect to the payment of any funds from Agent to
a Lender or from a Lender to Agent, the party failing to make full payment
when due pursuant to the terms hereof shall, on demand by the other party,
pay such amount together with interest thereon at the Federal Funds Rate. In
no event shall Borrower be entitled to receive any credit for any interest
paid by Agent to any Lender, or by any Lender to Agent, at the Federal Funds
Rate as provided herein.
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
13.1 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of Borrower, Agent and Lenders and their respective
successors and assigns (which, in the case of Agent, shall include any
successor Agent appointed pursuant to Section 12.8 hereof), except that (i)
Borrower shall not have the right to assign its rights or delegate
performance of any of its obligations under any of the Loan Documents and
(ii) any assignment by any Lender must be made in compliance with Section <PAGE>
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13.3 hereof. Agent may treat the payee of any Note as the owner thereof for
all purposes hereof unless and until such payee complies with Section 13.3 in
the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with Agent. Any assignee or
transferee of a Note agrees by acceptance thereof to be bound by all the
terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the holder of a Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note
or Notes issued in exchange therefor.
13.2 Participations.
13.2.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with Applicable Law, at any
time sell to one or more banks or other financial institutions (each a
"Participant") participating interest in any of the Obligations owing to such
Lender, any Commitment of such Lender or any other interest of such Lender
under any of the Loan Documents. In the event of any such sale by a Lender
of participating interests to a Participant, such Lender's obligations under
the Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any Note for all purposes
under the Loan Documents, all amounts payable by Borrower under this
Agreement and any of the Notes shall be determined as if such Lender had not
sold such participating interests, and Borrower and Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under the Loan Documents. If a Lender sells a
participation to a Person other than an Affiliate of such Lender, then such
Lender shall give prompt written notice thereof to Borrower and the other
Lenders.
13.2.2 Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than an
amendment, modification or waiver with respect to any Loans or Commitment in
which such Participant has an interest which forgives principal, interest or
fees or reduces the stated interest rate or the stated rates at which fees
are payable with respect to any such Loan or Commitment, postpones the
Commitment Termination Date, or any date fixed for any regularly scheduled
payment of principal or interest on such Loan or Commitment, or releases from
liability any Obligor or releases any substantial portion of any of the
Collateral.
13.2.3 Benefit of Set-Off. Borrower agrees that each
Participant shall be deemed to have the right of set-off provided in Section
11.4 hereof in respect of its participating interest in amounts owing under
the Loan Documents to the same extent and subject to the same requirements
under this Agreement (including Section 12.5) as if the amount of its
participating interest were owing directly to it as a Lender under the Loan
Documents, provided that each Lender shall retain the right of set-off
provided in Section 11.4 hereof with respect to the amount of participating
interests sold to each Participant. Lenders agree to share with each
Participant, and each Participant by exercising the right of set-off provided
in Section 11.4 agrees to share with each Lender, any amount received
pursuant to the exercise of its right of set-off, such amounts to be shared <PAGE>
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in accordance with Section 12.5 hereof as if each Participant were a Lender.
13.3 Assignments.
13.3.1 Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with Applicable Law, at any time
assign to any Eligible Assignee all or any part of its rights and obligations
under the Loan Documents, so long as (i) each assignment is of a constant,
and not a varying, ratable percentage of all of the transferor Lender's
rights and obligations under the Loan Documents with respect to the Loans and
to the Letter of Credit Obligations and, in the case of a partial assignment,
is in a minimum principal amount of $10,000,000 and integral multiples of
$1,000,000 in excess of that amount; (ii) except in the case of an assignment
in whole of a Lender's rights and obligations under the Loan Documents or an
assignment by one original signatory to this Agreement to another such
signatory, immediately after giving effect to any assignment, the aggregate
amount of the Commitments retained by the transferor Lender shall in no event
be less than $10,000,000; and (iii) the parties to each such assignment shall
execute and deliver to Agent, for its acceptance and recording, an Assignment
and Acceptance. The consent of Agent shall be required prior to an
assignment becoming effective with respect to an Eligible Assignee which is
not a Lender or an Affiliate of a Lender, and such assignment shall not
become effective until such time as notice thereof is given to Borrower and
Agent in substantially the form of Exhibit F attached hereto. Nothing
contained herein shall limit in any way the right of Lenders to assign all
or any portion of the Loans owing to it to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A of the
Board of Governors and any Operating Circular issued by such Federal Reserve
Bank, provided that in the case of this clause (ii) any payment in respect of
such assigned Loans made by Borrower to the assigning Lender in accordance
with the terms of this Agreement shall satisfy Borrower's obligations
hereunder in respect of such assigned Loans to the extent of such payment,
but no such assignment shall release the assigning Lender from its
obligations hereunder.
13.3.2 Effect; Effective Date. Upon (i) delivery to Agent of a
notice of assignment substantially in the form attached as Exhibit F hereto,
together with any consents required by Section 13.3.1, and (ii) payment of a
$5,000 fee to Agent for processing any assignment to an Eligible Assignee
that is not an Affiliate of the transferor Lender, such assignment shall
become effective on the effective date specified in such notice of
assignment. On and after the effective date of such assignment, such
Eligible Assignee shall for all purposes be a Lender party to the Agreement
and any other Loan Document executed by the Lenders and shall have all the
rights and obligations of the Lender under the Loan Documents to the same
extent as if it were an original party thereto, and no further consent or
action by Borrower, Lenders or Agent shall be required to release the
transferor Lender with respect to the Commitment (or portion thereof) of such
Lender and Obligations assigned to such Eligible Assignee. Upon the
consummation of any assignment to an Eligible Assignee pursuant to this
Section 13.3, the transferor Lender, Agent and Borrower shall make
appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Eligible Assignee, in each case in principal amounts
reflecting their respective Commitments, as adjusted pursuant to such
assignment.
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13.3.3 Dissemination of Information. Borrower authorizes each
Lender and Agent to disclose to any Participant, any Eligible Assignee or any
other Person acquiring an interest in the Loan Documents by operation of law
(each a "Transferee"), and any prospective Transferee, any and all
information in Agent's or such Lender's possession concerning Borrower, the
Subsidiaries or the Collateral, subject to appropriate confidentiality
undertakings on the part of such Transferee.
13.4 Certain Restrictions on Assignments and Participations.
Notwithstanding anything to the contrary contained in Section 13.2 or 13.3
hereof, in no event shall Fleet assign or sell participations in any of its
Commitment (i) without the prior written consent of Borrower, which consent
shall not be unreasonably withheld, if the effect of any such assignment or
participation would result in Fleet's owning and controlling, both
beneficially and legally, less than thirty-two percent (32%) of the total
Commitments, and (ii) without the prior written consent of Borrower and the
other Lenders, which consent shall not be unreasonably withheld, if the
effect of any such assignment or participation would result in Fleet's owning
and controlling, both beneficially and legally, less than the Commitment of
any other Lender; and in no event shall any Lender (including Fleet) assign
less than all of its Commitment or sell participations in its Commitment if
the effect of any such assignment or participation would result in such
Lender's owning and controlling, both beneficially and legally, less than
$10,000,000 of the total Commitments.
13.5 Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee that is organized under the laws of any
jurisdiction other than the United States or any State thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section 4.12
hereof.
SECTION 14. MISCELLANEOUS
14.1 Power of Attorney. Borrower hereby irrevocably designates,
makes, constitutes and appoints Agent (and all Persons designated by Agent)
as Borrower's true and lawful attorney (and agent-in-fact) and Agent, or
Agent's agent, may, without notice to Borrower and in either Borrower's or
Agent's name, but at the cost and expense of Borrower:
14.1.1 At such time or times as Agent or said agent, in its
sole discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Agent or under
Agent's control for application to the Obligations in accordance with this
Agreement.
14.1.2 At such time or times upon or after the occurrence of an
Event of Default, and during the continuance thereof, as Agent or its agent
in its sole discretion may determine: (i) demand payment of the Accounts of
Borrower from the Account Debtors, enforce payment of the Accounts of
Borrower by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of its
Accounts; (ii) settle, adjust, compromise, discharge or release any of the
Accounts of Borrower or other Collateral or any legal proceedings brought to
collect any of the Accounts of Borrower or other Collateral; (iii) sell or
assign any of the Accounts of Borrower and other Collateral upon such terms,
for such amounts and at such time or times as Agent deems advisable; (iv) <PAGE>
<PAGE> 135
take control, in any manner, of any item of payment or proceeds relating to
any Collateral; (v) prepare, fileand sign Borrower's name to a proof of claim
in bankruptcy or similar document against any Account Debtor or to any notice
of lien, assignment or satisfaction of lien or similar document in connection
with any of the Collateral; (vi) receive, open and dispose of all mail
addressed to Borrower and notify postal authorities to change the address for
delivery thereof to such address as Agent may designate; (vii) endorse the
name of Borrower upon any of the Payment Items or proceeds relating to any
Collateral and deposit the same to the account of Agent on account of the
Obligations; (viii) endorse the name of Borrower upon any Chattel Paper,
Document, Instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts or Inventory of Borrower and
any other Collateral; (ix) use Borrower's stationery and sign the name of
Borrower to verifications of its Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory and Equipment Collateral of Borrower and any other
Collateral; (xi) make and adjust claims under policies of insurance; and
(xii) do all other acts and things necessary, in Agent's determination, to
fulfill Borrower's obligations under this Agreement.
14.2 Indemnity. Borrower hereby agrees to indemnify the Agent
Indemnitees and the Lender Indemnitees and to hold the Agent Indemnitees and
the Lender Indemnitees harmless from and against any liability, loss, damage,
suit, action or proceeding ever suffered or incurred by the Agent
Indemnitees and the Lender Indemnitees (including reasonable attorneys fees
and reasonable legal expenses) arising out of or related to this Agreement or
any of the other Loan Documents, the performance by Agent or Lenders of their
duties or the exercise of any of their rights and remedies hereunder, or the
result of Borrower's or any of its Subsidiary's failure to observe, perform
or discharge Borrower's or any such Subsidiary's duties hereunder or under
any of the Loan Documents. In addition, Borrower shall also indemnify and
defend the Agent Indemnitees and the Lender Indemnitees against and save the
Agent Indemnitees and the Lender Indemnitees harmless from all Claims of any
Person with respect to the Collateral. Without limiting the generality of
the foregoing, these indemnities shall extend to any Claims asserted against
the Agent Indemnitees and the Lender Indemnitees by any Person under any
Environmental Laws or similar laws by reason of Borrower's or any other
Person's failure to comply with laws applicable to solid or hazardous waste
materials or other toxic substances. Additionally, if any Taxes (excluding
Taxes imposed upon or measured by the net income of the Agent Indemnitees and
the Lender Indemnitees, but including, without limitation, any intangibles
tax, stamp tax, recording tax or franchise tax) shall be payable by Agent,
any Lender or by Borrower or any of its Subsidiaries on account of the
execution or delivery of this Agreement, or the execution, delivery, issuance
or recording of any of the other Loan Documents, or the creation of any of
the Obligations, by reason of any Applicable Law now or hereafter in effect,
Borrower will pay (or will promptly reimburse Agent and each Lender for the
payment of) all such Taxes, including, without limitation, any interest and
penalties thereon, and will indemnify and hold Agent Indemnities and Lender
Indemnities harmless from and against all liability in connection therewith.
The foregoing indemnities shall not apply to protect any of the Agent
Indemnitees or Lender Indemnitees for the consequences of the gross
negligence or willful misconduct of any Agent Indemnitee or Lender Indemnitee
or in respect of any claims between or among any Lender, Lenders and Agent.
<PAGE>
<PAGE> 136
14.3 Survival of Indemnities. Notwithstanding any contrary
provision in this Agreement or the other Loan Documents, the obligation of
Borrower and each Lender with respect to each indemnity given by it in this
Agreement or any of the other Loan Documents shall survive the payment in
full of the Obligations and the termination of the Commitments.
14.4 Modification of Agreement. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower,
Agent and Lenders (or, where otherwise allowed by Section 12 hereof, the
Required Lenders); provided, however, that no consent, written or otherwise,
of any Borrower shall be necessary or required in connection with any
amendment of any of the provisions of Section 12 or any other provision of
this Agreement that affects only the rights, duties and responsibilities of
Lenders and Agent as among themselves so long as no such amendment imposes
any additional obligations on Borrower.
14.5 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
14.6 Cumulative Effect; Conflict of Terms. The provisions of the
Other Agreements and the Security Documents are hereby made cumulative with
the provisions of this Agreement. Except as otherwise provided in any of the
other Loan Documents by specific reference to the applicable provision of
this Agreement, if any provision contained in this Agreement is in direct
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and
control.
14.7 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
14.8 Agent's or Required Lender's Consent. Whenever Agent's,
Lenders' or Required Lenders' consent is required to be obtained under this
Agreement or any of the other Loan Documents as a condition to any action,
inaction, condition or event, Agent and each Lender shall be authorized to
give or withhold its consent in its sole and absolute discretion and to
condition its consent upon the giving of additional collateral security for
the Obligations, the payment of money or any other matter.
14.9 Notice. All notices, requests and demands to or upon a party
hereto, to be effective, shall be in writing and shall be sent by certified
or registered mail, return receipt requested, by personal delivery against
receipt, by overnight courier or by facsimile transmission and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, three
(3) Business Days after deposit in the mail, postage prepaid, or, in the case
of facsimile transmission, when received (if on a Business Day and, if not
received on a Business Day, then on the next Business Day after receipt), <PAGE>
<PAGE> 137
addressed to the noticed party at its address as set forth on the signature
pages hereof (or, in the case of a Person who becomes a Lender after the date
hereof, at the address shown on the Assignment and Acceptance by which such
Person became a Lender). Any written notice or demand that is not sent in
conformity with the provisions hereof shall nevertheless be effective on the
date that such notice is actually received by the noticed party.
14.10 Credit Inquiries. Borrower hereby authorizes and permits
Agent and each Lender, at its discretion and without any obligation to do so,
to respond to credit inquiries from third parties concerning Borrower or any
of its Subsidiaries.
14.11 Time of Essence. Time is of the essence of this Agreement,
the Other Agreements and the Security Documents.
14.12 Entire Agreement; Appendix A and Exhibits and Schedules. This
Agreement and the other Loan Documents, together with all other instruments,
agreements and certificates executed by the parties in connection therewith
or with reference thereto, embody the entire understanding and agreement
between the parties hereto and thereto with respect to the subject matter
hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written, including, without
limitation, the Commitment Letter. Appendix A and each of the exhibits and
schedules attached hereto are incorporated into this Agreement and by this
reference made a part hereof.
14.13 Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
14.14 Confidentiality. Agent and each Lender agrees that it will
use reasonable efforts to keep confidential any information from time to time
supplied to it by Borrower which Borrower designates in writing at the time
of its delivery to Agent or such Lender is to be treated as confidential;
provided, however, nothing herein shall restrict or otherwise affect the
right of Agent or a Lender to disclose any such information (a) in any
action, suit or other legal proceeding or arbitration involving Agent or a
Lender or to the extent required by Applicable Law or judicial process, but
Agent and each Lender shall use all reasonable means to provide Borrower with
prior notice of any such intended disclosure and to render reasonable
assistance to Borrower, at Borrower's expense, in Borrower's reasonable
efforts to prevent or limit such disclosure, (b) to counsel for Agent or a
Lender or a Participant, or Agent's or a Lender's or a Participant's
respective accountants, (c) to bank examiners and auditors of Agent, a Lender
or a Participant, (d) to any assignee or prospective assignee of a Lender, or
(e) to the extent such information has theretofore been disclosed by Borrower
or any other Person without restrictions as to confidentiality.
14.15 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED
IN ANY JURISDICTION OTHER THAN NORTH CAROLINA, THE LAWS OF SUCH JURISDICTION
SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT'S
<PAGE>
<PAGE> 138
LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OTHER REMEDIES IN
RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION
ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NORTH CAROLINA. EACH OF
THE PARTIES HERETO HEREBY CONSENTS AND AGREES THAT ANY STATE OR FEDERAL COURT
IN MECKLENBURG COUNTY, NORTH CAROLINA SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG BORROWER, AGENT AND ANY
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT. EACH PARTY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH PARTY HEREBY WAIVES ANY OBJECTION WHICH ANY PARTY MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
14.16 WAIVERS. BORROWER WAIVES (i) TO THE FULLEST EXTENT
PROVIDED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY (WHICH AGENT
AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF
THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii)
PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS,
CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY AGENT ON WHICH BORROWER MAY IN ANY WAY BE
LIABLE; (iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE
COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY
COURT PRIOR TO ALLOWING AGENT TO EXERCISE ANY OF AGENT'S REMEDIES;
(iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH
LENDER'S ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER
IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, this Agreement has been duly executed under seal
on the day and year specified at the beginning of this Agreement.
"Borrower"
ATTEST: DAN RIVER INC.
- ----------------------------- By:----------------------------------
Secretary Title:-------------------------------
<PAGE>
<PAGE> 139
[CORPORATE SEAL] Address:
2291 Memorial Drive
Danville, Virginia 24541
(for street address)
Post Office Box 261
Danville, Virginia 24543
(for post office box)
Attention: Vice-President-Finance
Facsimile No.: 804-799-7699
With a copy to:
Dan River Inc.
2291 Memorial Drive
Danville, Virginia 24541
(for street address)
Post Office Box 261
Danville, Virginia 24543
(for post office box)
Attention: General Counsel
Facsimile No.: 804-799-7276
"Lenders"
FLEET CAPITAL CORPORATION
By:--------------------------------
Title:-----------------------------
Revolver Commitment: $90,000,000
Term Loan Commitment: $35,000,000
LIBOR Lending Office:
6060 J. A. Jones Drive, Suite 200
Charlotte, North Carolina 28287
Attention: Southeast Loan
Administration
Facsimile No.: 704-553-6738
"Agent"
FLEET CAPITAL CORPORATION, as Agent
By:--------------------------------
- -
Title:-----------------------------
- -
Address:
6060 J. A. Jones Drive, Suite 200
Charlotte, North Carolina 28287
Attention: Southeast Loan
Administration
Facsimile No.: 704-553-6738<PAGE>
<PAGE> 140
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement, dated of even date
herewith, by and between DAN RIVER INC., a Georgia corporation ("Borrower"),
the various financial institutions listed on the signature pages attached
thereto as lenders ("Lenders"), and FLEET CAPITAL CORPORATION ("Agent"), in
its capacity as Agent for itself and the Lenders, the following terms shall
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
Acceptable Bank - any bank or trust company organized under the laws of
the United States or any state thereof or the District of Columbia, having
capital, surplus and undivided profits totaling more than $100,000,000.
Account - shall have the meaning ascribed to the term "account" under
the Code.
Accounts Borrowing Base - At any date of the determination thereof, an
amount equal to 85% of the sum of (a) the net amount of Eligible Accounts of
Borrower and each of its Subsidiaries outstanding at such date and (b) the
Factoring Credit Balances outstanding at such date; provided, however, the
maximum amount of Eligible Accounts of Borrower and its Subsidiaries included
within the Accounts Borrowing Base at any one time which are Bill-and-Hold
Accounts shall not exceed $9,400,000 or such higher amount as Borrower shall
request and Agent may in its discretion agree, with such limitations and upon
such conditions as Agent shall specify. For purposes hereof, the net amount
of Eligible Accounts of Borrower and each of its Subsidiaries at any time
shall be the face amount of such Eligible Accounts less any and all returns,
rebates, discounts (which may, at Agent's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Eligible Accounts at such time.
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Acquired Indebtedness - Indebtedness of a Person (a) existing at the
time such Person becomes a Subsidiary in a transaction permitted by Section
9.2.7 hereof or (b) assumed in connection with the acquisition by Borrower of
assets from a Person, other than Indebtedness Incurred in connection with, or
in contemplation of, such acquisition. Acquired Indebtedness shall be deemed
to have been Incurred on the date of the related acquisition of assets from
the Person.
Acquisition - the purchase by Borrower of substantially all of the
Properties of Seller and the assumption by Borrower of certain of the
liabilities of Seller.
Adjusted LIBOR Rate - with respect to each Interest Period for a LIBOR
Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) equal to the quotient of (a) the LIBOR Rate in effect for
such Interest Period divided by (b) a percentage (expressed as a decimal)
equal to 100% minus Statutory Reserves.<PAGE>
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Affected Lender - as defined in Section 12.17 of the Agreement.
Affiliate - means (a) any other Person which, directly or indirectly, is
in control of, is controlled by or is under common control with, such Person
or (b) any other Person who is a director or officer of such specified Person
or of any Person described in clause (a) above. As used in this definition,
"control" (including, with its correlative meanings, "controlled by" and
"under common control with") means possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests,
by contract or otherwise). For purposes of this definition, beneficial
ownership, direct or indirect, of 10% or more of the Voting Stock (on a fully
diluted basis), or the right to acquire such Voting Stock (whether or not
currently exercisable), of Borrower shall be deemed to be control of
Borrower.
Agent Indemnitees - Agent in its capacity as agent hereunder and all of
Agent's officers, directors and agents.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, as the same may hereafter be amended, modified,
supplemented or restated from time to time, all exhibits and schedules
hereto and this Appendix A.
Applicable Law - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant or Loan Documents in question,
including, but not limited to, all applicable common law and equitable
principles; all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; orders,
judgments and decrees of all courts and arbitrators.
Asset Sale - with respect to any Person, any transfer, conveyance, sale,
lease or other disposition (including, without limitation, dispositions
pursuant to any consolidation or merger) by such Person or any of its
Subsidiaries in any single transaction or series of transactions of (a)
shares of Capital Stock or other ownership interests of a Subsidiary, (b) all
or substantially all of the Property of an operating unit or business of such
Person or any of its Subsidiaries, or (c) any other Property (including,
without limitation, securities in or other ownership interests of another
Person) of such Person or any of its Subsidiaries outside the ordinary course
of business; provided, however, that the term "Asset Sale" shall not include
(i) any asset disposition (including, without limitation, dispositions
pursuant to any consolidation or merger) permitted pursuant to Section 9.2.1
of the Agreement which constitutes a disposition of all or substantially all
of Borrower's assets, (ii) sales (including pursuant to Factoring Agreements)
or other dispositions of Inventory, Accounts and other current assets in the
ordinary course of business, (iii) a disposition by a Subsidiary to Borrower
or by Borrower or a Subsidiary to a wholly-owned Subsidiary, and (iv) sales
of Equipment Collateral permitted pursuant to the Agreement.
Assignment and Acceptance - an assignment and acceptance entered into by
a Lender and an Eligible Assignee and accepted by Agent, in the form of
Exhibit E hereto.
<PAGE>
<PAGE> 142
Authority - The Industrial Development Authority of Danville, Virginia a
political subdivision of the Commonwealth of Virginia
Availability - the amount of money which Borrower is entitled to borrow
from time to time as Revolver Loans, such amount being the difference derived
when the sum of the principal amount of Revolver Loans then outstanding
(including any amounts which Agent or Lenders may have paid for the account
of Borrower pursuant to any of the Loan Documents and which have not been
reimbursed by Borrower) is subtracted from the Borrowing Base. If the amount
outstanding is equal to or greater than the Borrowing Base, Availability is
zero (0).
Average Monthly Availability - the amount obtained by adding the
Availability at the end of each day during the month in question and by
dividing such sum by the number of days in such month.
Average Monthly Revolver Loan Balance - for any month, the amount
obtained by adding the unpaid aggregate balance of Revolver Loans and Letter
of Credit Obligations outstanding at the end of each day for the month in
question and by dividing such sum by the number of days in such month.
Bank - Fleet National Bank, a national banking association and its
successors and assigns.
Base Rate - the rate of interest generally announced or quoted by Bank
from time to time as its base rate for commercial loans, whether or not such
rate is the lowest rate charged by Bank to its most preferred borrowers; and,
if such base rate for commercial loans is discontinued by Bank as a standard,
a comparable reference rate designated by Bank as a substitute therefor shall
be the Base Rate.
Base Rate Loan - a Loan, or portion thereof, during any period in which
it bears interest at a rate based upon the Base Rate.
Bill-and-Hold Accounts - Accounts of Borrower and its Subsidiaries
arising from the sale of Inventory in the ordinary course of business by
Borrower or any of its Subsidiaries to an Account Debtor pursuant to a
written agreement with such Account Debtor which provides that Borrower or
such Subsidiary shall manufacture and store such Inventory until such time as
the Account Debtor shall provide Borrower or such Subsidiary with shipping
instructions.
Board of Directors - With respect to any Person, the Board of Directors
of such Person or any duly authorized committee of such Board of Directors.
Board of Governors - the Board of Governors of the Federal Reserve
System of the United States.
Board Resolution - With respect to any Person, a copy of a resolution
certified by the secretary or an assistant secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to Agent.
<PAGE>
<PAGE> 143
Borrowing - a borrowing of one or more Loans made on the same day by
Lenders (or by Fleet in the case of a Borrowing funded by Settlement Loans).
Borrowing Base - at any date of the determination thereof, an amount
equal to the sum of (a) the Accounts Borrowing Base, plus (b) the Inventory
Borrowing Base, less (c) 100% of the undrawn face amount of any Letters of
Credit and Letter of Credit Guaranties outstanding on such date, less
(d) $10,000,000, less (e) the sum of the following (without duplication) not
to exceed, however, in the aggregate at any one time the sum of One Million
Dollars ($1,000,000), unless an Event of Default exists, (i) all amounts or
other charges which are then due and payable by Borrower to any landlord of
any premises where any Collateral is located or to any processor, finisher or
other Person which may have a claim against any Collateral, if and to the
extent such landlord, processor, finisher or other Person has not executed in
favor of Agent a waiver of its claims in respect of such Collateral provided
such amounts are net of any reserves imposed with respect to Eligible
Inventory with respect to such matters, (ii) any taxes assessed upon the
Collateral which are then due and payable by Borrower and which are not being
contested in accordance with Section 9.1.1 of the Agreement, and (iii) the
costs of any casualty insurance which is required to be maintained by
Borrower pursuant to Section 7.1.2 of the Agreement which are then due and
payable by Borrower, provided that Agent shall first have given Borrower at
least ten (10) days written notice of such amounts prior to the imposition of
such reserves pursuant to this clause (e), and (f) any amounts which Agent or
Lenders may pay pursuant to any of the Loan Documents for the account of
Borrower and its Subsidiaries and which have not been reimbursed by Borrower.
Borrowing Base Certificate - An Officer's Certificate of Borrower
certifying to Agent the amount and value of all of Borrower's and each of its
Subsidiary's Eligible Accounts, Eligible Inventory, Bill-and-Hold Accounts,
Factoring Credit Balances and other information about the Collateral
reasonably requested by Agent, as of a specific date, such certificate to be
in form and detail reasonably satisfactory to Agent.
Business Day - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of North Carolina or is a day on
which banking institutions located in such states are closed, provided,
however, that when used with reference to a LIBOR Rate Loan (including the
making, continuing, prepaying or repaying of any LIBOR Rate Loan for an
Interest Period), the term "Business Day" shall also exclude any day on which
banks are not opened for dealings in dollar deposits on the London interbank
market.
Capital Expenditure Indebtedness - Indebtedness Incurred by any Person
to finance the purchase or construction of any Property acquired or
constructed by such Person so long as (a) the purchase or construction price
for such Property is or should be capitalized in accordance with GAAP, (b)
the acquisition or construction of such Property is not part of an
acquisition of a Person or business unit, and (c) such Indebtedness is
Incurred within 360 days of the acquisition or completion of construction of
such Property.
Capital Stock - means, as to any Person, all shares, interests
(including partnership interests), rights to purchase, warrants, options,<PAGE>
<PAGE> 144
participations or other equivalents of or interests in the equity (however
designated, whether voting or non-voting, now outstanding or hereafter
issued) in such Person.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such
Indebtedness shall be the capitalized amount of such obligations determined
in accordance with GAAP.
Cash Collateral - cash or Cash Equivalents, and interest earned thereon,
deposited with Agent in accordance with the Agreement as security for the
Obligations to the extent provided in the Agreement.
Cash Collateral Account - an account established by Agent on its books
and to which Agent shall credit all Cash Collateral deposited with Agent in
accordance with the Agreement.
Cash Equivalents - (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government and backed by the
full faith and credit of the United States Government having maturities of
not more than twelve (12) months from the date of acquisition; (b) domestic
certificates of deposit and time deposits having maturities of not more than
twelve (12) months from the date of acquisition, banker's acceptances having
maturities of not more than twelve (12) months from the date of acquisition
and overnight bank deposits, in each case issued by any commercial bank
organized under the laws of the United States, any state thereof or the
District of Columbia, which at the time of acquisition are rated A-1 or
better by S&P or P-1 or better by Moody's, and (unless issued by Agent) not
subject to offset rights in favor of such bank arising from any banking
relationship with such bank; (c) repurchase obligations with a term of not
more than thirty (30) days for underlying securities of the types described
in clauses (a) and (b) entered into with any financial institution meeting
the qualifications specified in clause (b); and (d) commercial paper having
at the time of investment therein or a contractual commitment to invest
therein a rating of A-1 or better by S&P or P-1 or better by Moody's, and
having a maturity within nine (9) months after the date of acquisition
thereof.
Change of Control - means (a) prior to an initial Public Equity
Offering, if any, the Existing Holders cease to be the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of a
majority of the Voting Stock of Borrower, (b) on and after an initial Public
Equity Offering, any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Existing
Holders, becomes the "beneficial owner" (defined as aforesaid), directly or
indirectly, of more than 35% of the Voting Stock of Borrower and such amount
of Voting Stock is greater than the aggregate amount of Voting Stock of
Borrower then held by the Existing Holders, (c) Borrower consolidates with,
or merges with or into, another Person, or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
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assets to any Person or Persons in any transaction or series of related
transactions, or any Person consolidates with, or merges with or into,
Borrower in a transaction or series of related transactions with the effect
that any "person" or "group" (defined as aforesaid), other than the Existing
Holders, becomes the "beneficial owner" (defined as aforesaid), directly or
indirectly, of a majority of the Voting Stock of the surviving or
transfereecorporation, or (d) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Borrower (together with any new directors whose election to such
Board of Directors or whose nomination for election by the stockholders of
Borrower was approved by a vote of 66 2/3% of the directors still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors of Borrower then in
office; provided, however, that for purposes of the foregoing clauses (a)
through (d), a Change of Control shall not exist so long as either (i) MILP
or (ii) the Management Stockholders continues to have the right, directly or
indirectly, to appoint at least one-half of the members of the Board of
Directors of Borrower.
Chattel Paper - shall have the meaning ascribed to "chattel paper" under
the Code, evidencing an Account.
Claim - any and all claims, demands, liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including reasonable
attorneys' fees and expenses), whether arising under or in connection with
the Loan Documents, under any Applicable Law (including any Environmental
Law) or otherwise.
Closing Date - the date on which all of the conditions precedent in
Section 10 of the Agreement are satisfied and the initial Loan is made under
the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the State
of North Carolina, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 6 of the Agreement, and all other Property and interests in Property
of Borrower, each of its Subsidiaries and any other Person that now or
hereafter secure the payment and performance of any of the Obligations.
Collateral Assignment of Purchase Agreement - the Collateral Assignment
of Rights Under Purchase Agreement and Escrow Agreement, dated on or about
the Closing Date, between Borrower and Agent, by which, among other things,
Borrower assigns to Agent, as security for the Obligations, all of Borrower's
rights to receive payments from Seller under the Purchase Agreement and from
the Escrow Agent under the escrow agreement executed in connection therewith
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Commitment - at any date for any Lender, the aggregate amount of such
Lender's Revolver Commitment and Term Loan Commitment and "Commitments" means
the aggregate amount of all Revolver Commitments and Term Loan Commitments.
Commitment Letter - the commitment letter from Fleet to Borrower dated
January 10, 1997.
Commitment Termination Date - the date that is the soonest to occur of
(a) the last day of the Original Term or Renewal Term, if any, (b) the date
on which any petition for an order for relief under any chapter of the
Bankruptcy Code is filed by or against Borrower or any Obligor, (c) the date
on which Agent elects to terminate the Commitments pursuant to Section 5.2.1
of the Agreement as a consequence of the occurrence of any Event of Default,
or (d) the date on which Borrower elects to terminate the Commitments
pursuant to Section 5.2.2 of the Agreement.
Commodity Agreement - with respect to any Person, any forward contract,
futures contract or option or other agreement or arrangement, or combination
thereof, entered into in the ordinary course of such Person's business and
designed to provide protection against fluctuations in the price of any
commodity, including, without limitation, cotton.
Consolidated - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
Consolidated Adjusted Net Earnings - with respect to any fiscal period,
means the net earnings (or loss) after provision for income taxes for such
fiscal period of Borrower and its Subsidiaries, all as calculated in
accordance with GAAP and reflected on the financial statements supplied to
Agent and Lenders pursuant to Section 9.1.3 of the Agreement, but excluding:
(a) any gain (or loss) arising from the sale of capital assets;
(b) any gain arising from any write-up of assets;
(c) any income (or loss) of any Subsidiary of Borrower accrued
prior to the date it became a Subsidiary;
(d) any income (or loss) of any corporation, substantially all the
assets of which have been acquired in any manner by Borrower or any of its
Subsidiaries, realized by such corporation prior to the date of such
acquisition;
(e) net earnings of any business entity (other than a Subsidiary of
Borrower) in which Borrower has an ownership interest unless such net
earnings shall have actually been received by Borrower in the form of cash
distributions;
(f) any portion of the net earnings of any Subsidiary of Borrower
which for any reason is unavailable for payment of dividends to Borrower;
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(g) the earnings of any Person to which any assets of Borrower
shall have been sold, transferred or disposed of, or into which Borrower
shall have merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction;
(h) any gain (or loss) arising from the acquisition of any
Securities of Borrower or any of its Subsidiaries; and
(i) any gain (or loss) arising from extraordinary (including any
which are non-recurring) items.
Consolidated Cash Interest Coverage Ratio - for any period of
Borrower, the ratio of (a) Consolidated EBITDA for such period to (b)
Consolidated Cash Interest Expense for such period, all determined in
accordance with GAAP during the period for which the calculation is being
made.
Consolidated Cash Interest Expense - for any period of Borrower,
interest expense payable by Borrower and its Subsidiaries in cash and for
which Borrower and its Subsidiaries do not have the right to capitalize and
add to the principal amount of the obligation for which such Interest Expense
is due.
Consolidated EBITDA - for any fiscal period of Borrower, an amount
equal to the sum for such fiscal period of (a) Consolidated Adjusted Net
Earnings, plus (b) provision for Consolidated taxes based on income, plus (c)
Consolidated Interest Expense, plus (d) Consolidated depreciation,
amortization and other noncash charges.
Consolidated Fixed Charge Coverage Ratio - as of the date of the
transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio ("Transaction Date"), means the ratio of (a)
Consolidated EBITDA for the four full fiscal quarters immediately prior to
the Transaction Date to (b) Consolidated Interest Expense for the four full
fiscal quarters immediately prior to the Transaction Date. In making the
foregoing calculation, (i) pro forma effect shall be given to: (A) any
Indebtedness Incurred subsequent to the end of the four fiscal quarter period
referred to in clause (a) and prior to the Transaction Date (other than the
Revolver Loans hereunder or any predecessor revolving credit or similar
arrangement to the extent of the commitment thereunder on the last day of
such period); (B) any Indebtedness Incurred during such four fiscal quarter
period to the extent such Indebtedness is outstanding at the Transaction
Date; and (C) the Incurrence of any Indebtedness giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio and, in each case, the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of
such proceeds occurred, on the first day of such four fiscal quarter period;
(ii) Consolidated Interest Expense attributable to interest on any
Indebtedness (whether existing or being Incurred) bearing a floating interest
rate shall be computed as if the rate in effect on the Transaction Date
(taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness) had been the applicable rate for the entire period; (iii) <PAGE>
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subject to clause (iv) below, there shall be excluded from Consolidated
Interest Expense any Consolidated Interest Expense related to any amount of
Indebtedness that was outstanding during such four fiscal quarter period or
thereafter but that is not outstanding or is to be repaid on the Transaction
Date; and (iv) Consolidated Interest Expense attributable to interest on the
Revolver Loans outstanding hereunder (or any predecessor revolving credit or
similar arrangement) shall be computed based upon the average daily balance
of such Indebtedness during the four fiscal quarter period. In addition, if
during the four-fiscal-quarter period, Borrower or any of its Subsidiaries
shall have (a) engaged in any Asset Sale, or (b) acquired any material assets
out of the ordinary course of business, then (1) in the case of any such
Asset Sale, Consolidated EBITDA for such period shall be reduced by an amount
equal to the Consolidated EBITDA (if positive), or increased by an amount
equal to the Consolidated EBITDA (if negative), directly attributable to the
assets which are the subject of such Asset Sale for such period calculated on
a pro forma basis as if such Asset Sale and any related refinancing,
retirement or discharge of Indebtedness had occurred on the first day of such
period and (2) in the case of any such asset acquisition, Consolidated EBITDA
shall be calculated on a pro forma basis as if such asset acquisition had
occurred on the first day of such four-fiscal-quarter period.
Consolidated Interest Expense - for any fiscal period of Borrower, total
interest expense of Borrower and its Subsidiaries on a Consolidated basis, as
determined in accordance with GAAP.
Consolidated Net Worth - at any date means the total stockholders'
equity of Borrower and its Subsidiaries as shown on the Consolidated balance
sheet of Borrower and its Subsidiaries in conformity with GAAP, and shall
include common stock subject to put rights.
DRFSI - Dan River Factory Stores, Inc., a Georgia corporation and
wholly-owned Subsidiary of Borrower.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - a rate per annum equal to two percent (2%) in excess of
the interest rates otherwise applicable to the Loans as set forth in Sections
2.1.1 and 2.1.2 of the Agreement.
Disqualifying Event - the happening of one or more of the following
events or conditions:
(a) The occurrence of a Default or Event of Default, unless and
until such Default or Event of Default is cured or waived;
(b) Average Monthly Availability, determined for any month, is
less than $10,000,000, unless Average Monthly Availability for any one of the
three (3) succeeding months is at least $10,000,000; or
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(c) Availability is less than $5,000,000 at any time; in each
case, upon receipt by Borrower of written notice from Agent of Agent's
election to declare such Disqualifying Event as having occurred and, then,
only so long as such event or condition is continuing on the basis described
hereinabove.
Document - shall have the meaning ascribed to the term "document" under
the Code, issued in respect of Inventory.
Dollars - and the sign $ shall refer to currency of the United States of
America.
Dominion Account - a special account of Agent established by Borrower at
a bank selected by Borrower, but reasonably acceptable to Agent in its
discretion, and over which Agent shall have sole and exclusive access and
control for withdrawal purposes.
Eligible Account - an Account arising in the ordinary course of business
of Borrower and each of its Subsidiaries from the sale of Inventory or
rendition of services, but no such Account shall be an Eligible Account if:
(a) It arises out of a sale made by Borrower or any of its
Subsidiaries to Borrower or any of its Subsidiaries or an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower;
(b) It is unpaid for more than 150 days after the original invoice
date or more than 60 days after the original maturity date;
(c) 25% or more of the Accounts from the Account Debtor are not
Eligible Accounts;
(d) The total unpaid Accounts of the Account Debtor exceed 20% of
the net amount of all Accounts, to the extent of the amount of such excess;
(e) Any covenant, representation or warranty contained in the
Agreement or the other Loan Documents with respect to such Account has been
breached;
(f) The Account Debtor is also a creditor or supplier of Borrower
or any of its Subsidiaries, or has disputed liability with respect to such
Account, or has made any claim with respect to any other Account due from
such Account Debtor to Borrower or any of its Subsidiaries, or the Account
otherwise is or may become subject to any right of set off by the Account
Debtor; in each case, to the extent of the amount of any Indebtedness owing
by Borrower or any of its Subsidiaries to such creditor or supplier, or any
offset, dispute or claim;
(g) The Account Debtor has commenced a voluntary case under the
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amended, or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction in the
premises in respect of the Account Debtor in an involuntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any
other petition or application for relief under the federal bankruptcy laws
has been filed against the Account Debtor, or if the Account Debtor has
failed, suspended business, ceased to be solvent, or consented to or suffered
a receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs; provided, however,
Agent may in its discretion consent to an Account owing by an Account Debtor
that is the subject of a reorganization, bankruptcy, receivership,
custodianship or other insolvency proceeding being deemed an Eligible
Account, with such limitations and upon such conditions as Agent shall
specify, if all other eligibility criteria are satisfied;
(h) It arises from a sale to an Account Debtor outside the United
States or Canada;
(i) It arises from a sale to the Account Debtor on the basis of a
guaranteed sale, sale-or-return, sale-or-approval, consignment or any other
repurchase or return basis, or the Account otherwise does not represent a
final sale;
(j) Agent determines in good faith that collection of such Account
is insecure or that payment thereof is doubtful or will be delayed by reason
of the Account Debtor's financial condition or that the prospect of payment
or performance by the Account Debtor is or will be impaired;
(k) With respect to each Account owing by the United States of
America or any department, agency or instrumentality thereof, such Account
shall initially constitute an Eligible Account (provided all other
eligibility criteria are satisfied), but shall cease being an Eligible
Account at such time as Agent requests that Borrower or any of the
Subsidiaries of Borrower to which such Account is owed assigns its rights to
payment of such Account to Agent, in form and substance satisfactory to
Agent, so as to comply with the Assignment of Claims of 1940, and Borrower or
any of its Subsidiaries to which such Account is owed fails to execute such
requested assignment within ten (10) days of Agent's request therefor;
(l) The executive offices of the Account Debtor is located in the
State of New Jersey, Minnesota, Indiana or any other state imposing similar
conditions of the right of a creditor to collect Accounts, unless (i)
Borrower or any of its Subsidiaries to which such Account is owed has filed a
Notice of Business Activities report with the appropriate officials in those
states for the then current year, or (ii) such Account Debtor has substantial
assets located outside the State of New Jersey, Minnesota, Indiana or other
state, as the case may be;
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(m) The Account Debtor is located in a state in which Borrower or
any of its Subsidiaries to which such Account is owed is deemed to be doing
business under the laws of such state and which denies creditors access to
its courts in the absence of qualification to transact business in such state
or of the filing of any reports with such state, unless Borrower or any of
its Subsidiaries to which such Account is owed has qualified as a foreign
corporation authorized to transact business in such state or has filed all
required reports;
(n) The Account is subject to any Lien other than a Permitted
Lien;
(o) Except for Bill-and-Hold Accounts, the goods giving rise to
such Account have not been delivered to and accepted by the Account Debtor or
the services giving rise to such Account have not been performed by Borrower
or any of its Subsidiaries and accepted by the Account Debtor;
(p) Borrower or any of its Subsidiaries have determined for any
reason not to continue selling goods to the Account Debtor on open account;
(q) The Account is evidenced by Chattel Paper or an Instrument of
any kind, or has been reduced to judgment;
(r) Borrower or any of its Subsidiaries has made any agreement
with the Account Debtor for any deduction therefrom, except for discounts or
allowances which are made in the ordinary course of business for prompt
payment and which discounts or allowances are reflected in the calculation of
the face amount of each invoice related to such Account, to the extent of
such deduction;
(s) Borrower or any of its Subsidiaries to which such Account is
owed has made an agreement with the Account Debtor to extend the time of
payment thereof beyond the period set forth in clause (b) above;
(t) The Account arises from a retail sale of goods to a Person who
is purchasing the same primarily for personal, family or household purposes;
(u) The Account consists of finance or late charges for past-due
balances, to the extent of such finance or late charges; or
(v) The Account is a Factored Account.
Eligible Assignee - a Lender or a U.S. based Affiliate of a Lender; a
commercial bank organized under the laws of the United States or any state
and having total assets in excess of $5,000,000,000 or an asset based lending
affiliate of any such bank; or any other financial institution that is
acceptable to Agent and that in the ordinary course of business extends
credit of the type evidenced by the Notes and has total assets in excess of
$500,000,000.
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Eligible Inventory - All Inventory of Borrower and each of its
Subsidiaries owned in the ordinary course of business of Borrower and its
Subsidiaries which (a) is in good, new and saleable condition, (b) is not
obsolete, unmerchantable, spoiled, slow moving, damaged or unsaleable, (c)
meets all standards imposed by any governmental agency or authority, (d)
conforms in all respects to the warranties and representations set forth in
the Agreement and in the other Loan Documents, (e) is at all times subject to
Agent's first priority perfected Lien and no other Lien except Permitted
Liens, and (f) is situated or stored at a Permitted Inventory Location;
provided, however, upon the occurrence and during the continuance of a
Disqualifying Event, Licensed Inventory shall no longer constitute Eligible
Inventory until such time as Borrower obtains for the benefit of Agent a
written agreement from the licensor of such Licensed Inventory, in form and
substance reasonably acceptable to Agent, of a non-exclusive license granting
Agent the right to sell or otherwise dispose of Licensed Inventory for a
reasonable period (not less than six (6) months) after the occurrence of an
Event of Default on terms which provide for the payment of royalties on such
items of the Licensed Inventory as may be sold by Agent at a rate no greater
than the royalty rate payable by Borrower or its Subsidiaries under its
respective license agreement with such licensor (without regard to any
minimum royalty requirements or, if Agent is required to pay any such minimum
royalties, Borrower agrees in writing for the establishment of a reserve
against Availability in an amount equal to such minimum royalties for the six
(6) month term of the license agreement) and are otherwise no more burdensome
than the comparable terms required under the license agreement between
Borrower or its Subsidiaries and such licensor.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and all other tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or
owned by Borrower or in which Borrower has an interest.
Equipment Collateral - all Equipment of Borrower now or hereafter
located in, on or upon the Real Property and any such Equipment relocated
therefrom, which relocation shall be in accordance with the terms of the
Agreement.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
Escrow Agent - SunTrust Bank, Atlanta, a Georgia corporation.
Eurocurrency Liabilities - shall have the meaning ascribed thereto in
Regulation D issued by the Board of Governors.
Event of Default - as defined in Section 11.1 of the Agreement.
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Extraordinary Expenses - all costs, expenses, fees, and advances which
Agent may suffer or incur, whether prior to or after the occurrence of an
Event of Default, on account of or in connection with (a) the repossession,
storage, repair, appraisal, insuring, completion of the manufacture of,
preparing for sale, advertising for sale, selling, collecting or otherwise
preserving or realizing upon any Collateral; (b) the defense of Agent's Lien
upon any Collateral or the priority thereof or any adverse claim with respect
to the Loans, the Loan Documents or the Collateral asserted by any Obligor,
any receiver or trustee for any Obligor or any creditor of representative of
creditors of any Obligor; (c) the settlement or satisfaction of any Liens
upon any Collateral (whether or not such Liens are Permitted Liens); (d) the
collection of any of the Obligations; (e) the negotiation, documentation, and
closing of any restructuring or forbearance agreement with respect to the
Loan Documents or Obligations; (f) amounts advanced by Agent pursuant to
Section 7.1.3 of the Agreement; (g) the enforcement of any of the provisions
of any of the Loan Documents; or (hi) any payment under indemnity or other
payment agreement provided by Agent to any financial institution in
connection with any Dominion Account. Such costs, expenses and advances may
include transfer fees, taxes, storage fees, insurance costs, permit fees,
utility reservation and standby fees, legal fees, appraisal fees, brokers'
fees and commissions, auctioneers' fees and commissions, accountants' fees,
environmental study fees, amounts paid to employees of Borrower or
independent contractors in liquidating any Collateral, travel expenses, all
other fees and expenses payable or reimbursable by Borrower or any other
Obligor under any of the Loan Documents and all other fees and expenses
associated with the enforcement of rights or remedies under any of the Loan
Documents, but excluding compensation paid to employees (including inside
legal counsel who are employees) of Agent.
Exchange Act - the Securities Exchange Act of 1934, as amended.
Exchange Rate Contract - with respect to any Person, any currency swap
agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, entered into in the
ordinary course of such Person's business and designed to provide protection
against fluctuations in currency exchange rates.
Existing Holders - the Management Stockholders and MILP.
Existing Letters of Credit - those Letters of Credit outstanding on the
Closing Date and identified on Schedule C hereto.
Existing Letter of Credit Guaranties - those Letter of Credit Guaranties
outstanding on the Closing Date with respect to the Existing Letters of
Credit.
Factor - Factor Quadrum de Mexico, Milberg, Rosenthal and Rosenthal,
Inc., and each other factor with whom Borrower may hereafter enter into a
Factoring Agreement and who has executed a Factor Assignment and
Intercreditor Agreement.
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Factor Assignment and Intercreditor Agreement - each Collateral
Assignment of Factoring Credit Balances and Intercreditor Agreement among
Borrower, Agent and each Factor, pursuant to which, among other things,
Borrower assigns to Agent, as security for the Obligations, and each Factor
acknowledges the assignment to Agent of, all sums at any time or times due or
to become due to Borrower from such Factor under its Factoring Agreement with
Borrower, and establishes the relative priorities of the respective Liens of
such Factor and Agent with respect to the Accounts of Borrower.
Factored Account - an account of Borrower owing from an Account Debtor
located outside the United States, other than the Factoring Agreement with
Milberg which includes accounts within the United States, which is sold,
assigned or otherwise transferred to a Factor pursuant to a Factoring
Agreement and upon which the Factor shall have agreed to assume the risk of
credit loss.
Factoring Agreement - the Seller Factoring Agreement, the factoring
agreement, dated October 3, 1995, between Borrower and Factor Quadrum de
Mexico, the factoring agreement, dated March 15, 1993, between Borrower and
Rosenthal and Rosenthal, Inc., and any other Factoring Agreement entered
into by Borrower and a Factor, as the same may from time to time be amended
and supplemented, pursuant to which such Factor agrees to favor Factored
Accounts.
Factoring Credit Balances - the monies and credit balances due or to
become due to Borrower from any Factor under its Factoring Agreement with
Borrower arising from the sale by Borrower of Factored Accounts to such
Factor as calculated and determined under the Factoring Agreements and
reflected in the Borrowing Base Certificates delivered to Agent pursuant to
Section 7.2.1(i).
Fair Market Value - with respect to any transaction giving rise to the
need to determine the fair market value of any Property, the fair market
value thereof as determined in good faith by the Board of Directors of
Borrower, including a majority of the disinterested directors, as evidenced
by a Board Resolution; provided, however, if such Board Resolution indicates
that such fair market value exceeds $25,000,000, such Board Resolution shall
be accompanied by the written opinion of a nationally recognized firm of
investment bankers, accountants, industry consultants or other appropriately
qualified experts that such consideration or Property is fair to such Person.
Federal Funds Rate - for any period, a fluctuating interest rate per
annum equal for each date during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day)
in Charlotte, North Carolina, by the Federal Reserve Bank of Charlotte, or if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by Agent
from three (3) federal funds brokers of recognized standing selected by
Agent.
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Fleet - Fleet Capital Corporation, a Rhode Island corporation, and its
successors and assigns.
Fleet Indemnitees - Fleet and all of its present and future officers,
directors and agents.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time; provided, however, compliance by
Borrower with the financial covenants shall be calculated in accordance with
GAAP as in effect on the Closing Date applied on a basis consistent with the
preparation of the financial statements previously delivered to Agent and
Lenders.
General Intangibles - with respect to any Person, all general
intangibles of such Person, including, without limitation, all choses in
action, causes of action, corporate or other business records, deposit
accounts, inventions, blueprints, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, service
marks, goodwill, brand names, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, computer programs, operational
manuals, all claims under guaranties, security interests or other security
held by or granted to such Person to secure payment of any of its Accounts by
an Account Debtor, all rights to indemnification and all other intangible
property of every kind and nature (other than Accounts).
Guarantor - DRFSI and each other Subsidiary of Borrower hereafter
created or acquired pursuant to Section 9.2.7 of the Agreement.
Guaranty Agreement - any Guaranty Agreement executed by a Guarantor in
form and substance reasonably satisfactory to Agent.
Guaranty Security Agreement - the security agreement executed by each
Guarantor in favor of Agent, in form and substance reasonably satisfactory to
Agent, pursuant to which each Guarantor grants Agent a Lien in all Collateral
of such Guarantor.
Hazardous Material - any pollutants, contaminants, chemicals, toxic or
hazardous substance or material defined as such in (or for purposes of) the
Environmental Laws, including without limitation, any waste
constituentscoming within the definition or list of hazardous substances in
40 C.F.R. Section 261.1 through 261.33.
Incur - with respect to any Indebtedness or other obligation of any
Person, means to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
GAAP or otherwise, of any such Indebtedness or obligation on the balance
sheet of such Person (and "Incurrence", "Incurred" and "Incurring" shall have
meanings correlative to the foregoing); provided, however, that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness.
<PAGE>
<PAGE> 156
Indebtedness - means at any time (without duplication), with respect to
any Person, whether or not contingent:
(a) The principal of and premium (if any) in respect of (i)
indebtedness of such Person for money borrowed and (ii) indebtedness and all
other obligations of such Person evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible
or liable;
(b) All Capitalized Lease Obligations of such Person;
(c) All obligations of such Person issued or assumed as a deferred
purchase price of Property or services, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business);
(d) All obligations of such Person for the reimbursement of any
obligor on any letter of credit, bankers acceptance or similar credit
transaction (other than obligations with respect of letters of credit entered
into in the ordinary course of business of such Person or to the extent such
letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the fifth (5th) Business Day
following receipt by such Person of a demand for reimbursement following
payment on the letter of credit);
(e) All obligations of the type referred to in clauses (a) through
(d) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including guarantees of such
obligations and dividends; or
(f) All obligations of the type referred to in clauses (a) through
(e) of other Persons secured by any Lien on any Property of such Person
(whether or not such obligation is assumed by such Person), the amount of
such obligations being deemed to be the lesser of the Fair Market Value of
such Property at such date of determination or the amount of the obligation
so secured.
The amount of the Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at
such date; provided, however, that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in accordance with
GAAP.
Indemnified Amount - the amount of any loss, cost, expenses or damages
suffered or incurred by Agent Indemnitees and against which Lenders or
Borrower have agreed to indemnify Agent Indemnitees pursuant to the terms of
the Agreement or any of the other Loan Documents.
<PAGE>
<PAGE> 157
Insolvency Proceeding - any action, case or proceeding commenced by or
against a Person, or any agreement of such Person, for (a) entry of an order
for relief under any chapter of the Bankruptcy Code or other insolvency or
debt adjustment law (whether state, federal or foreign), (b) the appointment
of a receiver, trustee, liquidator or other custodian for such Person or any
part of its Property, (c) an assignment or trust mortgage for the benefit of
creditors of such Person, or (d) the liquidation, dissolution or winding up
of the affairs of such Person.
Instrument - shall have the meaning ascribed to the term "instrument"
under the Code, evidencing an Account.
Intercreditor Agreement - the intercreditor and subordination agreement
dated on or about the Closing Date executed by Agent and Fleet in the form of
Exhibit G to the Agreement, and acknowledged and agreed to by Borrower.
Interest Period - as defined in Section 2.1.5 of the Agreement.
Interest Rate Protection Agreement - with respect to any Person, means
any interest rate swap agreement, interest rate cap or collar agreement or
financial agreement or arrangement designed to protect such Person or its
Subsidiaries against fluctuations in interest rates, as in effect from time
to time.
Internal Revenue Code - the Internal Revenue Code of 1986, as amended
from time to time.
Inventory - with respect to any Person, all of such Person's inventory,
including, but not limited to, all goods intended for sale or lease by such
Person, or for display or demonstration; all work in process; all raw
materials and other materials and supplies of every nature and description
used or which might be used in connection with the manufacture, printing,
packing, shipping, advertising, selling, leasing or furnishing of such goods
or otherwise used or consumed in such Person's business.
Inventory Borrowing Base - at any date of the determination thereof, the
lesser of (a) $55,000,000 or (b) the sum obtained by multiplying the value of
the classification of Eligible Inventory of Borrower and its Subsidiaries set
forth in column I below at such date by the percentage corresponding to such
classification set forth in column II below, with value in each case
calculated on the basis of the lower of cost or market with cost calculated
on a first-in, first-out basis:<PAGE>
<PAGE> 158
I II
ELIGIBLE INVENTORY CLASSIFICATION ADVANCE RATE
Inventory of Baled Cotton 70%
Apparel Division Inventory:
Raw Materials Inventory:
Synthetic fibers 70%
Greige yarns and fiber 50%
Waste 50%
Work in Process Inventory:
Greige, finished and 45%
inspected fabric
Finished Goods Inventory:
Oxford or pin point standard 60%
shirt fabric
Other finished goods apparel 55%
inventory consisting of
fabric and cloth
Supplies consisting of machine 20%
parts, repair materials, dyes,
chemicals and packaging materials
Home Fashions Division Inventory:
Raw Materials Inventory:
Synthetic fibers 70%
Thread, trim and packaging 10%
Work in Process Inventory:
Greige sheeting 60%
Rolled stock of printed 30%
and colored sheeting
Open stock and in process 55%
set assemblies
Finished Goods Inventory:
Sheets, pillow cases, drapes, 55%
comforters, shams, dust
ruffles and the like
Supplies consisting of machine parts, 20%
repair materials, dyes, chemicals and
packaging materials<PAGE>
<PAGE> 159
Wetumpka Plant Inventory:
Raw Materials consisting of fibers 50%
Finished Goods Inventory 25%
consisting of dyed yarn
Supplies 10%
Outlet Stores Inventory:
Retail store Inventory of finished goods 55%
Investment - in any Person means any direct or indirect loan or advance
to, any net payment on a guarantee of, the acquisition of any stock, bonds,
notes, debentures, other securities or equity interest or obligation of, or
capital contribution to or other investment in, such Person; provided,
however, that Investments shall not include extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
Leased Real Property - the real Property of Borrower located in
Sevierville, Tennessee in which Borrower has a leasehold estate and which is
more particularly described in Schedule B hereto.
Lender Indemnitee - a Lender in its capacity as a lender under the
Agreement and all of its present and future officers, directors and agents.
Lenders - Fleet and any other Person who may from time to time become a
lender under the Agreement, and their respective successors and permitted
assigns.
Letter of Credit - the Existing Letters of Credit and any other letter
of credit issued by Agent or any of Agent's Affiliates for the account of
Borrower.
Letter of Credit Amount - at any time, the aggregate undrawn face amount
of all Letters of Credit and Letter of Credit Guaranties then outstanding.
Letter of Credit Guaranty - any guaranty issued by Agent pursuant to
which Agent shall guarantee the payment or performance by Borrower of its
reimbursement obligations under a Letter of Credit.
Letter of Credit Obligations - that portion of the Obligations
constituting Borrower's obligation to reimburse Agent and Lenders for all
amounts paid by Agent and Lenders under or with respect to a Letter of Credit
Guaranty.
Letter of Credit Participation - as defined in Section 1.3.4 of the
Agreement.
LIBOR Lending Office - with respect to a Lender, the office designated
as the LIBOR Lending Office for such Lender on the signature pages of the
Agreement (or on any Assignment and Acceptance, in the case of an assignee)
and such other office of such Lender or any of its Affiliates that is
hereafter designated by notice to Agent.<PAGE>
<PAGE> 160
LIBOR Rate - with respect to an Interest Period, the rate per annum
determined by Agent on the basis of the offered rate for deposits in Dollars
in the London Interbank Market of amounts equal to or comparable to the
amount of the LIBOR Rate Loan to which such Interest Period relates offered
for a term comparable to such Interest Period, which rate appears on the
Telerate Screen LIBOR Page (or as published by comparable service selected by
Agent) as of 11:00 o'clock a.m., London time, two (2) Business Days prior to
the first day of such Interest Period.
LIBOR Rate Loan - a Loan, or portion thereof, during any period in which
it bears interest at a rate based upon the applicable Adjusted LIBOR Rate.
Licensed Inventory - any Inventory of Borrower or any of its
Subsidiaries, whether now owned or hereafter acquired, which is subject to
any license agreement or other agreement that would condition or restrict
Borrower's or such Subsidiary's or Agent's right to sell or otherwise dispose
of such Inventory.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower and each of its Subsidiaries 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.
Loan - the Term Loan, a Revolver Loan or all or any of them as the
context may require.
Loan Account - the loan account established by each Lender on its books
pursuant to Section 4.10 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Lockboxes - as defined in Section 7.2.5 of the Agreement.
Lockbox Banks - as defined in Section 7.2.5 of the Agreement.
MILP - Mezzanine Investment Limited Partnership - BDR, its successors
and assigns, provided that Mezzanine Investment Limited Partnership - BDR or
such successor or assign is either Metropolitan Life Insurance Company or an
Affiliate of Metropolitan Life Insurance Company.
Management Stockholders - means (a) Joseph L. Lanier, Jr., Richard L.
Williams and Barry F. Shea and certain of their family members who
beneficially own Voting Stock of Borrower on the date of the Agreement (or,
in the case of the death or incompetence of any such Person or family member,
the estate, heirs, executor, administrator, committee or other personal
representative of such Person or family member (collectively "Heirs")) or any
<PAGE>
<PAGE> 161
Person controlled, directly or indirectly, by such Person or family member or
his Heirs and (b) any employee of Borrower who acquires common stock of
Borrower pursuant to its Amended and Restated Stock Option Plan, to the
extent such common stock is required to be, and is, surrendered by Joseph L.
Lanier, Jr. to Borrower. Notwithstanding the foregoing, no person who is
employed by a competitor of Borrower shall be considered to be a Management
Stockholder.
Mandatory Borrowing - as defined in Section 1.3.6 of the Agreement.
Margin Stock - shall have the meaning ascribed to it in Regulation U and
Regulation G of the Board of Governors.
Material Adverse Effect - the effect of any event or condition which,
alone or when taken together with other events or conditions occurring or
existing concurrently therewith, (a) has or may be reasonably expected to
have a material adverse effect upon the business, operations, Properties,
condition (financial or otherwise) or business prospects of Borrower and its
Subsidiaries, taken as a whole; (b) has or may be reasonably expected to have
any material adverse effect whatsoever upon the validity or enforceability of
the Agreement or any of the other Loan Documents; (c) has or may be
reasonably expected to have any material adverse effect upon the Collateral,
the Liens of Agent with respect to the Collateral or the priority of such
Liens; or (d) materially impairs the collective ability of Borrower and its
Subsidiaries to perform their obligations under the Agreement, any Guaranty
Agreement or any of the other Loan Documents or of Agent or a Lender to
enforce or collect the Obligations or realize upon any of the Collateral in
accordance with the Loan Documents and Applicable Law.
Maximum Rate - the maximum non-usurious rate of interest permitted by
Applicable Law that at any time, or from time to time, may be contracted for,
taken, reserved, charged or received on the Indebtedness in question or, to
the extent permitted by Applicable Law, under such Applicable Law that may
hereafter be in effect and which allow a higher maximum non-usurious interest
rate than Applicable Law now allows. Notwithstanding any other provision
hereof, the Maximum Rate shall be calculated on a daily basis (computed on
the actual number of days elapsed over a year of 365 or 366 days, as the case
may be).
Milberg - Milberg Factors, Inc., a Delaware corporation.
Moody's - Moody's Investors Service, Inc., or any successor thereto.
Mortgage - the deed of trust to be executed by Borrower on or about the
Closing Date in favor of Agent and by which Borrower shall grant and convey
to Agent, as security for the Obligations, a Lien upon the Owned Real
Property.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Net Proceeds - proceeds (including cash receivable (when received) by
way of deferred payment) received by Borrower from the sale, lease, transfer
or other disposition of any of the Equipment Collateral or the Owned Real
Property, including, without limitation, insurance proceeds and awards of
compensation received with respect to the destruction or condemnation of all <PAGE>
<PAGE> 162
or part of the Equipment Collateral or the Owned Real Property, net of: (a)
the reasonable costs of such sale, lease, transfer or other disposition; and
(b) in the case of the Equipment Collateral, amounts applied to repayment of
Indebtedness (other than the Obligations) secured by a Permitted Lien on the
Equipment Collateral disposed of that is senior to Agent's Liens.
Notes - the Revolver Notes and the Term Notes.
Notice of Borrowing - as defined in Section 3.1.1(i) of the Agreement.
Notice of Conversion/Continuation - as defined in Section 2.1.4(ii) of
the Agreement.
Obligations - Collectively, (i) the Loans and all other sums loaned or
advanced by Agent or any Lender to or on behalf of Borrower pursuant to this
Agreement or the other Loan Documents, (ii) all liabilities, indebtedness and
obligations now or any time hereafter owing by Borrower or any Guarantor to
Agent or any Lender under this Agreement or any of the other Loan Documents,
(iii) Letter of Credit Obligations and all other obligations incurred by
Agent or any Lender, whether direct or indirect, contingent or otherwise, due
or not due, in connection with the issuance of a Letter of Credit or Letter
of Credit Guaranty or any other agreement, instrument or document with
respect to a Letter of Credit; and (iv) all other liabilities, indebtedness
and obligations of any and every kind now or hereafter owing or to become due
from Borrower or any Guarantor in respect of the Loans. The term includes,
without limitation, all principal, interest, charges, expenses, fees,
attorneys' fees and any other sums chargeable to, or to be paid by, Borrower
or any Guarantor under any of the Loan Documents, but shall not include any
of the Project Loan Obligations
Obligor - each Borrower, each Guarantor, and any other Person that is
at any time liable for the payment of the whole or any part of the
Obligations.
Officer - as to any Person, the chief executive officer, the president,
any vice president, the treasurer, any principal financial officer, the
secretary or the controller of such Person.
Officer's Certificate - a certificate signed by an Officer.
Original Term - as defined in Section 5.1 of the Agreement.
Other Agreements - the Notes, the Syndication Fee Letter and all other
agreements, instruments and documents (other than the Agreement and the
Security Documents), heretofore, now or hereafter executed by Borrower, any
Subsidiary of Borrower or any other third party and delivered to Agent or any
Lender in respect of the transactions contemplated by the Agreement.
Overadvance - a Revolver Loan made by Lenders when an Overadvance
Condition exists or would result from the making of such Revolver Loan.
Overadvance Condition - at any date, a condition such that the principal
amount of the Revolver Loans outstanding to Borrower on such date exceeds the
Borrowing Base on such date.<PAGE>
<PAGE> 163
Owned Real Property - the real Property of Borrower located in Harris,
North Carolina and Spindale, North Carolina acquired from Seller as part of
the Acquisition and more particularly described in Schedule A hereto.
Payment Account - an account maintained by Agent to which all monies
deposited to a Dominion Account after the giving of a Payment Direction
Notice shall be transferred and all other payments shall be sent in
immediately available federal funds.
Payment Direction Notice - As defined in Section 7.2.5 of the Agreement.
Payment Item - all checks, drafts or other items of payment payable to
Borrower, including proceeds of any of the Collateral.
Pending Revolver Loans - at any date, the aggregate principal amount of
all Revolver Loans which have been requested in any Notices of Borrowing
received by Agent but which have not theretofore been advanced by Agent or
Lenders.
Permitted Indebtedness - Any and all of the following:
(a) The Obligations;
(b) The Senior Subordinated Notes;
(c) Indebtedness of Borrower and its Subsidiaries under Interest
Rate Protection Agreements, provided that the obligations under such
agreements are related to payment obligations on Indebtedness otherwise
permitted by the terms of the Agreement;
(d) Indebtedness of Borrower and its Subsidiaries to any of
Borrower's wholly-owned Subsidiaries so long as such Indebtedness is held by
one of Borrower's wholly-owned Subsidiaries and is subordinated in right of
payment to the Obligations;
(e) Indebtedness of Borrower and its Subsidiaries outstanding on
the date of the Agreement;
(f) Indebtedness of Borrower and its Subsidiaries under Exchange
Rate Contracts and Commodity Agreements;
(g) Indebtedness of any Person which shall merge into or
consolidate with Borrower in accordance with Section 9.2.1 hereof, which
Indebtedness was not Incurred in anticipation of such merger or consolidation
and was outstanding prior to such merger or consolidation;
(h) Acquired Indebtedness, provided that after giving pro forma
effect to the Incurrence thereof, Borrower could Incur $1.00 of additional
Indebtedness pursuant to Section 9.2.2 (other than as Permitted
Indebtedness);
(i) Indebtedness of Borrower or any of its Subsidiaries in respect
<PAGE>
<PAGE> 164
of Capitalized Lease Obligations or Capital Expenditure Indebtedness directly
Incurred by Borrower or such Subsidiary, provided that (i) the principal
amount of such Indebtedness does not exceed the Fair Market Value of the
Property leased, acquired or constructed, (ii) the Property so leased,
acquired or constructed is to be used in the textile or apparel business or
any business ancillary thereto, and (iii) the aggregate principal amount of
all Indebtedness Incurred pursuant to this clause (i) does not exceed
$35,000,000 at any one time outstanding;
(j) Indebtedness of Borrower Incurred pursuant to industrial
revenue or similar tax-free obligations not to exceed $10,000,000 at any one
time outstanding;
(k) Indebtedness of Borrower not otherwise permitted to be
Incurred pursuant to clauses (a) through (j) above in an aggregate principal
amount not to exceed $25,000,000; and
(l) Indebtedness Incurred by Borrower or any of its Subsidiaries
in exchange for, or the proceeds of which are used to refinance, Indebtedness
Incurred by Borrower or such Subsidiary, respectively, referred to in the
foregoing clauses (a) through (k), provided that (i) such Indebtedness is in
an aggregate principal amount not in excess of the aggregate principal amount
then outstanding of the Indebtedness being exchanged or refinanced plus any
premium required by the terms thereof and the amount of customary fees and
expenses payable by Borrower or such Subsidiary in connection therewith and
(ii) if the Indebtedness being exchanged or refinanced is Subordinated Debt,
(A) such Indebtedness is subordinate to the Obligations to at least the same
extent, (B) such Indebtedness has a final maturity date later than the final
maturity date of the Indebtedness being exchanged or refinanced and (C) the
interest rate is not in excess of the interest rate payable in respect of the
Indebtedness being exchanged or refinanced.
Permitted Investments - means any and all of the following:
(a) Direct obligations of the United States of America or any
agency thereof for the payment of which the full faith and credit of the
United States of America is pledged and which are non-callable at the option
of the issuer thereof and which mature within one year of the date of
purchase;
(b) Certificates of deposit from or acceptances accepted or
guaranteed by Acceptable Banks due within one year, or demand deposits
maintained in the ordinary course of business with Acceptable Banks;
(c) Commercial paper maturing within 180 days of original issue
rated at the time of acquisition A-1 by S & P or P-1 by Moody's;
(d) Investments in a wholly-owned Subsidiary or in any other
Person as a result of which such other Person becomes a wholly-owned
Subsidiary and which are otherwise permitted pursuant to the terms of the
Agreement;<PAGE>
<PAGE> 165
(e) Investments in money market funds organized under the laws of
the United States or any state thereof that invests substantially all their
assets in any of the Investments described in clauses (a), (b) or (c) above;
(f) Loans or advances to employees made in the ordinary course of
business and not to exceed $1,000,000 in the aggregate at any one time
outstanding; and
(g) Negotiable instruments held for collection, lease, utility and
similar deposits, or stock, obligations or securities received in settlement
of debts owning to Borrower or any of its Subsidiaries as a result of
foreclosure, perfection or enforcement of any Lien, in each case as to debt
that arose in the ordinary course of business of Borrower or such Subsidiary.
Permitted Liens - any Lien of a kind specified in subparagraphs (i)
through (vii) of Section 9.2.5 of the Agreement.
Permitted Inventory Location - premises at which Inventory of Borrower
or any of its Subsidiaries is or may be located from time to time in
compliance with the provisions of Section 7.7.1 of the Agreement and as to
which each of the following requirements has been fulfilled:
(a) Either (i) such premises are owned by Borrower or any of its
Subsidiaries and are located within the continental United States; or (ii)
such premises are leased by Borrower or any of its Subsidiaries or such
premises are public warehouses at which Inventory of Borrower or any of its
Subsidiaries is stored and in each case are located within the continental
United States; provided, however, upon the occurrence and during the
continuance of a Disqualifying Event, any premises described in this clause
(ii) shall no longer constitute a Permitted Inventory Location until such
time as Borrower obtains for the benefit of Agent a written agreement of such
landlord or warehouseman, in form and substance reasonably acceptable to
Agent, to disclaim any interest in any Inventory of Borrower or any of its
Subsidiaries located on such premises, and to afford Agent access to and the
right to repossess or take possession of such Inventory on such premises at
any time free of any Lien of such landlord or warehouseman and to use any
such premises for a reasonable period of time, without any obligation to such
landlord or warehouseman (other than regular rent or storage charges on a per
diem basis for the period Agent elects to maintain any Inventory of Borrower
or any of its Subsidiaries on such premises), to store or dispose of such
Inventory on such premises;
(b) The premises are not the premises of a processor or other
person engaged by Borrower or any of its Subsidiaries to add value of any
kind to the Inventory of Borrower or any of its Subsidiaries located on such
premises; and
(c) Agent has a first priority perfected Lien in the Inventory of
Borrower or any of its Subsidiaries located at such premises.<PAGE>
<PAGE> 166
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Pro Rata - a share of or in all Loans, payments, proceeds, collections,
Collateral and Extraordinary Expenses, which share for any Lender on any date
shall be a percentage arrived at by dividing the amounts of the Commitment of
such Lender on such date by the aggregate amount of the Commitments of all
Lenders on such date.
Prohibited Transaction - any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986.
Project - the construction of a plant consisting of approximately
260,000 square feet on certain land owned by the Authority in the City of
Danville, Virginia, and consisting of approximately 15.731 acres, and leased
by the Authority to Borrower pursuant to the terms of the Project Lease.
Project Lease - the Lease Agreement among the Authority, as lessor, the
City of Danville, Virginia, and Borrower, as lessee, dated May 3, 1996, as
amended, modified, supplemented or restated from time to time.
Project Loan - the non-recourse loan from Fleet to the Authority in an
amount up to $9,000,000 to finance the actual hard and soft costs of
constructing the Project.
Project Loan Documents - the Project Loan Guaranty, the Put Agreement,
the Project Lease, and all other agreements, notes, deeds of trust,
assignments, instruments and other documents executed by the Authority or
Borrower to evidence or secure the Project Loan.
Project Loan Guaranty - the Guaranty and Security Agreement, dated May
3, 1996, executed by Borrower and Fleet, by which Borrower unconditionally
guarantees the repayment of the Project Loan and the completion of the
Project, and grants Fleet a Lien in the Collateral of Borrower (except for
the Equipment Collateral) as security therefor, as amended, modified,
supplemented or restated from time to time.
Project Obligations - collectively, (a) the Project Loan and all other
sums loaned or advanced by Fleet to or on behalf of the Authority or Borrower
pursuant to the terms of any of the Project Documents, (b) all liabilities,
indebtedness or obligations now or at any time hereafter owing by the
Authority or Borrower under any of the Project Loan Documents, and (c) all
other liabilities, indebtedness and obligations of any and every kind now or
hereafter owing or to become due from the Authority or Borrower to Fleet in
respect of the Project Loan. The term includes, without limitation, all
principal, interest, charges, expenses, fees, attorneys' fees and any other
sums chargeable to, or to be paid by, the Authority or Borrower under any of
the Project Loan Documents, including, without limitation, all legal fees and
expenses incurred by Fleet in connection with the exercise of its rights
under the Put Agreement and the closing of the sale of the Project Loan to
Borrower pursuant to the terms thereof.<PAGE>
<PAGE> 167
Projections - Borrower's forecasted Consolidated (i) balance sheets,
(ii) profit and loss statements, (iii) cash flow statements, and (iv)
capitalization statements, all prepared on a consistent basis with Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Public Equity Offering - a bonafide underwritten public offering of
Capital Stock of Borrower pursuant to an effective registration statement
under the Securities Act of 1933, as amended, as a result of which Capital
Stock of Borrower is distributed to the public.
Purchase Agreement - the Asset Purchase Agreement, dated as of January
10, 1997 by and between Seller, as seller, and Borrower, as purchaser,
pursuant to which Borrower has agreed to make the Acquisition,
Purchase Documents - the Purchase Agreement and all documents and
instruments to be executed or delivered in connection therewith.
Put Agreement - the Put Agreement, dated May 3, 1996, between Borrower
and Fleet, pursuant to which Borrower agrees to purchase the Project Loan
from Fleet under the terms and conditions described therein, as amended,
modified, supplemented or restated from time to time.
Real Property - the Owned Real Property and the Leased Real Property.
Regulation D - Regulation D of the Board of Governors.
Renewal Term - as defined in Section 5.1 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Required Lenders - at any date of determination thereof, Lenders having
Commitments representing at least 66-2/3% of the aggregate Commitments at
such time; provided, however, that if any Lender shall have failed to fund
its Pro Rata share of any Borrowing of Revolver Loans in accordance with the
terms of the Agreement, then, for so long as such failure continues, the term
"Required Lenders" shall mean Lenders (excluding such Lender whose failure to
fund its Pro Rata share of any Borrowing of Revolver Loans has not been
cured) having Commitments representing at least 66-2/3% of the aggregate
Commitments at such time; provided, further, however, that if the Commitments
have been terminated, the term "Required Lenders" shall mean Lenders
(excluding each Lender whose failure to fund its Pro Rata share of any
Borrowing of Revolver Loans has not been cured) holding Loans representing at
least 66-2/3% of the aggregate principal amount of Loans outstanding at such
time.
Register - the register maintained by Agent in accordance with Section
4.10.2 of the Agreement.
Restricted Payment - Any or all of the following:
<PAGE>
<PAGE> 168
(a) A dividend or other distribution declared and paid on the
Capital Stock of Borrower (including any payment in connection with any
merger or consolidation involving Borrower) or to Borrower's shareholders
(other than dividends, distributions or payments made solely in Capital Stock
of Borrower), or declared and paid to any Person other than Borrower or any
of its wholly-owned Subsidiaries on the Capital Stock of any Subsidiary of
Borrower;
(b) A payment made by Borrower or any of its Subsidiaries to
purchase, redeem, acquire or retire for value any Capital Stock of Borrower
or of any Affiliate of Borrower (other than a purchase, redemption or
acquisition of Capital Stock form a wholly-owned Subsidiary of Borrower);
(c) A payment made by Borrower or any of its Subsidiaries to
redeem, repurchase, defease or otherwise acquire or retire for value
(including pursuant to mandatory repurchase covenants), prior to any
scheduled maturity, sinking fund or mandatory redemption payment, any
Subordinated Debt or any Indebtedness of Parent; or
(d) Any Investment other than a Permitted Investment by Borrower
or any of its Subsidiaries in any Person.
The amount of Restricted Payment, if other than in cash, shall be the
Fair Market Value of the Property transferred by Borrower or any of its
Subsidiaries, as the case may be.
Revolver Commitment - at any date for any Lender, the obligation of such
Lender to make Revolver Loans and to purchase Letter of Credit Participations
pursuant to the terms and conditions of the Agreement, which shall not exceed
the principal amount set forth opposite such Lender's name under the heading
"Revolver Commitment" on the signature pages hereof or the signature page of
the Assignment and Acceptance by which it became a Lender, as modified from
time to time pursuant to the terms of the Agreement or to give effect to any
applicable Assignment and Acceptance; and "Revolver Commitments" means the
aggregate principal amount of the Revolver Commitments of all Lenders, the
maximum amount of which shall be $90,000,000.
Revolver Loan - a Loan made by Lenders to Borrower as provided in
Section 1.1 of the Agreement.
Revolver Note - a Revolver Note to be executed by Borrower in favor of
each Lender in the form of Exhibit A-2 hereto, which shall be in the amount
of such Lender's Revolver Commitment and which shall evidence all Revolver
Loans made by such Lender to Borrower pursuant to the Agreement, and
"Revolver Notes" means all of the Revolver Notes.
S & P - Standard & Poor's Corporation, or any successor thereto.
Sale and Leaseback Transaction - with respect to any Person, any direct
or indirect arrangement pursuant to which Property is sold or transferred by
such Person or a Subsidiary of such Person and is thereafter leased back from
the purchaser or transferee thereof by such Person or one of its
Subsidiaries.<PAGE>
<PAGE> 169
Schedule of Accounts - as defined in Section 7.2.1(ii) of the Agreement.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Agreement - Trademarks - the Security Agreement to be executed
by Borrower on or about the Closing Date by which Borrower shall assign to
Agent, and grant to Agent a security interest in, as security for the
Obligations, all of Borrower's right, title and interest in and to all of its
trademarks, trade names and goodwill associated therewith.
Security Documents - the Mortgage, each Guaranty Agreement, the Security
Agreement - Trademarks, each Factor Assignment and Intercreditor Agreement,
the Collateral Assignment of Purchase Agreement, and all other instruments
and agreements now or at any time hereafter securing the whole or any part of
the Obligations.
Seller - The New Cherokee Corporation, a Delaware corporation.
Seller Factoring Agreement - the Factoring Agreement, dated as of
October 31, 1996, between Seller and Milberg, which has been terminated as of
the Closing Date and, as part of the Acquisition, each of Milberg, Seller and
Borrower have entered into an agreement by which the parties have
acknowledged and agreed that all of Seller's right, title and interest in all
of Seller's Accounts factored thereunder and the Factoring Credit Balances
owing thereunder have been sold and assigned, and shall be payable, to
Borrower.
Senior Subordinated Notes - Senior Subordinated Notes issued by Borrower
pursuant to the Senior Subordinated Notes Indenture in an aggregate principal
amount of $120,000,000.
Senior Subordinated Notes Indenture - the Indenture, dated December 15,
1993, between Borrower and Marine Midland Bank, N.A., as trustee, pursuant to
which the Senior Subordinated Notes were issued.
Settlement Date - as defined in Section 3.1.3(i) of the Agreement.
Settlement Loan - as defined in Section 3.1.3(ii) of the Agreement.
Settlement Report - a report delivered by Agent to Lenders summarizing
the amount of the outstanding Revolver Loans and Letter of Credit Obligations
as of the Settlement Date and the calculation of the Borrowing Base as of
such Settlement Date.
Solvent - as to any Person, such Person (a) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (b) is able to pay all of
its Indebtedness as such Indebtedness matures and (c) has capital sufficient
to carry on its business and transactions and all business and transactions
in which it is about to engage.
Statutory Reserves - on any date, the percentage (expressed as a
decimal) established by the Board of Governors which is the then stated
maximum rate for all reserves (including, but not limited to, any <PAGE>
<PAGE> 170
emergency, supplemental or other marginal reserve requirements) applicable to
any member bank of the Federal Reserve System in respect to Eurocurrency
Liabilities (or any successor category of liabilities under Regulation D).
Such reserve percentage shall include, without limitation, those imposed
pursuant to said Regulation D. The Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in such
percentage.
Subordinated Debt - the Senior Subordinated Notes and all other
Indebtedness of Borrower that is expressly subordinated to the Obligations.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
Taxes - any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, use, transfer, license,
payroll, withholding, social security and franchise taxes now or hereafter
imposed or levied by the United States, or any state, local or foreign
government or by any department, agency or other political subdivision or
taxing authority thereof or therein and all interest, penalties, additions to
tax and similar liabilities with respect thereto, but excluding, in the case
of each Lender, taxes imposed on or measured by the net income or overall
gross receipts of such Lender.
Term Loan - the Loan to Borrower by Lenders as provided in Section 1.2
of the Agreement.
Term Loan Advance - for each Lender, an advance to Borrower under such
Lender's Term Loan Commitment.
Term Loan Commitment - at any date for any Lender, the obligation of
such Lender to make Term Loan Advances pursuant to the terms and conditions
of the Agreement, which shall equal the amount set forth opposite such
Lender's name under the heading "Term Loan Commitment" on the signature pages
hereof or the signature page of any Assignment and Acceptance by which it
became a Lender, as modified from time to time pursuant to the terms of the
Agreement or to give effect to any applicable Assignment and Acceptance; and
the term "Term Loan Commitments" means the aggregate principal amount of the
Term Loan Commitments of all Lenders, the maximum amount of which shall be
$35,000,000.
Term Note - a Term Note to be executed by Borrower in favor of each
Lender in the form of Exhibit A-1 hereto, which shall be in the amount of
such Lender's Term Loan Commitment and which shall evidence the Term Loan
Advance made by such Lender to Borrower pursuant to the Agreement, and "Term
Notes" means all of the Term Notes.
Transferee - as defined in Section 13.3.3 of the Agreement.
Type - the type of Loan, which shall either be a LIBOR Rate Loan or a
Base Rate Loan.
Voting Stock - as to any Person, means any class or classes of Capital
Stock which entitle the holders thereof under ordinary circumstances to<PAGE>
<PAGE> 171
elect at least a majority of the Board of Directors of such Person
(irrespective of whether or not, at the time, stock of any other class or
classes shall have, or might have, voting power by reason of a happening of
any contingency).
Wetumpka Plant - the yarn manufacturing plant owned by Borrower and
located in Wetumpka, Alabama.
Accounting Terms - Unless otherwise specified herein, all terms of an
accounting character used in the Agreement shall be interpreted, all
accounting determinations in the Agreement shall be made, and all financial
statements required to be delivered under the Agreement shall be prepared in
accordance with GAAP, applied on a basis consistent with the most recent
audited Consolidated financial statements of Borrower and its Subsidiaries
heretofore delivered to Agent and Lenders and using the same method for
inventory valuation as used in such audited financial statements.
Other Terms. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Whenever
in the Agreement the word "including" is used, it is understood to mean
"including, without limitation". Any pronoun used shall be deemed to cover
all genders. The section titles, table of contents and list of exhibits
appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes
and regulations. All references to any of the Loan Documents shall include
any and all modifications thereto and any and all extensions or renewals
thereof. All references to any Person shall mean and include successors and
permitted assigns of such Person. All references to "including" and
"include" shall be understood to mean "including, without limitation".
<PAGE>
<PAGE> 172
IN WITNESS WHEREOF, the parties have caused this Appendix to be duly
executed by their duly authorized officers on February 3, 1997.
Borrower:
ATTEST: DAN RIVER INC.
- --------------------------- By:--------------------------------
Secretary Title:-----------------------------
[CORPORATE SEAL]
Lenders:
FLEET CAPITAL CORPORATION
By:----------------------------------
Title:-------------------------------
Agent:
FLEET CAPITAL CORPORATION, as Agent
By:----------------------------------
Title:-------------------------------
<PAGE>
<PAGE> 173
<TABLE>
<CAPTION>
LIST OF EXHIBITS AND SCHEDULES
<S> <C>
Exhibit A Form of Term Note
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Compliance Certificate
Exhibit E Assignment and Acceptance
Exhibit F Notice of Assignment
Exhibit G Intercreditor Agreement
Schedule 7.1.1 Business Locations
Schedule 8.1.1 Jurisdictions in which Borrower and
each Subsidiary is Authorized to
do Business
Schedule 8.1.4 Capital Structure of Borrower
Schedule 8.1.5 Corporate Names
Schedule 8.1.12 Surety Obligations
Schedule 8.1.13 Tax Identification Numbers of Borrower
and Subsidiaries
Schedule 8.1.15 Patents, Trademarks, Copyrights and Licenses
Schedule 8.1.18 Contracts Restricting Borrower's Right to
Incur Debts
Schedule 8.1.19 Litigation
Schedule 8.1.21 Capitalized and Operating Leases
Schedule 8.1.22 Pension Plans
Schedule 8.1.24 Labor Contracts
Schedule 9.2.4 Permitted Liens
Schedule A Owned Real Property
Schedule B Leased Real Property
Schedule C Existing Letters of Credit
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF DAN RIVER INC. AS OF DECEMBER 28, 1996 AND
THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED
DECEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 5,042
<SECURITIES> 0
<RECEIVABLES> 55,782
<ALLOWANCES> 0
<INVENTORY> 72,493
<CURRENT-ASSETS> 140,235
<PP&E> 274,698
<DEPRECIATION> 99,348
<TOTAL-ASSETS> 321,050
<CURRENT-LIABILITIES> 46,944
<BONDS> 162,478
9,726
0
<COMMON> 8
<OTHER-SE> 77,890
<TOTAL-LIABILITY-AND-EQUITY> 321,050
<SALES> 379,567
<TOTAL-REVENUES> 379,567
<CGS> 307,383
<TOTAL-COSTS> 306,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,168
<INCOME-PRETAX> 9,256
<INCOME-TAX> 3,570
<INCOME-CONTINUING> 5,686
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,686
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
